Tuesday, August 16, 2011
A few quick items for your August morning:
In a link shopped around by my lefty Facebook friends, the SEC is investigating Standard & Poor's for potential insider trading in advance of the downgrade of the credit rating of the United States. Smells political to me, with the twin benefits of a free-floating accusation against S&P that has already been repeated thousands of times in the media and the implicit threat to Moody's and Fitch. I predict that the investigation will find nothing after imposing massive legal expenses on S&P, but the point will have been made. One can both dislike S&P and deplore the political use of the power to prosecute.
[UPDATE: Much more on the unlikelihood that the government will be able to prove liability for insider trading on advanced news of the downgrade.]
Spengler tells something close to the truth about the financial crisis. Read the whole thing, and ask yourself whether you are among the guilty.
The somewhat lefty financial blogger Ritholtz catalogs many of the economic predictions of the last seven or eight years, and especially the last three. It is a useful reminder that many of our most confident predictors are no more right than a dart board.
Via Glenn, sales of home safes "soar." The soaring prices of gold and other transportable assets (see, e.g., the rare coin market) suggests that people want their money where they can feel it. Because we provide a valuable service here at TigerHawk, here is a link to a list of home safes on Amazon, many of which are substantially discounted off the MSRP.
Barack Obama, in shoulder-to-shoulder solidarity with George W. Bush (circa 2002), wants the government to continue to subsidize the market for home mortgages. While that may be in the short to medium term financial interest of lots of people -- mortgage originators, real estate brokers, and people who build houses -- does anybody actually believe it is good for the country? I suspect that with the benefit of hindsight even Dubya would not agree.
Anon Attorney here.
I've been reading Spengler for years and enjoy his analysis of matters political and financial. But much like you, TH, Spengler has spent his career in finance and has derived the warped sense of ethics that seems to pervade the sector.
Here's Spengler's thesis:
>> The trouble is that "Wall Street gamblers" didn't do the
speculating. The American public did. This was a Ponzi scheme by the people, of the people and for the people, the most democratic crony-capitalist scam in the history of humankind.
This is risible. The American public had little or no input into the financial policies that drove the credit bubble which, in turn, drove the housing bubble. Without going into detail, it should suffice to note that the American public had no input into Federal Reserve policy, lax bank regulatory policy, a complacent SEC, and idiotic ratings agencies who swallowed the idea that Wall Street could eliminate credit risk. And finally, the American public had little input on the post-crisis policies which have transferred this bad debt from the private sector to the public sector, which continues to this day.
Profits were privatized. Losses were socialized. This is financial fascism, not market economics.
If you want to see where financial fascism leads you should read Spengler's column in which he argues that Greece should not be allowed to default on its bonds. He argues that the EU should forcibly confiscate Greece's state property AND THE PRIVATE PROPERTY OF GREEK CITIZENS to pay Greek debt. WTF??
Agreeing with Anon Attorney: "Everyone's guilty, so no one is guilty" is bullshit.
I just saw the HBO flick "Too Big To Fail" after having sped read some of the book it was based on. The book is good as a timeline of the unfolding events of the Financial Crisis, but less good as an accurate portrayal of what actually happened as it relies on attributed (and most likely self-serving) quotes from the Big Swinging Dick principals.
I happen to know a lot about what went on, and I'm still clueless about what really happened. I can create my own alternative fantasy versions of "Too Big to Fail" by just changing the dialogue. In the more extreme versions Hank Paulson, Lloyd Blankfein, Tim Geithner, and John Thain conspired to put the interests of Goldman Sachs above country. Even Warren Buffet was in on it. I'm actually leaving out several other characters in the HBO flick that have a Goldman connection.
Is this true? I don't know, but it's actually plausible and it better fits the fuller facts of what happened than what you see in "Too Big To Fail".
What I can say with confidence is that you can point to specific people and what they did at exact points in time that helped make the Financial Crisis what it was and they weren't all at Goldman. Many of them are still in positions of influence and power. Most of them are still worth a boatload.
I go into this because the Financial Crisis is far from over. We didn't die from a liquidity stroke in 2008, although we came close. But we now have a slow-eating cancer. If you don't believe me, why are our Big Banks trading at a discount to book value -- even Goldman. Bank America is trading at less than a third of book -- that's a tell. Lots of ink has been spilled about the auto bailouts, but Fannie and Freddie lose more each quarter than all of what we put into GM.
Now if you want blame this on the public, you have a case as far as "the public" put into office elected officials who helped contribute to this mess. But I don't believe in our collective guilt on this. Washington and the Borg have become too big and too corrupt for the people to control, at least as of this moment.
That may change, or not .....