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Roubini Says Europe’s Banking System Faces Growing Risks: Latest Roubini Interviews

(2/20/09) Bloomberg: Roubini Says Europe’s Banking System Faces Growing Risks(click for video)

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From Bloomberg:

Roubini Says Europe’s Banking System Faces Growing Risks 

Nouriel Roubini, the New York University economist who predicted the global financial crisis, talks with Bloomberg’s Erik Schatzker and Julie Hyman about the growing risks facing Europe’s banking system.

Roubini also discusses the outlook for a “massive” increase in the U.S. deficit, the need to nationalize insolvent banks and the importance of global cooperation in financial regulation. (Source: Bloomberg)

00:00 Concerns over sovereigns; Eurozone bank risks

03:40 Outlook for “massive” boost in U.S. deficit

05:33 Possible sovereign default in Eastern Europe

06:33 Stimulus; “temporary” bank nationalization

08:59 Pan-European solution to bank woes; costs

10:16 Euro; U.S. debt, stimulus efforts vs. world

13:56 Overhaul of global financial regulation

From Bloomberg:

Roubini Says Europe Bank Risks Becoming ‘More Severe’

Europe’s banking system faces growing risks because of losses in the region’s emerging markets, and the crisis may require a region-wide rescue effort, said New York University economist Nouriel Roubini.

“The banking problem in Europe is becoming more severe,” Roubini said in a Bloomberg Television interview. “You have a series of countries that are really in trouble,” Roubini said, citing Latvia, Estonia, Lithuania, Hungary, Belarus and Ukraine.

German and French officials this week expressed concern about a slide in investor confidence in smaller European economies. The cost of insuring Irish, Greek and Spanish debt against default has climbed to records, and mounting losses in eastern Europe among Austrian banks sent that nation’s bond-yield premiums to an unprecedented level.

European lenders are taking steps that could increase state control of banks as the recession deepens. German Chancellor Angela Merkel’s cabinet approved draft legislation this week that allows for the takeover of Hypo Real Estate Holding AG, which would be the first German bank nationalization since the 1930s.

The continent’s largest financial companies have reported $316 billion in writedowns and credit-related losses since the collapse of the U.S. subprime mortgage market in 2007 spread to other asset classes and continents. The market turmoil has forced European lenders to raise $370 billion in fresh capital and government-led bailouts from London to Zurich to Berlin, according to Bloomberg data.

EU Aid

Roubini said European nations may go further and assist member states that are unable to rescue their own banks. “Even the European Union now is thinking of helping those sovereigns and their banking systems,” he said.

“There are significant problems in terms of debt and also banking problems in places like Ireland, for example,” Roubini said. “But also a country like Greece has a huge amount of stock of public debt.”

Moody’s Investors Service Inc. on Feb. 17 said some of Europe’s largest banks may be downgraded because of loans to Eastern Europe, sending Italy’s UniCredit SpA, which has aggressively expanded in the region, to its lowest in 12 years.

‘Pressure’ on Ratings

Moody’s sees “continuous downward rating pressure” in the region as a result of worsening asset quality and western banks’ reliance on short-term funding, the ratings company said in a report.

The International Monetary Fund has offered aid worth about $52 billion to Latvia, Hungary, Serbia and Ukraine.

Roubini, who predicted the global credit crisis, also discussed the need for plans to revive growth. The best approach in the euro zone is “fiscal stimulus in the short term but fiscal consolidation over the medium term,” he said.

He noted that while the $787 billion U.S. fiscal stimulus package, signed into law this week by President Barack Obama, is necessary, it may not be sufficient and will put the country deeper into debt.

“We’re going to add $4 trillion to $5 trillion to the public debt over the next few years,” he said. “Down the line, maybe two or four years, there may be a downgrade of even the United States.”

Still, he said, the U.S. is taking appropriate steps compared with other economies. He said the European Central Bank and Japan are “behind the curve.”

From Reuters:

Roubini: Nowhere near end of crisis

Nouriel Roubini, one of the few economists who foretold much of the current financial turmoil, on Friday said the United States is nowhere near the end of the banking and credit crisis.

“We are still in the third and fourth innings,” Roubini told Reuters in an interview, using a baseball analogy to drive home his view that the current cycle is only nearing its midpoint.

“And it’s getting worse,” said Roubini, a professor at New York University’s Stern School of Business and chairman of RGE Monitor, an independent economic research firm.

On February 10, U.S. Treasury Secretary Timothy Geithner unveiled his newest bailout plan for banks, including the government’s so-called “stress tests” involving all banks with more than $100 billion in capital. Regulators will analyze the banks’ books far more closely than previously to see if they have the capital to endure worsening conditions.

“It is the step to form an objective way to decide which banks are illiquid and which ones are insolvent and to take over the insolvent bank,” Roubini said. “We have to take over some banks.”

Bank of America Corp (BAC.N) and Citigroup Inc (C.N) shares plummeted for a sixth straight day on Friday, hammered by fears that the U.S. government could nationalize the banks, wiping out shareholders.

Nationalization or receivership of a bank need not be a permanent issue, Roubini added.

“I think of it being a temporary measure — take them over and clean them up and sell them back to the private sector,” Roubini said. “No one is in favor of long-term government ownership of the banking system.”

For example, IndyMac was bankrupt and taken over in July. “Less than six months later the very same group of private investors was willing to buy back the assets and the deposits,” he said.

“So it doesn’t have to be under government control for years and years. You can do it actually relatively quickly.”

All told, Roubini said he sees negative economic growth throughout 2009, predicting that the unemployment rate could reach roughly 10 percent in the next year.

233 Responses to “Roubini Says Europe’s Banking System Faces Growing Risks: Latest Roubini Interviews”

HayesFebruary 20th, 2009 at 12:06 pm

From previous thread7286 was the closing low Oct 9, 2002 with an intraday low of 7181 on Oct 10, 2002. But other than that you have to go back all the way to 1997 to find lower levels.Separately 741 on the S&P (Nov 21 intraday low) will be key. As suggested yesterday – potential Fed/Treasury intervention – though the market seems to be less and less impressed by such actions.

AnonymousFebruary 20th, 2009 at 12:25 pm

“Many people took out loans they were never going to be able to afford,never! That means somebody knew from day one they were never going tobe able to pay back the loans.” The bankers approved these loans and used the money to pay themselves bonuses and payed our government representatives to look the other way…that’s where we are…any suggestions for getting us out of the mess are welcome…but if you just want to play the blame game…where does that get us?Read what was spammed on the comments section of my blog:The people that bend the rules GET PAID!You too can bend the rules by printing out fake paystubs w-2 w2 1099 forms usinghttp://www.proofofemployment.com/Buy a home, car or get a huge irs tax refund just for being you! Do what you have to do to get yours! EVERYONE ELSE DID!!http://www.fakepaycheckstubs.com/Print out Fake Employment and Fake Income, Wages, 1099, w2, w-2, using your home computer printer!

MarkFebruary 20th, 2009 at 12:26 pm

Citi’s stock down almost 25% to $1.89. Any bets how long until this thing collapses? I suspect that this might be the weekend that we see our first nationalization of a bank.Gold now at $1,005/oz.Mark

GuestFebruary 20th, 2009 at 12:33 pm

This is causing a furor today: I’m reposting the discussion that began on previous thread:Microsoft, Intel Firings Stir Resentment Over VisasFeb. 20 (Bloomberg) — Microsoft Corp.’s plan to eliminate U.S. workers after lobbying for more foreigner visas is stirring resentment among lawmakers and employees.As many as 5,000 employees are being shown the door at Microsoft, which uses more H1-B guest-worker visas than any other U.S. company. Some employees and politicians say Microsoft should get rid of foreigners first.“If they lay people off, are they going to think of America first or are they going to think of the world first?” Chuck Grassley, a Republican Senator from Iowa, said in an interview. He sent a letter to Microsoft Chief Executive Officer Steve Ballmer the day after Microsoft announced the job cuts last month, demanding Ballmer fire visa holders first.Across the technology industry, some of the biggest users of H1-B visas are cutting jobs, including Intel Corp., International Business Machines Corp. and Hewlett-Packard Co. The firings at Microsoft, the world’s largest software maker, came less than a year after Chairman Bill Gates lobbied Congress for an expansion of the visa program.Even before Microsoft announced the cuts, its first-ever companywide layoffs, comments on a blog run by an anonymous Microsoft worker angrily debated getting rid of guest workers first. The author of the Mini-Microsoft blog eventually had to censor and then completely block all arguments about visas, after the conversation “got downright nasty.”Microsoft is hiring 2,000 to 3,000 workers over the next 18 months, offsetting the job cuts. Some of those will certainly be on H1-B visas, said Ginny Terzano, a spokeswoman for the Redmond, Washington-based company. She declined to comment on how many workers laid off are on visas. Laid-off Microsoft employees aren’t always a good fit for new positions, she said…Intel Chief Financial Officer Stacy Smith said…Intel, the world’s largest chipmaker, is closing five older plants by year-end, affecting as many as 6,000 jobs.“Our strategy has always been to hire the best talent we can hire anywhere in the world,” Smith said in an interview this month. “It’s the fuel that moves our industry forward.” …http://www.bloomberg.com/apps/news?pid=20601109&sid=afB9Q1A5.qyI&refer=homeHide replies Reply to this comment By Guest on 2009-02-20 10:44:51are they laying off Americans making high pay for non-Americans able to do the same job at lower pay?Reply to this comment By Guest on 2009-02-20 10:47:02Congresses’ response, after selling out America — her people and their production base –is to send a letter…to Microsoft.Reply to this comment By Guest on 2009-02-20 10:47:52I hope Ballmer wrote a letter back to Grassley demanding that he and his constituents only use fertilizers made in America in all their cornfields.Pretentious bastard…Reply to this comment By Guest on 2009-02-20 11:14:33Call your Congressman to complain about jobs moving from U.S. to foreign workers — what a waste! unless you are world-citizen, entrepreneur, major philanthropist and welfare-corporatist Bill Gates.With the revelation this morning of the Microsoft and Intel decisions to fire thousands of U.S. workers and replace them with less expensive foreign workers, the position of the United States Congress has deteriorated to a new low — one of the most devastating developments for American Society in the past 100 years.The H1-B visa program, regularly and substantially abused by most of the companies participating in it, is nothing but Congresses’ gift to corporate lobbyists who reward “our representatives” in ways that American citizens could never do.Hamilton, in referring to the seat of the federal government, remarked: Here “the people rule.” He was absolutely correct, but he obviously could not have foreseen the circling of the drain of U.S. government policy through the years that men the likes of Bill Gates and their toadies in Congress have brought by this disgusting affront to American workers and citizens. Congress is bartering away what is not theirs. These American families have paid the taxes, have fought the wars and have struggled to keep this country together, and their fat, manicured, coiffured, limousine-bound Congressman steal, cheat and sweep away their jobs–and the future of their country.Reply to this comment By Guest on 2009-02-20 11:17:38Most recent testimony by Bill Gates before the U.S. House of Representatives shows he wants unlimited use of H-1B visa workers to replace U.S. workers.In Washington, D.C., last year Bill Gates testified before the U.S. House Committee on Science and Technology, calling again for Congress to “reform,” i.e.,increase, the H-1B visa program that Microsoft and other companies use to bring foreign workers to the U.S.Here’s an excerpt from the text of his prepared remarks (PDF, 20 pages):“Congress’s failure to pass high-skilled immigration reform has exacerbated an already grave situation. For example, the current base cap of 65,000 H-1B visas is arbitrarily set and bears no relation to the U.S. economy’s demand for skilled professionals….“As a result, many U.S. firms, including Microsoft, have been forced to locate staff in countries that welcome skilled foreign workers to do work that could otherwise have been done in the United States, if it were not for our counterproductive immigration policies. Last year, for example, Microsoft was unable to obtain H-1B visas for one-third of the highly qualified foreign-born job candidates that we wanted to hire.“If we increase the number of H-1B visas that are available to U.S. companies, employment of U.S. nationals would likely grow as well. For instance, Microsoft has found that for every H-1B hire we make, we add on average four additional employees to support them in various capacities. Our experience is not unique. A recent study of technology companies in the S&P 500 found that, for every H-1B visa requested, these leading U.S. technology companies increased their overall employment by five workers…”Uh huh, Honest Bill. Sure!

GuestFebruary 20th, 2009 at 12:34 pm

Its a possibility, even Dodd admitted its a possibility. He is the big bank man, so lets see…What needs to be done is, call the markets off for one, whole week. Analyze the situation of all the banks. Nationalize the too-big-to-fail if they are unsound. Force the ones that are in awful shape into bankruptcy. After one week, when all the above has been accomplished, the sound banks will open again. This way there will be no run on the banking system, and eveything will be done in an orderly fashion. Certainty will be restored, even if the market goes down…this will bring the confidence in the medium-term.

AnonymousFebruary 20th, 2009 at 12:35 pm

Thank you Dr. Roubini. Your advice has helped saved my family and I and anyone else who would listen to me. I only hope that members of the US government will pay more attention to what you are saying.Michael V.

GuestFebruary 20th, 2009 at 12:41 pm

Professor,In your criticism of the wild-west model, you fail to consider one thing. The role of federal reserve and low interest rates after the 2001 recession. The federal reserve made the money free of cost and caused this crisis.If you could replicate this in your mind beyond the money markets. Take Apparels. If I were to get apparels on loan free of cost in the wholesale apparel market, I’d sell as much as I could to retailers. More so, if I were a stockholding company competing with others to maximize shareholders worth. If others were generating higher revenues than me, then my stock would be punished on a “relative” basis. So, one, I would be forced to take the risk, and second, I’d be inclined to take a risk. Once I have supplied all these goods to my reliable buyers, and the goods available free of cost for whatever amount of time, and others selling to risky retailers or directly to consumers, I’d have to find a new market. And that market is one that I wouldn’t know much about, yet because I would be, firstly expected and required to take the risk, and second, inclined to take the risk, I would. If I had loads of inventories accessible free of cost, why wouldn’t I sell it? Especially if my buyers would foreclose their stores in exchange should they not be able to pay back the cost of merchandise.Would the above be irrational exhuberance or plain common sense?Lets face it, the crisis is the fault of only and only govt which made the money cheap or free of cost.If you could eliminate a goverment-type, free cost of supplier to me, and if I had to buy the merchandise to be able to sell it, I’d be much more mindful of the market I am catering to. I’d learn a lot more about it, I’d sell the merchandise at a larger premium to assume to the risk I am taking, my supplier, even though I might be paying a cost for the credit I am taking, would want to know what this new market is. Knowing that he would raise my cost, make me more mindful, and so on. Self-interest would keep me from selling to a market I don’t know much about, buyers I don’t know, retailers and consumers who might not be able to pay back, and so on.

GuestFebruary 20th, 2009 at 12:49 pm

The Professor is on the money in this video. The firstorder of business is to stem the crisis, but the jurisdictional and regulatory arbitrage of rule avoidance has to be stopped. There must be Global Rules and they must cover the offshore havens. The professor has the 3 prescriptions. 1)Much more front loaded fiscal and it must be global 2)reduce debt overhang for the morgtage borrowers with principal reductions 3)low interest monetary policy.The global system with jurisdictional and regulatoryarbitrage only benefits the financial operators whocan always seek downward harmonization of regulation and have now brought us to the brink of disaster. Thewhole world financial architecture has to be redesigned. The sooner the better!!!!

PeteCAFebruary 20th, 2009 at 1:20 pm

Nightmare on Elm Street?We’re looking at a new period of significant drops in the US markets – and the collapse of BoA and Citi. I don’t see how the Gov’t even can remotely work its way through resolving the tangled web of derivatives held by these two banks. The Gov’t isn’t smart enough to do it. How do you even price many of these deals and assets? So what do they do … feed the remaining good assets into the bowels of JPM and discard the rest of the entrails into the mythical “Bad Bank”?At this stage the nightmare is eating Elm Street – or should we say … Wall Street.PeteCA

SoftwarengineerFebruary 20th, 2009 at 1:31 pm

I AGREE WITH OBAMA’S NEW ATTORNEY GENERALWe’re a nation of cowards when it comes to pragmatically discussing anything to do with uncontrolled population/debt growth destroying America’s economy….we walk on egg shells to be politically correct and simultaneously, We the People know the news has totally missed the bulls-eye on overpopulation impact.What do you think the NYT, etc, etc are all going bankrupt? They feed us this uncontrolled growth debt is good for you slop and no one is buying it anymore.Step one to an American recovery, stop being a nation of cowards when it comes to pragmatically discussing demographic science and put overpopulation back into our public schools’ text books.I agree with Obama’s new Attorney General.

subgeniusFebruary 20th, 2009 at 1:34 pm

A rally because the Whitehouse said “banks should be privately owned” – because obviously the bankers know best…and are well-capitalized…and are using the bailout for good (like bonus payments)

economicminorFebruary 20th, 2009 at 1:47 pm

Those who fail to plan, plan to FAIL!When important topics are taboo and the populous is more obsessed with gladiator sports than what their leaders are doing, it is just a matter of time before consequences of ignored past actions catch up with the present.When issues like health care, education, social security, the environment, long term energy sources, pension funds, electric grid, transportation and so many others are put on a back burner so that current consumption can be ramped up, well, there are consequences. There is RISK! There is no computer model that can actually do away with risk, only mask it.We are there! We have reached the days of reckoning. Good luck to us all. We’ll need it.from the last thread.Worth reading IMHOTHE BURNING PLATFORM

GuestFebruary 20th, 2009 at 1:48 pm

“Microsoft has found that for every H-1B hire we make, we add on average four additional employees to support them in various capacities”Like limousine driver, secretary, secretary #2, and personal assistant!

GuestFebruary 20th, 2009 at 1:50 pm

That’s some serious frustration manifesting itself, my friends.I wonder who they’ll get to sponsor it? Lipton?

Hey, Nouriel, you rock!February 20th, 2009 at 2:07 pm

We the people see through the propaganda and we know overpopulation is not a problem. We know because we know the Malthuisdian analysis of “the children keep coming” hides a very important reality: fewer and fewer children are coming these days, above all in the richest parts of the world (but even large parts of the not-so-rich world are seeing fertility rates sink like a rock, sometimes below replacement). Malthus was wrong: people do not procreate up to the very limits of their resources. Once people obtain a certain degree of wealth, security, education and freedom, they tend not even to replace themselves. This is nothing new: it was noted in ancient times that the rich have fewer children than the poor. The number of kings and emperors who have died without any issue is startling compared to the general population. Even among other living things the trend can occasionally be seen: many plants, given an overabundance of fertilizer, water and sunlight will grow lushly, but will be bare of fruit and flower.At this point in human progress, this effect can be increasingly experienced by the masses and is being so. Hence the population bomb has defused itself and will soon ride the elevator slowly back down to the lower floors where it began. Come back in 500 years: if we succeed in reducing the wealthgap far enough, the Earth will host about a billion people (though there may be more Elsewhere) living lives of undreamed of plenty compared to us, fueled by technologies as alien to us as ours would be to Henry VIII and Martin Luther.

David in SeattleFebruary 20th, 2009 at 2:13 pm

This “miracle rally” smells like the rally(s) when Bernanke went on TV and said all housing problems were “contained” and all banks were “well capitalized.” You know what happened with that, and they can only lie so much before they lose all credibility.No one listens to Bernanke any more, so now they bring out the White House Press Secretary. Is the Stock Market so desperate that it goes up 200 points in one hour because of what the Press Secretary says?

MarkFebruary 20th, 2009 at 2:17 pm

Check out that thing called “history.” What did the Easter Islanders do? What did the Greenland Norse do?Sorry, but Malthus was right. We’re no different than any other population.And, for those still ignorant of what technology means- IT’S A _PROCESS_! It does NOT replace physical resources.BTW – it all probability nearly everyone will be wiped out due to the passing of the inter glacial period (into the next glacial period).Mark

GuestFebruary 20th, 2009 at 2:19 pm

Bill Gates-perhaps one of the most ungrateful Americans of all time:Bill Gates, an American, builds one of the most successful companies of all time, becomes one of the richest men of all time, all because he lived in America and had Americans working for his company and Americans buying his products. He now claims and has been steadily lobbying for more H-1b visas to hire additional foreigners because our people are not smart enough! But what isn’t stated is how much less money and benefits Microsoft pays these foreign workers than their American counterparts. What is particularly disturbing is how no amount of success and or money is ever enough and seems to always be the top priority over everything else including jobs for Americans. I used to admire the man when I was younger, now I’m disgusted by his actions.

GuestFebruary 20th, 2009 at 2:20 pm

Highland Capital CDO Fund Is Insolvent, Wiping Out InvestorsFeb. 20 (Bloomberg) — Highland Capital Management LP, the investment firm founded by James Dondero and Mark Okada, said one of its hedge funds was wiped out by losses on high-risk debt securities, at least its third fund since October to close.The managers and directors of Highland CDO Opportunity Fund LP, comprised of a U.S. partnership and an offshore affiliate, determined that “it is in the best interests” of the fund to wind down, according to a Feb. 4 letter to investors. Remaining assets will be distributed to creditors, leaving nothing for shareholders.Highland Capital, based in Dallas, said in October it would shutter its flagship Crusader Fund, which had declined about 30 percent during the year, and its Credit Strategies fund. That month, Barclays Capital Inc. seized $642 million of leveraged loans from the firm, which oversees $33 billion.As recently as October 2007, Barron’s magazine ranked Highland CDO Opportunity third among the top 50 hedge funds, with an average annual return of 44.12 percent during the three-year period ended that June. Its fortunes reversed last year, as the securities it invests in, known as collateralized debt obligations, plunged in value amid the credit crunch and downgrades by ratings firms…Highland Capital, founded in 1993, was the fund’s largest shareholder, said a spokeswoman. The firm hadn’t marketed the fund extensively to investors, she said.CDOs are securities backed by a pool of debt obligations, usually between 50 and 100, that can range from bank loans used to finance buyouts to high-yield bonds, commercial real estate loans and mortgage-backed securities. CDOs entitle holders to a share in the stream of payments generated by the underlying loans, with the most senior securities getting first dibs.Highland Capital was one of the largest sponsors of CDOs in the U.S., having formed 30 such vehicles since 1996, according to documents filed in May 2007 for an initial public offering tied to its CDO business. The firm issued $3.2 billion of CDO securities in 2005 and $8.5 billion in 2006, the filing said. The IPO was later withdrawn.The opportunity fund’s liabilities exceeded the value of its assets “to such a degree” that there won’t be anything left to satisfy unpaid redemptions to shareholders or make distributions to current investors, according to the Feb. 4 letter…http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=a1MrBhVi9fmA

nik og jayFebruary 20th, 2009 at 2:21 pm

lets make it just;YOU AND ME THE PEOPLE asThere are far too many of WE THE PEOPLE plus there’s THEM THE OTHER PEOPLEI want to know WHO GAVE THEM ALL THESE EXTRA POOR PEOPLE PERMISSION TO EXIST? As americans we need to decide whether it is time to revoke that permission either now or in the future WHEN OUR ECONOMIC SYSTEM MEANS I AM IN DANGER OF NOT BEING AS COMFORTABLE AS I WOULD LIKE !!!!!!!!

AnonymousFebruary 20th, 2009 at 2:26 pm

if we nationalize a bank like citi and find their insolvency is in the trillions, say 7 trillion. Does that not mean we the tax payers are liable ?Do you know what i mean ? Is this scenario or something close a possible way that the usa collapses ?

Go NourielFebruary 20th, 2009 at 2:30 pm

this was up in the very short thread and bears repeating imo:I watched the Charlie Rose video and if the situation was not so dire, this would be a Monty Python episode. The Professor is stating that we are going to have a “foreclosure tsunami” and without mortgage principal reduction it can’t be stopped. The Professor is stating that we need “synchronized global fiscal stimulus” or we can’t get out of this Global rescession. It turns out that Tim Geithner is turning back any policy that affects the banks negatively. Therefore Tim Geithner is de-facto President with Summers and Kissinger Associates as the Sith. Easton, Mishkin and Zandi are all talking about Obama needing to make his policies “bi-partisan”. To hell with all this bull. Obama has to institute policies that will save the american people unemployment and homelessness. The elite have plenty of cash to ride this out, but the rest of the population is up to their neck in debt. The professor is the only one to make any sense and to communicate the urgency of superquick action. We need a New Deal, but only one that disconnects the banksters from power. Geithner will eventually provide a temporary nationalization of various banks, but we must be careful that his subsequent reprivatization does not provide a WINDFALL TO THE BANKSTERS IN ANOTHER GUISE. The banksters have no intention to reduce the debt overhang for the borrowers. The debt overhang gives them interest profits. The trick is to come up with a solution that maintains the debt overhang and spends enough money, so that later all entitlement programs will have to be sacrificed to “Responsibility”. Beware of that word responsibility. There is no Responsibility if the money spent favors the banksters and there is a major amount of “Responbility” for money for the peons. Wake the hell up and smell the USURY!!!We are being divided into conservatives and liberals in approach, but the banksters will always implementthe political approaches to their benefit. The political spectrum has great patriots in all portions of the political spectrum. Divide the personalities into 2 camps. Those bought by the banksters and those trying to resist the banksters. Forget liberal and conservative disputes. The Federal Reserve must be marginalized and Treasury must take over to benefit people. If the uber-rich have to pay more taxes for budget purposes, then they must. We are standing at a precipice of global deflationary spiral where the banksters have an interest in TOTAL AGGREGATE DEBT, because they make interest on that huge sum. The end game is to inflate the debt to a point where banksters survive and let the taxpayers of the world pay it. The professor is a good man trying to reconcile the extremes of the banksters with the needs of the people. We are presently walking into a bridge to nowhere and off the cliff like lemmings because of the “sanctity of contracts”. The CDS overhang and other “legal contracts” were generated by Bankster Fraud. There must be a reduction of principal on all debt and the investors must take a loss on a global level. There must be an International Debt Conference where there is a percentage haircut on all debt.posted by Guest on 2009-02-20 11:17:15″wake up and smell the usury” is right.I add more thanks to Dr. Roubini – for highlighting that the capitalist system is the best at creating the wealth but that doesn’t make it good at distributing the wealth it aids in creating.

GuestFebruary 20th, 2009 at 2:35 pm

That Easter Islanders myth again? Gees – do some investigation! Their problem was NOT overuse of their resources! The story of their and their island’s exploitation by europeans has been erased from the public’s radar screen!

GuestFebruary 20th, 2009 at 2:45 pm

Here’s the latest on the lengthening list of the ways banks and government team up to steal your money. Excerpts here from The Register-Guard“Bank fees hit jobless on unemployment pay”February 20 (AP) — For hundreds of thousands of workers losing their jobs during the recession, there’s a new twist to their financial pain: Even when they’re collecting unemployment benefits, they’re paying the bank just to get the money — or even to call customer service to complain about it.Thirty states have struck such deals with banks that include Citigroup Inc., Bank of America Corp., JP Morgan Chase and US Bancorp, an Associated Press review of the agreements found. All the programs carry fees, and in several states the unemployed have no choice but to use the debit cards. Some banks even charge overdraft fees of up to $20 — even though they could decline charges for more than what’s on the card…“It’s a racket. It’s a scam,” said Rachel Davis, a 38-year-old dental technician from St. Louis who was laid off in October. Davis was given a MasterCard issued through Central Bank of Jefferson City and recently paid $6 to make two $40 withdrawals.Neither banks nor credit card companies will say how much money they are making off the programs, or what proportion of the revenue comes from user versus merchant fees or interest. It’s difficult to estimate the profits because they depend on how often recipients use their cards and where they use them.But the potential is clear.In Missouri, for instance, 94,883 people claimed unemployment benefits through debit cards from Central Bank. Analysts say a recipient uses a card an average of 6 to 10 times a month. If each cardholder makes three withdrawals at an out-of-network ATM, at a fee of $1.75, the bank would collect nearly $500,000…With the national unemployment rate now at 7.6 percent, the market for bank-issued unemployment cards is booming. In 2003, states paid only $4 million of unemployment insurance through debit cards. By 2007, it had ballooned to $2.8 billion, and by 2010 it will likely rise to $10.5 billion, according to a study conducted by Mercator Advisory Group, a financial industry consulting firm.A typical contract looks like the agreement between Citigroup and the state of Kansas, which took effect in November.The state expects to save $300,000 a year by wiring payments to Citigroup instead of printing and mailing checks.Citigroup’s bill to the state: zero. The bank collects its revenue from fees paid by merchants and the unemployed.“If you use your card the right way, you’re not going to pay fees at all,” said Paul Simpson, Citigroup’s global head of public sector, health care and wholesale cards.But that’s not always practical.Santa-Maria, the laid-off New Mexico engineer, said he didn’t pay any fees the first time he was laid off, for several months in 2007. His unemployment benefits were paid by paper checks. He found a new job last year but was laid off again last fall.This time, he was issued a Bank of America debit card — a “prepaid” card in industry lingo — but he was surprised to learn he had to pay fees to get his money. He asked the bank to waive them. It said no. That’s when Santa-Maria called back to ask how to check his account online. He logged on and saw that the call cost him a half dollar. To avoid more fees, Santa-Maria found a Bank of America ATM at a strip mall and withdrew $80 at no charge. When he got back to his car, he decided to take out the rest of his money — $250 — and deposit it in his bank account.Afterward, Santa-Maria logged on to his account and saw a charge of $1.50 for two withdrawals in one day.http://www.registerguard.com/csp/cms/sites/web/business/8043642-41/story.csp?print=true

2centsFebruary 20th, 2009 at 2:46 pm

I caught this very late post from a couple of threads back. It’s not that there’s anything earth shattering in it, but that it comes from a GM supplier. I suspect that GM is not much of his business, but at least GM felt that he was important enough to send them a letter.

This is one of the greatest responses to the requests for bailout money I have seen thus far.As a supplier for the Big 3 this man received a letter from the President of GM North America requesting support for the bail out program. His response is classic, and has to make you proud of a local guy who tells it like it is.”Dear Employees & Suppliers,””Congress and the current Administration will soon determine whether to provide immediate support to the domestic auto industry to help it through one of the most difficult economic times in our nation’s history. Your elected officials must hear from all of us now on why this support iscritical to our continuing the progress we began prior to the global financial crisis……… As an employee or supplier, you have a lot at stake and continue to be one of our most effective and passionate voices. I know GM can count on you to have your voice heard. Thank you for your urgentaction and ongoing support.””Troy Clarke, President General Motors North America”GO ON DOWN FOR THE REPLYResponse from:Gregory Knox, Pres. Knox Machinery Company Franklin, OhioGentlemen:In response to your request to contact legislators and ask for a bailout for the Big Three automakers please consider the following, and please pass my thoughts on to Troy Clark, President of General Motors North America.Politicians and Management of the Big 3 are both infected with the same entitlement mentality that has spread like cancerous germs in UAW halls for the last countless decades, and whose plague is now sweeping this nation, awaiting our new “messiah”, Pres-elect Obama, to wave his magic wand andmake all our problems go away, while at the same time allowing our once great nation to keep “living the dream”… Believe me folks, The dream is over!This dream where we can ignore the consumer for years while management myopically focuses on its personal rewards packages at the same time that our factories have been filled with the worlds most overpaid, arrogant, ignorant and laziest entitlement minded “laborers” without paying the pricefor these atrocities… this dream where you still think the masses will line up to buy our products for ever and ever.Don’t even think about telling me I’m wrong. Don’t accuse me of not knowing of what I speak. I have called on Ford, GM, Chrysler, TRW, Delphi, Kelsey Hayes, American Axle and countless other automotive OEM’s throughout the Midwest during the past 30 years and what I’ve seen over those years in these union shops can only be described as disgusting.Troy Clarke, President of General Motors North America, states: “There is widespread sentiment throughout this country, and our government, and especially via the news media, that the current crisis is completely the result of bad management which it certainly is not.”You’re right Mr. Clarke, it’s not JUST management… how about the electricians who walk around the plants like lords in feudal times, making people wait on them for countless hours while they drag ass… so they can come in on the weekend and make double and triple time… for a job they easily could have done within their normal 40 hour work week. How about the line workers who threaten newbies with all kinds of scare tactics… for putting out too many parts on a shift… and for being too productive. (Wecertainly must not expose those lazy bums who have been getting overpaid for decades for their horrific underproduction, must we?!?Do you folks really not know about this stuff?!? How about this great sentiment abridged from Mr. Clarke’s sad plea: “over the last few years… we have closed the quality and efficiency gaps with our competitors..” What the hell has Detroit been doing for the last 40 years?!?Did we really JUST wake up to the gaps in quality and efficiency between us and them? The K car vs. the Accord? The Pinto vs. the Civic?!? Do I need to go on? What a joke! We are living through the inevitable outcome of the actions of the United States auto industry for decades. It’s time to pay for your sins, Detroit.I attended an economic summit last week where brilliant economist, Alan Beaulieu, from the Institute of Trend Research, surprised the crowd when he said he would not have given the banks a penny of “bailout money”. “Yes, he said, this would cause short term problems,” but despite what people like politicians and corporate magnates would have us believe, the sun would in fact rise the next day… and the following very important thing would happen…where there had been greedy and sloppy banks, new efficient ones would pop up… that is how a free market system works… it does work… if we would only let it work…”But for some nondescript reason we are now deciding that the rest of the world is right and that capitalism doesn’t work – that we need the government to step in and “save us”… Save us my ass, Hell – we’re nationalizing… and unfortunately too many of our once fine nation’s citizens don’t even have a clue that this is what is really happening… But, they sure can tell you the stats on their favorite sports teams… yeah – THAT’S reallyimportant, isn’t it…Does it ever occur to ANYONE that the “competition” has been producing vehicles, EXTREMELY PROFITABLY, for decades in this country?… How can thatbe??? Let’s see… Fuel efficient… Listening to customers… Investing in the proper tooling and automation for the long haul…Not being too complacent or arrogant to listen to Dr. W. Edwards Deming four decades ago when he taught that by adopting appropriate principles of management, organizations could increase quality and simultaneously reduce costs. Ever increased productivity through quality and intelligent planning; treating vendors like strategic partners, rather than like “the enemy”…Efficient front and back offices… Non union environment… Again, I could go on and on, but I really wouldn’t be telling anyone anything they really don’t already know down deep in their hearts.I have six children, so I am not unfamiliar with the concept of wanting someone to bail you out of a mess that you have gotten yourself into – my children do this on a weekly, if not daily basis, as I did when I was their age. I do for them what my parents did for me (one of their greatest gifts, by the way) – I make them stand on their own two feet and accept the consequences of their actions and work through it. Radical concept, huh… Am I there for them in the wings? Of course – but only until such time as they need to be fully on their own as adults.I don’t want to oversimplify a complex situation, but there certainly are unmistakable parallels here between the proper role of parenting and government. Detroit and the United States need to pay for their sins. Bad news peop le – it’s coming whether we like it or not. The newly elected Messiah really doesn’t have a magic wand big enough to “make it all goaway.” I laughed as I heard Obama “reeling it back in” almost immediately after the final vote count was tallied…”we really might not do it in a year…or in four…” Where the Hell was that kind of talk when he was RUNNING for office.Stop trying to put off the inevitable folks … That house in Florida really isn’t worth $750,000… People who jump across a border really don’t deserve free health care benefits… That job driving that forklift for the Big 3 really isn’t worth $85,000 a year… We really shouldn’t allow Wal-Mart to stock their shelves with products acquired from a country that unfairlymanipulates their currency and has the most atrocious human rightsinfractions on the face of the globe…That couple whose combined income is less than $50,000 really shouldn’t be living in that $485,000 home… Let the market correct itself folks – it will. Yes it will be painful, but it’s gonna’ be p ainful either way, and the bright side of my proposal is that on the other side of it all, is a nationthat appreciates what it has…and doesn’t live beyond its means…and gets back to basics…and redevelops the patriotic work ethic that made it the greatest nation in the history of the world…and probably turns back to God.Sorry – don’t cut my head off, I’m just the messenger sharing with you the”bad news”. I hope you take it to heart.Gregory J. Knox, President Knox Machinery, Inc.”The problem with socialism is that you eventually run out of other people’s money.”Margaret ThatcherHide reply Reply to this comment By Wm on 2009-02-20 09:26:26

GuestFebruary 20th, 2009 at 2:52 pm

UNDERSTATEMENT OF THE YEAR! NR says “Europe’s banking system faces growing risks”. Once BAC and Citi go, there is no European banking system as they are so intertwined there will be a catastrophic domino effect. The contamination of concentrated wealth destroys all wealth.

GuestFebruary 20th, 2009 at 2:55 pm

I’m very happy to see Dr. Roubini highlighting a crucial point: how good the capitalist system is at creating wealth – and how badly it distributes the wealth created. Capitalism is a good workhorse for humanity, being worked very badly. The problem is not the good horse, it’s the bad actor working the good horse badly. (In this same manner, government is a good workhorse for us when worked by responsible, intelligent governors – meaning the citizenry and their elected representatives/public servants – and government is less than no use to us if worked badly – which happens without vigilance.)When a car is driven off the road into a ditch by a drunk driver, do we blame the car – or the drunk driver? Capitalism is the car. A car obeys mechanical laws just as economics has laws like supply and demand. But we don’t fail to drive the car because it obeys mechanical laws; we control the car by steering and braking and accelerating to make it take us where we want to go while it’s following its mechanics. Capitalism has been hands-off-the-wheel in the right-conservative/right-libertarian playbook – so capitalism has been wrecked in the ditch. These people are so short-sighted they narrowly define freedom as the freedom to have no government restraint upon wealthtaking and they think the American dream was about something they like to call “individual responsibility” (if you didn’t get rich it’s your own damn fault) and they seem to have no concept that the american dream was never about the freedom to get over on your fellows but was about the dream of freedom from the tyranny of the moneypowerful! And they NEVER acknowledge that nobody did it all by themselves!But we can and must take control of the way the wealth that a capitalist system is good at generating gets distributed – because market forces automatically and ceaselessly shift the work that produces the wealth and the wealth produced by the work, in opposite directions. Leave capitalism/ the market totally alone and you can’t get anything but ever-escalating extreme maldistribution. The problem with disaster capitalism has always been the strangulation of consumption. You CANNOT separate production from consumption: consumption is for production, production is for consumption. Now, if the very purpose of economics is not to see that the wealth gets rewarded to what created the wealth, then what IS the purpose?Disaster capitalism is when there is, as now, this huge disconnect between what creates wealth and what receives wealth. Disaster capitalism is allowing what creates wealth to be deprived of wealth and what does nothing to create wealth to be paid from the work of others. Disaster capitalism is when people are allowed to take more from the pool of wealth than they contributed by their own work – because only work creates wealth and the amount of work an individual can contribute is limited by nature’s immovable decree. Disaster capitalism is just people robbing people and robbing back, and it creates violence and 99% of human suffering that could easily be eradicated.Don’t throw the baby out with the bathwater, just marry capitalism to justice. Justice is equal pay for equal sacrifice.

GuestFebruary 20th, 2009 at 2:56 pm

Excerpts of concern caused by an embedded Congress from The Microsoft Blog:The base limit on H-1B visas is a vastly excessive 65K, the total limit is over 85K, broken down as follows, according to USCIS:1,400 nationals of Chile;5,400 nationals of Singapore;20,000 with master’s and doctor’s degrees from US colleges and universities;58,200 with “bachelor’s degrees or equivalent experience” from any hole-in-the-wall in the world;unlimited visas for those employed by non-profit research outfits;unlimited visas for those employed for local, state and federal research;unlimited visas for those employed by US colleges & universities.Those numbers constitute the current open-ended “cap”. The numbers actually approved and the numbers of visas issued have been quite a bit above those numbers according to USCIS and State Department data.H-1B visas approved (USCIS):year Initial renewed+extended total1999 134,411 na na2000 136,787 120,853 257,6402001 201,079 130,127 331,2062002 103,584 93,953 197,5372003 105,314 112,026 217,3402004 130,497 156,921 287,4182005 116,927 150,204 267,131H-1B visas issued (DoS):1996 58,3271997 80,5471998 91,3601999 116,5132000 133,2902001 161,6432002 118,3522003 107,1962004 138,9772005 124,3742006 135,861If they were for the “highly skilled” “best and brightest” a more reasonable cap would be a hard 2K visas in use at any one time.Yes, the E-3, F, H-1B, J, and L visa programs need to be reformed. First, cut the numbers of visas so that more of the bright, well-educated US citizens can be brought back from cat-sitting to something resembling full employment of their skills. It’s a terrible waste to subsidize the educations of foreign students, make it more difficult for US students to succeed, and then destroy the careers of US students who had succeeded, while transferring knowledge and research techniques and capital equipment outside of the USA.There is no requirement that H-1B visa applicants be “highly skilled”. Indeed, the US Labor Department data show that 56% of applications filed are for H-1B workers with the lowest skill level (level 1 of 4).http://www.cis.org/articles/2007/back407.htmlUSCIS reports show that hundreds are issued each year to those lacking the equivalent of a US high school education, while hundreds more lack the equivalent of a bachelor’s degree. With a few welcome exceptions, these are not “best and brightest” individuals, but ordinary people doing ordinary jobs for which the USA has been producing an excess of US citizen talent for decades.These elevated numbers of E-3, F, H-1B, J, and L-1 visas have been being used to drive down compensation, to facilitate off-shoring, and to facilitate age discrimination.http://www.prospect.org/cs/articles?article=how_guestworkers_promote_outsourcingIf a foreign student cannot obtain US employment within 2 months after graduation from a US university, then their skills and knowledge must not be in demand. Rather than increasing the time they can legally remain in the USA after graduation from 1 year to 2 years, it should be reduced.http://blog.seattlepi.nwsource.com/microsoft/archives/134123.asp

GuestFebruary 20th, 2009 at 3:06 pm

what a load.and – ew – sickening – a parent proud of being stupidly convinced his children’s mistakes deserve punishment as if children make mistakes on purpose or because they are wicked, as if children can’t learn from mistakes unless they suffer some dreadful consequences or removal of a parent’s loving care.gimme a break. PEOPLE MAKE MISTAKES. IT DOESN’T MEAN THEY’RE BAD – just mistaken! children learn how not to repeat mistakes through reasoning. they don’t have to experience punishment to be shown their mistake. punishment just teaches them don’t get caught. punishment teaches them to think about consequences to themselves and to not think about what their actions mean to others so they know why to not repeat the mistake.

GuestFebruary 20th, 2009 at 3:14 pm

Lest we forget, Attorney William H. Gates, Sr. is the brains behind the business arrangement that made Microsoft into the goliath it is today.Microsoft billionaire Bill Gates reveals that his parents were the inspiration for his funding of pro-abortion population control measures. Responding to a question by Moyers on how he came to fund “reproductive issues” Gates answered, “When I was growing up, my parents were always involved in various volunteer things. My dad was head of Planned Parenthood. And it was very controversial to be involved with that. And so it’s fascinating. At the dinner table my parents are very good at sharing the things that they were doing. And almost treating us like adults, talking about that.”Gates Sr. is a co-chair of the Bill and Melinda Gates Foundation, which his son Bill and his son’s wife Melinda founded. He also serves as a director for Costco wholesale, a bulk retail corporation.So why should Billy Gates care about any of you and your jobs or your country when he is a proponet of violent worldwide population “control”? Afterall, he’s a sophisticate of the world, isn’t he? And his father’s son.

2centsFebruary 20th, 2009 at 3:15 pm

Speaking of the automobile companies, I had the “pleasure” of going to several dealers this weekend to pick out a new company vehicle. This is a process that I have undertaken numerous times over 20 years. Usually, the game is to get enough “car time” to make your selection from the list of available vehicles offered before the salesman finds out there’s no money in it for him and storms off. I understand the salesman’s position, but with the system, it’s the only way to get enough information to make an informed decision. This time was different.First, the selection list is very, very limited. The vehicles are basically 4cyl. econo-boxes. Furthermore, virtually all options have been restricted (even colors black, white or silver only!). Don’t get me wrong, I appreciate the value of the provided vehicle and will be happy to be getting a new vehicle relative to the other possibilities, but it is nonetheless hard to fathom the severe reduction. Things must not be looking remotely good to the corporates.My bigger point is that during our dealer visits, several things popped out. The salesmen were overwhelmingly gracious and responsive even though they knew it was a fleet purchase (we tell them right up front now). They said that even though it won’t help their pocket directly, that it would help their representative manufacturer and that they would assist in any way they could. Two even asked (begged) to have us request their dealership as the drop-off dealer. They get a minimal paperwork/prep fee for doing this. (In the past may dealers refused to do drop-offs because it wasn’t worth the hassle)The even bigger surprise was the lack of customers and the lack of inventory on the dealer’s lots! There were whole sections of their lots devoid of vehicles! I would estimate 40 to 60% less that normal. When I asked the manager about this he said we are bracing for where the market is heading! He said that their market information points to 2009 as being 45% to 65% below 2007! WOW.

MarkFebruary 20th, 2009 at 3:16 pm

@Guestpeople should not listen to you when your facts and reasoning are wrong.True (as for anyone), but in general people DO listen to me, so I guess, then, that my facts and reasoning ARE right.MarkP.S. What is it with “Guests” always suing ad hominem attacks? Unable to come up with a posting name, unable to engage in meaningful dialog; seems to go hand in hand.

2centsFebruary 20th, 2009 at 3:20 pm

@ guest,I didn’t see the use of the word punishment in regards to children.I think the sound bite for Mr. Knox’s comments would be something like – let them learn from their mistakes! He did say that he was there in the wings which I assume means that the children were to solve their own mistakes up to the approriate level before the parents would step in.

MarkFebruary 20th, 2009 at 3:20 pm

The ISSUE is over-consumption (total consumption), not necessarily population. The US per-capita consumption is (at least) 35 times that of Bangladesh. Multiply 300 million (US) by 35 and see how this number stacks up against Bangladesh’s population.Mark

MarkFebruary 20th, 2009 at 3:25 pm

The neocons (war) and neoliberals (oppressive labor) both do a pretty good job at working to keep populations down. Gate’s contribution is pretty minor.NOTE: Planned Parenthood has to do with planning. If you can’t care for your kids then should you really be having them? But the religious fanatics never ask such simple questions (they just want control over the individual- hmm, sounds familiar; power is power…).Mark

GuestFebruary 20th, 2009 at 3:25 pm

Dodd Says U.S. Bank Takeovers May Be Necessary for ‘Short Time’Feb. 20 (Bloomberg) — Senate Banking Committee Chairman Christopher Dodd said banks may have to be nationalized for “a short time” to help lenders such as Citigroup Inc. and Bank of America Corp. survive the worst economic slump in 75 years.“I don’t welcome that at all, but I could see how it’s possible it may happen,” Dodd said on Bloomberg Television’s “Political Capital with Al Hunt” to be broadcast later today. “I’m concerned that we may end up having to do that, at least for a short time.”Citigroup and Bank of America, which received $90 billion in U.S. aid in the past four months, tumbled today on concern they may be nationalized. The Obama administration today said a “privately held” banking system is the “correct way to go.”Dodd, a Connecticut Democrat, also said Treasury Secretary Timothy Geithner has “an awful lot of leeway” in interpreting how the executive compensation restrictions he wrote into the economic stimulus legislation will be applied for banks that take federal aid.Dodd’s statement gives Geithner the flexibility to say the rules don’t apply to firms that participate in the public-private partnership Treasury announced Feb. 10 to buy banks’ toxic assets, but only to companies that get cash injections under the Troubled Asset Relief Program…http://www.bloomberg.com/apps/news?pid=20601087&sid=aSzsPdWP89R0&refer=home

2centsFebruary 20th, 2009 at 3:30 pm

Great post. — The problem is that we don’t really practice capitalism anymore.Capitalism is a country wide if not now global concept.We have broken that down into corporatism, finance, individualism (executives, worker-bees), politics and welfare. It’s only capitalism when all the parts are working towards a common set of “profits”. Unfortunately, the current accounting likes to profitize these individual parts and assumes that if the individual parts are profitized via capitalist principles then the larger picture will be better off. Not so, we now have a feudal system with compartmentalized feedback loops!

GuestFebruary 20th, 2009 at 3:31 pm

Planned Parenthood is the world’s leading provider of abortions — with your tax dollars. This “non-profit” abortion giant, whose income has reached an all-time high of almost one billion dollars, receives about one-third of its income from tax dollars.

2centsFebruary 20th, 2009 at 3:35 pm

I have the feeling that this is going to be very, very busy weekend for some.Do you see some marathon meetings going on with gov. officials?

PeteCAFebruary 20th, 2009 at 3:36 pm

And so with BoA and Citi on the chopping block, they’re still trying to find a way to justify huge salaries for these bank execs?!!What a bunch of turkeys.PeteCA

MarkFebruary 20th, 2009 at 3:40 pm

You’re a religious zealot. Quit whining about this and go feed some hungry kids (so that you can brainwash them into being religious slaves).Mark

GuestFebruary 20th, 2009 at 4:01 pm

What’s amazing is all this panic is really about the wealthiest people not willing to forgive debt. They’ll hold on to their debt instruments till every American is out a job-greed is completely blind to the peril before it.What’s amazing to me is early on a little debt forgiveness would have saved the elite tons but now through deflation the elite will lose most of their wealth except for the few who are able to hold on. So in the end the wealth will have trickled up once again to a smaller and smaller minority.

2centsFebruary 20th, 2009 at 4:15 pm

White House Press Secretary Gibbs blasts CNBC ranter Rick Santelli.What a joke, I’m no CNBC fan, but Santelli obviously stated what’s on most people’s minds. Why does Gibbs think that it is at all related to campaign coverage.My question to Gibbs is where is all the Shock and Awe promised during the campaign. Heck where’s the Change we can believe in. My impression of Obama’s choices of support staff leave me to question just what sort of criteria he used to get such a hapless compendium of assistants.

GuestFebruary 20th, 2009 at 4:17 pm

Obama’s all the promises and hope for main street can be thrown in the dustbin. He seems to want to please the main street and the wall street by spinning words, the vietnamese and the korean, the neoconservative and whoever. Will he socialize all the losses by avoiding nationalization?As soon as the market started selling, it wasn’t Bernanke but Obama this time who indicated that there will be no nationalization and another brillian “plan” of throwing money around will be announced next week.What I’d like to hear from Obama is not poetry, not instilling expectation in “everyone” that he can never meet, not the isles and the green pastures, but, for once, what he thinks is right and the strength to be able to implement what he thinks is right. I mean has Obama ever even spoken about what he thinks is right?

PeterJBFebruary 20th, 2009 at 4:30 pm

The bones have been thrown; the game is over; now wait and watch the End Game; it begins!Expect change; much change.If you revolt please remember to nurture the children they are both innocent and the hope for our future.Ho hum

subgeniusFebruary 20th, 2009 at 4:36 pm

I’ll take this on Mark…JULIAN MORRISJulian Morris is director of think-tank International Policy Network, was formerly a Research Fellow and subsequently Director of the Environment and Technology Programme of the Institute of Economic Affairs. He is also a visiting professor of Economics at the University of Buckingham. Recently he become co-ditor with Indur M. Goklany of the Electronic Journal of Sustainable Development. He receives a reasonable proportion of his funding comes from oil companies such as Exxonmobil.Qualifications:* Graduate Diploma, Law, University of Westminster, 1999* MPhil, Land Economics, Cambridge University, 1995* MSc, Environment and Resource Economics, University College London, 1993* MA, Economics, Edinburgh University, 1992The International Policy Network (IPN) is a non-profit organisation based in the United Kingdom that funds groups and workshops to promote market solutions to international policy debates. It used to have offices in India, Chile and the USA, but closed the first two early in its existence and the US office due to a falling out between its founders.IPN, which argues that we should not seek to reduce our carbon emissions, has received $295,000 from ExxonThe article you cite was published in ENERGY & ENVIRONMENTENERGY & ENVIRONMENTThe journal’s peer-review process has at times been criticised for publishing substandard papers .Roger A. Pielke (Jr), who published a paper on hurricane mitigation in the journal, said in a post answering a question on Nature’s blog in May about peer-reviewed references and why he published in E&E: “…had we known then how that outlet would evolve beyond 1999 we certainly wouldn’t have published there. The journal is not carried in the ISI and thus its papers rarely cited. (Then we thought it soon would be.) We were invited to submit a piece in 1997 or 1998 and we had this in prep and sent it in.”Numerous people considered climate skeptics or contrarians have published in the journal. Skeptics on the journal’s editorial staff include Boehmer-Christiansen herself and anthropologist Benny Peiser. Some of the journal’s articles opposing the scientific consensus on climate change have been quoted by policy makers known to be skeptical of the subject, such as U.S. Senator James Inhofe and U.S. Congressman Joe Barton.[1] When asked about the publication of these papers Boehmer-Christiansen replied, “I’m following my political agenda — a bit, anyway. But isn’t that the right of the editor?”[5]JARED DIAMONDJared Mason Diamond (born 10 September 1937) is an American evolutionary biologist, physiologist, biogeographer, lecturer, and nonfiction author. Diamond works as a professor of geography and physiology at UCLA. He is best known for the Pulitzer Prize-winning book Guns, Germs, and Steel (1998), which also won the Phi Beta Kappa Award in Science, as well as for Collapse: How Societies Choose to Fail or Succeed (2005). He received the National Medal of Science in 1999.So you base your arguments on an article by a shill for the big energy companies, who has NO qualifications in the area he is discussing, and is a professor at a second-rate institution, that was published in a publication with, at best, a dubious reputation; rather than on the publication by a person qualified to talk about the subject, who is a professor at a first-rate institution.Let me guess: you don’t believe in peak oil or anthropogenic climate change either…

GuestFebruary 20th, 2009 at 5:21 pm

Just goes to show who’s been skimming all the cream off the top of big bank profits — the boys at the top. It really is a casino. And if you notice, that’s what they spend their time fighting over — their personal billionaire plutocrat profits. No wonder the imploding bankers and Wall Street don’t want temporary nationalization — there goes their money pool. But I don’t trust “nationalization” either under Frank and Dodd and Congress or Obama’s Cabinet — only if it’s under high, honest, disinterested quality, such as Dr. Roubini.

GuestFebruary 20th, 2009 at 5:32 pm

Boy, you guys are really dug into that mindgroove. So where’s the beef, subgenius? Where’s the word in all you wrote that disputes what was said about Easter Island or the source material it was based on??Now about the climate thang, you can get up to speed on the fact that Al Gore and the IPCC are full of scientific error by going to youtube and finding Bob Carter, New Zealand scientist who shows that the observational data says without question that Co2 has never caused global warming in billions of years.Don’t miss the part where the ground thermometers were tampered with…Doesn’t anybody ever do any unbiased researching anymore?? Did they, like, outlaw that or something?why is this important? because a lot of human focus and energy that is needed to address the real problem is being diverted to these other “grave concerns” – that’s why.

GuestFebruary 20th, 2009 at 5:36 pm

Good for RGE Monitor: that’s why I’m here — for varying economic analysis and perspective from which to garner a solid economic footing and direction. That’s the power behind Roubini; one of the reasons why he’s the best.

GuestFebruary 20th, 2009 at 5:43 pm

of course you didn’t see the word punishment. he used the codespeak: “accepting the consequences”.he describes himself as “off in the wings” while his children must “stand on their own two feet”why isn’t guidance, explanation, discussion enough? why must there be consequences “for their own good”?

GuestFebruary 20th, 2009 at 5:53 pm

From “Where the Future Went” by Joe SchembrieThe decades up until the 1970s had shown tremendous progress. In twentieth century America, living standards skyrocketed. Automobiles, indoor plumbing, electric lighting, telephones – the list of marvels was endless. Average life expectancy increased by fifty percent. We did indeed sense a momentum that would carry us to the stars.Popular culture envisioned this as straightforward economic extrapolation. The cartoon The Jetsons portrayed a “typical” twenty-first century family living in a spacious fully-automated home with a flying car, robot maid, and four-hour workday. The movie 2001: Space Odyssey had a hotel in orbit and city on the Moon.But then something happened, and it happened around 1971. Being fifteen at the time, I had no idea it had to do with the abandonment of the gold standard. I merely noticed the optimism had suddenly vanished.Suddenly my dad, who ran a successful construction business, started wondering aloud about how he was going to put food on the table. He and my mother got into arguments about where to buy hamburger for the cheapest and we kids were sharply scolded for leaving the lights on.Inflation and unemployment reached double-digit levels in what was called “Stagflation.” Some national commentators warned that even economic collapse was in the offing.Then, after more than a decade in the wilderness, the economy finally stabilized. Government economists congratulated themselves for “fixing” the business cycle.But – where was the future?True, by the official econometric indices, the economy of the 1980s was booming as before. Unemployment and inflation were low, and Gross Domestic Product growth had returned to the levels of decades earlier. Officially, everything was getting better and better . . . except the middle class knew different.I had graduated from college and was working as an engineer by then. Going by the historical trends of recent decades of American economic progress, I expected to live better than my parents, who had lived better than their parents. Instead, my salary was barely keeping up with inflation.I had grown up among other middle-class families but now I looked at housing prices and realized that I could barely afford to buy a home in the community where I had been raised. Living better? No, despite paper-GDP growth, the economy was running backward for the middle class.By the late 1990s, my generation had come to realize that the promises of the twenty-first century had been broken. We couldn’t afford flying cars. Instead of robot maids, mothers had to work overtime to keep roofs over their families.The future we lost was about more than gadgetry. Less poverty, less drudgery, greater health, abundant energy – our progress has been slower than anticipated. And now, rising fuel prices and declining life expectancy threaten us with being dragged back to the barbarous past.How did abandoning the gold standard lose the future?In theory, a fiat currency can function indefinitely, so long as the monetary printing presses are restrained. In practice, once the discipline of the gold standard was abandoned, the banksters immediately became profligate. And the greatest damage wasn’t the boom-and-bust cycle, it was the effect on economic growth.Even an annual monetary inflation rate of a few percent will erode the savings of successful businesses, which must then borrow to finance capital investments. Interest costs then eat profit. That curtails re-investment and R&D, stifling innovation and stunting economic growth.But can businesses even acquire loans? In what amounts to a giant money-laundering operation, the government-enforced banking cartel prefers lending its printing-press dollars to select cronies in the financial industry. Interest rates on those loans are kept artificially low by inflating away the savings of productive enterprises. Our manufacturing base is bankrupted so that financial speculation can be lavishly subsidized.Today, burgeoning Federal-Reserve-induced debt causes America to falter from lack of value-added investment. Once-impoverished China fills cities with skyscrapers, while we can’t afford to fill potholes. Now even the computer industry staggers under the ravages of Keynesianism Unleashed.To bring the future back, first find where it went. To do that, follow the money.http://www.lewrockwell.com/schembrie/schembrie12.html

JoyceFebruary 20th, 2009 at 5:59 pm

Answer? Obama has effectively neutralized his unremarkable “Team of Rivals” and left the heavy lifting to outsiders. Maybe that’s the best arrangement possible. We can now N-A-T-I-O-N-A-L-I-Z-E the banks starting with the Federal (Private) Reserve.

subgeniusFebruary 20th, 2009 at 6:13 pm

It’s all about peer review buddy. Show me the science, not bull$hit on youtube.These people you rely on operate on wishful thinking and mass infusions of capital from sources wedded to their current power. Obviously you are not going to change your opinions and have no interest in the power of rational thought.Many of the “facts” disputing the work of J. Diamond come from Benny Peiser’s article in the SAME JOURNAL.Benny PeiserBenny Peiser born 1957 in Haifa, is a senior lecturer in the School of Sport and Exercise Sciences at Liverpool’s John Moores University (2nd rate). Peiser was educated in West Germany and studied Political science, English studies and Sports science in Frankfurt and previously was an historian of ancient sport at the University of Frankfurt. He is a UK social anthropologist, and a believer in scientific progress’ ability to help us work our way round ecological disasters. Popular in the media as he is an “expert” on near-earth asteroids.Peiser’s “claim to fame” in the war on climate change science was a 2005 study that he claimed refuted an earlier study by Dr. Naomi Oreskes.Originally published in the prestigious publication, Science, the Oreskes study looked at 928 research papers on climate change and found that 100% agreed with the scientific consensus. Peiser originally stated in January, 2005 that Oreskes was incorrect and that “in light of the data [Peiser] presented… Science should withdraw Oresekes’s study and its results in order to prevent any further damage to the integrity of science.On October 12, 2006, Peiser admitted that only one of the research papers he used in his study refuted the scientific consensus on climate change, and that study was NOT peer-reviewed and was published by American Association of Petroleum Geologists.Peiser’s incorrect claims were published in the Financial Post section of the National Post, in a May 17, 2005 commentary authored by Peiser himselfAccording to a search of 22,000 academic journals, Peiser has published 3 research papers in peer-reviewed journals: Sports Medicine, 2006; Journal of Sports Sciences (2004); and, Bioastronomy 2002: life among the stars (2004). None of these studies are related to human-induced climate change.Some other quotes from your “source”, with comments:Nor does it mean we need to be sentimental about trees. If people in poor countrieswant to convert their forests to grow crops, build towns or play golf, then who are weto tell them that they can’t do such a thing?One of the primary causes of anthropogenic climate change is deforestation.Most preposterously, Diamond claims that “The lower costs of aquaculture than offishing, by driving down fish prices, initially drive fishermen to exploit wild stockseven more heavily in order to maintain their incomes constant when they are receivingless money per pound of fish.” This claim, stated as fact, is unsupported by anyevidence. In reality, the opposite is far more likely to be the case: the lower cost offarmed fish drives ocean fishermen out of the market, ensuring that more fish are leftin the oceans to breed.No evidence is available for the resurgence of fish stocks, despite the increase in aquaculture. If anything, stocks are declining to the point of collapse. Fishermen are driven out of work by the lack of anything to catch.Soil erosion is a serious problem in many places – especially where agriculturalpractices favour leaving the land fallow and tilling the soil heavily (typical agriculturalpractices in many parts of Africa and among organic farmers in rich countries).But there are also many places where erosion rates are now essentially sustainable(see e.g. Marohasy’s description of Australia, this volume). This is increasingly so inarable areas in wealthy countries, where the use of modern no-till farming (madepossible by the use of chemical herbicides and, increasingly, biotechnology) as well aschemical fertilisers (which replace lost soil nutrients) means that farmers bothexperience less soil erosion and are less reliant on the formation of new soil fornutrition.Good luck with that when the rapid increase in natural gas prices takes out the fertilizer industry.Diamond’s fifth scare is that “The prevalent view is that known and likely reservesof readily accessible oil and natural gas will last for a few more decades.” Yes, thatprobably is the prevalent view and it has been the prevalent view for at least fifty years.The rate of discounting investments in the discovery of new reserves and newtechnologies for extracting reserves of oil and gas mean that at any time we only knowabout the reserves that will be commercially viable to extract in the next thirty to fortyyears (fewer for gas than oil). The price of oil and gas fluctuates according to theamount that is currently in production and the amount that is demanded: if demandrises, it typically takes some time to increase output and in the meantime the price rises,which provides an incentive for more marginal producers to come online. The recenthike in oil prices, for example, has meant a substantial increase in supply of Canadianshale oil (a much more expensive source than, say, Saudi crude).The only reason that we would stop extracting oil and gas is that we foundalternatives that are cheaper, more efficient, or otherwise more desirable. Suggestingthat we should reduce our consumption of these resources now so that we can havemore of them in the future ignores the fact that our economic progress and hence ourcondition in the future is in part dependent on the cost of the energy sources that weuse today. If we spend more on energy today, we will have fewer resourcesto spend on other investments, so growth will be slower and people in the futurewill be worse off. Thus, the question is: do we do something today (reduce oiland gas consumption) that will definitely impoverish us as well as future people in order to ensure that future people have more of a resource that they might or might notneed?I am not even going to rehash the arguments against this bull$hit. Suffice it to say he has a lot of oil money backing him, and if you really want to understand this issue, there is plenty of material out there.We are using most of our available fresh water….Diamond then falls into the trap of assuming that because desalinization is expensive today, it will always be too costly to supply “most of the world’s water shortages”. The main constraint on the desalinization ofwater, as with transport of fresh water, is energy cost. So, it is imperative that wecontinue to utilise and develop low-cost energy sources….blah blah blahEnergy costs again. I suggest you study physics and geology.Air pollution…The World Health Organization states that 2.4 million people die each year from causes directly attributable to air pollutionClimate changeblah blah blah – go to realclimate.org, the uk met office, NASA… whatever…More generally, Diamond has swallowed, hook line and sinker, the notion thatincreases in population and wealth are bad per se:“… a society’s steep decline may begin only a decade or two after the societyreaches its peak numbers, wealth and power. … The reason is simple: maximumpopulation, wealth, resource consumption, and waste production meanmaximum environmental impact, approaching the limit where impact outstripsenvironmental resources.” (509)Diamond’s aim seems to be to scare us into thinking that there isn’t much time to act ifwe want to save the Earth. Fortunately, his analysis is utter bunkum. In the past century,many societies have experienced simultaneously dramatic increases in both wealth andpopulation, as well as increased consumption…all predicated on massive use and rapid depletion of fossil fuels. The “green revolution” was really the “petrochemical revolution”Now [email protected] off and do some real reaserch

GuestFebruary 20th, 2009 at 6:24 pm

on NBC nightly news with Brian Williams – he clearly was not on Santelli’s side – referring to Gibbs as continuing the conversation instead of rantingCan you imagine the pressure on NBC who has been in the tank for Obama from the get go. Santelli will be demonized within a week and my guess is he’ll be gone

PeterJBFebruary 20th, 2009 at 6:32 pm

Speaking of Morons and “leadership” and smoking the ultra-high grade hashish – a shoe at a time (something you youngsters wouldn’t know about).Yesterday, in Testimony (pious awe) before Committee (the Capital ‘C’ indicates that “they” may know something about anything), the Head of the Reserve Bank of Australia (RBA), Mr. Glen (quick draw) Stevens said the indicators were that – the worst of the “global economic recession” was over – you know, them “evil doers” was defeated, like we done Al Qaeda) and that Australia was well placed to – well – soar to “infinity and beyond” (Buzz Lightyear) or words to that effect.It’s a headline – Wow!!!!!!!!!!!!!!Well, we can all relax now…Sadly, the abysmal state of “leadership” guarantees not only “their” end, but our end too (if you chose to believe “them”.I advise against such insanity.Ho hum

GuestFebruary 20th, 2009 at 6:45 pm

There is no use talking to you if you refuse to look at what the observational data says and just dismiss is as “some bull on you tube”, then declare what you refuse to look at simply has to be wrong.Bob Carter presents the science and the evidence that proves your “scientific consensus” is in error.Hopefully, people who read this will not adopt your own refusal to consider new eveidence presented to them, and will take 9 minutes to see the video presentation Mr. Carter gave in New Zealand.

subgeniusFebruary 20th, 2009 at 6:52 pm

Carter is on the research committee of the Institute of Public Affairs, a group that has received funding from corporate interests including oil and tobacco companies, and appears to have little standing in the Australian climate science community.Former CSIRO climate scientist Graeme Pearman said Professor Carter was not a credible source on climate change. “If he has any evidence that [global warming over the past 100 years] is a natural variability he should publish through the peer review process,” Dr Pearman said. “That is what the rest of us have to do.” He said he was letting the fossil fuel industry off the hook.Like I said, [email protected] off and do some real research….

subgeniusFebruary 20th, 2009 at 6:54 pm

addendum: I don’t have to look at non-peer-reviewed nonsense on youtube. THAT IS WHY PEER REVIEW EXISTS, idiot.

GuestFebruary 20th, 2009 at 7:26 pm

You have disputed nothing – as in no thing – that the sources I’ve offered has asserted, you have only continued casting your aspersions, and been rude.good night, mr. all-ego.

GuestFebruary 20th, 2009 at 7:26 pm

“As Secretary (Timothy) Geithner has said, we will preserve a financial system that is owned and managed by the private sector,” Baker said.Even if it means stealing and raping every man woman and child in this country. After all our motto is bankers first and then bankers second too!

GuestFebruary 20th, 2009 at 7:26 pm

Even if the rest of what you wrote were true, Santelli won’t be gone. He’s very smart, very good at what he does, and a huge number of CNBC viewers think he’s one of the best people at CNBC.

Average JaneFebruary 20th, 2009 at 7:32 pm

Re-inflation?I talked to my trusty realtor, Tony, today. He tells me he is incredibly, incredibly busy with buyers flocking to buy homes due to the stimulus plan’s promise of an $8,000 tax credit for this year.Here we go again. Follow the Herd, dammit. <Sigh.>

GuestFebruary 20th, 2009 at 7:35 pm

Rick Santelli lost all my respect the government proposes a 50 billion dollar bailout for home owners and he starts a riot but when they bailed out the banks to the tune of 10 trillion counting all the FED’s moves he barely makes a roar. What a putz!

PeterJBFebruary 20th, 2009 at 7:52 pm

Well if that isn’t enough ‘quick draw’ sees the new Australia boom economy of LQ09 to be built on supra-leveraged home prices (held there by “leadership” policy and “stimulus” low (sucker) interest rates – er, he means adjustable interest rates that will conveniently soar to infinity before this year contemplates its end, and the creepy, creeping massive unemployment that has just now publically emerged for all to see.No doubt Mr. Glen (quick draw)Stevens (who looks amazingly like Hank Paulsen and perhaps is related through the hip) will be elevated to the Morons Hall of Fame (MHF)yet to be built as a wing of the Grande Global Bordello (GGB) or former Federal Reserve Building (FedRes).The Banks in Australia have already commenced sticking it to the pubic some more with NEW fees (and we all thought that they were focused on straightening up their books) for just about everything – they want to get in on the taxation game where the receiver (or banker) is always the winner.It’s feeding time and guess what? We are dinner.Advice: Become a moving target.Ho hum

PeterJBFebruary 20th, 2009 at 8:00 pm

BoA / Citi – RIP: (Obvious 9 months ago)http://www.chartingstocks.net/2009/02/gone-in-60-days-citi-and-bank-of-america-wont-live-to-see-may/with chartsHo hum

PeterJBFebruary 20th, 2009 at 8:06 pm

Speaking of wise words:1. “Don’t throw the baby out with the bathwater, just marry capitalism to justice. Justice is equal pay for equal sacrifice.”@ Guest on 2009-02-20 14:55:272. “Great post. — The problem is that we don’t really practice capitalism anymore… “@ 2centsHere lies a fundamental.Ho hum

subgeniusFebruary 20th, 2009 at 8:19 pm

Apologies to all other readersI have spent years dealing with this kind of thing. I have produced a series of presentations on the subject – some for the UK Parliament – beginning about 10 years ago, and occasionally the lack of reason still evident in the world gets the better of me.

GuestFebruary 20th, 2009 at 8:33 pm

A downward spiral…1. heavy hitters like Roubini saying that U.S. banks need to be nationalized.2. investors selling their stocks in U.S. banks because they do not want to loose the money in case the banks get nationalized.3. banks stock losing value because investors selling the stock:http://www.reuters.com/article/marketsNews/idUSN20201566200902214. banks needing more money from the government because the value of their stock gets pummeled.5. banks being so down-and-out that the only options left are to let them die or nationalize them.

toadfaceFebruary 20th, 2009 at 8:58 pm

Yep this is like Duh? And the real kicker is “Lets fix the problem by making it easy to borrow money!” ?!?!?! F-IN DUH!!!

PeterJBFebruary 20th, 2009 at 9:17 pm

Another opinion:”NEW YORK (Reuters) – Renowned investor George Soros said on Friday the world financial system has effectively disintegrated, adding that there is yet no prospect of a near-term resolution to the crisis.Soros said the turbulence is actually more severe than during the Great Depression, comparing the current situation to the demise of the Soviet Union.”http://www.reuters.com/article/newsOne/idUSTRE51K0A920090221As regards:His [Soros] comments echoed those made earlier at the same conference by Paul Volcker, a former Federal Reserve chairman who is now a top adviser to President Barack Obama.”I take Mr Volker to task as he ‘hesitatingly’ suggested that financial distribution systems do not act according to the Laws of Physics, which of course is absolute nonsense. What he meant to say is that “leadership” does not understand much at all about economics, and soooo manipulates the system to the political desire du jour and as a consequence, every now and then, collapses, bringing much harm, cost, death and misery to all – other than “leadership” and those minions that only did ‘that which they were told’.Volker’s talk was about the ‘pillars of ignorance’, which wouldn’t be so bad if they admitted it and then we could get rid of the “faith” based crappy attitudes and run with individual risk models – as it should be. Humans are built with “risk” hardwired into the neurological sensory systems, innately.Individual democracy would go a long way to reduce crises.Ho hum

GuestFebruary 20th, 2009 at 9:18 pm

Would someone (where is Bernard from long ago?) who understands bonds explain to me why there appears to be essentially no risk except that of frozen capital on bonds that paid up to 20%, as indicated in the abbreviated article below? Why, at that interest, are they marketed as “safe, cash-like instruments”? That type of interest usually involves risk.And now, why is it considered “suffering” for these holders to be earning an average of 1.36% on their frozen funds when savers in CDs have had such low rates as common practice for about a third of the past 8 years? If the only “risk” in high yield auction-rate securities is frozen capital for a duration, why would not everyone be in bonds earning 20%? Or are some of these holders in jeopardy of losing their principal? (I understand Stelzer, below, lost capital because he chose to sell – but that was his choice.) Admittedly, I don’t understand bonds.Auction-Rate Bonds Claim Victims Year After Collapse (Update1)Feb. 20 (Bloomberg) — Mike Stelzer expected to retire after selling his cattle ranch south of Bakersfield, California. Instead, the 73-year-old is raising Holsteins on leased land, unable to quit because a chunk of his $2 million nest egg is stuck in auction-rate securities paying next to nothing.[Stelzer, whose old ranch was in Corona, earns an annual interest rate of less than 1 percent on $675,000 in so-called auction-rate preferred securities issued by New York-based money manager BlackRock Inc. He sold $675,000 of his holdings in October at a loss of $103,000 and got all his money back on $650,000 of debt that was refinanced by the borrower.]“I have lost all faith in bankers and Wall Street,” said Stelzer, who invested the proceeds from the sale of his ranch in the securities through San Francisco-based Wells Fargo & Co.A year after collapsing, the one-time $330 billion market for debt with rates typically set every 7, 28 or 35 days is still claiming victims. Investors are stuck with as much as $176 billion of the securities even after regulators forced banks to buy back more than $50 billion of auction-rate debt that was marketed as safe, cash-like instruments.The market’s meltdown, the result of the seizure in credit markets, initially left investors with bonds they couldn’t sell, though the securities paid interest at rates as high as 20 percent. Now, rates on securities auctioned every seven days pay an average 1.36 percent, according to an index from the Securities Industry and Financial Markets Association, after central banks slashed borrowing costs…UBS AG and nine of the 10 other biggest underwriters of municipal auction-rate debt reached agreements with state and federal regulators last year to redeem at par the bonds they sold to individual investors and some institutions; Lehman Brothers Holdings Inc. declared bankruptcy before settling.The last resolution occurred in October, when the Financial Industry Regulatory Authority said City National Securities of Beverly Hills, California, BNY Capital Markets LLC of New York and Harris Investor Services of Chicago would redeem $60 million of the debt.Regulators, including officials in Massachusetts and Illinois, are now focused on banks and brokerages that resold the securities, said Denise Voigt Crawford, the Texas Securities Commissioner. Those companies didn’t underwrite the securities or run auctions, so proving they knew the market might fail may be more difficult, she said.A resolution can’t come soon enough for Brad Dickson of Los Angeles, whose holdings of BlackRock Inc. and Van Kampen Investments Inc. securities purchased through Oppenheimer Holdings Inc. pay less than 1 percent.“I’m getting paid virtually nothing,” Dickson said. “This is money that’s frozen, that basically has a zero return, and I’m stuck with it indefinitely.” …http://www.bloomberg.com/apps/news?pid=20601213&sid=aiZtqBGgvPMA&refer=home

GuestFebruary 20th, 2009 at 9:20 pm

Why are you mingling the problems in Detroit with the issue of massive asset inflation? Do you realy believe an assembly line worker who just signed on at the new $10.75 an hour is buying a $750,000 home in FL? Lets talk realities here. The Coral Gables type problem is not based on a new truck. Sure maybe someone who pours molten metal into a mold so someone can drive a $45,000 car does own a house and based on the likelihood it is in Pontiac or maybe Windsorthat house may actually be still be worth, whats that?, the price of that truck….Yep. You pegged the heart of the problem (not).

AnonymousFebruary 20th, 2009 at 9:20 pm

I really ‘admire’ how many out there just say “wipe out the shareholders” as if they’re just flotsam and jetsom. What are these shareholder people, chopped liver? How about pension funds and the people they represent are they worthy of getting wiped out too?Heaven forbid many unworthy market gamblers ‘speculated’ in buying stocks of BofA or Citi – so now they should be thrown under the bus like a frivolous afterthought due to the incompetence of credit rating firms much less the ineptitude of the SEC? There’s something not quite kosher about this angle in this age of Madoffs and Stanfords is there. How about instead of wiping out all the shareholders like ants under wheel they think of something else a bit less draconian and equitable?Yes, that wipe out the shareholders first attitude should really help support the markets here on out now won’t it? Me thinks this reeks a bit of smug BS to be quite honest.Just venting a bit here….AM

GuestFebruary 20th, 2009 at 9:37 pm

As in any gambling game, there is the risk of loss of money: you accept the risk when you decide to play. That’s the name of the game in gambling – and throughout history (disregarding recent media hype) investing in the stock market has been akin to gambling. When you gamble and win, you keep the stakes. When you gamble and lose, you pay up.The Whore & Gambler, by theStateLicenc’d, build that Nation’sFate.WILLIAM BLAKE: Auguries of Innocence.

2centsFebruary 20th, 2009 at 9:42 pm

If this is the Volker @ Columbia speech, I saw it and was unimpressed with Volker. My basis is that Volker is an experienced go to man, but his support of Geithner and this video have me wondering.He says that he is for a two-tier banking system. Lassie fair for the smaller ones and tight regulation and international gov. guarantees for the too big to fail ones. Geeesh, Paul do you really think we’re that good at regulating that you want to do this. Besides if somehow we end up being good at regulating then the small institutions will have a field day doing whatever they want. What happens at the midway point? A little regulation and a little lassie faire?Clearly he is loosing his faculties, as this is a nightmare plan!

AnonymousFebruary 20th, 2009 at 9:46 pm

I still stinks. And no I don’t agree with you 100%. It’s one thing for the ‘house’ to take it’s due, it’s another for the house to be crooked and the people gambling against it have to play against their very own government too ala SEC and every other related agency that didn’t and won’t do their jobs as the gamblers (taxpayers) expected them to.This is where I’m coming from.AM

AnonymousFebruary 20th, 2009 at 9:48 pm

Oops, I meant it still stinks not I still stinks. Hey was this a freudian slip of the silent kind? lolAM

2centsFebruary 20th, 2009 at 10:03 pm

The answer to this downturn unmistakably leads to solutions that are painful, requiring not just brains but significant amounts of courage.Unfortunately, what have we been told:Geithner – incredibly smart (doubtful)Bernanke – incredibly smartObama – smart beyond his yearsSummers – smart experienced economist????? – Has courage to implement what’s right and best for all of our futuresWe spend more brain power collectively as a country trying to outsmart, outfox and outmaneuver that we’ve lost sight of the goal.It will take 100 million brilliant soles fighting to outdo the other to solve this problem, or one SOB who steps up, sticks his neck out and gets it accomplished.

PeterJBFebruary 20th, 2009 at 10:15 pm

What you describe is called “democracy” and all other forms of socio-economic er, administration. “us and them”Ho hum

GuestFebruary 20th, 2009 at 10:18 pm

For the good of the whole the debt reduction must come from investors they are the only ones who have or had the money to lose common people don’t have the money unless the government steals it from their future earnings which in turn destroys the economy.

ChignosFebruary 20th, 2009 at 10:23 pm

Hey guys, the government can’t afford to nationalize C or BAC because it would cause a run on the banks and they don’t have enough money in place to stem the panic. That’s why they won’t do anything. If Wall Street wants to panic because the government can’t solve the credit crisis, well then Wall Street will just have to panic until it gets tired of panicking and wakes up to the true value of the American economy/system. All you doom and gloomers–just take a Valium.

PeterJBFebruary 20th, 2009 at 10:24 pm

My grading:Geithner – Cunning and treacherous; coward: worse than a sewer rat.Bernanke – As dumb as they come: arrogant /pious and neither a hero nor coward be.Obama – Naive and definitely not smart: not a coward but he will do as he is told. But then, I view him also as a potential wild-card.Summers – Cunning and cautious – like a sewer rat: definitely a coward.The Powers of Nature do not need numbers as life to us is irrational but we believe it to be rational.Ho hum

ChignosFebruary 20th, 2009 at 10:32 pm

Marx. Are you nuts? Marx lived long ago and had no vision. When you think “Marx,” think “delete” (that little button up on the top right of your keypad). Think for yourself for a change. Do you think Marx would have ever envisioned free-thinking bloggers? C’mon, THINK!

ChignosFebruary 20th, 2009 at 10:37 pm

Maybe you should try to spend a little more time with your writing, No one can understand where you’re coming from.

ChignosFebruary 20th, 2009 at 10:43 pm

So confused (and boring, too). Do you ever reread your idiotic posts after you slather them all over this site? They do not add to the general intellectual effort.

GuestFebruary 20th, 2009 at 10:50 pm

And you believe comments like this one of yours that I’m responding to do add to the general intellectual effort?

AnonymousFebruary 20th, 2009 at 10:53 pm

Ok, I think I now understand what all of us are really trying to say, including Dr. Roubini…….”The SOFT AND BROWN HAS ALREADY HIT THE FAN!!!!!!!!!!!!!!”Duck!AM

ChignosFebruary 20th, 2009 at 10:56 pm

Ho hum, you are not smart enough to realize that Obama, Summers, Bernanke, Geithner (in that order) are just smart enough to realize they have no idea what to do more than NOTHING. That’s why they’re doing NOTHING. As long as they do NOTHING, they’ll be deemed smarter than anyone else on the planet. Oh, and by the way, PeterJB, that’s what you should post……NOTHING.

ChignosFebruary 20th, 2009 at 11:10 pm

No, lazy as they are, I’ll predict there’ll be absolutely no news from the brilliant minds in our government this whole weekend. They’re worn out, fellas. They need 3 days’ rest before getting back into the bright lights.

ChignosFebruary 20th, 2009 at 11:16 pm

You must’ve voted for this guy Obama. Sad when you realize you’ve just been a dreamer isn’t it? Oh well, look at it this way, at least you didn’t have to vote for Yosemite Rip-off Publican Sam.

JasonFebruary 20th, 2009 at 11:44 pm

You want risk free gains? How about I just send a cheque to your house? $100 enough? $10000? How much do you want?

AnonymousFebruary 20th, 2009 at 11:56 pm

The government stealing investor assets through nationalization is the issue as in preferred and common stock holders losing their assets outright through arbitrary actions by their own government. That is not a gambling loss. That is not an equitable risk trade-off for speculation. That is getting mugged by the police.AM

PeteCAFebruary 20th, 2009 at 11:57 pm

Well .. the week of Feb 16-20 has been a real bellwether for the US economy. All the more interesting because the week did not include any really spectacular news – aside possibly for the growing speculation that BoA and Citi are on death row. I may add some more general comments about the events this week and what they portend – at a later time this weekend.Right now – let’s look at these 2 banks.Here’s some data I pulled up from past postings of Brian Pretti and the folks at Contrary Investor:Citigroup: Notional Derivatives Exposure = $41 trillionBoA: Notional Derivatives Exposure = $39 trillion———————————————–Total Notional Derivatives: $80 trillion———————————————–This data was relevant as of the close of the 1’st quarter of 2008.So .. does anybody in their right mind think that the Gov’t knows how to shut down two major banks holding a combined total of $80 trillion of derivatives deals? Seriously?? Compared to what you’re looking at here, the closure of Lehman was just a walk in the park.Second, does anyone even vaguely recall all the market gyrations and fallout that happened after Lehman collapsed? That’s a drop in the bucket compared to the ramifications here.Third, even if the Gov’t comes out with a bizarre plan to keep these banks on some sort of sustained life support … do you think anyone’s going to do business with them? Depositors must be bailing out like crazy. And who’s going to enter any new derivatives deals??And finally … wrap your mind around this. What exactly do you think the bright minds over at JPM and Goldman Sach must be doing right now? Well .. suppose for example you had an inkling that BoA held a lot of short positions in a certain market, and that these positions could be forced to be closed very soon. Do ya’ think you might just place a few long positions and get ready for a juicy profit? You’ve gotta’ believe that some very big calculations are going on right now.Too big to fail?????This scenario is too incomprehensible to even resolve.PeteCA

Jason BFebruary 20th, 2009 at 11:59 pm

Face the facts:Our fincncial system is bankruptedmanfufacturing is gonepopulace is dependant on the dolewe are toast

GuestFebruary 21st, 2009 at 12:00 am

The ability to read does not always mean one has the ability to understand. My son has the same issue, but his excuse is autism. What’s yours?If you’ve been following this blog and its commenters for any length of time, it would be glaringly apparent what he means by his writing. If you have such issues with him, please feel free to skip over his posts. I will certainly be taking my own advice in regards to yours. Enjoy your evening, or whatever time a day it is where you reside.

REDFebruary 21st, 2009 at 2:49 am

Yes, we are toast if we do nothing but the solution seems to me to be simple. First lets set out the problem.The Problem: The establishment has all the capital, which they loan out to consumers, governments, etc at a given rate of interest. They have continued to collect and hoard capital and hand out new loans. People cannot afford to pay the interest or repay the capital so the owners of capital have been forced to reduce interest rates so they don’t drive all of us into insolvency. They now can’t reduce interest rates anymore.So…. a few people have all the capital and they are drowning in it. The population has none and they won’t borrow any more. Its the end of a cycle – but how do we fix it.The FIXThree strategies – debt forgiveness, capitalise the consumer – tax the rich.Debt Forgiveness / Capitalise the consumer – The solution is to print money and give it to the consumer through debt forgiveness. Critics would say this creates inflation. Well, it may when you have scarce resources (anyone think this is the case now). Basically if you drop money from a helicopter and raise interest rates as needed (ie. to 10%, where they should be anyway) you can stop inflation as long as their is not limited goods. I’m happy to defend this argument if anyone disagrees.The mechanism to distribute the helicopter money is simple – Give people a cheque from the US treasury in a proportion to how much tax they have paid (to a maximum) that they can use to reduce debt. Keep giving the money until they get their balance sheet in order and the economy rights itself. If they don’t have debts and have managed responsibly, they should be able to cash it in for 50c on the dollar – to spend. If they haven’t paid taxes or earned income – they’re screwed, as it should be.Next step – raise taxes on the rich. Can anyone explain to me reasonably why someone earning over $1m gets to keep more the 50% of the excess? This should put the government finances somewhat back on track.The reason this isn’t being touted as a solution is that the holders of debt (who control the media and congress) don’t want to give anything away – they would rather watch the peasants suffer than reduce the relative value of their debt holdings.The solution is really not that hard folks – you just have to hit the streets so that the politicians cannot say no, and have no choice but to tell their backers to go jump.IN A DEFLATIONARY SPIRAL – DROPPING MONEY FROM A HELICOPTER DOESN’T CREATE HYPERINFLATION – you just need to give it out in a reasonably well thought out way so the peasants get recapitalised.

kilgoresFebruary 21st, 2009 at 3:13 am

An underlying assumption of Mr. Santelli and those who cheer for him is that those who got in over their heads on their mortgages are uniformly morally culpable, so it would be unfair to those who do not find themselves in this position to help them. As a society, however, Americans traditionally have not considered poor financial judgments alone to constitute moral failings meriting punishment. For example, we abandoned long ago the notion that insolvency was tantamount to a crime when we rejected debtors’ prisons in favor of bankruptcy. Both approaches result in expenses borne by the rest of society, but the latter is deemed to be more in keeping with our sense of fundamental fairness and justice, and to cost less to all of us in the long run.Issues of moral hazard may well exist with respect to the well-informed businessmen who profited handsomely from the housing bubble, as these people had an affirmative duty to ensure that mortgage loans were made on the basis of sound fundamentals. By contrast, the vast majority of homeowners who are underwater entered into their home purchases through a combination of financial ignorance and a desire to better themselves and their families, and should not be universally reviled for their mistakes.A second assumption of Mr. Santelli and his admirers is that a wholesale failure to lend a helping hand to homeowners in trouble will not have an impact on those of us who have “followed the rules” and made more prudent choices in terms of our home purchases and assumptions of personal debt. As Dr. Roubini has pointed out repeatedly, however, a critical element in halting the continued downward spiral of the U.S. economy is a reduction in the principal value of mortgages that exceed the value of their underlying collateral. If this is not done, the result will be a disorderly deleveraging of the excessive debt burdens of millions and millions of Americans that in the end will devastate not only those who are now in trouble, but the rest of us as well. In this respect, bailing out homeowners having difficulty, even if seemingly unfair to those who are not, serves the interests of everyone.Mature adults understand and accept that life is not always perfectly fair, and that from time to time we must all suffer a degree of apparent personal injustice in order to accommodate the greater good. That is simply the price we need pay in order to avoid living in Hobbes’ world, in which life remains nasty, brutish, and short and it is every man for himself.SWK

kilgoresFebruary 21st, 2009 at 3:18 am

Mr. Schiff is not an economist, but an economic commentator. By this I am not venturing comment on his views, but only pointing out a limitation as to the nature and extent of his credentials.SWK

MedicFebruary 21st, 2009 at 5:15 am

I’d be willing to bet Martin and the gang have already been doing some of the pre-lims……In fact, we may just be due for an update.Martin?

piperFebruary 21st, 2009 at 5:31 am

What Easter Island myth ? BTW – I’ve read Diamond’s book Collapse and he lays out a good case for both the Greenland Norse, Icelanders and the Easter Islanders being responsible for their own misfortune (overpopulation, environmental recklessness). What reference do you have for the ‘myth’ statement?

PiperFebruary 21st, 2009 at 5:35 am

‘the observational data says without question that Co2 has never caused global warming in billions of years.’You don’t believe CO2 is a greenhouse gas ???!!! I’m speechless.

GuestFebruary 21st, 2009 at 5:52 am

ObamaNation Is ‘High’ On ‘Speed’Chignos,Surely you joke.

I don’t believe it’s too late to change course, but it will be if we don’t take dramatic action as soon as possible. If nothing is done, this recession could linger for years. That is why we need to act boldly and act now to reverse these cycles. Barack Obama

Delay is preferable to error. Thomas Jefferson

And last, but not least, from Bamelot’s muse we have,

Give me six hours to chop down a tree and I will spend the first four sharpening the axe. Abraham Lincoln

If the ObamaNation does not SUFFER like the Lincoln presidency did – nothing will be accomplished. Instead they run on fumes of rhetoric pursuing the endless Bamelot wet dream.

GuestFebruary 21st, 2009 at 5:52 am

Very poor argument if not for the government your position in these banks would have been wiped out a year ago! Right now your only chance is for government to prop up your investment and you think that’s fair?You’re self-interested that’s cool but come on at least be honest.

MorbidFebruary 21st, 2009 at 6:03 am

A SILVER LiningDoes this make good financial sense? Or is GOLD better. Certainly, in either investment, taking possession of the actual product is necessary given the potential chaos that could erupt in our everyday lives if things turn out as bad as it looks.

I recommend that they buy silver coins, as long as silver is under $25 an ounce. Today, silver is cheap and easy to acquire and manage, while real estate and businesses are both management-intensive; silver requires no management, expect for a safe storage place. In addition, the iShares silver ETF (SLV) is convenient.Silver is consumed in many industries, and it’s reported that the world has less than a 10-year supply of it left. That’s why I believe silver is currently one of the best investment opportunities there is — even for people with limited financial training.

The Profit of Doom

MorbidFebruary 21st, 2009 at 6:11 am

Pete,Well said. I just don’t understand why Roubini does not address this issue head-on; we all “silently” know about this “poison pill” looming out there and a whole lot more. HOW TO DEAL WITH IT?Perhaps the professor could enlighten us all and maybe earn the Nobel Price in economics in 2010!

GuestFebruary 21st, 2009 at 6:14 am

If stealing peoples homes through fist stealing their jobs and disguising labor exploitation for elites as Globalization and then second lowering interest rates to cover it up and create artificial demand and an artificial economy and an artificial housing boom with phony excessive real estate prices no one can afford at any interest rate. Then having a look the other way SEC government create deceptive securitized bull, then kicking people out of their homes that the FED bogusly raised all the prices on. Well if that’s being a patriot Mr. Santelli is as red white and blue as they come!Save the bond holders! Enslave the peasants! it’s the American thing to do ! Go Santelli!

MorbidFebruary 21st, 2009 at 6:23 am

RED,Here is a simple solution.The government should confiscate everyone’s wealth that was accumulated in this financial scam (realtors, banks, the Buffets of the world, etc.), pay down the debt and if anything is left over in the Treasury let the ObamaNation fund their Bamelot wet dreams. A different way to hit the RE-SET button. Then scream – GO! and all can begin to play in the big casino all over again.

MorbidFebruary 21st, 2009 at 6:31 am

Opps,I forgot to enter my handle in the above post. But given my use of the ‘disgraceful’ concoctions regarding Obama’s name I guess you all ‘knew’ who wrote it.

piperFebruary 21st, 2009 at 6:31 am

Marx was one of the greatest thinkers of the 19th century; as well he was a product of his time. He saw the evils of unfettered capitalism ( 12 year old girls working in knitting mills, 10 year old boys in coal mines for example) and looked for a solution. He was wrong or at least went too far the other way, but then Issac Newton was wrong too based on the knowledge of today.

GuestFebruary 21st, 2009 at 6:33 am

I agree 100 % and think Santelli’s moral prosecution of people in debt was an outrage, it obfuscated the real issues and aided this already perception that the poor are worthless human beings who are poor because their lazy. It’s the old us vs. them where the needy are villianized! We’ve been listening to Rush Limbaugh and the neo-con neo-lib majority cram this down our throats for the past 30 years. Well for one I can guarantee it was not the poor who were smart enough to create ponzi scheme derivatives that is the root cause of this financial collapse.Listen to Santelli and he’ll tell you the story about the irresponsible peasant who took on too much debt when loans was his only alternative because his job was sent to slave labor camp China. Blame the peasant blame you neighbor it’s always the easiest scapegoat but never blame those who actually created the mess!

GuestFebruary 21st, 2009 at 7:01 am

I didn’t say what you ‘suggest’ I said, piper, and i’ll thank you not to put words in my mouth. I swear you human-caused warming crowd NEVER argue the FACTS, you just cling like crazy to the lies you’ve swallowed, and just like here you REFUSE to go look at the evidence that reveals how hoodwinked you are. So what you gave a presentation, sub? If you based it on falsified evidence, you’re still wrong!You guys can slam me and get defensive of your entrenched positions all you want: only the evidence matters to the truth – and your evidence is shot through with errors, as has been proven.YOU’RE BEING MISLEAD – and I have tried to warn you. You are all entitled to your own opinions, but you are NOT entitled to your own set of ‘facts’ that are no such thing.Humans are not causing warming, Co2 is not causing warming, and the earth is not overpopulated, and RESEARCH proves it.I’ve provided the sources for the evidence and true data, but if you don’t check it out, you CANNOT know what it says!you should stop proclaiming you know what you haven’t investigated is wrong. that’s DUMB, my gullible friends.

GuestFebruary 21st, 2009 at 7:02 am

This guy is hell bent on appeasing everyone when I don’t think he gets the fact that the country voted for him because we want to lean to the left hard before things get even worse!

GuestFebruary 21st, 2009 at 7:10 am

thanks for those posts, Kilgores and Guest. Finally, some sanity shines on Santelli’s revolting nonsense.

GuestFebruary 21st, 2009 at 7:26 am

Chignos, you NEVER bring light – just heat. I cannot recall a single post of yours that offered any rational thinking. You’re a cheap-labor predator in love with social hierarchy and your posts in summary are one big, bad joke.You are transparent, and fooling nobody.

GuestFebruary 21st, 2009 at 7:32 am

I don’t understand the comment about humans “hardwired” with risk built in? Have you some evidence? For my entire life I have avoided all risk I percieve – so am I not human?whatever – Volker and Soros are NOT friends to humanity.

GuestFebruary 21st, 2009 at 7:40 am

What does that mean – “life is irrational”?Existence is irrational? Mother Nature is irrational? God is irrational?What do you mean?

ThoreauFebruary 21st, 2009 at 7:41 am

KPMG KPMG KPMG/Tax Shelter Tax Shelter Tax Shelter. Of course all the banks are insolvent and KPMG audits a disproportionate amount of them. You thought KPMG’s tax shelter shenanigans were disturbing, such activities were nothing compared to the 100s of Billions of fraud contained in the banks financial statements that KPMG audits. Just remember Flynn and his high priced lawyers tried to help put all the tax shelter partners in prison, what do you think Flynn is going to do to all the Audit Partners who have helped the banks engage in massive fraud by signing off on fraudulent bank financial statements? Though it is difficult to muddle through the fraudulent KPMG bank financial statements, it is not impossible and from that you can profit. Many of us made a small fortune shorting Citibank the KPMG audit client just by understanding the fraudulent nature of Citi’s financials. It is like taking candy from a baby, a favorite KPMG saying.As one small example for all you dopes who somehow think the system is not and has not always been rigged by liars and thieves, Citi’s 10q as of 9/31/08 shows capital of about $126 billion yet its market cap as of today is $19 Billion (though it is likely insolvent). Forget about FAS 157 there are a million ways around it, the more difficult scam to discern is the use of SIVs to offload bad assets from Citi’s balance sheet so it does not have to recognize the losses. To Citi’s credit it does disclose in footnote 15 of its 10q potential exposure of about $130 Billion for part of their SPEs. Of course such amount is in excess of its stated book capital and almost 7 times larger than its current market cap and likely massively understated.I know no one saw this coming; you can’t know the unknown; and all KPMG did was follow the accounting rules. Then how come a dope like me could figure it out? Further, that is what the tax partners thought before Tim Flynn, Joe Loonan and Swen Holmes tried to get them put in prison. In fact, many beginning as early as 2005 saw this problem coming like Dr. Roubini and used simple math to explain why. If KPMG is so expert at anything, why didn’t KPMG see this coming and warn all the decimated Citi investors. Personally, I am glad KPMG continued to produce the self evident fraudulent financials because me and my kind made a fortune off all the idiots who think any integrity exists within the fraudulent accounting statements or companies (such statements are reflective of).In fact, Dr. Roubini is suggesting formally nationalizing all the banks (which most of are already 100% owned on a fair market value basis) because the system is insolvent. It may be time to short these fraudulent companies yet again if he is right, any thoughts?15. SECURITIZATIONS AND VARIABLE INTEREST ENTITIESThe following tables summarize the Company’s significant involvement in VIEs in millions of dollars:As of September 30, 2008(continued)Maximum exposure to loss insignificant unconsolidated VIEs(continued) As of December 31, 2007(1)Total maximum exposure ConsolidatedVIE assets SignificantunconsolidatedVIE assets(2) Maximum exposure to loss insignificant unconsolidatedVIE assets(3)$ — $ 63 $ — $ —— 35 — —— 1,385 — —$ — $ 1,483 $ — $ —$ 63,462 $ — $ 72,558 $ 72,5581,337 — 27,021 2,1542,501 22,312 51,794 13,9792,034 1,353 21,874 4,76237,032 4,468 91,604 34,29716,560 17,003 22,570 17,8433,430 53 13,662 2,7112,124 2,790 9,593 1,643— 58,543 — —317 140 11,282 2121,795 12,809 10,560 1,882$ 130,592 $ 119,471 $ 332,518 $ 152,041$ 35 $ 604 $ 52 $ 45$ 162 $ — $ 23,756 $ 162$ 130,789 $ 121,558 $ 356,326 $ 152,248Total stockholders’ equity 126,062 126,962 (1 )http://investing.businessweek.com/research/stocks/financials/drawFiling.asp?docKey=137-000104746908011506-5R9J4HT8PI832K9ORA58RBE2V1&docFormat=HTM&formType=10-Q

PeterJBFebruary 21st, 2009 at 8:02 am

“Feb 20, 4:36 PM (ET)By GARANCE BURKESACRAMENTO, Calif. (AP) – Federal water managers said Friday that they plan to cut off water, at least temporarily, to thousands of California farms as a result of the deepening drought gripping the state.”http://apnews.myway.com/article/20090220/D96FI4R85.htmlNow this tells you that all them bureaucrats i.e. “leeadersship” know what “stimulus” really is!I am ‘sorta’ leaning towards a theory that Obama is a good guy (I have some inside knowledge here) and given a “surge” of ground roots support, would have / does have the courage to shrug off the “parasites” of his administration that have been imposed on him – and bring about some realistic and reasonable inductions for change.Why not then support your President – but if you do; do it overwhelmingly and conditionally!Given some of the comments such as RED above, it appears logically and reasonable, to confront resistance with cause; where Obama just may be the result of a Causal Moment.Ho hum

Jason BFebruary 21st, 2009 at 8:23 am

The banks are already partially nationalized. The losses have been nationalized, the profits are still privately held.I dont think a furthering of this arrangement is politically possible any longer.

Octavio RichettaFebruary 21st, 2009 at 8:32 am

GLL anyone? A good one from Santoli:http://online.barrons.com/article/SB123517399098337205.html?page=sp…A sour but ultimately helpful result of the past two weeks’ sloppy, nervous, noisy action is that it has banished most of the hope that the next government measure, or the one after that, will do the trick. As noted here last week, hope — the raw material of which disappointment is made — in this context is dangerous. Fair to say the level of public disdain for the stimulus package, the hazy bank-support plan and the Obama mortgage-aid effort shows hope has turned to disgust. The recognition is spreading that these efforts are treating symptoms and not delivering miracle cures.With allegations of fresh investment frauds, frequent news of official investigations of CEOs and all the rest jamming the news flow, it is logical to assume the sour taste will linger in investors’ mouths a while. This heightens the chance that when something sneaks up on us all and brings some improvement (the way the Fed programs of the fourth quarter quietly got credit markets functioning again), it will come as a pleasant surprise that could include a meatier rally, from whatever level.Until then, the recent tentative signs that the market is becoming more selective in administering punishment — is sifting survivors from lost causes — imply we could be in for more of a two-way market mixing both opportunity and risk, even if the indexes fail this re-test.WHAT TO DO NOW WITH AN ounce of gold — priced at more than $1,000, exchangeable for exactly 106 shares of General Electric (GE), equivalent to more than 25 barrels of oil, a gold/oil ratio that has rarely been exceeded for any length of time during the past 35 years?On the one hand, the logic behind owning some gold has rarely been more intuitive, as world governments threaten to deplete the global ink supply in their money-printing efforts, and faith in financial assets has been all but broken. The price action confirms this logic for now, with gold’s settlement Friday at $1,002 per Troy ounce, making for a 16% gain in the past month.The fact, too, that the metal has been able to log such gains even with a firm-to-rising dollar is encouraging the true believers, who always bristle at the notion that gold merely rides the opposite end of the seesaw as the greenback. Yet, is it not a bit worrisome, at least short-term, just how popular gold has gotten in a hurry, and how an air of inevitability attends the commodity’s ascent as the beneficiary of market, economic and geopolitical calamity?Granting that contrarian positioning often takes a long time to work in strongly trending asset markets, the wild flocking to the SPDR Gold (GLD) exchange-traded fund — which routinely turns over $2 billion worth of trading a day — ought to give slight pause. The GLD, which holds the real stuff, is about the biggest buyer of physical gold out there, its stash now topping 1,020 tons, up 20% in a month.The Market Vane traders’ bullish consensus reading on gold recently approached 80%. Famously, the minters of gold coins haven’t been able to slake public demand. Radio ads are all over the AM band these days featuring commodity-brokerage houses talking up the appreciation potential of gold. (On the other hand, the ubiquitous and obnoxious http://www.Cash4Gold.com ads prod cash-strapped folks to come in on the supply side.)The can’t-miss mentality is hinted at in the remarks of commentators quoted Friday afternoon in a Dow Jones Newswires market dispatch. “We’re seeing investors rush into gold as a crisis of confidence continues to emerge,” said Ralph Preston, senior market analyst with Heritage West Financial. “Once these things start running, it’s the herd mentality.”And this: “There really is no other place to go,” said Leonard Kaplan, president of Prospector Asset Management.Really? No other place?Granted, as gold advocates have been arguing for years, with intermittent merit, it would take only a tiny reallocation of the world’s investment assets toward gold for the price of the borderline-useless metal to scream to new heights. The gold price is nowhere close to its highest ratio in history versus any equity index you could find.Yet couldn’t one look at the way gold has vastly outperformed any index of actually useful and necessary commodities in recent months and conclude this means gold already has done its job, in large measure — by proving its use as a store of wealth?No firm answers to these musings are readily at hand. Yet it is worth noting that when gold and other commodity markets pull back, they often do so with violence and speed. Investors looking for at least a refreshing pullback in the gold bull run could, in such a case, make some hay with the ProShares UltraShort Gold (GLL) ETF, which delivers twice the inverse of gold’s daily price move….

maniFebruary 21st, 2009 at 8:50 am

Chignos, earlier on someone suggested that if you do not like PJB’s style or the content of his posts, you can just skip over them. If you cannot do that then learn to debate in a civilized manner, else go away.

HayesFebruary 21st, 2009 at 9:03 am

The latest from Pettis The US government frozen in the headlights excerpt from his article:

The world needs US leadership more than ever, and the US is in a very strong position to provide it for at least three reasons. For all the problems of the economic contraction, the US will probably suffer less than other countries, it will emerge more quickly than the rest of the world, and it commands by far the largest amount of the most valuable resource in the world: net demand.Inevitably someone will misread this and think I am crazy – the US has a great problem and, they will say, I am insane to suggest things are going so well. But note that I am not suggesting that the US is in great shape. I am suggesting that world is in worse shape, and the US has the flexibility and resources to reshape the global balance.This seems to be something that not many people in Washington believe. The lack of confidence is so deep that several times I heard people refer knowingly to the Chinese fiscal stimulus (yes, that vague, risky, and hard-to-understand stimulus package) as the “gold standard” of economic stimulus packages. Gold standard? Really? The only way this can be true is if every other stimulus package in the world is total garbage. Perhaps it is.One of my good friends in Washington, who is considering accepting a very senior position in the executive branch (surprisingly enough he might not accept it because of the bitterness of the confirmation process), asked me to point out a single bright spot for the US right now. I told him geopolitics – the chance to engineer a new global framework that will allow the US to regain the centrality that was lost in the past eight years while including Europe, China, Japan and the rest of the world as firmly committed members. He smiled dubiously and asked me to write it up.However, even if I am right, unless the mood changes dramatically I am not sure that US policy makers are in any position to seize the reins and steer us firmly into a new global institutional framework. Instead I suspect that things will continue drifting downward for the next year or so, until it is that much harder for anyone to work out a reasonable plan that doesn’t involve a great deal of hostility and mistrust. Maybe it is just because I am a little jetlagged, but I am not very optimistic.

GuestFebruary 21st, 2009 at 9:05 am

Clinton made this statement while in China:”Human rights cannot interfere with the global economic crisis, the global climate change crisis and the security crises.”And this my friends is exactly why were all in this mess because doing what’s right always seems to come second to doing what’s in our interest even when there isn’t a crisis.

GuestFebruary 21st, 2009 at 9:32 am

If we could have our founding fathers come back for 8 years, as it would take at least that to correct the problems we have allowed ourselves to get into by straying away from the original documents that they created for the good of all Americans. The right and left would be shocked at the changes our founding fathers would make to our government. The pain we would have to go thru to rebalance this country would not faze them one bit. The founding fathers could care less who they angered or what measures needed to be taken to resolve the problems. Hearings would be held criminal sentences would be handed down and many would be found guilty then summarily hung or shot in mass for the crimes that were committed against America.

Jason BFebruary 21st, 2009 at 9:38 am

Nationalization is a political decision, so who knows what they will do. They keep changing the rules. What if they suspend mark to market? Of course, nationalization is the only logical choice, butwhen did logic ever enter politics?

HayesFebruary 21st, 2009 at 9:40 am

Heavy economic focus for Obama’s Tuesday speechWASHINGTON (AP) — For President Barack Obama, it’s a chance to take a deep breath and paint a big picture after a first month of gargantuan economic proposals, legislative accomplishments and Cabinet missteps.The president addresses a joint session of Congress Tuesday night, giving a State of the Union-like speech. It lacks the formality of that title only because he’s not considered to have had enough time in the White House yet to deliver a full status report.Regardless, it is one of the most high-profile trappings of the presidency: traveling to the Capitol to speak to representatives of the entire federal government, with the public watching in prime time, about his agenda.With the recession well into its second year, expect the remarks to be longer on the economy than on foreign affairs. The economy is in just too bad shape for Obama to do anything other than focus mostly on what he’s already trying to do about job losses and dwindled savings and frozen credit, as well as what else he has in mind.The president is expected to show Americans how all the pieces fit together to make the economy sound again.http://www.google.com/hostednews/ap/article/ALeqM5iD9vySTOHtw9d2GaGAA5kxP1NjKAD96G1MG80

GuestFebruary 21st, 2009 at 9:44 am

My A+ was for Peter JB — it’s hard to tell to whom the line gives it. Anyway, Peter JB, if anything, you are graciously lenient in your bullet-proof evaluations.

KafkaFebruary 21st, 2009 at 9:48 am

Uh, do you mean bring back slavery (including the rape and beating of women and children), genocide of the indians and the slaughter of the Brits over a 5% tax rate? Remember under the constitution before amended, blacks only constituted 3/5s of a person for their white masters voting purposes. Would the fore fathers revolt against the current government which confiscates about 70% of income earned through various taxes (for those making less than $150k) plus 50% of any assets you may have left upon death? And God only knows what they would do to the Fed.

Hen in SeattleFebruary 21st, 2009 at 9:54 am

“You’re a religious zealot. Quit whining about this and go feed some hungry kids (so that you can brainwash them into being religious slaves)-Mark”Mark, please listen to the merits of the gentleman’s point without resorting to ad hominen attacks.

HayesFebruary 21st, 2009 at 9:54 am

Optics???Obama ‘Fiscal Responsibility’ Summit Set for MondayBy Ceci Connolly and Lori MontgomeryPresident Obama and Vice President Biden plan to convene a White House “fiscal responsibility” summit Monday afternoon to launch a national conversation on how to put the nation on sounder financial footing.The administration is still finalizing a guest list,/u> of more than 100 participants — a mix of Democratic and Republican lawmakers, economists, policy specialists and special interest group representatives.http://voices.washingtonpost.com/44/2009/02/20/obama_fiscal_responsibility_su.html?hpid=topnews

HayesFebruary 21st, 2009 at 10:08 am

more on the summit from NY Times (looks like a cluster… to me (Does anyone else get the impression that Obi’s style is similar to the CEO who surrounds himself with consultants as a substitute for leadership (some here would know exactly what I mean) – breakout groups and whiteboards — give me a break

Invitations are going out this week to 90 people: 30 members of the House, 30 senators and 30 scholars and representatives of advocacy groups such as AARP, according to a person familiar with the plans.The afternoon session is not expected to yield any policy decisions, but to “underscore how big the problems are” and to air potential solutions, this person said. Administration officials have put out the word that the summit will not be the occasion to announce a task force on keeping Social Security solvent for the long-term, as they had considered, though such a panel may be formed eventually.After Mr. Obama opens the summit, the assemblage will break into six groups. Each will discuss separate topics that encompass the range of fiscal challenges that would exist even without the current recession and will endure once the economy recovers. The topics include health-care costs, Social Security, tax reform, defense procurement and the federal budget process.

http://thecaucus.blogs.nytimes.com/2009/02/17/white-house-plans-fiscal-responsibility-summit/

blindman mikeFebruary 21st, 2009 at 10:10 am

g,if this clinton quote is accurate then clinton is openlyembracing fascism. i suppose that is his right but it does make him a parasite. ( or grade, f-.) or scale 1 to 10 .0. at least with regards to this particular comment and what it implies concerning his integrity.yesterday he said, to the effect..” no one ever made moneybetting against america, 230 years.”signals are being sent. he is being used as the economic and dark public mouthpiece of his better half. the latest phase of the 2 for 1, hill bill show has begun. i guess, telling global “investors”, buy treasuries.or, on the flip side, some people ( crooks ) will be violated,forget your rights for a time ( perhaps your lifetime), so this problem can be brought under control?i prefer 2 but suspect it is just 1.

Jason BFebruary 21st, 2009 at 10:14 am

This makes me think they are looking for ideas. Shouldnt they have a plan by now, or are they back to square one? What the hell is going on?!Cmon Obama, grow a pair and do what needs to be done.

GuestFebruary 21st, 2009 at 10:22 am

Debt is sacrosanct because it yield power and multiplies with interest. The WWI Allied War debt owedto the United States and its forced servicing laidthe groundwork for the first depression. Excessive debt creation has been the Achille’s heel of the 20th century and will culminate with a global depression in the 21st Century. A Global Conference on Sovereign Debt must be made to lower debt levels in a Chapter 11 type proceeding. The problem is that the sacrosanct nature of debt is going to prevent this from happening until the crisis and contagion is too far along. Please review the history of Sovereign Debt.

AnonymousFebruary 21st, 2009 at 10:28 am

Not really. I don’t own any bank stocks. I just think the blame for the banks failures should be shared equitably. The feds certainly have some skin in that regard now don’t they? Just ask Bernanke, Henry P., Barney F, and Turbo Timmy Geithner for starters.But what the hay, wipe out the bondholders, preferreds, common. It’s very American only if one happens to live in Venezuela.AM

AnonymousFebruary 21st, 2009 at 10:35 am

I think it’s called governance by committee. Then pretty soon you have governance by subcommitees. And then finally you end up with the U.S. Government.AM

FEDupFebruary 21st, 2009 at 11:07 am

yes mr. pettis, it is the greatest opportunity since the great depression to significantly change the system creating a “new global intitutional framework” but until the wolves in washington are removed from guarding the people’s henhouse then a snowball has a greater chance in hell than creating a fair, equitable, honest, transparent system. Replace the greedy wolves with NR or others who will serve the people not the elite!

GuestFebruary 21st, 2009 at 11:18 am

CAN ANYONE tell me why all the assets (private and personal) of the decision makers at Bank America $3.61/sh and Citigroup (1.95/sh)and others should not be frozen and seized immediately considering they have already been guaranteed over $200 billion of taxpayer’s money between them?

slfFebruary 21st, 2009 at 11:43 am

The “Nobel Price” (not ‘prize’)? Is that really what it’s called, or was that something of an unintentional pun of sorts? 😉

blindassFebruary 21st, 2009 at 12:07 pm

g,i heard the voice and the interview. it was bill. perhaps the otherside of his mouth, hillary, said the same thing. apparently it is a “goodline” in which case many “other” people will repeat it tooooo…

AnonymousFebruary 21st, 2009 at 12:44 pm

I agree with this philosohpy completely, they SHOULD drop money on the consumers along with complete debt forgiveness, as retribution for all of the illegal taxation and interest we have been chargeed during the past 100 years.

GuestFebruary 21st, 2009 at 1:01 pm

Perhaps you misunderstood me–I was referring to the original quote in this comment box. Here’s an excerpt from an article. It was clearly Hillary who made the comment about human rights:“BEIJING, China (CNN) — U.S. Secretary of State Hillary Clinton broached the issue of human rights with Chinese leaders Saturday, but emphasized that the world economic and other crises are more pressing and immediate priorities.”Human rights cannot interfere with the global economic crisis, the global climate change crisis and the security crises,” Clinton said in talks with China’s foreign minister.Clinton made China the last and most crucial stopover in her Asia trip, signaling the new administration’s first attempts to lay a foundation toward a China policy. It is Clinton’s first trip to China as secretary of state.”CNN article link

GuestFebruary 21st, 2009 at 1:03 pm

Thanks, Morbid. I think blindman might’ve believed I was referring to the “no one ever made money betting against America” quote, rather than the human rights quote.

piperFebruary 21st, 2009 at 1:30 pm

I believe it’s because of a small technicality called the rule of law. Non ones personal wealth can be seized unless that have been convicted of a crime and forced by a court to forfeit the proceeds, or to make restitution, or pay a fine? At least I think so (I’m not a lawyer).

confused blindassFebruary 21st, 2009 at 2:14 pm

g,you are correct, my bad. i thought it was bill for the first quote andthought you were refering to the second quote in your second entry.so sorry.

GuestFebruary 21st, 2009 at 2:18 pm

Hey, it’s all right–I can see where it was easy to misinterpret. I’m usually more careful in my communications, so apologies from me as well. :-)

GuestFebruary 21st, 2009 at 4:27 pm

You had to take some risk at some point, or you would never have learned to stand, to walk, to run, to swim, to ride a bike, to venture into friendships and other relationships, to live on your own and manage your career & finances, etc. All things involve certain risk. With that risk, you learned caution. There’s nothing wrong with that. You are still human. :-)

GuestFebruary 21st, 2009 at 4:39 pm

Kafka you’re not the brightest bulb in the room if you think this is a literal statement, I’m sure your reading way too much into this. If I said boy it would be nice to have GM go back to a time and build those muscle cars again, People like you would say oh my look at all the horrible things that happened to people who were not by law required to wear seat belts, as an example. Lighten up.

KafkaFebruary 21st, 2009 at 7:26 pm

Dude, I realize I am stupid, do you realize how stupid you sound. I was half kidding but you are a dope if you think the constitution means anything or anyone in this country of lying fools cares about anything other than maximizing their own self interest. The fore fathers were self propagating pansies just like most in this country today. Americans love lying to themselves about most things, including their past history and the way out of this mess. Everyone is a victim and nothing is anyone’s fault, good luck, I am sitting back laughing my ass off while I short my way to prosperity. Apply a little logic, read some Schumpter and Darwin, you can’t fix something that is destined to continuously break down no matter how much you hope and dream.

GuestFebruary 22nd, 2009 at 9:04 pm

My understanding, NR was talking about bank bailout and the banks leverage in bad loans. National Debt is what the national govt has borrowed. The bad loans for US banks are about 150% of the GDP. If the US govt. had a complete bailout at 150% GDP plus the prior debt of 80% GDP, USA would have 240% GDP. Say 2% interest for servicing the debt, than 4.8% GDP to service the debt. That’s one big interest payment and tax load to boot.Solutions: Across the board fee/salary reduction 30% about $500,000 salaries, 25% for $400,000 to 500,000 range, 20% for $300-400k range, etc.Raise taxes collected (higher rate or lower rate) and lower spending increases.Inflate the currency to payback with cheap money (Ben Franklin plan).Berzerkelian

GuestFebruary 22nd, 2009 at 9:11 pm

I’m not a lawyer, my understanding is, the US has administrative seizure law for property used in drug transactions or with money from drug transaction. Just fill the paper work, no trial needed. I disagree with those laws but they were put into place with Bush I and expanded with Clinton. I think there was an expansion to include “terror” seizure law under Bush II.Berzerkelian

GSMFebruary 23rd, 2009 at 12:50 am

Indeed, this the very same RBA that did not have a CLUE what was coming and then madly chainsawed interest rates faster than any country in the OECD save the UK. Now Stevens would have us believe his very reliable and obviously superior economic radar is picking up a recovery what?- 8-12 months away? …Cough.There was a caveat though at the very end and in small print- “provided that global events don’t impact on Australia’s economic recovery” – or something of the like.Stevens is now desperately trying to divert attention away from the incompetence of the RBA in managing Australia’s addiction to debt which was nurtured and fed by RBA policy. Steven’s is now in bed with the Govt of Australia and acting as a shill for their spending orgy that will push Australia to the brink of collapse with an enormous national debt.

AnonymousFebruary 23rd, 2009 at 4:59 am

Sorry to deepen your pessimism, but you are more than right. As an European citizen, during the last ten years, I was amazed at which point the USA looked more and more like a Middle Age country with public services in very bad state (electricity, phones, railroad …), no real social security, in many respects a country classified as third world country for health, poverty and so on, and I was amazed also to see how much average american citizen liked it, with justification like “we are a free nation, our citizens work hard to be free and don’t need any help, we build this country by our own hands, we do not need socialism and state welfare, we will not fall into communism and so on..” all this stupid Hollywood speech that is good for Ivanohe or Far-West; man, you do not see the truth, you are ridiculous. Mankind did not reach the moon with those selfish so-called libertarian attitude but with collective efforts to make life and work smoother for anyone on earth especially the most vulnerable like old persons, women with children, children, people with diseases, handicaps and so on. The truth is that Batman or John-Wayne’s-like-heroes do not exist on earth, wake up !