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Representative Brad Miller had a recommended diary on for most of Friday evening, The World is Flat...and Crooked, in which he writes that

I’m still waiting to hear "we’re sorry" for the devastation that subprime mortgages caused middle class homeowners.

Whoooaaaa ! The Wall Street "masters of the universe" have just plunged the world into the worst financial and economic crises since the First Great Depression, and drenched eight billion people in God only knows how much misery and anguish, and all we want is from said "masters" is a little contrition?

Not only is no contrition forthcoming – which is why Rep. Miller is blogging this evening – but even if it were, it would serve no purpose. It certainly would not serve justice, at least not what I consider to be justice.

Let me put this is real simple terms - "us" and "them" terms. They have taken and are still taking over $7 trillion from us. This means we are going to suffer, a lot. To fix things, and end the suffering as quickly as possible, we need to take back the $7 trillion from them.

If this is too simple for you, and you prefer the more complicated way of explaining things, you can go here, or here, or here.

First, anyone who expects any contrition from anyone on Wall Street simply has no idea what they’re dealing with. Yeah, yeah, all the talk about Wall Street needs Main Street and Main Street needs Wall Street sounds real nice and cozy.

It’s complete and utter bullshit. As in, BULL SHIT. Bovine excrement. Cattle paddies. Am I making myself clear here?

Here’s what the Wall Street Journal is reporting about Credit Suisse’s plan to hold bonuses in a special fund for eight years before actually paying them out:

The announcement elicited livid reactions from senior bankers, many of whom questioned whether it was legal. Many said they believed they were being unfairly punished for risky assets bought by colleagues in distant parts of the firm. And while the securities may prove lucrative over time, many bankers are already stretched for cash.

"I did not lose one penny for this firm this year," complained one senior banker who advises on mergers and acquisitions. "I guess I had a hard time vacillating between which was more offensive: that cash is no longer cash or that equity is no longer equity."

I mean, doesn’t anyone remember Robert Rubin’s arrogant refusal to accept responsibility just three weeks ago?

And look what’s happening now: the Fed is even bailing out hedge funds!

When you’re dealing with Wall Street, you’re simply not dealing with nice, normal people. I don’t care how much BondDad and all his acolytes will shriek about this, but that’s just the plain truth. They sold their souls to get on the great American gravy train to riches. Now that the train has wrecked, we’re supposed to do what? Help them out? For what purpose? To go back to doing what they were doing before?

I don’t f#@king think so.

Let ‘em burn.

Shirah points out in a rescued dairy, Bank smart - Bank local, and provides a great link to a story in the Washington Monthly which reports:

One reason community banks are doing so well right now is simply that they never became too clever for their own good. When other lenders, including underregulated giants like Ameriquest and Countrywide, started peddling ugly subprime mortgages, community banks stayed away. Banking regulations prevented them from taking on the kind of debt ratios assumed by their competitors, and ties to their customers and community ensured that predatory loans were out of the question. Broadway Federal, for its part, got out of single-family mortgages when they stopped making sense. "A borrower comes and asks, ‘Do you do interest-only, no-down-payment, option ARMs?’ " recalls Hudson, with a chuckle. "No!" The bank focused instead on expanding its reach to niche borrowers, such as local churches. . . .

Today, with the world’s system of anonymous high finance in crisis, small-scale community banks, thrifts, and credit unions—all regarded until recently as vestigial players in a new world of global consumer finance—are setting an important example. If federal policies were in place to provide proper support to small-scale financial institutions, Washington could do a lot to alleviate the country’s most serious economic problems: its lack of savings, its runaway consumer debt, its dwindling supplies of social capital, and its vulnerability to financial contagion brought on by Wall Street excess. By encouraging thrift, responsibility, and a sense of community, small-scale financial institutions could play a leading role in helping us dig out of this financial meltdown—and in helping to fend off the next one.

The Washington Monthly article is sub-headlined,

While the behemoths of Wall Street stumble and fall, humble local banks are doing just fine,  thank you. Their surprising resilience holds a key lesson for twenty-first-century global finance.

Well, it’s no surprise to me. All anyone had to do is read the reports put out by the staff of the regulatory agencies – something you would think is what economics and business correspondents and financial regulators are supposed to be doing. But, no, they don’t. So here’s the relevant parts of my diaries again:

. . . creating, selling, and trading financial derivatives is entirely the province of the small number of investment and commercial banks that have hundreds of billions of dollars in assets. In other words, the big Wall Street banks. Take a look at this graph from the Third Quarter 2007 Report on Bank Derivatives Activities by the Office of the Comptroller of the Currency
DerivativesNotionalsOCC

Look at that bottom line that stays flat no matter how much derivatives increases. That’s the amount held by end-users. End-users ?! So it’s the banks that are holding most of the derivatives. Now, this is just commercial banks, and does not include derivatives activities of investment banks.

According to the Federal Reserve Board’s Report on the Condition of the U.S. Banking Industry: Second Quarter, 2006
derivatives holdings of the 50 largest bank holding companies as of the second quarter of 2006 totaled $ 117,631 billion, or $117.6 trillion.

Derivatives holdings of all other reporting bank holding companies in the United States was $88 billion.

In fact, only five commercial mega-banks - J.P. Morgan Chase, HSBC, Citibank, Bank of America, and Wachovia – account for well over 90 percent of derivatives activities by  commercial banks. Here’s a graph from the OCC report:
DerivativesConcentration

SNIP

So come the next "too big to fail" crises, I think it would actually be better to let the institution involved fail. And let it take the rest of the big Wall Street players with it. As far as the real economy would be concerned, good bye and good riddance. We can let the big Wall Street players collapse into the ruin they so richly deserve (pun intended) while insulating the rest of the financial system and the real economy. . . .

Yes, I will make the idea explicit here: the goal in the next crisis point of the financial collapse should be to ruthlessly euthanize the biggest institutions on Wall Street. These big commercial and investment banks are NOT providing any net value to the economy – they are actually sucking value out.

That was me writing Tue Apr 22, 2008 after the Bare Sterns collapse and repeating myself on Wed Sep 17, 2008, the week the Wall Street investment bank model vanished forever. And here's economist Randy Wray writing on TPMCafe two days ago:

Finally, there has long been a doctrine of "too big to fail", which counseled that we can let small banks fail but we must always bail out the big ones. This current crisis has revealed such policy to be nonsense. I advocate a "too big to save" doctrine: the big Wall Street banks serve almost no public purpose. Let them fail. Save the small and medium sized banks that actually lend to firms and households.

Look, folks, I can only explain this so many different ways. The way out of these crises is very simple:

Wall Street must be crushed. Take the top 20 people, the top 100 people, whatever, from each and every firm – including the law firms - on Wall Street AND LOCK THEM UP. Throw away the keys. They are NOT of any value to our society right now. They are a greater danger than anything else, because they are the ONLY political obstacle to getting the financial and monetary reforms we need to get credit flowing to rebuild our economies. This includes Robert Rubin and the person selected to be the next Treasury Secretary, Timothy Geithner. (Probably Rahm Emmanual, too, but I’m willing to let him serve Obama and see if it works out).  Sorry, but that’s just the plain truth. We need to be ruthless and punitive. Just the way conservatives have been with the over one million of our fellow Americans that are now in prison.

Maybe in a few years, after reeducating the "masters of the universe" in what real economics is all about, it might be safe to let them out on the streets again.

Until then, get the criminals behind bars, to keep the rest of us safe.

Originally posted to NBBooks on Fri Dec 19, 2008 at 10:46 PM PST.

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Comment Preferences

  •  I am 100% with you on this (22+ / 0-)

    I have to wonder, AGAIN, just how much shit will Americans eat?

    When do the pitchforks come out?

    Never?

    There's gotta be a point when we finally just say "all right, that's ENOUGH".

    I do have to say the only time in my entire LIFE that I've seen both the "right" and the "left" in agreement, and equally outraged, is over the whole "bailout" back when it was first proposed.  

    It was oddly thrilling.  I was visiting my extremely RW Dad and stepmom at the time, and we were finally, after all these years, in agreement about something, and in agreement about who the Bad Guys were, and agreement about who was screwing who.

    America may unite yet.  Over having our money stolen.  

    •  I'm just afraid that, (17+ / 0-)

      with The Obama's support, the Congressional Democrats are going to give Paulson another 350 billion to pass out to his friends.

      That's a thousand bucks for each and every American.  On top of the last thousand.  But instead of coming to us it's being taken from us to be given to the top tenth of one percent.  Who will then lend it back to us, at interest, as part of a "homeowner bailout".

      Because we need them, to rule us.

      Sick of it, I am . . .

    •  Yes, you're not kidding Inky... (4+ / 0-)

      It was literally STOLEN.  Read this and weep:Wall Street's Coup D'etat--The Lie

      The saddest part of all is that they will probably get away with it.  And what could we have done with the money that would have been constructive?  As the article points out, we COULD have paid off 80% of everyone's mortgage in the country!  Now wouldn't that have been a marvelous stimulus to the economy if everyone's mortgage payment was reduced by 80%?  

    •  After the inauguration.... (4+ / 0-)

      ....get a million of the people in that crowd to get on the Amtrak train and go directly from Washington to Wall Street and stage the biggest, noisiest demonstration Wall Street has EVER seen.

    •  Television (1+ / 0-)
      Recommended by:
      NoMoreLies

      I have come to the conclusion that tv is the culprit in arresting action by the citizenry. There are others, like fear of losing your livelihood.

      But more than anything, I think, the sedation of television is what keeps America firmly planted in its easy chair. People are so brainwashed, and I mean that literally, that they don't even believe something is real unless they see it on TV. And what do they see on TV but lies, bullshit and watered down versions of the truth.

      The message we get from TV is that the smart people are on the job, and that we are powerless. Never is a true villain identified unless it is a villain that the establishment has already gone after. Like Bernie Madoff. 'We're on it.'

      And there will never be an uprising unless people have a villain. It is our job to identify the real villains, as this diary does. And they truly are villains. If people understood just what monsters these people are they would drag them into the streets and hang them from light poles.

      But the monsters have PR firms working overtime. And they sit on the boards of GE, ABC, DISNEY, and FOX. They own significant shares of their stocks and buy massive amount of advertising on their networks.

      And so the monsters always win.

  •  yes, make the F*ckers PAY! nt (5+ / 0-)
    Recommended by:
    Timaeus, G2geek, jimreyn, chrome327, Johnny Q

    It would be the first principle of sane kindness that all forms of sacrifice would be avoided, if at all possible."--Adam Phillips

    by andrewj54 on Fri Dec 19, 2008 at 11:03:12 PM PST

  •  At some point (20+ / 0-)

    people are going to have to understand the basic fact that power never concedes anything.  It must be ripped from their greedy hands in the most unkind manner. They will take the 7 trillion and another 70 trillion while bodies pile up the the streets from starvation and not bat an eye.
    I honestly don't think the corporate overlords and the financial wizards will change their behaviors in any way shape or form until we start mounting their heads on pikes in front of their gilded corporate lobbys. Nothing in the history of the last 10,000 years leads me to any other conclusion.

    The trick is in what one emphasizes. We either make ourselves miserable, or we make ourselves happy. The amount of work is the same." Carlos Castaneda

    by FireCrow on Fri Dec 19, 2008 at 11:07:29 PM PST

    •  But...but...but... (1+ / 0-)
      Recommended by:
      Inky99

      Obama wants change to come with CIVILITY.

      It would be the first principle of sane kindness that all forms of sacrifice would be avoided, if at all possible."--Adam Phillips

      by andrewj54 on Fri Dec 19, 2008 at 11:11:51 PM PST

      [ Parent ]

      •  the only change we're getting (2+ / 0-)
        Recommended by:
        Inky99, Johnny Q

        is the front man.

        Mr. Civility himself.

        Look at his "economic team" (bring your barf bag).

        •  Yeah, and he now owns the bailout (1+ / 0-)
          Recommended by:
          chrome327

          He was all for it.

          Just for starters!

        •  Timothy Geithner is a Wall Street... (5+ / 0-)

          insider who is likely at least partially responsible for the mess.  There is little hope that there will be anything remotely like justice being served up in the economic cafeteria line, any time soon.  The international banksters are way more powerful than any merely elected official.  Mayer Amschel Rothschild, the founder of the enormously wealthy Rothschilde banking family, was once quoted as saying, "Permit me to issue and control the money of a nation, and I care not who makes its laws."  The banksters are much more open and bold about their plans for humanity.  The most recent Baron de Rothscilde (David) visited the Dubai International Financial Center (By the way, Haliburton is shifting its corporate headquarters to Dubai), last month and was quoted as saying that he thought the international financial crisis would do a lot to usher in a "new world order".

          Think that the banksters are not that powerful?  Think again: "I am afraid that the ordinary citizen
          will not like to be told that banks
          can and do create money...And they who control
          the credit of the nation direct the policy of Governments and hold in the hollow of their hands
          the destiny of the people."
          --Reginald McKenna, past Chairman of the Board, Midlands Bank of England

          And again: "If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash, or credit. If the banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless situation is almost incredible -- but there it is." [emphasis mine]  --Robert Hemphill. Credit Manager, Federal Reserve Bank of Atlanta  

          I leave you with a quote from President Woodrow Wilson who was apparently feeling some regret over signing the Federal Reserve Act into law in 1913:
          "Since I entered politics, I have chiefly had men's views confided to me privately. Some of the biggest men in the United States, in the Field of commerce and manufacture, are afraid of something. They know that there is a power somewhere so organized, so subtle, so watchful, so interlocked, so complete, so pervasive, that they better not speak above their breath when they speak in condemnation of it."

          -- from The New Freedom (1913)

      •  I hope it can happen (1+ / 0-)
        Recommended by:
        chrome327

        and maybe it can, but an actual honest to goodness redistribution of wealth is probably not in the cards. At most we can hope that they throw us a few bones; healthcare, affordable housing, etc. They have become adept at keeping themselves secure behind their locked gates, and with the advent of things like Blackwater, they are well protected.

        The trick is in what one emphasizes. We either make ourselves miserable, or we make ourselves happy. The amount of work is the same." Carlos Castaneda

        by FireCrow on Fri Dec 19, 2008 at 11:20:50 PM PST

        [ Parent ]

    •  Hey, firecrow! (1+ / 0-)
      Recommended by:
      FireCrow

      I hope you're feeling better!

      A conservative is a scab for the oligarchy.

      by NBBooks on Fri Dec 19, 2008 at 11:12:07 PM PST

      [ Parent ]

      •  Hey NB (0+ / 0-)

        yes a little better, thanks. Now I have a damn cold on the heels of the flu. I miss the days when I could stay up for days, party all night, run naked in the snow and still feel great. That was a long time ago.  ;)
        Good diary by the way.

        The trick is in what one emphasizes. We either make ourselves miserable, or we make ourselves happy. The amount of work is the same." Carlos Castaneda

        by FireCrow on Fri Dec 19, 2008 at 11:16:49 PM PST

        [ Parent ]

    •  Yeah but Americans (6+ / 0-)

      have no freaking idea of how to deal with this truth.

      None.

      Americans will sit glued to their televisions as their ship sinks below the waves ....

    •  riot on Wall Street (2+ / 0-)
      Recommended by:
      FireCrow, chrome327

      Have you heard about what's going on in Athens and other parts of Greece right now?  Seen the pictures?  

      I wonder what would happen if angry mobs converged on Wall Street and started doing that.  

  •  Here's how it works (20+ / 0-)

    Power concedes nothing without a demand. It never did and it never will. Find out just what any people will quietly submit to and you have found out the exact measure of injustice and wrong which will be imposed upon them, and these will continue till they are resisted with either words or blows, or both. The limits of tyrants are prescribed by the endurance of those whom they oppress.

    Frederick Douglass was dead on.

    "how many times do we have to learn that tough talk is not a substitute for sound judgment?" - Senator Obama

    by moviemeister76 on Fri Dec 19, 2008 at 11:13:00 PM PST

    •  Wonderful quote! Thanks n/t (5+ / 0-)

      A conservative is a scab for the oligarchy.

      by NBBooks on Fri Dec 19, 2008 at 11:14:33 PM PST

      [ Parent ]

    •  WOW. What a quote (3+ / 0-)
      Recommended by:
      JG in MD, moviemeister76, chrome327

      It's always humbling when you're trying to think of how to state something, then you see somebody already did it, long ago, and they did it far better than you could have ever done.

      Also makes me realize the more things change the more they remain the same.

      That's a hell of a quote.

      And the American people are living proof of its veracity, right now.  

      How much shit will Americans eat?

      It's like they've lined us up for one of those State Fair shit-eating contests, and they're all just staring in horrified amazement as everyone digs in ... and keeps digging ... Soon they'll start to giggle and elbow each other ... hoping we don't catch on ...

      •  This is why... (6+ / 0-)

        ...history in schools should be about stuff like this, and not just a list of facts. In fact, even though I am a history major, I don't really care much about exact dates, or even names, really. I think history has more to do with why things happen. I have learned more reading biographies and autobiographies than I ever did in public schools; sometimes more than some colleges courses. People don't understand history is essentially an instructional guide. I think it's insane that most people essentially start their lives with no knowledge of the great ideas that were already thought of a century or more ago. Scientists today don't start off by trying to figure out why things fall down and not up; they already know the theory of gravity. Why do we start off not knowing about things like Frederick Douglass' quote?

        I am sometimes surprised by how insanely intelligent people in the past were. I think it's all too easy to fall into the trap of thinking that just because we have advanced technologically, we have advanced just as much philosophically as well. For the most part, that is just not true. Frederick Douglass was a slave who was only taught how to read; he did the rest on his own. Yet his thoughts are more eloquent than most, including myself, can compose today.

        "how many times do we have to learn that tough talk is not a substitute for sound judgment?" - Senator Obama

        by moviemeister76 on Sat Dec 20, 2008 at 12:48:04 AM PST

        [ Parent ]

        •  totally agree (2+ / 0-)
          Recommended by:
          TocqueDeville, moviemeister76

          I remember HATING 8th grade history class.  Absolultey HATING it.  (and the teacher).  

          When I grew up, I started reading biographies, and that changed everything.

          There's really nothing more fascinating to me now than reading true histories.  Biographies and non-fiction.

          Yes, the way history is traditionally taught is 100% wrong.  I would do ANYTHING to get out of a history class back in high school.  

  •  The extent of the criminality is finally (5+ / 0-)

    trickling out, thanks to diaries like this and zero thanks to most media outlets.  The damn facts are there to find.  The leverage was well beyond 10x all mortgages in the US.  The risk and subsequent failure were total.  

    Casual criminal disregard for others.  I'm starting to believe that the punishment should fit the crime on these bad deeds.  Something like a life sentence to live in a station wagon, or only able to buy clothes third hand, or the kids go to public schools that can't afford books because of depression-related budget cuts.

    "You may already be a wiener!" Anonymous

    by Terra Mystica on Fri Dec 19, 2008 at 11:19:36 PM PST

    •  Disagree (0+ / 0-)

      I won't get any Recs but this is just not how the game is played.  Bad investment decisions are "usually" not illegal.  If that is the case then every subprime homeowner who purchased a home with a mortgage they knew they could not afford if rates went up are criminals as well.  

      I acknowledge that there is very likely some criminal activity that has gone on during the past few years in the RE bubble.  I just do not think those activities in relation to the market as a whole are going to amount to much.

      I'm trapped in couple of stocks that are underwater by more than 50%.  I made what I thought were good investments at the time I made them.  Does this mean I'm a criminal?  

      Come on people.  Investing is the essence of taking risk.  Risk means what it means.  

      •  You're missing the point (8+ / 0-)

        Wall Streeters need to be removed because they are an obstacle to reform. Without reform, a lot of people are going to suffer, many will die. So, how do we get rid of the obstacle to reform?

        I think the best way to this "by the book" is to force open all those secret bank accounts in place like the Caymens and Lichtenstein.

        But I think the window in which removing the "masters of the universe" legally and by the book is the next 12 to 18 months. After that, I honestly think we're looking at social explosions as a result of being unable to implement radical change because of Wall Street's opposition.

        Ariz. police say they are prepared as War College warns military must prep for unrest; IMF warns of economic riots

        A new report by the U.S. Army War College talks about the possibility of Pentagon resources and troops being used should the economic crisis lead to civil unrest, such as protests against businesses and government or runs on beleaguered banks.

        "Widespread civil violence inside the United States would force the defense establishment to reorient priorities in extremis to defend basic domestic order and human security," said the War College report.

        The study says economic collapse, terrorism and loss of legal order are among possible domestic shocks that might require military action within the U.S.

        International Monetary Fund Managing Director Dominique Strauss-Kahn warned Wednesday of economy-related riots and unrest in various global markets if the financial crisis is not addressed and lower-income households are hurt by credit constraints and rising unemployment.

        U.S. Sen. James Inhofe, R-Okla., and U.S. Rep. Brad Sherman, D-Calif., both said U.S. Treasury Secretary Henry Paulson brought up a worst-case scenario as he pushed for the Wall Street bailout in September. Paulson, former Goldman Sachs CEO, said that might even require a declaration of martial law, the two noted.

        State and local police in Arizona say they have broad plans to deal with social unrest, including trouble resulting from economic distress. The security and police agencies declined to give specifics, but said they would employ existing and generalized emergency responses to civil unrest that arises for any reason.

        "The Phoenix Police Department is not expecting any civil unrest at this time, but we always train to prepare for any civil unrest issue. We have a Tactical Response Unit that trains continually and has deployed on many occasions for any potential civil unrest issue," said Phoenix Police spokesman Andy Hill.

        "We have well established plans in place for such civil unrest," said Scottsdale Police spokesman Mark Clark.

        A conservative is a scab for the oligarchy.

        by NBBooks on Sat Dec 20, 2008 at 12:02:35 AM PST

        [ Parent ]

        •  How Exactly ... (0+ / 0-)

          does the government remove a CEO from a publicly traded company outside the judicial system without itself breaking the law?

          Look ... all you're doing is saying everyone on Wall Street is evil so let's have our own version of the French Revolution and off with their heads.  That is facile.  It removes the possibility that investors make bad decisions.  

          •  Go back and look at how Bush defined (2+ / 0-)
            Recommended by:
            NoMoreLies, chrome327

            "terrorist activity."

            Then compare that definition with what happened and what was said to push through the bailout.

            Man, you guys on Wall Street are so screwed. You fit the definition of terrorists by engaging in activity that "frightened a population." Your only hope is that Bob Rubin succeeds in controlling Obama.

            A conservative is a scab for the oligarchy.

            by NBBooks on Sat Dec 20, 2008 at 12:38:52 AM PST

            [ Parent ]

            •  Don't Lecture About Things You (0+ / 0-)

              are ignorant of.  And I'm not a "Wall Street Guy" take you very much.  I'm an Average Joe on Main Street.

              Two major money market funds broke the buck after Lehman failed and the financial market was on the verge of collapse.  We had to have IMMEDIATE action to avert a complete meltdown.  Expecting perfect legislation under duress and an immediate time frame is unrealistic.  Comparing it to the terrorist activity is idiotic in the extreme. Trying to tie Barney Frank of all people to being an idiotic dupe of the Bush Administration really takes the cake.  

              As Barney Frank said ... it's hard to prove you averted a catastrophe when the catastrophe did not occur.  

              •  No, no, no. (0+ / 0-)

                I am trying to lecture you about things you are ignorant of.

                So the money market funds broke the buck, and people like you panicked.

                And now you want us to pick up the tab for $7 trillion dry cleaning bill for your underpants?

                I think you know what I think about that.

                A conservative is a scab for the oligarchy.

                by NBBooks on Sat Dec 20, 2008 at 12:52:59 AM PST

                [ Parent ]

                •  What? (0+ / 0-)

                  I'm convinced you don't know the first damn thing about investing in stocks, bonds or anything else for that matter and you have no idea of what happened in the credit markets on October 12th.  None.  Zip.

                  When the Reserve Fund broke the buck after Lehman failed ALL rational investors were concerned about the safety of their money market funds.  Do you even know what a money market fund is?  I'm not sure you do.  There was a big exodus from money market funds to bank deposits strictly because those funds had FDIC insurance behind them.  You call that panic?  It was a rational reaction by literally millions of investors who wanted safety in the face of what looked like a possible total collapse of our financial system.  

                  And now you want us to pick up the tab for $7 trillion dry cleaning bill for your underpants?

                  WTF does this mean?  I didn't lose any money in money market funds and nobody else did except for those that were in the Reserve Fund and they came out at 98 cents on the dollar.  The Evergreen Fund also broke the fund but was backstopped by Whacovia.  Had the Treasury and Fed not intervened Merrill Lynch and host of others would have likely gone down and then LOTS of AVERAGE investors would have lost money they had in money market funds and the system would have collapsed.  It would have ensured a Depression style run on banks across the country and resulted in a calamity.

                  By the way ... how are investors in financial stocks doing these days?  They got CRUSHED!  If you were unlucky enough to own AIG common stock you got wiped out.  

                  The preferred stock investments made in the big nine bank stocks that pay 5% a year for the first five years and 9% after that ... guess what ... most of those investments are going to be paid back in full.  

        •  So they plan to deal with unrest (0+ / 0-)

          related to this financial crisis in the same way Hoover dealt with the Bonus Army - sending in MacArthur with tanks to expel them.

          God forbid Americans help others less fortunate.

          "Without our playstations, we are a third world nation"-Ani DiFranco

          by NoMoreLies on Sat Dec 20, 2008 at 02:14:08 PM PST

          [ Parent ]

      •  They got Al Capone for income tax evasion and he (2+ / 0-)
        Recommended by:
        NoMoreLies, JG in MD

        died in prison.  These Wall Street guys and gals should get ready for the same flashlight treatment.

        I understand what you are saying, but I think your analogy is not relevant here. These Wall Street clowns brought down the whole global economy because they made stuff (securities with no underlying value) up and sold them and used that value to pay themselves huge paychecks and used the same securities to prop up their balance sheets (i.e. falsify company condition reports) until they were called on the making stuff up part (classic securities fraud).

        This isn't about the people that bought the made up stuff.  It's about the people that made it up and sold it.  But they all knew about the problems.  This diary shows that, beyond any question imo.  It puts the criminality into RICO territory, afaic.

        "You may already be a wiener!" Anonymous

        by Terra Mystica on Sat Dec 20, 2008 at 05:36:21 AM PST

        [ Parent ]

  •  Anybody else read Floyd Norris's column (7+ / 0-)

    in the NYT?  Beautifully written overview of the past year:

    This is shaping up as the worst year in seven decades for the stock market. Of the 10 best days the stock market experienced during those 70 years, six came in 2008.  [snip]

    The economists are worried about deflation. They are also fearful of inflation.

    The government is lending money to businesses that could never before have borrowed from it. People fear a wave of corporate bankruptcies as companies find they cannot borrow money to repay loans that are due.

    This was the year the financial system stopped working. Nearly all the contradictory, but accurate, statements above can be traced to that fact.

    http://www.nytimes.com/...

    The banks have engaged in such non-transparency that not even they really know the shape they are in. Every day there are more foreclosures - Joseph Stiglitz

    by Youffraita on Fri Dec 19, 2008 at 11:31:01 PM PST

    •  You mean of the 10 "worst" days. (0+ / 0-)
      •  No, someone did a study (3+ / 0-)
        Recommended by:
        Timaeus, Youffraita, chrome327

        of market volatility in October 2008m, and it includes some of the best days as well as some of the worst.

         

        October 2008 was certainly a spectacular month in the stock markets. Large daily changes occurred that surprised most investors. Yet, although many investors had not seen such wild gyrations of stock prices for a long time, there was a general sense that this had happened before.

           Those of us who studied modern finance theory, however, were truly astonished by the sheer improbability of the events occurring in the stock markets during that fateful month. One of the basic assumptions used in almost all our finance models is that returns are normally distributed. These models are widely used to price derivatives and other complex financial products. What do these models tell us about the probabilities of the events that occurred in October?

           The following table gives an answer. We selected the six largest daily percentage changes in the Dow Jones Industrial Average during October, and asked the question of how frequent these changes occur assuming that, as is commonly done in finance models, these events are normally distributed. The results are truly astonishing. There were two daily changes of more than 10% during the month. With a standard deviation of daily changes of 1.032% (computed over the period 1971-2008) movements of such a magnitude can occur only once every 73 to 603 trillion billion years. Since our universe, according to most physicists, exists a mere 20 billion years we, finance theorists, would have had to wait for another trillion universes before one such change could be observed. Yet it happened twice during the same month. . . .

           Our conclusion, therefore, should be not that these events are miraculous but that our finance models are wrong. By assuming that changes in stock prices are normally distributed, these models underestimate risk in a spectacular way. As a result, investors have been misled in a very big way, believing that the risks they were taking were small. The risks were very big. We now know why.

           It is time to throw away the models and to go back to the drawing board. In the meantime banks should be forbidden to hold complex assets on their balance sheets that have been priced using one of these models.

        Click here to read the entire article, and to view the eye-popping charts.

        A conservative is a scab for the oligarchy.

        by NBBooks on Sat Dec 20, 2008 at 12:33:23 AM PST

        [ Parent ]

      •  What NBBooks said, plus (2+ / 0-)
        Recommended by:
        Timaeus, chrome327

        that was a direct quote from Paul Krugman...and our very own liberal Nobel Laureate knows what he's writing about.

        The banks have engaged in such non-transparency that not even they really know the shape they are in. Every day there are more foreclosures - Joseph Stiglitz

        by Youffraita on Sat Dec 20, 2008 at 01:26:17 AM PST

        [ Parent ]

  •  Short-sighted and stupid . . . (1+ / 0-)
    Recommended by:
    Norm DePlume

    Punitive justice may be cathartic, but it usually just kicks the problem down the road.  Not unlike the reparations issue following WWI.

    The goal here is:

    How do we keep this from happening again?

    We had a reckoning after the Great Depression which resulted in a regulatory framework that kept investors and ordinary citizens protected for the next 3 and a half generations.  That's the kind of solution that we need to be pushing for.  

    Selecting people from financial institutions at random and putting them into prison arbitrarily may very well be the stupidest idea that I've heard.  That's the description of an action that would only be permitted in a dictatorship.  Frankly I'll take a nasty recession in a democracy any day; over one man arbitrary rule.

    •  Wrong goal (5+ / 0-)

      You write

      The goal here is:

      How do we keep this from happening again?

      No.

      The goal is to seize back control of the economy's credit mechanism.

      And this is not even the ultimate goal.

      The ultimate goal is to shift the entire world economy from dependence on burning fossil fuels, by, say 2030.  

      I do not believe that anyone on Wall Street or in the City of London is willingly going to accept the very low returns that achieving these goals is going to allow.

      A conservative is a scab for the oligarchy.

      by NBBooks on Sat Dec 20, 2008 at 12:18:42 AM PST

      [ Parent ]

      •  Part of repudiating the credit criminals (1+ / 0-)
        Recommended by:
        NotGeorgeWill

        will be reforming the tax code. One thing that made the get rich quick scams possible was the ultralow 15% tax rate on passive income such as capital gains and dividends. That makes the short term financial lottery that much more attractive than investing in tangible assets such as infrastructure, goods, and services that people actually use every day.

        A good way to put a stop to this is taxing capital gains at the same rate as ordinary income such as wages and company profits, eliminating preferential tax treatment for the financial industry, and re-instituting the pre-Reagan top marginal rate of 75% for incomes in excess of $3.5 million, with no exceptions.

        "Without our playstations, we are a third world nation"-Ani DiFranco

        by NoMoreLies on Sat Dec 20, 2008 at 05:01:32 PM PST

        [ Parent ]

      •  Well, if you destroy the financial system . . . (0+ / 0-)

        you pretty much will achieve your objectives by 2030.  At least so far as the U.S. is concerned.

        I guess it's better that people die in their 40s and 50s, and that we have high infant mortality rate, and a high rate of poverty than global overheating (although China and India might still achieve that objective for us -- we won't be able to do much since your plan will effectively destroy our economic capacity, China and India can go ahead and ignore us).

    •  of course it would be stupid to lock people up (3+ / 0-)
      Recommended by:
      NoMoreLies, JG in MD, chrome327

      who haven't been convicted of crimes.

      And I seriously doubt that the diarist is suggesting that.  

      What s/he appears to be suggesting is to send in an army of prosecutors, put the top management of these firms under a magnifying glass, find the crimes that have been committed, and throw the book at 'em.  

      About which I wholeheartedly agree.

      And also, let the toobigtofails fail.  What's good the the goose is good for the gander.

      One more thing.  Making false statements on a loan application is felony fraud.  Encouraging borrowers to do that is conspiracy to commit fraud, and is fraud in its own right.  First-time home-buyers should be let off the hook because they have a reasonable claim that they didn't know what was going on and thought this was normal.  But the lenders who encouraged this:  throw the book at them too, and they can be cellmates with the Wall Street guys.

      •  Ah ah ! (2+ / 0-)
        Recommended by:
        G2geek, JG in MD

        We have found one of our prosecution team leaders! Someone get G2geek a badge!

        A conservative is a scab for the oligarchy.

        by NBBooks on Sat Dec 20, 2008 at 06:16:44 AM PST

        [ Parent ]

      •  Read the diary . . . (0+ / 0-)

        "pick financial managers at random and make an example of them."  That's the process.

        In the real world, NBBooks case doesn't even make it to trial, because it works from the assumption that any head of a major Wall Street financial firm is a criminal -- it presumes guilt.

        It's like what the Nazi's and fascist army's have done through history.  "They kill one of ours, we round up the men over the age of 18 and kill 1,000 of them at random, just to instill fear."

        It's stupid and ultimately counter-productive.

        In reference to the false statements claim what your saying is true.  But you are making an arbitrary rule when you say "First-time homebuyers should be let off the hook, because they have a reasonable claim that they didn't know what was going on . . ."

        Where's the evidence in the law for that claim?

        The law says: fraud is fraud.  If the law before-hand doesn't say "first-time homebuyers are exempt" then you're playing the dictator by making exemptions that don't exist in the law.

        The problem with proving any case is that proving intention is very difficult, and it would be a waste of resources to search for and prosecute every small time crook who engaged in what is believed to be fraudulent activity.  It's the same deal with having cops vigilantly enforce traffic laws for speeders who go 2 mph over the speed limit.  Resources aren't unlimited and you have to prioritize.

        Clear violations of the law should be prosecuted, but they should be done on the basis of evidence of fraud or illegal activity.  Not on the basis of some whim.

  •  The Cure Will Be Worse Than The Disease (0+ / 0-)

    As an investor I've been burned pretty good this year.  I'm as outraged as the next guy about the shenanigans that have taken place on Wall Street but if we go on a witch hunt that is only going to exacerbate our problems and make the recession longer, deeper and more painful.  The big banks really do hold the keys to how this thing turns out if only because of their size.  We need the credit markets to start to un-freeze and the best way to keep that from happening is for a punitive purge with thousands of lawyers setting up camp at all the big banks.  

    Let's make a distinction between making bad investment decisions and doing something illegal.  If something illegal took place then I'm all in favor of having as many perp walks as possible.  But I've made some bad investment decisions over the years and that's the way the market works.  Lots of very rich people have lost huge amounts of money during this crisis.  Dick Fuld of Lehman Bros is now at least a couple billion dollars poorer because of his mismanagement.  The market punishes those that hold stocks.  The market doesn't punish bonuses based on bad investment decisions.  That's a problem and hopefully that will somehow get fixed or abated under an Obama Administration.  How?  I haven't the foggiest idea of a practical way to enforce that.

    It's not just the big boys on Wall Street.  We have a friend in our neighborhood who is a RE broker.  She has made a ton of money the past few years.  Drives a new BMW and lives lavishly with lots of overseas trips and various other forms of conspicuous consumption.  She was part of the problem ... but I know her and she is not a crook.  She played the game that Greenspan put in place and took her easy inflated commissions in an over-heated market.  Should we punish her?  If not, why not?  How about all the RE appraisal firms across the country?  They were as complicit as anyone on Wall Street.

    •  Ok, let me ask you this: (4+ / 0-)
      Recommended by:
      Timaeus, G2geek, andrewj54, chrome327

      Are you willing to accept a one or two percent return on your "investments" for the next twenty or thirty years?

      Because if not, we as a society have to get you out of the process of allocating credit.

      A conservative is a scab for the oligarchy.

      by NBBooks on Sat Dec 20, 2008 at 12:07:21 AM PST

      [ Parent ]

      •  What? (0+ / 0-)

        Are you willing to accept a one or two percent return on your "investments" for the next twenty or thirty years? Because if not, we as a society have to get you out of the process of allocating credit.

        I have no idea what you are getting at.  "Society" did not allocate credit.  What are you talking about?

        I've already had over a 15% return in commodity positions in the past two weeks but I'm still down BIG ytd.  Lots of people have made BIG money being long the dollar in the past three months.  Your assertion that I, or anyone else, is limited to one or two percent returns over the next 30 years is so far from the mainstream that I do not know how to respond to it.

         

        •  What I am getting at (4+ / 0-)
          Recommended by:
          G2geek, NoMoreLies, ggwoman55, chrome327

          I just don't see how anyone is going to get 15% returns on investment in building the 250 trillion megawatts of clean electricity generating capacity we need, just in the U.S.

          And if society needs that 250 trillion megawatts of clean electricity generating capacity in order to avoid committing environmental suicide, what right do you or anyone else have to say that your "investment" in commodities speculation is more important?

          "Society" has allowed speculators like you to be the agent of allocating credit. The result we now see is a disaster. So, you may think "one or two percent returns over the next 30 years" is out of the mainstream now. The important word is "now."

          A conservative is a scab for the oligarchy.

          by NBBooks on Sat Dec 20, 2008 at 12:28:25 AM PST

          [ Parent ]

          •  Have You Ever Bought A Stock? (0+ / 0-)

            just asking.  I'm asking because it sounds like you have absolutely no idea of what you are talking about.

            I purchased a commodity stock.  I am an extremely small fish in a big market.  Miniscule wouldn't even do it justice.  I'm now where close to even being on the on the radar screen.  My investment of a couple hundred shares of Potash Corp. went up 15% from the time of my recent purchase.  That does NOT make me an evil speculator.  I invest in stocks and try to make some money in the process.  Geeeeze Louise.

            Your assertion that investors are limited to 2% returns for the next 30 years is one of the dumbest things I've read on this forum (and that's actually saying quite a bit).  I'm sorry.  It just IS.

            Not responding to anymore of your posts on this subject.  

            •  Yep, been there done that (2+ / 0-)
              Recommended by:
              andrewj54, chrome327

              and always felt like being obsessed with market movements was deranging my soul.

              But tell me this - does Potash Corp actually see any of the money you use to buy a few hundred of its shares? Does that money actually get "invested" in real economic activities of production or distribution?

              Nope, just goes to another speculator is all.

              I think you ought to listen to some old Bob Dylan. The times, they are a'changin'.

              A conservative is a scab for the oligarchy.

              by NBBooks on Sat Dec 20, 2008 at 12:48:27 AM PST

              [ Parent ]

              •  Good Grief (0+ / 0-)

                I said I wasn't going to reply to anymore of your posts but this one is so blatant I'm making an exception.

                But tell me this - does Potash Corp actually see any of the money you use to buy a few hundred of its shares? Does that money actually get "invested" in real economic activities of production or distribution?Nope, just goes to another speculator is all.

                This is just amazing.  Is it better if a company's stock goes up or goes down?  Is it better if a company's market cap is large or small?  Is it more beneficial if Potash raises capital at $80/share or $50/share?  You really don't understand any of this ... do you?

                •  Just answer the original questions (0+ / 0-)

                  Wall Street is not serving its function of allocating capital. It has not been for decades.

                  When someone buys shares of stock, where does the money go? It goes to someone who already owned the stock.

                  A conservative is a scab for the oligarchy.

                  by NBBooks on Sat Dec 20, 2008 at 06:25:51 AM PST

                  [ Parent ]

                  •  Allocating Capital? (0+ / 0-)

                    You seem to be hung on this but honestly I don't think you have the foggiest idea of what you are talking about.  Sorry to have to put it that way but there it is.

                    Companies do equity offerings all the time.  They issue stock to raise capital.  Where do you think they sell these offerings?  On the stock exchanges.  

                    What happens after a company issues stock is between the buyers and sellers of that stock.  It is THEIR capital that is getting allocated and that is exactly how it should be.    

                    Companies also buyback their own shares on the open market.  Where do you think those funds go?  They go directly into Treasury Stock and if you know your accounting principles you know that is part of stockholder's equity (i.e. capital).

                    What country of any significance does not have a stock market?  They ALL do and they all operate more or less the same.  What is your alternative for "allocating capital" (whatever that means)???  Dissolve the NYSE?  And then what?

          •  Love the diary, but... (1+ / 0-)
            Recommended by:
            JG in MD

            I'm afraid you've gone off the rails on this reply here. Not quite sure what you're implying, especially since you seem to be assuming a lot about Norm DePlume and his investment(no quotes needed) habits, and possibly about "society"(???) more generally.

            The fact is, this is a volatile market, not least for commodities and the companies that deal in them. Every investment show I've watched in the past few months has asked the question "Where's the Bottom?", because people are looking to buy into good stocks at cheap prices. I see nothing wrong with this; it's the way markets are supposed to work, is it not?

            I'd also add that investing in commodities seems, to me anyways, a hell of a lot less speculative than plunking money into any of these bank stocks or other victims of their own criminality. Ditto for negative yielding t-bills. No thanks. I'm a private citizen, and I'm free to put my money wherever I want, thank you. Call me a speculator if you like, but I'm not a part of the problem. My few thousand dollars is irrelevant against the flows of institutions and funds.

            Show me an "investment" today that isn't a speculation of some kind.

            Sorry, NBBooks, much respect for your diaries and valued comments, but this comment was weak sauce. No disrespect intended, just bewilderment.

            I do disagree with Norm Deplume's original reply though, and strongly too. Dick Fuld wasn't burnt by something that everyone thought was safe that just HAPPENED to explode. I know people on Wall Street, and they all knew that criminality was rampant, even if they didn't know the specifics. It was a game and everyone was in on it, and no one dared to question it until late in the game. I think he's right that most people were caught up in the game through no fault of their own and are innocent of wrongdoing(criminality, after all, requires that intent be present) but this does not mean that there were not people who DID understand the big picture. This is the thrust of your diary, and I'm in full agreement that those people who engineered this should be frogmarched to the nearest jail cell.

          •  in point of fact we can get VC levels of ROE on (0+ / 0-)

            renewable energy.

            I worked on the spreadsheets for about 350 megawatts' worth of wind farms.

            30% return on equity after 5 years.

            And all the construction labor was calculated at union rates.  

            It can be done.

            •  I'm skeptical but would love to see you (0+ / 0-)

              write up something. I looked through the list of your diaries and did not see where you might have already. Maybe I missed it. Or maybe you plunked it into the Energizing America blog?

              Did you run the numbers using the tax credits for renewable energy, or without them?

              And what cost estimates did you use? AWEA's or DOE's?

              My immediate reaction is that if 30% ROE is possible, how come there's not hundreds of billions of dollars flowing into the sector right now, instead of the flight to safety in Treasuries at real negative interest rates.

              But don't let me discourage you - really, please do write a bit about this. Maybe we don't have to be as harsh and punitive as I think we do. Maybe some tweaking of government incentives is all that's required.

              A conservative is a scab for the oligarchy.

              by NBBooks on Sat Dec 20, 2008 at 07:43:38 AM PST

              [ Parent ]

              •  i didn't write a diary on that because.... (1+ / 0-)
                Recommended by:
                NBBooks

                ...quite frankly I'm lazy about writing diaries.  Also because that particular company is still privately held, and I'm well-trained at keeping secrets and staying out of the gray zone between OK and not-OK, so there will never be identifying information or confidential business information spilled here.  

                Primarily I'm a telephone systems engineer, and the wind project occurred during a couple of years when geekdom was taking an economic hit and telephony projects were fewer than normal.  

                Interestingly, I don't know doodly-squat about the arcana of tax credits and so on.  Basically what I did was focus on the engineering side to find ways to reduce costs without compromising the project; and keep management costs low which included keeping management compensation to the minimum (as in, "nearly flat pay scale").  

                The key thing was direct labor rather than contracting out to the big civil engineering firms: with what you save on their overheads, you can pay union scale and still end up double-digits ahead of where you'd be if you contracted out.  There were a few other things that had to do with construction equipment & methods: notably that the 300 MW that I was working on, was part of a much larger portfolio, so we could spread out the costs of equipment acquisition over the larger portfolio and that reduced the unit costs per installed megawatt considerably.  

                But the most important thing was that the wind sites in question were truly excellent, and could be counted on to produce at the level needed.  That's the first & foremost when it comes to wind: the quality of the site.  And that part isn't up to humans, it's up to nature.  

                In the end there was a series of changes in management and approach, though the piece about keeping management compensation as low as possible still remained, along with a strong culture of "delayed gratification," along the lines of "we'll get our rewards when our stock is worth something."  Those sites will get built and those of us who were there early will earn a decent though not excessive reward for our troubles, and the investors will earn their return on equity, some faster than others (the early birds knew they'd have to wait).    

                But I'll tell you this.  Building wind can take every bit as long as building nuclear.  And the tragic irony is, most of that delay has to do with money and paperwork.  Given the necessary funding and no arbitrary paperwork delays, a gigawatt of wind or nuclear can go up in three to five years.  In the real world, more like 8 - 15 years due to arbitrary BS.   This is the key factor that will have to be overcome in order to build the climate-clean energy we need for this century and beyond.  

  •  Yell it from the rooftops (3+ / 0-)
    Recommended by:
    G2geek, NoMoreLies, chrome327

    NBBooks, you are so right.

    A "Trillion" of anything is really hard to wrap your mind around. If people could only do so - Americans would be exponentially angrier at "Wall Street" thievery.

    Pitchforks and torches pissed off. And rightfully so.

    I'm already against the NEXT war

    by SecondComing on Sat Dec 20, 2008 at 12:02:22 AM PST

  •  This is a GREAT diary. (10+ / 0-)

    Tipped and rec'd.

    Too bad this is posted in the middle of the night.

    If this does not get rescued, please repost it.

    I could not agree more completely! Screw Wall Street!

    Put them in jail!

    I've been dealing with Wall Street types for decades. I think they're almost all scum.  They KNOW what they're doing is crooked and they don't give a shit.

    Forget about "regulation."  I'd like to see real RICO conspiracy criminal prosecutions. They all knew what was going on.

    I have no words foul enough to express my indignation about my tax dollars going to give BONUSES to those assholes at Goldman Sachs and other investment banks. Those bastards should be IN FUCKING JAIL!  Millions are out of work and they're whining about gigantic bonuses larger than I ever made in a year of really hard work!!! Fuck 'em!

    Editorial note: As a Christian I do not approve of the tone of everything I have just written; oh but I approve of the substance.

  •  Agree, agree, agree (6+ / 0-)

    Randy Wray is right:

    I advocate a "too big to save" doctrine: the big Wall Street banks serve almost no public purpose. Let them fail. Save the small and medium sized banks that actually lend to firms and households.

    This is what we should have done to begin with rather than pissing away a no-strings attached $700 billion.

    To notch diary. Thanks NB.

  •  Thank you! And oddly enough.. (5+ / 0-)
    Recommended by:
    G2geek, NoMoreLies, Luetta, JG in MD, chrome327

    Sen. Diane Feinstein has been screaming from the rafters about why derivatives need to be ended or curtailed since Orange County went broke with them in the 90s.

    We in Cali need to get on this band wagon and separate them out and limit them from normal raising of capital.

    There used to be blue chip stocks and solid steady 5% growth on savings accounts and if a company could make 5% profits that was a solid company.

    When Wall Street became a slot machine under Reagan, I knew we were in big, big trouble.

  •  Taken or given? (1+ / 0-)
    Recommended by:
    chrome327

    None of this could have happened without the cooperation and complicity of both political parties.

    Americans: losing their homes; John McCain: misplacing his houses

    by jhecht on Sat Dec 20, 2008 at 04:37:57 AM PST

  •  The "boys will be boys" chorus has started. (2+ / 0-)
    Recommended by:
    NBBooks, JG in MD

    And we need to nip it in the bud.

    NIP IT!!!!!

    St. Ronnie was an asshole.

    by manwithnoname on Sat Dec 20, 2008 at 07:26:37 AM PST

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