Busted: Bankers and The Global Economy

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

August 28, 2008

IBM Continues to Escalate Global Tracking

IBM’s strong financial performance lately can be attributed in part to the growth of IBM’s System z10 mainframe. On an increasing basis IBM has been developing global banking and tracking software to serve the needs of multinational corporate clients. In fact, IBM has received a notable patent for tracking which could be used for the creative tracking of not only data and products, but human beings as well.

The IBM mainframe allows for additional protection of sensitive data such as credit card information and client’s personal information from hackers which is a very attractive feature in banking operations. From a computer standpoint, the beauty of the mainframe allows for a policy-based system that distributes, manages and tracks all data in a simplified fashion over older computing. Multinational bankers are investing in the system because of huge expandability promises combined with flexibility in use for multiple types of banking simultaneously: commercial banking, Islamic banking, investment banking and insurance.

If you use your imagination, you can visualize where this advance in computing is taking the global banking system and other multinational corporate capabilities. IBM is almost single-handedly creating the means to elevate a digital revolution in the global economy, quickly becoming a completely digital economy. ~ E. Manning

August 5, 2008

Economic Confidence and the Art of Maybe

Captain Henry Paulson

Captain Henry Paulson

In a measure of “prudent preparedness”, U.S. Treasury Secretary Henry Paulson has retained Wall Street’s Morgan Stanley to advise the government on shoring up the props for ailing government mortgage twins Fannie Mae and Freddie Mac.

Paulson, emboldened with new authority, has hired Morgan Stanley to assist the Treasury in the event it needs to expand the government’s line of credit or buy stock in the companies or at least that is what the public line is. The reality is that where money and credit are concerned, Paulsen has the Federal Reserve attached to his right hip. It isn’t about the need for more money as such.

Morgan Stanley knows how investment bankers think, how banking instruments work behind the scenes along with associated tricks of the trade from an insider perspective. He’s an old hand himself, a Goldman Sachs man, just a little out of perfect practice. He needs a sounding board. In essence, the government has an old con man hiring the equivalent of group of con men to help beat what con men have designed for their own ends. That’s the story. The action by Paulson is beautiful in its simplicity. It’s a deal that gives Morgan Stanley plenty of reputation collateral since the money the firm is making is largely symbolic. Desperate times require desperate measures.

Where would America be without confidence?

Where would America be without confidence?

Paulson has 18 months to cover his bases in legislation that George Bush recently signed. Even so, supporters and critics of the plan are worried that taxpayers will be stuck holding the ball for the massive debt with the danger of bankrupting the country in a truly profound sense.

Paulson says that his action is all about confidence. He believes that having special powers in place may boost confidence in the mortgage twins enough to keep the U.S. Treasury from bailing them out.

That is what the whole study is about: the Art of Confidence. Maybe Paulson can boost confidence since investors and citizens know that the U.S. Treasury has its firm hand in place with the assistance of a qualified investment banking insider. That is the hope. Securing that hope cost the government a mere $95,000 for expenses on the surface.

Authorities range a bailout of Fannie and Freddie between $25 and $100 million dollars depending on who is doing the talking. An extra note of confidence with Captain Paulson at the helm may just steer us clear of the icebergs. May be.

June 27, 2008

Confidence, Mortgage Debacle & Fed Loans

Even though the Euro is on top of the world monetarily, European confidence is reported to be at the lowest level in 5 years. Whose confidence is being measured? There is no telling, but the guess would be the bankers, economists and investors. Because of the wonder of the mortgage securities debacle, the plight of many professionals globally in banking and investment circles is less money and fear of money trouble. Its all based on the outlook of growth, not only of collective economies, but of the financial system at large. Growth is a question mark on many fronts coupled with inflationary pressures.

Curiously, The Federal Reserve Bank of New York extended a $28.82 billion loan to JPMorgan Chase for the acquisition of Bear Stearns made in March. The Fed also released the minutes of two meetings on March 14 and March 16 that involve that loan. You would think that JPMorgan is prosperous enough to be able to cover that loan entirely after 90 days instead of having taxpayers float the loan for the credit, which is the reality of the situation. While JP Morgan is paying modest interest, the U.S. taxpayer is paying for interest put against the national debt. The Fed is collecting from both sides on money that they created from thin air.

The line of credit extended is based on collateral (more…)

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