How Could it Be?

How did a small percentage of mortages equal 700B. Houses have been overpriced and over appraised. Most of them are vacation homes, no or little down payment or just paying the interest. A quick fix on this greed, please! Yes, we need CHANGE-change in attitudes, ethics, morals. How many times do we need the media to repeat McCain's remarks about the fundamentals of the economy are strong. Workers (taxpayers) are part of the economy. The next few days Wall St. hits bottom! No warning. If it doesn't work the next president will be blamed. We need an investigation, spreadsheets, something for main street to see. WE have had enough. How are the taxpayers going to pay it back? People are using credit cards now to buy gas, food etc. It just keeps going on and on!

This financial catastrophe has been coming for a long, long time. I saw this coming at least 3 years ago, others longer than that. It's the government and the "insiders" that have been caught off guard. And they have been caught off guard because they simply don't understand the fundamentals of how sound business practices work, nor do they understand human nature. Anyone "surprised" by this "crisis" is ignorant beyond belief or simply intellectually dishonest. Now had we been working in a culture where ethics and virture trumped making a profit then this would have been a different story.

Viv are you banker? u sound and write like one.

i aagree w/ viv. I'm not even a financial type but I've been reading articles from folks who are that have been predicting this major credit unwinding as far back as last summer of '07. Fleckenstien (a chicken little nay sayer) was writing about the housing market imploding the financial sector before most "Street" talking heads even agreed that housing was going in the tank. So hey! There were smart enough people who saw this hard to comprehend financial model where houses would not appreciate indefinately and 100% financed loans may not all get paid back. Wow!

How could it be? Three little words( and not 'I luv you' ): 'poor( or no ) risk management'. Having worked for commodity and energy trading entities in the past, I have to wonder where the risk management/mitigation was. I find it difficult to fathom traders and institutions could be so stupid as to not hedge themselves against losses in the investments they made. Since this appears to be the case, I have no sympathy. Contrary to popular belief, the credit markets will not 'sieze'. Banks will not stop loaning money, they'll just be particular to whom they lend, as it should be. Mr. Paulson is trying to scare us by saying the capital markets will 'quit'. The only thing that will quit is 'easy' credit, which is not necessarily a bad thing. Paulson, Bernacke and other scare mongers are giving us dire warnings of what will happen to Main Street if Wall Street collapses. How about oil spiking and the dollar plummeting? Inflation? Oh wait, that's because our Congress is seriously considering this bailout. Fear not, though, my fellow Americans, I have great faith in divided government- hopefully our Congress will bicker over the details and this bailout becomes a welcome victim of Congressional gridlock. It's time to let the markets unwind and adjust. Sure, it will be hard, but hard lessons are the kind we will remember.

I agree the bailout is bad, it is just too simplistic. When more than one cliché comes to mind when trying to wrap my mind around a concept like this it's usually a bad idea. Let the companies fail & fail hard. The best idea/solution (I'll admit it was on NPR this morning)is to mirror the response Japan took during their depression. They didn't get out of it via artificial interest rates. They realized "the people" didn't want or need to borrow more! They were already in debt! Sounding Familiar? Spend the $Tril on infrastructure like Japan did. Remember that report on our nation's bridges? Washington & Wall St don't b/c it was more than a quarter ago. Japan knew it had to keep jobs up & it seemed to work. They made people earn their money a concept missing in all of the proposed solutions so far. The cynical will say "Yeah but Japan faced tons of corruption during the big Govt' spending spree" I wouldn't expect it to be any more scandalous than our current CEO silver lining policies.

Excuse me?? But how could you have not seen this coming. People on the blogosphere have been going on it for well over a year now. Roubini? Mish? Karl Denninger? Jim Kunstler? Hellloooo!! There's a systematic run on the shadow banking system, people are way too deep in debt in America, banks can't lend, people can't afford to borrow. System is shut down. Which will result in a global depression. Yes, depression. Next up is a run on the CDS markets and all the off balance shenanigans that the big banks have. Japan tried the exact same thing in their deflationary phase in the early 90's, trying to prop up the banks. This just zombified the banks, same thing in America, except it'll be much worse as America doesn't have sufficient savings. You think it's bad now, wait 2 years from now. The US banking system is technically insolvent. Stocks will halve, P/E ratios are too high and corporate earnings for non-financial companies are dropping sharply. House values will continue to drop, till they reach their historical average of 101.2 on the case shiller index relative to inflation. Have you ever met a millionare who spent his way to success? This is what American policy is at the moment. It's a short term spurt to success but a long term disaster. Start saving, be frugal and watch events unfold, the American way of life will never be the same.

Alexis, I just heard an interview from a retired banker that opened up another thread in this debacle. He brought up a possible root cause for how we got here and I am not hearing anything in this bailout addressing why we got here. The premise is made that under the CRA (Community Reinvestment Act) financial institutions were forced as a part of doing business to make bad loans in the sub prime market. The banker mentioned ACORN (Association of Community Organizations for Reform Now) and other such groups, for forcing these institutions under the CRA to make these loans. In 1995 Clinton relaxed the regulation to enable these groups and in 2003 Bush tried to stabilize the situation. If permitted, to pass in 2003, the CRA changes may have prevented the current meltdown. So I am asking you to raise the question, what is included in this package to address the root cause so that any fix we put into place doesn’t just patch the past, but fixes it going forward. Regards, Dan W.

It's Savings and Loan part II BAC is the laundering vehicle.

Amazing no one saw the planes coming either !

Over the weekend a Bloomberg.com broke the news that first two congressmen lost investments in AIG. Speaker Nancy Pelosi lost 200,000 to 250,000 in stock; Senator John Kerry lost two million dollars in AIG. Cindy McCain played it smart and got out of AIG before thier bailout. Last night I followed the coverage. Now new wrinkle might have appeared courtesy of those not paying attention to all peices of the puzzle. The successful community banks could be next due actions of unattended consequences. Still I ask how far does the fininacial hole go with thse mortgage securities? But the radical plan has shifted the economic plans of both presidental canidates. Know it all Goolsby has been quiet on the issue and hasn't opened his mouth on the issue. But it makes one wonder if both systems:political anf financial are broken. All weekend I followed the story from Friday morning to Sunday evening. Now that treasury and congress have intervene in the marketplace what the consequences of the fed actions? Still it's time to release a list of congressman,Democrat and Republican who lost Wall Street Investments. Question now is Goldman Sachs going survive? This new Wall Street Change is fluid at best.

Well put...I have worked in the financial services industry for over 30 years and I am embarassed too. We are smarter than this. For example, the restricted short list just rewarded those who took excessive risk with a huge reward...an increase in thier stock prices. I wonder if we will see any insider selling in these companies now? I hope the government is smart enough to curb insider sales on the gift these companies and their execs were given on Friday. Also, uncurbed and unchecked finanical power like Paulson is asking for is very, very dangerous. It goes against best practices in oversight and governance that the FDIC recommends for banks. "Do as we say not as we do." Unchecked economic power with one individual is very dangerous for our government...it is wrong. Last, how can the government insure money market deposits at an insurance rate that is lower than FDIC banks pay with higher limits than $100,000? They better be careful because they could create very serious disintermediation. They did this without Congressional legislation...to raise FDIC limits it takes Congressional action. Paulson, Bernanke, and Cox have exercised authority that reaches far beyond what was intended. There has to be a legal challenge to what they just pulled out of the rabbit's hat. To do nothing is implicit approval. Get in gear Congress!

I have a question I would love to see FOX News take on, since I don't have Fox Business News channel if you can answer this on both sides of your network that would be awesome. Here's my question and after you read it your readers here will know why all this is really going on. Why has the media neglected to mention that the Russian Central Bank is no longer included in the G8. All media outlets including Reuters is running stories with "G7 banks...." Now I don't recall Russia walking out, but the entire media has not stated the G7 determined Russia to be ousted. ***Could Russias removal/absence from the G8 been the root cause of the fiasco last week? ***Was this an act of war on the side of Russia or the G7 countries?