# Chaos on Wall Street



## metric (1 April 2008)

i wasnt sure where to put this article, as i cant see a news section here at ASF. perhaps there could be one?

Chaos on Wall Street 
The big banks' fear of big losses is threatening to bring down the entire system, with dire consequences for all of us. Here's what's going on, and what we can do about it.
By Allan Sloan, senior editor at large



THE BAILOUT BOYS: S.E.C. Chairman Christopher Cox (left) with Paulson, President Bush and Bernanke. 

POINT MAN: New York Fed President Geithner 

Chaos on Wall Street 
The last days of Bear Stearns  
An accident waiting to happen

More VideosNow what?
How would I mop up this mess? I have no magic cures, but I can offer a few modest suggestions.
Profit Sharing
If we taxpayers are going to subsidize Wall Street, as we're now doing, the Fed - or some agency the government sets up - should get a piece of the action for us in return for saving those firms. 
Model: the $1.2 billion of Chrysler loans the Treasury guaranteed in 1980 and 1981. Chrysler repaid the loans, and the government made $311 million from stock-purchase warrants it extracted for issuing the guarantee. 
If firms can't raise the capital they need, Uncle Sam himself should recapitalize them, as Israel did for its banks in the 1980s, with an eye toward making a profit by selling stock when things improve.
Regulation
If Wall Street is going to create its own banking system, let's regulate it - especially the hedge funds - or restrict what it can do. Otherwise, how can regulated banks, which need to follow rules and have capital, compete with the cowboys that don't have to worry about either?
Transparency
Wall Street has made tons of money by selling and trading esoteric securities without informing investors in any meaningful way about the mortgages or other assets that underlie them. It's now in everyone's interest to disclose more, so these securities can be analyzed and trust in the market restored. 
I'd start with Richard Field, founder of TYI - it stands for "trust your input." TYI's programs let you track individual assets like auto loans, credit card debts, and medical receivables that are in collateral pools. It's worth a look.
Mortgages
The one thing I won't try to do is solve the home mortgage problem that started all this. I'd like to save the truly innocent homeowners, while punishing speculators and imprudent lenders. Alas, I have no idea how to do that quickly, cost-effectively, or well. 

What in the world is going on here? Why is Washington spending billions to bail out Wall Street titans while leaving struggling homeowners to fend for themselves? Why are the Federal Reserve and the Treasury acting as if they're afraid the world may come to an end, while the stock market seems much less concerned? And finally, what does all this mean to those of us who aren't financial professionals? 

Okay, take a few breaths, pour yourself a beverage of your choice, and I'll tell you what's happening - and what I think is going to happen. Although I expect these problems will resolve themselves without a catastrophic meltdown, I'll also tell you why I'm more nervous about the world financial system now than I've ever been in my 40 years of covering business and markets. 

Finally, I'll tell you why I fear that 

http://money.cnn.com/2008/03/28/news/economy/disaster_sloan.fortune/index.htm?cnn=yes


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## jman2007 (1 April 2008)

Oh man, am I the only one who is really over all this doom-and-gloom prohesising? 

Even threads like this seem to multiplying like hobgoblins these days.

At the end of the day, yes... Wall Street is the hub of global financial markets, and yes...there have been some big-name casualties from the Credit Crunch. But at the end of the day, no matter how bad some commentators are predicting this can/will get, eventually the financial system will pick itself up, brush of the dust and carry on again. Over what kind of timeframe am I talking about?...well that is one question I can't answer.

Markets will get to the point where they will begin to essentially become de-sensitized to this negative sentiment. I think we're already seeing signs of this in Australia with institutional investors dipping their feet back into the equity pool once again. Of course we can't just expect the rampant Bull Market of the last 3-4 years to just simply carry on after this rather "large" speed bump. But the Australian economy is in great shape, the Resource sector just keeps growing with no end in sight, and people are beginning to realise that global economies around the world are sufficiently decoupled from the US to the point that, dare I say it, some look oversold.

So if another bank or two in the US falls over, well.... "yawn" another one bites the dust  No I'm being facetious now ... But seriously, it is so easy to get caught up in this bandwagon of misery and over-complicate things instead of taking a really level-headed approach and applying some simple common-sense logic. I get the impression that some of these "commentators" (not necessarily this guy) are the same people who were saying with beard-stroking and pipe-puffing assurance that the All Ords would easily reach 8000 points by the end of 2007, were some of the first people to despair and hysterically declare that the world as we know it, had come to an end.

So am I a heathen for daring to stand up to this big scary monster, or do some people actually agree with me?

jman


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## explod (1 April 2008)

Jman, in all that you have just said you have not actually said anything.  I have over the last few years read a number of books on the fundmantals of the US of A and its coming financial mess.  And believe me it is only just beginning and the people of America (and the rest of us to some extent) ae facing 20 years of abject poverty.

There is so much to go into that you need to check it out for yourself.  And the texts that I have read are from experienced economists, some of 60 years of experience.

Check out Google and find a site called "Financial Armageddon" it will open your eyes.

We are not heading into a walk in the park, the last 8 to 12 months has been compared to what is looming.


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## Joe Blow (1 April 2008)

Metric, 2 things:

1. Please try and enclose the quoted parts of articles in quote tags to separate it from the rest of your post. At the moment it looks like a dogs breakfast. No effort at all has gone into formatting it to make it easy for people to read. Find out about the quote tags here: https://www.aussiestockforums.com/forums/showthread.php?t=2737

2. I don't like people just quoting articles and then leaving it at that. Tell us what you found interesting about it or why you think it is worthy of being discussed. Try and stimulate a little discussion.

Thank you.


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## Wysiwyg (1 April 2008)

jman2007 said:


> Oh man, am I the only one who is really over all this doom-and-gloom prohesising?
> 
> *Markets will get to the point where they will begin to essentially become de-sensitized to this negative sentiment.*
> So am I a heathen for daring to stand up to this big scary monster, or do some people actually agree with me?
> ...




Well in reference to the bold type i think there won`t be a de-sensitisation, instead, a rosey picture will begin to form as the seppos decide they are ready to move on.Hard not to be part of the American world.


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## jman2007 (1 April 2008)

explod said:


> There is so much to go into that you need to check it out for yourself.  And the texts that I have read are from experienced economists, some of 60 years of experience.
> 
> Check out Google and find a site called "Financial Armageddon" it will open your eyes.




Well with a name like "Financial Armageddon" I can already guess the angle this site will take. My eyes are open explod, I obviously just chose to see things in a different way to you.

jman


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## explod (2 April 2008)

jman2007 said:


> Well with a name like "Financial Armageddon" I can already guess the angle this site will take. My eyes are open explod, I obviously just chose to see things in a different way to you.
> 
> jman





But you have not substantiated your view.

Mine is well known, collapse is because of US debt now so large it cannot be serviced, let alone paid back, thier Gross Domestic Product is 80% consumption but the consumers now do not earn enough to keep it up.

So let go of some real hot air and tell us some facts on why you think things are just a walk in the park.


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## jman2007 (2 April 2008)

explod said:


> But you have not substantiated your view.
> 
> Mine is well known, collapse is because of US debt now so large it cannot be serviced, let alone paid back, thier Gross Domestic Product is 80% consumption but the consumers now do not earn enough to keep it up.
> 
> So let go of some real hot air and tell us some facts on why you think things are just a walk in the park.




Explod,

I don't seem to recall saying things would be "a walk in the park" 

I said the timeframe for the financial hub to regain its composure was a question I couldn't answer. I also wrote my piece with the Australian Resource sector in mind, which I alluded to in my second paragraph.

And don't make the assumption that you're the only one who has read books and thinks they have a water-tight argument for global economic woes. Are these your own views, or ones just taken from your favourite authors?

I don't have a financial background, and that's why I don't invest in this area. Great, if you beleive some guy in the US doesn't earn enough money to keep up with GDP consumption, then good for you, I'm not going to argue with you.

But I know resource companies in Australia and elsewhere make money by finding stuff, digging it out, processing it, getting it to the market and selling it for a profit, therefore increasing in value. Somehat simplistic, but accurate enough. These companies are not fly-by-nighters, they were here before Bear Stearns collapased, and they'll be here for a good while longer too.  I also can't see Asia's desire for raw materials going into a nosedive any time soon.  You might think this is all "hot air" as you put it, but I'll side with the guys making the profits this time around. 

That's my view.

jman


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