The title is the thesis. About the author:

Mr. Posner is a federal circuit judge and a senior lecturer at the
University of Chicago Law School. He is the author of the just-published
"A Failure of Capitalism: The Crisis of '08 and the Descent into
Depression" (Harvard University Press).


http://online.wsj.com/article/SB124165301306893763.html

The Wall Street Journal, 7 May 2009, page A17.


Joe Gwinn

Joseph Gwinn wrote:
The title is the thesis. About the author:

Mr. Posner is a federal circuit judge and a senior lecturer at the
University of Chicago Law School. He is the author of the just-published
"A Failure of Capitalism: The Crisis of '08 and the Descent into
Depression" (Harvard University Press).


http://online.wsj.com/article/SB124165301306893763.html

The Wall Street Journal, 7 May 2009, page A17.


Joe Gwinn


Fascinating...

Thanks, Joe.

"cavelamb" wrote in message
m...
Joseph Gwinn wrote:
The title is the thesis. About the author:

Mr. Posner is a federal circuit judge and a senior lecturer at the
University of Chicago Law School. He is the author of the just-published
"A Failure of Capitalism: The Crisis of '08 and the Descent into
Depression" (Harvard University Press).


http://online.wsj.com/article/SB124165301306893763.html

The Wall Street Journal, 7 May 2009, page A17.


Joe Gwinn


Fascinating...

Perhaps, but it's largely nonsensical and in some instances, just
innacurate.
Posner apparently doesn't understand what constitutes a "demand deposit"
account.

He's right about one thing, at least. What we are seeing in the worlds of
finance and economics coldn't have happened without the active and passive
assistance of government.

JC

John R. Carroll wrote:
"cavelamb" wrote in message
m...
Joseph Gwinn wrote:
The title is the thesis. About the author:

Mr. Posner is a federal circuit judge and a senior lecturer at the
University of Chicago Law School. He is the author of the just-published
"A Failure of Capitalism: The Crisis of '08 and the Descent into
Depression" (Harvard University Press).


http://online.wsj.com/article/SB124165301306893763.html

The Wall Street Journal, 7 May 2009, page A17.


Joe Gwinn

Fascinating...

Perhaps, but it's largely nonsensical and in some instances, just
innacurate.
Posner apparently doesn't understand what constitutes a "demand deposit"
account.

He's right about one thing, at least. What we are seeing in the worlds of
finance and economics coldn't have happened without the active and passive
assistance of government.

JC



John (et al),

At what point does it become possible to "just say no" to government involvement?

"cavelamb" wrote in message
m...
John R. Carroll wrote:
"cavelamb" wrote in message
m...
Joseph Gwinn wrote:
The title is the thesis. About the author:

Mr. Posner is a federal circuit judge and a senior lecturer at the
University of Chicago Law School. He is the author of the
just-published "A Failure of Capitalism: The Crisis of '08 and the
Descent into Depression" (Harvard University Press).


http://online.wsj.com/article/SB124165301306893763.html

The Wall Street Journal, 7 May 2009, page A17.


Joe Gwinn

Fascinating...

Perhaps, but it's largely nonsensical and in some instances, just
innacurate.
Posner apparently doesn't understand what constitutes a "demand deposit"
account.

He's right about one thing, at least. What we are seeing in the worlds of
finance and economics coldn't have happened without the active and
passive assistance of government.

JC

John (et al),

At what point does it become possible to "just say no" to government
involvement?

I'm not sure I understand your question but Tim Geithner spelled out
Treasury's position fairly well yesterday.
http://www.charlierose.com/view/interview/10278

He seems to be finding his legs, so to say, in public appearances.

JC

On Thu, 07 May 2009 21:22:49 -0500, cavelamb
wrote:

John R. Carroll wrote:
"cavelamb" wrote in message
m...
Joseph Gwinn wrote:
The title is the thesis. About the author:

Mr. Posner is a federal circuit judge and a senior lecturer at the
University of Chicago Law School. He is the author of the just-published
"A Failure of Capitalism: The Crisis of '08 and the Descent into
Depression" (Harvard University Press).

http://online.wsj.com/article/SB124165301306893763.html

The Wall Street Journal, 7 May 2009, page A17.
Joe Gwinn
------
Fascinating...

Perhaps, but it's largely nonsensical and in some instances, just
innacurate.
Posner apparently doesn't understand what constitutes a "demand deposit"
account.

He's right about one thing, at least. What we are seeing in the worlds of
finance and economics coldn't have happened without the active and passive
assistance of government.

JC
-------

John (et al),

At what point does it become possible to "just say no" to government involvement?
------
When you are not depending on the government to keep your
businesses from collapsing, your buildings from burning down,
etc.

The banks (commercial and investment), quasi banks, brokerages,
insurance companies, credit card companies, etc. created this
entire asset bubble problem, putting the world on the verge of an
uncontrolled deflation/depression and now everyone is paying the
price.

The "stress test" results are out, but the single most important
comment/observation IMNSHO is that "Together, the 19 firms that
took the test hold two-thirds of the assets and half the loans in
the U.S. banking system."
http://news.yahoo.com/s/ap/20090508/...1bIdjmK yBhIF

Note that one of the 19 is GMAC which is now a bank [now wholly
owned by Cerberus]. GMAC is expected to play a key role is the
financing of both Chrysler and GM vehicle purchases and leasing,
but was heavily involved in sub prime lending under Diatech
Funding and ResCap [Residential Capital]. By all objective
standards GMAC is bankrupt, but is likely to get another big wad
of taxpayer cash.

for complete report [and free eye test] see
http://static.reuters.com/resources/...r_20090507.pdf
also for Reuters analysis see
http://www.reuters.com/article/ousiv...5463T820090508


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

Timothy Geithner's interview (thanks John) was most interesting.

Rethinking the way things ought to work...

One thing he said that I thought made sense was "the only reason
that one penny was given to these banks is to keep the people who
depend on them from (going under).

But in the end it's a "confidence game" (maybe in BOTH senses).

But mostly...

Do you have confidence in this recovery?
Do you have confidence in this economy?

George said:

The "stress test" results are out, but the single most important
comment/observation IMNSHO is that "Together, the 19 firms that
took the test hold two-thirds of the assets and half the loans in
the U.S. banking system."

All my emerging confidence just evaporated again...

"John R. Carroll" wrote:

He seems to be finding his legs, so to say, in public appearances.

I think he could use a few good nights sleep. This is a non-political observation.

Wes

"Wes" wrote in message
...
"John R. Carroll" wrote:

He seems to be finding his legs, so to say, in public appearances.

I think he could use a few good nights sleep. This is a non-political
observation.

Wes

He looks like the son of Eraserhead......

ATP* wrote:
"Wes" wrote in message
...
"John R. Carroll" wrote:

He seems to be finding his legs, so to say, in public appearances.
I think he could use a few good nights sleep. This is a non-political
observation.

Wes

He looks like the son of Eraserhead......



Cynacism isn't intellectual...it is the antithesis of the curiosity
and optimism that keep us striving to innovate and to find new solutions
to old problems.

And, as the saying goes, if you aren't part of the solution,
you're part of the problem.

On Fri, 08 May 2009 00:18:27 -0500, cavelamb
wrote:

Timothy Geithner's interview (thanks John) was most interesting.

Rethinking the way things ought to work...

One thing he said that I thought made sense was "the only reason
that one penny was given to these banks is to keep the people who
depend on them from (going under).

Which may well be true, but you need to find out how he defines
"people." It appears that his concern is limited to "people"
like himself, with high positions in the banks, earning huge
bonuses, or those that have huge amounts of credit with the bank,
or those likely to face prison for fraud if the banks go "belly
up." The casual acceptance of bank refusal to lend to credit
worthy borrowers after the injection of billions of taxpayer
dollars under TARP and trillions by the secretive FRB, especially
for business expansion/operation and the general gouging on
credit cards clearly shows that there are "people" and then there
are "people," [some of whom are more equal than others] Remember
Geithner's background and history, and firm advocacy of the Leona
Helmsly rule ["Only little people pay taxes"].
http://en.wikipedia.org/wiki/Timothy_Geithner
http://online.wsj.com/article/SB123187503629378119.html


But in the end it's a "confidence game" (maybe in BOTH senses).

But mostly...

Do you have confidence in this recovery?
Do you have confidence in this economy?

In this sense, all government, insurance, religion, and almost
all commerce, all finance and paper money, etc. is a "confidence
game." As soon as the "confidence" goes, the game is over.

"Incantation" is a well know and frequent cure or at least
attempted cure for this loss of confidence. This is greatly
helped because people both want and need to believe.

Now go out and sacrifice two goats and everything will be fine...


George said:

The "stress test" results are out, but the single most important
comment/observation IMNSHO is that "Together, the 19 firms that
took the test hold two-thirds of the assets and half the loans in
the U.S. banking system."

All my emerging confidence just evaporated again...
----------
This is very much a good news/ bad news situation.

The bad news is the gross over concentration of wealty/power in
far too few hands of totally unaccountable and insulated/isolated
[short of a violent revolution] people. These are no longer
"private businesses" in the usual sense, but quasi governments,
larger than many states and indeed, all but a handful of
countries in the United Nations in terms of GDP.

The good news is that the problem has been identified, and the
"vital few" as opposed to the "trivial many" have been named.

The problem is that just thinking about taking on these
corporations and individuals makes the individuals that must act
in Congress, the Administration and the bureaucracy pee in their
pants and/or grab their billfold.

In the short term the directors, officers and cadre management of
at least the top ten organizations must be immediately replaced,
possibly with a 3-5 year ban on employment in the financial
services sector. Given the quasi-governmental status of these
companies, and the huge amounts of taxpayer funds "invested," the
seating of one or more governmental employees as directors, to
serve as "peoples" representatives, seems highly desirable, and
it would be imperative for them to serve on the "compensation"
and "executive" committees, if only to keep an eye on things.

In the longer term, a policy *MUST* be developed and implemented
to prevent such economic over-concentration. One suggestion is
the imposition of a graduated "franchise" tax on both deposits
and loans, to be paid by the financial institution, such that it
will no longer be economically viable to amass such huge
financial positions. A parallel suggestion for all companies,
not just the financial sector is the imposition of a [steeply]
graduated gross receipts/sales tax, both to discourage the
formation/preservation of these mega corporations [that are too
big to fail], and to insure they pay their fair share of the
costs to run government, i.e. taxes.


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

"cavelamb" wrote in message
news
Timothy Geithner's interview (thanks John) was most interesting.

Rethinking the way things ought to work...

One thing he said that I thought made sense was "the only reason
that one penny was given to these banks is to keep the people who
depend on them from (going under).

But in the end it's a "confidence game" (maybe in BOTH senses).

But mostly...

Do you have confidence in this recovery?
Do you have confidence in this economy?

George said:

The "stress test" results are out, but the single most important
comment/observation IMNSHO is that "Together, the 19 firms that
took the test hold two-thirds of the assets and half the loans in
the U.S. banking system."

All my emerging confidence just evaporated again...


Too bad about that. But does this information finally allow you to see the
wisdom of what the government did in bailing out these firms? When you
consider how much the country's financial health depends upon good
functioning by these giant firms it quickly becomes very clear why the
government stepped in to prevent a catastrophe. Without the intervention
some of these giants would have fallen. If they did the problems we have
experienced would have seemed puny compared to what might have happened. So
it may have been a mistake for the government to have allowed firms to
become "too big to fail" it was clearly the right decision to prevent those
firms from falling and by doing so take the rest of us down with them.

Hawke

Mr. Posner is a federal circuit judge and a senior lecturer at the
University of Chicago Law School. He is the author of the
just-published
"A Failure of Capitalism: The Crisis of '08 and the Descent into
Depression" (Harvard University Press).

http://online.wsj.com/article/SB124165301306893763.html

The Wall Street Journal, 7 May 2009, page A17.
Joe Gwinn
------
Fascinating...

Perhaps, but it's largely nonsensical and in some instances, just
innacurate.
Posner apparently doesn't understand what constitutes a "demand
deposit"
account.

He's right about one thing, at least. What we are seeing in the worlds
of
finance and economics coldn't have happened without the active and
passive
assistance of government.

JC
-------

John (et al),

At what point does it become possible to "just say no" to government
involvement?
------
When you are not depending on the government to keep your
businesses from collapsing, your buildings from burning down,
etc.

The banks (commercial and investment), quasi banks, brokerages,
insurance companies, credit card companies, etc. created this
entire asset bubble problem, putting the world on the verge of an
uncontrolled deflation/depression and now everyone is paying the
price.

The "stress test" results are out, but the single most important
comment/observation IMNSHO is that "Together, the 19 firms that
took the test hold two-thirds of the assets and half the loans in
the U.S. banking system."

http://news.yahoo.com/s/ap/20090508/...1bIdjmK yBhIF

Note that one of the 19 is GMAC which is now a bank [now wholly
owned by Cerberus]. GMAC is expected to play a key role is the
financing of both Chrysler and GM vehicle purchases and leasing,
but was heavily involved in sub prime lending under Diatech
Funding and ResCap [Residential Capital]. By all objective
standards GMAC is bankrupt, but is likely to get another big wad
of taxpayer cash.

GMAC is not owned by Cerberus. At one time it had more than a 50% stake in
the company but now it's ownership has been reduced to 9.9% as part of the
deal. So things are constantly in flux. As for more government money, that
may come. But if it means credit will keep flowing and it will allow people
to buy, and more importantly, to finance new car purchases that will be a
good thing. Bottom line is that as bad as the financial situation was the
new administration is taking the necessary steps to fix the problems. But no
matter how well they do it for some folks it will never be good enough and
they will never give them the credit they deserve. By the way, those folks
are called republicans and they are the people who created the mess Obama
has to clean up.

Hawke

F. George McDuffee wrote:
On Fri, 08 May 2009 00:18:27 -0500, cavelamb
wrote:

Timothy Geithner's interview (thanks John) was most interesting.

Rethinking the way things ought to work...

One thing he said that I thought made sense was "the only reason
that one penny was given to these banks is to keep the people who
depend on them from (going under).

Which may well be true, but you need to find out how he defines
"people." It appears that his concern is limited to "people"
like himself, with high positions in the banks, earning huge
bonuses, or those that have huge amounts of credit with the bank,
or those likely to face prison for fraud if the banks go "belly
up." The casual acceptance of bank refusal to lend to credit
worthy borrowers after the injection of billions of taxpayer
dollars under TARP and trillions by the secretive FRB, especially
for business expansion/operation and the general gouging on
credit cards clearly shows that there are "people" and then there
are "people," [some of whom are more equal than others] Remember
Geithner's background and history, and firm advocacy of the Leona
Helmsly rule ["Only little people pay taxes"].
http://en.wikipedia.org/wiki/Timothy_Geithner
http://online.wsj.com/article/SB123187503629378119.html


Yeah. I caught that. He was referring to the people who needed
credit to make payroll, buy material, and ship product.

Putting words in his mouth maybe, but people who employ people
(who pay taxes?).


"Incantation" is a well know and frequent cure or at least
attempted cure for this loss of confidence. This is greatly
helped because people both want and need to believe.

Now go out and sacrifice two goats and everything will be fine...

I just bought a new boat (well, new to me anyway).
Seems like a better place to put my money (than in the bank )

But I paid cash for it. It's for my "half way around the block" trip
next summer. Texas to Maine and back (maybe the following summer).

Maybe I would have bought a bigger boat with more bells and whistles,
and carried a small mortgage - were the economy more stable.
But I don't really need more.

I am spending the rest of my small fortune fitting out, so even without
the goats, I'm doing what I can to help.


(AND - to bring this back ON topic: I need to find a small (1 gallon?)
propane powered STAINLESS STEEL water heater. The electric water heater
is fine hanging on the dock, but I can't afford an extension cord that
reaches past Florida.) Anybody interested in building this thing for me?
Maybe I need to start that on in a new thread?


As for the rest, George...

I think you've got some excellent suggestions there.
But is congress listening to you (yet)?

The idea that these guys could be put out of work just
doesn't wash.

Heck, look at the money we are putting out to clean up their mess.
While I'd just as soon see these guys hung on the airport fence,
I truly doubt it will EVER happen...


Richard

Hawke wrote:
"cavelamb" wrote in message
news
Timothy Geithner's interview (thanks John) was most interesting.

Rethinking the way things ought to work...

One thing he said that I thought made sense was "the only reason
that one penny was given to these banks is to keep the people who
depend on them from (going under).

But in the end it's a "confidence game" (maybe in BOTH senses).

But mostly...

Do you have confidence in this recovery?
Do you have confidence in this economy?

George said:

The "stress test" results are out, but the single most important
comment/observation IMNSHO is that "Together, the 19 firms that
took the test hold two-thirds of the assets and half the loans in
the U.S. banking system."

All my emerging confidence just evaporated again...


Too bad about that. But does this information finally allow you to see the
wisdom of what the government did in bailing out these firms? When you
consider how much the country's financial health depends upon good
functioning by these giant firms it quickly becomes very clear why the
government stepped in to prevent a catastrophe. Without the intervention
some of these giants would have fallen. If they did the problems we have
experienced would have seemed puny compared to what might have happened. So
it may have been a mistake for the government to have allowed firms to
become "too big to fail" it was clearly the right decision to prevent those
firms from falling and by doing so take the rest of us down with them.

Hawke



I'll reply to you on this one hawkie.

Bail out the company if we must, but in return, how about a firing squad
for the top executives.

Just to keep the balance.

"cavelamb" wrote in message
news
Timothy Geithner's interview (thanks John) was most interesting.

Here is the book end for it.
http://www.charlierose.com/view/interview/10280
Also, be sure and watch Liz Warren tonight. She's another keeper, along with
Shiela Bair.


Rethinking the way things ought to work...

Not exactly, it's more like revisiting history and applying lessons learned
long ago.

One thing he said that I thought made sense was "the only reason
that one penny was given to these banks is to keep the people who
depend on them from (going under).

He measured his comments carefully. What he was actually saying was that,
like it or not, the uncontrolled death of these banks would have killed
everybody and while there will be significant carnage, that carnage won't be
the end of the world and while violent, will be relatively short lived.
I don't envy Giethner or any of these guys now in government. They know they
are making decisions and implimenting policy that will have the same effect
on some people that decoy movements have in military operations in the
field. Those decoy attacks are never undertaken by leadership beyond a
certain level you know, and for a perfectly valid reason. The "decoy's" are
not expected to survive their effort.

Something else these guys, all of them, are careful to omit. We started down
the "bail out" road not in August of 2008 but in March of 1981, IIRC, and
the habit has become ingrained.

The initial S&L crisis was dealt with using tax policy. S&L's were allowed
to sell off mortgages with low returns, sustain the losses, and then apply
those losses directly - as a tax credit - against taxes paid to the Federal
government over the preceeding ten years. Initially, there was neither a
mechanism to accomplish the sale or a means to dispose of the revalued
mortgages. This defect was corrected by the creation of the mortgage backed
security. The sale of these instruments to Federally chartered bank, BTW,
was illegal initially and had been for 50 years but that was rectified as
well in short order. Fannie and Freddie promptly blessed the things. The S&L
industry didn't just get well, they made a lot of profit on these tax
abetted transactions and before anyone could say "Boo", entire mortgage
portfolios had been sold. This is where the money came to fund the explosive
growth of the next bubble and bust - High Yield Bonds.

The cycle has repeated several time since. The financial services sector
sucks one vein dry only to move on the the next, and with a larger bore
needle for each subsequent vein, always with the support of bought and paid
for politicians ( on both sides of the aisle ) and in the full knoweledge
that the Republican Party had adopted the pattern as one of its formal,
underlying policies. If only the markets were truly free, so went the
mantra, and beginning in 1999, they were so freed, or at least had seen the
several major impediments removed.
The repeal od Glass-Steagal was the first. By the end of the first Bush
term, banking rules and regulations had been rewritten to allow pensions to
invest directly in hedge funds, something that had been completely illegal -
for the obvious reason. Halleluja Brother and AMEN!!! Can I get an AMEN?
LMAO
The single remaining bastion was The Social Security Trust fund.
Unfortunately for Mr. Bush and his band of criminals, Americans were
beginning to understand that they had been repeatedly played for fools.
Thank the diety of your choice that the administration of George W. Bush had
incompetence and deciet as it's hallmarks. The Bush administration's plan to
privatize SS was met with what can only be called a resounding THUD, largely
because the President of the United States wasn't trusted to tell anything
resembling the truth, a good thing on the one hand and a terrible comment on
the other.
None the less, America dodged a bullet.

At this point, American's needn't worry that the guys running the show ar
Wall Street insiders colluding with their peers. They are not.
They are, however, the product of the culture of bail outs that has grown up
over 30 years or so.
Given that the only tool they know and can use is a hammer, every problem
looks like a nail.
Bernanke, Paulson, Geithner and Kashkari run around forcefully making the
case that there was nothing else to do when the real truth is that there
wasn't anything else that THEY KNEW HOW TO DO. They're response has been
entirely
Pavlovian, in the extreme. The peasants have also responded in kind.


But in the end it's a "confidence game" (maybe in BOTH senses).

But mostly...

Do you have confidence in this recovery?

I have every confidence that the economy will preform well enough for the
Democrats to cement an unasailable majority in both houses in 2010. Whatever
inpetus the economy doesn't provide will be more than compensated for by the
Republican's own behavior. They are completely focussed on their efforts to
rewrite the last eight years of history instead of proposing viable and
intelligent solutions to the challenges of today.

Do you have confidence in this economy?

No, and I won't until I see Congress step up and put a company like GM, or
really GM for starters, down like a dog.
There isn't a single reason America ought to go on the hook to create jobs
in China, Mexico or anywhere else, not in the numbers GM's latest
restructuring plan indicates. That plan says only one thing to me. GM just
doesn't get it and that means they are too stupid to survive.
Then it will be time to release the productive capital of the 19 banks just
stress tested back to the market. We have a mechanism to do this. Congress,
the Obama administration and the American public need to just suck it up,
quit crying like a bunch of Nancy boys and get the hell on with it.

I'd start with a non-bank, AIG. Have Congress pass the necessary
legistlation poste haste, authorize the money with new legistlation and then
just BK the thing the way we sieze a bank.
American's are not the ones that need a confidence transplant, it's the
banking and financial services giants.. The confidence that Citi needs to
have is that when they mess up big, the American taxpayer is going to come
in, sieze and sell their ****, kill the men, rape the women and then burn
what's left to the ground without batting an eye. Were these 19 banks to
believe that this might be their fate, they would probably alter their
conduct in the direction of prudent behavior. The banking business might go
back to being as completely dull as it was in the 40's and 50's. That would
be entirely appropriate and, to borrow a phrase from Mike Milken, I'd be
highly confident.


JC

On Fri, 8 May 2009 11:42:25 -0700, "Hawke"
wrote:

Note that one of the 19 is GMAC which is now a bank [now wholly
owned by Cerberus]. GMAC is expected to play a key role is the
financing of both Chrysler and GM vehicle purchases and leasing,
but was heavily involved in sub prime lending under Diatech
Funding and ResCap [Residential Capital]. By all objective
standards GMAC is bankrupt, but is likely to get another big wad
of taxpayer cash.

GMAC is not owned by Cerberus. At one time it had more than a 50% stake in
the company but now it's ownership has been reduced to 9.9% as part of the
deal. So things are constantly in flux. As for more government money, that
may come. But if it means credit will keep flowing and it will allow people
to buy, and more importantly, to finance new car purchases that will be a
good thing. Bottom line is that as bad as the financial situation was the
new administration is taking the necessary steps to fix the problems. But no
matter how well they do it for some folks it will never be good enough and
they will never give them the credit they deserve. By the way, those folks
are called republicans and they are the people who created the mess Obama
has to clean up.
========
You can't tell the players with a program... Get your program
here....

---
How could a government-run GMAC reshape car sales?
By KIMBERLY S. JOHNSON, AP Auto Writer Kimberly S. Johnson, Ap
Auto Writer – 1 hr 24 mins ago [08 May]

DETROIT – With the federal government almost certain to take
control of GMAC Financial Services, analysts suggest it could
become a loan machine that gives General Motors and Chrysler a
huge advantage over their competitors.

The company was one of 10 financial firms ordered by the
government to raise more capital after taking a stress test. In
GMAC's case, it needs $11.5 billion, and the most likely source
is the government itself.

A government-controlled GMAC would have the power to offer
low-cost loans to buyers of GM and Chrysler cars and trucks as a
way of steering business to the troubled automakers.

"GMAC could become the Freddie Mac and Fannie Mae of auto
finance. {Comment: Run, do not walk to the nearest exit.} It
would probably help sales of GM and Chrysler cars, but it also
increases the risk of taxpayer loss," said Bert Ely, a banking
consultant in Alexandria, Va.

"A very serious question is being raised about how the government
could use a GMAC to advance the fortunes of GM at the expense of
other automakers like Ford and Toyota," he said.

The Obama administration already owns 5 million shares of GMAC,
which it got in exchange for a $5 billion bailout loan. And
Treasury Secretary Timothy Geithner said Friday his department is
poised to offer GMAC more help. {comment: that's a thousand $US
per share folks, and the taxpayers' own it, *NOT* the Obama
administration...}

"We're going to provide substantial support to GMAC," Geithner
said. He said it was "likely" that GMAC will need more money from
the government, "and we'll be prepared to provide that."
{Comment: We? Does he have a mouse in his pocket? What he means
is that the taxpayers will provide more money, more or less at
the point of a gun, and that ain't investment, that's robbery or
extortion.}
snip
-----
http://news.yahoo.com/s/ap/20090508/...JOaCAAeyBhI F


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

On May 8, 5:33*pm, "John R. Carroll"
wrote:
"cavelamb" wrote in message

news
Timothy Geithner's interview (thanks John) was most interesting.

Here is the book end for it.http://www.charlierose.com/view/interview/10280
Also, be sure and watch Liz Warren tonight. She's another keeper, along with
Shiela Bair.



Rethinking the way things ought to work...

Not exactly, it's more like revisiting history and applying lessons learned
long ago.



One thing he said that I thought made sense was "the only reason
that one penny was given to these banks is to keep the people who
depend on them from (going under).

He measured his comments carefully. What he was actually saying was that,
like it or not, the uncontrolled death of these banks would have killed
everybody and while there will be significant carnage, that carnage won't be
the end of the world and while violent, will be relatively short lived.
I don't envy Giethner or any of these guys now in government. They know they
are making decisions and implimenting policy that will have the same effect
on some people that decoy movements have in military operations in the
field. Those decoy attacks are never undertaken by leadership beyond a
certain level you know, and for a perfectly valid reason. The "decoy's" are
not expected to survive their effort.

Something else these guys, all of them, are careful to omit. We started down
the "bail out" road not in August of 2008 but in March of 1981, IIRC, and
the habit has become ingrained.

The initial S&L crisis was dealt with using tax policy. S&L's were allowed
to sell *off mortgages with low returns, sustain the losses, and then apply
those losses directly *- as a tax credit - against taxes paid to the Federal
government over the preceeding ten years. Initially, there was neither a
mechanism to accomplish the sale or a means to dispose of the revalued
mortgages. This defect was corrected by the creation of the mortgage backed
security. The sale of these instruments to Federally chartered bank, BTW,
was illegal initially and had been for 50 years but that was rectified as
well in short order. Fannie and Freddie promptly blessed the things. The S&L
industry didn't just get well, they made a lot of profit on these tax
abetted transactions and before anyone could say "Boo", entire mortgage
portfolios had been sold. This is where the money came to fund the explosive
growth of the next bubble and bust - High Yield Bonds.

The cycle has repeated several time since. The financial services sector
sucks one vein dry only to move on the the next, and with a larger bore
needle for each subsequent vein, always with the support of bought and paid
for politicians ( on both sides of the aisle ) and in the full knoweledge
that the Republican Party had adopted the pattern as one of its formal,
underlying *policies. If only the markets were truly free, so went the
mantra, and beginning in 1999, they were so freed, or at least had seen the
several major impediments removed.
The repeal od Glass-Steagal was the first. By the end of the first Bush
term, banking rules and regulations had been rewritten to allow pensions to
invest directly in hedge funds, something that had been completely illegal -
for the obvious reason. Halleluja Brother and AMEN!!! Can I get an AMEN?
LMAO
The single remaining bastion was The Social Security Trust fund.
Unfortunately for Mr. Bush and his band of criminals, Americans were
beginning to understand that they had been repeatedly played for fools.
Thank the diety of your choice that the administration of George W. Bush had
incompetence and deciet as it's hallmarks. The Bush administration's plan to
privatize SS was met with what can only be called a resounding THUD, largely
because the President of the United States wasn't trusted to tell anything
resembling the truth, a good thing on the one hand and a terrible comment on
the other.
None the less, America dodged a bullet.

At this point, American's needn't worry that the guys running the show ar
Wall Street insiders colluding with their peers. They are not.
They are, however, the product of the culture of bail outs that has grown up
over 30 years or so.
Given that the only tool they know and can use is a hammer, every problem
looks like a nail.
Bernanke, Paulson, Geithner and Kashkari run around forcefully making the
case that there was nothing else to do when the real truth is that there
wasn't anything else that THEY KNEW HOW TO DO. They're response has been
entirely
Pavlovian, in the extreme. The peasants have also responded in kind.



But in the end it's a "confidence game" (maybe in BOTH senses).

But mostly...

Do you have confidence in this recovery?

I have every confidence that the economy will preform well enough for the
Democrats to cement an unasailable majority in both houses in 2010. Whatever
inpetus the economy doesn't provide will be more than compensated for by the
Republican's own behavior. They are completely focussed on their efforts to
rewrite the last eight years of history instead of proposing viable and
intelligent solutions to the challenges of today.

Do you have confidence in this economy?

No, and I won't until I see Congress step up and put a company like GM, or
really GM for starters, down like a dog.
There isn't a single reason America ought to go on the hook to create jobs
in China, Mexico or anywhere else, not in the numbers GM's latest
restructuring plan indicates. That plan says only one thing to me. GM just
doesn't get it and that means they are too stupid to survive.
Then it will be time to release the productive capital of the 19 banks just
stress tested back to the market. We have a mechanism to do this. Congress,
the Obama administration and the American public need to just suck it up,
quit crying like a bunch of Nancy boys and get the hell on with it.

I'd start with a non-bank, AIG. Have Congress pass the necessary
legistlation poste haste, authorize the money with new legistlation and then
just BK the thing the way we sieze a bank.
American's are not the ones that need a confidence transplant, it's the
banking and financial services giants.. The confidence that Citi needs to
have is that when they mess up big, the American taxpayer is going to come
in, sieze and sell their ****, kill the men, rape the women and then burn
what's left to the ground without batting an eye. Were these 19 banks to
believe that this might be their fate, they would probably alter their
conduct in the direction of prudent behavior. The banking business might go
back to being as completely dull as it was in the 40's and 50's. That would
be entirely appropriate and, to borrow a phrase from Mike Milken, *I'd be
highly confident.

JC

APPLAUSE!!! APPLAUSE!!! APPLAUSE!!! APPLAUSE!!!

WELL SAID JOHN!!

TMT

On May 8, 6:51*pm, F. George McDuffee gmcduf...@mcduffee-
associates.us wrote:
On Fri, 8 May 2009 11:42:25 -0700, "Hawke"



wrote:
Note that one of the 19 is GMAC which is now a bank [now wholly
owned by Cerberus]. *GMAC is expected to play a key role is the
financing of both Chrysler and GM vehicle purchases and leasing,
but was heavily involved in sub prime lending under Diatech
Funding and ResCap [Residential Capital]. *By all objective
standards GMAC is bankrupt, but is likely to get another big wad
of taxpayer cash.

GMAC is not owned by Cerberus. At one time it had more than a 50% stake in
the company but now it's ownership has been reduced to 9.9% as part of the
deal. So things are constantly in flux. As for more government money, that
may come. But if it means credit will keep flowing and it will allow people
to buy, and more importantly, to finance new car purchases that will be a
good thing. Bottom line is that as bad as the financial situation was the
new administration is taking the necessary steps to fix the problems. But no
matter how well they do it for some folks it will never be good enough and
they will never give them the credit they deserve. By the way, those folks
are called republicans and they are the people who created the mess Obama
has to clean up.

========
You can't tell the players with a program... Get your program
here....

---
How could a government-run GMAC reshape car sales?
* By KIMBERLY S. JOHNSON, AP Auto Writer Kimberly S. Johnson, Ap
Auto Writer * – 1 hr 24 mins ago [08 May]

DETROIT – With the federal government almost certain to take
control of GMAC Financial Services, analysts suggest it could
become a loan machine that gives General Motors and Chrysler a
huge advantage over their competitors.

The company was one of 10 financial firms ordered by the
government to raise more capital after taking a stress test. In
GMAC's case, it needs $11.5 billion, and the most likely source
is the government itself.

A government-controlled GMAC would have the power to offer
low-cost loans to buyers of GM and Chrysler cars and trucks as a
way of steering business to the troubled automakers.

"GMAC could become the Freddie Mac and Fannie Mae of auto
finance. {Comment: Run, do not walk to the nearest exit.} It
would probably help sales of GM and Chrysler cars, but it also
increases the risk of taxpayer loss," said Bert Ely, a banking
consultant in Alexandria, Va.

"A very serious question is being raised about how the government
could use a GMAC to advance the fortunes of GM at the expense of
other automakers like Ford and Toyota," he said.

The Obama administration already owns 5 million shares of GMAC,
which it got in exchange for a $5 billion bailout loan. And
Treasury Secretary Timothy Geithner said Friday his department is
poised to offer GMAC more help. {comment: that's a thousand $US
per share folks, and the taxpayers' own it, *NOT* the Obama
administration...}

"We're going to provide substantial support to GMAC," Geithner
said. He said it was "likely" that GMAC will need more money from
the government, "and we'll be prepared to provide that."
{Comment: We? Does he have a mouse in his pocket? *What he means
is that the taxpayers will provide more money, more or less at
the point of a gun, and that ain't investment, that's robbery or
extortion.}
snip
-----http://news.yahoo.com/s/ap/20090508/ap_on_bi_ge/us_gmac_car_loans;_yl...

Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

A question...is it in the national interest for the United States to
be able to design and manufacture vehicles?

As in National Defense interest.

TMT

"F. George McDuffee" wrote in message
...
On Fri, 8 May 2009 11:42:25 -0700, "Hawke"
wrote:

Note that one of the 19 is GMAC which is now a bank [now wholly
owned by Cerberus]. GMAC is expected to play a key role is the
financing of both Chrysler and GM vehicle purchases and leasing,
but was heavily involved in sub prime lending under Diatech
Funding and ResCap [Residential Capital]. By all objective
standards GMAC is bankrupt, but is likely to get another big wad
of taxpayer cash.

GMAC is not owned by Cerberus. At one time it had more than a 50% stake in
the company but now it's ownership has been reduced to 9.9% as part of the
deal. So things are constantly in flux. As for more government money, that
may come. But if it means credit will keep flowing and it will allow
people
to buy, and more importantly, to finance new car purchases that will be a
good thing. Bottom line is that as bad as the financial situation was the
new administration is taking the necessary steps to fix the problems. But
no
matter how well they do it for some folks it will never be good enough and
they will never give them the credit they deserve. By the way, those folks
are called republicans and they are the people who created the mess Obama
has to clean up.
========
You can't tell the players with a program... Get your program
here....

---
How could a government-run GMAC reshape car sales?
By KIMBERLY S. JOHNSON, AP Auto Writer Kimberly S. Johnson, Ap
Auto Writer - 1 hr 24 mins ago [08 May]

DETROIT - With the federal government almost certain to take
control of GMAC Financial Services, analysts suggest it could
become a loan machine that gives General Motors and Chrysler a
huge advantage over their competitors.

The company was one of 10 financial firms ordered by the
government to raise more capital after taking a stress test. In
GMAC's case, it needs $11.5 billion, and the most likely source
is the government itself.

A government-controlled GMAC would have the power to offer
low-cost loans to buyers of GM and Chrysler cars and trucks as a
way of steering business to the troubled automakers.

"GMAC could become the Freddie Mac and Fannie Mae of auto
finance. {Comment: Run, do not walk to the nearest exit.} It
would probably help sales of GM and Chrysler cars, but it also
increases the risk of taxpayer loss," said Bert Ely, a banking
consultant in Alexandria, Va.

"A very serious question is being raised about how the government
could use a GMAC to advance the fortunes of GM at the expense of
other automakers like Ford and Toyota," he said.

The Obama administration already owns 5 million shares of GMAC,
which it got in exchange for a $5 billion bailout loan. And
Treasury Secretary Timothy Geithner said Friday his department is
poised to offer GMAC more help. {comment: that's a thousand $US
per share folks, and the taxpayers' own it, *NOT* the Obama
administration...}

"We're going to provide substantial support to GMAC," Geithner
said. He said it was "likely" that GMAC will need more money from
the government, "and we'll be prepared to provide that."
{Comment: We? Does he have a mouse in his pocket? What he means
is that the taxpayers will provide more money, more or less at
the point of a gun, and that ain't investment, that's robbery or
extortion.}
snip
-----
For national security reasons, we need domestic auto manufacturers,
preferably ones that can, if they have to, provide powerplants etc. from
American plants. It also makes sense to spend relatively little money to
keep the US auto industry going even if it may eventuallly fail- right now
is not a good time for it to fold up.

On Fri, 8 May 2009 20:40:04 -0400, "ATP*"
wrote:


"F. George McDuffee" wrote in message
.. .
On Fri, 8 May 2009 11:42:25 -0700, "Hawke"
wrote:

Note that one of the 19 is GMAC which is now a bank [now wholly
owned by Cerberus]. GMAC is expected to play a key role is the
financing of both Chrysler and GM vehicle purchases and leasing,
but was heavily involved in sub prime lending under Diatech
Funding and ResCap [Residential Capital]. By all objective
standards GMAC is bankrupt, but is likely to get another big wad
of taxpayer cash.

GMAC is not owned by Cerberus. At one time it had more than a 50% stake in
the company but now it's ownership has been reduced to 9.9% as part of the
deal. So things are constantly in flux. As for more government money, that
may come. But if it means credit will keep flowing and it will allow
people
to buy, and more importantly, to finance new car purchases that will be a
good thing. Bottom line is that as bad as the financial situation was the
new administration is taking the necessary steps to fix the problems. But
no
matter how well they do it for some folks it will never be good enough and
they will never give them the credit they deserve. By the way, those folks
are called republicans and they are the people who created the mess Obama
has to clean up.
========
You can't tell the players with a program... Get your program
here....

---
How could a government-run GMAC reshape car sales?
By KIMBERLY S. JOHNSON, AP Auto Writer Kimberly S. Johnson, Ap
Auto Writer - 1 hr 24 mins ago [08 May]

DETROIT - With the federal government almost certain to take
control of GMAC Financial Services, analysts suggest it could
become a loan machine that gives General Motors and Chrysler a
huge advantage over their competitors.

The company was one of 10 financial firms ordered by the
government to raise more capital after taking a stress test. In
GMAC's case, it needs $11.5 billion, and the most likely source
is the government itself.

A government-controlled GMAC would have the power to offer
low-cost loans to buyers of GM and Chrysler cars and trucks as a
way of steering business to the troubled automakers.

"GMAC could become the Freddie Mac and Fannie Mae of auto
finance. {Comment: Run, do not walk to the nearest exit.} It
would probably help sales of GM and Chrysler cars, but it also
increases the risk of taxpayer loss," said Bert Ely, a banking
consultant in Alexandria, Va.

"A very serious question is being raised about how the government
could use a GMAC to advance the fortunes of GM at the expense of
other automakers like Ford and Toyota," he said.

The Obama administration already owns 5 million shares of GMAC,
which it got in exchange for a $5 billion bailout loan. And
Treasury Secretary Timothy Geithner said Friday his department is
poised to offer GMAC more help. {comment: that's a thousand $US
per share folks, and the taxpayers' own it, *NOT* the Obama
administration...}

"We're going to provide substantial support to GMAC," Geithner
said. He said it was "likely" that GMAC will need more money from
the government, "and we'll be prepared to provide that."
{Comment: We? Does he have a mouse in his pocket? What he means
is that the taxpayers will provide more money, more or less at
the point of a gun, and that ain't investment, that's robbery or
extortion.}
snip
-----
For national security reasons, we need domestic auto manufacturers,
preferably ones that can, if they have to, provide powerplants etc. from
American plants. It also makes sense to spend relatively little money to
keep the US auto industry going even if it may eventuallly fail- right now
is not a good time for it to fold up.

=======
This may very well be the case. But why would we want the same
d**kweeds, f**kwits, no-loads, and scam artists that ran the
companies into the ground anywhere near a national defense
critical industry?

It should be crystal clear by now that without a complete "regime
change" or total purge of the existing directors, officers and
most importantly the cadre management, no recovery [or even
survival] can be expected, no matter how much tax payer funds are
"invested." The existing management is too committed to the
Chrysler/GM way, and "business as usual," which, as the last 30
years shows, is over the cliff following Nash, Hudson, Packard,
Studebaker, etc. into the abyss. AFAIK GM still has 106
vice-presidents.

The only apparent way to blast the incumbent management out is
chapter 7 liquidation, with the sale of viable assets to another
company. A chapter 7 may also break the incestuous links between
the automotive corporations, the banks, and the
brokerages/insurance companies [401k, pension plans] that appear
to have caused so much of the problems.

FWIW: An email I just sent one of the Kansas Senators on this
topic is attached. This was in response to a very informative
email that he sent me in response to an earlier anti-bailout
email.

----- start of email -----
To:
Senator Roberts
CC:
President Obama
Senator Brownback
Representative Moran
Representative Tiahrt

Thank you for your responsive and informative email on the
domestic automotive crisis. I am sending copies of this email to
the people on the CC list in the hope this may be of interest to
them also.

Two recent media articles [dated 08 May] that should be of
interest a

http://www.freep.com/article/2009050...SS01/905080415
Note that this is the Detroit Free Press at the center of the
domestic automotive industry, which has long touted governmental
support for the "big" three. Of particular interest are the huge
numbers of reader comments, including a large number of
self-identified UAW members, which are almost entirely against
pouring any more money down these bottomless rat holes, without a
total "regime change" at the top.

The American people, even in a heavily union state such as
Michigan, with considerable vested interest in the preservation
of the domestic automotive industry can now smell the "dead rat,"
and they well understand the futility of "beating a dead horse,"
and "sending good money after bad." The call now is for
immediate chapter 7 [liquidation] bankruptcy for both Chrysler
and General Motors, and an end to the endless subsidies, loans,
grants, etc.

http://www.washingtonpost.com/wp-dyn...050704336.html
This abrupt "sea change" in attitude appears to be due to the
information published by the Washington Post, a paper known for
its liberal democratic and labor bias, detailing how the GM
rescue plan is based on greatly increasing the outsourcing of
jobs (and components), including not only direct manufacturing,
but also IT, engineering, tool and die, etc. to low wage
countries such as South Korea, China, India and Mexico, with the
cars manufactured in those countries and exported to the United
States for sale. This kills not only large numbers of domestic
GM jobs but also destroys the domestic supplier base, who are
even larger employers.

I urge you or your staff to review these articles, and just as
importantly the comments.
----- end of email -----
Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

John R. Carroll wrote:


Do you have confidence in this economy?

No, and I won't until I see Congress step up and put a company like GM, or
really GM for starters, down like a dog.
There isn't a single reason America ought to go on the hook to create jobs
in China, Mexico or anywhere else, not in the numbers GM's latest
restructuring plan indicates. That plan says only one thing to me. GM just
doesn't get it and that means they are too stupid to survive.
Then it will be time to release the productive capital of the 19 banks just
stress tested back to the market. We have a mechanism to do this. Congress,
the Obama administration and the American public need to just suck it up,
quit crying like a bunch of Nancy boys and get the hell on with it.

I'd start with a non-bank, AIG. Have Congress pass the necessary
legistlation poste haste, authorize the money with new legistlation and then
just BK the thing the way we sieze a bank.
American's are not the ones that need a confidence transplant, it's the
banking and financial services giants.. The confidence that Citi needs to
have is that when they mess up big, the American taxpayer is going to come
in, sieze and sell their ****, kill the men, rape the women and then burn
what's left to the ground without batting an eye. Were these 19 banks to
believe that this might be their fate, they would probably alter their
conduct in the direction of prudent behavior. The banking business might go
back to being as completely dull as it was in the 40's and 50's. That would
be entirely appropriate and, to borrow a phrase from Mike Milken, I'd be
highly confident.


JC




Damned straight!

I think even I could feel good about it then.

On Fri, 8 May 2009 15:33:52 -0700, "John R. Carroll"
wrote:
snip
No, and I won't until I see Congress step up and put a company like GM, or
really GM for starters, down like a dog.
There isn't a single reason America ought to go on the hook to create jobs
in China, Mexico or anywhere else, not in the numbers GM's latest
restructuring plan indicates. That plan says only one thing to me. GM just
doesn't get it and that means they are too stupid to survive.
Then it will be time to release the productive capital of the 19 banks just
stress tested back to the market. We have a mechanism to do this. Congress,
the Obama administration and the American public need to just suck it up,
quit crying like a bunch of Nancy boys and get the hell on with it.

I'd start with a non-bank, AIG. Have Congress pass the necessary
legistlation poste haste, authorize the money with new legistlation and then
just BK the thing the way we sieze a bank.
American's are not the ones that need a confidence transplant, it's the
banking and financial services giants.. The confidence that Citi needs to
have is that when they mess up big, the American taxpayer is going to come
in, sieze and sell their ****, kill the men, rape the women and then burn
what's left to the ground without batting an eye. Were these 19 banks to
believe that this might be their fate, they would probably alter their
conduct in the direction of prudent behavior. The banking business might go
back to being as completely dull as it was in the 40's and 50's. That would
be entirely appropriate and, to borrow a phrase from Mike Milken, I'd be
highly confident.


JC
snip
While a bit rhetorical, you appear to be entirely correct.

As stated somewhat more tersely in an earlier age:
"Men are not hanged for stealing horses, but that horses may not
be stolen."
George Savile Halifax, Lord (1633-95), English statesman, author.
Political, Moral, and Miscellaneous Thoughts and Reflections, "Of
Punishment" (1750).

From a logical standpoint, what has occurred to this point to at
least discourage, if not prevent, the type of corporate excess,
bravado, and brinkmanship that produced this latest crisis? The
answer is *NOTHING*. To be sure some people have been "thrown
under the bus" as scape goats such as John Thain, but they cried
all the way to the bank, and this now appears to be more the
result of infighting at the top levels and not the result of any
mis-deeds or errors.

Many of the people in this NG have worked or work in the metal
trades. How long would you expect to last if you continually
produced excessive scrap and damaged the tools, tooling and
machines? It should be no different for the people at the top.


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

On May 9, 9:39*am, F. George McDuffee gmcduf...@mcduffee-
associates.us wrote:
On Fri, 8 May 2009 15:33:52 -0700, "John R. wrote:

snip

No, and I won't until I see Congress step up and put a company like GM, or
really GM for starters, down like a dog.
There isn't a single reason America ought to go on the hook to create jobs
in China, Mexico or anywhere else, not in the numbers GM's latest
restructuring plan indicates. That plan says only one thing to me. GM just
doesn't get it and that means they are too stupid to survive.
Then it will be time to release the productive capital of the 19 banks just
stress tested back to the market. We have a mechanism to do this. Congress,
the Obama administration and the American public need to just suck it up,
quit crying like a bunch of Nancy boys and get the hell on with it.

I'd start with a non-bank, AIG. Have Congress pass the necessary
legistlation poste haste, authorize the money with new legistlation and then
just BK the thing the way we sieze a bank.
American's are not the ones that need a confidence transplant, it's the
banking and financial services giants.. The confidence that Citi needs to
have is that when they mess up big, the American taxpayer is going to come
in, sieze and sell their ****, kill the men, rape the women and then burn
what's left to the ground without batting an eye. Were these 19 banks to
believe that this might be their fate, they would probably alter their
conduct in the direction of prudent behavior. The banking business might go
back to being as completely dull as it was in the 40's and 50's. That would
be entirely appropriate and, to borrow a phrase from Mike Milken, *I'd be
highly confident.

JC

snip
While a bit rhetorical, you appear to be entirely correct.

As stated somewhat more tersely in an earlier age:
"Men are not hanged for stealing horses, but that horses may not
be stolen."
George Savile Halifax, Lord (1633-95), English statesman, author.
Political, Moral, and Miscellaneous Thoughts and Reflections, "Of
Punishment" (1750).

From a logical standpoint, what has occurred to this point to at
least discourage, if not prevent, the type of corporate excess,
bravado, and brinkmanship that produced this latest crisis? *The
answer is *NOTHING*. *To be sure some people have been "thrown
under the bus" as scape goats such as John Thain, but they cried
all the way to the bank, and this now appears to be more the
result of infighting at the top levels and not the result of any
mis-deeds or errors.

Many of the people in this NG have worked or work in the metal
trades. *How long would you expect to last if you continually
produced excessive scrap and damaged the tools, tooling and
machines? *It should be no different for the people at the top.

Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

I strongly agree George...but it IS different.

Why else has executive pay become the way it is?

TMT

On Sat, 9 May 2009 07:58:12 -0700 (PDT), Too_Many_Tools
wrote:
snip
I strongly agree George...but it IS different.

Why else has executive pay become the way it is?

TMT
-------------
IMNSHO the root cause is because the executives get to set their
own pay, establish their own bonuses, and the criteria for which
the bonuses are to be awarded, at least up until the time
bankruptcy is filed. If engineers, machinists, or anyone else
were able to set their own pay without regard to the market, the
same situation would quickly arise.

This seems to be a direct result of the isolation/insulation
mechanisms the board of directors has been allowed, indeed even
encouraged, to erect such as super majority voting, staggered
directors terms, etc. as "hostile take over" defenses.

I have written my Congressional representatives several times on
this suggesting an imposed revision in corporate governance,
mandating changes to again make the owners [stockholders]
"masters in their own house," at least for the SEC regulated,
non-chapter S corporations. [As has been observed "a crisis is a
terrible thing to waste..."]

Among the provisions proposed:

* Mandatory simple majority voting, i.e. 50% + 1 vote is enough
to pass a measure;

* Prohibition of "staggered" director terms.

* Term limits for directors of say 10 years;

* Term limits for the CEO/president, CFO, etc. of say 10 years;

* Mandatory annual mental and physical health evaluations,
including drug testing, of all directors and officers;

* Prohibition of the same individual serving as both board
chairman and president/ceo of a corporation;

* "Initiative" such that a proposal backed by 10% of the share
holders must be presented at the general stockholder meetings for
an up/down vote;

* "Recall" such that any director or officer can be terminated by
a simple majority vote at the next general stock holder meeting,
if the recall proposal is approved by 10% of the stock holders;
and

* Direct stockholder "say on pay" for total compensation,
including perks, bennies, stock options, gross ups, and bonuses,
above some reasonable level, say 20X the previous year's median
adult US income [e.g. 40k$ X 20 = 800,000$], with at least a
simple majority [50% +1] required for approval.

Pigs will fly to the moon in formation before any of this is
enacted.


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

On Fri, 8 May 2009 15:33:52 -0700, "John R. Carroll"
wrote:
snip
Do you have confidence in this economy?

No, and I won't until I see Congress step up and put a company like GM, or
really GM for starters, down like a dog.
There isn't a single reason America ought to go on the hook to create jobs
in China, Mexico or anywhere else, not in the numbers GM's latest
restructuring plan indicates. That plan says only one thing to me. GM just
doesn't get it and that means they are too stupid to survive.
Then it will be time to release the productive capital of the 19 banks just
stress tested back to the market. We have a mechanism to do this. Congress,
the Obama administration and the American public need to just suck it up,
quit crying like a bunch of Nancy boys and get the hell on with it.

I'd start with a non-bank, AIG. Have Congress pass the necessary
legistlation poste haste, authorize the money with new legistlation and then
just BK the thing the way we sieze a bank.
American's are not the ones that need a confidence transplant, it's the
banking and financial services giants.. The confidence that Citi needs to
have is that when they mess up big, the American taxpayer is going to come
in, sieze and sell their ****, kill the men, rape the women and then burn
what's left to the ground without batting an eye. Were these 19 banks to
believe that this might be their fate, they would probably alter their
conduct in the direction of prudent behavior. The banking business might go
back to being as completely dull as it was in the 40's and 50's. That would
be entirely appropriate and, to borrow a phrase from Mike Milken, I'd be
highly confident.


JC
=====
This just posted on CNBC. My only comment is "what took so
long," but then again it is hard to believe things got so bad so
quick, with everyone assuring everyone else that things were just
fine.

This "sudden unexpected failure" took at least 30 years to
create, and wipes out a generation's [or more] financial/economic
gains and savings.
-----
Big US Banks May Be Headed For Extinction—And Soon
By: Albert Bozzo, Senior Features Editor | 08 May 2009 | 02:30 PM
ET

In the world of banking, too-big-to-fail may be in the process of
morphing into too-big-to-exist.

After hundreds of billions in federal aid and even more in lost
investment capital, both the government and investors may be
ready for a big sea change.

The only question, for some, is how quickly it will happen.

“In the next few months, we'll see the tacitly nationalized
banks—Bank of America, Citigroup —sold off rapidly into pieces,
turned into much smaller banks,” Sanders Morris Harris Group
Chairman George Ball predicted on CNBC Thursday, adding the
government wants to send a strong message, to “punish
too-big-to-fail banks that have blotted their copy and not
exonerate their management.”

“Five years from now, these banks will be broken up,” is how FBR
Capital Markets bank analyst Paul J Miller sees it.

From Washington to Wall Street to Main Street, a dramatic change
in conventional thinking appears to underway.

“Some institutions are too big to exist, because they are too
interconnected," Sen. Richard Shelby (R-Ala.) told CNBC earlier
this week. “The regulators can’t regulate them.”

That conclusion became painfully obvious in the two faces of the
financial crisis. On one side, the federal government had to
provide billions in aid —and on more than one occasion—to the
likes of to Bank of America, Citigroup,and the giant insurer AIG,
which has its own lending unit, to prop them up.

On the other side, the failure of Lehman Brothers—which might
have been averted with federal intervention—reverberated
throughout the global economy.

Months later, the Obama administration and Congress now appear
keenly focused on the dilemma and are expected to create
legislation that will empower regulators to intervene in the
affairs of big financial institutions and essentially wind down
their operations in an orderly fashion with limited collateral
damage to the economy. Such authority would also apply to
investment banks tirned bank holding companies, such as Goldman
Sachs.

“They need it and they’ll get it,” said Robert Glauber, who was a
top Treasury official during the government rescue of the savings
and loan industry two decades ago.

Regulatory reform is also likely to include new antitrust
authority to block mega-mergers creating financial firms whose
problems could adversely affect the overall system. Analysts say,
if that’s the case, the government won’t want the too-big-to-fail
companies of the past essentially hanging around.

Exactly how the government does that is unclear, but experts say
there are ways without resorting to a heavy-handed approach such
as nationalization.

snip
On one side, the federal government had to provide billions in
aid —and on more than one occasion—to the likes of to Bank of
America [BAC Loading... () ], Citigroup [C Loading...
() ] and the giant insurer AIG [AIG Loading... () ],
which has its own lending unit, to prop them up.

On the other side, the failure of Lehman Brothers—which might
have been averted with federal intervention—reverberated
throughout the global economy.

Months later, the Obama administration and Congress now appear
keenly focused on the dilemma and are expected to create
legislation that will empower regulators to intervene in the
affairs of big financial institutions and essentially wind down
their operations in an orderly fashion with limited collateral
damage to the economy. Such authority would also apply to
investment banks tirned bank holding companies, such as Goldman
Sachs [GS Loading... () ].

“They need it and they’ll get it,” said Robert Glauber, who was a
top Treasury official during the government rescue of the savings
and loan industry two decades ago.

Regulatory reform is also likely to include new antitrust
authority to block mega-mergers creating financial firms whose
problems could adversely affect the overall system. Analysts say,
if that’s the case, the government won’t want the too-big-to-fail
companies of the past essentially hanging around.

Exactly how the government does that is unclear, but experts say
there are ways without resorting to a heavy-handed approach such
as nationalization.

snip

Some analysts say recent events highlight a fundamental problem
that has been somewhat ignored for years; the financial
supermarket structure of the big institutions makes them
difficult, if not, impossible to operate with great success.

“Investors will say,That business unit hidden in there; let's
spin that off,” says Sorrentino. “Either the regulators are going
to force it or the shareholders are going force it.” {comment:
This again assumes the stockholders have some say in how the
business is run.}
---
http://www.cnbc.com/id/30624782


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

On May 9, 9:05*pm, F. George McDuffee gmcduf...@mcduffee-
associates.us wrote:
On Fri, 8 May 2009 15:33:52 -0700, "John R. wrote:

snip

Do you have confidence in this economy?

No, and I won't until I see Congress step up and put a company like GM, or
really GM for starters, down like a dog.
There isn't a single reason America ought to go on the hook to create jobs
in China, Mexico or anywhere else, not in the numbers GM's latest
restructuring plan indicates. That plan says only one thing to me. GM just
doesn't get it and that means they are too stupid to survive.
Then it will be time to release the productive capital of the 19 banks just
stress tested back to the market. We have a mechanism to do this. Congress,
the Obama administration and the American public need to just suck it up,
quit crying like a bunch of Nancy boys and get the hell on with it.

I'd start with a non-bank, AIG. Have Congress pass the necessary
legistlation poste haste, authorize the money with new legistlation and then
just BK the thing the way we sieze a bank.
American's are not the ones that need a confidence transplant, it's the
banking and financial services giants.. The confidence that Citi needs to
have is that when they mess up big, the American taxpayer is going to come
in, sieze and sell their ****, kill the men, rape the women and then burn
what's left to the ground without batting an eye. Were these 19 banks to
believe that this might be their fate, they would probably alter their
conduct in the direction of prudent behavior. The banking business might go
back to being as completely dull as it was in the 40's and 50's. That would
be entirely appropriate and, to borrow a phrase from Mike Milken, *I'd be
highly confident.

JC

=====
This just posted on CNBC. *My only comment is "what took so
long," but then again it is hard to believe things got so bad so
quick, with everyone assuring everyone else that things were just
fine. *

This "sudden unexpected failure" took at least 30 years to
create, and wipes out a generation's [or more] financial/economic
gains and savings.
-----
Big US Banks May Be Headed For Extinction—And Soon
By: Albert Bozzo, Senior Features Editor | 08 May 2009 | 02:30 PM
ET

In the world of banking, too-big-to-fail may be in the process of
morphing into too-big-to-exist.

After hundreds of billions in federal aid and even more in lost
investment capital, both the government and investors may be
ready for a big sea change.

The only question, for some, is how quickly it will happen.

“In the next few months, we'll see the tacitly nationalized
banks—Bank of America, Citigroup —sold off rapidly into pieces,
turned into much smaller banks,” Sanders Morris Harris Group
Chairman George Ball predicted on CNBC Thursday, adding the
government wants to send a strong message, to “punish
too-big-to-fail banks that have blotted their copy and not
exonerate their management.”

“Five years from now, these banks will be broken up,” is how FBR
Capital Markets bank analyst Paul J Miller sees it.

From Washington to Wall Street to Main Street, a dramatic change
in conventional thinking appears to underway.

“Some institutions are too big to exist, because they are too
interconnected," Sen. Richard Shelby (R-Ala.) told CNBC earlier
this week. “The regulators can’t regulate them.”

That conclusion became painfully obvious in the two faces of the
financial crisis. On one side, the federal government had to
provide billions in aid —and on more than one occasion—to the
likes of to Bank of America, Citigroup,and the giant insurer AIG,
which has its own lending unit, to prop them up.

On the other side, the failure of Lehman Brothers—which might
have been averted with federal intervention—reverberated
throughout the global economy.

Months later, the Obama administration and Congress now appear
keenly focused on the dilemma and are expected to create
legislation that will empower regulators to intervene in the
affairs of big financial institutions and essentially wind down
their operations in an orderly fashion with limited collateral
damage to the economy. Such authority would also apply to
investment banks tirned bank holding companies, such as Goldman
Sachs.

“They need it and they’ll get it,” said Robert Glauber, who was a
top Treasury official during the government rescue of the savings
and loan industry two decades ago.

Regulatory reform is also likely to include new antitrust
authority to block mega-mergers creating financial firms whose
problems could adversely affect the overall system. Analysts say,
if that’s the case, the government won’t want the too-big-to-fail
companies of the past essentially hanging around.

Exactly how the government does that is unclear, but experts say
there are ways without resorting to a heavy-handed approach such
as nationalization.

snip
On one side, the federal government had to provide billions in
aid —and on more than one occasion—to the likes of to Bank of
America [BAC *Loading... * * *() * *], Citigroup [C *Loading...
() * *] and the giant insurer AIG [AIG *Loading... * * *() * *],
which has its own lending unit, to prop them up.

On the other side, the failure of Lehman Brothers—which might
have been averted with federal intervention—reverberated
throughout the global economy.

Months later, the Obama administration and Congress now appear
keenly focused on the dilemma and are expected to create
legislation that will empower regulators to intervene in the
affairs of big financial institutions and essentially wind down
their operations in an orderly fashion with limited collateral
damage to the economy. Such authority would also apply to
investment banks tirned bank holding companies, such as Goldman
Sachs [GS *Loading... * * *() * ].

“They need it and they’ll get it,” said Robert Glauber, who was a
top Treasury official during the government rescue of the savings
and loan industry two decades ago.

Regulatory reform is also likely to include new antitrust
authority to block mega-mergers creating financial firms whose
problems could adversely affect the overall system. Analysts say,
if that’s the case, the government won’t want the too-big-to-fail
companies of the past essentially hanging around.

Exactly how the government does that is unclear, but experts say
there are ways without resorting to a heavy-handed approach such
as nationalization.

snip

Some analysts say recent events highlight a fundamental problem
that has been somewhat ignored for years; the financial
supermarket structure of the big institutions makes them
difficult, if not, impossible to operate with great success.

“Investors will say,That business unit hidden in there; let's
spin that off,” says Sorrentino. “Either the regulators are going
to force it or the shareholders are going force it.” {comment:
This again assumes the stockholders have some say in how the
business is run.}
---http://www.cnbc.com/id/30624782

Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

So...how big is too big?

TMT

"F. George McDuffee" wrote in message
...
On Fri, 8 May 2009 15:33:52 -0700, "John R. Carroll"
wrote:
snip
No, and I won't until I see Congress step up and put a company like GM,
or
really GM for starters, down like a dog.
There isn't a single reason America ought to go on the hook to create
jobs
in China, Mexico or anywhere else, not in the numbers GM's latest
restructuring plan indicates. That plan says only one thing to me. GM
just
doesn't get it and that means they are too stupid to survive.
Then it will be time to release the productive capital of the 19 banks
just
stress tested back to the market. We have a mechanism to do this.
Congress,
the Obama administration and the American public need to just suck it up,
quit crying like a bunch of Nancy boys and get the hell on with it.

I'd start with a non-bank, AIG. Have Congress pass the necessary
legistlation poste haste, authorize the money with new legistlation and
then
just BK the thing the way we sieze a bank.
American's are not the ones that need a confidence transplant, it's the
banking and financial services giants.. The confidence that Citi needs to
have is that when they mess up big, the American taxpayer is going to
come
in, sieze and sell their ****, kill the men, rape the women and then burn
what's left to the ground without batting an eye. Were these 19 banks to
believe that this might be their fate, they would probably alter their
conduct in the direction of prudent behavior. The banking business might
go
back to being as completely dull as it was in the 40's and 50's. That
would
be entirely appropriate and, to borrow a phrase from Mike Milken, I'd be
highly confident.


JC
snip
While a bit rhetorical, you appear to be entirely correct.

As stated somewhat more tersely in an earlier age:
"Men are not hanged for stealing horses, but that horses may not
be stolen."
George Savile Halifax, Lord (1633-95), English statesman, author.
Political, Moral, and Miscellaneous Thoughts and Reflections, "Of
Punishment" (1750).

From a logical standpoint, what has occurred to this point to at
least discourage, if not prevent, the type of corporate excess,
bravado, and brinkmanship that produced this latest crisis? The
answer is *NOTHING*. To be sure some people have been "thrown
under the bus" as scape goats such as John Thain, but they cried
all the way to the bank, and this now appears to be more the
result of infighting at the top levels and not the result of any
mis-deeds or errors.

Many of the people in this NG have worked or work in the metal
trades. How long would you expect to last if you continually
produced excessive scrap and damaged the tools, tooling and
machines? It should be no different for the people at the top.


Ah, but when has it ever been that it wasn't different for the people at the
top from everybody else? You're wishing. The way things are and the way they
ought to be are two mighty different things. That the people at the top have
a different life than the rest of us is a simple fact. But it would be nice
if somehow, someday we could change the status quo and bring some real
equality and justice to our country instead of simply pretending that we
already have it.

Hawke

"F. George McDuffee" wrote in message
...
On Fri, 8 May 2009 15:33:52 -0700, "John R. Carroll"
wrote:
snip
Do you have confidence in this economy?

No, and I won't until I see Congress step up and put a company like GM, or
really GM for starters, down like a dog.
There isn't a single reason America ought to go on the hook to create jobs
in China, Mexico or anywhere else, not in the numbers GM's latest
restructuring plan indicates. That plan says only one thing to me. GM just
doesn't get it and that means they are too stupid to survive.
Then it will be time to release the productive capital of the 19 banks
just
stress tested back to the market. We have a mechanism to do this.
Congress,
the Obama administration and the American public need to just suck it up,
quit crying like a bunch of Nancy boys and get the hell on with it.

I'd start with a non-bank, AIG. Have Congress pass the necessary
legistlation poste haste, authorize the money with new legistlation and
then
just BK the thing the way we sieze a bank.
American's are not the ones that need a confidence transplant, it's the
banking and financial services giants.. The confidence that Citi needs to
have is that when they mess up big, the American taxpayer is going to come
in, sieze and sell their ****, kill the men, rape the women and then burn
what's left to the ground without batting an eye. Were these 19 banks to
believe that this might be their fate, they would probably alter their
conduct in the direction of prudent behavior. The banking business might
go
back to being as completely dull as it was in the 40's and 50's. That
would
be entirely appropriate and, to borrow a phrase from Mike Milken, I'd be
highly confident.


JC
=====
This just posted on CNBC. My only comment is "what took so
long," but then again it is hard to believe things got so bad so
quick, with everyone assuring everyone else that things were just
fine.

This "sudden unexpected failure" took at least 30 years to
create, and wipes out a generation's [or more] financial/economic
gains and savings.

snip

First I have to ask - Unexpected by whom?
Certainly not by either myself or probably the majority of the people
involvd. A huge number of smart, respected industry people predicted this
failure. You, George, detected the odor a while ago yourself but like a
silent fart, didn't know who had issued from.

Second, the actual failure took just under seven years to occur. The 20
years prior to that were nothing more than getting the camel lined up with
the tent flap in the minds of average Americans. The guardians, such as they
were, remained at the gates.

I've reviewed my take on history earlier in a previous post to this thread
so I won't belabor the issue.
You replied, in part, "While a bit rhetorical, you appear to be entirely
correct."

Largely correct , but not entirely, because Treasury already has the
authorities to deal with the banking system. They just need Congress to
cough up some money. I also chose to omit a couple of things because they
are so obvious that they nearly defy belief in spite of the fact that they
are true and because this is a little like telling tales out of school. Oh
well, shoot me if you feel the need. My NDA has long since expired.

The first ommision is that the financial services industry has been sucking
more than six hundred billion dollars per year from the real economy since
the turn of the century, more or less, and you can't remove that much zero
return capital without consequences.

Second, take Dave Li, whom I have refered to a couple of times as patient
zero. He actually is and yes, please, just take himG
Dave is a smart guy but hardly an intellectual. Educated at MIT, he's a
mathematician and it's a shame he went to work on Wall Street instead of
Mound Road but you know, when you offer a guy a choice between Wall Street
"Shooting Star" and working for the auto industry and having your friends
ask you "What went wrong?" at class reunions, you go with the money and
prestige. Dave did just that.

Mathematically modeling the financial universe is as old as mankind. So is
fortune telling. Both are undertaken by ametuers with an interest or reason
and professional mathematicians and economists like David Li. The goal, at
least in his case, was to precisely estimate risk. Doing so is especially
important if what you want to do is sell unregulated risk that isn't backed
up with a reserve. You absolutely must properly value default products
correctly because you only really get one bite at the apple if the risk
market fails.
The model Dave created went further. It supported the proposition that you
could not just resolve risk down to a single value, but that you could use
the model to test pools of risk and formulate securities for which risk had
been driven to zero. It's the greatest thing if you can do this because you
get to charge by the individual risk quotient but never have to PAY
anything. I saw the Li model while it was being written because I was
working on something similar but using different topology . I only had a
couple of comments and I was pretty pleased to meet Dave and his boss as
well as extremely flattered. Somebody at that level expressing interest in
what I had to say was a little unusual. Anyway, I pointed out that thinking
that you could express something complex as a single value seemed unlikely
and that any risk analysis that excluded a behavioral component was crazy.
This was the reason I was using a fractal based model for what I was doing.
I even showed it, and the underlying studies and data, to them and, as I
ater learned, that was the actual reason anyone was interested in what I was
doing - Fractal modelling.

In the end, they finished their work and I gave up on mine. I thought at the
time that my model didn't work and I didn't know how to get it fixed. What I
know now is that it was working, it just didn't produce the result I was
interested in seeing. The model kept crashing my virtual economy.
Well, no ****. As it turns out, the real world behaved in a similar manner.
LOL

The David Li model DID seem to work and was rolled out as the "Gaussian
Cupola". That model, and its clones and derivatives, was what gave the
government, as well as the financial "Masters of the Universe", the
confidence to remove the barriers previously in place that barred certain
asset pools and cash flows from being invested innapropriately. Some of the
worlds best economists looked the Gaussian Cupola and called bull ****. The
mathematics, however, were sound and this could be demonstrated. That was
the road show and it was persuasive enough to steam roll the econ weenies.
Mathatematics is a science, economics is guesssing and Geeks Rule!

Increasing reserves and stress testing Daddy Warbucks is really just
tinkering around the edges. Financial institutions can't bring themselves to
face their situation head on and so far, they haven't had to. The American
economy can't work without the secondary credit markets. Two thirds, at
least, of lending is supported there. That market, and the banks that hold
linked derivative products won't work again until all of the flaky zero risk
products are isolated and the wealth destruction they represent monetized.
Period. Everything so far has been an effort to keep the patient alive long
enough to figure out how to do the surgery.

Siezing the banks would make the entire reality impossible to avoid. You
couldn't just show part of your hand and ask for help with a specific
problem and in the end, Americans are going to be on the hook for the losses
anyway, it's unavoidable, so we ought just to get on with it. It's a bill
our kids will have to pay, like it or not. That will be easier for them to
do if we leave them a vibrant and growing economy to do it with and the
sooner the better.

You will know something is going to happen when Bernanke, Geithner and our
President start to use the phrase "Hold to Maturity".
That is what we are going to have to do because Li was wrong, the risk
coefficient can be preordained but peoples perceptions can't and that, in
the end, is what counts.

JC

On Sun, 10 May 2009 16:09:53 -0700, "John R. Carroll"
wrote:


"F. George McDuffee" wrote in message
.. .
On Fri, 8 May 2009 15:33:52 -0700, "John R. Carroll"
wrote:
snip
Do you have confidence in this economy?

No, and I won't until I see Congress step up and put a company like GM, or
really GM for starters, down like a dog.
There isn't a single reason America ought to go on the hook to create jobs
in China, Mexico or anywhere else, not in the numbers GM's latest
restructuring plan indicates. That plan says only one thing to me. GM just
doesn't get it and that means they are too stupid to survive.
Then it will be time to release the productive capital of the 19 banks
just
stress tested back to the market. We have a mechanism to do this.
Congress,
the Obama administration and the American public need to just suck it up,
quit crying like a bunch of Nancy boys and get the hell on with it.

I'd start with a non-bank, AIG. Have Congress pass the necessary
legistlation poste haste, authorize the money with new legistlation and
then
just BK the thing the way we sieze a bank.
American's are not the ones that need a confidence transplant, it's the
banking and financial services giants.. The confidence that Citi needs to
have is that when they mess up big, the American taxpayer is going to come
in, sieze and sell their ****, kill the men, rape the women and then burn
what's left to the ground without batting an eye. Were these 19 banks to
believe that this might be their fate, they would probably alter their
conduct in the direction of prudent behavior. The banking business might
go
back to being as completely dull as it was in the 40's and 50's. That
would
be entirely appropriate and, to borrow a phrase from Mike Milken, I'd be
highly confident.


JC
=====
This just posted on CNBC. My only comment is "what took so
long," but then again it is hard to believe things got so bad so
quick, with everyone assuring everyone else that things were just
fine.

This "sudden unexpected failure" took at least 30 years to
create, and wipes out a generation's [or more] financial/economic
gains and savings.

snip

First I have to ask - Unexpected by whom?
Certainly not by either myself or probably the majority of the people
involvd. A huge number of smart, respected industry people predicted this
failure. You, George, detected the odor a while ago yourself but like a
silent fart, didn't know who had issued from.

Second, the actual failure took just under seven years to occur. The 20
years prior to that were nothing more than getting the camel lined up with
the tent flap in the minds of average Americans. The guardians, such as they
were, remained at the gates.

I've reviewed my take on history earlier in a previous post to this thread
so I won't belabor the issue.
You replied, in part, "While a bit rhetorical, you appear to be entirely
correct."

Largely correct , but not entirely, because Treasury already has the
authorities to deal with the banking system. They just need Congress to
cough up some money. I also chose to omit a couple of things because they
are so obvious that they nearly defy belief in spite of the fact that they
are true and because this is a little like telling tales out of school. Oh
well, shoot me if you feel the need. My NDA has long since expired.

The first ommision is that the financial services industry has been sucking
more than six hundred billion dollars per year from the real economy since
the turn of the century, more or less, and you can't remove that much zero
return capital without consequences.

Second, take Dave Li, whom I have refered to a couple of times as patient
zero. He actually is and yes, please, just take himG
Dave is a smart guy but hardly an intellectual. Educated at MIT, he's a
mathematician and it's a shame he went to work on Wall Street instead of
Mound Road but you know, when you offer a guy a choice between Wall Street
"Shooting Star" and working for the auto industry and having your friends
ask you "What went wrong?" at class reunions, you go with the money and
prestige. Dave did just that.

Mathematically modeling the financial universe is as old as mankind. So is
fortune telling. Both are undertaken by ametuers with an interest or reason
and professional mathematicians and economists like David Li. The goal, at
least in his case, was to precisely estimate risk. Doing so is especially
important if what you want to do is sell unregulated risk that isn't backed
up with a reserve. You absolutely must properly value default products
correctly because you only really get one bite at the apple if the risk
market fails.
The model Dave created went further. It supported the proposition that you
could not just resolve risk down to a single value, but that you could use
the model to test pools of risk and formulate securities for which risk had
been driven to zero. It's the greatest thing if you can do this because you
get to charge by the individual risk quotient but never have to PAY
anything. I saw the Li model while it was being written because I was
working on something similar but using different topology . I only had a
couple of comments and I was pretty pleased to meet Dave and his boss as
well as extremely flattered. Somebody at that level expressing interest in
what I had to say was a little unusual. Anyway, I pointed out that thinking
that you could express something complex as a single value seemed unlikely
and that any risk analysis that excluded a behavioral component was crazy.
This was the reason I was using a fractal based model for what I was doing.
I even showed it, and the underlying studies and data, to them and, as I
ater learned, that was the actual reason anyone was interested in what I was
doing - Fractal modelling.

In the end, they finished their work and I gave up on mine. I thought at the
time that my model didn't work and I didn't know how to get it fixed. What I
know now is that it was working, it just didn't produce the result I was
interested in seeing. The model kept crashing my virtual economy.
Well, no ****. As it turns out, the real world behaved in a similar manner.
LOL

The David Li model DID seem to work and was rolled out as the "Gaussian
Cupola". That model, and its clones and derivatives, was what gave the
government, as well as the financial "Masters of the Universe", the
confidence to remove the barriers previously in place that barred certain
asset pools and cash flows from being invested innapropriately. Some of the
worlds best economists looked the Gaussian Cupola and called bull ****. The
mathematics, however, were sound and this could be demonstrated. That was
the road show and it was persuasive enough to steam roll the econ weenies.
Mathatematics is a science, economics is guesssing and Geeks Rule!

Increasing reserves and stress testing Daddy Warbucks is really just
tinkering around the edges. Financial institutions can't bring themselves to
face their situation head on and so far, they haven't had to. The American
economy can't work without the secondary credit markets. Two thirds, at
least, of lending is supported there. That market, and the banks that hold
linked derivative products won't work again until all of the flaky zero risk
products are isolated and the wealth destruction they represent monetized.
Period. Everything so far has been an effort to keep the patient alive long
enough to figure out how to do the surgery.

Siezing the banks would make the entire reality impossible to avoid. You
couldn't just show part of your hand and ask for help with a specific
problem and in the end, Americans are going to be on the hook for the losses
anyway, it's unavoidable, so we ought just to get on with it. It's a bill
our kids will have to pay, like it or not. That will be easier for them to
do if we leave them a vibrant and growing economy to do it with and the
sooner the better.

You will know something is going to happen when Bernanke, Geithner and our
President start to use the phrase "Hold to Maturity".
That is what we are going to have to do because Li was wrong, the risk
coefficient can be preordained but peoples perceptions can't and that, in
the end, is what counts.

JC

-----------
Long and very interesting/insightful post.

My disenchantment came when I realized that what was being
proposed and sold was economic "perpetual motion" of the first
class.

The phrase
This "sudden unexpected failure" took at least 30 years to
create, and wipes out a generation's [or more] financial/economic
gains and savings.
was intended to be sarcastic. While it qualifies as a failure,
it most definitely was not sudden or unexpected. Indeed it was
the only possible outcome, the only question being one of timing
and not occurrence. While Lehman Brothers are popularly blamed
for "causing" this crash, if it hadn't been them it would have
been somebody else, and it was always just a question of who was
going to go first. The system was [and is] inherently unstable,
based on several thousand years of history. This is not to say
that it can't be made to work, after all the newer stealth and
air superiority fighter aircraft are inherently unstable, but can
fly with the use of very fast, very powerful "fly by wire"
computers and continuous [minor] corrections. The technology has
evolved beyond the possibility of manual/mechanical control.

I am interested in your use of fractals distributions as modeling
tools. I am sure that you have read "The (mis)behavior of
markets" by Mandelbrot. Any comments that you can share? Were
you able to identify any attractors? Were you using a Monte
Carlo simulation approach, or attempting to directly "solve"
Leontev I/O matrix with fractal equations for [some of the]
elements?

Given its publication date of 2004, with some of the more
important conclusions reached/published much earlier, such as
using the Cauchey rather than the Gausian/normal distribution for
financial modeling based on the actual examination of prices, in
some cases for more than 100 years [cotton trading], rather than
the ease of calculation, it does indeed appear that the model
that would gave the desired results was selected.

As you point out, it is entirely possible to have a model of
great complexity and indeed "beauty" which is mathematically
correct, even brilliant, but totally misleading because the basic
assumptions on which it is based are incorrect. Two example that
come to mind are Astrology and Numerology. However it should be
noted that both of these "sciences" have had considerable
influence on human conduct, and continue to do so even today,
e.g. the management of the Orange County [California] investment
pool. Indeed, many papers continue to have an astrology column
and publish the day's "lucky" number.

You raise a very interesting philosophical point about the nature
and meaning of "future." Is it fixed and determinant, and thus
capable of being described by a single index or coefficient, or
is it probalistic/stochastic and best described by a probability
distribution?

You again appear to be correct when you observe:
The Obama administration and the American public need to just suck it up,
quit crying like a bunch of Nancy boys and get the hell on with it.
the problem being this is major surgery, like a limb amputation,
and at least on the political side no one wants to antagonize the
banksters/broksters and/or lose their campaign contributions.
However it does appear at this point that it is like a severe
case of "gas gangrene," in that the choice is between losing the
limb and losing your life, not between losing and not losing a
limb.

You may very well be correct when you observe
The first ommision is that the financial services industry has been sucking
more than six hundred billion dollars per year from the real economy since
the turn of the century, more or less, and you can't remove that much zero
return capital without consequences.
Indeed, the total amount "skimmed" may even be higher if the
defined benefit pension funds, 401ks, and insurance companies on
the borders of the financial services industry are included. Any
idea where this money is going/has gone?

We are living in interesting times....


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

"F. George McDuffee" wrote in message
...
On Sun, 10 May 2009 16:09:53 -0700, "John R. Carroll"
wrote:


"F. George McDuffee" wrote in message
. ..
On Fri, 8 May 2009 15:33:52 -0700, "John R. Carroll"
wrote:

snip
I am interested in your use of fractals distributions as modeling
tools. I am sure that you have read "The (mis)behavior of
markets" by Mandelbrot. Any comments that you can share?

I have, as well as Kantor's and Koch's work. That's where all this stuff
started you know - an offshoot of Euclidean Geometry.
That's where you start with fractal geometry. Mandelbrot's "Fractal
Geometry of Nature" was the first of his publications that I read.
One thing all of these guys had in common was they were seen as kooks by a
lot of their peers. LOL
See if you can find a copy of Mandelbrot's article about the coastline of
England. It's a good explanation of Koch's pathalogical curves.
A pathalogical curve appears fixed and closed bit it's actually infinitely
long and, therefore, can't be closed. I've read a lot of descriptions of
economies throughout time but "Pathalogical Curved Geometry" is head and
shoulders the best.
It appears to me that everything created by euther man or nature has to be
fractal, ie. self similar in its shape, to work. That means an exact
geometric solution. There really isn't ten ways to skin a cat, you only
think there is, and the first tsk was to do a mathematical proof.
Fortunately, that had been done and for a seemingly unrelated application -
antennas. A group in Santa Ana that was working on a multi frequency antenna
did the math and found not that here's a way of doing it and there's a lot
of other ways of doing it. It turned out, mathematically, they were able to
demonstrate that there was only technique they could use to get their
antenna to work. Another fortunate happenstance was that they were one of my
customers.

Were
you able to identify any attractors? Were you using a Monte
Carlo simulation approach,

No, you wouldn't use itterative guessing but as it turns out you can express
Monte Carlo scenarios as fractals if you want to.
Did you read what the Navy did to find the last hydrogen bomb they lost in
the Atlantic? Mandelbrot would have saved them a lot of time.
Pretty funny don't you think?
I used to take peoples lunch money by betting them that I cound draw and
then mathematically describe a nurbs curve made from a piece of string.
Guess what I drew? A circle!
LOL
Have some fun yourself sometime and ask an undergrad to express the energy
model for mamals as fractal geometry..
The answer is E=MC Squared.+C. Really, there is an experimental proof.
Einstein expressed the relationship between mass and energy as fractal
geometry. He probably even realized it.

or attempting to directly "solve"
Leontev I/O matrix with fractal equations for [some of the]
elements?

All of the elements, not some, even the behavioral stuff, and you can ( I
think we did ) create a model that builds itself to fit the granularity of
the number of constraints. The only limit is hardware based. You have seen
the combined Julia Set expressed graphically haven't you? You must have.

As an aside, there is a new search engine on the horizon and from what I
know, it's almost certainly driven by a fractal engine.
It would take to long to "learn" what it needed to "Know" to be useful
otherwise.
I've heard it's busted, or perhaps doesn't live up to it's billing. The
release date is coming up pretty soon.


Given its publication date of 2004, with some of the more
important conclusions reached/published much earlier, such as
using the Cauchey rather than the Gausian/normal distribution for
financial modeling based on the actual examination of prices, in
some cases for more than 100 years [cotton trading], rather than
the ease of calculation, it does indeed appear that the model
that would gave the desired results was selected.

Doesn't it just.
You'd expect that from a bunch of lawyers and MBA's though.
Technicians are annoying if they can't provide anything that goes to the
bottom line.
Analysts are employed in the same way, as you know. Their job is to create
metrics that reinforce whatever bill of goods that has been sold.


As you point out, it is entirely possible to have a model of
great complexity and indeed "beauty" which is mathematically
correct, even brilliant, but totally misleading because the basic
assumptions on which it is based are incorrect. Two example that
come to mind are Astrology and Numerology. However it should be
noted that both of these "sciences" have had considerable
influence on human conduct, and continue to do so even today,
e.g. the management of the Orange County [California] investment
pool. Indeed, many papers continue to have an astrology column
and publish the day's "lucky" number.

You raise a very interesting philosophical point about the nature
and meaning of "future." Is it fixed and determinant, and thus
capable of being described by a single index or coefficient, or
is it probalistic/stochastic and best described by a probability
distribution?

Neither and both. The answer depends on what you do about granularity.
You are really talking about geometry that lives in the space between two
and three dimensions.
The more granular you are, the closer you get to 3D. You cannot, however,
get all the way there - by definition.
The solution is exact but that solution varies with granularity. You can fix
one or the other but not both. That is where the model, degenerates and why
mine kept crashing. You can't thread the needle unless you can grab the end
of the thread and there isn't one - there appears to be, but there isn't
because the thread is infinitely long.
Does that make sense to you?
I'm sick and also tired and it just looks a little like gibberish to me.



You again appear to be correct when you observe:
The Obama administration and the American public need to just suck it
up,
quit crying like a bunch of Nancy boys and get the hell on with it.
the problem being this is major surgery, like a limb amputation,
and at least on the political side no one wants to antagonize the
banksters/broksters and/or lose their campaign contributions.

I think we will be crossing that Rubicon presently George.
In fact, the Banksters are trying to get out in front of the charge.
Funniest thing I've seen in a while.

"The backlash against the investment professionals is so sharp that in
recognition of public outrage, the financial planning industry is asking
Congress to create a national organization to regulate its ranks."

http://www.washingtonpost.com/wp-dyn...l?hpid=topnews

However it does appear at this point that it is like a severe
case of "gas gangrene," in that the choice is between losing the
limb and losing your life, not between losing and not losing a
limb.

I couldn't turn the word earlier but what I would have said was that we are
currently triaging the patient. That is exactly correct and I believe that
the dudes running this clusterF**K knew all along what the real underlying
problem was. They stopped trading derivative financial products almost
completely for no real reason after all. They wouldn't have done that if
they really believed in Li's model. His model says it doesn't matter,
remember?
Ya', right - Okie Dokie.....

I think this is one of the big differences between Bush/Paulson and
Obama/Geithner. The latter intends to be deliberate and pragmatic.
The former was just putting out fires willy nilly, or trying to anyway. It
was terrible to have all this come to a head in an election year.


You may very well be correct when you observe
The first ommision is that the financial services industry has been
sucking
more than six hundred billion dollars per year from the real economy since
the turn of the century, more or less, and you can't remove that much zero
return capital without consequences.
Indeed, the total amount "skimmed" may even be higher if the
defined benefit pension funds, 401ks, and insurance companies on
the borders of the financial services industry are included. Any
idea where this money is going/has gone?

John Boggle spells this out in one of his books but you can search
Charlierose.com for an interview that is illuminating.
Basically, the money disappeared as fees, commisions, bonus pools, corporate
perks and so forth.


We are living in interesting times....

So did that French broad, Marie something or other.

LOL

JC

On Sun, 10 May 2009 20:48:09 -0700, "John R. Carroll"
wrote:
snip
I think we will be crossing that Rubicon presently George.
In fact, the Banksters are trying to get out in front of the charge.
Funniest thing I've seen in a while.

"The backlash against the investment professionals is so sharp that in
recognition of public outrage, the financial planning industry is asking
Congress to create a national organization to regulate its ranks."

http://www.washingtonpost.com/wp-dyn...l?hpid=topnews
============
I don't think they know what backlash is yet.

As the referenced article states:

-----
snip
The numbers illustrate the outrage. New arbitration cases filed
with the Financial Industry Regulatory Authority, a
non-governmental regulator of securities companies, soared 86
percent in the first three months of this year after climbing
nearly 54 percent in 2008. New cases during the period totaled
1,715. Adding in April's figures, FINRA projects that filings are
on track to hit 7,000 this year, up from 4,982 in 2008.
snip
-----
How many banksters/broksters have been "terminated with extreme
prejudice?" How many brokesters/banksters have been mugged?

7,000 out of who knows how many million is minuscule, and the
most that happens is that some money gets refunded, and at most a
lifetime ban from the security services sector [unless you change
your name -- see recent media articles on this].

FWIW -- it appears that the reason Bernie Maddoff is taking the
rap so silently is that he was "investing" real mobster or drug
cartel money, and they have their own version of a "guaranteed
return on investment."


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

On Sun, 10 May 2009 20:48:09 -0700, "John R. Carroll"
wrote:
snip
I think this is one of the big differences between Bush/Paulson and
Obama/Geithner. The latter intends to be deliberate and pragmatic.
The former was just putting out fires willy nilly, or trying to anyway. It
was terrible to have all this come to a head in an election year.
snip
It came at exactly the right time. I only wish that all these
crisis would arise just before elections.

Do you think President McCain and Secretary of the Treasury Gramm
would be doing any better?


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

On Sun, 10 May 2009 20:48:09 -0700, "John R. Carroll"
wrote:
snip
John Boggle spells this out in one of his books but you can search
Charlierose.com for an interview that is illuminating.
Basically, the money disappeared as fees, commisions, bonus pools, corporate
perks and so forth.
snip
Probably "The Battle for the Soul of Capitalism." That's the
how.

My question is *WHERE* is this money going. It's not easy to
hide that much money [c. 600 billion per year], and somewhere the
vaults must be bulging, the Maybach sales booming, chalet prices
soaring, etc.


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

On Sun, 10 May 2009 20:48:09 -0700, "John R. Carroll"
wrote:
snip
We are living in interesting times....

So did that French broad, Marie something or other.

LOL

JC
-----
Yes, she just lost her head over the situation...


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

On Sun, 10 May 2009 20:48:09 -0700, "John R. Carroll"
wrote:
snip
I have, as well as Kantor's and Koch's work. That's where all this stuff
started you know - an offshoot of Euclidean Geometry.
That's where you start with fractal geometry. Mandelbrot's "Fractal
Geometry of Nature" was the first of his publications that I read.
One thing all of these guys had in common was they were seen as kooks by a
lot of their peers. LOL
snip
Now if we could only calculate the Koch derivative or the Cauchy
variance/SD ...


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

My question is *WHERE* is this money going. It's not easy to
hide that much money [c. 600 billion per year], and somewhere the
vaults must be bulging, the Maybach sales booming, chalet prices
soaring, etc.


Hear him!

"F. George McDuffee" wrote in message
...
On Sun, 10 May 2009 20:48:09 -0700, "John R. Carroll"
wrote:
snip
John Boggle spells this out in one of his books but you can search
Charlierose.com for an interview that is illuminating.
Basically, the money disappeared as fees, commisions, bonus pools,
corporate
perks and so forth.
snip
Probably "The Battle for the Soul of Capitalism." That's the
how.

My question is *WHERE* is this money going. It's not easy to
hide that much money [c. 600 billion per year], and somewhere the
vaults must be bulging, the Maybach sales booming, chalet prices
soaring, etc.

Just look at the profits these companies have been reporting George.
2.3 billion in bonus money and 42.5 billion in profits for AIG's FP division
alone.
You'd have to drill all the way down to loan origunation fees to capture
everything.

JC

"F. George McDuffee" wrote in message
...
On Sun, 10 May 2009 20:48:09 -0700, "John R. Carroll"
wrote:
snip
I think this is one of the big differences between Bush/Paulson and
Obama/Geithner. The latter intends to be deliberate and pragmatic.
The former was just putting out fires willy nilly, or trying to anyway. It
was terrible to have all this come to a head in an election year.
snip
It came at exactly the right time. I only wish that all these
crisis would arise just before elections.

Do you think President McCain and Secretary of the Treasury Gramm
would be doing any better?

McCain/Palin wouldn't have beaten Obama/Biden regardless George.
Presidential politics had a big influence on what Paulson did.
I wouldn't be surprised to learn that Paulson pulled the trigger at a time
of his choosing specifically to prevent McCain from prevailing.
I wear a belt even when I've got my suspenders on.
He certainly knew what the Lehman failure would do and Bernanke could have
prevented that from happening.

JC

"F. George McDuffee" wrote in message
...
On Sun, 10 May 2009 20:48:09 -0700, "John R. Carroll"
wrote:
snip
I have, as well as Kantor's and Koch's work. That's where all this stuff
started you know - an offshoot of Euclidean Geometry.
That's where you start with fractal geometry. Mandelbrot's "Fractal
Geometry of Nature" was the first of his publications that I read.
One thing all of these guys had in common was they were seen as kooks by a
lot of their peers. LOL
snip
Now if we could only calculate the Koch derivative or the Cauchy
variance/SD ...

You've lost me George. There is no variance in a Cauchy distributuion. There
can't be, by definition.

JC