The traditional model of investment banking came under renewed threat Wednesday as Morgan Stanley and Goldman Sachs, the two remaining giants of this beleaguered Wall Street industry, suffered stunning losses only one day after they reported quarterly earnings that exceeded analysts' expectations.
The turmoil at the two vaunted institutions -- which only a year ago had the company of three other major investment banks -- follows an unprecedented week in American finance that has rattled investors, reshaped the landscape of the investment-banking business and raised questions about the viability of stand-alone brokerages
Here is a list of recent reckless financial events :
1) Technology bubble
2) Housing Bubble
3) Reckless Government Debt Spending
4) Oil Bubble / Commodity Bubble (some of this occured outside of this country)
Where were the voices of reason? The financial leadership in our county has shown its incompetence. It is a tragic period in our nation's financial history. It is d*mn scary.
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Have you ever stopped to consider that it's not bad financial leadership ... but instead that the world economy has globablized to the point where no one country (or its leaders) can exert financial leadership? The financial levers just aren't there anymore. Capital is just too fluid ... It doesn't respect national boundaries like it used to.
ReplyDeleteAnd no, don't expect Obama to be able to do anything. He's the fall guy in the whole story.
Lance,
ReplyDeleteI won't accept that. Decisions regarding reckless spending by the US government are made here in the US. Many of the decisions to load reclessly were made here in the US.
David,
ReplyDeleteThat's only because the money was there to loan to begin with ... and at almost no cost to the lenders. They reacted as any rational player would have. And yes, there were restrictions, but they didn't work. They couldn't work because they were designed for an old paradigm that no longer existed. For example, the Fed couldn't exert the controls it once could.
In the long term though everything will be fine. This is just an adjustment as we move from one way of doing things to another. Things always have a way of balancing themselves.
I don't see throngs of people out of work. I don't see throngs of people homeless. I don't see the throngs staying away from the malls. Yeah, some big wig mortgage company CEOs might get hurt. But all in all, almost everyone is doing fine.
Too bad McCain backed away from the statement. He was right there.
"That's only because the money was there to loan to begin with ... and at almost no cost to the lenders. They reacted as any rational player would have."
ReplyDeleteRational players would have REFUSED to make loans to borrowers with poor credit, no credit and no way of repaying the loans.
"And yes, there were restrictions, but they didn't work."
They were not allowed to work, House appraisers were blackballed if they didn't make the numbers work on the real estate deal and no one would listen to their complaints.
"They couldn't work because they were designed for an old paradigm that no longer existed."
Old paradims like-
"Honesty is the best policy"
"In the long term though everything will be fine. -Lance"
"In the long run we're all dead -Keynes"
"I don't see throngs of people out of work."
Thats because you are not looking at the real estate agents, carpenters, plumbers, roofers, sub-contractors, etc who are out of work. Travel to Florida and Arizona and look around and then tell us you don't see people unemployed.
Why is anyone arguing with Lance?
ReplyDeleteLance is/was on da Nile for so long that nothing he says should be listened to for any reason. His credibility is completely shot.
That's right anon 616. That's why I've been on the money so far. Don't you wish you'd listened and bought back when you could still get a loan? ... Of course I know you're going to tell me how YOUR down payment investments haven't been effected and YOUR bank will still lend to YOU. Of course ... :)
ReplyDeleteGet ready for some walloping rent increases. With all the money the Fed has been printing the last couple days, double digit inflation is just around the corner.
Lance who said there was no housing bubble, and may still be saying it.
ReplyDeleteReason, facts, arguments are lost on some.
But here goes--the CEOs are NOT the ones who are going to suffer, they leave with golden parachutes they set up in the "anything goes" times.
And you don't see unemployment because you 1) don't want to and 2) aren't in Michigan, New York (many investment bankers coming to a bar near you--in the DAYTIME), Ohio, etc.
"Of course I know you're going to tell me how YOUR down payment investments haven't been effected and YOUR bank will still lend to YOU"
ReplyDeleteThis is the key, isn't it?
I personally know folks who have lost hundreds of thousands from their savings in the last 6 months. Metals were up yesterday but are down from recent highs.
I've seen the reports that credit is getting harder to obtain. BH's say this is OK because THEY have a top credit rating and anyway, if they can't get credit to buy, prices will fall.
The part they miss is that (as Lance points out) the builders are out of business and the supply of homes is drying up.
Also, building materials will be in short supply and more expensive as the country continues to rebuild New Orleans and now starts on the Houston-Texas Coast.
Fewer builders, fewer new homes, more costly materials, falling stock market, credit crisis, inflation looming, gasoline still expensive, counties don't have money for transportation maintenance or upgrades.
". Don't you wish you'd listened and bought back when you could still get a loan? "
ReplyDeleteSome of us were too young to buy a house 8 years ago. And refused to spend too much/get a crazy loan recently. So we suffer because of all that unfolded these past years. But I forgot, I'm supposed to be happy that everyone a little older/more settled than me made tons of money while I can't afford a home in a decent neighborhood, and I should be happy to help out everyone who bought more than they could afford while I struggle to save as much as I can.
Ok . . .
I welcome tough loan standards. Because I've been responsible and been saving. Bring it on ...
Anon 5:37,
ReplyDeleteYou still don't get it, do you? Those folks you were mocking who didn't "refused to spend too much/get a crazy loan", but instead did the best they could under the circumstances and are better off now. Those who thought all their problems would be solved by "gloom and doom" and that THEY'd magically be the ones coming out ahead --- despite their "refusing" to do the hard thing --- are suddenly learning the hard way that there are no free lunches.
We've ALL been through similar challenges. And I will admit that for many years I was a "BH" thinking "prices MUST drop" ... "buying a house should be easy" ... I one day came around though, and I realized I was wrong.
I hope you do too.
Higher mortgage rates
ReplyDelete+
harder to get a mortgage
=
Lower house prices.
How so you ask?
Desperate sellers
+
failed flippers
+
increased inventory from over building by builders
+
increased foreclosures
+
fewer people able to buy a house due to dmamged credit by buying too soon or getting a crazy mortgage or being foreclosed
=
lower house prices for those who have the cash in the bank, down payment, good credit & proof of employment.
Inflation and deflation can
co-exist (think stagflation in the 1970's.)
Lance said...
ReplyDeleteYou still don't get it, do you? Those folks you were mocking who didn't "refused to spend too much/get a crazy loan", but instead did the best they could under the circumstances and are better off now.
Hummm, forclosure is better off? That’s a new one Lance. Is that a new paradigm?
Those who thought all their problems would be solved by "gloom and doom" and that THEY'd magically be the ones coming out ahead --- despite their "refusing" to do the hard thing --- are suddenly learning the hard way that there are no free lunches.
Hard thing? What was hard about qualifying for a NINJA loan? And please…a “free lunch”….what do you call a no money down, negative amortized, ARM…
We've ALL been through similar challenges. And I will admit that for many years I was a "BH" thinking "prices MUST drop" ... "buying a house should be easy" ... I one day came around though, and I realized I was wrong.
Similar challenges? Oh yea, that’s right, this is a “normal” down turn…we see it every coupla years.
Lance, like the housing market that was, you are at a disconnect from fundamentals.