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Opinion: Wallstreet deserves to Die

 
 
Reply Thu 18 Sep, 2008 04:55 pm
Quote:
Wall Street's Just Deserts

By Harold Meyerson
Thursday, September 18, 2008; Page A21

At the risk of speaking ill of the dead, what good was Lehman Brothers, anyway? And if Merrill Lynch was so bullish on America, why is it that, despite the torrent of foreign investment that flowed in to Lehman, Merrill and their Wall Street peers over the past half-decade, so few jobs were created in America during that period of "recovery"?

During the late, lamented Wall Street boom, America's leading investment institutions were plenty bullish on China's economy, on exotic financial devices built atop millions of bad loans, and, above all -- judging by the unprecedented amount of wealth they showered on the Street -- on themselves. The last thing our financial community was bullish on was America -- that is, the America where the vast majority of Americans live and work.

Over the past eight years, the U.S. economy has created just 5 million new jobs, a number that is falling daily. The median income of American households has declined. Airports, bridges and roads are decaying. Rural wind-power facilities cannot light cities because our electrical grid has not been expanded. New Orleans has not been rebuilt. And as productive activity within the United States has ceased to be the prime target of investment, household consumption -- more commonly known as shopping -- has come to comprise more than 70 percent of our economy.

The banks' underinvestment in America was hardly due to a lack of capital. But even as petrodollars and China's dollars poured into Wall Street, the investment houses directed trillions into new and ever more dubious credit instruments, which yielded massive profits for Wall Streeters and their highflying investors, and put chump change into efforts to improve, to take just one example, American transportation.


It was not ever thus on Wall Street. In the late 19th and early 20th centuries, bankers such as August Belmont and J.P. Morgan invested European capital in American railroads and steel. Moreover, by the 1830s, a major political party, the Whigs, had arisen on a platform of "internal improvements" -- fast-forwarding the nation's development through a public commitment to building roads, rails and canals. Their successor party, the Republicans, continued these commitments, as Lincoln's support for the transcontinental railroad and land-grant colleges makes clear.

By the mid-20th century, the behemoths of American manufacturing reinvested their own resources to meet most of their capital needs, while New Deal-era and subsequent administrations (including that of Republican Dwight Eisenhower) invested heavily in the nation's infrastructure. Wall Street played a diminished role during the golden years of mass American prosperity but came roaring back beginning with the financial deregulation of the Reagan era.

Finance set the terms of corporate behavior over the past quarter-century, and not in ways that bolstered the economy. By its actions -- elevating shareholder value over the interests of other corporate stakeholders, focusing on short-term investments rather than patient capital, pressuring corporations to offshore jobs and cut wages and benefits -- Wall Street plainly preferred to fund production abroad and consumption at home. The internal investment strategy of 100 years ago was turned on its head. Where Morgan once funneled European capital into American production, for the past decade Morgan's successors have directed Asian capital into devices to enable Americans to take on more debt to buy Asian products.

Worse yet, as Wall Street turned its back on America, so did government. The Bush administration and congressional Republicans (John McCain among them) kept American incomes low by opposing hikes in the minimum wage; helping employers defeat unionization; and shunning policies to modernize infrastructure, make college more affordable, and boost spending on basic science and research.

Today, it's the Democrats who sound like Lincoln's Republicans. In recent months, the Obama campaign and liberal think tanks in particular have generated numerous proposals for heightened public commitment to infrastructure and education. Unlike tax cuts, which chiefly bolster our ability to consume imported goods and commodities, infrastructure investments make us more productive and have a multiplier effect that creates more jobs over and above those that the government funds directly. Congressional Democrats have included major infrastructure investments in their pending new stimulus bill, which Bush and GOP leaders oppose.

Someone needs to invest in the United States of America. For the past decade and, in a broader sense, for the entire duration of the Reagan era, both government and Wall Street have opted not to. Should Barack Obama win, the era of neglectful government will probably come to an end. No matter who wins, Wall Street is vanishing before our eyes. And by the measure of their contribution to America's economic strength and well being, both Reagan-age government and Wall Street's investment banks plainly deserve to die.


http://www.washingtonpost.com/wp-dyn/content/article/2008/09/17/AR2008091702971.html?hpid=opinionsbox1

Pretty much in line with my opinion, Wallstreet has become more a leech on the back of hard working Americans than it is an asset, 80% of Wallstreet costs of operations could go away and America would not be deprived of a thing. Let's get America's best and brightest minds off of Wallstreet and into doing something productive.
 
farmerman
 
  2  
Reply Thu 18 Sep, 2008 04:57 pm
@hawkeye10,
What do you think about lawyers?
Wilso
 
  -1  
Reply Thu 18 Sep, 2008 04:59 pm
@hawkeye10,
I've been really interested in the complete lack of comments from the right wing on these issues. The slimy little conservative scum have crawled back into their holes in the ground because they know they don't have a philosophical leg to stand on.
mysteryman
 
  4  
Reply Thu 18 Sep, 2008 05:09 pm
@Wilso,
This conservative thinks that every bank or financial institution in trouble, INCLUDING Fannie May and Freddie Mac, should have been allowed to die without any type of govt intervention.

If they cant make the correct decisions to stay afloat, they should die.

BTW, didnt one of Obama;s advisors actually run Fannie Mae at one time?

I thought he did...

http://articles.latimes.com/2008/jun/12/nation/na-johnson12

So I wonder how much responsibility does he bear regarding the collapse.
farmerman
 
  1  
Reply Thu 18 Sep, 2008 05:16 pm
@mysteryman,
David Stockman, one of the Ronnie revolution guys who began the disassembly of govt, later realized that this mentality doesnt work at all and could be , should situations like this occur, force us into another Depression.

The "let em die minds" among you should better analyze consequences before making simplistic statements.
0 Replies
 
hawkeye10
 
  -1  
Reply Thu 18 Sep, 2008 05:24 pm
@farmerman,
I am much more tolerant of excess legal capacity than financial capacity, Lawyers contribute to the society by keeping everyone honest, it is an honest profession. However, a large portion of highly paid wallstreet operators contribute to the society about on par with pimps. They shove financial instruments around and facilitate the rich getting richer, and for this they take a huge cut. Pimps facilitate those who pay getting sex, and in return they take a huge cut. Both pimps and traders chase the dollar and don't care who pays or for what and don't care what they need to do to get paid.
hamburger
 
  2  
Reply Thu 18 Sep, 2008 06:07 pm
@hawkeye10,
hawk wrote :

Quote:
Lawyers contribute to the society by keeping everyone honest, it is an honest profession.



yes , most lawyers are honest , but wallstreet would never have been able to accomplish all its tricks and deceptions without some "honest" lawyers that knew how to manouver around legal obstacles .
one might argue that these lawyers were indeed honest since they only helped others to execute dishonest business - and they shouldn't be held resonsible for that .
personally , i would expect an honest lawyer not to give advice on how to conduct unsavory business practices .
just my opinion .
hbg

btw a/t to this book about 17% of lawyers have been "disnonest" in the practice of their profession .

see link :
http://books.google.ca/books?id=2hrqvjccW5UC&pg=PA66&lpg=PA66&dq=dishonest+lawyers&source=web&ots=yAGcWvYCq4&sig=9-b645QE1VIybTaAMNpsBzbiNl8&hl=en&sa=X&oi=book_result&resnum=2&ct=result
cicerone imposter
 
  3  
Reply Thu 18 Sep, 2008 06:19 pm
@hamburger,
hbg, I agree whole-heartedly~! Not all legal loopholes are ethical.
hawkeye10
 
  -2  
Reply Thu 18 Sep, 2008 06:37 pm
@cicerone imposter,
when lawyers pimp themselves out to corporations to find a way around the laws and the other interested parties so that the corporations can do what they want then we all lose. I am well aware that very little gets done at the high levels of corporate governance without lawyers. The difference is the the legal profession frowns upon wall street lawyers, where as the financial industry is Wall Street. In once case we have a few individuals of a profession up to no good, in the other it is the profession that has mostly become no good.
0 Replies
 
A Lone Voice
 
  1  
Reply Thu 18 Sep, 2008 10:35 pm
@hawkeye10,
Quote:

Pretty much in line with my opinion, Wallstreet has become more a leech on the back of hard working Americans than it is an asset, 80% of Wallstreet costs of operations could go away and America would not be deprived of a thing. Let's get America's best and brightest minds off of Wallstreet and into doing something productive.


I agree the markets should run their course without government intervention.

Let it crash. Monitor for illegal actions, but let the market go where it will. Those companies that will survive, will. Those that won't will be replaced.

Our financial system, with its truckload of debt, will have to reset sooner or later. We are not going to be able to finance all the programs the government has set up, especially once the boomers begin to retire en masse.

Hard times are coming. We will rebound, but we are eventually going to have to bite the bullet. Our 'money' is backed by nothing but the future taxes of the workers supporting the government and what those workers will earn; our government has taken the idea that debt doesn't mean anything.

What the government is doing now is just putting the inevitable off a bit, and probably making it worse in the long run...
Foxfyre
 
  2  
Reply Thu 18 Sep, 2008 11:48 pm
@A Lone Voice,
I was hearing around the edges today that President Bush's economic advisors and others are strongly suggesting a moratorium on selling short for at least three months. I would like to see that made permanent to make it much more difficult to manipulate the market for personal gain. Wasn't it George Soros who broke the Bank of England some years ago using that tactic? I understand the principle though I have a tough time wrapping my brain around it enough to fully understand exactly how it works.

And the other thing that needs to happen follows when Dr. Williams identifies the root of the current fiasco which was greatly exacerbated during the Clinton years and the Bush administration did nothing to curtail it. The punch line is in the last paragraph.:

Quote:
A MINORITY VIEW
BY WALTER E. WILLIAMS
SEPTEMBER 17, 2008

Stubborn Ignorance

Here's what the U.S. Constitution says: "All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills."

How many times have we heard politicians, pundits and guardians of our news media say that President Bush cut taxes, or Obama is going to raise taxes? The fact of the matter is that presidents have no power to raise or lower taxes. They can propose tax measures or veto them but it is Congress that has the ultimate power to raise or lower taxes since they can, with a two-thirds vote, override a presidential veto.

The same principle applies to spending. Presidents cannot be held responsible for budget deficits or surpluses. A president cannot spend a dime that Congress does not first appropriate. Given these plain facts, are politicians, pundits and media people -- who persist in talking about a president cutting or raising taxes, or creating a budget deficit -- ignorant, stupid or deceptive?

Did President Clinton create more jobs, or did President Bush? Let's look at it. In 1996, I landed a job at Grove City College team teaching a course with one of its faculty members, Professor Dirk Mateer. I would like someone to tell me how President Clinton created that job for me. Did he call the college president and say, "Hire Williams"? Did he give Grove City College, a private college, resources to hire me? He surely didn't call me up and say, "Williams, there's a job waiting for you at Grove City College." So what precisely do people mean when they say this president or that president created jobs? You might argue, "You're right when it comes to a president creating jobs, but Congress can create jobs through appropriating money for infrastructure such as highways and bridges."

That's true in one sense and false in another. You can see this by asking, "Where does Congress get the money to create the jobs?" They won't get it from the Tooth Fairy or Santa Claus; they must get the money from taxpayers. That means if Congress collects $100 from a taxpayer for highway construction, he cannot use that $100 for some other expenditure that would have created a job. If Congress borrows the money for highway construction, it causes interest rates to be higher and therefore less job-creating investment. The bottom line is that Congress can only shift employment or unemployment but cannot create net new jobs.

Many politicians and pundits claim that the credit crunch and high mortgage foreclosure rate is an example of market failure and want government to step in to bail out creditors and borrowers at the expense of taxpayers who prudently managed their affairs. These financial problems are not market failures but government failure. The Community Reinvestment Act of 1977 is a federal law that intimidated lenders into offering credit throughout their entire market and discouraged them from restricting their credit services to low-risk markets, a practice sometimes called redlining. The Federal Reserve Bank, keeping interest rates artificially low, gave buyers and builders incentive to buy and build, thereby producing the housing bubble. Lenders were willing to make creative interest-only loans, often high-risk "no doc" and "liar loans," in order to allow people to buy more housing than they could afford. Of course, with the expectation that housing prices will continue to rise, it was no problem for lenders and borrowers but housing prices began to fall, leaving some people with negative home equity and banks in trouble.

The credit crunch and foreclosure problems are failures of government policy. In fact, what we see now is a market correction to foolhardy government policy. Congress' move to bailout lenders and borrowers who made poor decisions will simply create incentives for people to make unwise decisions in the future. English philosopher Herbert Spencer said, "The ultimate result of shielding men from the effects of folly is to fill the world with fools."
http://www.gmu.edu/departments/economics/wew/articles/08/Stubborn%20Ignorance.htm




OCCOM BILL
 
  2  
Reply Fri 19 Sep, 2008 02:31 am
@Foxfyre,
Foxfyre wrote:

I was hearing around the edges today that President Bush's economic advisors and others are strongly suggesting a moratorium on selling short for at least three months. I would like to see that made permanent to make it much more difficult to manipulate the market for personal gain. Wasn't it George Soros who broke the Bank of England some years ago using that tactic? I understand the principle though I have a tough time wrapping my brain around it enough to fully understand exactly how it works.
Laughing So, by your own admission: You don't understand how it works, apparently can't be troubled to spend 2 minutes learning how it works, but agree a 3 month moratorium is in order and would even like to see it be made permanent. Laughing
spendius
 
  1  
Reply Fri 19 Sep, 2008 04:02 am
It's structural. The problems are deep seated. They are psychological.

Has Media no hand in it? Does it connect to Wall Street?

Your greatest writers and artists have been telling you for years but you won't look at them. You read the ephemera.

fm asks about lawyers. Well- read Rabelais. Everything you need to know about lawyers is in that. And nothing has changed.

Credit crunch--read Galbraith.

Read Spengler. Read Burroughs. Read Salinger. Read Mailer. Listen to Dylan. Read Hofstadter. Study Warhol.

Waste=Status, Use=Odium. Farmers, steel workers, garbage collectors are all useful. Compare their rewards to financial marketeers. Compare their working conditions.

Don't indulge your intellect thinking you know what conspicuous consumption is just because you know the phrase.

You're throwing good money after bad bailing out these thieves. And you don't know what else to do.

Your breadbasket is dismissed as flyover states.

Have anti-intellectualism at your peril.
0 Replies
 
spendius
 
  1  
Reply Fri 19 Sep, 2008 04:13 am
On short selling.

HBOS stood at £12 when it began to be short sold. Lloyds Bank bought the business for £2.32 yesterday. The short sellers were correct. The company was 5 times overvalued. Without short selling it would still be £12.

Short sellers can lose their shirts. Soros shorted the £ and was proved right. The person who backs a horse in a race shorts all the other runners.

Banning it is a sign of panic. It's banning truth.

0 Replies
 
Foxfyre
 
  2  
Reply Fri 19 Sep, 2008 06:03 am
@OCCOM BILL,
Just basing my opinion on listening to financial guru types talking about how 'investors' band together to intentionally drive down the price of a stock so that they can personally benefit selling short. When many millions of people have their retirement funds in the market invested on faith that the companies will grow and prosper, I can't believe that is a good thing and I can't see how that should be legal. What I don't understand is the details of exactly how selling short works as I have never (and don't think I probably would) do that despite reading numerous explanations of it. That does not mean that I don't know what it is. I don't know how a nuclear reactor works either, but I know what one is.

Spendi does provide a different perspective that I will look at however. And he did it without being sarcastic and condescending which I much appreciate.
Bi-Polar Bear
 
  2  
Reply Fri 19 Sep, 2008 08:45 am
@cicerone imposter,
ethics and legality..... 2 different things.
cicerone imposter
 
  1  
Reply Fri 19 Sep, 2008 09:38 am
@Bi-Polar Bear,
No, they are not separate; just because something is legal does not necessarily make it ethical.
0 Replies
 
Below viewing threshold (view)
spendius
 
  0  
Reply Fri 19 Sep, 2008 10:58 am
The crux of the matter was that property was ridiculously over-valued. That meant, in real terms, that a couple couldn't get married and have kids without the wife going out to work.

Wives with young children going out to work has been made to seem respectable by a tiny minority of women in media who would suffer any strain, and cause others to suffer any strain, so they could be in the public eye and have a big income. The millions of women with young children neither want to go out to work nor be in the public eye but they now have to go out to work doing shite jobs in order to get a "foot on the property ladder". Millions. With five thousand headbanging ceiling busters leading them over a cliff with their kids.

A working bloke, a hard working bloke, on average income can't get his wife a home anymore. He can help her get a dormitory.

Something had to give.

And a few of the head-banging ceiling busters, weather girl types, starstruck, are now wringing their conscience out. I saw an ex-editor of Cosmopolitan on TV apologising for all the damage she felt she had caused.

It's ridiculous. My mother's generation considered that women going out to work after they got married to be akin to prostitutes except that they had to work harder.

And how do you turn £1500 invested in an acre of land into £50,000? Easy. You get the planning committee to pass it for housing. Hands up all in favour.

And let us not all get carried away with our moral dignity. All of us would have shorted HBOS through the floor and cleaned up if we had had the chance. Excluding Snow White I mean and the Archangel Gabriel.

But one good thing might come out of it. It's an educational experience.

The taxpayer is bailing out the fat cats even though they still have the money. One of them is reported to have blown £40,000 in a restaurant the other night.
0 Replies
 
OCCOM BILL
 
  1  
Reply Fri 19 Sep, 2008 06:25 pm
@Foxfyre,
Foxfyre wrote:

Just basing my opinion on listening to financial guru types talking about how 'investors' band together to intentionally drive down the price of a stock so that they can personally benefit selling short. When many millions of people have their retirement funds in the market invested on faith that the companies will grow and prosper, I can't believe that is a good thing and I can't see how that should be legal. What I don't understand is the details of exactly how selling short works as I have never (and don't think I probably would) do that despite reading numerous explanations of it. That does not mean that I don't know what it is. I don't know how a nuclear reactor works either, but I know what one is.

Spendi does provide a different perspective that I will look at however. And he did it without being sarcastic and condescending which I much appreciate.
By way of explanation, I offer my apologies for being snarky on your birthday, darlin. Happy Birthday!

Typically, obviously, you purchase a stock with the intention of selling it at a later date at a higher price. Shorting, in the simplest terms, is selling it first, while agreeing to purchase it later (hopefully at a lower price). The degree of gamble and manipulative effect is very close to identical.

While Market speculation for short term gains does have the effect of manipulating the market to some extent; shorting is no more or less effective at doing so than normal attempts at short term speculation.

While it is reasonable to assume a temporary moratorium on shorting would help to stabilize the market to some extent; so too would any other limit on short term speculation. For this reason; it is very odd to see a purported conservative advocating such direct invasive government interference on the free market... let alone making it permanent when there is virtually no difference in effect between this and other forms of short term speculation. (Make no mistake; the ganging for profit you described above is NOT legal... but it's a tough to establish line, making the burden of proof tough to establish as well.)

While I tend to agree that in certain circumstances Government interference is called for; I find the idea of permanent direct interference anathema to the idea of a free-er market itself. So do you.

What I suspect many people don't understand about shorting; is that while the act of selling ahead of time serves to increase the proportion of sellers to buyers, which naturally drives down prices, short term speculation on the buy-side has an equal effect on driving prices artificially up. Neither is inherently evil, but both can be used in illegal attempts at stock manipulation.

When you consider the damage visited upon the innocent investor by speculative bubbles; you should realize that this buy-side effect is every bit as damaging to the equilibrium as shorting... and since Joe Citizen tends to be less savvy; he tends to participate in this kind of short term foolishness more often and to his greater detriment.

While a typical conservative, like yourself, would generally be in favor of less government interference; a more sensible middle ground (than placing a permanent moratorium on a standard trading practice) would be to favor tax penalties or incentives to indirectly limit the scope of short-term manipulation via speculative trading... which would have the effect of diminishing the damaging effects without hog-tying the savvy investor by limiting his options.

Ps. While some may point out my proposed "middle ground solution" would make life more difficult for the day trader; I would counter this isn't necessarily so... in that the Tax incentive/penalty could be written to apply only to trades large enough for effective manipulation... and could even be put on a sliding scale hinged to percentage of total market capitalization (or some other such measurement or formula).

Pps. I am not entirely sure it would be a bad idea to slowly reduce the volume of day-trading with a similar strategy; but I AM NOT offering an opinion one way or another on that at this time (I'm torn between weighing the damage to the true equilibrium by excess bubble producing speculation and my disdain for an overly protective government seeking to protect me from me.)

Ppps. Happy Birthday!
0 Replies
 
 

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