Nouriel Roubini:
I was today on a webcast conference call organized by RiskMetrics together with Barry Ritholtz and Zach Gast.
The events of the last few weeks say we’re one accident away from a systemic financial meltdown,” says Roubini. He points to previous accidents that nearly caused a universe-eating financial black hole: Bear Stearns in March, Fannie and Freddie in July and Lehman and AIG a couple of weeks ago. “We’re seeing the beginning of a silent run on the shadow and traditional banking system,” he says. “There’s a generalized panic” in the financial markets.
“We are literally one step away from collapse of entire financial system and even the corporate system.”
Barry Ritholtz:
This is shaping up to be a “generational bear market,”not a typical bear market. We have a severe recession, with a credit
crunch. We’re just starting to see the effects of credit on the real economy.
“My concern is what disaster are we gonna be dealing with 3, 4, 5 years from now that will be the consequences of giving Wall Street’s most reckless players a pass?”
Zach Gast at RiskMetrics:
There are loans still sitting, overpriced, on bank books. When you
move away from fair-value accounting, people lose confidence in your
numbers and it gets harder to get capital. Moving away from mark-to-market accounting, as the banking sector seems anxious to do, will be a net negative for banks.“Many institutions would be insolvent if we fully fair-valued their assets,” says Gast.
This bailout is probably best for the money center banks. They’re the ones holding trading securities. They’ve already taken the hits to
earnings. This hurts the regional banks and others still holding assets at cost basis. Setting a lower market price will hurt their capital
adequacy in “a big way.
What a surprise. Good for the money-centers (Citi Bank of Goldman America), makes the smaller fish more digestible. Is it just that the Bush-Neocon Crime Gang will keep on looting even if the building is on fire, or something more? 9-1-1 was really essential to them, "a latter-day Pearl Harbor", without which they couldn't have executed the long-planned attacks on Iraq and the Constitution; is the current decompensation of the financial system, accompanied by massive consolidation in banking and concentration of wealth, yet another essential Pearl Harbor?
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Precisely. Here is the email I've been sending to politicians and friends this past week:
"Forget the injustice of rewarding fraud with lavish rewards, and the insanity of throwing money at a problem that will not go away without a complete legal overhaul of our financial markets.
No. The real point is, this bailout proposal is nothing more than a POWER GRAB by the wealthy families fronted by JP Morgan and Goldman Sachs. 700 billion-plus
will buy a lot of carrots and sticks for the JPM/GS Syndicate to reshape Wall Street to its specifications. Bear Stearns and Washington Mutual are good examples of what it looks like to be beaten by the Syndicate's sticks...
We don't need to aid and abet the hyper-consolidation of financial-political power any more than we already have. VOTE NO ON THE BAILOUT!"
Exactly, Mark. I was all over my officials too, mailing them Roubini statements, Soros statements, credible alternative plans and so forth.
The questions uppermost in my mind revolve around planning and intentionality. At first glance, it seems to be a case of simple greed and incompetence, as
F.W. Engdahl seems to be thinking. Why crash the world economy, especially right before an election?
On the other hand, the neocons and people like Rove and Cheney are very competent long-term players. The Iraq invasion was one of the top neocon goals for years before they took power, and they at the very least made good use of 9-1-1 to accomplish that, if they were not in fact involved in engineering it. They then went on to milk it since then, entrenching themselves and dismantling separation of powers, separation of church and state, separation of corporations and state, and significant pieces of the Bill of Rights.
So if the result of crashing the world economy now is that they manage to perpetuate themselves in power while achieving total financial control and extreme concentration of wealth, it would indicate that the deregulation that led to the crash was intended to produce the inevitable result, and that the timing of the crash was also adjusted to suit their purposes.
On the other hand, they could simply have massively fucked up. We should know for sure within a month or so.
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