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Old 09-21-2008, 07:52 PM   #16
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Here we go:

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"Congress will respond to the financial markets crisis by taking action this week in a bipartisan manner that will protect the taxpayers’ interests. The Administration’s $700 billion proposal does not include the necessary safeguards. Democrats believe a responsible solution should include independent oversight, protections for homeowners and constraints on excessive executive compensation.

"We will not simply hand over a $700 billion blank check to Wall Street and hope for a better outcome. Democrats will act responsibly to insulate Main Street from Wall Street."
Now watch McCain and the GOP start screaming about obstructionist Democrats in Congress.
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Old 09-21-2008, 09:56 PM   #17
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It looks like the investment bank may be a thing of the past:

wsj.com:

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The Federal Reserve said it had approved the transformation of both Morgan Stanley and Goldman Sachs from investment banks to traditional bank holding companies, a step that would place the last two Wall Street titans under the close supervision of national bank regulators, subjecting them to new capital requirements and additional oversight.

The Fed said it would also extend additional lending to the broker-dealers of the two firms, in addition to Merrill Lynch's, as they make the transition.

The steps effectively mark the end of Wall Street as it has been known for decades, and formalizes a quid-pro-quo that regulators have warned about in the months after Bear Stearns's near collapse -- in return for access to the Fed's emergency lending facilities, the firms would need to subject themselves to more oversight. The step could have far reaching effects on their profitability and their business models.
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Old 09-22-2008, 01:04 PM   #18
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Get the Politicians Out of the Economy: Recipe for Sound Economic Growth - Blog

The Corner on National Review Online

Back to the fundamentals guys. Let those who screwed up be punished and people need to look at the stock market less like a casino and more like a place to earn independence slowly with less risky investments.

Wealth will come from savings over time and not from big jackpots.

The longer you gamble the increased chances you will lose. Most people can't afford to lose any capital.

Do not lose your capital. Those who had safe investments earned less income but suffered no losses in their capital. It's like the tortoise vs. the hare.

Pay off all credit card debts and lines of credit as fast as you can.

Pay off mortgages ASAP!

Once that is done save 20% of your paycheck and invest in safe investments. It will take approx. 15 years, (after paying off your mortgage), of saving and investing in safe investments before you will notice significant financial independence. If you can comfortably save more than 20% then DO IT!

Avoid mutual funds and brokerage fees like the plague. Buy actual bonds and stocks. When companies go belly-up the actual holders of the securities will get their money before mutual fund unit holders during bankruptcy.

Reinvest your dividends and interest into more safe investments. It's easier to save money when your investments do it for you.

Guaranteed income certificates, Government bonds are safer than company bonds, and blue-chip stocks than penny stocks. I advise staying away from most stocks until you've paid off your house and have some significant income coming from your investments. In fact pay off your mortgage before you get heavy into investments.

Read more books on economics and investment. I'm talking about hard economics because there are lots of bozo economic and get rich quick scheme books out there that will steer you into greed/gambling mentality.

Live a life that allows you to save. Spend money on entertainment after you achieve goals rather than spoiling yourself all the time.

All this requires self-discipline to pull off. Those who can discipline themselves always have the best life. Self-discipline takes practice.

If you want a higher salary then go to school and get a practical education that can lead you to higher paying opportunities.
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Old 09-22-2008, 01:23 PM   #19
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Originally Posted by ntalwar View Post
It looks like the investment bank may be a thing of the past


when i think back to college, and i think back on all the brilliant people who went to Wall Street, i can't help but sometimes think that we'd all be better off if they put their brainpower to work doing things other than raising capital.

it started sometime in the 80s, or maybe even the mid-1990s, but at some point bankers became cool. this was never traditionally the case. perhaps this patina of coolness is gone, along with the mega-bucks one was once able to earn, even at the age of 25, and maybe now the pull will be less towards Wall Street and more towards medicine, engineering, etc. places like Goldman Sachs and Lehman and Bear Sterns and the others would show up on campus, collect resumes, whittle them down for interviews, then whittle those down a bit more and bring them down to new york where they'd meet other recruits from similar top-tier universities and then set these 22 year old kids loose in Manhattan for a weekend -- they'd feed them wine, champagne, ride them around in limousines as they'd do a scavenger hunt, put them up in hotels like the W or the Soho Grand. then within 6 months these same kids would be sleeping at their desks and working 90 hour weeks. and then they'd go to B-School.

it's not that we don't need bankers. not at all. i'm just glad that the tractor beam of mega-salaries might be exerting less of an influence on each year's smartest crop of seniors. wouldn't it be great if all that effort and brain power were put to use in another field of endeavor?
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Old 09-22-2008, 02:17 PM   #20
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NYT 1999: Fannie Mae Eases Credit To Aid Mortgage Lending [to minorities and uncreditworthy]

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NYT 1999: Fannie Mae Eases Credit To Aid Mortgage Lending [to minorities and uncreditworthy]
The New York Times ^ | 1999 | By STEVEN A. HOLMES

Posted on Saturday, September 20, 2008 7:12:48 PM by Jim Robinson

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''

Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.

Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.

Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.

In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.

Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.

In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.

The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants

YouTube - Explosive Video, Fannie Mae CEO calling Obama and the Dems the "Family" and "Conscience" of Fannie Mae
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Old 09-22-2008, 02:32 PM   #21
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Quote:
Originally Posted by Irvine511 View Post
i'm just glad that the tractor beam of mega-salaries might be exerting less of an influence on each year's smartest crop of seniors. wouldn't it be great if all that effort and brain power were put to use in another field of endeavor?
True - it might take a couple years at least to filter through the system as it's too late for many people to switch majors. It's not a good time to be starting off as a first year MBA or graduating with a BBA, with expectations of a Wall Street job. Some positions will continue to pay high salaries - such as trading (for the top traders). But the massive bonuses for everyone will probably be a thing of the past.
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Old 09-22-2008, 07:27 PM   #22
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The massive bonuses exist because of the changes to the tax act which capped exec salaries at a set amount (I think it was $1 million) EXCEPT for payment tied to performance. That's when it all went to shit.
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Old 09-22-2008, 08:27 PM   #23
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Read the article. Extremely interesting although I must admit not knowing anything about economics. At the very least the article made me realise I have to do more research on this subject. Thanks.
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Old 09-22-2008, 08:56 PM   #24
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The massive bonuses exist because of the changes to the tax act which capped exec salaries at a set amount (I think it was $1 million) EXCEPT for payment tied to performance. That's when it all went to shit.
I see. Goldman's 2007 average bonus was $600k, double or triple that of other large firms last year. It'll be interesting to see what it is in 2008.
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Old 09-22-2008, 10:45 PM   #25
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it started sometime in the 80s, or maybe even the mid-1990s, but at some point bankers became cool. this was never traditionally the case.
"Greed is good." ~ Gordon Gekko (Michael Douglas), Wall Street, 1987

I'm pretty sure that's when it started.

What I find truly remarkable and unbelievable is that the investment bankers that have pulled an Enron on our economy are being bailed out by the taxpayers whose representatives have had NO SAY in the matter. No session of congress. No appropriations committee. No judicial review. No due diligence.

As I recall, the Enron executives were tried and went to prison. The executives of the falling investment banks are still making their millions. Only now it's directly on the backs of the working class who are paying their failed gambling debts through government bail outs arranged by the Fed. Which happens to be a private financial organization.

It's utterly perverse.
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Old 09-22-2008, 10:51 PM   #26
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You can't fully liberalise a sector and then sue the people when they have taken advantage of what you have given to them.
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Old 09-22-2008, 11:06 PM   #27
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Well, except that's exactly what Enron and Worldcom did and they got called on it.

So if people really are ok with the national debt being raped and pillaged because a sector was liberalised then taken advantage of in ways that no one understands (nor have been publically debated), then the average American citizen got what they asked for (deserved).

It's all good.
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Old 09-22-2008, 11:19 PM   #28
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No, Enron clearly broke the law and that is why there were verdicts on it. They falsified balance sheets and gave out false information.
The managers of the investment banks didn't break laws to do what they did. It's highly doubtful that there will be any successful lawsuits against them.
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Old 09-22-2008, 11:23 PM   #29
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Looks like European banks may be too big to bail out (if they needed it):

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European Banks: Too Big to Rescue?

European banks face greater capital shortages than their U.S. counterparts, but have become too big for any one European country to save, according to an article published Saturday by European economists Daniel Gros and Stefano Micossi on the Centre for European Policy Studies’ Web site.

That means a rescue of the European financial sector like the $700 billion plan proposed by the Bush administration over the weekend would be difficult, requiring coordination by the European Central Bank with the participation of all European countries.

The “overall leverage ratio” - a measure of total assets to shareholder equity - of the average European bank is 35, compared with less than 20 for the largest U.S. banks, the economists say, and relatively small writedowns on their assets could have a devastating impact on a bank’s capital.
Real Time Economics : European Banks: Too Big to Rescue?
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Old 09-22-2008, 11:37 PM   #30
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No, Enron clearly broke the law and that is why there were verdicts on it. They falsified balance sheets and gave out false information.
And Al Capone went down for tax evasion.

Enron was covering up (with the help of external accounting auditors) its speculative investing that led to its implosion.

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The managers of the investment banks didn't break laws to do what they did. It's highly doubtful that there will be any successful lawsuits against them.
How would anyone know when the situation hasn't really been examined closely or publically?

Regardless, why should the taxpayers bail them out without consequences?

Let the liberalised market take care of itself.
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