⌛ "The Earth is but one country, and mankind its citizens"

The collapse of WaMu has been interesting to watch, especially since I work just a few blocks from their (former) corporate headquarters. WaMu was the bank that loaned money to people rebuilding after the Great Seattle Fire. They prided themselves on being the hometown bank for many decades after. Several years ago things started to rapidly change. WaMu started buying everything they could get their hands on along with absorbing smaller lenders nationwide. Then they got involved in speculative finances which later became commonly known as “sub-prime” loans. They quickly became the largest thrift bank in the US. To commemorate their achievement they built a huge, state-of-art office tower in downtown Seattle. Reports came out that WaMu was heavily involved in “sub-prime” lending and were on the list of possible bank failures. When the credit crises hit they insisted, again and again they had enough capital to survive. This didn’t prevent account holders from withdrawing their money; nearly 18 billion dollars in one week.

On a historical note:

While some parallels may be drawn between the Great Depression of the 1930s and the current economic turmoil I would like to clear up some common misunderstandings about the causes of the Great Depression.
It is commonly believed that greedy capitalists are responsible for the Depression, however, it was the US Federal Government that turned a typical period of adjustment (recession) into an economic catastrophe.
Following the stock market crash of 1929:

1. President Hoover persuaded business leaders to keep wages artificially high which increased unemployment.
2. President Hoover created the FFB which made loans to farmers so they would keep their crops off the market in order to maintain high prices. This made it even harder on people with little money to buy food.
3. The FFB created the Grain Stabilization Corporation which purchased wheat from farmers instead of allowing it to be exported in order to maintain high prices.
4. The FFB chairman asked state governors to plow under every third row of cotton that was being grown.
5. President Hoover pushed through the Smoot-Hawley Tariff. Our trading partners retaliated with tariffs against the US essentially shutting US manufacturers out of overseas markets further increasing unemployment.
6. The Revenue Act of 1932 was the largest peacetime tax increase to date confiscating capital that could have been invested in businesses.
7. President Hoover created the Reconstruction Finance Corporation to provide emergency low interest loans to, primarily, railroads and banks. The RFC eventually loaned money to state governments for unemployment and to fund public works projects. The businesses Hoover tried to save either went under anyway or were burdened with a crushing debt for the remainder of the 1930s.

The “takeaway” is that government intervention, when incorrectly applied, can create a greater problem than originally existed. This government has a history of creating a crisis, providing a solution which leads to another crisis so they can once again swoop in to save the day. Just something to think about during these times.

 

doom and gloom. employment level during a recession is still unbelievably resilient, so how many people are really effected.

the balance between government control and trusting the citizens to govern their business's, families and communities has always been debated.
the problem is a personal thirst for credit and asset speculation, people need to take responsibility for their actions and risks, assess prices go up and down accept it.

i for one applaud the usa effort to prop up international credit flows, but if i was usa tax payer, i do not know how grandiose, i would be to pay my tax dollars to international companies and external countries.
all empires end sometime, but it is way to early to ring the death keel for the usa.


"The Euro will become the preferred currency of choice around the world"
teacher if u are abetting man, i will bet with u, that the dollar will be stronger against the euro in 12 months . take me up?

 

From what I understand of this bailout is that it's not really even a bailout. But rather it's a huge garage sale on Wallstreet (and elsewhere) where everything goes for bargain basement prices.

There is potentially a boatload of money to be made, but the U.S. government is the only player in town which can really act from this. The reason is that while the assets to be bought are going to go really cheap, they would still be way too risky (and overvalued) in an economic meltdown. And in this condition, nobody is going to give up liquidity to do so.

The "bailout" comes from the U.S. gov being the the only player with money to spend. If they give these troubled banks money in exchange for the toxic assets, then the banks will hopefully have the money (and rid themselves of the burdensome bad assets) to do what they normally do and keep the economy going.

In a good economy, many of those toxic assets will go back to a decent value and many others will become worthless. In the end, the balance could end up in a windfall for taxpayers. Also, the U.S. government has the resources to ride out the ups and downs while the banks do not.

However, that is not to say that other players couldn't jump in. As I posted before, Warren Buffet anticipated the gov decision by investing 5 billion of his own in Goldman Sachs. He has said he wouldn't have done this if he believed the U.S. gov wouldn't have passed the bailout.

The American anger against the "bailout" is more ideological than anything else. As is the House Republicans stand against the plan. People believe it's not right that these companies should be bailed out when regular people aren't going to get their own bailout (even though it's the houses which regular consumers bought and couldn't afford which got us into this mess.)

I don't totally agree with the anger of many of the American people. If the jobless rate were to climb significantly higher and people could no longer get loans for school, houses and business then they would have something else to complain about.

But in this case I think reality trumps ideology. We need this bailout. And again, the government stands to make a lot of money. Or at least get its money back.

 

"The American anger against the "bailout" is more ideological than anything else. As is the House Republicans stand against the plan. People believe it's not right that these companies should be bailed out when regular people aren't going to get their own bailout (even though it's the houses which regular consumers bought and couldn't afford which got us into this mess.)"

how angry would they be if they had a look at the lunatic coke fueled decadent lifestyles of the traders they are supporting (i will exempt the analysis's from the lunatic tag)

nice point about cheap assets.

 

The American home buyers are responsible for buying homes they couldn't afford. Lenders are responsible for giving out loans to people who shouldn't have been able to get loans. Wall Street is responsible for trading these toxic assets as if they were low risk. Gov. regulators were responsible for letting this all happen without stepping in.

Blame goes from one end of the food chain to the other.

 

Well said Dude.....it's all down to greed which ever way you look at it.
From the very top to the bottom....but that's capitalism for you.

 

Yup, but it's a lot easier for everyone to point their fingers and place all the blame on the government or the banks.....I feel that your average Dick and Jane that went out and got a no money down, adjustable low interest subprime mortgage should be held equally responsible as well for this mess.

 

Yes it is the Banks and goverments fault

USA Today reported that 64 percent of high school graduates go to college, but the number of Americans with bachelor degrees is only 29 percent. So what happens to that other 35 percent between the time they go and four years later?
Many students simply aren't equipped to attend. They can't foot the bill, or don't have the academic skills. For many, their personal habits interfere with their success. Besides money, college demands maturity and self-discipline. If you don't have those, college can chew you up.
Secondly, there's the question of whether we need college degrees - as individuals or a society. The United States has the largest economy in the world, but less than a third of us have a degree. Yeah, we need educated folk running the country, but we rely just as much on those who ask, "Do you want fries with that?"
Finally, some choose to educate themselves in their pursuit of rewarding jobs and a comfortable life. In America, the average salary for teaching, which requires at least a bachelor's degree, is $45,722. The starting salary for a power lineman (those good guys who climb power poles to keep our electricity coming) is $55,000. No college degree necessary, though some training (and risk) is required. That salary increases to $72,000 for journeymen. What would you do?
The average American isn't equipped to understand the complexity of buying a home or their mortgages. You really need a lawyer to explain it to you. But the average Joe on the street you say I can get you a house with low or no down. They will start signing anything you put in front of them. Because home ownership has always been a dream of Americans. Not to mention trying to keep up with the joneses. So atlargex it is the fault of the banks and the government they knew what would happen and let it.

 

I don't want to start an ideological debate here since I don't believe that's why this website was created. I know some have tried before to guess my political affiliation and have been wrong although I certainly don't hide it. I would like to say it would be nice if Americans would simply admit they live in a socialist state rather than clinging to the delusion that this is a free-market, capitalist system. No, I'm not a socialist.

I don't know if we're getting too far off-topic or not, or if that matters, but I do enjoy reading your viewpoints.

 

Now the democratic-socialist states of America

Timn8ter there's no circumventing that deduction: The federal government's mind-blowing economic involvement has turned America into a democratic-socialist state. The fact that these desperate movements are happening under a purportedly conservative administration leaves this expat fatigued and disillusioned. You are not off topic this thread is for intellectual conversation there must be something more to life than just a cold beer and complaining about the place you reside. I know you are the one of the few people that could comprehend the meaning of this thread. As for me I am more of a observer these days. Being an American for me is just my roots, I am an expat now.