Subscribe to Dollars & Sense magazine. Recent articles related to the financial crisis. The Death Panel MentalityTwo interesting discussions, by Asia Times columnist Julian Delasantellis and The Independent's Johann Hari.Labels: health care reform, Johann Hari, Julian delasantellis Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Delasantellis on Foreclosed Home SalesThe Asia Times columnist sees a new breed of buyer--one that will buy-to-rent, and be financed by, of all things, debt! And don't forget to click on the link to the award-winning photo of the foreclosed property at the end of the article.August 12, 2009 Credit still at the wheel By Julian Delasantellis Asia Times In 1977, the Swedish pop band Abba sang Knowing Me, Knowing You, a lover's lament over once-vibrant rooms and a home now being vacated by passion's demise. These old familiar rooms, children would play, Now there's only emptiness--nothing to say. Walking through and empty house, tears in my eyes Here is where the story ends--this is goodbye. But that's probably not where the story ends--at least if the break-up took place in the United States. It's a lot more likely that it concludes at one of the thousands of court-adjudicated distressed home and property auction sales going on all across America, like the one I recently attended outside Seattle. Before the deluge, before the CDOs and the CDSs, before AIG and Lehman Brothers, and the TALF and the TARP, were the homeowners who borrowed and bought more house than they could afford. The nightmare that their American dream turned into was the match that lit the powder keg of an overleveraged world. According to Realtytrac, a real estate statistical service, 2.5 million American homes entered the foreclosure process in 2008, a number that had tripled just since 2005. For the first six months of 2009, foreclosures are running 15% ahead of last year's record, a torrid pace. In 1942, Austrian economist Joseph Schumpeter, in his book Capitalism, Socialism and Democracy, extolled capitalism's virtue in regularly promoting what he called "creative destruction", that is, the ability to build new, successful capitalist enterprises on the wreckage of those that have failed. In many ways here, the auction struck me as a celebration the "creative destruction" of about 80 families' dreams of a better life. Read the rest of the article Labels: bailout, financial crisis, foreclosures, Julian delasantellis, mortgage banking, mortgage meltdown Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). T. D.C.o.t.E (xiii): Flexibility FundamentalismThe Dull Compulsion of the Economic (xiii)A series of blog postings by D&S collective member Larry Peterson Flexibility Fundamentalism Recently The Financial Times featured an analysis of the US labor market entitled End of the Line. The piece was interesting inasmuch as it hinted that the fragility--to put it charitably, indeed--of the US social safety net may foster social tensions that could, in turn, have a negative impact on the flexibility of the US labor market (by leading to greater job protection, etc.). The unquestioned assumption throughout the piece, of course, was that the flexibility of the US labor market has been a good thing, or has had nothing much to do with the county's current economic and financial woes. In fact, the article refers to two prominent economists, Austan Goolsbee and Robert Reich, for tributes, of varying degrees of enthusiasm, to labor market flexibility. Goolsbee, now an adviser to President Obama, wrote in 2007 that "[W]e may be best poised to take advantage of the coming changes on a global scale precisely because we are so good at adjusting. The world economy may be tough on your industry but look on the bright side: you could be French." And former Secretary of Labor Reich, who should know better, was quoted in the article as saying "The US labor market is extraordinarily flexible, [which] in normal times is a great asset." He then goes on to add the following caveat, though: "When you have an economic downdraft like this, that same flexibility can become a severe detriment." Goolsbee's crass triumphalism looks ludicrous now, as the FT points out. It notes that France and Germany now have lower unemployment rates than the US (though both started with higher rates before the crisis began). But what does Reich mean by "normal"? It is now clear that the labor flexibility characteristic of the last few years was, far from being the product of, or reflecting "normal" conditions, made possible by the fostering of not one, but several different anomalies or imbalances. As is well known, median real wages, which had begun to reverse a marked slowdown from the 1970s on by the late 'nineties, were vigorously clawed back after the .com crash, and languished well behind sterling productivity gains until the middle of the next century's first decade, when, again, they began to creep upwards--only to be stopped dead in their tracks by the onset of the financial crisis. The wage contribution to GDP fell sharply as well, and here, as is again well known, real wage gains were captured only by the very, very wealthy. Meanwhile, benefits were falling sharply, especially as healthcare costs (high due to the existence of the dysfunctional US healthcare system, which, while doing little where vital statistics are concerned, contributed to labor market flexibility by making workers more dependent on the boss for healthcare benefits) skyrocketed. The mortgage bubble was enabled by these shortfalls, as a substitute for falling incomes, and as a means to maintain consumption in the face of falling pay packets (not to mention savings). And the consumption surrounding the housing boom played no small role in ballooning current-account deficits. Investment followed this consumption overseas, with US foreign investment tending to trump domestic investment. And foreign investment in the US increasingly became the province of state investors (who tended to purchase US Treasury and agency--Fannie Mae, Freddie Mac, etc--debt) rather than private ones: by the latter part of the decade, the old adage that the US's current-account deficit was a sign of strength--that foreign investors were expressing thereby a vote of confidence in the competitiveness of the US economy, and of its famously flexible labor markets--was becoming something of a joke, though the fact that so many foreigners had invested instead in the US mortgage market revealed that the joke could well end up being on them. But, back to the original point, productive investment did not respond vigorously to productivity gains in the US in the first decade of the twenty-first century, even with the Bush tax cuts to encourage them, or given the vast amounts of cheap borrowed money that were made available to investors as the Fed put the economy on steroids post 9/11. Then there were all the wonderful financial innovations that "lowered the cost of capital" and made capital available to relatively untapped consumers for the first time. These put lots of dollars at consumers' disposal, and enabled consumption to top 70% of national product, even as wages were stagnant (or, for some, even fell) and benefits became more expensive, or disappeared (many companies began to cancel 401K and healthcare programs as the decade wore on) altogether, and workers increasingly had to shoulder simultaneous burdens of saving for retirement, financing children's education, and caring for elderly parents. The hugely inflated costs of the latter trio certainly whittled away at the cheapening effects of the dynamic duo of cheap foreign production and easy consumer financing. Needless to say, practices in the subprime mortgage market topped this distinguished list, but the essential point here is that just about all of these means of maintaining consumer spending were part and parcel of a larger debt bubble, in which financial firms were betting huge amounts of other people's money so they could increase returns on the much smaller sums they put forward (If I take a dollar of mine, and borrow nine of yours, and the investment appreciates by 50%, I get a $5 return, which is pretty good if I've only bet one dollar of my own money--even if I pay a generous rate of interest, or, more likely, high fees). But in reverse, this process becomes pernicious (if I lose 50%, I've lost much more than my $1; and if, being unregulated, I'm not required to hold any reserves, I can go bankrupt after losing my dollar, leaving my creditors holding the bag), and such deleveraging, as Julian Delasantellis has noted, probably has a long way to go before all the rot is purged from the system: "As opposed to today's total government and private-sector debt load of almost $53 trillion, the 20-year period average is down at $43 trillion--that implies another $10 trillion of debt somehow disappearing, being written off, or (the most unlikely case) paid off. In the case of the solely "households and non-profit organizations credit and equity market instruments liability", another $1.2 trillion, in addition to what has already been vaporized, has to be written off as well." So, getting back to the original point, it's hard to understand how Reich can classify the situation of US labor in the last decade (at least) as anything near "normal." As we have seen, not one, but several clearly unhealthy factors either enabled or redoubled an almost masochistic flexibility the core of which, anyway, Reich seems to want somehow to preserve. And we've only spoken here of aspects of flexibility that strictly concern pay and benefits: when one considers work practices, as well as things like public education policy, healthcare and all the other areas that can be collapsed under the umbrella of productivity-enhancers, I would venture that the cutbacks or simple nonperformance in all these areas, again all-to-often implemented or merely accepted in accordance with the gluttonous demands of flexibility, have become, in ever-expanding ways, seriously counterproductive, despite continuing gains to the bottom line (as we shall see in a moment). But the situation could get worse for labor, even if legislative or executive means to increase flexibility are avoided, as they most certainly will be, given the severity of the downturn: in the second quarter of 2009, companies were already cutting costs at furious rates to bleed the semblance of profit from the stone of labor cuts and tax breaks. This is reflected in some truly eye-opening productivity-related figures: for instance, as Goldman Sachs economist Andrew Tilton notes, total hours worked fell at about an 8 percent annual rate in the second quarter, Labor Department data shows. Meanwhile, Tilton thinks second-quarter gross domestic product fell at a more modest 1 percent rate. Tilton then goes on: "That's a 7-point gap, and there have only been a few instances in the last 50 years when it has been that wide. It's particularly unusual at a time when the economy is not growing." Reuters then adds: "Indeed, the gap appears to have widened last quarter. In the first quarter, when GDP fell at a 5.5 percent annual rate, the number of hours worked fell at a 9 percent pace." Indeed, the situation has got so bad that economists are beginning to mix their admiration for US flexibility with fears that it has finally turned overtly pathological (i.e. that it threatens a level of aggregate demand sufficient for any sort of recovery). David Rosenberg of Glushkin Sheff (formerly of Merrill Lynch) claims that there is no evidence that profitability can be maintained on basis of cost cuts alone, and fears that when multiple sectors cut costs, it creates a snowball effect that in turn hurts everyone: "It's one thing when one or two sectors are cutting costs. But when it happens in every sector, this ends up eating into aggregate demand." So far, the Obama administration has not done much to help workers affected by this sort of bloodletting, and with 1.5 million workers expected to exhaust their unemployment benefits by the end of 2009, one would think the situation could become truly explosive. One would hope that the left would be at the forefront of a vigorous effort to concentrate this casual attitude on the part of the administration; and an end to the mythology surrounding the endless benefits of flexible labor markets might constitute a small contribution to such an effort. Labels: Austan Goolsbee, financial crisis, Julian delasantellis, labor, labor law, Larry Peterson, Robert Reich, the dull compulsion of the economic Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Goldman good but not that bad (Julian Delasantellis)Julian Delasantellis has a piece at Asia Times Online taking issue with Matt Taibbi's Rolling Stone article about Goldman Sachs. Hat-tip to LP for this.(Delasantellis is right that Taibbi's understanding of 1929, and Goldman's role in it, comes from Galbraith's The Great Crash (the chapter entitled "In Goldman Sachs We Trust"). But he is wrong not to care who is the best Bond—it is so clearly Connery that it is painful to watch the others, imho.) For related D&S reading, see this Ask Dr. Dollar column about the supposed "international banking conspiracy," and also Robert Zevin's piece, All that Glitters is Goldman Sachs. Goldman good but not that bad By Julian Delasantellis I've seen every single James Bond movie, a few on their opening morning in the theatres, but as for the eternal debate as to who—Connery, Lazenby, Moore, Dalton, Brosnan or Craig—was the best Bond, I couldn't care less. I watch for the villains. What a glorious gang they are. Suave, sophisticated, well spoken, all-powerful, all-seeing and all-knowing in their incredibly dastardly and ambitious plots, they seem quite the contrast with actors in today's world, Peter Principle incompetents who couldn't bomb the water even if they fell out of a boat. My favorites are Thunderball's Emilio Largo (Adolfo Celi), a man so evil that he seemed to have an offscreen orchestra follow him around continually playing ominously threatening sounding overtures (also, I liked the part that he was called the "guardian" of Domino, Claudine Auger-yeah, right), and Alex Trevelyan (Sean Bean) of Goldeneye. Putting a rare bit of actual history in the plot lines, Trevelyan's story was that he was a descendent of the so-called Liensk Cossacks, nationalist, anti-communist Russians who fought for Hitler during World War II. This group was betrayed back to Stalin's most untender mercies by the West after the war, and Trevelyan, a former MI-6 agent, still burns for horrible revenge against a British society that gave him its class, manners and refinement in exchange for the murder of his parents. After September 11, I wondered if we had, in Osama Bin Laden, a real live Bond-type villain, as he had managed to pull off, with not one of his henchmen getting lost or being prevented from getting to the airport by a dead battery or parking enforcement boot, a plot of truly Bond-scale perfidy and ambition. It was only later that we learned, by discovering that all Saudi pilots had to train in the United States to receive their commercial licenses, that all Bin Laden had done was to find a seam in American security big enough to fly jumbo jets through. Indeed, the belief that shadowy, all-powerful and all-secret conspiracies are forever working behind the scenes to thwart the American people's express will is a fairly common theme in American political and social life. Back before World War I it was the mysterious Colonel House who whispered in President Woodrow Wilson's ear to support the establishment of both the progressive income tax and the Federal Reserve; he is also said to be the one who, in contravention of George Washington's sacred advice to the nation 120 years previously to avoid "foreign entanglements", convinced Wilson to get the United States involved in the war. Prior to the Japanese attack on Pearl Harbor, it was said that the elite Council of Foreign Relations (CFR), the secretive society for all those Harvard and Yale scion not desirous to give the nation up to the new political reality of the New Deal, "arranged" for the attack by assuring that the US Pacific Fleet's aircraft carriers would be out of their Hawaiian homeport on December 7. Then, all during the Cold War, and the 20 years of New World Disorder that has followed it, the shadowy underworlds of both the extreme left and right have been continually striking from out of the darkness against the popular will. Taking Middle Europe's Crusades-era fantasies about mysterious Masonic orders to America animated much suspicion about the nation's Boston/Washington power axis in the still mostly uninhabited sunbelt. The conspiracies from the left were drawn more from current events than ancient history, with suspicions about plots ever being hatched by arms contractors, oil companies and multinationals such as Bechtel and ITT; neither right nor left had much use for the CFR. President George HW Bush's phrase that he intended should describe the post cold war era of peace and prosperity, the "New World Order", became a sort of nefarious conspiracy in and of itself, with NWO's silent black helicopters ever said to be prowling the dark skies of American suburbia by night, just itching to pluck a gun-rights activist out of his bed for eventual deposit at UN concentration camps in Montana. As a general rule, to be considered for the part of a nefarious worldwide conspirator, you have to be public and known, but not too much public and not that well known. Many conspiracy theorists posit that the strings of the world are being pulled by something called the Bilderberg group, but that sounds more like a fast-food drive through than a perverted cult of the super rich. Similarly, when it is said that the world is ruled by the Masons, care is made to specify that "the Masons" here refers to a super-elite and secret band called the "Secret Rite 33rd degree Masons", not ordinary, everyday Masons like your neighbor, who apparently isn't even powerful enough to return your lawnmower. Public, but not too public? If that's the central operating criteria to be accused of operating a secret world conspiracy, then it's no wonder that Rolling Stone writer Matt Taibbi chose Goldman Sachs to anoint upon the dark throne of current evil ruling conspiracies. In his long piece in the July 9-23 edition, "The Great American Bubble Machine—how Goldman Sachs has engineered every major market manipulation since the Great Depression." Taibbi says your empty wallet or pitiful ATM receipt slip are just about all Goldman's fault. Taibbi certainly cannot be accused of burying his lead, for in his second sentence he makes this comparison, probably more fitting to the monsters in the Sigourney Weaver Alien franchise than how you would commonly assume an investment bank would be described. "The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." After calling John Thain, the former Goldman employee who was Merrill Lynch CEO at the time of its buyout by Bank of America, a pejorative applicable to the exit terminus of the alimentary canal, Taibbi lifts Goldman's magician's curtain just a little bit higher. "What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain—an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased." Taibbi proves his point in two ways. First, he seems to have taken a comprehensive census of everybody working in the finance business around the world. Of course, he finds many, many former Goldman alumni in this manner; as the annual visit from the Goldman Sachs recruiter is the most important day in business schools around the world, this should not be that surprising. Among these are Thain, Bush, former Treasury secretary Henry Paulson and Clinton Treasury secretary Robert Rubin, along with Robert Steel from Wachovia, Bush-era White House chief of staff Josh Bolton, New Jersey governor Jon Corzine, Ed Liddy of AIG, Ebay CEO Meg Whitman , and "chattering television—( that orifice word again) Jim Cramer". It's certainly an impressive list; if you added on a bunch of foreign economic mandarins and central bankers it would be even longer. But does it mean anything? Taibbi seems to be implying that, for all these officials, employment at Goldman is like being in a mafia family—once you're in you're never out. Once you start doing Goldman's bidding, you will continue to do so forever—you've totally lost your ability to execute your individual desires in favor of those being broadcast to your head from Goldman Sachs' World Headquarters on Broad Street. Even more surprising is the fact that, for the overwhelming majority of these ex-Goldmans, the view that money is the central operating factor in economic decisions illuminates how they deal with their careers as well as the companies of which they are employed. Goldman could have kept their wayward staff until they took their secrets to the grave, but not when other institutions start offering better deals. That caused the alumni to go out from Goldman and conquer; the alumni are still working hard, hoping that some other future prospective employer will see their work and hire them away once more. In short, would it be rational for all of the Goldman competitors and other institutions who have hired Goldman alumni away for premium prices to accept a situation where their new employees are still known and accepted to be working to advance Goldman's interests? If the answer to that question is no, much of Taibbi's argument falls away almost immediately. The second part of Taibbi's argument is to look back on five previous economic calamities, and one possible one in the future, to dig out Goldman's previously hidden secret duplicities. Taibbi goes back 80 years for his first example of Goldman perfidy, back to the heady days of 1929 before the great Wall Street Crash. Excessive employment of leverage was as much a cause of that crash as it was the current one, but back then, leverage was effected not through exotic debt securities, but through mutual fund like vehicles called "investment trusts". Most of Taibbi's 1929 analysis comes from John Kenneth Galbraith's masterpiece on the subject, The Great Crash. Taibbi notes that: Beginning a pattern that would repeat itself over and over again, Goldman got into the investment trust game late, then jumped in with both feet and went hog-wild. The first effort was the Goldman Sachs Trading Corporation; the bank issued a million shares at $100 apiece, bought all those shares with its own money and then sold 90% of them to the hungry public at $104. The trading corporation then relentlessly bought shares in itself, bidding the price up further and further. Eventually it dumped part of its holdings and sponsored a new trust, the Shenanndoah Corporation, issuing millions more in shares in that fund—which in turn sponsored yet another trust called the Blue Ridge Corporation. In this way, each investment trust served as a front for an endless investment pyramid: Goldman hiding behind Goldman hiding behind Goldman. But what Taibbi does not mention was that Goldman's investment trusts were hardly the biggest on the street; United Founders and State Street's trusts bested Goldman's. Also, how does one mesh Taibbi's conception of an all-powerful Goldman eternally directing efforts behind the scenes with the fact that the bank lost, in current value, $475 billion during the period, with its stock dropping from $102 to $3? If that's what's happened to the chiefs, just imagine the world of hurt of the Indians. Read the rest of the article. Labels: Arthur MacEwan, Goldman Sachs, James Bond, Julian delasantellis, Matt Taibbi, Robert Zevin Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Delasantellis on Realtors' Latest Lobby EffortFrom his Asia Times column:Cheating still beats real work By Julian Delasantellis Asia Times July 2d, 2009 A colleague recently relayed a story about her experience as an observer at a faculty/student disciplinary hearing for a pre-law undergraduate charged with cheating. Apparently, this young man had come around to the belief that, when it came to engaging in conduct that could get him expelled, in for a dime-in for a dollar. Just in the space of a single term, his teachers had found him copying from a test, rifling through the course's graduate assistant notebook looking for a test, and, word for word, punctuation mark by punctuation mark, lifting without attribution a large section of a Wikipedia entry on "jurisprudence" for a research paper. "How do you answer these charges?" asked the earnest student prosecutor, who, both my colleague and I agreed, can be expected to be next seen on TV in Kevlar helmet, flak jacket, frameless glasses and FBI windbreaker when the government takes down another religious compound in 2017 or so. Read the rest of the article Labels: appraisal management companies, bailout, financial crisis, Julian delasantellis, mortgage meltdown, National Association of Realtors Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Down the dark path (Delasantellis on Geithner)Hat-tip to Larry P. for this; he says "it's by far the best thing I've read on this travesty."I am in absolutely no possession of any historical evidence that 16th-century English jailers employed modern stand-up comedians to bring a bit of levity to their inheritantly bleak workspaces, but what if they had? What if, as the clock ticked down in the Tower of London before the execution of Sir Thomas More ordered by King Henry VIII in July 1535, a comic, in the style of the late Rodney Dangerfield, was brought in to do stand-up? "Hey, everybody looks great here. Anybody here Papists? Don't worry, your secret's safe with me—I haven't even paid the withholding tax on my foodtaster yet. I just flew in from the Isle of Man, and boy, are my arms tired—you know what I mean? Hey, prison guards! I never knew why they called you guys Beefeaters until I saw your wives outside the gates!" Turning to the condemned man. "Hey, Tommy, I got good news for you. You're not going to be drawn and quartered tomorrow." "Pray tell sir, do not jest!" "I'm serious. Big H's gonna cut your head off instead!" That's a little bit like the situation with the newly revealed, final US Treasury Secretary Timothy Geithner toxic asset recovery bank program. It may work. It may not. Whatever happens with its effectiveness, one thing is certain. US taxpayers are definitely going to be getting the chop, maybe you could even say they're getting it in the chops, as a result of its implementation and administration. Read the rest of the article. Labels: bailout, financial crisis, Henry VIII, Julian delasantellis, Rodney Dangerfield, Sir Thomas More, Timothy Geithner, toxic assets Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Delasantellis on Foreclosure EndgameHe has some great observations about US politics setting the upper middle class against the working and lower classes as well. From his Asia Times column:A scam at the heart of the US By Julian Delasantellis Asia Times, February 26th, 2009 Travelers visiting New York city from Americas's rural heartland in the 1980s might have been able to regale the folks back home with tales of encounters with knife-wielding drug addicts and/or disease-scourged prostitutes, but it's not like their predecessors who made the same trek back in the 1950s didn't have a tale to tell around the cracker barrel as well. They might have come back to the square dance and talked about playing and losing at the game of three-card monte. Set up on rapidly movable folding card tables, in order to remain mobile against the disproving eyes of the constabulatory, three-card monte games were operated by New York sharpies who, when spying a rural rube from Racine, Wisconsin, or maybe Red Wash, Utah, would invite the visitor to play a simple card game. Three cards from a deck would be dealt face up-one a face cardsuch as a King or Queen. Then the cards would be turned face down, the "dealer" would arrange and re-arrange them on the table, and, the contestant would be invited to chance a wager as to which card was the face card. This was a lot harder than it seemed, especially with the dealer usually employing sleight of hand to hide the face card in his sleeve. No matter how hard he tried, no matter with how much concentration he watched the dealer's hands, the contest could never be won by its very nature; the player was destined to lose the card and his wager - rather like the chances of those facing foreclosure in the current mortgage and financial crisis of ever gaining relief from their hardship. Read the rest of the article Labels: Fannie Mae, financial crisis bailout, Fredddie Mac, housing market, Julian delasantellis, mortgage innsurance, mortgage meltdown, securitization Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Julian Delasantellis on Stress TestingThe witty Delasantellis offers his thoughts. Nice to read in conjuction with our post on Bill Black today:Perhaps a cool hand by Julian Delasantellis Asia Times February 17th, 2008 It wasn't the planet-killing asteroid from 1998's Armageddon that you heard slamming into Earth with a deafening thud last week, but the consequences of what it was may be just about as serious. It was but the latest attempt, the Treasury Secretary Tim Geithner plan, to pull the US financial system out of the deep hole it so aggressively and enthusiastically threw itself into during the great credit boom early in this decade. How bad was it? Well, as Wall Street secretary pretending to be investment banker Tess McGill (Melanie Griffith), in 1988's Working Girl, observed on her attempt to pitch a corporate buyout seemingly going badly, "They don't exactly have bouncers atthese things, they're a little more subtle than that." Geithner should be thankful for that as well. If not, he would have been grabbed by his collar and thrown out into the gutter on Pennsylvania Avenue, beneath the statue of Alexander Hamilton, his country's first Treasury secretary, realizing that, on the basis of the tax problems and this dubious financial system rescue plan that have essentially become the coming-out party for the Treasury debutante, he has a long way to go to even match up to the standards of Ogden Livingston Mills, Herbert Hoover's second Treasury secretary, let alone the giants in the office such as Hamilton. The basic complaint about the Geithner plan was that it was vague. At a time as dire as this, the press, and, it turns out, the markets, with the Dow Jones Industrial Average dropping over 350 points just as Geithner was speaking, wanted something a bit more substantial than just the Treasury secretary playing coy and batting his baby-blue eyes before the entire world. Read the rest of the article Labels: bailout, bank failures, bank stress testing, banking regulation, banking system, financial crisis, Julian delasantellis Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Good Review of SubprimeThe excellent Julian Delasantellis, who contributes regularly to Asia Times, reviews Confessions of a Subprime Lender, by Richard Bitner, who worked in the industry and coundn't take it anymore. The review serves as a good refresher on some of the chronology, arcana and issues, and is just fun to read because of Delasantellis' writing style and wit.BOOK REVIEW Subprime--an (im)morality tale Confessions of a Subprime Lender by Richard Bitner Reviewed by Julian Delasantellis In 1949, the hard-boiled American crime writer Raymond Chandler observed that "Such is the brutalization of commercial ethics in this country that no one can feel anything more delicate than the velvet touch of a soft buck." It wasn't that "velvet touch of a soft buck" that the subprime mortgage business felt, and fell victim to, these past few years; it was the creamy caress of about 3 trillion of those soft bucks. It was the heady intoxication of this sensation that caused the industry to abandon all pre-existing standards of banking probity and morality, and this is the story that Richard Bitner tells in his new book, Confessions of a Subprime Lender. By 2006, Bitner, co-founder of subprime broker Kellner Mortgage, had seen so much of his industry's blatant balderdash, howling half truths, and malevolent mendacities that he could stand no more. Walking away from a business that had made him, and everyone in his business, insanely wealthy in an insanely brief amount of time, he pledged to write a book that would tell the truth about this business. Amazingly enough, considering the dross that winds up in the business sections of the bookstores these days (The Way of the Bushido Method to Sell Your Timeshare or, 12 Apostles=12 Successful Salescalls--The New Testament Sales, Commission and Wealth Plan) Bitner could not find a publisher for his work, so he self-published. Buzz spread and word got around, John Wiley and Sons put out an edition in early summer. On Amazon.com, the book is now ranked number 4 in the "mortgages" sub-category of Business and Investing/Real Estate Read the rest of the article Labels: Asia Times, banking regulation, financial crisis, financial crisis bailout, Julian delasantellis, mortgage meltdown, subprime lending Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). |
