An interesting read via Stewie's blog regarding the mortgage crisis. Jason Leavitt does a fantastic job summing up the role's played by each variable of the mortgage melt-down. But, ultimately, Bill Clinton seems to deserve to be held accountable as well. Leavitt writes;
"...on November 12, 1999. With the CEO of Citigroup looking over his shoulder, Bill Clinton signed into law the Gramm-Leach-Bliley Act which repealed the Glass-Steagall Act of 1933.
The Gramm-Leach-Bliley Act permitted commercial and investment banks to consolidate, and almost overnight behemoth financial service companies that supplied everything to everybody were born. Smith-Barney, Salomon Brothers, PaineWebber and many other well-known and respected investment banks were gobbled up by Citibank, JP Morgan etc, and while the lay public didn’t have a clue what was going on, conflict of interests were rampant. Suddenly the banking arm of one of these financial service companies was pressuring the investment arm to raise its ratings on stocks to help lubricate the deal-making process. (As a quick side note, Citigroup played a major role lobbying for an end to Glass-Steagall. Starting in 1998, the finance, insurance and real estate industries together spent more than $200 million to get Glass-Steagall repealed, and not so coincidentally, only a couple days after Clinton signed Gramm-Leach-Bliley into law, recently-departed Treasury Secretary Robert Rubin was hired by Citigroup as a member of its 3-person office of the chairman.)
If you start with today and work backwards with intentions of figuring out when “all this mess started,” you’ll find many parties that played a role in adding fuel to a fire which was spinning out of control, but your journey won’t end until November 12, 1999 when Bill Clinton tore down the walls within the financial community.
I’m not going to go as far to say if Bill Clinton had not repealed Glass-Steagall, we wouldn’t be in the financial situation we’re in, but I can certainly say it would have been much more mild and probably isolated. When second and third parties are involved in a transaction, more due diligence is done, more scrutiny is applied, and less risk is taken."
It's a very interesting read. And to top it all off, the article ends with a great photo of Bill Clinton after signing the Gramm-Leach-Bliley Act. Looks like a circle-jerk at an occult sacrifice...not that I know what one of those would look like, but I've seen some movies.
Showing posts with label interesting reads. Show all posts
Showing posts with label interesting reads. Show all posts
Monday, July 28, 2008
Thursday, July 17, 2008
reads
Three great reads can be found here:
The Big Picture - Stick it to 'em
Who Holds all that "Agency Debt?" (a whopping 25% of GDP, or $1-trillion is held by China)
Why can't people take sound advice when it's smacking them in the face? Here's an excerpt from this link; taking note it was written in September of '07:
"...if loans were extended to people who shouldn't have received them, real estate prices would have been bid up higher than they should have been. And it is a propagation mechanism in the sense that, as long as house prices continued to rise, all sins were forgiven. Even a completely fraudulent loan would not go into default when there's sufficient price appreciation, since the perpetrator is better off repaying the loan in order to enjoy the capital gain.The problem is that, as this process gets undone, both effects operate in reverse. A credit crunch means that some people who should get loans don't receive them, depressing real estate prices, and as prices fall, some loans will become delinquent that otherwise might not. If such fundamentals are indeed contributing factors on the way up and the way down, the magnitude of the resulting decline in real estate prices, and their implications for default rates, could be much bigger than the reassuring numbers Mishkin invites us to remember based on the historical variability of these series. What worries me in particular is, if we see this much in the way of delinquencies and short-term credit concerns in the current economic environment, in which GDP has still been growing and house price declines are quite modest, what can we expect with a full-blown recession and, say, a 20% decline in average real estate values?"
The Big Picture - Stick it to 'em
Who Holds all that "Agency Debt?" (a whopping 25% of GDP, or $1-trillion is held by China)
Why can't people take sound advice when it's smacking them in the face? Here's an excerpt from this link; taking note it was written in September of '07:
"...if loans were extended to people who shouldn't have received them, real estate prices would have been bid up higher than they should have been. And it is a propagation mechanism in the sense that, as long as house prices continued to rise, all sins were forgiven. Even a completely fraudulent loan would not go into default when there's sufficient price appreciation, since the perpetrator is better off repaying the loan in order to enjoy the capital gain.The problem is that, as this process gets undone, both effects operate in reverse. A credit crunch means that some people who should get loans don't receive them, depressing real estate prices, and as prices fall, some loans will become delinquent that otherwise might not. If such fundamentals are indeed contributing factors on the way up and the way down, the magnitude of the resulting decline in real estate prices, and their implications for default rates, could be much bigger than the reassuring numbers Mishkin invites us to remember based on the historical variability of these series. What worries me in particular is, if we see this much in the way of delinquencies and short-term credit concerns in the current economic environment, in which GDP has still been growing and house price declines are quite modest, what can we expect with a full-blown recession and, say, a 20% decline in average real estate values?"
Sunday, July 22, 2007
Gold Stocks
To follow up the previous post, I'm reading an interesting article about the "Secular Gold Bull Market."
An excerpt of interest from the post being: "While the spot price of gold has yet to reach the swing high in April 2007, the Philadelphia Gold BUGS Index (HUI) has just surpassed it. If this sort of disconnect continues, either the price of gold has to run up to catch up, or the gold stocks will fall to realign with the commodity."
Gold Stocks: MDG, NEM, CDE, GG, GSC, GSS, RGLD
An excerpt of interest from the post being: "While the spot price of gold has yet to reach the swing high in April 2007, the Philadelphia Gold BUGS Index (HUI) has just surpassed it. If this sort of disconnect continues, either the price of gold has to run up to catch up, or the gold stocks will fall to realign with the commodity."
Gold Stocks: MDG, NEM, CDE, GG, GSC, GSS, RGLD
Wednesday, July 18, 2007
Articles to Read
Here are a couple of interesting (unrelated) articles I read this morning.
The first being an argument for reasons to believe why China might be nearly where it currently is ten years from now. Basically, big population = big beaurocracy = bigger hurdles to overcome.
"A more intractable problem is China's power structure itself. Although Beijing holds a monopoly on politics, local Communist Party officials enjoy wide latitude over social and economic affairs. They also have huge professional and financial incentives to spur GDP growth, which they often do by ignoring regulations or lavishing companies with perks. As a result, China has built a bureaucratic machine that at times seems almost impervious to reform. Even if Beijing has the best intentions of fixing problems such as undrinkable water and unbreathable air, it is often thwarted by hundreds of thousands of party officials with vested interests in the current system."
The first being an argument for reasons to believe why China might be nearly where it currently is ten years from now. Basically, big population = big beaurocracy = bigger hurdles to overcome.
"A more intractable problem is China's power structure itself. Although Beijing holds a monopoly on politics, local Communist Party officials enjoy wide latitude over social and economic affairs. They also have huge professional and financial incentives to spur GDP growth, which they often do by ignoring regulations or lavishing companies with perks. As a result, China has built a bureaucratic machine that at times seems almost impervious to reform. Even if Beijing has the best intentions of fixing problems such as undrinkable water and unbreathable air, it is often thwarted by hundreds of thousands of party officials with vested interests in the current system."
This next article is another great tome put out by Dr. Brett.
In summary;
"Too many nuances of the TICK exist to cover in a single article. An important one, however, is to observe unusually large thrusts in TICK values...A large jump or drop in the one-minute TICK readings indicates that baskets of stocks are either being purchased or sold. It isn’t small retail traders executing such baskets, but rather, this is a footprint of institutional traders. By tracking whether the big jumps are primarily occurring in the positive or negative direction; by observing whether they are coming early or late in a market move; and especially by noting how the jumps are affecting price, it becomes possible to align your trading with that of the “big players” in the market.
Ultimately, it’s those large traders that move price. When they are repeatedly hitting bids of lifting offers, they’re tipping their hands in the market auction. It pays to be a market shrink and analyze what they’re doing!"
In summary;
"Too many nuances of the TICK exist to cover in a single article. An important one, however, is to observe unusually large thrusts in TICK values...A large jump or drop in the one-minute TICK readings indicates that baskets of stocks are either being purchased or sold. It isn’t small retail traders executing such baskets, but rather, this is a footprint of institutional traders. By tracking whether the big jumps are primarily occurring in the positive or negative direction; by observing whether they are coming early or late in a market move; and especially by noting how the jumps are affecting price, it becomes possible to align your trading with that of the “big players” in the market.
Ultimately, it’s those large traders that move price. When they are repeatedly hitting bids of lifting offers, they’re tipping their hands in the market auction. It pays to be a market shrink and analyze what they’re doing!"
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