I still want to urge everyone to go to YouTube and search for "lehman cnn report" and watch the first video :thumb:

 

:sssh::lol:

I still want to urge everyone to go to YouTube and search for "lehman cnn report" and watch the first video :thumb:

 

:lol: :lol:

 

Thanks a lot Wireman And Jim for pointing that out ...:irked: :lol:

 

That's the hardest I've laughed in a couple weeks...

Apparently those two guys are plants from the Howard Stern show.

One of the problems that have led to this situation is that during the Clinton years banks were told to stop redlining. That is they had to make loans in areas that were risky and then the banks ran with it and went overboard.

For Mac and Mae some of Clinton's old cronies ran this outfits and they have yet to be brought to justice even though they caused the loss of more money than Enron.

There are lots of laws in place to regulate these institutions, but they were not enforced. More laws will only make business more bureaucratic.

And how about old Charlie Rangel, talk about the fox guarding the hen house.

 

The solution to some of this is to make sure that people have to have a downpayment of 10 or 20 percent and that banks have a certain amount of reserves and then the government actually does their job of enforcing the laws on the books.

The market will sort it all out? That's one heck of a euphemism. When your home loses 20% of its value, your 401K tanks, and you lose your job, you can take heart in knowing that it is just the market "sorting it all out."

 

By the way, how do you get your financial news? Smoke signals? :lol:

 

What will happen is that the weak will be eliminated and financiallly stronger businesses will take over. All you have to do is look at history and see that it will recover. Now I know that does not immediately help the person that has lost thier job, that is why we have a safety net that will help these individuals.

Think about those people of the 1930's, don't you think that they felt a whole lot worse than what we do today? They had experienced 3 years of a depression by the 1932 election and would experience 7 more years of economic woes. It will hurt some more, but will recover.

Apparently those two guys are plants from the Howard Stern show.

 

Yeah, that's Sal and Richard. They are notorious for those types of bits on the air. I love how the woman was trying to cover for CNN.

What will happen is that the weak will be eliminated and financiallly stronger businesses will take over. All you have to do is look at history and see that it will recover. Now I know that does not immediately help the person that has lost thier job, that is why we have a safety net that will help these individuals.

Think about those people of the 1930's, don't you think that they felt a whole lot worse than what we do today? They had experienced 3 years of a depression by the 1932 election and would experience 7 more years of economic woes. It will hurt some more, but will recover.

 

 

Eventually, the economy will recover. Eventually, stability will return to Wall Street finance. That's not the point. The point is that the entire U.S. economy (your livelihood and mine) should not be thrown into jeopardy by a few companies who were allowed to run amok because common sense regulations were not in place.

 

If your kids are playing with matches and start a fire, the first thing you do is put out the fire (which is what the government is doing by preventing large, interconnected financial players from failing). The second thing you do is take the matches away from the kids. Should the kids have been smart enough not to endanger themselves? Yes, they should have. But if you don't take away the matches, you're a fool.

Eventually, the economy will recover. Eventually, stability will return to Wall Street finance. That's not the point. The point is that the entire U.S. economy (your livelihood and mine) should not be thrown into jeopardy by a few companies who were allowed to run amok because common sense regulations were not in place.

 

If your kids are playing with matches and start a fire, the first thing you do is put out the fire (which is what the government is doing by preventing large, interconnected financial players from failing). The second thing you do is take the matches away from the kids. Should the kids have been smart enough not to endanger themselves? Yes, they should have. But if you don't take away the matches, you're a fool.

 

Give us a solution. I hope it isn't take away the matches. I'd propose have a way to educate the kids about matches and playing with fire- which is why I proposed a consumer-interest board (private or government-run) that reports on the health of loans, and checks up on mislabeling of bundled loans.

 

I don't know if mine is plausible. Let's hear your solution

Give us a solution. I hope it isn't take away the matches. I'd propose have a way to educate the kids about matches and playing with fire- which is why I proposed a consumer-interest board (private or government-run) that reports on the health of loans, and checks up on mislabeling of bundled loans.

 

I don't know if mine is plausible. Let's hear your solution

 

 

I think regulations need to be tightened around the ideas below. Certainly, people with much more knowledge of the workings of Wall Street would be able to offer other suggestions:

 

1) Investment banks and possibly other financial institutions have been allowed to become far too leveraged. At the end of last year, Lehman had a debt to equity (D/E) ratio of 30:1. For those who don't know, that means the company assets were funded almost entirely by debt. It is the equivalent of buying a $1 million house with a $32,000 down payment. Such high leverage yields spectacular returns on shareholder equity as long as asset prices are increasing, but if asset prices drop, the thin amount of "shareholder equity" on the other side of the balance sheet disappears quickly and the company may find itself unable to make its debt payments. Large financial companies should be required to maintain a minimum cash reserve and should not be allowed to become so highly leveraged.

 

2) Many forms of complex derivative investment instruments are completely untouched by any government regulations. As a result, many types of derivatives have very poor transparency, meaning it is difficult to assess the underlying value and risk like you would be able to do if you were buying a publicly-traded stock. If you are interested in buying stock in a publicly-traded company, the SEC requires those companies to issue audited quarterly (10Q) and annual (10K) financial statements with strict reporting requirements as defined by GAAP (Generally Accepted Accounting Principles). The whole purpose is to ensure that investors have access to accurate information so they can make sound decisions. If you think about it, these regulations actually improve the functioning of the markets because they ensure quality information, which is critical in an efficient capital market. However, many types of exotic derivatives are not covered by regulations and there is little or no transparency. As a result, their risks are often not well understood, even though these things are often on the balance sheets of publicly-traded companies. The market for these types of investments is huge (tens of trillions of dollars), so the effects of invisible risk can be far-reaching. There needs to be effective regulation of derivatives like swaps to ensure adequate information is available

 

3) Mortgage regulations need to be rewritten to require minimum down payments (zero down home mortgages are insanity).

 

4) Wall Street rating agencies need to be regulated to ensure that their product is a reasonable reflection of risk. There might also be a need for regulations to ensure that these companies don't have conflicts of interest

 

5) Home appraisal firms need to be held to standards of performance, to ensure that appraisals are market-driven and worth the paper they are written on.

I think regulations need to be tightened around the ideas below. Certainly, people with much more knowledge of the workings of Wall Street would be able to offer other suggestions:

 

1) Investment banks and possibly other financial institutions have been allowed to become far too leveraged. At the end of last year, Lehman had a debt to equity (D/E) ratio of 30:1. For those who don't know, that means the company assets were funded almost entirely by debt. It is the equivalent of buying a $1 million house with a $32,000 down payment. Such high leverage yields spectacular returns on shareholder equity as long as asset prices are increasing, but if asset prices drop, the thin amount of "shareholder equity" on the other side of the balance sheet disappears quickly and the company may find itself unable to make its debt payments. Large financial companies should be required to maintain a minimum cash reserve and should not be allowed to become so highly leveraged.

 

2) Many forms of complex derivative investment instruments are completely untouched by any government regulations. As a result, many types of derivatives have very poor transparency, meaning it is difficult to assess the underlying value and risk like you would be able to do if you were buying a publicly-traded stock. If you are interested in buying stock in a publicly-traded company, the SEC requires those companies to issue audited quarterly (10Q) and annual (10K) financial statements with strict reporting requirements as defined by GAAP (Generally Accepted Accounting Principles). The whole purpose is to ensure that investors have access to accurate information so they can make sound decisions. If you think about it, these regulations actually improve the functioning of the markets because they ensure quality information, which is critical in an efficient capital market. However, many types of exotic derivatives are not covered by regulations and there is little or no transparency. As a result, their risks are often not well understood, even though these things are often on the balance sheets of publicly-traded companies. The market for these types of investments is huge (tens of trillions of dollars), so the effects of invisible risk can be far-reaching. There needs to be effective regulation of derivatives like swaps to ensure adequate information is available

 

3) Mortgage regulations need to be rewritten to require minimum down payments (zero down home mortgages are insanity).

 

4) Wall Street rating agencies need to be regulated to ensure that their product is a reasonable reflection of risk. There might also be a need for regulations to ensure that these companies don't have conflicts of interest

 

5) Home appraisal firms need to be held to standards of performance, to ensure that appraisals are market-driven and worth the paper they are written on.

I agree with 2 and 4. Transparency is the key to any solution. Investors need to be able to know what they are investing in.

 

As for number 1, banks are required to keep 10:1 cash reserves on hand, and I think that that is an adequate amount. I believe you are correct in saying that a 30-1 debt to equity is horrible, but a company wants to do that (and adequately expresses this to investors) then they should have the right to do that.

 

Number 3, same thing. Investors should be able to know what their company is doing that they are investing in, but that company should be able to take these high-risk loans.

 

Unclear exactly what you are saying on 5.

 

Transparency is certainly the key though. I believe that our citizens are entitled to the tools to make good investing decisions, but I don't believe that the government should be telling executives how to run their business. If people don't want to look into their prospective investments, that is there fault. With transparency, we don't need government regulations.

I agree with 2 and 4. Transparency is the key to any solution. Investors need to be able to know what they are investing in.

 

As for number 1, banks are required to keep 10:1 cash reserves on hand, and I think that that is an adequate amount. I believe you are correct in saying that a 30-1 debt to equity is horrible, but a company wants to do that (and adequately expresses this to investors) then they should have the right to do that.

 

Number 3, same thing. Investors should be able to know what their company is doing that they are investing in, but that company should be able to take these high-risk loans.

 

Unclear exactly what you are saying on 5.

 

Transparency is certainly the key though. I believe that our citizens are entitled to the tools to make good investing decisions, but I don't believe that the government should be telling executives how to run their business. If people don't want to look into their prospective investments, that is there fault. With transparency, we don't need government regulations.

 

I think H's recommendations are reasonable. I think the least we can ask for is for the government not to pave new and easier ways for companies to do such things. But, the problem is much deeper, in my opinion, than the government can handle, even if we wanted it to. These ridiculous, snaking, hidden, backroom deals allow for companies like Lehman or AIG to have their tentacles in such a vast amount of other companies and countries that we really don't know what would happen if it collapsed. (Or, I suppose we are going to find out with Lehman. But, that could take years before the full effects of that are seen.) The problem is that the current corporate structure and systematic ways of manipulating profits that are so ingrained in the American capitalist system, that the only way they will sort themselves out is if they are allowed to totally collapse on a massive scale. And I don't think that anyone is ready to endure that.