If you're new here, you may want to subscribe to my RSS feed. You can also subscribe via email.Thanks for visiting!

Rep. Barney Frank, Chairman of the House Financial Services Committee wants more regulations for wall street, and to pass laws "addressing" executive compensation.  I'm guessing "address" here means limit.

Obama's 'banking czar' Paul Volcker has his reform proposal, and it seems everyone in the country who doesn't make as much money as wall streeters or bankers wants them to make less.

I think truly those people would probably be happy if they made more, but since most of us  don't see million dollar bonuses in our futures, we think about how much those guys are making.  Especially since most of them are still making it and some of us are making nothing.

We have a couple of issues here - everyone is unhappy, and with reason, over what the financial markets have managed to do to us, and at the same time, do for them.

So lets look again at what they did:

At the most simplistic level:

1. They came up with dozens of ways to make money - they came up with new products to sell to everyone from other investment banks to institutional investors, to those people who had never paid a bill in their life, but still wanted to own their own homes.
2. They did this with encouragement from the Clinton Administration (changes to Fannie/Freddie guidelines to assist more people into home ownership)
3. They did it with help from the Federal Reserve (who kept credit really really cheap, not just for institutions, but for EVERYONE in the country)

Am I okay with it?  Hardly.  My life has been turned inside out.  But I believe that the people who are trying to FIX this problem don't understand exactly how we got where we are. 

Read any book written on Lehman Brothers, they'll all tell you that Lehman Brothers Chairman and CEO Richard Fuld - who by the way made over $30 million the last year his company was still breathing - didn't understand the markets and what his people were doing to them and doing with them.  

And not to just pick on Dick Fuld (although a lot of people will agree with me that he deserves it), Long Term Capital Management's John Meriweather wasn't aware that his traders were hanging him out to dry.  That was the first of the almost crippling blows to the economy. 

And it should have been the first red flag that maybe, just maybe, leveraging capital (someone else's capital) to the tune of 40 to one may have been more than just a bad idea.

I don't think it is possible for people completely outside the hallowed money walls to get to the root, fix it, and keep the US afloat while they do it.  Hell, the Fed and the SEC weren't doing anything when those guys were playing fast and loose with our lives and our livlihoods, how can Senators and Congressmen begin to get a grasp now and figure it out, then make the necessary corrections?

I read in THE WEEK's Confidential Intelligence Briefing (touted as some of the most intriguing information and opinion printed in THE WEEK in the last year):

 

A new study revealed that "functional psychopaths" make better investors, [and] CEOs ... than normal people because they lack normal human emotions.

I don't know who did the study, and I don't care.  It makes a good story, doesn't it?  And those Wall Street Guys that dreamed up those products, sliced and diced credit derivatives, and sold them off in a thousand different directions, they made great investors, didn't they? Most of them? The ones we've heard about?  They made money for themselves and for the financial institutions for whom they worked. Trouble is, they made if off the backs of their countrymen, and the backs of half the world, and that's not okay with us.

But I fear the worst from those who run out screaming now that they will fix this and fix that. Why didn't they notice when it was happening? Why didn't anyone get a handle on it then?

And, really, how'd they get so much smarter here lately?

In the AIG debacle, where AIG has officially estimated a discount of 20% to 50% for clients who have been offered the opportunity to redeem half the fund; and while they can redeem residual income, due to mature in 2012, now, it appears that will be at 30% lower than face value. Finally, some Ethics are being exercised in the world of  working "other peoples' money" While I don't lately think of ethics and Wall Street banks in the same sentence, Barclays Wealth says they will "step up to the plate" to offer their clients support in recovering from AIG. An unnamed  Barclays spokeswoman confirmed the bank's earlier comment: “We have a dedicated team working with AIG to determine the best way to achieve the return of all funds to our clients. This team is working closely with other private banks. We are focusing our efforts on representing the interests of our clients in these discussions. You may recall that Sallie Krawcheck (known as one of the most powerful women on Wall Street,  named as one of Forbes 100 Most Powerful Women)  resigned from Citigroup's wealth division in September, "after failing to persuade her former employer that it should compensate clients for investment losses" according to the Wall Street Journal. (Read the article, it wasn't the only reason she left, but it makes her a hero in my book.) Maybe the Universe will right itself . . . maybe.

“Whatever money you may need for the next five years,” Jim Cramer told the legions of Cramericans yesterday, “please take it out of the stock market right now.” From Agora Financial's 5 minute forecast: "Mr. There’s always a bull market somewhere” officially checked out of the current market, suggesting that a the current drama could cause “as much as a 20% decrease in the stock market.” You don't have to run screaming from the market and take losses today because Cramer said to.  You can take a loan against your portfolio to hedge against losses; non-recourse loans mean that if your stock tanks, you can walk away. I don't recommend making any decision on the emotions we're experiencing now.  Check out your options, take a deep breath, then sleep on it. Manage the risk of owing stock in this market by taking out a stock loan.  If you have $1 million in stock you can borrow $500,000.00 now and if the stock drops in value during the loan you can walk away from the loan without any negative impact on your credit. If the stock increases in value you can capture that appreciation. There is NO fall-back position to selling your stock. Done is done. Use a stock loan to hedge your position instead of abandoning it.

Dan Slater writes in the Wall Street Journal LAW BLOG: Bear Fund Managers Get Good Draw, Sizing Up Judge Block So, Justice Carries a Swift Sword?  We'll See - Curiously, a poster named "Anonymous", says "the sub-prime mess  . . . has plenty of people who deserve fines and jail time . . . BUT these guys are not the scapegoats we need." Well, gee, they thought up the hedge funds, created them, bought the mortgage backed securities, and then (!) CIOFFI was charged with insider trading for moving TWO MILLION DOLLARS OF HIS MONEY out of the fund . . . leaving institutional investors in the fund with no warning . . . when they knew the fund was in danger. They may not be the scapegoats we NEED, but it certainly appears they need to be in front of a judge for the way they ran the funds!

The U.S. Attorney's Office for the Eastern District of New York handed down indictments for Ralph Cioffi and Matthew Tannin formerly with Bear Stearns.  You may or may not recognize them as the brains (if you will forgive me) behind the Bear Stearns High Grade Structured Credit Strategies Fund (begun  in 2003) and the Bear Stearns High Grade Structured Credit Strategies Enhanced Fund (begun  in 2006), both of which failed miserably earlier this year. From the US Attorney's Office (Eastern District of New York) Press Release   "... The indictment alleges that by March 2007, the defendants believed that the Funds were in grave condition and at risk of collapse. However, rather than alerting the Funds’ investors and creditors to the bleak prospects of the Funds and facilitating an orderly wind-down, the defendants made misrepresentations to stave off withdrawal of investor funds and increased margin calls from creditors in the ultimately futile hope that the Funds’ prospects would improve and that the defendants’ incomes and reputations would remain intact. " (italics all mine) "... The subsequent collapse of the Funds during the summer of 2007 resulted in losses to investors totaling more than $1 billion." CIOFFI was also charged with insider trading, as I understand it, for moving TWO MILLION DOLLARS OF HIS OWN MONEY out of the fund and into another. Probably one that didn't fail, doncha guess? Attorneys for the men maintain their innocence . . . Well, would they get paid otherwise? I understand the FBI is investigating 19 other companies who were originating and securitizing sub-prime loans for accounting fraud, insider trading, and the failure to disclose true valuations. Lovely ~~~~~~~~~~~~~~~~~~ Billed as social networking with a bite  (pun intended I suppose) the Black Widow Network is designed to send real estate investment deals direct to your in-box . . . Other websites designed to take advantage of REOs and the possibility of making money off them are BiggerPockets.Com PropertyShark.Com Krunching.Com If you're looking for deals - try them out -