Greed is Good?

[One Eyed Cat]

In all seriousness, does anyone understand what is going on here? I see no reason to panic, but it appears this means:

1. The Death of The Wall St. Investment Banks (only 2 remain)
2. The govt is liberalizing collateral = the govt itself is leveraging??

I know basically what I'm reading. I have no idea what it means overall though.

http://online.barrons.com/article/SB...usives_weekend

OEC

[Ajax Knucklebones]

In all seriousness, does anyone understand what is going on here? I see no reason to panic, but it appears this means:

1. The Death of The Wall St. Investment Banks (only 2 remain)
2. The govt is liberalizing collateral = the govt itself is leveraging??

I know basically what I'm reading. I have no idea what it means overall though.

http://online.barrons.com/article/SB...usives_weekend

OEC

I've been a banker for like 18 years now and I'm not even totally sure. I just know when a gigantic company that's dealing with alot of people's money goes bankrupt, it's not good for anyone. The first thing the public thinks is, is the place where I invest or keep money also going to go under? I think that's why the government keeps trying to back these failed companies because they don't want everyone to freak out, sell all their stock, take all there money out of the banks and investment firms and then the U.S. would have REAL problems. If these companies that invested in lending out mortgages, don't have anymore investible assets, then they have to shut down. If they all start to shut down, then welcome to another depression. IndyMac might still be around today if it wasn't for a run on their bank the week before. The government is doing their best to avoid big time runs....At least that's what I get out of all of this.

[One Eyed Cat]

I've been a banker for like 18 years now and I'm not even totally sure. I just know when a gigantic company that's dealing with alot of people's money goes bankrupt, it's not good for anyone. The first thing the public thinks is, is the place where I invest or keep money also going to go under? I think that's why the government keeps trying to back these failed companies because they don't want everyone to freak out, sell all their stock, take all there money out of the banks and investment firms and then the U.S. would have REAL problems. If these companies that invested in lending out mortgages, don't have anymore investible assets, then they have to shut down. If they all start to shut down, then welcome to another depression. IndyMac might still be around today if it wasn't for a run on their bank the week before. The government is doing their best to avoid big time runs....At least that's what I get out of all of this.

Seems like it. Although they didn't bail out Lehman Brothers. I don't think they'll be able to bail out many more due to moral hazard (if people think govt will cover their risks etc). Overall, I really don't know though.

OEC

[Morning Glory]

yeah, it's funny. you might as well leave your money in the bank even if it goes bankrupt. the economy is based on investments, so without those it's worthless anyway, just a bunch of paper.

however, it wouldn't be a bad idea to take it all out now and convert it to another currency while you can still get some value out of it, that way if the bottom does drop out, you won't be totally screwed.

[One Eyed Cat]

yeah, it's funny. you might as well leave your money in the bank even if it goes bankrupt. the economy is based on investments, so without those it's worthless anyway, just a bunch of paper.

however, it wouldn't be a bad idea to take it all out now and convert it to another currency while you can still get some value out of it, that way if the bottom does drop out, you won't be totally screwed.

The dollar has gone schizo. It had actually gained and now is losing value yet again. I could have made a bit of coin if I'd opened a forex account last year. I'll go down with the ship though. It's not like I'm sporting bank accounts over the FDIC guarantee. If that falters, we're pretty much fubar.

OEC

[Ajax Knucklebones]

Seems like it. Although they didn't bail out Lehman Brothers. I don't think they'll be able to bail out many more due to moral hazard (if people think govt will cover their risks etc). Overall, I really don't know though.

OEC

I think it's just that Bear Stearns was bigger than Lehman so the government had no choice but to step in on Bear. I think the government will still step in on certain companies if they think by those companies filing bankrutcy, it could cause mass hysteria in certain sectors. Like the article says Bear as a metaphor was Hurricane Katrina, but Lehman was more like Hurricane Gustav. The government knew the DOW would decrease in the hundreds due to the Lehman announcement, but that would probably be about all. So far, they were right. We'll see.

[Ajax Knucklebones]

yeah, it's funny. you might as well leave your money in the bank even if it goes bankrupt. the economy is based on investments, so without those it's worthless anyway, just a bunch of paper.

however, it wouldn't be a bad idea to take it all out now and convert it to another currency while you can still get some value out of it, that way if the bottom does drop out, you won't be totally screwed.

If the U.S. fell into a deep depression, pretty much all the modern countries would also. Think about it. All these countries have lots and lots invested in America. We go down...So do they. That's why whenever America falls into a recession, you see alot of other countries also go the same route. I don't think exchanging your U.S. dollars for foreign cash, in the long run, would really save your financial worth....

[Mr Karl]

I don't think this has anything to do with greed..................

[Ajax Knucklebones]

I don't think this has anything to do with greed..................

It has to do with alot of greedy people getting loans to invest in property to make lots of money quick, without seeing the big picture that these properties could go down in price. People were too greedy to see that if the properties went down in value they couldn't sell them for what they bought them for, hence losing big time on an investment. Then they slowly realized that they didn't have or didn't want to pay the monthly bills for these loans since they were now stuck with these homes, so they walked away leaving banks and any other financial corporations that gave the loans to foot the bill and take big losses. Banks and other financial corporations were greedy because they too didn't see the big picture and kept lending money hand over foot before it was too late.

As for the people that bought houses to live in them, in a ARM loan at like 1.99% for the first year and then jumping like 10% the next; They actually make up the smaller portion of borrowers in this whole mess. They weren't greedy. They just didn't READ what they were signing. They just listened to their brokers who fed them a line of shit. These shitty corporations and brokers that got mortgage companies to lend these "live-in" customers the money were greedy because they too didn't spend much time reading what they were having these customers sign for because they were all rolling in commisions.


So....It ALL has to do with greed and trying to make a fast buck without taking a moment to think about what could happen.....And now has.

[Ajax Knucklebones]

Banking is such a boring conversation, I bore myself.

[Bikerpunk]

It's the direct result of them issuing SIVs for debt.

It was an evil spiral.

Mortgage -> SIV -> More Mortgages -> more SIVs. Profits from SIVs reinvested into SIVs rinse lather repeat.

Result: asset bubble.

[One Eyed Cat]

I think it's just that Bear Stearns was bigger than Lehman so the government had no choice but to step in on Bear. I think the government will still step in on certain companies if they think by those companies filing bankrutcy, it could cause mass hysteria in certain sectors. Like the article says Bear as a metaphor was Hurricane Katrina, but Lehman was more like Hurricane Gustav. The government knew the DOW would decrease in the hundreds due to the Lehman announcement, but that would probably be about all. So far, they were right. We'll see.

Yeah let's hope. I do think they should use government bailouts only in extreme instances.

OEC

[One Eyed Cat]

This is just getting more bizarre by the day. I must admit I don't understand the concept of the U.S. govt. owning 79.9% of a major insurer.

http://online.wsj.com/article/SB122165238916347677.html

"Greed is Good" is cribbed from the 80s Movie "Wall Street". I would tend to agree with Ajax though. The crazy leveraging for a quick buck + byzantine rules of the game got us here.

OEC

[Bacchus88]

Banking is such a boring conversation, I bore myself.

But for those who are not in the world, you are bank of info. Just like I bore myself talk about doors, windows, kitchen cabinets...


What the US people are not looking the global effect this will have. If AIG feel, think how that would effect a global economy? Effect europe, asia and bad thing... This economy has different levels, if the dollar is weak export up and farmer make more money they have in the last 15 years. there are so many different factors playing in this economy. Look at in more one economy: Personal, local, state, national and global.

[Ajax Knucklebones]

It's the direct result of them issuing SIVs for debt.

It was an evil spiral.

Mortgage -> SIV -> More Mortgages -> more SIVs. Profits from SIVs reinvested into SIVs rinse lather repeat.

Result: asset bubble.

Short, sweet, and 100% correct in describing how foreclosures have affected the investment corporations like Bear, Lehman, and AIG.