"How did you go bankrupt?"
"Two ways. Gradually, then suddenly."
Ten years ago his week America started the "suddenly" part of the financial collapse. Lehman collapsed.
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| Lehman. Then the dominos start falling. |
Here is the Wiki: summary and overview: Click: Wiki
Today's post comes from the perspective of a foot soldier on the front lines of the battleground, far from the HQ, a spectator to the collateral damage and a victim of it.
I was a retail Financial Advisor.
I was a retail Financial Advisor.
What happened suddenly is that banks and non-bank institutions that provide money for banks had a liquidity crisis. Nobody trusted anybody else not to go broke next, so business stopped. Suddenly.
The short term financing that makes money available day to day dried up. Banks would have failed, as would have General Electric, which financed itself with commercial paper that renewed each week, and AIG, which provided insurance to banks guaranteeing that the mortgage packages they owned as assets would pay off at face value. People realized they wouldn't pay off. AIG wrote lots of insurance. If AIG was broke then the banks they insured were broke.
The Treasury Secretary and Fed Chairman went to Congress to ask for a bailout. Congress did not want the bad publicity of bailing out rich, foolish bankers, so they voted no. Finally, then-president G. W. Bush prevailed on Democrats to do their duty, and a bi-partisan coalition of mostly Democrats approved the bailout. It may have saved the economy but it was bad politics.
People need banks, and you cannot have banks without bankers, but voters wanted bankers to suffer. They didn't suffer enough. The theory was that they were foolish, not criminal. Some of them lost their jobs but they did not go to jail. Lots of them got their bonuses.
It just didn't feel right to voters. People who lost tens of billions of dollars are not prosecuted, but people who steal ten dollars are.
It fueled a populist revolt in the US and around the world.
In the US there were two versions of the revolt. The right wing version was the Tea Party, and it got started with a rant against mortgage bailouts for imprudent borrowers. Rick Santelli on a Chicago trading floor asked: "How about this, president and new administration, why don't you put up a website to have people vote on the internet as a referendum to see if we really want to subsidize the losers' mortgages? How many of you people want to pay for your neighbor's mortgage that has an extra bathroom and can't pay their bills?"
The Tea Party was populism down, against "losers." The movement was about social class and then added an ethnic component under Trump and his appeals to white fears and resentments. The villains were foreigners taking advantage. Immigrants. Mexicans. China. Nonwhites.
Populism grew on the left as well: Bernie Sanders pointed to the "millionaires and billionaires" in his early campaign speeches, and then primarily "billionaires." A million dollars isn't as much as it used to be. The Democratic Party split between the incrementalist who want to save capitalism and the socialists who see it as irrevocably flawed. That is the fracture line between Hillary Clinton--and now Elizabeth Warren-- and Bernie Sanders. Warren wants to save capitalism by fixing it.
Sanders is a Democratic Socialist. Sanders is leading Democrats to question capitalism itself, and Gallup polls show that skepticism of capitalism is taking hold among many Democrats. Click: Gallup
The Financial Crisis of 2008 did not end in 2008, nor under the eight years of Obama, nor is it over now. Its consequences may go on for decades.
The short term financing that makes money available day to day dried up. Banks would have failed, as would have General Electric, which financed itself with commercial paper that renewed each week, and AIG, which provided insurance to banks guaranteeing that the mortgage packages they owned as assets would pay off at face value. People realized they wouldn't pay off. AIG wrote lots of insurance. If AIG was broke then the banks they insured were broke.
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| Click. Santelli: the Rant |
People need banks, and you cannot have banks without bankers, but voters wanted bankers to suffer. They didn't suffer enough. The theory was that they were foolish, not criminal. Some of them lost their jobs but they did not go to jail. Lots of them got their bonuses.
It just didn't feel right to voters. People who lost tens of billions of dollars are not prosecuted, but people who steal ten dollars are.
It fueled a populist revolt in the US and around the world.
In the US there were two versions of the revolt. The right wing version was the Tea Party, and it got started with a rant against mortgage bailouts for imprudent borrowers. Rick Santelli on a Chicago trading floor asked: "How about this, president and new administration, why don't you put up a website to have people vote on the internet as a referendum to see if we really want to subsidize the losers' mortgages? How many of you people want to pay for your neighbor's mortgage that has an extra bathroom and can't pay their bills?"The Tea Party was populism down, against "losers." The movement was about social class and then added an ethnic component under Trump and his appeals to white fears and resentments. The villains were foreigners taking advantage. Immigrants. Mexicans. China. Nonwhites.
Populism grew on the left as well: Bernie Sanders pointed to the "millionaires and billionaires" in his early campaign speeches, and then primarily "billionaires." A million dollars isn't as much as it used to be. The Democratic Party split between the incrementalist who want to save capitalism and the socialists who see it as irrevocably flawed. That is the fracture line between Hillary Clinton--and now Elizabeth Warren-- and Bernie Sanders. Warren wants to save capitalism by fixing it.
Sanders is a Democratic Socialist. Sanders is leading Democrats to question capitalism itself, and Gallup polls show that skepticism of capitalism is taking hold among many Democrats. Click: GallupThe Financial Crisis of 2008 did not end in 2008, nor under the eight years of Obama, nor is it over now. Its consequences may go on for decades.
1 comment:
It is possible to make a lot of money investing in the stock market.
Also Las Vegas.
In Las Vegas success is either blind luck against a slim chance of winning, or cold competence that mitigates the risk. On Wall Street the operative principle is the "greater fool theory". This is why it's a boom and bust proposition. An army of salesmen spend their days looking for the greater fool, something that takes little effort, until they reach a point where no one can be convinced to buy, then then they sell like mad. Rinse and repeat.
Socialism is everyone doing "pretty good" while capitalism as evidenced currently is a few "winners" and everyone else struggling. You can't have it both ways, and the trend is toward a more equitable distribution of wealth, for instance, consider the radical idea that children shouldn't work in slaughterhouses which was considered unthinkable in 1920.
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