Nation’s Financial Industry Gripped by Fear

[RedEarth]

Source: NYT

Fear and greed are the stuff that Wall Street is made of. But inside the great banking houses, those high temples of capitalism, fear came to the fore this weekend.

As Lehman Brothers, one of oldest names on Wall Street, appeared to unravel on Sunday, anxiety over the bank’s fate — and over what might happen next — gripped the nation’s financial industry. By late afternoon, Merrill Lynch, under mounting pressure, entered into talks to sell itself to Bank of America.

Dinner parties were canceled. Weekend getaways were postponed. All of Wall Street, it seemed, was on high alert.

In skyscrapers across Manhattan, banking executives were holed up inside their headquarters, within cocoons of soft rugs and wood-paneled walls, desperately trying to assess their company’s exposure to the stricken Lehman. It was, by all accounts, a day unlike anything Wall Street had ever seen.



Read more: http://www.nytimes.com/2008/09/15/business/15street.html?ref=business

[mrJJ]

1. GOP owns this mess. Time To Pay The Piper

McCain & the GOP Screwed America

Gramm-Leach-Bliley Financial Services Modernization Act.

53 Republican Senators plus one Democrat - AYE

44 Democrats no Republicans - NAY

The Gramm-Leach-Bliley Act, also known as the Gramm-Leach-Bliley Financial Services Modernization Act, Pub. L. No. 106-102, 113 Stat. 1338 (November 12, 1999), is an Act of the United States Congress which repealed the Glass-Steagall Act, opening up competition among banks, securities companies and insurance companies. The Glass-Steagall Act prohibited a bank from offering investment, commercial banking, and insurance services.

The Gramm-Leach-Bliley Act (GLBA) allowed commercial and investment banks to consolidate. For example, Citibank merged with Travelers Group, an insurance company, and in 1998 formed the conglomerate Citigroup, a corporation combining banking and insurance underwriting services. Other major mergers in the financial sector had already taken place such as the Smith-Barney, Shearson, Primerica and Travelers Insurance Corporation combination in the mid-1990s. This combination, announced in 1993 and finalized in 1994, would have violated the Glass-Steagall Act and the Bank Holding Acts by combining insurance and securities companies, if not for a temporary waiver process <1>. The law was passed to legalize these mergers on a permanent basis. Historically, the combined industry has been known as the financial services industry.

...

Economist Robert Kuttner has criticized the repeal of the Glass-Steagall Act as contributing to the 2007 subprime mortgage financial crisis.<6> Economists Robert Ekelund and Mark Thornton have made similar criticisms, arguing that while "in a world regulated by a gold standard, 100% reserve banking, and no FDIC deposit insurance" the Financial Services Modernization Act would have made "perfect sense" as a legitimate act of deregulation, under the present fiat monetary system it "amounts to corporate welfare for financial institutions and a moral hazard that will make taxpayers pay dearly".

100's Of Banks WILL FAIL. The FDIC DOES NOT have enough liquid funds to cover the insured depositors. Of course the FDIC will go to the FED and get the needed money. Those funds Will NOT show up on the books as a deficit. The taxpayer gets screwed again.

"John McCain voted FOR the bank laws that led to the current credit crisis. John Mccain's economic advisor WROTE the law. 53 Republicans voted YES to the law. When you're in danger of losing your house, can you take a chance on more of the same from those who wrecked out economy?"

U.S. Senate Roll Call Votes 106th Congress - 1st Session
as compiled through Senate LIS by the Senate Bill Clerk under the direction of the Secretary of the Senate

http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=106&session=1&vote=00105

[Old and In the Way]

14. Another subject we will all need to become conversant in.

You know that McCain's lobbyists and Phil Gramm, the guy responsible for this act are working now to try to figure a way to blame this mess on Obama and the Democrats. Thanks for posting this article...I think it's going to be a very helpful post to refer to in the coming days.

Some day, people are going to figure it out that Republicans are ultimately bad for business. They don't understand the importance of good regulation. Republicans have squandered this country's future by gorging on short term profits. I fully expect to see major investors exit the US financial markets in the days to come. That'll leave us broke with no real options. 2nd world nation-status, here we come. Wheeeeeeee......

[central scrutinizer]

17. Bingo - this is the smoking gun that should sink McW

Plus remind everybody that Bushco and McW and the Repugs wanted to privatize Social Security. If they had gotten their way, millions of people would be looking for cardboard boxes for their retirement homes.

And FEMA is once again fucking things up royally - time to post the Bushco/McW birthday pix again

[Waiting For Everyman]

18. Exactly. Gramm, Gramm, Gramm.

And his idiot wife Wendy.

Congress knows all about this, they know what to do. FDR's safeguards need to be put back ASAP.

This was all deliberate and understandable - not some dumbassed "shit happens" market forces. The price of oil this summer proved that. It started falling immediately with even minor changes by the regulators.

Will the perps admit it? No, they lie about it, and try to keep doing it. They have to be stopped, they won't stop themselves. The Repubs have created a runaway train, none of them have enough sense to stop before it totally destroys the economy.

Let the banks fail, if that's what it takes. Our homeowners aren't the RISK, the banks and investors are. And yes, the pension funds egged it on. GREED.

[trthnd4jstc]

28. Thanks for your post. Exactly what I was saying.

Isn't this the Same Sen. Gramm that called all of us suffering under this economy whiners?

[wordpix]

33. exactly. I hope Sen. Dodd explains this in simple terms tomorrow am

The earlier the better, Chris!

[MannyGoldstein]

37. Bill Clinton Has Significant Responsibility

And he's ostensibly a Democrat.

Clinton repealed the Glass-Steagall Act of 1933, which was designed to prevent another Great Depression. Clinton handed the pen with which he repealed the Act to Sandy Weil, then head of Citigroup.

Now we're reaping the reward of this phenomenally stupid/evil act.

[snot]

39. Thanks for the reminder – seriously. nt

[billyoc]

2. Thirty years of deregulation.

Party's over.

[TomClash]

12. The regs are there

but not enforced.

[aint_no_life_nowhere]

36. In February, 2007, the Bush administration refused to regulate hedge funds

They made the official pronouncement on that subject as reported in the New York Times. They stated that the industry could regulate itself and self-report according to a set of non-binding principles. And we know the impact that the hedge fund industry has played in the home mortgage crisis (at least we know some of it, the rest is to convoluted and screwed up that most economists don't quite understand what went on in the handling of hedge funds).

[TomClash]

44. Read the Investment Company Act of 1940 . . .

. . . and tell me if you really think hedge funds are exempt.

[snot]

40. No, the regs have been eviscerated AND the remainder's not enforced. nt

[BlooInBloo]

3. (shrug) It's their own fault.

[Xipe Totec]

Houston won't be the only city with busted skyscraper windows... n/t

[defendandprotect]

4. Capitalism is going down again -- as in over + over again --

and those who participated in the new great steals will be moving on with

heavy pockets -- along with their happy legislative enablers --

Swiss bank accounts, anyone?

They're a fascist idea which threatens democracy --

[bronxiteforever]

5. Time to be scared. This is a cluster of epic proportions-not a time for McSame policies

[spotbird]

50. Someone is getting rich

http://tbn0.google.com/images?q=tbn:Z0HGK0YAvRpbcM:http://photos21.flickr.com

[defendandprotect]

6. And Congress seems to be vacationing . . . . !!

Just more "shock + awe" for the nation -- !!

[Sen. Walter Sobchak]

7. Our firm just called all our retired finance law people out of retirement

were preparing for a meltdown that will keep our bankruptcy and forensic accounting people very, very busy.
I am expecting to be pulled out of the regulatory group and sent back to bankruptcy any day now.

[MadMaddie]

16. Damn

Is this meltdown going to be worse then when the Great Depression hit?

[customerserviceguy]

8. Kind of wondering

why I should give a shit about Lehman. All stock brokers do is set up the tables for legalized gambling. There are plenty of assclowns running around out there to sell us worthless pieces of paper (fuck, they don't even do that anymore, at least you could wipe your ass with a paper share of Enron...), why should I care about this particular set of money grubbers? They always vote against us, and they don't give a goddam about where they're 'investing' people's money, it could be for poison or the war machine, it's all the same to them as long as they make their big fat commission.

Nope, my give-a-damn is plumb busted!

[CountAllVotes]

9. Bank of America just bought Merrill Lynch

price = $44 billion according to CNBC.

:kick:

[wordpix]

34. I didn't know BoA was doing so well

[hunter]

47. The best book cookers will win.

It's the financial version of Iron Chef.

Todays secret ingredient: Worthless Paper!

[CountAllVotes]

10. where the f' is Bernanke

we are getting all of these stories re: Alan Greenspan. :wtf: is going on folks? :scared:

:dem: :kick:

[bluesmail]

11. Yes, the party (GOP) is over.

[TomClash]

13. Basically the endof the B-D business in the US

I ever thought I'd see this happen in my lifetime. Wow.

[snot]

41. "B-D"?

[TomClash]

43. Broker-Dealer nt

[snot]

46. thanks. nt

[Waiting For Everyman]

15. ...and they still don't get that if the individual homeowner goes down, they're going too.

They still don't get that it's stupid to kill the goose that lays the golden eggs.

I hope all like them fall.

[Waiting For Everyman]

19. 3 words: LEVEL PLAYING FIELD

... what we don't have in any transactions, thanks to Gramm.

[dixiegrrrrl]

20. CNBC has excellent coverage of the Titanic sinking....

and some of these guys are saying it like it is...calling this the end of investment banks, talking about how it happened and who is to blame, etc.
really interesting.
One guy was getting really incensed and the moderators cut him off....too bad.

Not often you get to be an eyewitness to a historic collapse as it happens.

oh, tip o' the hat to which ever DU-er earlier posted that CNBC would be covering this.

tomorrow I an taking a huge chunk of money out of our poorly rated community bank.

[PassingFair]

23. "Not often you get to be an eyewitness to a historic collapse as it happens."

That was the sickening feeling I had, too.

Historic.

I was a youngster in the 80's, and failed to
understand the Savings and Loan fiasco as it
occurred. I am on to them this time...

:puke:

[PassingFair]

21. OMG, they had to come in on a SUNDAY!!!!?!!!11!

It was, by all accounts, a day unlike anything Wall Street had ever seen.

I thought it was THIEVES DAY OFF!

[Ex Lurker]

22. Look out for JP Morgan Chase. They are not in nearly as good shape as

everybody thinks.

[Dover]

48. Got a link or can you explain further?

What's happening is further and more extreme banking consolidation (mergers, acquisitions, bankruptcies) in preparation for expansion into global financing. There will only be a handful of larger mega-multinational banks standing once the dust clears and the economic drought recovers. Chase already devoured Bank One and Bear Stearns (with fed help).
So I'm guessing they plan on being one of the global players when all is said and done.

So I'm curious what evidence you might have to the contrary.

[dabenpb]

24. Is there a list of troubled banks?

Does anyone know of a list of banks that are vulnerable?

[wordpix]

35. my guess is if they're heavily involved in the banking-investment-development revolving door

they're going down. Fuck em, too, these banks have been screwing us everyday with their developers and no accountability.

[Dover]

49. All part of globalization of the banking institutions (via consolidation)

though I'm not sure if all the loose regulation was simply a ploy to accelerate this process by baiting some banks to over extend themselves (while others stayed relatively conservative).

But the basic plan is to have fewer banks with broader reach and more diverse functions.

Not saying I agree with this trend, but it IS the current philosophy upon which we are operating (and it began well before Bushco took the helm). And that's why Bush keeps saying the economy is
relatively healthy. What he is referring to is the process toward this endgame, rather than to the
painful fallout. Ends justify means.

[Buns_of_Fire]

45. I don't know of a list per se, but you might want to take a gander at Bankrate.com...

It'll tell you if your financial institution is in pretty good shape (or not), based on their metrics.

http://www.bankrate.com/brm/safesound/ss_home.asp

As things shake out, a list of the sound banks left standing might wind up being the shorter list to wade through.

[Odin2005]

25. Fuck 'em all. They are a cancer infecting the temple of our civilization.

Bunch of evil money-grubbers that do no truly productive work.

[greyghost]

26. It's here, world wide recession/depression. Better strap in we're

in for a BUMPY ride.

[Psephos]

29. Sky is falling. World will end tomorrow. Meanwhile, I just booked my hotel for New Year's. n/t

[greyghost]

31. I've been booked, but that isn't going to stop the inevitable.eom

[trthnd4jstc]

27. What is amazing to my mind is this:

I do not steal.
I do not lie
I do not cheat.
I am a liberal.
I believe in justice.
I believe in being honest.
I believe in fairness.
I believe in fair trade.
I believe in working for what I receive.
I believe in a mixed economy based on creating the highest amount of opportunity for the most number of people, but that prevents the powerful from abusing the rest of the population.
I am a self admitted and prescribed democratic socialist.
Boo Hiss. Evil. Liberal. Boo Hiss.
I know I am not perfect, but I try to do my best, every single day.
According to Republicans, I and people like me are the bad guys. We are the ones that are bringing down America.
Guess what, I even pay all of my taxes. I must be a terrible person.

Many Capitalists and Republicans, often one and the same, who believe greed and selfishness are good, who decry governmental regulation, and who claim that the free market is the end all be all, now are seeing the results of their stupid, selfish philosophy coming to term.

Maybe Greed and selfishness should not be the basis for an economy or a society? It is always interesting how hypocritical these people are who go to church on Sunday and lie, scam, and cheat, Monday through Friday.

These people did not want regulations. They wanted deregulations. They supported the Republican hate machines. They helped export more than half of the lower middle class paying jobs oversees, because they wanted to bust the unions and did not want working class people to make that much. Well now that you (free marketeer, Republicans) have weakened the economy so much, is there any doubt that your philosophy of Free Markets are all that good?

I doubt it.

We as a people, including the rich, need to work together. Capital is not the end all be all. Manufacturing matters. Having a society that produces goods matter. We have been simply moving money around. This should have never counted as Gross Domestic Product. We have had our national productivity gutted by greedy selfish people who are so certain about free markets, and yet, what has happened is that we have impoverished our nation.

Amazing that the Republicans might win another presidency, and our economy is on the edge of total collapse. And, this collapse could have been prevented if there was a concern about keeping lower middle class paying jobs in this country instead of offshoring them. This collapse could have been prevented if there was a sufficient amount of regulation over investment banking. But No! The Greedy Selfish People wanted money. Money, Money, Money. There was no real concern about the nation by these rough-shod people. They wanted to squeeze every bit of profit they possibly can, and guess what, the old Mercantilist belief that a company should save half of its profits, dismissed. The old Mercantilist idea of a country's wealth being based on creating value. Dismissed.

There were some terrible, imperialistic occurences by mercantilist, but there were some solid economic principles. Making money off of money leads to ruin.

I am an electrician. I create value. I try my best. Being a member of the working class, I know what work is. If the people at the top were less greedy, they would have understood the value of the working class. Yes, a lot of the peope at the top of America worked many hours, just like us down here, but what real value where they creating for society?

[Psephos]

30. good post

I don't quite share your belief that the imperfectability of humankind consigns us to doom, but I utterly respect your contributions to the world and your bedrock values.

[greyghost]

32. Well said.

[PassingFair]

38. It's all your fault, you liberal DEMON.

:sarcasm:

Get used to being blamed.

They have no one to blame
but us, the demonized sub-
culture of their greed and
rapaciousness.

[Terry in Austin]

42. The awful truth comes out.

Finance is not really an "industry." It produces nothing.

It's a bunch of guys with money who rent it out for more money.

Couldn't happen to a nicer bunch of drones!

:nopity: