All of them are guilty.

Oppenheimer's Analyst Meredith Whitney, was the most notorious person who warned last year (if I recall correctly) about the huge mess but nobody seemed even to listen to her although the people who listened, laughed at her.

I recall a particular event when she told directly John Thain about the mess within Merrill Lynch; the gentleman got "angry" about what she said ML should do in order to take at least some initial measures but he said "We at ML think that yours is not an exactly feasible alternative for us".

Within the following days, Thain admitted that ML was considering to do exactly what Ms. Whitney concluded were appropriate measures. It seems it wasn't enough... in the end, ML ceased to exist as well as many other investment banks

If we add what Bernard Madoff did, the issue becomes more complicated and the persons/entities you mention, are again, guilty...

Regards.

posted December 24, 2008

Harry Dexter White- Architect of our global financial system, Russian spy, Marxist, economist, primary mover behind the Bretton Woods agreement and formation of the IMF and World Bank. ..... and we consider the global crises a failure of the free market system.

Links:

• http://en.wikipedia.org/wiki/Harry_Dexter_White
• http://www.businessweek.com/magazine/content/07_25/b4039001.htm

posted December 24, 2008

At the end of the day it was you and me and the rest of the human beings on this planet. We're the ones that broke it and we're the ones who are going to get this thing back on track and rolling again. Ready to get started?

posted December 24, 2008

That's wicked.. Here goes:

(4) set the (5) , that led to (3) not doing their job properly , and due to certain levels of necessary greed, (2) made the not so wise decision of trusting (1) with their money.... From any of those above perspective, it is (6) to blame.




;0}

posted December 24, 2008

Stagnation of real wages eroded purchasing power which gave rise to better living through credit which was tied to and furthered by the creation of exotic financial instruments that exceeded an archaic financial system (controls) that were enabled and nurtured through poor legislation that was written and manipulated by banking interests with only short term gains in mind.

The combination of these discrete events (and others) become a chain of events that have led to the position we now find ourselves in

posted December 24, 2008

Hi Pankaj,

Let's think of it in terms of lessons learned, rather than the blame game.

I think the most important lesson learned is that risk has to be better managed and understood. It seems that no one asked how CDOs, for example, would be priced in a down market. The biggest reason for assets being "toxic" is not so much that they are "bad" per se, but that the mathematical models for pricing them didn't work in the down market.

Josh.

posted December 25, 2008

Hi Pankaj,

In the US it started in August of 2007 when - the Federal Reserve cut (inter-meeting, 8/17) the 'discount rate' to 5.75% from 6.25% citing tighter credit and shaken financial markets. Central banks in the U.S., Europe and Asia had injected more then $400 billion (Aug 9-16) into the banking system providing liquidity to global credit markets.

Global Oversight / new Laws / Regulation were discussed in Washington on Nov 15, see statement: www.jcbcapital.com/2008panic.htm

The problems have been identified and stopgap remedies are already being implemented. The current panic / crisis was a failure of US/global laws/regulations. Global Markets have fallen from $62.6 trillion [10/31/07] to $27.6 trillion [11/20/08] losing $35 trillion.

Our U.S. Laws which were written in 1933, 1934 & 1940...globally leading into Bretton Woods...The G-20, EU, IMF & World Bank met in Washington on Nov 15 - to discuss a post-Bretton Woods structure of laws / regulations.

- $47 trillion credit-default swaps - 'largely unregulated', the NY Fed has taken the lead in organizing this market defining them in recent weeks as an insurance product and trying to clear them. The Bank for International Settlements cites the total outstanding notional amount of OTC derivatives at $596 trillion (12/ 2007) - $400 trillion are interest rate derivatives.

- $12 trillion of U.S. mortgages - 'failing non-prime', this July the Federal Reserve's issued new regulations for mortgage lenders.

- $3.6 trillion of money market funds - 'uninsured', Paulson's Treasury using its authority protects US money market mutual funds in the past days with insurance (using a $50 billion fund) - as some of the $3.6 trillion of funds 'broke the buck'.

- $2-3 trillion Hedge funds / naked-shorting - 'largely unregulated', now reporting of short-selling. Short selling by Hedge funds of $100 million must now report positions to the SEC.

Markets will rebound. The US Treasury will use the $700 billion EESA to buy equity positions in financial institutions: $125 billion going to the 9 largest US banks and $125 billion going to smaller banks, the FDIC supports interbank lending. Federal Reserve increases its balance sheet to $2.2 trillion from $924 billion (9/10) in 2 months. The Federal Reserve, CFTC and SEC announce that a central clearinghouse for the $33 trillion credit-default swap market will be running by December 31.

G7 agrees to recapitalizing banks with public and private funds, insure depositors and unfreezing credit markets. G20 commits to "using all the economic and financial tools to assure the stability and well functioning of financial markets" - they account for about 90% of global gross domestic product. IMF's 185 member nations endorse a commitment to "use all available tools" to prevent systemic failure.

15 leading European nations commit $2.3 trillion and agree to a 14pt plan to aid troubled banks by adding capital through investment and by guaranteeing inter-bank lending.

China announced a $586 billion (4 trillion yuan) economic stimulus package (almost 20% of China's 2008 gdp) - the plan bolsters low-rent housing, infrastructure in rural areas, roads, railways, airports, subsidies for farmers will be raised and tax deductions for purchases of fixed assets (machinery) to stimulate investment.

Japan's package includes government guarantees for loans to businesses is $385 billion.

Chicken Littles' are running amok screaming the sky is falling the sky is falling - the alarmist/alarmist media, dooms-dayers, naysayers, fear mongers are the enemies of the American spirit. We will have some weak quarters of gdp - however, Americans are a resilient lot and our economy and markets will recover shortly. Buy Low - Sell High, Build a highly diversified portfolio.

JC Brandon

Links:

• http://www.JCBCapital.com

posted December 25, 2008

Do you really think this is productive? Can you take some of those statements and turn them into solutions?
I'm hearing much too much enjoyment of the situation; ways of resolving or fighting it strike me as much more helpful.

posted December 26, 2008

Lack of regulation of the financial market. Greed allowed most of the volatile capital circulate without physical guarantees and also talking about the lack of regulations it worths to points to another important trigger forgotten by many: the speculations towards grains and oil.
Huge US deficit raising always also has its part to be blamed. WTO shall also includes regulation in order to avoid this kid of Issue in the future.

It is hard to not design a parallel to the Stock Market crisis in 80's when due the lack of regulations about the public titles would bring it into surface nor check out how tha volatile markets can destroy economies like Argentina in 90's only due the greed for more profit.

Money also means responsability. Ethics and Moral shall leave the discourse.

posted December 30, 2008

All of the above...

posted January 10, 2009

Blame: The nature of the banking and monetary system itself. FDR going off the gold standard domestically in 1933, and Nixon severing the link for international transactions in 1971.

At that point, you had floating paper currencies backed by nothing. It was only a matter of time before a central banker threw caution to the wind and inflated in perpetuity to "keep the party going." That central banker was Alan Greenspan - the corrupted, ass-covering, former gold-bug, liar of the worst kind. This man said with a straight face -- on the record in a House Finance Committee meeting upon being questioned about returning to the gold standard by the heroic Ron Paul-- that a gold standard isn't necessary because the FED runs the economy as if it was on a gold standard. And then this empty shell has the nerve to feign surprise that his fascist monopolistic control over the money supply, which he characterized as "free market," didn't regulate itself. Poppycock!

The current credit crisis could not have happened without a fiat money, fractional reserve economic system with evil crooks controlling the credit levers.

The government and the FED created the problem. They are proposing more of the same insanity to fix the problem that caused the problem in the first place.

END THE FED.

RETURN TO SOUND MONEY.

All other discussion is superfluous if REAL growth and prosperity is to return.

posted January 10, 2009

There was a business school article last spring that claimed something like 1000 executives are responsible for 80% of the current problem ... and it would go a long way to correcting the situation if the gov. could figure out how to loose their jobs.

In congressional hearings last fall there was discussion that both the toxic CDO issuers and the rating agencies knew that the toxic CDOs weren't worth the triple-A ratings ... but the issuers were paying for triple-A ratings (the word "fraud" was periodically used). They also mentioned that there was a switch in the early 70s from the "buyers" paying for the ratings to the "sellers" paying for the ratings ... which misaligned the business process. The triple-A ratings enormously increased the institutions that would deal in toxic CDOs and the amount of money available for loans.

related article:

The Man Who Beat The Shorts
http://www.forbes.com/personalfinance/global/2008/1124/042.htm

from above:

Watsa's only sin was in being a little too early with his prediction
that the era of credit expansion would end badly. This is what he said
in Fairfax's 2003 annual report: "It seems to us that securitization
eliminates the incentive for the originator of [a] loan to be credit
sensitive. Prior to securitization, the dealer would be very concerned
about who was given credit to buy an automobile. With securitization,
the dealer (almost) does not care."

... snip ...

Then there were some of number of the institutions buying this triple-A rated toxic CDOs ... which were playing long/short mismatch ... even tho it has been known for centuries to take down institutions. Comment was that Bear-Stearn and Lehman had marginal change surviving (playing long/short mismatch)
http://www.forbes.com/entrepreneursfinance/2007/11/13/citigroup-suntrust-siv-ent-fin-cx_bh_1113hamiltonmatch.html
decade old article from the fed
http://www.frbsf.org/econrsrch/wklyltr/2000/el2000-26.htm

The recent washington post series about CDS ... basically talked about
CDS being sold on instruments that were totally unrelated to the
original business case risk analysis.

In large part deregulation and/or failing to enforce regulations ... allowed a lot of isolated (gread/corrupt) hot-spots to combine into economic fire storm.

There was a recent news item that IDC is now helping the gov. evaluate these securitized instruments ... as part of gov. purchase plan. A recent reference about IDC from the 60s&70s ... including IDC purchasing Standards & Poors "pricing services" division in the early 70s ... about the time the claims about business process becoming mis-aligned

Links:

• http://www.garlic.com/~lynn/2009.html#21
• http://www.forbes.com/personalfinance/global/2008/1124/042.html
• http://www.forbes.com/entrepreneursfinance/2007/11/13/citigroup-suntrust-si...

posted January 11, 2009