Baseball91's Weblog

September 28, 2008

The Truth About Cheating

“Don’t do what so many of us do, which is hold our breath and hope [the problem] goes away.”                             –Gary Neuman       

In the New World, it was fear that had moved a people here. The majority. To this place whose government is now based upon majority rule.

In private talks on Capitol Hill, the Bush administration was pushing an even bleaker picture. A Republican familiar with the warnings issued by the Treasury Department away from the cameras, said the New York stock market should brace for a collapse of up to a third of its value if the deal failed to materialize.  “We could see falls of 3,000 or 4,000 points on the Dow in just a couple of days. It’s one of those things that no one can quite grasp or understand. Everybody is extraordinarily scared.”                                          – Tim Shipman in Telegraph.co.uk

In a new book, “The Truth About Cheating: Why Men Stray and What You Can Do To Prevent It,” Gary Neuman says, “Don’t do what so many of us do, which is hold our breath and hope [the problem] goes away.”

“The price of all this greed? Sadly, because of the actions of the investment banks, the mortgage industry and the rating agencies, the investment community has now incurred an estimated $1 trillion and more in losses. Even more troubling, housing prices have dropped 20 percent from their July 2006 highs, with the very real likelihood that housing could contract another 15 to 20 percent — essentially wiping out more than $4 trillion in housing values. This would be the biggest hit since the Depression to Americans’ most important asset.  What is even more remarkable is that at the same time, firms such as Goldman Sachs and Lehman not only made billions of dollars packaging and selling these toxic loans, they also wagered with their own capital that the values of these investments would decline, further raising their profits. If any other industries engaged in such knowingly unscrupulous activities, there would be an immediate federal investigation.  

Why is Washington so complicit in this intricate and lucrative affair? First, the Fed laid the groundwork for both these asset bubbles by lowering interest rates to historic lows. Treasury Secretaries under Presidents Clinton and Bush — Robert Rubin and Hank Paulson, respectively — took no action to curb these abuses. It certainly was not because they did not understand Wall Street’s practices — both are former chief executives of Goldman Sachs.” –Eric D. Hovde, chief executive of Washington-based Hovde Capital in The Washington Post
on September 21, 2008

“By one estimate the nominal value of certain derivatives ballooned to $62 trillion, based on only $6 trillion of underlying assets. An environment in which “discouraging words” are seldom heard may be fine for a place “where the deer and the antelope play,” but not for the frenzied range where the bulls and the bears roam. The Rupert Murdoch-owned Wall Street Journal is engaging in un-Murdochian restraint, banishing words like “crash” and “pandemonium.”

“Financial media organizations are keeping Un-Happy Talk to a minimum.  “We’re very careful not to throw words around like ‘meltdown’ and ‘free fall’.” — CNN correspondent Ali Velshi

“It is one thing for media organizations to censor themselves. It’s quite another for the government to ban certain types of speech.”   –-Daniel Gross  in Newsweek on Sep 27, 2008

“Peter Spencer, economic adviser to the Ernst & Young Item Club, said: “This has the potential to make [the stock market crash of] 1929 look like a walk in the park.  It would be disastrous. This is the time you just have to bail people out and ask questions later. It is very difficult to see how the US banking system would survive without that package.  – Tim Shipman in Telegraph.co.uk

“Consider that financials make up about 16% of the S&P 500 index, and I think we’ve found the squeaky wheel.  “If there’s a silver lining to bear markets, it is that they make stocks cheap for the next wave of investors. But so far in this downturn, it isn’t working out that way.  Based on the price-to-earnings ratio, stocks have actually become more expensive even as share prices have come tumbling down. In fact, the P/E ratio for the Standard & Poor’s 500-stock index, based on earnings over the previous four quarters, has risen to just over 24 from around 19, according to S&P.”  –Peter Lim in NYTimes on September 10, 2008

And in an article by Tim Shipman in Telegraph.co.uk, this is what happened starting last Thursday in Washington:

“ In a closed-door meetings with senior Democrats, Mr Paulson accepted compromises (limits on executive pay at the banks needing help, and more support for struggling mortgage holders) that allowed the House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid to line up their troops in support of the plan. The White House soon won over Senate Republicans, too. But when the 199 House Republicans gathered, just four raised their hands to back Paulson’s proposals.

And more was needed to sell the deal to the nation. Step forward George Bush, whose political capital has long been deep in the red. His televised address on Wednesday night laid out a vision of plummeting house prices and pension funds. “Our entire economy is in danger,” he said.

Steve Clemons, a senior fellow at the New America Foundation think tank, accused Mr Bush of pushing the “fear” button: “He said the clock was ticking. This seems like a bad episode of 24.”

In the panelled splendour of the Capital Grille, a favoured haunt of the political smart set, a former White House speechwriter reflected the view that the presidents doom-mongering could actually make things worse: “If we didn’t need a bail-out before that, we do now.”

But in private talks on Capitol Hill, the Bush administration was pushing an even bleaker picture. A Republican familiar with the warnings issued by the Treasury Department away from the cameras, said the New York stock market should brace for a collapse of up to a third of its value if the deal failed to materialise. “The economy is dropping into the john,” he said. “We could see falls of 3,000 or 4,000 points on the Dow in just a couple of days.

“What’s being put around behind the scenes is that we’re looking at Thirties stuff. We’re looking at catastrophe; huge, amazing catastrophe. It’s one of those things that no one can quite grasp or understand. Everybody is extraordinarily scared.”

This harum-scarum offensive seemed to bear fruit and the tentative basis of a deal was hammered out by Thursday lunchtime. But by then, John McCain had made another of the political gambles for which he is becoming known. The Republican presidential candidate, whose unsure performance on the economy (declaring the fundamentals sound just as the stock market plunged, opposing the bail-out of insurance giant AIG the day before supporting it) had seen his poll numbers decline, declared that he was suspending his campaign to return to Washington and help finalise the deal. From a man known as Senator Hothead for his profanity-laced negotiating style, this was like a bull announcing to the inhabitants of the china shop his intention to do a little browsing.

Mr McCain succeeded in persuading Mr Bush to invite the principal players, and his Democratic rival, Barack Obama, to a Thursday-afternoon summit in the White House. His move also emboldened the House Republicans.

What happened next will go down as the biggest White House drama since The West Wing left our screens two years ago. President Bush lost control as tempers flared in the cabinet room. John Boehner, the Republican House minority leader, torpedoed the Paulson plan, offering up an alternative proposal that would force banks to buy insurance for their failing securities instead of giving them public money.

Mr Paulson explained that the idea was unworkable and declared: “We can’t start over.” But the rebels were not done. Republican Senator Richard Selby then produced a five-page list of 192 economists and business school professors who oppose the plan. That was a red rag to Mr Bush, who snapped back: “I don’t care what somebody on some college campus says,” saying he would trust Mr Paulson instead.

The President then summarized the dangers of inaction to the world economy in characteristically blunt terms: “If money isn’t loosened, this sucker could go down.”

With the deal on life-support, Mr Paulson then chased after furious Democrats, dropping to his knees, only half-jokingly, to beg Nancy Pelosi not to blow up the legislation. Through it all, Mr McCain, who knew Mr Boehner’s plans in advance, far from helping to engineer a compromise, sat mute.

Moderate Republicans were furious at Boehner’s band of brothers. Jim Nuzzo, a White House staffer under the first President Bush, branded the House Republicans “immature brats who have put ideology before country”.

“We’re at a point in our nation’s history when they need to grow up. If McCain can’t get the House Republican leadership to give him 100 votes to do something that the President wants, the treasury secretary wants, the Fed chairman wants, then he doesn’t have a set of nuts that’s worth a damn.”

If he can deliver them over the next 24 hours, it may yet boost Mr McCain’s credibility. Those 100 votes are critical political cover for the Democrats who fear they might lose 20 to 30 congressional seats in November if they alone pushed through an unpopular bill.

The Democratic Senate aide, steeped in seven years of military metaphors from the war on terror, said: “We were prepared to strap on the suicide bomb vests and pull the pins together. But we’re not committing suicide if the Republicans won’t do the same. It’s mutually assured destruction, or nothing.”

In the long run, the true significance of the opposition of the House Republicans may not be the narrow politicking but their stance on the broader historic issue of whether America, a country built on capitalism, will have to accept more government intervention in the market.”

“The past year has shown plenty of evidence of unsound fundamentals—eight straight months of job losses, the failure of financial institutions, etc. And yet the word from Washington for much of 2008 has been that things are just fine. Was there a debate whether we were in a recession?

“>http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3093680/US-economy-in-crisis-How-did-it-come-to-this.html

“In his new book, “The Truth About Cheating: Why Men Stray and What You Can Do To Prevent It,” Gary Neuman talked about how a woman could entrust her vulnerability to that man again if you had a husband who is not truly apologetic – the 12 percent of those you surveyed who will cheat no matter what for what he has already done, does not show remorse, is not now willing to be completely transparent.” 

“How could we entrust our vulnerability again to companies like Goldman Sachs? The twelve percent who will cheat no matter what are still out there. And isn’t this connected to the book that Martha Stout has written about people without any conscious. The research by this teacher at Harvard indicates four percent of the population are psychopaths. And I do not believe anything in the way of facts that stem from what a psychopath states about a cause of death of the financial markets.

Advertisements

1 Comment »

  1. Comment by baseball91 — March 24, 2012 @ 2:30 AM | Reply


RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Blog at WordPress.com.