It appears that the government backed lending institutions are on the brink of failing.  The govenrment  (us!) has stated that it may bail these two massive lending institutions out, at a cost of 5 TRILLION dollars debt.  Add this to the 9 trillion of pubic debt, and the yearly interest paid will equal about 650 billion dollars a year--The largest single portion of the government budget. 

  All indications point to a severe prolonged recession, perhaps a depression.   This is the end result of years of lobbying efforts to limit governent regulation of financial markets, and let free markets do their magic.

  And I have to say, it is indeed stunning.

cyberpatzer:

This is the end result of years of lobbying efforts to limit governent regulation of financial markets, and let free markets do their magic.

Not sure what you mean. Are you saying we have too much or not enough government regulation of financial markets? 

Too Little!  That was my sarcastic-speak.

   It appears it is now again permissable to buy on margin--basically putting only 10% down on stocks.  This was the same practice as during the 20s, which exacerbated the depression.

  In other words, it was as if the bank lent you money to go to the casino!

  Lending institutions were allowed to go on a sub-prime loan rampage!  Anecdotal cases by the dozens report huge loans going out to people who were unemployed to 300-500k homes!!

  Then, they would bundle these loans, and financial institutions would buy them as triple A securities to other corporations--- "as safe as houses"!  --on margin.  

  But actually, they were virtually worthless.  The beginnings of an economic downturn spikes forclosure on homes that should never have been mortgaged out in the first place.  The holders of these securites realized they were holding confetti...then...

   The government allowed these practices without oversight.  Now the American public, after losing money in their retirement funds, tremendous value on their homes, and perhaps their jobs, are being told they may possibly bail out the same institutions that engaged in these insane practices-- at a temendous price and cost to other programs of actual use.  NASA, medicare, --everything-- would be under severe pressure.

  The question:  who is responsible?

 I think of  my old Latin class and a phrase:

  "Manus manum lavat."

   One hand washes the other....

Irrespective of politics, It's a recurrent historical fact that unbridled capitalism, corporate greed, and cronyism lead to such shameful excesses.  Unfortunately, the American taxpayer will be swallowing a very bitter pill thanks to this most recent of financial disasters.

"If Fannie or Freddie failed...it could throw the economy into depression or something close to it," Sean Egan, head of credit ratings firm Egan Jones, told Fortune earlier this week.

http://money.cnn.com/2008/07/10/news/companies/fannie_freddie/index.htm?postversion=2008071015

http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_baum&sid=aHGjICIkoaR0

Dave Mitsky 

cyberpatzer:

and let free markets do their magic.

Free markets will only do their magic if they are truly free. Without the impression that the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, both created by Congress, were backed by the U.S. government, those transactions would not have happened.

cyberpatzer:

And I have to say, it is indeed stunning.

It is indeed stunning that central control of the economy is still is almost universally accepted and applauded.

DaveMitsky:

Irrespective of politics, It's a recurrent historical fact that unbridled capitalism, corporate greed, and cronyism lead to such shameful excesses.

This is not an undisputed fact. I recommend this book to everyone. 

How free was I to choose losing 20% of my homes value due to the avarice of bankers and financial institutions?  How free was I to exert control over the loss of defined retirement benefits for the roll of the dice approach of the market friendly 503B?  How free would Americans be if their social security was coopted by the same persistent forces that enabled this disgusting scandal.

  Spare me your Randian clap-trap.  Captialistic markets must be regulated closely due to human falibility and the greed of the types of personalities that are drawn to these endeavors.  Period.

  And  when billions are spent petitioning senators and congressman on a daily basis, and funding their campaings, how free are we, the citizens of the United States, to chart a wise and proseprous course, for ALL?

  I, and many others, would like to see socialized medicine, as well as socialized utilities, and healvily regulated financials for starters.  You folks have had your time at the trough.  Enough is enough.

  No matter how much money YOU have extracted from this system, it clearly hasn't benefited the nation as a whole.  It is indefensible, and criminal.

 OK. No harm intended. I used to believe pretty close to what you are saying. In fact, in both religion and politics, I have strongly held completely contradictory beliefs at different times. I have concluded that the only thing I'm 100% sure of is that I can be wrong. The only clarification I have to make now is I am not one of those rich guys. This is gonna hurt me bad too.

Friends? 

Aww, come on!

  I was just starting to have some fun!

  If I don't get my blood pressure up over 180, I consider it a bad day.....

 friends!   Forever!

  Hey, you wanna buy a house in St. Clair Shores?  Buddy!?

cyberpatzer:

Hey, you wanna buy a house in St. Clair Shores?  Buddy!?

Too cold! I used to live in Saginaw. 

goon:

cyberpatzer:

and let free markets do their magic.

 

Free markets will only do their magic if they are truly free. Without the impression that the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, both created by Congress, were backed by the U.S. government, those transactions would not have happened.

    

cyberpatzer:

And I have to say, it is indeed stunning.

 

It is indeed stunning that central control of the economy is still is almost universally accepted and applauded.

This may be touching on politics but there is no such thing as a free market.  Government is always involved in the economy in some way and the manner in which it is involved determines whether only a tiny portion of the population benefits or whether the society as a whole does.

http://www.hellblazer.com/archives/2004/03/the_myth_of_the.html 

It's interesting to note that even more reactionary free marketeers find fault with the Friedmans' support of a government central bank.

http://www.fee.org/publications/the-freeman/article.asp?aid=450

The rich and powerful always find ways to insure that they have influential "friends" in government.  When markets are deregulated and allowed to run wild, financial scandals and crashes soon follow, another case in point being the savings and loan scandal of the late 1980s, in which members of a certain prominent political family were deeply involved but I won't go into that.

I'll play the Amazon.com game too.

http://www.amazon.com/Inside-Job-Looting-Americas-Savings/dp/0070502307

Congress was repeatedly lobbied to the tune of many millions of dollars by representatives of both Fannie and Freddie.

See this link and this one.

On the Indymac front:

http://www.cnn.com/2008/US/07/16/fbi.indymac/?iref=hpmostpop

Dave Mitsky 

Thanks for the links Dave--

    See my other post of the UBS 'scandal'.  The figure is now 20 billion.  Keep in mind this is just one bank.  The tax from UBS alone (assuming it didn't go to Chad or Deke's trust fund...) would be 1-2 billion.  Enough to save Arecibo, Fermi, and fund 2-3 planetary missions. 

   Or seed money for green energy research and development....

DaveMitsky:

The rich and powerful always find ways to insure that they have influential "friends" in government.

That's a good reason to limit the government. I hope y'all don't think I'm in favor of corporate welfare and crime (ambiguity intended). I also hope you don't think I'm a Republican. I believe in liberty and justice and when they conflict (rare), it's not all that hard to sort out.

cyberpatzer:

Enough to save Arecibo, Fermi, and fund 2-3 planetary missions. 

   Or seed money for green energy research and development....

Or, more likely, another senseless war or two.

They're not gonna let us keep this up.

Update:

  As it turns out, Michigan's own Senator,Carl Levin is pushing these investigations.  His office estimates about 100 Billion in tax evasion monies going to European banks (Lichtenstein, Switzerland, etc...)   Figure about 10 billion in taxes.  NASA costs 18 billion a year to run, as an example of what we, the people of the US, could do with such funds.

   Isn't tax evasion subject to criminal sentencing?  We could spend some of the recovered revenue on special jails for something like 100,000 hard swindling pseudo-Americans.

  Of course, government tax revenue next year, and the following (most likely) are going to be severely down.   Much of this activity is a preeemptive attempt to stop the bleeeding and try to stabilize the nation.  To bad it has to be a crisis to do the right thing by the people.

goon:

DaveMitsky:

The rich and powerful always find ways to insure that they have influential "friends" in government.

That's a good reason to limit the government. I hope y'all don't think I'm in favor of corporate welfare and crime (ambiguity intended). I also hope you don't think I'm a Republican. I believe in liberty and justice and when they conflict (rare), it's not all that hard to sort out.

I'm sorry but your logic doesn't seem to follow, since the near criminal and overtly criminal activities that are currently plaguing the economy predominate during times of minimal governmental regulation.  IMO, the answer to this and many of the nation's other problems is to completely eliminate lobbyists and to enforce strict legislative codes of ethics. 

Dave Mitsky

This discussion is probably taking far too much of a political turn so I'm bowing out at this point.

Dave Mitsky

DaveMitsky:

IMO, the answer to this and many of the nation's other problems is to completely eliminate lobbyists and to enforce strict legislative codes of ethics. 

Good luck. I'm out too, unless someone starts it up again and I can't help myself. 

  That says a lot!!!

  Since when is corruption POLITICAL (ideologically driven--)???

  Doesn't corruption cut across party lines?  Isn't it a national ssue?  is there a pro-corruption party?(rhetorical, please do not answer).

  Every American should be concerned about recent revelations concerning our financial and economic system.  Fairness and law are the underpinings of our, and most other, modern western nations.  Law is administered by governments, composed of frail human beings.  Thus, oversight is given to the people through the vote.  So, ultimately the failure is ours, the people, to hold government accountable, not get rid of it!  Advanced societies are far to complicated, and concerns to interrelated and vast to dream of a simpler (perhaps imaginary) time.  I would say some soul-searching and changes of views are in order, not anarchy.