Our financial system is crumbling this week.

[greenback44]

Has anyone heard if this new huge bailout does anything for Lehman Bros.? It seems to me like their employees are really getting the shaft if it doesn't--why does everyone else get to be saved, but they don't?

I heard an answer to this yesterday from designated experts. First, Lehman is, or was, a wholesaler rather than a retail institution. The millions of folks on Main St. won't wet their pants when Lehman goes under. Furthermore in crisis mode it's a lot easier to deal with Lehman's creditors than those of, say, Washington Mutual. Second, Lehman doesn't have the counter-party issues that, say, Bear Stearns has. Basically Lehman is an end domino, they won't take down five (or maybe 500 in the case of the mortgage giants) other institutions with them.

[Hungary Jack]

I blame the financial crisis on stupidity.

If that's the case, doesn't that imply that more effective oversight is needed?

I don't know, but probably. Many institutional investors apparently need to be saved from themselves.

During the cheap-money driven speculative housing boom, I don't blame mortgage brokers for writing really crappy mortgage contracts and them selling them to banks and other financial firms that were hungry to boost their investment yields. The saying "buyer beware" holds true here. Mortgage brokers were able to very quickly wash their hands of any risk they incurred in writing such contracts while reaping the rewards. Bully for them.

It amazes me that so many "smart people", including many people who were probably among my peers at top-tier MBA programs, could somehow think that housing prices could continue to rise faster than personal income year after year. This assumption leads one to believe that the collateral behind the loans would be valuable even if the loans default. These folks probably also believed that the demand for mortgages would continue to grow despite the fact that home ownership in the US was at an all-time high. And finally some historical awareness should have shown that the cost of capital was absurdly low by historical standards, especially in a nation that was running trade deficits and public deficits simultaneously for over two decades. These things simply cannot last forever.

So I think the people that bought up these mortgage-backed securities deluded themselves with some incredibly myopic, short-term thinking. It is mathematically impossible for everyone to out-perform or out-time the market. But these investors seemed to think that.

[cardsfansince82]

Sounds like the bailout is close to being finalized:

http://www.cnn.com/2008/POLITICS/09/28/ ... index.html

[cardsfansince82]

Has anyone heard if this new huge bailout does anything for Lehman Bros.? It seems to me like their employees are really getting the shaft if it doesn't--why does everyone else get to be saved, but they don't?

I heard an answer to this yesterday from designated experts. First, Lehman is, or was, a wholesaler rather than a retail institution. The millions of folks on Main St. won't wet their pants when Lehman goes under. Furthermore in crisis mode it's a lot easier to deal with Lehman's creditors than those of, say, Washington Mutual. Second, Lehman doesn't have the counter-party issues that, say, Bear Stearns has. Basically Lehman is an end domino, they won't take down five (or maybe 500 in the case of the mortgage giants) other institutions with them.

From what I understand Lehman has a pretty attractive portfolio of assets. I think they are counting on (or hoping) that someone will buy them so the taxpayers don't have to. Bank of America has been mentioned.

[lukethedrifter]

[/youtube]


Vid is from '07 btw

[heyzeus]

Today might go down as the most volatile day in NYSE history. Down 511 points right now.

[cardinalkarp]

Today might go down as the most volatile day in NYSE history. Down 511 points right now.

This whole situation just flat out sucks.

[omaha_red]

Sounds like the bailout is close to being finalized:

http://www.cnn.com/2008/POLITICS/09/28/ ... index.html

now.. it ain't lookin' too good.. NPR just said it probably won't pass

[Freed Roger]

Today might go down as the most volatile day in NYSE history. Down 511 points right now.

it dropped 400 points (from 270down to 670down) in a matter of minutes after congress vote on bailout. now its stabilizing sort of.

i was honing up my survivor skills the other night -the dude on Man vs Wild (cable reality show) was crossing the desert and resorted to drinking his pee that he'd stored in a snakeskin. bring on the corporate welfare!

[Leroy]

It is a good thing I didn't tear down my Y2k shelter.