Busted: Bankers and The Global Economy

September 19, 2008

Total Meltdown or Financial Reconstruction?

What is happening on Wall Street? Everyone wants to know why government has waited so long and who will be held accountable. Now we are in the midst of a financial panic. Communication at the top of government during the panic has been in contention among politicians. Some are pointing fingers of blame. Most are simply carrying a stiff upper lip and wearing a poker face.

hundreds of billions of dollars

bailout: hundreds of billions of dollars

There has been plenty of talk about effectively sucking up the bad securities with a vaccuum cleaner style policy that has yet to be revealed. This miraculous policy is what authorities will be working on today and this weekend in order to avoid what some say is an inevitable collapse. In essence, everything needs shoring up and the government seems intent on taking care of the world. Open the newspaper or check out the internet to see the flurry of activity by authorities “to address the underlying problem.” All of this is being touted to cost the American taxpayer far less than allowing the crushed system to play itself out. If you like big government or have the idea that only marketing matters, this may be the ultimate solution for you.

Recently bailed out Fannie Mae and Freddie Mac will be used to bolster the system, but all measures in place are deemed as “not enough.” Liquidity must be restored. Government is working to eliminate selling short by profiteers, which has worked to undermine the solidity of the system. They expect to buy out all of the securities, modernize the system to today’s standards and then set up new rules so that what led to the collapse can never happen again. U.S. Treasury Secretary Henry Paulson has revealed right now that saving the system from total collapse is what is on the financial and political plate this weekend rather than worrying about the idea of regulating the new policies that they want to put in place. Obviously, flooding the monetary system with a cash infusion yesterday has done nothing to take care of the crisis. That is no surprise.

Now a lame duck president is setting the direction for this nation with very little consultation, much like what he has done with other issues during his terms in office. There must be no controversy and authorities are in a great rush to action. Is that action warranted? Will the nation default on its debt? What will happen after the policy miracle of this weekend? Like it or not, prepare for a roller coaster ride. ~ E. Manning

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September 12, 2008

Lehman: The Prophecy of Failure

Lehman Brothers paints themselves as an innovator in global finance as they serve the financial needs of corporations, governments and municipalities, institutional clients, and high net worth individuals worldwide. They “maintain leadership positions in equity and fixed income sales, trading and research, investment banking and investment management.

In advance of the collapse of investment banker Bear Stearns in March of this year, rumors have been circulating continually about the demise of Lehman. Those have hardly quelled since then. As a result, the value of the stock holdings has steadily evaporated and the value of the investment bank plummeted.

Employees are now worried and expecting pink slips. The New York Times is pointing out that the Lehman decline is much like Bear Stearns. However, while the failure and decline is similar, the circumstances that brought those about is very much different.

The demise of Bear Stearns was brought about by bungling, bad financial moves within the banking system and an ensuing panic. The collapse was quick and decisive. The decline of Lehman has been created by the prophecy of pessimism, the fear of weakness which has been mostly unrelenting. This undercurrent of perceived weakness has evolved over time despite the efforts to prop up the firm.

The Times reports an employee as saying, “Everyone is walking around like they have just been Tasered. Everyone was always hoping we would pull through. Now, that is not really an option.” The undercurrent involving a lack of confidence has been pernicious, even on the inside.

The media has talked up the demise and is now talking up the sale of the company. “The cold prospect of losing a life savings in Lehman stock has become more of a reality, many employees have grown resentful.” While that is true, the idea of investing is usually based on a sound investment. It is sad that employees have chosen to sink with the ship instead of divesting themselves if that were possible. What is more sad is that a wealthy corporation like Lehman hasn’t bothered to secure even a small portion of interest in their employees. That is, in fact, the dilemma that threatens the very fabric of American society. It’s all about “me.” This eighties born attitude rises to the top of the corporate ladder. The backlash has been and will be substantial except for the corporate leaders.

It is true that business is not about charity. However, this writer is not discussing charity. The problem is that life in America has become so self-centered that the prospect of tomorrow is rarely if ever addressed. There is lack of planning and little care for tomorrow or for anyone else on any level. That attitude is as prevalent at the top of business as it is at the bottom. The nation has thoroughly corrupted itself and the corporate environment that it originally built. There is not even the illusion of responsibility. Live for today for tomorrow is its own.

Sooner or later, that attitude along with the prophecy of failure comes home to roost. ~ E. Manning

September 4, 2008

Inflation: Sick of the “I” Word

Yes. Every American knows what the Fed is reluctant to admit. The economy is struggling. Prices remain high. Booyah. It’s a revelation.

It took the Fed and the federal government almost 9 months to admit the truth about the mortgage, banking and finance debacle. They had all the facts and saw it coming. They looked the other way in the hope that you might not notice or in the vain hope that a pied piper might come along and enchant all the rats. Shortly after that mortgage and finance truth was reinforced by reality, Bear Stearns collapsed, threatening the fall of U.S. investment bankers. Now the Federal Reserve has effectively nationalized every important sector of the banking community within the United States in the effort to keep the show running in the spirit of confidence. The federal government a/k/a the American taxpayer is theoretically on the hook for the entire expense, enslaving the nation to an uncertain future unless we wise up.

We’ve heard about the “R” word, but never has another word meant more to a nation or a global economy in consternation than the infamous “I” word that economists, writers and politicians cannot fail to utter in quiet undertones of fear. What make the “I” word so dangerous is the lack of power against it. Inflation isn’t just a cycle. Inflation is a symptom of unbridled lack of discipline and theft by the Federal Reserve and central bankers themselves. The fact is that authorities have decided that if we mention inflation enough, the public will actually stop taking it seriously.

Inflation has been described as “creeping.” Inflation may well be creepy and may well be advancing, but inflation has showed its ugliness rather dramatically. The nation faces higher inflation than in more than 20 years. Even worse, the nation flutters on the brink of truly nasty stagflation.

The officials in charge won’t readily admit such a thing. First, we have invented hard and fast rules about such topics. Economics is a science say many experts. We have strict definitions for these kinds of things say leaders. That depends on what school of thought you choose to believe. Still, you may be right if you consider economics to be on the same level of science as evolution. The best and the brightest are still unresolved about both except where it fits an agenda for power as they constantly update the facts in an effort to make their case.

In the meantime, prognosticaters are expecting a “rough patch” to come up soon. This patch could happen at any time. Christmas is going to be very bad, business pundits say in prophecy. Bad depends on the level of expectations. If consumers continue to retrench by only buying what they need, the economy is doomed in the eyes business retailers and tax collectors.

American consumers may be in a “slump”, but business and government is in the midst of a crisis. Government has grown to depend on more consumption and rosy projections to raise operating funds by taxation. Business has grown to depend on cheap foreign labor to slash expenses while raising prices. Inflation comes as much from greed and usury of the little guy on both sides as it does from devaluation of American currency and weakness in the dollar.

Food and fuel prices have knocked inflationary values out of the park recently. The Fed says that fuel prices have moderated somewhat, but are still elevated. Considering that the average barrel of oil averaged about $37.00 in 2004, the word elevated is an understatement.

Then the Fed blithely states that wage gains are modest. This is an obscene statement considering that wages have been flat for years, even when adjusted continually for “nominal 3 percent inflation.” No danger for inflationary pressure here because employers are laying off workers in droves in an effort to save the bottom line of business. Employers haven’t been known to be “overly generous” in at least 3 decades.

Manufacturing is weak or declining as corporations close down facilities and offshore jobs to foreign nations with significantly lower wage rates and taxation. The things that America still manufactures like steel, heavy machinery and aircraft are cheaper for foreign buyers because of the weakness of the devalued dollar. This possibility combined with stimulus payments are being given credit for growth figures in the second quarter of 2008.

The largest problem with concepts like recession and inflation is that like every other economic idea, there isn’t much agreement on much of anything. Now that is science. ~ E. Manning

July 11, 2008

Banking Economy: More Stability and Danger

Wall Street Investment Bankers didn’t borrow from the emergency lending program of the Federal Reserve over the past week. Perhaps we are seeing signs of confidence or what is perceived as a lack of need. This creates additional hope as the banking community appears to be backing off of Federal Reserve funding.

Investment bankers failed to draw loans for the week ending July 9, borrowing $1.7 billion in the previous week, down from $6.1 billion the week before that.

Meanwhile, the regulatory prowess of the Federal Reserve is increasing as they work to initiate new rules that discourage assumption of safety in the banking community. Assumption coupled with false confidence is exactly led to the downfall of bankers and the U.S. economy, (more…)

June 19, 2008

FBI Begins Kicking Booty in Banker Fraud

The Federal Bureau of Investigation isn’t wasting time. America needs some fall guys. Who better than lying and scheming financial salesmen? Finally, crooked bankers, financial gurus and investment brokers should be shaking in their boots. The FBI is on the stick and hasn’t been wasting much time. Obviously, the preponderance of evidence is huge or the government wouldn’t moving this quickly. Previously, the FBI stated that the first arrests could have taken two years or more.

The first criminal cases of the credit crunch are two former Bear Stearns hedge fund managers, Ralph Cioffi and Matthew Tannin. The men allegedly misled investors in two funds that collapsed last summer on mortgage-backed securities.

Why fall guys you ask? The FBI will have to be up on their numbers (more…)

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