Wall Street, USA
Submitted by kpaul.mallasch on Tue, 09/23/2008 - 6:08pm.
By Martha Randolph Carr
We are in very strange times. Large financial institutions are shuttering or morphing very quickly and in their wake leaving behind even more questions. The two newest, Goldman Sachs and Morgan Stanley waited till Sunday night just before the opening of the world markets to shake off their independence and become bank holding companies.
The Federal Reserve bypassed the usual scrutiny and granted the applications over the weekend in an effort to shore up public confidence, which after last week seems like a noble goal on the face of it particularly after the run on money market accounts. But, not if it’s still more plastering over seeping problems, which slowly erodes even more infrastructure.
Actually it’s more of the same idea of using taxpayer money to give large institutions a little time to try and figure things out. It’s a really big admission that there is no easy fix.
Goldman Sachs in particular was trading in the same securities that got Merrill Lynch and Lehman into trouble and has not yet disclosed their assets and more importantly the extent of their bad deficits. No one has even come up with a standard to judge what that constitutes.
If someone is three months in arrears right now that debt is generally still sitting in the good column and is seen as an asset. There’s trouble percolating but odds are still good that the people will catch up with the payments. Of course, that’s based on the old paradigm before the unemployment rate started to skip upwards along with the cost of food or the fuel to get to work. Maybe they should have their own column.
How about if someone’s not behind on their mortgage but owes significantly more than their house is worth, in other words they’re upside down. Maybe they should be considered an asset for a few quarters to give the housing market a chance to bounce back. However, if it doesn’t how many people will have to sell at a loss and how many of those will walk away or declare bankruptcy? Should that have a column of it’s own as well?
Financial markets are not very good at predicting long term problems. It’s why the futures market is seen as so speculative and has more rules than any other financial sector. Now, that’s ironic but it’s also an acknowledgment that there’s no such thing as careful planning when speculating too far down the road. Stocking away large amounts in retirement accounts is our individual way of saying we really have no idea what to expect ten years down the road but we’re hoping this might cover it.
This is the dilemma the federal government, Wall Street, banking institutions and most importantly, American taxpayers are now facing. How do we balance the current crisis so that it doesn’t cripple the economy to the point where we slide significantly backward into a depression against bankrupting the taxpayer and the ability to grow in the future? Right at the moment, the current administration has said that the first one is more important, apparently to the tune of about a trillion future taxpayer dollars, maybe more. No one really knows that answer just yet.
And by the way, every time you hear any candidate say they won’t raise taxes to pay for it all, laugh heartily to keep from crying. That’s another fast one. It’s as if we’re being told that part of this new world is there aren’t going to be any consequences. However, as we’ve seen this past week, putting off the clean-up actually leads to a bigger mess and no one is telling us enough of the truth for anyone to accurately be able to say how we’re going to pay for it.
You see, by granting Goldman and Morgan Stanley permission to change their standing without looking at the books, the government gave them the chance to more easily use more of our money without ever clearly showing us just what we’re underwriting. Kind of like giving a mortgage to someone without making them prove upfront they have the income to pay you back and then hoping that somehow it will all magically work out. That should sound familiar, just on a much bigger scale. It’s as if they have no new ideas and would rather do the same old thing and yet hope for a different outcome. Try not to act too surprised when we finally get the bill.
Martha Randolph Carr’s latest book, A Place to Call Home, a memoir about the reemergence of U.S. orphanages is available wherever books are sold. If you’d like Martha to come and speak to your group visit: www.newvoicespeakers.com. Martha’s Big Adventure coming soon to World Talk Radio and Voice America. Email Martha at: Martha@caglecartoons.com or visit www.martharandolphcarr.com.
©2008 Martha Randolph Carr.
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Area: National Topics: Government Types: Opinion
We are in very strange times. Large financial institutions are shuttering or morphing very quickly and in their wake leaving behind even more questions. The two newest, Goldman Sachs and Morgan Stanley waited till Sunday night just before the opening of the world markets to shake off their independence and become bank holding companies.
The Federal Reserve bypassed the usual scrutiny and granted the applications over the weekend in an effort to shore up public confidence, which after last week seems like a noble goal on the face of it particularly after the run on money market accounts. But, not if it’s still more plastering over seeping problems, which slowly erodes even more infrastructure.
Actually it’s more of the same idea of using taxpayer money to give large institutions a little time to try and figure things out. It’s a really big admission that there is no easy fix.
Goldman Sachs in particular was trading in the same securities that got Merrill Lynch and Lehman into trouble and has not yet disclosed their assets and more importantly the extent of their bad deficits. No one has even come up with a standard to judge what that constitutes.
If someone is three months in arrears right now that debt is generally still sitting in the good column and is seen as an asset. There’s trouble percolating but odds are still good that the people will catch up with the payments. Of course, that’s based on the old paradigm before the unemployment rate started to skip upwards along with the cost of food or the fuel to get to work. Maybe they should have their own column.
How about if someone’s not behind on their mortgage but owes significantly more than their house is worth, in other words they’re upside down. Maybe they should be considered an asset for a few quarters to give the housing market a chance to bounce back. However, if it doesn’t how many people will have to sell at a loss and how many of those will walk away or declare bankruptcy? Should that have a column of it’s own as well?
Financial markets are not very good at predicting long term problems. It’s why the futures market is seen as so speculative and has more rules than any other financial sector. Now, that’s ironic but it’s also an acknowledgment that there’s no such thing as careful planning when speculating too far down the road. Stocking away large amounts in retirement accounts is our individual way of saying we really have no idea what to expect ten years down the road but we’re hoping this might cover it.
This is the dilemma the federal government, Wall Street, banking institutions and most importantly, American taxpayers are now facing. How do we balance the current crisis so that it doesn’t cripple the economy to the point where we slide significantly backward into a depression against bankrupting the taxpayer and the ability to grow in the future? Right at the moment, the current administration has said that the first one is more important, apparently to the tune of about a trillion future taxpayer dollars, maybe more. No one really knows that answer just yet.
And by the way, every time you hear any candidate say they won’t raise taxes to pay for it all, laugh heartily to keep from crying. That’s another fast one. It’s as if we’re being told that part of this new world is there aren’t going to be any consequences. However, as we’ve seen this past week, putting off the clean-up actually leads to a bigger mess and no one is telling us enough of the truth for anyone to accurately be able to say how we’re going to pay for it.
You see, by granting Goldman and Morgan Stanley permission to change their standing without looking at the books, the government gave them the chance to more easily use more of our money without ever clearly showing us just what we’re underwriting. Kind of like giving a mortgage to someone without making them prove upfront they have the income to pay you back and then hoping that somehow it will all magically work out. That should sound familiar, just on a much bigger scale. It’s as if they have no new ideas and would rather do the same old thing and yet hope for a different outcome. Try not to act too surprised when we finally get the bill.
Martha Randolph Carr’s latest book, A Place to Call Home, a memoir about the reemergence of U.S. orphanages is available wherever books are sold. If you’d like Martha to come and speak to your group visit: www.newvoicespeakers.com. Martha’s Big Adventure coming soon to World Talk Radio and Voice America. Email Martha at: Martha@caglecartoons.com or visit www.martharandolphcarr.com.
©2008 Martha Randolph Carr.
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