Remembering the Glass-Steagall Act

[Toddsterpatriot]

Commercial banks could write bad mortgages under Glass-Steagall.
You never did defend your claim that every bank failure during the crisis was due to derivatives. Or that writing derivatives was a guaranteed money maker. Why did you run away from your silly claims?

Wow! You need it proven the crash was because of derivatives? What an astounding profession of ignorance! How could you live through the crash and not know this and still believe you know something about it?

Amazing.

Well, let's start with AIG. Collapsed due to selling Credit Default Swaps (CDS) against Wall Street's CDOs without backing them up with even a modicum of cash reserves.

CDS and CDO are both derivatives.

Bear Stearns. Collapsed due to CDOs.

Lehman Brothers. Collapsed due to CDOs.

Name a collapsed bank, I'll show you the derivatives that brought them down.


I mentioned about how Wall Street also snookered municipalities into buying derivatives. That's not all. They also snookered insurance companies, pension funds, college endowment funds, 401k funds. All over the world.

Example: Banks Sell Toxic Waste CDOs to Calpers Texas Teachers Fund - Bloomberg

CDOs are bonds. Lehman and Bear failed because they financed huge bond positions, including mortgages and MBS, with overnight loans.

That's like saying a gambler went bankrupt not because he tried the Martingale system, but because the loan sharks cut him off.

They went bankrupt because they bought bonds with borrowed money, the bonds went down in value and they couldn't roll over their loans.
Not because of derivatives.

What you term as bonds were in fact derivatives. They are not interchangeable terms.

The MBS that Bear and Lehman loaded up on were bonds.

 

[Toddsterpatriot]

Yeah, its all that FDIC's fault.

Lehman Brothers, et al, were not FDIC insured institutions. It has nothing to do with the FDIC.

Wrong. Read Sheila Bair's book on the bailouts and the FDIC was involved.

Once again, if Glass-Steagall had not been repealed, those FDIC-insured banks would not have been in the jam they were.

The man's unhinged, but I rather doubt the treasury

Yeah, its all that FDIC's fault.

Lehman Brothers, et al, were not FDIC insured institutions. It has nothing to do with the FDIC.

Wrong. Read Sheila Bair's book on the bailouts and the FDIC was involved.

Once again, if Glass-Steagall had not been repealed, those FDIC-insured banks would not have been in the jam they were.

The man's unhinged, but I really doubt FDIC took much loss from insuring commercial paper issued after the interbank failu

"Bailing out the banks" was merely a byproduct. There was a primary problem of falling prices thoughout the world economy. A mortgage backed security nominally worth a dollar in Feb. 2007 were worth less, and nobody knew how much less, because the US housing market was in it's early stages of decline. The interbank system no longer supported commercial paper. In plain English, what this meant was a US importer could not raise a dollar in debt/capital to buy a dollar of Chinese imports ... because no one was willing to buy that dollar for a dollar and a penny. In response the FDIC did this:

"Newly issued debt guarantee: The FDIC is providing a guarantee of all newly issued senior unsecured debt, including promissory notes, commercial paper, inter-bank funding, and any unsecured portion of secured debt, issued by FDIC-insured depository institutions, U.S. bank holding companies, U.S. financial holding companies, and certain U.S. savings and loan holding companies. The amount of debt covered by the guarantee may not exceed 125% of debt that was outstanding as of September 30, 2008, and was scheduled to mature before June 30, 2009, but otherwise is unlimited. The guarantee applies to debt issued on or before June 30, 2009, and the guarantee will only extend through June 30, 2012, even if the debt has not matured. After the first 30 days, there will be an annualized fee of 75 basis points. The FDIC estimates that about $1.4 trillion of unsecured debt will be covered by this guarantee"

FDIC Press Releases - PR-100-2008 10 14 2008

Yahoo Groups

--------------------
It turned out that while actions like that and similar actions globally did save the interbank system. However, that was not enough as the general malaise (-: set in with housing prices falling, and consumer demand falling. Global deflation would have been Great Depression Redeaux

"Crude oil prices, for instance, have fallen more than 63 percent from their July peak of $145.29 a barrel, to $53.62 on Wednesday. The national average price for unleaded gasoline is now $2.05 a gallon, down from $2.92 a month earlier, according to AAA, the auto club. In fact, it now seems clear that the nation is entering a more frugal era after several years of conspicuous consumption.
....
Still, the so-called core price index — which excludes energy and food — was down a more modest 0.1 percent. The prices of goods and services like meat, alcohol, medical care and education increased in October.
...
“It would take significant and persistent contraction in the economy to push core inflation into negative territory,” said Dean Maki, an economist at Barclays Capital in New York. “We do not think that is likely, especially given the aggressive policy response on the part of the Fed and Treasury.”
...
“The Fed is going to ram liquidity into the financial system whether it is asking for it or not, just going out and buying assets and printing money in order to do it,” said Alan D. Levenson, chief economist at T. Rowe Price. “If you jam money into everyone’s pocket, they will spend it..” "

http://www.nytimes.com/2008/11/20/business/economy/20econ.html?pagewanted=1&_r=0
-------
So, actually we all got bailed out. True, we taxpayers gave about a trillion in rusty trombone. But, again as I asked, what's the alternative. Doing nothing was not an option. An "orderly bankruptcy" had already been tried at Lehman with not so good results. I don't think it's possible to regulate how much capital in card hold cash (or federal debt) has to be held against how much risk. We can set basic guidelines, but quantifying risk is ... a guess. I think really all we can do is akin to GS in limiting what money can be bet against specific debt.

Lehman was not an orderly bankruptcy.

That was the point.

Your claim was wrong. That was my point.

 

[bendog]

Yeah, its all that FDIC's fault.

Lehman Brothers, et al, were not FDIC insured institutions. It has nothing to do with the FDIC.

Wrong. Read Sheila Bair's book on the bailouts and the FDIC was involved.

Once again, if Glass-Steagall had not been repealed, those FDIC-insured banks would not have been in the jam they were.

The man's unhinged, but I rather doubt the treasury

Yeah, its all that FDIC's fault.

Lehman Brothers, et al, were not FDIC insured institutions. It has nothing to do with the FDIC.

Wrong. Read Sheila Bair's book on the bailouts and the FDIC was involved.

Once again, if Glass-Steagall had not been repealed, those FDIC-insured banks would not have been in the jam they were.

The man's unhinged, but I really doubt FDIC took much loss from insuring commercial paper issued after the interbank failu

"Bailing out the banks" was merely a byproduct. There was a primary problem of falling prices thoughout the world economy. A mortgage backed security nominally worth a dollar in Feb. 2007 were worth less, and nobody knew how much less, because the US housing market was in it's early stages of decline. The interbank system no longer supported commercial paper. In plain English, what this meant was a US importer could not raise a dollar in debt/capital to buy a dollar of Chinese imports ... because no one was willing to buy that dollar for a dollar and a penny. In response the FDIC did this:

"Newly issued debt guarantee: The FDIC is providing a guarantee of all newly issued senior unsecured debt, including promissory notes, commercial paper, inter-bank funding, and any unsecured portion of secured debt, issued by FDIC-insured depository institutions, U.S. bank holding companies, U.S. financial holding companies, and certain U.S. savings and loan holding companies. The amount of debt covered by the guarantee may not exceed 125% of debt that was outstanding as of September 30, 2008, and was scheduled to mature before June 30, 2009, but otherwise is unlimited. The guarantee applies to debt issued on or before June 30, 2009, and the guarantee will only extend through June 30, 2012, even if the debt has not matured. After the first 30 days, there will be an annualized fee of 75 basis points. The FDIC estimates that about $1.4 trillion of unsecured debt will be covered by this guarantee"

FDIC Press Releases - PR-100-2008 10 14 2008

Yahoo Groups

--------------------
It turned out that while actions like that and similar actions globally did save the interbank system. However, that was not enough as the general malaise (-: set in with housing prices falling, and consumer demand falling. Global deflation would have been Great Depression Redeaux

"Crude oil prices, for instance, have fallen more than 63 percent from their July peak of $145.29 a barrel, to $53.62 on Wednesday. The national average price for unleaded gasoline is now $2.05 a gallon, down from $2.92 a month earlier, according to AAA, the auto club. In fact, it now seems clear that the nation is entering a more frugal era after several years of conspicuous consumption.
....
Still, the so-called core price index — which excludes energy and food — was down a more modest 0.1 percent. The prices of goods and services like meat, alcohol, medical care and education increased in October.
...
“It would take significant and persistent contraction in the economy to push core inflation into negative territory,” said Dean Maki, an economist at Barclays Capital in New York. “We do not think that is likely, especially given the aggressive policy response on the part of the Fed and Treasury.”
...
“The Fed is going to ram liquidity into the financial system whether it is asking for it or not, just going out and buying assets and printing money in order to do it,” said Alan D. Levenson, chief economist at T. Rowe Price. “If you jam money into everyone’s pocket, they will spend it..” "

http://www.nytimes.com/2008/11/20/business/economy/20econ.html?pagewanted=1&_r=0
-------
So, actually we all got bailed out. True, we taxpayers gave about a trillion in rusty trombone. But, again as I asked, what's the alternative. Doing nothing was not an option. An "orderly bankruptcy" had already been tried at Lehman with not so good results. I don't think it's possible to regulate how much capital in card hold cash (or federal debt) has to be held against how much risk. We can set basic guidelines, but quantifying risk is ... a guess. I think really all we can do is akin to GS in limiting what money can be bet against specific debt.

Lehman was not an orderly bankruptcy.

That was the point.

Your claim was wrong. That was my point.

My point was it was NOT an orderly bankruptcy and you lack an ability to comprehend irony. And derivatives and bonds.

 

[Toddsterpatriot]

Lehman Brothers, et al, were not FDIC insured institutions. It has nothing to do with the FDIC.

Wrong. Read Sheila Bair's book on the bailouts and the FDIC was involved.

Once again, if Glass-Steagall had not been repealed, those FDIC-insured banks would not have been in the jam they were.

The man's unhinged, but I rather doubt the treasury

Lehman Brothers, et al, were not FDIC insured institutions. It has nothing to do with the FDIC.

Wrong. Read Sheila Bair's book on the bailouts and the FDIC was involved.

Once again, if Glass-Steagall had not been repealed, those FDIC-insured banks would not have been in the jam they were.

The man's unhinged, but I really doubt FDIC took much loss from insuring commercial paper issued after the interbank failu

"Bailing out the banks" was merely a byproduct. There was a primary problem of falling prices thoughout the world economy. A mortgage backed security nominally worth a dollar in Feb. 2007 were worth less, and nobody knew how much less, because the US housing market was in it's early stages of decline. The interbank system no longer supported commercial paper. In plain English, what this meant was a US importer could not raise a dollar in debt/capital to buy a dollar of Chinese imports ... because no one was willing to buy that dollar for a dollar and a penny. In response the FDIC did this:

"Newly issued debt guarantee: The FDIC is providing a guarantee of all newly issued senior unsecured debt, including promissory notes, commercial paper, inter-bank funding, and any unsecured portion of secured debt, issued by FDIC-insured depository institutions, U.S. bank holding companies, U.S. financial holding companies, and certain U.S. savings and loan holding companies. The amount of debt covered by the guarantee may not exceed 125% of debt that was outstanding as of September 30, 2008, and was scheduled to mature before June 30, 2009, but otherwise is unlimited. The guarantee applies to debt issued on or before June 30, 2009, and the guarantee will only extend through June 30, 2012, even if the debt has not matured. After the first 30 days, there will be an annualized fee of 75 basis points. The FDIC estimates that about $1.4 trillion of unsecured debt will be covered by this guarantee"

FDIC Press Releases - PR-100-2008 10 14 2008

Yahoo Groups

--------------------
It turned out that while actions like that and similar actions globally did save the interbank system. However, that was not enough as the general malaise (-: set in with housing prices falling, and consumer demand falling. Global deflation would have been Great Depression Redeaux

"Crude oil prices, for instance, have fallen more than 63 percent from their July peak of $145.29 a barrel, to $53.62 on Wednesday. The national average price for unleaded gasoline is now $2.05 a gallon, down from $2.92 a month earlier, according to AAA, the auto club. In fact, it now seems clear that the nation is entering a more frugal era after several years of conspicuous consumption.
....
Still, the so-called core price index — which excludes energy and food — was down a more modest 0.1 percent. The prices of goods and services like meat, alcohol, medical care and education increased in October.
...
“It would take significant and persistent contraction in the economy to push core inflation into negative territory,” said Dean Maki, an economist at Barclays Capital in New York. “We do not think that is likely, especially given the aggressive policy response on the part of the Fed and Treasury.”
...
“The Fed is going to ram liquidity into the financial system whether it is asking for it or not, just going out and buying assets and printing money in order to do it,” said Alan D. Levenson, chief economist at T. Rowe Price. “If you jam money into everyone’s pocket, they will spend it..” "

http://www.nytimes.com/2008/11/20/business/economy/20econ.html?pagewanted=1&_r=0
-------
So, actually we all got bailed out. True, we taxpayers gave about a trillion in rusty trombone. But, again as I asked, what's the alternative. Doing nothing was not an option. An "orderly bankruptcy" had already been tried at Lehman with not so good results. I don't think it's possible to regulate how much capital in card hold cash (or federal debt) has to be held against how much risk. We can set basic guidelines, but quantifying risk is ... a guess. I think really all we can do is akin to GS in limiting what money can be bet against specific debt.

Lehman was not an orderly bankruptcy.

That was the point.

Your claim was wrong. That was my point.

My point was it was NOT an orderly bankruptcy and you lack an ability to comprehend irony. And derivatives and bonds.

Be sure to explain how the mortgages and the MBS Bear and Lehman choked on were really derivatives.