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Sat Sep 14, 2013, 12:17 AM


Weekend Economists Celebrate September 13-15, 2013

Forty three years ago, radicals used bombs, not boycotts or petitions, against Bank of America. In the Guy Fawkes tradition, student and underground revolutionaries burned three BofA branches in 1970 during a wave of violent protest. The first incendiary incident began on Feb. 24, 1970, as campus unrest spiraled out of control at the University of California at Santa Barbara.

According to talk radio host Jeff Rense’s website: “The immediate spark was the arrest of a young black militant, accused of using obscene language in public. As deputies tried to take him to jail, they were attacked by 50 of his sympathizers. That night, a mob of 400 attacked local realty offices, which, students claim, charge inflated rents. The rioters also broke every window in the Isla Vista branch of the Bank of America.”

The following day, the outspoken William Kunstler, attorney for the Chicago 7 leaders charged with conspiring to riot during the Democratic National Convention in 1968, made a rousing speech at UCSB’s Harder Stadium. According to Coastlines, UCSB’s alumni magazine, “Shortly after the speech, police apprehended and beat a student for carrying an open bottle of wine on the walk back to Isla Vista, sparking a volatile reaction from the students.

While the speech itself may have aroused emotions, the long-standing attitude toward the police played an important role in escalating events at Santa Barbara, where students already felt aggrieved by reputedly heavy-handed law enforcement tactics.

Rense’s website recounts, “After Kunstler’s speech, a crowd of 500 gathered in a park to listen to student radicals. Many appeared to be out for a lark. But the mood suddenly turned ugly, and when police patrol cars appeared a block away, the crowd began hurling rocks.

With 1,000 students and street people shouting ‘Burn, baby, burn!’ youths set fire to piles of debris and shoved them through the Bank of America doorway. Some of the students argued that the attack was senseless. Though outnumbered, state patrolmen and sheriff’s deputies took the offensive. But after a ten-minute rock barrage, they retreated, leaving a patrol car behind. The students set it afire. Meanwhile, the bank burned to the ground — a $275,000 loss.”


38 years later, the banks burned down and terrorized the people. It was 2008 and life was crazy!

As bankster after bankster, drunk with power and driven by greed, sought to amass more and more off the backs of American homeowners and any passive investor with a little cash, the financial system swayed, and teetered, and then fell in splinters to the ground...only by paying trillions in blackmail were we able to keep the economy from diving into a repeat of the Great Depression. But the Great Recession, as they euphemistically called it, was bad enough. The first hint of doom came from Lehman Brothers:

Financial services firm Lehman Brothers filed for Chapter 11 bankruptcy protection on September 15, 2008. The filing remains the largest bankruptcy filing in U.S. history, with Lehman holding over $600 billion in assets.

Lehman borrowed significant amounts to fund its investing in the years leading to its bankruptcy in 2008, a process known as leveraging or gearing. A significant portion of this investing was in housing-related assets, making it vulnerable to a downturn in that market. One measure of this risk-taking was its leverage ratio, a measure of the ratio of assets to owners equity, which increased from approximately 24:1 in 2003 to 31:1 by 2007. While generating tremendous profits during the boom, this vulnerable position meant that just a 3–4% decline in the value of its assets would entirely eliminate its book value or equity. Investment banks such as Lehman were not subject to the same regulations applied to depository banks to restrict their risk-taking.

In August 2007, Lehman closed its subprime lender, BNC Mortgage, eliminating 1,200 positions in 23 locations, and took a $25-million after-tax charge and a $27-million reduction in goodwill. The firm said that poor market conditions in the mortgage space "necessitated a substantial reduction in its resources and capacity in the subprime space".

Lehman's final months

In 2008, Lehman faced an unprecedented loss due to the continuing subprime mortgage crisis. Lehman's loss was apparently a result of having held on to large positions in subprime and other lower-rated mortgage tranches when securitizing the underlying mortgages. Whether Lehman did this because it was simply unable to sell the lower-rated bonds, or made a conscious decision to hold them, is unclear. In any event, huge losses accrued in lower-rated mortgage-backed securities throughout 2008. In the second fiscal quarter, Lehman reported losses of $2.8 billion and decided to raise $6 billion in additional capital.[6] In the first half of 2008 alone, Lehman stock lost 73% of its value as the credit market continued to tighten. In August 2008, Lehman reported that it intended to release 6% of its work force, 1,500 people, just ahead of its third-quarter-reporting deadline in September.

On August 22, 2008, shares in Lehman closed up 5% (16% for the week) on reports that the state-controlled Korea Development Bank was considering buying Lehman. Most of those gains were quickly eroded as news emerged that Korea Development Bank was "facing difficulties pleasing regulators and attracting partners for the deal." It culminated on September 9, 2008, when Lehman's shares plunged 45% to $7.79, after it was reported that the state-run South Korean firm had put talks on hold.

Investor confidence continued to erode as Lehman's stock lost roughly half its value and pushed the S&P 500 down 3.4% on September 9, 2008. The Dow Jones lost nearly 300 points the same day on investors' concerns about the security of the bank. The U.S. government did not announce any plans to assist with any possible financial crisis that emerged at Lehman.

On September 10, 2008, Lehman announced a loss of $3.9 billion and their intent to sell off a majority stake in their investment-management business, which includes Neuberger Berman.[12][13] The stock slid 7% that day.

On September 13, 2008, Timothy F. Geithner, then president of the Federal Reserve Bank of New York called a meeting on the future of Lehman, which included the possibility of an emergency liquidation of its assets. Lehman reported that it had been in talks with Bank of America and Barclays for the company's possible sale. The New York Times reported on September 14, 2008, that Barclays had ended its bid to purchase all or part of Lehman and a deal to rescue the bank from liquidation collapsed. It emerged subsequently that a deal had been vetoed by the Bank of England and the UK's Financial Services Authority. Leaders of major Wall Street banks continued to meet late that day to prevent the bank's rapid failure. Bank of America's rumored involvement also appeared to end as federal regulators resisted its request for government involvement in Lehman's sale.

Bankruptcy filing

Barclays acquired the investment banking business of Lehman Brothers in September 2008

Lehman Brothers filed for Chapter 11 bankruptcy protection on September 15, 2008. According to Bloomberg, reports filed with the U.S. Bankruptcy Court, Southern District of New York (Manhattan) on September 16 indicated that JPMorgan Chase & Co. provided Lehman Brothers with a total of $138 billion in "Federal Reserve-backed advances." The cash-advances by JPMorgan Chase were repaid by the Federal Reserve Bank of New York for $87 billion on September 15 and $51 billion on September 16.

Breakup process

On September 22, 2008, a revised proposal to sell the brokerage part of Lehman Brothers holdings of the deal, was put before the bankruptcy court, with a $1.3666 billion (£700 million) plan for Barclays to acquire the core business of Lehman Brothers (mainly Lehman's $960 million Midtown Manhattan office skyscraper), was approved. Manhattan court bankruptcy Judge James Peck, after a 7 hour hearing, ruled: "I have to approve this transaction because it is the only available transaction. Lehman Brothers became a victim, in effect the only true icon to fall in a tsunami that has befallen the credit markets. This is the most momentous bankruptcy hearing I've ever sat through. It can never be deemed precedent for future cases. It's hard for me to imagine a similar emergency."

Luc Despins, the creditors committee counsel, said: "The reason we're not objecting is really based on the lack of a viable alternative. We did not support the transaction because there had not been enough time to properly review it."[citation needed] In the amended agreement, Barclays would absorb $47.4 billion in securities and assume $45.5 billion in trading liabilities. Lehman's attorney Harvey R. Miller of Weil, Gotshal & Manges, said "the purchase price for the real estate components of the deal would be $1.29 billion, including $960 million for Lehman's New York headquarters and $330 million for two New Jersey data centers. Lehman's original estimate valued its headquarters at $1.02 billion but an appraisal from CB Richard Ellis this week valued it at $900 million."[citation needed] Further, Barclays will not acquire Lehman's Eagle Energy unit, but will have entities known as Lehman Brothers Canada Inc, Lehman Brothers Sudamerica, Lehman Brothers Uruguay and its Private Investment Management business for high net-worth individuals. Finally, Lehman will retain $20 billion of securities assets in Lehman Brothers Inc that are not being transferred to Barclays. Barclays had a potential liability of $2.5 billion to be paid as severance, if it chooses not to retain some Lehman employees beyond the guaranteed 90 days.

On September 22, 2008, Nomura Holdings, Inc. announced it agreed to acquire Lehman Brothers' franchise in the Asia Pacific region including Japan, Hong Kong and Australia. The following day, Nomura announced its intentions to acquire Lehman Brothers' investment banking and equities businesses in Europe and the Middle East. A few weeks later it was announced that conditions to the deal had been met, and the deal became legally effective on Monday, October 13. In 2007, non-US subsidiaries of Lehman Brothers were responsible for over 50% of global revenue produced.
Impact of bankruptcy fili

The Dow Jones closed down just over 500 points (−4.4%) on September 15, 2008, at the time the largest drop by points in a single day since the days following the attacks on September 11, 2001. (This drop was subsequently exceeded by an even larger −7.0% plunge on September 29, 2008.)

Lehman's bankruptcy was expected to cause some depreciation in the price of commercial real estate. The prospect for Lehman's $4.3 billion in mortgage securities getting liquidated sparked a selloff in the commercial mortgage-backed securities (CMBS) market. Additional pressure to sell securities in commercial real estate is feared as Lehman gets closer to liquidating its assets. Apartment-building investors are also expected to feel pressure to sell as Lehman unloads its debt and equity pieces of the $22 billion purchase of Archstone, the third-largest United States real estate investment trust (REIT). Archstone's core business is the ownership and management of residential apartment buildings in major metropolitan areas of the United States. Jeffrey Spector, a real-estate analyst at UBS said that in markets with apartment buildings that compete with Archstone, "there is no question that if you need to sell assets, you will try to get ahead" of the Lehman selloff, adding "Every day that goes by there will be more pressure on pricing."

Several money funds and institutional cash funds had significant exposure to Lehman with the institutional cash fund run by The Bank of New York Mellon and the Primary Reserve Fund, a money-market fund, both falling below $1 per share, called "breaking the buck", following losses on their holdings of Lehman assets. In a statement The Bank of New York Mellon said its fund had isolated the Lehman assets in a separate structure. It said the assets accounted for 1.13% of its fund. The drop in the Primary Reserve Fund was the first time since 1994 that a money-market fund had dropped below the $1-per-share level.

Putnam Investments, a unit of Canada's Great-West Lifeco, shut a $12.3 billion money-market fund as it faced "significant redemption pressure" on September 17, 2008. Evergreen Investments said its parent Wachovia Corporation would "support" three Evergreen money-market funds to prevent their shares from falling.[28] This move to cover $494 million of Lehman assets in the funds also raised fears about Wachovia's ability to raise capital.

Close to 100 hedge funds used Lehman as their prime broker and relied largely on the firm for financing. In an attempt to meet their own credit needs, Lehman Brothers International routinely re-hypothecated[30] the assets of their hedge funds clients that utilized their prime brokerage services. Lehman Brothers International held close to 40 billion dollars of clients assets when it filed for Chapter 11 Bankruptcy. Of this, 22 billion had been re-hypothecated.[31] As administrators took charge of the London business and the U.S. holding company filed for bankruptcy, positions held by those hedge funds at Lehman were frozen. As a result, the hedge funds are being forced to de-lever and sit on large cash balances inhibiting chances at further growth.[32] This in turn created further market dislocation and overall systemic risk, resulting in a 737 billion dollar decline in collateral outstanding in the securities lending market.

In Japan, banks and insurers announced a combined 249 billion yen ($2.4 billion) in potential losses tied to the collapse of Lehman. Mizuho Trust & Banking Co. cut its profit forecast by more than half, citing 11.8 billion yen in losses on bonds and loans linked to Lehman. The Bank of Japan Governor Masaaki Shirakawa said "Most lending to Lehman Brothers was made by major Japanese banks, and their possible losses seem to be within the levels that can be covered by their profits," adding "There is no concern that the latest events will threaten the stability of Japan's financial system." During bankruptcy proceedings a lawyer from The Royal Bank of Scotland Group said the company is facing between $1.5 billion and $1.8 billion in claims against Lehman partially based on an unsecured guarantee from Lehman and connected to trading losses with Lehman subsidiaries, Martin Bienenstock.

Lehman was a counterparty to mortgage financier Freddie Mac in unsecured lending transactions that matured on September 15, 2008. Freddie said it had not received principal payments of $1.2 billion plus accrued interest. Freddie said it had further potential exposure to Lehman of about $400 million related to the servicing of single-family home loans, including repurchasing obligations. Freddie also said it "does not know whether and to what extent it will sustain a loss relating to the transactions" and warned that "actual losses could materially exceed current estimates." Freddie was still in the process of evaluating its exposure to Lehman and its affiliates under other business relationships.

After Constellation Energy was reported to have exposure to Lehman, its stock went down 56% in the first day of trading having started at $67.87. The massive drop in stocks led to the New York Stock Exchange halting trade of Constellation. The next day, as the stock plummeted as low as $13 per share, Constellation announced it was hiring Morgan Stanley and UBS to advise it on "strategic alternatives" suggesting a buyout. While rumors suggested French power company Électricité de France would buy the company or increase its stake, Constellation ultimately agreed to a buyout by MidAmerican Energy, part of Berkshire Hathaway (headed by billionaire Warren Buffett).

The Federal Agricultural Mortgage Corporation or Farmer Mac said it would have to write off $48 million in Lehman debt it owned as a result of the bankruptcy. Farmer Mac said it may not be in compliance with its minimum capital requirements at the end of September.

In Hong Kong more than 43,700 individuals in the city have invested in HK$15.7 billion of "guaranteed mini-bonds" (迷你債? from Lehman. Many claim that banks and brokers mis-sold them as low-risk. Conversely, bankers note that minibonds are indeed low-risk instruments since they were backed by Lehman Brothers, which until just months before its collapse was a venerable member of Wall Street with high credit and investment ratings. The default of Lehman Brothers was a low probability event, which was totally unexpected. Indeed, many banks accepted minibonds as collateral for loans and credit facilities. Another HK$3 billion has been invested in similar like derivatives. The Hong Kong government proposed a plan to buy back the investments at their current estimated value, which will allow investors to partially recover some of their loss by the end of the year.[44] HK chief executive Donald Tsang insisted the local banks respond swiftly to the government buy-back proposal as the Monetary Authority received more than 16,000 complaints.[41][43][44] On October 17 He Guangbe, chairman of the Hong Kong Association of Banks, agreed to buy back the bonds, which will be priced using an agreed upon methodology based on its estimated current value.[45] This episode has deep repercussions on the banking industry, where misguided investor sentiments have become hostile to both wealth management products as well as the banking industry as a whole. Under intense pressure from the public, all political parties have come out in support of the investors, further fanning distrust towards the banking industry.
Neuberger Berman

Neuberger Berman Inc., through its subsidiaries, primarily Neuberger Berman, LLC, is an investment-advisory firm founded in 1939 by Roy R. Neuberger and Robert Berman, to manage money for high-net-worth individuals. In the decades that followed, the firm's growth mirrored that of the asset-management industry as a whole. In 1950, it introduced one of the first no-load mutual funds in the United States, the Guardian Fund, and also began to manage the assets of pension plans and other institutions. Historically known for its value-investing style, in the 1990s the firm began to diversify its competencies to include additional value and growth investing, across the entire capitalization spectrum, as well as new investment categories, such as international, real-estate investment trusts and high-yield investments. In addition, with the creation of a nationally and several state-chartered trust companies, the firm became able to offer trust and fiduciary services. Today the firm has approximately $130 billion in assets under management.

In October 1999, the firm conducted an initial public offering of its shares and commenced trading on the New York Stock Exchange, under the ticker symbol "NEU". In July 2003, shortly after the retired Mr. Neuberger's 100th birthday, the company announced that it was in merger discussions with Lehman Brothers Holdings Inc. These discussions ultimately resulted in the firm's acquisition by Lehman on October 31, 2003, for approximately $2.63 billion in cash and securities.

On November 20, 2006, Lehman announced its Neuberger Berman subsidiary would acquire H. A. Schupf & Co., a money-management firm targeted at wealthy individuals. Its $2.5 billion of assets would join Neuberger's $50 billion in high-net-worth client assets under management.[46]

An article in The Wall Street Journal on September 15, 2008, announcing that Lehman Brothers Holdings filed for Chapter 11 bankruptcy protection, quoted Lehman officials regarding Neuberger Berman: "Neuberger Berman LLC and Lehman Brothers Asset Management will continue to conduct business as usual and will not be subject to the bankruptcy case of the parent company, and its portfolio management, research and operating functions remain intact. In addition, fully paid securities of customers of Neuberger Berman are segregated from the assets of Lehman Brothers and aren't subject to the claims of Lehman Brothers Holdings' creditors, Lehman said."[47]

Just before the collapse of Lehman Brothers, executives at Neuberger Berman sent e-mail memos suggesting, among other things, that the Lehman Brothers' top people forgo multi-million dollar bonuses to "send a strong message to both employees and investors that management is not shirking accountability for recent performance."

Lehman Brothers Investment Management Director George Herbert Walker IV dismissed the proposal, going so far as to actually apologize to other members of the Lehman Brothers executive committee for the idea of bonus reduction having been suggested. He wrote, "Sorry team. I am not sure what's in the water at Neuberger Berman. I'm embarrassed and I apologize."[48]
Controversy of executive pay during crisis

Richard Fuld, head of Lehman Brothers, faced questioning from the U.S. House of Representatives' Committee on Oversight and Government Reform. Rep. Henry Waxman (D-CA) asked: "Your company is now bankrupt, our economy is in crisis, but you get to keep $480 million (£276 million). I have a very basic question for you, is this fair?"[49] Fuld said that he had in fact taken about $300 million (£173 million) in pay and bonuses over the past eight years.[49] Despite Fuld's defense on his high pay, Lehman Brothers executive pay was reported to have increased significantly before filing for bankruptcy.[50] On October 17, 2008, CNBC reported that several Lehman executives, including Richard Fuld, have been subpoenaed in a case relating to securities fraud.[51]
Accounting manipulation

In March 2010, the report of Anton R. Valukas, the Bankruptcy Examiner, drew attention to the use of Repo 105 transactions to boost the bank's apparent financial position around the date of the year-end balance sheet. The attorney general Andrew Cuomo later filed charges against the bank's auditors Ernst & Young in December 2010, alleging that the firm "substantially assisted... a massive accounting fraud" by approving the accounting treatment.[52]

On April 12, 2010, a New York Times story revealed that Lehman had used a small company, Hudson Castle, to move a number of transactions and assets off Lehman's books as a means of manipulating accounting numbers of Lehman's finances and risks. One Lehman executive described Hudson Castle as an "alter ego" of Lehman. According to the story, Lehman owned one quarter of Hudson; Hudson's board was controlled by Lehman, most Hudson staff members were former Lehman employees.[53]
Section 363 Sale

On February 22, 2011, Judge James M. Peck of the U.S. Bankruptcy Court in the Southern District of New York rejected claims by lawyers for the Lehman estate that Barclays had improperly reaped a windfall from the section 363 sale. "The sale process may have been imperfect, but it was still adequate under the exceptional circumstances of Lehman Week."=wikipedia

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Reply Weekend Economists Celebrate September 13-15, 2013 (Original post)
Demeter Sep 2013 OP
Demeter Sep 2013 #1
DemReadingDU Sep 2013 #2
Fuddnik Sep 2013 #6
DemReadingDU Sep 2013 #10
Fuddnik Sep 2013 #16
xchrom Sep 2013 #3
Demeter Sep 2013 #18
xchrom Sep 2013 #4
Demeter Sep 2013 #19
xchrom Sep 2013 #5
xchrom Sep 2013 #7
Fuddnik Sep 2013 #8
xchrom Sep 2013 #9
DemReadingDU Sep 2013 #21
xchrom Sep 2013 #11
Demeter Sep 2013 #17
Demeter Sep 2013 #12
Demeter Sep 2013 #13
Demeter Sep 2013 #14
Demeter Sep 2013 #15
Demeter Sep 2013 #20
Demeter Sep 2013 #22
hamerfan Sep 2013 #23
hamerfan Sep 2013 #24
Demeter Sep 2013 #27
hamerfan Sep 2013 #29
Demeter Sep 2013 #31
Demeter Sep 2013 #25
Demeter Sep 2013 #26
gopiscrap Sep 2013 #28
hamerfan Sep 2013 #30
Demeter Sep 2013 #32
xchrom Sep 2013 #33
Ghost Dog Sep 2013 #41
xchrom Sep 2013 #42
Ghost Dog Sep 2013 #44
xchrom Sep 2013 #34
xchrom Sep 2013 #35
xchrom Sep 2013 #36
Demeter Sep 2013 #46
xchrom Sep 2013 #37
xchrom Sep 2013 #38
xchrom Sep 2013 #39
xchrom Sep 2013 #40
Demeter Sep 2013 #47
xchrom Sep 2013 #43
antigop Sep 2013 #45
Demeter Sep 2013 #48
Demeter Sep 2013 #49
hamerfan Sep 2013 #50
Demeter Sep 2013 #51
Demeter Sep 2013 #52
Demeter Sep 2013 #53
DemReadingDU Sep 2013 #54
Demeter Sep 2013 #55

Response to Demeter (Original post)

Sat Sep 14, 2013, 12:29 AM

1. In Honor of Lehman's, we have two banks failed


The Federal Deposit Insurance Corporation (FDIC) approved the payout of the insured deposits of The Community's Bank, Bridgeport, Connecticut. The bank was closed today by the Connecticut Department of Banking, which appointed the FDIC as receiver.

The FDIC was unable to find another financial institution to take over the banking operations of The Community's Bank. The FDIC will mail checks directly to depositors of The Community's Bank for the amount of their insured money. As a convenience to depositors, the FDIC has made arrangements with People's United Bank, Bridgeport, CT, to accept the failed bank's direct deposits from the federal government, such as Social Security and Veterans' payments for 90 days. The two People's United Bank locations designated to service The Community's Bank's customers receiving federal government direct deposit payments are as follows: 4531 Main Street, Bridgeport, CT – located inside the Brookside Stop and Shop Supermarket, and 58 Boston Avenue, Bridgeport, CT....

As of June 30, 2013, The Community's Bank had approximately $26.3 million in total assets and $25.7 million in total deposits. The amount of uninsured deposits will be determined once the FDIC obtains additional information from those customers.

The FDIC as receiver will retain all the assets from The Community's Bank for later disposition. Loan customers should continue to make their payments as usual.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $7.8 million. The Community's Bank is the 21st FDIC-insured institution to fail in the nation this year, and the first in Connecticut. The last FDIC-insured institution closed in the state was Connecticut Bank of Commerce, Stamford, on June, 26, 2002.

First National Bank, Edinburg, Texas, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with PlainsCapital Bank, Dallas, Texas, to assume all of the deposits of First National Bank.

The 51 former branches of First National Bank will reopen as branches of PlainsCapital Bank during their normal business hours, including the two branches in El Paso doing business as The National Bank of El Paso. Depositors of First National Bank will automatically become depositors of PlainsCapital Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship in order to retain their deposit insurance coverage up to applicable limits. Customers of First National Bank should continue to use their current branch until they receive notice from PlainsCapital Bank that systems conversions have been completed to allow full-service banking at all branches of PlainsCapital Bank.

Depositors of First National Bank can continue to access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of June 30, 2013, First National Bank had approximately $3.1 billion in total assets and $2.3 billion in total deposits. In addition to assuming all of the deposits of First National Bank, PlainsCapital Bank agreed to purchase approximately $2.7 billion of First National Bank's assets. The FDIC will retain the remaining assets for later disposition.

The FDIC and PlainsCapital Bank entered into a loss-share transaction on $1.8 billion of First National Bank's assets....
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $637.5 million. Compared to other alternatives, PlainsCapital Bank's acquisition was the least costly resolution for the FDIC's DIF. First National Bank is the 22nd FDIC-insured institution to fail in the nation this year, and the first in Texas. The last FDIC-insured institution closed in the state was First International Bank, Plano, on September 30, 2011.

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Response to Demeter (Original post)

Sat Sep 14, 2013, 07:21 AM

2. Where are student radicals today?

One would think as much as they use their smartphones, that they would be protesting the NSA for snooping on those texts and phone calls.

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Response to DemReadingDU (Reply #2)

Sat Sep 14, 2013, 09:15 AM

6. One right here.

Former SDS, but was more at home with Yippie!'s.

We're old and arthritic now. I can't throw a rock all that far any more. When I do sit-in, I almost need help getting up.

Back then, we used to have someone steal Ma Bells phone credit card codes, and used to charge our calls to the CIA. Now the CIA and NSA hacks our smartphones.

We've traded pot and protest for vodka and golf.

on edit: BTW, I start my new job on Monday. It's two 5-hour shifts a week for minimum wage, and free golf at a nice, semi-private country club.

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Response to Fuddnik (Reply #6)

Sat Sep 14, 2013, 09:36 AM

10. Nice job!

and free golf, What a deal!

Ok, so we former student radicals are still around, but where are current student radicals? Can't more of them organize protests using those smartphones and meet-up somewhere with signs?

here's one...

9/13/13 University of Michigan IYSSE opposes war on Syria
The International Youth and Students for Social Equality (IYSSE) at the University of Michigan (UM) Ann Arbor held a demonstration Thursday afternoon. Students on campus and between classes took leaflets and carried picket signs denouncing war against Syria, as speakers from the IYSSE and the Socialist Equality Party called on them to turn to the working class to build a movement against war.

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Response to DemReadingDU (Reply #10)

Sat Sep 14, 2013, 10:18 AM

16. Just gotta watch myself.

Part of my job is, in the evenings at closing, to ride around the course and bring in the flags from the greens. There's a lot of lakes on that course. And we know what lives in them lakes.


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Response to Demeter (Original post)

Sat Sep 14, 2013, 08:20 AM

3. Obama Appoints Bain & Co Consultant to Top Post


Jeff Zients (Photo: AP/Charles Dharapak)

President Obama has appointed Jeff Zients as head of the National Economic Council. A former executive of Gov. Mitt Romney’s Bain & Company investment firm—Zients worked at Bain & Co. from 1988 to 1990. Romney was running Bain Capital at the time, so the two did not work directly together.

Romney worked at Bain & Company, first from 1977-1984, and then again from 1991 and 1992, when he was the Bain & Company chief executive officer.

Bain Capital was heavily criticized by the 2012 Obama campaign as an 'outsourcing pioneer' responsible for closing plants, devastating U.S. communities, and even contributing to the deaths of disenfranchised workers.

Zients work at Bain was one of many lucrative positions at corporate management and media firms that allowed him to build a multimillion dollar fortune. He has worked as a close aid to Obama since 2009, serving twice as the president's acting budget director, among other positions. He will now ascend to head of the National Economic Council, replacing Gene Sperling, who says he is departing for personal reasons.

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Response to xchrom (Reply #3)

Sat Sep 14, 2013, 10:34 AM

18. I think he does it to taunt us


I cannot fathom this, politically, integrity-wise, future of O man or the country....

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Response to Demeter (Original post)

Sat Sep 14, 2013, 08:39 AM

4. US retail sales growth slower than expected in August


US retail sales grew at a slower-than-expected rate in August, despite increased demand for high-priced, one-off items such as cars.

Sales were up by a seasonally adjusted 0.2%, as US consumers bought fewer items of clothing, sporting goods and building materials.

Economists had expected sales to rise by 0.4%.

Sales of cars rose by 0.9% last month according to the Commerce Department, having dropped 0.5% in July.

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Response to xchrom (Reply #4)

Sat Sep 14, 2013, 10:35 AM

19. We are all supposed to go out and spend our income decreases


They are nuts.

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Response to Demeter (Original post)

Sat Sep 14, 2013, 09:07 AM

5. Spanish public debt reaches record level


The figure has risen to 942.8bn euros (£792.5bn; $1.3 trillion), equal to 92.2% of the country's entire economic output, the bank said.

This is nearly 15% higher than the same period last year and above the Spanish government's target limit of 91.4%, despite severe public spending cuts.

Austerity measures have led to street protests as unemployment now tops 26%.

Prime Minister Mariano Rajoy's government is aiming to reduce public spending by 150bn euros between 2012 and 2014, but rising unemployment and the consequent benefit payments, is making this target difficult to reach.

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Response to Demeter (Original post)

Sat Sep 14, 2013, 09:17 AM

7. It Doesn't Make Much Sense To Invest Like The Dow


Just recently it was announced that the Dow Jones Industrial Average will undergo some changes as three companies are removed (Bank of America, Alcoa and Hewlett-Packard) to be replaced by Goldman Sachs, Nike and Visa. However, the reality is that while the changes are of interest only to people involved in the financial markets as the Dow Jones Industrial Average is no longer relevant as a representation of America's industrial complex or most individual's portfolios. One of my favorite writers, Neil Irwin, recently wrote in the Washington Post:
"The announcement of the changes shows the absurdity of the index. 'The index changes were prompted by the low stock price of the three companies slated for removal and the Index Committee's desire to diversify the sector and industry group representation of the Index,' the company said.

Of course, the per-share price of a stock has absolutely nothing to do with its size, importance or representativeness. Bank of America is being booted, it would seem, for its sub-$15 per-share price, in favor of Goldman Sachs with a $164 share price. But Bank of America is a way bigger company! Its total market capitalization is $155.6 billion, to $74.5 billion for Goldman. It has 257,000 employees, to 32,000 for Goldman. It is engaged in banking and lending activity in basically every community in America, as opposed to Goldman's specialty investment banking business. But when you find yourself in the archaic trap of weighing companies based on their per-share price, that's the kind of absurdity you end up with."

However, these changes highlight a much bigger issue to investors. I recently wrote an a article entitled "Why You Can't Beat The Index" which covered the variety of flaws of how benchmark indexes are calculated and the effect on portfolios.

"The sad commentary is that investors continually do the wrong things emotionally by watching benchmark indexes. However, what they fail to understand is that there are many factors that affect a 'market capitalization weighted index' far differently than a 'dollar invested portfolio.'"

Read more: http://www.streettalklive.com/daily-x-change/1815-why-benchmarking-your-portfolio-is-a-losing-bet.html#ixzz2esAXoXIa

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Response to xchrom (Reply #7)

Sat Sep 14, 2013, 09:25 AM

8. The Dow has been irrelevant for a long time.

It's more of a shark index now.

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Response to Fuddnik (Reply #8)

Sat Sep 14, 2013, 09:32 AM

9. sharknado!

what struck me were all the little ins and outs -- how does an average person keep up with it all?

i'm very mistrustful of what looks like institutional complexity.

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Response to xchrom (Reply #9)

Sat Sep 14, 2013, 10:52 AM

21. The market is a rigged casino

I don't understand people who never gamble playing the lottery nor the slot machines nor Las Vegas card games. Yet they trust their life savings in the stock and bond markets.

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Response to Demeter (Original post)

Sat Sep 14, 2013, 09:37 AM

11. IMF WARNS: China Is Taking Ever Greater Risks And Putting The Financial System In Danger


The International Monetary Fund has warned that China is taking ever greater risks as surging credit endangers the financial system, and called for far-reaching reforms to wean the economy off excess investment.
"China's growth has become too reliant on an unsustainable surge in credit. Failure to change course and accelerate reforms increases the likelihood of an accident or shock that could trigger an adverse 'financial-real’ feedback loop," said the Fund in its latest report on G20 imbalances.

"While China has the resources and capacity to maintain stability even in the face of an adverse shock, the margin of safety is narrowing.”

The country has relied on loan growth to keep the economy firing on all cylinders but the law of diminishing returns has set in, with the each yuan of extra debt yielding just 0.20 yuan of economic growth, compared with 0.85 five years ago. Credit of all types has risen from $9 trillion to $23 trillion in five years, pushing the total to 200pc of GDP, much higher than in emerging market peers.

Read more: http://www.businessinsider.com/imf-warns-china-taking-greater-risks-2013-9#ixzz2esFahfQF

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Response to xchrom (Reply #11)

Sat Sep 14, 2013, 10:33 AM

17. That's funny, coming from the IMF!


Redefining chutzpah as we speak....

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Response to Demeter (Original post)

Sat Sep 14, 2013, 09:38 AM

12. Economic Collapse Seen Through Aerial Photos of Abandoned Mansions




"Monaco" Lake Las Vegas homes on gated Grand Corniche Drive. Henderson, NV 2010.

Michael Light often snaps his photos from a two-seater plane — at a bumpy 70 mph — that he pilots himself at the same time, but you’d never know it from his well-composed aerial shots. From swimming-pooled suburbs in Phoenix to razed hills awaiting their luxury homes in Nevada, Light has been documenting the western U.S.’s unique topography from the air for the past decade.

In his series on Black Mountain, Nevada, Light’s photos put viewers in the plane with him as he glides over 640 acres of dynamite-flattened hilltops, carved through with pristine roads and cul de sacs linking graded house foundations. But there are no houses. No lawns, no pools, no sidewalks. No guard-staffed gates. This is the site of the Ascaya luxury housing development, which has lain dormant since the economic crash of 2008.


The Sun Belt cities experienced the most rapid growth of any American urban area in the early 21st century, and were hardest hit in the economic downtown. The ferocious demand for housing — over-sized, over-watered trophy housing — resulted in major alterations to the landscape.

The theme continues in Light’s work on Lake Las Vegas, a complex of luxury housing, country clubs and casinos fringing an artificial lake. The photos capture the surrealism of these “instant cities” made even more uncanny by their stalled development. Huge faux-Mediterranean mansions and irrigated yards neighbor bleak scrub brush. Residents use the empty lots next door for parking. Swaths of velvety golf lawns are framed by barren dirt.

(More pics at link.)

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Response to Demeter (Original post)

Sat Sep 14, 2013, 09:52 AM

13. Speaker Boehner Really Mad About Putin's Op-Ed (DANZIGER)


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Response to Demeter (Reply #13)

Sat Sep 14, 2013, 09:53 AM

14. If you're a mother, you are on duty until you die


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Response to Demeter (Reply #14)

Sat Sep 14, 2013, 10:07 AM

15. The Snare of High Tech (TOM TOLLES)


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Response to Demeter (Original post)

Sat Sep 14, 2013, 10:37 AM

20. Friday was such a rolling catastrophe that I never even got to the email


I'm going to have to catch up with myself for today. Post, on, brave Weekenders! When (if) i can, I will.

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Response to Demeter (Original post)

Sat Sep 14, 2013, 01:26 PM

22. Obamacare Doublethink PAUL KRUGMAN




I’m sure someone else has pointed this out, but there’s a fundamental contradiction at the heart of the right’s anti-Obamacare strategy — I mean, aside from the fact that it isn’t going to work, and may do immense damage both to America and to the Republican brand.

On one side, as Jonathan Cohn points out, inside the right-wing bubble it’s taken as gospel that Obamacare will be an utter, obvious disaster:

If you sincerely believe Obamacare will bankrupt the country, violate personal liberty, raise costs or ruin insurance for most Americans, and generally destroy American health care, then it’s easy to believe that it’s only a matter of time before the rest of the country demands repeal—forcing both Senate Democrats and the president to go along. It’s particularly easy to believe this if you live in the right-wing media bubble, where all of the reports about Obamacare focus on the law’s shortcomings and failures—insurance premiums going up, people losing coverage, part-time workers losing hours, and so on.

But if the right really believed this, it should be happy to let Obamacare come into existence, then collapse. The last thing Republicans should want is to let Democrats snatch victory from the jaws of defeat by provoking confrontations over the budget and the debt ceiling before the American people get to experience the nightmare of expanded insurance coverage.

In fact, politically the right is acting as if it fears that Obamacare will, in reality, be highly popular — that once the exchanges and the Medicare Medicaid expansion go into effect, people will decide that they like the new system, and strongly oppose efforts to reverse course. (This is almost surely the more realistic view.) So the law must be stopped at any cost before it goes into effect, and people learn first-hand that the anti-Obamacare propaganda was false.

So which is it? Are Republicans sure that disaster looms, or are they terrified because they suspect that things will be OK? My guess is, both: clear thinking is not exactly a hallmark of the modern GOP, and may indeed be a positive disqualification for career success.

Unfortunately, fear of Obamacare success is in the driving seat right now, and may well lead to government shutdown, debt default, or both.





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Response to Demeter (Original post)

Sat Sep 14, 2013, 01:36 PM

23. Musical Interlude

See You In September by The Happenings:

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Response to Demeter (Original post)

Sat Sep 14, 2013, 01:40 PM

24. Musical Interlude II

There's A Riot Goin' On by Sly & The Family Stone:

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Response to hamerfan (Reply #24)

Sat Sep 14, 2013, 01:51 PM



I turned on the heat last night. I'm nostalgic for the summer I didn't have...

Got anything about market crashes, greed or stuff like that?

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Response to Demeter (Reply #27)

Sat Sep 14, 2013, 02:32 PM

29. Just these perennial favorites (for now, anyway)

Jump You F#ckers by Gene Burnett:


Money by Pink Floyd:

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Response to hamerfan (Reply #29)

Sat Sep 14, 2013, 08:42 PM

31. Those will never go out of style, alas!


Perfect for this theme, though.

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Response to Demeter (Original post)

Sat Sep 14, 2013, 01:43 PM

25. Warnings about the economy from people you should listen to by Fabius Maximus




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Response to Demeter (Original post)

Sat Sep 14, 2013, 02:01 PM

28. I remember when that hapened

can't say I had any sympathy for the banks!

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Response to Demeter (Original post)

Sat Sep 14, 2013, 02:44 PM

30. Musical Interlude III

A great cover version of a Woody Guthrie classic!
Do-Re-Mi by John Mellencamp:

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Response to Demeter (Original post)

Sat Sep 14, 2013, 09:13 PM

32. Tomorrow is the big day! Get your hat, and glitter and confetti ready!


With any luck, I will be able to partake, too!

Sweet dreams, all!

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Response to Demeter (Original post)

Sun Sep 15, 2013, 06:58 AM

33. The Economist Falls Under Merkel's Spell


There's a reason Germans affectionately refer to Merkel as Mutti, or "mommy." She's like a matriarch who can be strict at home, and might even make you clean your room. But you're not going to get spanked and you will always get dessert. And she will bend over backwards to protect you from the evils of the outside world. You will never, ever want to move out.

It is hardly surprising, then, that the chancellor is likely to get re-elected. More unexpected, however, is that there seem to be some abroad who would like to be adopted. Like the Economist, for example. The current edition of the British newsmagazine includes an impassioned appeal to German voters to hand the chancellor a third term. The argument? It is essentially a truism adhered to by children the world over: Mommy knows best.

"We believe Mrs. Merkel is the right person to lead her country and thus Europe," the magazine writes. "That is partly because of what she is: the world's most politically gifted democrat and a far safer bet than her leftist opponents. It is also partly because of what we believe she could still become -- the great leader Germany and Europe so desperately needs."

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Response to xchrom (Reply #33)

Sun Sep 15, 2013, 08:55 AM

41. 1. The Economist does not like 'leftists' (editorial line supports 'free markets'

(and so should not support otherwise, as at present, manipulated, oligarchical ones));

2. The Economist likes 'safe bets' (and being close to power);

3. The Economist is what is known as 'pro-Europe'.

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Response to Ghost Dog (Reply #41)

Sun Sep 15, 2013, 08:57 AM

42. +1

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Response to xchrom (Reply #42)

Sun Sep 15, 2013, 09:46 AM

44. + The Economist dates back to the beginning of big banking. Here's Bagehot (1873):

/... http://www.gutenberg.org/cache/epub/4359/pg4359.html

... The briefest and truest way of describing Lombard Street is to say that it is by far the greatest combination of economical power and economical delicacy that the world has even seen. Of the greatness of the power there will be no doubt. Money is economical power. Everyone is aware that England is the greatest moneyed country in the world; everyone admits that it has much more immediately disposable and ready cash than any other country. But very few persons are aware how much greater the ready balance—the floating loan-fund which can be lent to anyone or for any purpose—is in England than it is anywhere else in the world. A very few figures will show how large the London loan-fund is, and how much greater it is than any other. The known deposits—the deposits of banks which publish their accounts—are, in

London (31st December, 1872) 120,000,000 L
Paris (27th February, 1873) 13,000,000 L
New York (February, 1873) 40,000,000 L
German Empire (31st January, 1873) 8,000,000 L

And the unknown deposits—the deposits in banks which do not publish their accounts—are in London much greater than those many other of these cities. The bankers' deposits of London are many times greater than those of any other city—those of Great Britain many times greater than those of any other country.

Of course the deposits of bankers are not a strictly accurate measure of the resources of a Money Market. On the contrary, much more cash exists out of banks in France and Germany, and in all non-banking countries, than could be found in England or Scotland, where banking is developed. But that cash is not, so to speak, 'money-market money:' it is not attainable. Nothing but their immense misfortunes, nothing but a vast loan in their own securities, could have extracted the hoards of France from the custody of the French people. The offer of no other securities would have tempted them, for they had confidence in no other securities. For all other purposes the money hoarded was useless and might as well not have been hoarded. But the English money is 'borrowable' money. Our people are bolder in dealing with their money than any continental nation, and even if they were not bolder, the mere fact that their money is deposited in a bank makes it far more obtainable. A million in the hands of a single banker is a great power; he can at once lend it where he will, and borrowers can come to him, because they know or believe that he has it. But the same sum scattered in tens and fifties through a whole nation is no power at all: no one knows where to find it or whom to ask for it. Concentration of money in banks, though not the sole cause, is the principal cause which has made the Money Market of England so exceedingly rich, so much beyond that of other countries.

The effect is seen constantly. We are asked to lend, and do lend, vast sums, which it would be impossible to obtain elsewhere. It is sometimes said that any foreign country can borrow in Lombard Street at a price: some countries can borrow much cheaper than others; but all, it is said, can have some money if they choose to pay enough for it. Perhaps this is an exaggeration; but confined, as of course it was meant to be, to civilised Governments, it is not much of an exaggeration. There are very few civilised Governments that could not borrow considerable sums of us if they choose, and most of them seem more and more likely to choose. If any nation wants even to make a railway—especially at all a poor nation—it is sure to come to this country—to the country of banks—for the money. It is true that English bankers are not themselves very great lenders to foreign states. But they are great lenders to those who lend. They advance on foreign stocks, as the phrase is, with 'a margin;' that is, they find eighty per cent of the money, and the nominal lender finds the rest. And it is in this way that vast works are achieved with English aid which but for that aid would never have been planned.

In domestic enterprises it is the same. We have entirely lost the idea that any undertaking likely to pay, and seen to be likely, can perish for want of money; yet no idea was more familiar to our ancestors, or is more common now in most countries. A citizen of London in Queen Elizabeth's time could not have imagined our state of mind. He would have thought that it was of no use inventing railways (if he could have understood what a railway meant), for you would not have been able to collect the capital with which to make them. At this moment, in colonies and all rude countries, there is no large sum of transferable money; there is no fund from which you can borrow, and out of which you can make immense works. Taking the world as a whole—either now or in the past—it is certain that in poor states there is no spare money for new and great undertakings, and that in most rich states the money is too scattered, and clings too close to the hands of the owners, to be often obtainable in large quantities for new purposes. A place like Lombard Street, where in all but the rarest times money can be always obtained upon good security or upon decent prospects of probable gain, is a luxury which no country has ever enjoyed with even comparable equality before.

But though these occasional loans to new enterprises and foreign States are the most conspicuous instances of the power of Lombard Street, they are not by any means the most remarkable or the most important use of that power. English trade is carried on upon borrowed capital to an extent of which few foreigners have an idea, and none of our ancestors could have conceived. In every district small traders have arisen, who 'discount their bills' largely, and with the capital so borrowed, harass and press upon, if they do not eradicate, the old capitalist. The new trader has obviously an immense advantage in the struggle of trade. If a merchant have 50,000 L. all his own, to gain 10 per cent on it he must make 5,000 L. a year, and must charge for his goods accordingly; but if another has only 10,000 L., and borrows 40,000 L. by discounts (no extreme instance in our modern trade), he has the same capital of 50,000 L. to use, and can sell much cheaper. If the rate at which he borrows be 5 per cent., he will have to pay 2,000 L. a year; and if, like the old trader, he make 5,000 L. a year, he will still, after paying his interest, obtain 3,000 L. a year, or 30 per cent, on his own 10,000 L. As most merchants are content with much less than 30 per cent, he will be able, if he wishes, to forego some of that profit, lower the price of the commodity, and drive the old-fashioned trader—the man who trades on his own capital—out of the market. In modern English business, owing to the certainty of obtaining loans on discount of bills or otherwise at a moderate rate of interest, there is a steady bounty on trading with borrowed capital, and a constant discouragement to confine yourself solely or mainly to your own capital.

This increasingly democratic structure of English commerce is very unpopular in many quarters, and its effects are no doubt exceedingly mixed. On the one hand, it prevents the long duration of great families of merchant princes, such as those of Venice and Genoa, who inherited nice cultivation as well as great wealth, and who, to some extent, combined the tastes of an aristocracy with the insight and verve of men of business. These are pushed out, so to say, by the dirty crowd of little men. After a generation or two they retire into idle luxury. Upon their immense capital they can only obtain low profits, and these they do not think enough to compensate them for the rough companions and rude manners they must meet in business. This constant levelling of our commercial houses is, too, unfavourable to commercial morality. Great firms, with a reputation which they have received from the past, and which they wish to transmit to the future, cannot be guilty of small frauds. They live by a continuity of trade, which detected fraud would spoil. When we scrutinise the reason of the impaired reputation of English goods, we find it is the fault of new men with little money of their own, created by bank 'discounts.' These men want business at once, and they produce an inferior article to get it. They rely on cheapness, and rely successfully.

But these defects and others in the democratic structure of commerce are compensated by one great excellence. No country of great hereditary trade, no European country at least, was ever so little 'sleepy,' to use the only fit word, as England; no other was ever so prompt at once to seize new advantages. A country dependent mainly on great 'merchant princes' will never be so prompt; their commerce perpetually slips more and more into a commerce of routine. A man of large wealth, however intelligent, always thinks, more or less 'I have a great income, and I want to keep it. If things go on as they are I shall certainly keep it; but if they change I may not keep it.' Consequently he considers every change of circumstance a 'bore,' and thinks of such changes as little as he can. But a new man, who has his way to make in the world, knows that such changes are his opportunities; he is always on the look-out for them, and always heeds them when he finds them. The rough and vulgar structure of English commerce is the secret of its life; for it contains 'the propensity to variation,' which, in the social as in the animal kingdom, is the principle of progress.


But in exact proportion to the power of this system is its delicacy I should hardly say too much if I said its danger. Only our familiarity blinds us to the marvellous nature of the system. There never was so much borrowed money collected in the world as is now collected in London. Of the many millions in Lombard street, infinitely the greater proportion is held by bankers or others on short notice or on demand; that is to say, the owners could ask for it all any day they please: in a panic some of them do ask for some of it. If any large fraction of that money really was demanded, our banking system and our industrial system too would be in great danger.

Some of those deposits too are of a peculiar and very distinct nature. Since the Franco-German war, we have become to a much larger extent than before the Bankers of Europe. A very large sum of foreign money is on various accounts and for various purposes held here. And in a time of panic it might be asked for. In 1866 we held only a much smaller sum of foreign money, but that smaller sum was demanded and we had to pay it at great cost and suffering, and it would be far worse if we had to pay the greater sums we now hold, without better resources than we had then.

It may be replied, that though our instant liabilities are great, our present means are large; that though we have much we may be asked to pay at any moment, we have very much always ready to pay it with. But, on the contrary, there is no country at present, and there never was any country before, in which the ratio of the cash reserve to the bank deposits was so small as it is now in England. So far from our being able to rely on the proportional magnitude of our cash in hand, the amount of that cash is so exceedingly small that a bystander almost trembles when he compares its minuteness with the immensity of the credit which rests upon it.

Again, it may be said that we need not be alarmed at the magnitude of our credit system or at its refinement, for that we have learned by experience the way of controlling it, and always manage it with discretion. But we do not always manage it with discretion. There is the astounding instance of Overend, Gurney, and Co. to the contrary. Ten years ago that house stood next to the Bank of England in the City of London; it was better known abroad than any similar firm known, perhaps, better than any purely English firm. The partners had great estates, which had mostly been made in the business. They still derived an immense income from it. Yet in six years they lost all their own wealth, sold the business to the company, and then lost a large part of the company's capital. And these losses were made in a manner so reckless and so foolish, that one would think a child who had lent money in the City of London would have lent it better. After this example, we must not confide too surely in long-established credit, or in firmly-rooted traditions of business. We must examine the system on which these great masses of money are manipulated, and assure ourselves that it is safe and right.

But it is not easy to rouse men of business to the task. They let the tide of business float before them; they make money or strive to do so while it passes, and they are unwilling to think where it is going. Even the great collapse of Overends, though it caused a panic, is beginning to be forgotten. Most men of business think—'Anyhow this system will probably last my time. It has gone on a long time, and is likely to go on still.' But the exact point is, that it has not gone on a long time. The collection of these immense sums in one place and in few hands is perfectly new. In 1844 the liabilities of the four great London Joint Stock Banks were 10,637,000 L.; they now are more than 60,000,000 L. The private deposits of the Bank of England then were 9,000,000 L.; they now are 8,000,000 L. There was in throughout the country but a fraction of the vast deposit business which now exists. We cannot appeal, therefore, to experience to prove the safety of our system as it now is, for the present magnitude of that system is entirely new. Obviously a system may be fit to regulate a few millions, and yet quite inadequate when it is set to cope with many millions. And thus it may be with 'Lombard Street,' so rapid has been its growth, and so unprecedented is its nature...

/... http://www.gutenberg.org/cache/epub/4359/pg4359.html

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Response to Demeter (Original post)

Sun Sep 15, 2013, 07:05 AM

34. EU spending cuts to hit Portugal's poor


(Reuters) - Spending cuts to European Union food aid programs could leave Portugal's growing ranks of poor with even emptier plates.

Western Europe's poorest country is likely to lose 40 percent of 20 million euros ($27 million) in food aid it gets from Brussels every year, according to Isabel Jonet, who heads the Food Banks charity.

Her institution supports 390,000 poor people out of Portugal's 10.5 million population. They have been helped by the EU "Food for the Needy" program but it is due to be replaced by the Fund for European Aid.

The new fund will have fewer resources for food, Jonet told Reuters. And the cash-strapped government has made no preparations to deal with the problem, she said.

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Response to Demeter (Original post)

Sun Sep 15, 2013, 07:56 AM

35. Cyprus eyes investors, may not need full privatization-president


(Reuters) - Cyprus may need to only partly privatize state-owned enterprises to meet one of the conditions of its international bailout, its president was quoted as saying on Sunday.

The 10 billion euro ($13 billion) bailout deal Cyprus reached with the European Union and International Monetary Fund this year envisages selling some state assets.

Authorities could convert state enterprises into joint-stock companies and seek out strategic investors with the state retaining a controlling stake, President Nicos Anastasiades said.

"Part of the share capital could be allocated to a strategic investor, without full disengagement (of the state) from semi-government corporations," Anastasiades was quoted as telling the Kathimerini Cyprus newspaper.

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Response to Demeter (Original post)

Sun Sep 15, 2013, 08:05 AM

36. Summers cancels Citi events, while Fed chief decision pending


(Reuters) - Former Treasury Secretary Lawrence Summers has pulled out of speaking engagements and other events involving Citigroup Inc while President Barack Obama considers whether to nominate the Harvard economist as the next chairman of the Federal Reserve, the bank said in a statement.

"Mr. Summers has withdrawn from participation in all Citi events while he is under consideration to be Chairman of the Federal Reserve," Danielle Romero-Apsilos, a spokeswoman for the third-biggest U.S. lender, said in a statement e-mailed to Reuters on Saturday.

Summers, a former economic adviser to Obama, has bowed out of a keynote address on global economic challenges at a Citigroup research seminar next month, according to a Bloomberg report.

While Summers is widely thought to be Obama's preferred choice to replace Fed Chairman Ben Bernanke when his term is up in January, an unusually vitriolic public debate has erupted over that possibility in recent months.

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Response to xchrom (Reply #36)

Sun Sep 15, 2013, 10:37 AM

46. Too little, too late Larry


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Response to Demeter (Original post)

Sun Sep 15, 2013, 08:07 AM

37. U.S. retail sales, consumer confidence point to soft economy


(Reuters) - U.S. consumer confidence ebbed early this month and retail sales advanced just slightly in August, the latest indications of a lack of momentum in the economy.

The sluggish pace of activity was underscored by another report on Friday showing an energy-led rise in wholesale prices last month, but subdued underlying inflation pressures.

The soft data, however, was unlikely to deter the Federal Reserve from cutting its massive bond-buying program as early as next week, analysts said.

"I don't think that's a red flag for the Fed. Overall the data picture is mixed and supports our view that it will be a light taper," said Thomas Costerg, a U.S. economist at Standard Chartered Bank in New York.

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Response to Demeter (Original post)

Sun Sep 15, 2013, 08:10 AM

38. Budget deficit shrinks in August from year earlier


(Reuters) - America's budget deficit shrank in August compared to a year earlier, with government accounts helped by tax hikes and an improving economy.

The federal government sank $147 billion further into the red last month, the Treasury said on Thursday.

Washington this year has taken in only about seven cents in revenue for every dollar it spends, extending a decades-long trend of deficit spending.

The deficit widened sharply during the 2007-09 recession, which hit tax revenues and increased payments for unemployment benefits.

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Response to Demeter (Original post)

Sun Sep 15, 2013, 08:30 AM

39. Existing-Home Sales Probably Declined: U.S. Economy Preview


Purchases (ETSLTOTL) of previously-owned homes probably fell in August as mortgage rates at a two-year high began to slow the progress in U.S. residential real estate, economists said before a report this week.

Contract closings fell 2.6 percent to a 5.25 million annualized rate from the highest level since November 2009, according to the median forecast of 62 economists in a Bloomberg survey ahead of National Association of Realtors data due on Sept. 19. Another report is projected to show home construction starts rose in August, reflecting orders in the months preceding the run-up in interest rates.

Rising borrowing costs may temper the pace of the housing rebound that’s been a mainstay of the economy. Federal Reserve policy makers meeting this week will decide whether the expansion and labor market have improved enough to warrant scaling back purchases of government and mortgage securities.

“The recent jump in mortgage costs will moderate the pace of the housing recovery but not derail it,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. “The Fed is likely to go ahead with tapering. Borrowing costs could ease a bit between now and year-end as the market digests the idea that the Fed’s decision is not a tremendously negative event.”

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Response to Demeter (Original post)

Sun Sep 15, 2013, 08:52 AM

40. Companies Use IRS to Raise Bonuses With Earnings Goals


After Exelon Corp. (EXC) earned less than top executives needed to reach their annual cash bonus target last year, the company's directors provided a way to help bridge the gap: nonexistent profits.

The board tacked on 6 cents a share -- equal to $85 million -- that the Chicago-based power company never made, augmenting earnings solely for the purpose of calculating bonuses. Exelon said that it would have earned the sum except for a regulatory setback on electricity rates and that the pennies helped thousands of employees avoid smaller payouts.

The 6 cents helped executives receive their fourth above-target bonus in five years as the company’s operating profits and its market value fell by more than half. Amid the slide, the board awarded more than $20 million in cash bonuses to top managers as tax-deductible “performance-based pay.”

Exelon and dozens of other corporations demonstrate how such tax-advantaged bonuses -- which cost the U.S Treasury $3.5 billion a year, according to the congressional Joint Committee on Taxation -- can reward even subpar shareholder returns. Chief executive officers at 63 companies in the Standard & Poor’s 500 Index (SPX) got cash incentive-pay increases last year after their share returns underperformed the index’s, according to data compiled by Bloomberg.

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Response to xchrom (Reply #40)

Sun Sep 15, 2013, 10:38 AM

47. WTF?


Why should anybody follow rules or reason anymore? Can you tell me that?

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Response to Demeter (Original post)

Sun Sep 15, 2013, 09:31 AM

43. MIT's Andrew Lo Explains Why Hedge Funds Are Incentivized To Decimate Capital


Professor Krugman writes: Heads They Win, Tails We Lose
Many years ago MIT’s Andy Lo made a simple point (weirdly, I haven’t been able to track down the paper) about the distortion of incentives inherent in financial-industry compensation. Suppose you’re a hedge fund manager, getting 2 and 20 — fees of 2 percent of investors’ money, plus 20 percent of profits. What you want to do is load up on as much leverage as possible, and make high-risk, high return investments. This more or less guarantees that your fund will eventually go bust — but in the meantime you’ll have raked in huge personal earnings, and can walk away filthy rich from the wreckage.

But surely, you say, investors will see through this strategy. They can’t consistently be that stupid or naive, can they?


Andy Lo's article was published in the Financial Analysts Journal in 2001: Risk Management for Hedge Funds: Introduction and Overview. An online copy is available here.

Jim Hamilton at Econbrowser has a nice summary from 2005: Hedge fund risk

[L]et me tell you about one fund I do know about called CDP, which was described by MIT Professor Andrew Lo in an article published in Financial Analysts Journal in 2001.

1992-1999 was a good time to be in stocks-- a strategy of buying and holding the S&P 500 would have earned you a 16% annual return, with $100 million invested in 1992 growing to $367 million by 1999. As nice as this was, it pales in comparison to CDP's strategy, which would have turned $100 million into $2.7 billion, a 41% annual compounded return, with a positive return in every single year.

Read more: http://www.calculatedriskblog.com/2013/09/hedge-fund-risk-and-andy-los-capital.html#ixzz2ey4bzdrW

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Response to Demeter (Original post)

Sun Sep 15, 2013, 10:20 AM

45. James Gabraith, Neil Barofsky, and John Coffee Discuss Lessons from Lehman Meltdown

Last edited Sun Sep 15, 2013, 11:03 AM - Edit history (1)

Video: about an hour and a half


I've only watched the first hour so far...but I think it's pretty good.

They discuss ways to prevent the next meltdown -- what needs to happen because we can't count on Congress to fix anything.

I found it informative.

Sorry if it's already been posted.

eta: We can't count on Congress or the agencies to fix anything.

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Response to antigop (Reply #45)

Sun Sep 15, 2013, 10:40 AM

48. Thanks for that! No, it isn't posted. You are the first!


I've been overwhelmed lately.

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Response to Demeter (Original post)

Sun Sep 15, 2013, 11:02 AM

49. Calvin explains exactly how we got into this mess


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Response to Demeter (Original post)

Sun Sep 15, 2013, 01:21 PM

50. Musical Interlude IV

Money (That's What I Want) by The Beatles:

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Response to Demeter (Original post)

Sun Sep 15, 2013, 04:34 PM

51. IN CONCLUSION: 5 years after Lehman, Americans still angry at Wall Street--POLL



A few years ago, Larry Summers, then the director of President Barack Obama's National Economic Council, held a private meeting with some of Wall Street's top bankers and executives. Although the worst of the financial crisis was over by then, Summers - now seen as a candidate to be the next chairman of the U.S. Federal Reserve - chastised bankers for being out of touch, saying they didn't understand how angry average Americans were with them, according to a participant in the meeting.

A spokeswoman for Summers said it sounded like something he might have said, though she did not provide more specific confirmation. Five years after the collapse of Lehman Brothers and two years after the start of the Occupy Wall Street movement, Wall Street has drastically changed under an onslaught of new regulations and by some accounts become more conscious of its image on Main Street. Still, a new Reuters/Ipsos poll shows Main Street animus against bankers and their role in the financial crisis persists. (Click on http://link.reuters.com/sud23v for the results)

The anti-Wall Street sentiment bodes ill for the sector: It serves to pressure lawmakers and regulators into further restraining perceived excesses on Wall Street, threatening the long-term profitability of the industry.



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Response to Demeter (Reply #51)

Sun Sep 15, 2013, 04:35 PM



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Response to Demeter (Reply #52)

Sun Sep 15, 2013, 04:36 PM



We have seen the enemy, and he is us.

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Response to Demeter (Reply #53)

Sun Sep 15, 2013, 06:02 PM

54. FLASH: Summers Withdraws

per Karl Denninger:
On the wires: Summers has told Obama he does not want the Fed Chief job.
This ought to be interesting given that he was widely considered to be "the one."

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Response to DemReadingDU (Reply #54)

Sun Sep 15, 2013, 09:43 PM

55. Now we have something POSITIVE to celebrate!


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