When Bookies Fail

September 18, 2008
5:45 AM CST

I’ve been looking on the recent financial calamities with something of a jaundiced eye. No, I’m not indulging in socialist corporate/wealth hate—remember where you’re reading this—but at the same time I think I need to point out a few hard truths about the finance industry.

They’re a bunch of bookies. What they do is lend money, at varying degrees of risk, charging people interest according to that risk. The bet is that people will repay the debts on time.

When they take a risky bet—in the sense that the default is more likely, they lay the bets off, or sell the betting slips to other bookies who are more solvent, and are also willing to take the risk.

Then you have the insurance companies, who are the biggest bookies of them all, because they bet against catastrophe, once again with varying degrees of exposure covered by higher or lower premiums paid by the insurees. (Their “form” books are compiled by actuaries—a high-falutin’ term for oddsmakers.)

And then you have the currency-, futures- and stock traders—the biggest punters of them all—who bet on outcomes, and who often finance their activities by betting on the turn (that they’ll make enough money to cover their investments before the bill comes due).

So I look on all their woes and travails with, as I said, a jaundiced eye, much as I would the sight of a Las Vegas casino going bankrupt.

What I don’t understand is why ordinary people would be so surprised at the fact that in the heart of the money business lies greed, mendacity, fraud and cupidity. What else did you expect?

Yeah, I know that all this is going to affect the economy, accustomed as we are to living beyond our means and relying on credit to finance our lives.

But I fear not for the once-overpaid people who are most affected by the various crashes—the thousands of people who one day went to work at Lehmann Brothers only to find the place empty and their salaries unpaid, for example. At worst, they’ll be taught a lesson in hubris and morality—for despite all the propaganda, they are not the “Masters of the Universe”—and while some will bounce back, others will pay the price. It serves them all right for having such short memories.

Here’s someone even more cynical than I am:

You fuckers didn’t want an actively regulated market when you were splicing and dicing toxic debt and selling this shit as if its shinola to unwitting third world countries who have difficulty with potable water (which I’m cool with, no playa hatas here). Then, the market bitch slaps you one down day after five years of offering up its fake breasts for you to snort the toxic lines of cocaine that is shit debt like Tony Montana and you get your undescended testicles in bind and go crying to the paradoxically named Chris Cox.

Reminds me of the joke told at the end of the 1980s, when there was a similar crash caused by greed and overreach:

Q. What do you call a yuppie investment banker?
A. ”Hey, waiter!”

It’s cruel, but that’s capitalism.

Comments

Bottom of Comments | Original Post

I am just curious as to where the feds find 85 billion to bail out anybody. Don’t they have a budget? Also, do you notice how many politicians sons or daughters work for hedge funds? (C. Clinton, Biden) Money must have been pouring in over the transom. Also, what do the thousands of people at these companies actually do in a day? I sure don’t understand.

Author ID: 9899 | 9/18/2008 05:58 AM CST | #132447


The takeaway of course is that “valuations” are complete fiction, not in anyway based on actual assets of a company, but on the fictional assets, if some fictional event where to occur, based on how much fiction people want in their lives at that moment.

If everyone decides they have too much fiction, the valuation is as real and tangible as fairy dust.

While I’m not an authority on any of this, if I had to guess how much real equity there was in the companies in the stock exchange, it would be about 2% of the valuations.  That means they’re running long odds on 98% fairy dust… and about a 98% sell off is what happens when people decide to have a day of reality in those companies.

0 Author ID: 2 | 9/18/2008 06:07 AM CST | #132449


The guys and gals I feel the most sorry for at the banks/insurance companies are some of the “back office” folks

I used to work for AIG.  They are NOT known for paying the staff well, and working them hard, with the lure of a company matched 401K - matched with company stocks (Hint, I got out like 13 years ago)

Anyway, there are a lot of secretaries, receptionists, etc who are out of work.  The IT guys are doing somewhat better, in that when the back ends got sold off this week, the IT areas were valued at something like 90% of what was left, with most of the other 10% being real estate

Sigh

Author ID: 7736 | 9/18/2008 06:29 AM CST | #132455


Pick up today’s Wall Street Journal or read the online WSJ.com to get a good idea of this crisis. Which by the way has some blame pointing back to Harry Reid and Nancy Pelosi. I know its inside baseball talk but the uptick rule should be brought back to keep short sellers from crushing companies. Oh and something called Sarbanes-Oxley has also crushed these businesses. From when the government was trying to “helpful” in the last crisis.
If you got any spare cash now’s a great time to pick up bargains. IF

Author ID: 7539 | 9/18/2008 06:30 AM CST | #132456


The CEO’s who precipitated this mess are robber barons and thereby thieves. Nothing less. “Captains of Industry” my ass.

Author ID: 7763 | 9/18/2008 06:53 AM CST | #132461


AIG is the one bailout I don’t disagree with since the government helped the crises happen.

My wife worked for AIG for a few years and I declined a job offer there in favor of my current job (they wanted me to commute to NYC every day - no thanks).

AIG was run by Hank Greenberg ever since the company founder stepped aside in the 1960’s.  Under Greenberg they were the toughest and most solid financial institution around (yes they were chiselers when it came to pay). 

Then NY attorney general Eliot Spitzer decides to get himself in the news by filing baseless criminal and civil suits against the company and Greenberg (as well as his son who ran Marsh & McLennan).  The Board of Directors buckles under the pressure, forces Greenberg to retire, and pays $ billions in fines and restructuring charges to appease the aspiring politician.  (I was at an insurance conference with my wife when Spitzer’s demise made the news – people were cheering and raising toasts to that asshole.)

The new CEO is an idiot who obviously didn’t listen to his risk managers so one of the great American financial institutions is headed down the drain.

Author ID: 8662 | 9/18/2008 07:05 AM CST | #132462


My take on this is simply unprintable.

Author ID: 8821 | 9/18/2008 07:07 AM CST | #132463


Unfortunately, some of this will hit pension funds and the like; bad news for those of us who decided to look after our own interests rather than depend on ‘The Gubmint’. Bad news also in that my industry (The Eeeeevil Oil Companies) puts projects on the back burner because much of the money for new builds and revamps is borrowed and paid back from increased profits and productivity.


Author ID: 7404 | 9/18/2008 07:07 AM CST | #132464


Achilles -
‘Never attribute to malice that which is adequately explained by stupidity.”

Robert J. Hanlon

Author ID: 8662 | 9/18/2008 07:07 AM CST | #132465


Achilles,

I could not be more in disagreement.  In fact, talk that there must be criminal actions involved when a company fails make me angry.

Investments are RISKY.  That’s something folks need to understand when they buy stock/lend money. 

Most of us have been involved with companies who go out of business for one reason or another.  Most of the time, it is because the business didn’t pan out to be as successful as folks originally thought it would.  Then there are ordinary and customary things that happen, such as vendors not meeting delivery schedules, others defaulting on loans or commitments, and any of another thousand things that can happen that can strain a business’s ability to be profitable, or remain solvent.

That’s all that happened here.  These companies are no more or less solvent than they were a month ago.  Every single investment house is operating based on fiction.  That’s the nature of the beast.  The fiction involves consumer confidence, having no basis in fact, and is entirely emotion driven, based on what else is going on in the economy, in the news, or how people feel after watching some drivel TV show.  There’s no there there.

In the case of Fannie Mae, for example, that was complicated by the government.  The government demands that home lenders don’t use methods for evaluating risk that could be racist or discriminatory, when in fact, that has bearing on their solvency, and is why they collapsed.  Insurance companies, such as AIG, are no longer allowed to red-line, when in fact, they know that their risk is higher in HIGHER RISK AREAS!

If there is any criminal culpability in any of these messes, it is with We, The People, through our legislators, who have demanded that businesses who lend money, handle investments, or sell insurance not use proven criteria to properly evaluate risk.  These companies have been prevented, by law, from using all the data available to them to refuse customers who could be risker.

When folks talk of “high risk loans” that Fannie Mae was REQUIRED BY LAW to accept, the dirty little secret (that isn’t a secret) is that they were required to lend money to people who could not get loans from other institutions, because they were a risk to do business with.  They were a disaster waiting to happen.

In the case of the investment houses, people were investing in ether, by companies with assets of ether, funded by ether.  If folks are too stupid to understand that, then they have no business doing business in these industries.

We need less regulation, not more.  We need to allow businesses to use whatever criteria they feel is necessary to properly evaluate risk… even if folks don’t like the dirty words such as red-lining or discrimination.

Businesses fail.  If folks don’t know that “investing” in a business is loaning them money, secured only by their continued existence, then they have no business making any investments and should keep their cash under their mattress… which is probably the case for 95% of the people who float their cash in accounts belonging to others.

It’s gambling… it is not similar to gambling.  It IS gambling.

I don’t make these investments, because I cannot afford the risk, and I certainly can’t afford to pay higher taxes for people who take those risks, and often get a pay out.  I get neither the pay out or the loss.  If folks don’t realize how risky their investments are, or how risky ALL investments are, then it is time they learned that… by not getting bailed out by the government, and not having their loss of face assuaged by the government dragging a company exec to the gallows as a scapegoat.  The idiots were the investors, who are 100% responsible for the risk, not the company execs or the rest of us.

0 Author ID: 2 | 9/18/2008 07:16 AM CST | #132468


RE Spitzer and MRG - I totally agree

And he went after other companies that were found not guilty, but would not let go.  A simple example = Publishers Clearing House - they were getting blamed for a lot of what American Family Publishers was doing (AFP were the guys with Ed McMahon) - PCH put in all the stuff the Government asked (you call and ask off, you were OFF - my wife was involved with that) - you were a Sr Citizen, they had checks in there to make sure you were not spending like crazy (yes, some folks think that they more they buy, the more likely they were to win - if they knew you were a Sr Cit, they would double check things and the like)

American Family pulled out of the industry (they were a small division of a larger company).  PCH was and is a small stand alone - Spitzer did his best to bankrupt them (BTW they are actually mostly owned by charities!!)

Author ID: 7736 | 9/18/2008 07:20 AM CST | #132469


What bothers me the most about the AIG crash - and may be WHY the Gummint did the buyout - is that SO MANY State and Local Gov. Pension Funds are heavily invested in AIG. I know MD is; that’s where Sandy and I are at, and I gotta tell you, it was a little SCARY around here yesterday. Because my IRA is in Primerica, and Sandy’s in is John Hancock, and THEY’re not exactly rock solid either, at the moment.
In fact, NO investment, anywhere, is ROCK SOLID right now, because EVERYTHING investment is invested in either an insurance house of SOME kind, or a mutual fund of SOME kind.
And BOTH of those trade on The Street.
Even precious metals aren’t REALLY secure right now; you can’t eat them, you can’t pour them in the tank, and they won’t light/heat the house. They MIGHT hold value for a while - if someone ELSE has what you need and wants the metals. YMMV.

Consumer confidence can crash ANY economy; THAT’S the biggest reason WHY Dubya & Co. bailed AIG. If you and I are confident that The Street will recover and we can weather this, then guess what? We can, and we will. BUT: if we all start squirreling away the coin and the chow, if everyone starts hoarding gas and cash, then kiss America Good-frakking-BYE. That’s ALL it will take, and I am NOT kidding around here. ONE good panic will destroy our economy.

I HATE it when the damn Survivalists start sounding right.

Author ID: 8889 | 9/18/2008 07:31 AM CST | #132471


Sorry Connie, we are in disagreement.

At the heart of this particular problem is human greed. A significant factor in the collapses is CEO compensation in the US, and the methods that they are compensated by, are completely out of whack with the rest of the free world. The sheer amount of bonuses and salaries effectively insulate them from the effects of their bad decisions.

Dick Fuld and his cronies are crooks. Fuld “earned” a $22 million bonus in March of 08. Now, given the collapse of his company, it is absolutely implausible that “no one knew” what was going on in March. Fuld and his ilk are crooks. They skimmed, scammed and bilked. He walks away with hundreds of millions of dollars while the rank and file go under. He is laughing his ass off.

Now let’s get to the bottom of the problem - excessive liquidity and the mortgage collapse. Since after 2000, the world has been awash in capital. TONS of “cheap” money out there. Once investing in “real” assets are exhausted, the excess capital seeks to go somewhere, so it went into the housing market. Dumping all this money into the housing market had two effects - it inflated their prices beyond what was realistic and gave money to people who had no way to repay. Essentially, what these companies were doing was loaning money to people who had no way to pay it back because the assumption was (and it is was and is a bad one) that the housing market would continue to go up. Markets always go up and down, they never go up ALL the time. Bear Stearns, Lehman and their ilk got in on the action on the assumptions that mortgages are relatively less risky investments - after all, real estate is tangible. So they bought and sold loans. When the bottom dropped out, these assets became worthless.

The “Masters of the Universe” made some bad calls and it is time for all of us to suffer. But all is not lost, the invisible hand will work. And it will be ruthless. A recession is probably necessary to correct this mess. And guess what, the Captains of Industry will not suffer. The ordinary people will. And it will be painful.

Pure capitalism is not a good thing. There are well-known market failures. The trick is to mitigate these failures WITHOUT resorting to out-and-out socialism and thereby killing off the Golden Goose. Financial markets NEED regulation. Their collapse is what brought on the great depression. That is why we had Glass-Stegall.

And people wonder why the Democrats manage to hang on…

Author ID: 7763 | 9/18/2008 07:42 AM CST | #132472


Then the boards and the stock owners shouldn’t pay them those salaries.  It isn’t the fault of the people who are offered and accept large salaries, the problem (if there is one) is that people offer them.

As Kim has written about numerous times, there are maybe a hundred people in this country who can effectively manage large corporations.  They earn those big bucks because they return even greater yields to the people who own the companies.

There is nothing out of whack with any of that.  That’s what Capitalism is all about.  The fittest survive.

Yes, greed exists.  There are six more on the 7 Deadly Sin list that exist also.

Capitalism is vulnerable to greed, but the greed is only satisfied when folks open their wallets to give to the greedy or immoral.  If folks weren’t too stupid or greedy themselves, then none of it would exist.  Greed feeds on greed.

Greed, like lust, is not illegal, nor should it be.

0 Author ID: 2 | 9/18/2008 07:51 AM CST | #132476


What happens when the boards are staffed with people hand picked by the CEOs whos’ salaries will be decided upon? I sit on your board and vote for your compensation and you sit on mine and vote for my compensation. And as for individual shareholders, their votes don’t REALLY matter because they are inconsequential in number compared to institutional stock holders.

Too much cross pollination.

My fear is that the Obamamessiah will make a move to have to government regulate compensation. That would be a mess.

Author ID: 7763 | 9/18/2008 07:58 AM CST | #132478


“there are maybe a hundred people in this country who can effectively manage large corporations.”

Not sure that is the real number but I certainly agree with the notion.  Thanks to the NY Attorney General, one of those hundred - Hank Greenberg - is no longer steering AIG.  Instead they had Robert Willumstad who definitely isn’t in that group.

Author ID: 8662 | 9/18/2008 08:04 AM CST | #132480


Achilles,

That’s just nonsense. What happen if, if if.  That’s the responsibility of the investors to make sure that the companies in which they are investing are managed to THEIR satisfaction.  It’s no one’s business but the people who own the companies, ie, the people who own their stock.

0 Author ID: 2 | 9/18/2008 08:06 AM CST | #132482


Now let’s get to the bottom of the problem - excessive liquidity and the mortgage collapse. Since after 2000, the world has been awash in capital. TONS of “cheap” money out there.

So if that’s the real problem, what “could of, should of” been done differently and by whom?

“Off with their heads” tends to lead nowhere but deeper insanity—whether in Paris 1793 or New York, NY 2008.

Author ID: 8713 | 9/18/2008 08:09 AM CST | #132485


I can tell you for fact the number of people working in corporate finance that have gambling problems - LOADS. If I were not bound by confidentiality, I’d really spill the beans.

It’s at times like this you ask “What would Patrick Bateman do?” Kill and eat somebody, most likely.

Author ID: 10286 | 9/18/2008 08:16 AM CST | #132487


When you walk into a bank and see posted on the wall a big Federal Issue sign saying the bank cannot discriminate between welfare payments and a salary in deciding whether or not to grant a loan, something is wrong. 

There is a lot of blame to go around- the reckless borrowers who either could not afford to pay the loan or gambled they could flip the house and got stuck, the lenders who made the bad loans and were INDUCED TO DO SO BY GOVERNMENT REGULATION (and to make matters worse could sell them off so they could disperse the risk), and the firms that bundled them as “high grade “ securities, and now the Feds who insist on bailing them out.

The thing that makes me imagine a blood dripping battle axe is the fact every responsible, careful prudent person in this country is now going to be taxed to bail out all the reckless and greedy borrowers and lenders.  Privatize the profits and socialize the risks.

Generally speaking, there is no problem so bad the Government cannot make it worse.  They seem intent on destroying the middle class in order to save the wastrels and the greedy.

Author ID: 8821 | 9/18/2008 08:26 AM CST | #132488


Connie -
Sorry to disagree, but a few years back I was doing something and ended up with the list of directors of the largest 25 companies in the US.  The names were the same over and over.  Not all the same ones on the same boards, but the same names on different boards with a small sprinkling of unique names.

What I drew from this was that the hoi-poloi of stockholders have about zero influence on who and how directors are “elected” on these boards.  It looked a lot more like a you vote your shares for me on this board and I’ll vote my shares for you on that one.  And considering that most board seats pay $25-50K per year, holding a few of those is a nice little boost for the portfolio.  And who cares if the CEO of this company where I sit is a thieving bas****.  He’s sitting on the board that decides what MY compensation will be as CEO of MY company.

Author ID: 7596 | 9/18/2008 08:59 AM CST | #132490


Dear Crew,

I have not read every word written above, so if I’m redundant...I have seen our financial markets reach two bubbles since Clinton repealed Glass-Steagall and if you would go back and see the follow-up to the repeal in 1999 Nov. and follow the run-up of the Nasdaq after, you would see the ramifications of when you “marry” retail banking with investment banking.
The first bubble burst in March of 2000 and this current housing bubble was created when banks could sell their mortgages off to Wall Street. Think about it, if you have NO responsiblity for loans you just made, why would you care if the mortgagee pays back that loan? You don’t own the loan anymore and futhermore you as the banker have just received from the bond sale a huge influx of cash of which you can now leverage at the tone of 10:1. So if you just leverage the initial at 10:1 you are now at 100:1. Do it again and you are at 1000:1 and on and on and on...Well, you can see just “ONE” of the reasons we and I do mean WE are in this mess. Dan

Author ID: 11628 | 9/18/2008 09:08 AM CST | #132492


I think you’re completely misunderstanding my point, 0007.  The shareholders vote by buying or selling the stock.  They vote to approve what the board/CEO is doing by maintaining their stock.  They vote their disapproval by selling.

That’s the beginning and the end of it.  Shareholders aren’t micromanaging the board or the CEO.  They get one decision:  sell or keep.

The government isn’t responsible for making sure that companies are run properly or that there isn’t nepotism in boards or CEO selections.  That’s the investors’ responsibility.

You found it about it, and it would influence your investing decisions in those companies.

That wasn’t a flaw or accident.  That’s the way it is supposed to work, and is what responsible, engaged and educated investors do.  That’s why it isn’t as simple as logging on to one of the stock trading companies and buying an $8.00 trade.  It requires research.  It requires that you read the prospectus, and evaluate the board members and CEOs.  Most people can’t be bothered to do any of that, and see this as something like buying socks at WalMart.  They have no business trading in stocks.

We can’t have a test or a license to make sure that investors aren’t idiots, but most are, and the best way for them to learn that they’re operating in an arena they don’t belong, is for them to FEEL the losses made by their ignorance and stupidity.... not by government bailouts for their incompetence.

Since most investors don’t do their research, the Boards/CEOs can do whatever they want… but the oversight responsibility REMAINS with the stockholders, regardless.  If investors showed their disapproval by selling, it would stop, not by “some law” that micromanages business and is “socialism” defined.

Either people are responsible for both their losses and profits, or they are not.  I’ll support a government bailout of investors on the same day I also get to control who may ever make an investment (and I get to tell people if they’re qualified to make investments).  Since I don’t have the control for the latter, the government doesn’t get to do the former.

0 Author ID: 2 | 9/18/2008 09:37 AM CST | #132496


That’s the responsibility of the investors to make sure that the companies in which they are investing are managed to THEIR satisfaction.  It’s no one’s business but the people who own the companies, ie, the people who own their stock.

Just ONE LITTLE PROBLEM, Connie; MOST INVESTORS don’t OWN STOCK!
They own a tiny piece of a MUTUAL FUND - and DON’T KNOW what companies that fund has a piece of.
And wouldn’t have a clue how to manage their OWN INVESTMENTS if they were trying to do it. I admit it - I wouldn’t know how. MY IRA is through Primerica, which runs theirs (I THINK) through Smith Barney, unless they sold out to someone else. My State Pension Fund is - or was - largely with AIG (So you KNOW I’m grateful the Fed bailed them out!). If you still have an IRA or pension that you don’t DIRECTLY manage, you probably have at least PART of it in a mutual fund whether you know it or not. There are more mutual funds on the Street than individual investors.
The days of the individual investor are GONE, by and large.

Author ID: 8889 | 9/18/2008 10:40 AM CST | #132502


I do not get to decide where my 403b gets invested. Limited choices and not transparent in the day to day operations are the norm. Most people don’t “invest” their money. It is taken out of their pay and invested for them. Not by choice.  Yes, I could decide to work elsewere but those choices are limited by the market, as you live in the Dallas area instead of that place up north. Perhaps this mess is older than the short period of instability that is going on now. Maybe it goes back to the lack of education of the major players in business and government. Education lacking a complete foundation. Many in high places are only as good as their last quarter results. Alas, many seem not to notice this shortfall. Bad Heart

Author ID: 11639 | 9/18/2008 10:43 AM CST | #132503


Almost seems simple really, after changing jobs a year back I had to pick new 401k investments.  Oil exploration?  Check.  Real estate?  Hell no.

It was clear (by then, it was clear to everyone) that many people held loans beyond the market value of thier homes.  TV shows detailed folks on 50k incomes buying 700k homes with interest only loans!!!  In declining markets!!!  I did not send any of my money into that mess. 

What bothers me is that I have the choice of 15 or so mutual funds, each fund holding stock in dozens of companies.  I cannot research, or even identify, all those hundreds of companies that I’m invested in.  Murky business, not clear cut shareholder voting. 

Above all, I agree these bailouts are a horrendous crime against taxpayers.  I’m not apreciating the theft.

Author ID: 612 | 9/18/2008 10:46 AM CST | #132504


How much is this costing us?  The first comment here mentions 85 billion, guessing that there are about 150 million taxpayers, thats 500 dollars per person.  Ouch.

Author ID: 612 | 9/18/2008 10:49 AM CST | #132506


What bothers me is that I have the choice of 15 or so mutual funds, each fund holding stock in dozens of companies.  I cannot research, or even identify, all those hundreds of companies that I’m invested in.  Murky business, not clear cut shareholder voting. 

Congress deregulated that, AT OUR REQUEST.  It used to be that those things considered “retirement” contributions had to go to big retirement insurance FIRMS, not into mass market mutual funds that folks could control, manage, borrow against, or withdraw.  Since the 1980s saw corporate raiders “borrowing” against private employee retirement funds (not to mention the mafia, who in concert with trade unions, Redundancy Alert “borrowed” money against their strike back-up and retirement accounts as the security).

People wanted something done…

Well, what was done was that the tax code changed to allow companies to contribute money to IRA accounts in the investment industries, instead of the insurance industry.  Guess who championed THAT ponzie scheme?

So instead of requiring that companies could only get a tax deduction for their payroll contributions to a retirement fund, it allowed John Q. Citizen to put their retirement money in mutual and other funds, rather than in 400 year old insurance institutions, who have been managing risk for centuries.

Oh, joy, more freedom.

Well, guess what happens with MORE freedom?  You get MORE risk and more responsibility.  When you decentralize FREEDOM you simultaneously decentralized RISK.  Some folks didn’t READ the memo or consider the implications of millions of ignorant people having their retirement in ether, rather than in banks, invested in T bills.  TOO BAD.  You don’t get to control the money and it isn’t yours to withdraw for anything but retirement, but it will be there come your retirement date.

You have to manage your 401K plan and choose from the fund options they give you.  You could complain to your company that you don’t like the choices, or that you’d prefer that they had a retirement company as an option (rather than a 401K), but that would require some initiative on the part of employees, and they can’t be bothered to investigate the value of their retirement contribution choices as part of their compensation plan, because they’re just idiot workers after all, and the government has to protect us from all of that, while at the same time telling us how “free” we are now to have all these choices.

It’s been one sucker punch after another...and it is ALL our fault, because we told Congress “We Want Something Done!”

Well I want NONE OF IT.  I want companies to be able to deduct “retirement contributions” when they truly are retirement, and not some other sort of savings plan designed by the investment industry to get more suckers investors.

To quote Jack Nicholson:  You can’t handle the truth.

The TRUTH is that John Q. Citizen is an irresponsible idiot and wants deregulation and tax incentives for corporations to have and deliver all this freedom, but they don’t want the corresponding risk to their sacred retirement accounts, but only when they lose money instead of earn it.

Tough shit, Sherlock.  You wanted the deregulation and the rapid growth, but that comes with a price:  higher risk and the reality that your retirement funds could disappear tomorrow if the market tanks.

The market tanking is a reality.  It can happen, despite all the micromanaging of the markets by government, that only DELAY the tank, not prevent it.

There comes a point when questions like “Are the American people REALLY that stupid and irresponsible” becomes “yes” and it is time to rollback their freedom, because I can’t afford the bill for their stupidity any longer.

0 Author ID: 2 | 9/18/2008 11:15 AM CST | #132511


I’ll be looking for Thomas Sowell’s take on this later and my guess it’s not far from Connie’s(maybe without all the Capital Letters).
There were 2 parts to AIG, the one with insurance was always solvent, the drunken sailor gambling sorry investment house is the one that took it under. Also New York’s state government asked the Feds to step in to fix, my quess because they are all Dems and the Feds are thought of as Republicans. Except for Paulson who is getting rid of all the competition when he goes back to Goldman Sachs.

Author ID: 7539 | 9/18/2008 11:43 AM CST | #132518


The problem, as I see it, is that folks want their cake and eat it too.

They want to be able to get pre tax savings and employer contributions, but they don’t like the options of mutual funds.

Well, take the money POST tax and then send that portion to a retirement savings firm.  Then you have complete control over where you spend the money.  You won’t get the matching funds and you’ll have to do it all yourself, but you also get to control it, and a minimize your exposure.

It used to be, back before we invented fire and the wheel, that you got a retirement benefit from your employer.  That was either a fund your company managed, or they paid an insurance company to manage it.  You had no say over that money.  It just went to the insurance provider, in the same way that your health insurance payments are made today, and if you died before retiring, it didn’t get paid to anyone (that’s how retirement savings programs stay solvent).  It was a retirement benefit, funded by your employer.

They got to deduct that as a payroll expense on their taxes, as part of the total compensation deduction.

Folks didn’t like that, because they “wanted that money.”

Well, they got it… and all the risk associated with it.

People don’t get retirement benefits anymore (unless a company has a matching 401K program).  They’re paying into the funds themselves, in pretax monies, but the companies are not contributing anything.  These were seen as old fashioned, inflexible benefits, and since we didn’t stay with one company for our entire careers anymore, vesting was no longer common.

So do it yourself or face the reality that you could lose ALL your retirement savings in 401K programs, or work until you drop.

If folks are banking on Social Security as the fall back in 30 years, they have another awakening to learn about.

0 Author ID: 2 | 9/18/2008 11:58 AM CST | #132520


Just a heads up…

By the recent nationalization financial companies, it was the Republican Party not the Democratic Party that made another step towards socialism.

I don’t like socialism any more than the rest of you, but if you keep voting Republican (even though they say ‘small government’ and ‘free market’ in their campaign ads) all you’re going to get is more socialism and bigger government.  Because they lie and they don’t care.

Author ID: 11549 | 9/18/2008 12:54 PM CST | #132524


Bean Delphiki,

I disagree, the companies taken over are still intact and aren’t 100% Gov’t owned and down the road, like the Resolution Trust Corp and the next new RTC will be spun off. If the Dems did this it would now be the 1st Federal ________ of whatever.
By the way if you want people that “care” vote Democratic and you’ll find all the caring you wish you never got.

Author ID: 7539 | 9/18/2008 01:12 PM CST | #132527


I don’t buy it.  Either the U.S. government took it over or some other country would do the same.  It was too dangerous and risky to have another government assume that giant.  The U.S. government, despite all the paranoia talk, won’t entirely assume the business.  They’ll provide oversight and secure bridge loans, but it will remain in the private sector… and the loans will be paid back when all the panicking stops, and their valuation settles.

It will be sold as a bailout and as a way of helping the poor grannies who had their entire savings invested, but that’s just a veneer for fools and morons.  It was a national security and sovereignty issue and the company was too big and too important to have fall into the wrong hands.

0 Author ID: 2 | 9/18/2008 01:45 PM CST | #132530


Mr. Bean,

Let me direct you to Clinton’s Community Redevelopment Act of which created this Sub-prime mess. Oh by the way he is a Democrat. Then there is Joe Bidden’s BAPCPA of which caused a hugh amount of forclosures that otherwise would not have happened. And then there is Obama’s Penny Pritzker who is his Finance Chair and who developed the sub-prime instrument w/ help. Shall I go on? McCain wanted to stop this Fannie and Freddy problem back in 2005 but was voted down by Democrats (S.190).

With the facts in front of you, you’ll probably say something like this “Oh, you know you can always find dirt on anyone if you dig deep enough”.

Just a heads up, I live in California surrounded by Liberal Democrats and have heard every argument in the book and not one of them can ever bring facts because it is always Bush’s fault.

Dan

Author ID: 11628 | 9/18/2008 02:16 PM CST | #132534


I saw a comment somewhere that Sarbanes-Oxley has made the crunch much worse: apparently companies weren’t allowed to put money aside for rainy days. Is there any truth to this?

Author ID: 8647 | 9/18/2008 03:01 PM CST | #132535


for the moment, I can say that perhaps living paycheck to paycheck has been a good thing. I will continue to invest heavily in lead and copper. If I can;t sell it, I will use it (at the range).

Author ID: 186 | 9/18/2008 05:22 PM CST | #132547


Oh, man, am I gonna miss this place.
--
littlejbg

Author ID: 10790 | 9/18/2008 05:27 PM CST | #132548