Updated: Open Thread - Bank Ratings

Posted Sat, 10/04/2008 - 19:05 by avahome
Promoted. Originally posted 2008-10-04 13:53:38 -0500. -- GH Update: Just saw this on 60 minutes.. 60 Minutes: How Some Arcane Wall Street Financial Instruments Magnified Economic Crisis (An eye opening investigation - buzz word is "swap.")
...this market is almost entirely unregulated.
The result is a huge shadow market that may control our financial destiny, and yet the details of these private insurance contracts are hidden from the public, from stockholders and federal regulators. No one knows what they cover, who owns them, and whether or not they have the money to pay them off.
One of the few sources of information is the International Swaps and Derivatives Association (ISDA), a trade organization made up the largest financial institutions in the world. Many of them are the very same companies that created the vast shadow market, lobbied to keep it unregulated, and are now drowning because of unanticipated risks.
It's like what Luaptifer worries about: We have the people who created the mess in control of the mess. The hits just keep on acoming!.

The CBS 60 minute piece is a lot like the NPR American Life transcript of the Ira Glass program The Giant Pool of Money that JeninRI pointed out a while ago... It is fabulous... audio link here. In that piece, they talk about some of the people who did these deals... like the guy who was a bartender until he became a mortgage backed securities guy, or the guy just out of college, doing the same thing as Mike and making $100,000 a month.

I found something kinda neat today in the Denver Post. I don't live in Colorado but if you do you can check up on where you have your money deposited. Also on reading more into this site I found where anyone can look up the institutions in their state: http://www.bauerfinancial.com/btc_ratings.asp Seems the powers that be are worried that people will begin drawing out their monies from financial institutions and putting the money under mattresses, table clothes, glass jars buried in back yards, oh I'm out of ideas here...help me out! P.S. Wouldn't hurt to have a look see at your bank or credit union just to keep informed....don't want to be called slackers!

Comments

Listen to This American Life

by luaptifer - 10/04/2008 - 12:42
365: Another Frightening Show About the Economy Alex Blumberg and NPR's Adam Davidson—the two guys who reported our Giant Pool of Money episode—are back, in collaboration with the Planet Money podcast. They'll explain what happened this week, including what regulators could've done to prevent this financial crisis from happening in the first place. You can learn more about the daily ins and outs on the Planet Money blog.
And answer me this question - Paulson heads bailout: What is wrong with this financial picture?

"So your party is the only party that can save the country from the mess that your party created?" - attrib. Jon Stewart

Adam Davidson

by cho - 10/05/2008 - 08:09
elaborates a little on the show trying to answer his father's and his uncle's questions about how scared we (the guys on the street)should be; Davidson's answer is on the npr blogs. Quick read, nothing new for the folks here, but a good reminder. But what is news to me.. and maybe somebody else can explain it better, is that the stock infusion idea (not at all liked by the bank lobbyists, but preferred by noted economists) is in the language in the bill passed by the Senate, and by House just this Friday. It sounds to me, that the Stock Infusion idea is really closer to what most of us would see as the effective and equitable method for resolving the crisis. Instead of throwing 700 billion of taxpayer money at toxic debt -- assets of which we have no idea the real "price" of-- the stock infusion plan would give taxpayers ownership of the corporations who need the toxi debt taken off their hands... and also give taxpayers the right to fire the executives of those corporations who got us into this mess. So, Luaptifer, welshman, chris, susie... you guys know more than I do... can you listen to the show Luaptifer links to and tell me if I understood that correctly?

MLEC

by susie dow - 10/05/2008 - 11:16
Stock infusion is not necessarily a capital infusion. After all, it really depends on what exactly you are buying. Are you buying something that might one day have value - such as prefered shares -- or are you buying what is in effect toxic debt? It's still not at all clear to me that there are enough safety catches in the bill to prevent the taxpayers from getting stuck with the sludge. Just this morning, Paul Krugman (Princeton economist writing at the NY Times) gave a nod to Yves Smith at Naked Capitalism for identifying a rehash of an old Paulson plan - the MLEC.
Hank Paulson attempted to ride to the rescue with an idea, the so called Master Liquidity Enhancement Conduit [MLEC], that we said virtually from the get-go would not work. He wanted to set up a vehicle, to be managed by a third party that would buy the junky SIV holdings, which included risky real estate assets and murky stuff like collateralized debt obligations, and be funded by private investors. The problem was that there was no price which would solve the basic conundrum: investors were not willing to pay above market prices, and the banks were unwilling to sell at market. Paulson & Co. wasted nearly two months trying to breathe life into this stillborn idea, then abandoned the effort.

Bank runs

by susie dow - 10/04/2008 - 14:24
Recently read one opinion piece that advocated insuring all deposits regardless of amount for the next year or so specifically to help guard against bank runs. I hadn't given much thought to boosting the cap for that reason but it does make sense. I'll see if I can dig up a link.
jimstaro's picture

The Blow by Blow.

by jimstaro - 10/05/2008 - 04:27
From MudFlats: McCain Palin Rally vs. Obama Biden Rally in Anchorage!, yesterday with a bunch of pics!! Do We Need Change, You're Damn Right We Do, And The World Needs Us To Change, Now!!

"that I will support and defend the Constitution of the United States against all enemies, foreign and domestic">

I love the non-media photos

by cho - 10/05/2008 - 08:03
of the photo ops... Great link, Jim. Great paragraph mudflats:
One would think that the Republican rally celebrating the hometown girl, in her very very red state would have drawn a huge crowd, and that the Obama rally would be a few brave intrepid souls with a couple signs shivering by the side of the road. One would be wrong.
jimstaro's picture

I'll Tell Ya

by jimstaro - 10/05/2008 - 08:09
MudFlats missed her calling, she's a Very Entertaining Writer, especially as to describing the serious but putting a lighthearted down to earth reality to it with humor. It's really enjoyable to visit and read her writings, there's gonna be much more than the 15min of popularity when this all ends for her anyway, Palin's political careerer etc. is over. Do We Need Change, You're Damn Right We Do, And The World Needs Us To Change, Now!!

"that I will support and defend the Constitution of the United States against all enemies, foreign and domestic">

On your Update: from the 60 Minutes article

by cho - 10/05/2008 - 16:47
Grant is one of the country’s foremost experts on credit markets. He says it didn't have to happen, that this disaster was created entirely by Wall Street itself, during a time of relative prosperity. And they did it by placing a trillion dollar bet, with mostly borrowed money, that the riskiest mortgages in the country could be turned into gold-plated investments.
"If you look at how this started with the subprime crisis, it doesn't seem to be a good bet to put your money behind the idea that people with the lowest income and the poorest credit ratings are gonna be able to pay off their mortgages," Kroft points out.
"The idea that you could lend money to someone who couldn't pay it back is not an inherently attractive idea to the layman, right. However, it seemed to fly with people who were making $10 million a year," Grant says.

That blame it on the low income people., Clinton, etc..

by avahome - 10/05/2008 - 17:31
just bit the dust!!!!!! Busted!

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