Dont sweat it mate. Kryo has slapped me down more than once and some how i still have managed to get by, with a promotion no less!!!

I think, provided that your F-Bombs and other infractions are not used in flaming members or going out of your way to be disruptive, you can get by quiet well.

Of course it hurts.  You're getting skrewed by an elephant.

Yeah... that's what the other infractions are...

I talked with the family trust officer (Keybank Privatebank) this morning, and he confirmed that these Mortgage Backed Securities (Investments) (MBIs) are a Ponzi Scheme. They have been repackaged so many times that nobody knows their value.

The government will pay for the rescue of the Financial System the easy way (least painful), or the hard way via the FDIC, which IS the government, IF people panic and do a general run on their banks (extremely painful).

Factual inaccuracy: a 54-44 party line (1 Dem in favor, no GOP against) vote in the Senate for Gramm Leach Bliley Act does not exactly scream 'massive bipartisan support in both houses, although the house vote was more one-side, 90+% of the GOP and exactly 2/3rds of the Democrats voted for the final version there - but that's still a rather distinct difference between almost 100% support in the GOP and a decent majority among Democrats.

Well, no, actually not - the right hand side of the income curve makes far more of their money from things classified as 'capital gains', which have a much lower tax rate - Long term capital gains (Held over a year) is taxed at 15% - the income tax in my tax bracket. So, per dollar, Warren Buffet is paying the same tax rate as I am, and less than his secreatary is (Or so he has said - as I make almost exactly average U.S. Salary, I can only presume she is paid somewhat better than average for for jog - {G})

Personally, I think capital gains should be taxed as income - the argument about "but investment helps the economy" seem to me to assume "and working for a living . . . doesn't" - but if you *really* believe in markets, you have to assume that Bob the Company Owner/President/CEO is paying money where it does *him* the most good - so if he's paying $30,000 dollars for a worker, he's paying $30,000 for a bond his company issued, and he's paying $30,000 to his stockholders, he's kinda saying 'these three are worth the same to me - we know this because I was willing to pay the same amount for each of them.".

So taxing them at different rates actually seems rather like market manipulation to me - either,

A. You're trying to encourage living off of investments rather than living off of work. Kinda silly - given a choice I know *I* would choose to live off of investments rather than working for a living. Try me - anybody, give me money that I can equal my current salary with just investments, there won't be a momentary thought - I'll invest the money and quit my job, even if I was paying *higher* taxes.

You don't have to trust me on this BTW - give me the money and we'll test the theory. I will sacrifice, for the sake of economic science, I swear.

B. You feel that either investments don't actually pay what they should for how much they contribute to the economy, or contrawise, that regular workers are overpaid for what they do because they *don't* contribute to the economy. But somebody is actually making a decision - "Should I use this $300,000 of profit to pay ten average workers, two really important people, invest in equipment, post it to my stockholders as a profit, or use it to pay interest and or buy back some bonds - or some combination thereof?", and taxing these at different rates kinda assumes he doesn't really know WTF he's doing.

So, to be perfectly honest, I think it's kind of unfair that Paris Hilton is actually paying the same taxes on her trust fund money that I'm paying for working for a living.

Jonnan

In a nutshell, the US is going down and it's going to have a negative effect on it's neighbours like Canada.

Just mine more crystal!

The current plan only treats the problem but dosen't cure it. I suggest that they take that money and distribute it evenly to every lower middle class and poor person. Not the wall street elite.

The best part is that I have not seen a single person say that this bailout will solve the current crisis. My bet is it will be $700 billion dollars down the drain.  This country (government, companies, and individuals) has been living outside it's means for far to long (thanks to easy credit). Now Wall Street and the Fed are holding it hostage.

It wont solve anything because fannie and freddie will still be required by law to buy bad mortgages and create an artificial market for them.

Jonnan, run for president, you've got my vote for changing capital gains to income.  Got an opinion on the fair tax plan?

You're rather unfair towards the investments though.  It's not as if people invest into a vacuum.  Although the mortgages are pretty close.  If I have a choice between using my 300k to make more money by hiring more workers or investing in someone else to hire more workers, there isn't a disparity in value there.  One is direct employment, the other indirect.  You save effort, they get a needed investment.

Bear in mind $700bn is just the headline figure. In reality the cost of the 'bail-out' could make money for the government. That is, all of these loans have such an uncertain value they could drive a fairly hard bargain, get them really cheap, and then there's the possibility that they end up being worth a bit more over time as things settle down+confidence improves and the economy starts growing again. Once that happens they sell them on for a profit, and everyones happy.

Not saying it's likely, but it's certainly a possibility. In any event the full cost won't be $700bn, but a figure likely far less than that if there is a cost.

As to the more general issue, it's somewhat disheartening to see so many people jumping on the knee-jerk 'need more regulation' bandwagon. Before introducing more regulation you need to know what actually went wrong with the original mechanism, and how to fix it. Otherwise you end up just making things worse if you throw a ton of unhelpful and constricting regulation at the problem. So to look at it from that mindset, it seems to me although there were several problems, one issue was the contracts for the bankers/investors - they were rewarded heavily via bonuses for the 'upside' of a deal/decision, yet on the downside all they stood to lose was their job. That means that it is fairly obvious they would be taking excessive risks which might not be likely to pay off, since they only need it to pay off for a few years to make a ton of money, and by then it doesn't matter so much if they lose their job. However the real issue is why did the companies allow this - it clearly wasn't maximising shareholders interests, and so that suggests the shareholders did not have full information regarding this. Does the fault lie then with the management of the company, who may not have been acting in the shareholders best interests (as they should have)? Or was it due to a lack of communication/understanding between different parts of the company, or just the managers and the shareholders?

Then you have the same issue again with companies now thanks to the various bail outs - they know that if they're a big company (i.e. affect lots of voters lives) then the government will look to bail them out most of the time if they get into trouble. So those companies then feel they can take on excessive risks because they won't be allowed to fail, or alternatively if they're not 'too big to fail' they end up merging, forming oligopolies+moving ever closer to monopoly situations, which further harms the consumer by restricting choice+increasing prices on average as a result of the reduced competition.
 Equally the government's not exactly in a desirable position, because if they do nothing and allow the firms to fail then it could have a massive negative impact in the short termAs a result my own opinion is the government shouldn't just bail out these banks automatically, but should look at these loans, decide what they're really worth, and if the price drops below what they think they're worth, then they buy them. If some firms fail as a result, then so be it - it'll be a bitter pill to swallow initially, but you'd end up paying much more in the long term by looking to prop up a failing institution.

Oh, I'll grant that there's nothing *wrong* with investment income - by the same principle as before, the owner/president/ceo that decides to pay for a bond issue or a dividend is making a decision that *that* is as good for his company as paying that money out as salary would be.

My objection is the tax benefit to capital gains is based in the assumption investing is automatically better than working - there may be times it actually is - but in *that* case, if you believe in a market solution, your assumption *should* be that the company that needs that investment with a higher return, not that you need to distort the investment market by not taxing that money at a lower rate.

I wouldn't even object to a capital gains tax system that target specific industries with a lower capital gains tax, if the government/society feels the need to do so - say a system that rewarded investment in small companies, or one that was designed to make it easier for companies that were competing against 'dumping' in interenational markets. I inherently distrust such systems (If you're dealing with a specific problem, By the time they're written up in a way that discourages abuses, the issue may no longer be there, but for general, objective criteria, it can/has been done.).

No, my problem is that it's not something to encourage a specific industry that's at risk - it's a general assumption that a CEO who is paying x amount of money to an employee and x amount of money to an investor, must be either overpaying the employee or underpaying the investor for the economic benefit they're receiving. As a specific assumption, for specific circumstances, it might even be valid - but as a general assumption, it assumes the market is already distorted in some way that I've never seen any proof is true.

Jonnan

The problem here is the assumption that it *wasn't* maximizing shareholder value - in fact it was . . . for a time.

Which means something fairly obvious - every analyst for a firm that told his boss "Stay out of these derivative markets" had to have an answer for his Boss when he looked at the money other firms were making hand over fist, walked back to his desk and said, plaintatively, "Um . . . Why?".

Now - if you're Warren Buffet, you can look the people that own Berkshire Hathaway stock and say "Because I don't understand these derivatives, the way this goes doesn't make sense to me, I ain't doin' it and you can't make me."

When you're Warren Buffet, that happens to work. For every other analyst, you're looking for a new job between the first and second comma's in that sentence - and as it happens, Warren Buffet doesn't need to hire you - he's got a perfectly good analyst that doesn't understand derivatives in the office across from his mirror.

Nobody had full information, because the regulations that would force the full information out into the open weren't in place, but everybody also saw their rivals making money hand over fist, and they're paid by how much they made the company last month.

In other words - the Kool aid tasted GREAT! Who cares if you never saw the guy that mixed it up!

Regulations are not the be all and end all of all things. But they are good for several things.

A. They can help make sure that information doesn't get lost in the shuffle. These derivative market were unregulated specifically because people, mostly Republican, didn't want regulations stifling the creativity of the markets. But that also meant that as stuff got sliced and diced in, and nobody knew what the hell they had - they were selling it off for more than they bought it, so what did they care?

B. They set a standard, a definite moment when you can look at your boss and say "This doesn't smell right - it's gut instinct, but doesn't this feel a lot like what H13-C is designed to prevent?" - and you've at least got a leg to stand on, because H13C is designed to prevent short term gains that turn into long term catastrophes,  firm X ran up against H13-C three years ago and look at that mess - sure, the SEC killed the firm but by then it was a mercy killing.

C. If they're enforced properly, they keep honest people honest. Because you *did* see what happened to Firm X when they skirted H13-C three years ago, which means two things

 1. You don't want to get any of *that* on you, and

 2. you know you're not competing against people that are getting ahead because they're gutsy, manly men that are cheating the rules, because you know the SEC actually *watches* for H13-C violations. So your boss isn't looking at you and going "All the other firms are doing it."

Do they need to be watched carefully? Yes - what that regulation was guarding against may not be relevant today, or it may not be the best way of guarding against it, or heck, it might even have just been wrong at the time, guarding against a bogieman that never did exist.

But the fact that firms *will* go for the short term gain and ignore the long term consequences is not a fictional bogieman. Everyone *always* thinks they have the reflexes to grab the brass ring *and* dodge the consequences - but there's always another brass ring, just inches closer.

Jonnan

It's quite clear it wasn't IMO - short term gains at the expense of heavy long term losses are not maximising shareholders value. The value of a share is basically the value of what you (or to be more accurate, the market) expect all the future income streams (via dividends) from that share to be (assuming the government distributes its profits via dividends as opposed to using share buyback schemes etc. which would just complicate but not change the result). You're then going to need to guage the real value on those income streams (since obviously $100 in a years time is worth less than now due to inflation), and then decide whether the return you're gaining justifies the risk of that share, since higher risk = higher returns as people are typically risk averse...or at least, they were until their contracts started rewarding them for such risks . Anyway the point of this fairly theoretical look at it? Well lets say hypothetically you have a company that is expected to give you roughly a 10% real return on average every year. Now say that company decides to undertake a project/investment that will increase that figure to 50% for say 3 years, but then the company will go bankrupt (again to be a better example we could look at introducing a higher propability the co. will go bankrupt, and put a few more numbers in to work out the present value of the two different revenue streams, but I can't be bothered since it ends up getting a bit too complicated to be worth it then!). Now that's not going to be maximising your value, since although you're gaining more money now, you're losing all of that money in the future. The present value of your share after that decision will be less than before it (note that I'm referring to shareholder value, and not expected value/price - that is it would be possible to look to manipulate the share price and increase it in the short term, even if you're decreasing the actual value of those shares).

The problem though is that this is what firms appear to have done - looked to increase their profits in the short term by undertaking risky projects/investments which may pay off lots initially, but are likely to backfire and ruin the company in the end. However the markets did not reflect this in the share price. That is, shareholders either didn't believe this would happen, or weren't even aware of it in the first place - they expected these profits to continue, rather than to be a final payout before a huge crash. What I'm interested in knowing though is where this breakdown in information arose, and why - was it simply that shareholders in these banks were often too spread out to really take much of an interest in the banks affairs, and so had blind faith in the bigger shareholders and/or the directors of the company? Was it that the directors gave false information to shareholder? Was there some other fundamental problem?

The only thing is that when I ponder these questions myself, I'm still always drawn back to the issue underlying many of these problems - the contracts that encouraged excessive risk taking. With directors often having golden parachutes, being paid in share options, and having hefty bonuses, they're clearly going to lean towards excessive risk taking themselves (and hence look to encourage it in the rest of their staff). Then again being paid bonuses via shares should help counter this to some extent by ensuring those directors have a vested interest in the company's long term performance (if the selling of those shares/exercising of options is restricted by time+have to be held for the long term). Equally if those share options+shares could be sold without the time restrictions, there is a clear incentive for directors to act to boost profits short term, and deceive shareholders into thinking such increases will take place for the long term. In this case it would be fraudulent, so is the problem then (apart from the shareholders not imposing a time restriction) the legal framework that makes it difficult to prosecute/prove such fraudulence/abuse of responsibility, or that has insufficient penalties for if it is proved? If not, is there an awareness that such penalties are in place to dissuade the directors.

What I'm really going around here all the time is the incentives - shareholders have an incentive for the return on their investment to be maximised. Hence they have an incentive to make sure the directors have incentives to maximise the shareholders return. Hence the directors have incentives to make sure that the rest of the employees are also looking to maximise the shareholders return. Something seems to have broken down in this around the shareholder-director level, and the danger is that if the cause isn't found (assuming there is one), not only could the same problem repeat itself with the banks, but it could also spread to other industries with the same structure.

Maudlin, you're attempting to apply logic in an illogical manner.

I have just been appointed CEO to a billion dollar industry, when they can me, I'm going to make X million dollars.  If their stock price goes up, I get X million dollars when it does.

Yes, logically, the shareholders don't want their stock to go up five bucks today and down five hundred tomorrow.  Also logically, the CEO doesn't want the same thing the shareholders do.  He makes money by the stock going up, and if it doesn't go up, they'll can him anyway, so trading two bonuses for one bonus just so he can do the sensible thing in the shareholders interest isn't very sensible.

People are stupid, it's an unavoidable reality that must be applied to any and all situations.  Shareholders will fire an intelligent CEO that isn't screwing them over simply because his short term performance is inferior to the ones that do.  Intelligent CEO's know this, and stupid CEO's don't see the cliff before they run off it.  It's why publically traded companies always fluctuate between utter morons and intelligent people in their leadership.  They literally encourage their own demise by being public, only recently following a brush with death are they cognizant enough to recognize their own incompetence.

The free market, when you leave it the fuck alone, is beautiful in that stupid companies run by stupid people, die.  Which is the crux of the bailout problem.  Even if we make money off the 700 billion, it's preventing the natural order of the market.

There are more houses than people that can afford them.  A lot more.  The housing market has to collapse, it's not something that can be stopped simply by buying those bad mortgages.  The houses are also significantly over-valued.  People were selling homes that cost $120k to manufacture for $250k, even if we only buy them for $200k, and the companies take that massive hit that will put many of them under, there's an $80k profit over a newly built home before you can sell them for what you put in.

To get around this, we have to continue encouraging those bad loans, hoping that the market will perpetually expand a bubble to keep them going.  The Bush administration has done a phenominal job of just that, they managed a 7 year run of housing expansion built on bad loans that would have crashed bad when he took office.  You can't continue this indefinitely, the billions will simply continue increasing.  They are going to cause these financial collapses to a greater degree every time the business cycle comes to a downturn.  The next one will probably make the great depression look like a cake walk.

We need to take our medicine now, cut Fannie and Freddie off, abolish the idiotic HUD program, collapse the housing market, put a shitload of contractors out of business(we have way too many of them), sink the stupid banks that couldn't see this coming.  If we let reality punish the people that create it and put up with any potential recession it causes, we might avoid the worldwide collapse the next round will create.  I'd prefer to avoid stockpiling guns and munitions so I can shoot the starving masses trying to steal my food 20 years from now.  It cost about 120 billion to save their bacon in the 80's, they're looking to spend well over a trillion this time around.  We literally can't take the next hit, the money simply isn't going to exist.  The billions they're using now don't exist either, it's all borrowed.  Even if we do survive it, each successive bailout simply encourages the next round of idiocy to a greater degree.

Read up on the S&L crisis, it was the exact same problem, bad mortgages repackaged by the GSE's and sold back to the suckers on Wallstreet.