just fyi the glass steagall act was repealed under clinton. the repeal of that act is one of the reasons why investments banks got into this mess.
There are people who are starting to say that this is sort of a referendum on the Reaganomics regulation-free market policy. Essentially that we've allowed the markets to police themselves, and they've failed miserably. The derivatives house of cards is finally collapsing. S&P has broken support sharply in futures ... looks like it's definitely headed to 1200. Whether it holds there is another question.
Uh no, see there are oversight to these corporations, but the oversight didn't understand the problems until its too later. Actually almost nobody understood the problem until its too late. Unless you expect government to be better at banking than wall street, you are never going to avoid problems completely. Also bailing out would be better than no bail out, you could argue the oversight is in better position to deal with problems than what we had years before.
The inmates ran the asylum. There's no way Wall Street can escape this mess without harsher regulation.
It's official -- LEH just filed for bankruptcy. AIG is begging the fed for a $40 billion loan. I'm guessing they're not going to get it.
these guys didn't give out the bad mortgages they only bought them lol. http://en.wikipedia.org/wiki/Glass-Steagall_Act Repeal of the Act The neutrality of this article is disputed. Please see the discussion on the talk page. (August 2008) Please do not remove this message until the dispute is resolved. On November 12, 1999, President Bill Clinton signed into law the Gramm-Leach-Bliley Act, which repealed the Glass-Steagall Act of 1933. One of the effects of the repeal was to allow commercial and investment banks to consolidate. Some economists have criticized the repeal of the Glass-Steagall Act as contributing to the 2007 subprime mortgage financial crisis.[7][8] The repeal enabled commercial lenders such as Citigroup, the largest U.S. bank by assets, to underwrite and trade instruments such as mortgage-backed securities and collateralized debt obligations and establish so-called structured investment vehicles, or SIVs, that bought those securities. Citigroup played a major part in the repeal. Then called Citicorp, the company merged with Travelers Insurance company the year before using loopholes in Glass-Steagall that allowed for temporary exemptions. With lobbying led by Roger Levy, the "finance, insurance and real estate industries together are regularly the largest campaign contributors and biggest spenders on lobbying of all business sectors [in 1999]. They laid out more than $200 million for lobbying in 1998, according to the Center for Responsive Politics..." These industries succeeded in their two decades long effort to repeal the act.[9] The banking industry had been seeking the repeal of Glass-Steagall since at least the 1980's. In 1987 the Congressional Research Service prepared a report which explored the case for preserving Glass-Steagall and the case against preserving the act. The argument for preserving Glass-Steagall (as written in 1987): 1. Conflicts of interest characterize the granting of credit – lending – and the use of credit – investing – by the same entity, which led to abuses that originally produced the Act 2. Depository institutions possess enormous financial power, by virtue of their control of other people’s money; its extent must be limited to ensure soundness and competition in the market for funds, whether loans or investments. 3. Securities activities can be risky, leading to enormous losses. Such losses could threaten the integrity of deposits. In turn, the Government insures deposits and could be required to pay large sums if depository institutions were to collapse as the result of securities losses. 4. Depository institutions are supposed to be managed to limit risk. Their managers thus may not be conditioned to operate prudently in more speculative securities businesses. An example is the crash of real estate investment trusts sponsored by bank holding companies (in the 1970s and 1980s). The argument against preserving the Act (as written in 1987): 1. Depository institutions now operate in “deregulated” financial markets in which distinctions between loans, securities, and deposits are not well drawn. They are losing market shares to securities firms that are not so strictly regulated, and to foreign financial institutions operating without much restriction from the Act. 2. Conflicts of interest can be prevented by enforcing legislation against them, and by separating the lending and credit functions through forming distinctly separate subsidiaries of financial firms. 3. The securities activities that depository institutions are seeking are both low-risk by their very nature, and would reduce the total risk of organizations offering them – by diversification. 4. In much of the rest of the world, depository institutions operate simultaneously and successfully in both banking and securities markets. Lessons learned from their experience can be applied to our national financial structure and regulation.[10]
The futures look real bad, but might be good chance to load up on some uyg at the open. SKF recently seems to gap up and sell off. If this works out BAC will be a force to reckon with in a few years. They are paying a lot, but everything thing is cyclical.
i think buying the nasdaq or tech since they clearly are not financials is also an intriguing trade too but i will have to see how it looks when i get to work.
Buying UYG is a pretty risky trade. IMO the only saving grace for that trade is if the Fed does an emergency rate cut. This Lehman mess is going to take a little while to unwind the way I see it, and AIG right now is exactly where LEH was one week ago... pursuing options and trying to restructure. I'm hearing rumors UBS could be next on the chopping block -- they never really resolved their exposure issues either.
You would be dumb to hold financials long right now, but as a very short trade you might be able to make some money.
Well, I could see catching a falling knife just before the short covering starts... that's the only trade I'd make.
I've been reading all these articles, but one thing that is rarely discussed....what happens to the ants on the bottom? How will small-medium banks fare with an even worse credit crunch? How much more will this affect main street? There's more questions with "no one knows" as the answer, but what are some Clutchfans thoughts on this?
I think it depends on their exposure to subprime. We've seen that those who were heavily exposed like IndyMac get wiped out. The whole sector is going to suffer, and those who have bad assets on their books are at risk of getting shaken out. People don't care about the little fish because their failure doesn't pose a systemic risk, so all we'll see is more of the same ... the shock will probably cause a few more bad banks to fail and they'll be nothing more than a footnote.
if they didn't buy mounds and mounds of garbage with leverage that was really worth nothing then that helps. but then they will also have to avoid the fannie and freddie preferred stock damage. i have already seen 2 banks that had market caps of 20 million state losses of 10 million on the fannie and freddie preferreds. i imagine we will have another much smaller round with lehman.
Wow, no more LEH and MER... <object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/8b3mftcV0dY&hl=en&fs=1"></param><param name="allowFullScreen" value="true"></param><embed src="http://www.youtube.com/v/8b3mftcV0dY&hl=en&fs=1" type="application/x-shockwave-flash" allowfullscreen="true" width="425" height="344"></embed></object>
