The president is called that for a reason.
So.. since the market was down almost 400 points today, I guess it's all Obama's fault?
We are the most powerful country in the history of the world.
Show me a country that is not being financially devastated by this crisis? Then ask yourself why they are being affected if their policies were so much better than ours.
Bush, Clinton ...neither made the slightest attempt to reign in Wall St. and the crooks that run this world.
Listen.. do you know why the SEC permitted our 5 IBs to leverage up to 40:1? Because European banks WERE ALREADY DOING IT and our guys had to compete to survive.
THAT SAID, there's no doubt that the SEC under both Bush and the Clinton has been miserably incompetent. We can also a lot of blame at Greenspan's feet since he drank the kool-aid when it came to using creative derivatives to increase financial velocity. So MANY people believed that securitizing mortgage loans and selling them off to global and sovereign capital so banks could take them off-balance sheet was a good thing. And so many people actually believed it was a good thing to create financial entities (CDOs.. etc) that required days/weeks of supercomputer time to assess their values and payouts. And so many people believed it was a good thing for the ratings agencies to be intimately involved (paid) to "bless" these financial entities, despite their obvious inability to properly model the risks in such an environment as we have today.
Additionally, someone back in 2007 thought it was a good idea to apply Mark to market accounting against these securitized mortgage entities, despite the fact that their market, and the CDS markets established to hedge against losses, were illiquid and unregulated. And considering that most of the actual mortgage debt underlying these CDOs were accounted for with a mark to model process, it just doesn't make sense to use mark to market with the securitized entities, does it?
Now.. when you add the fact that going long a CDS equates to shorting the bonds, we've created a situation where risk is limited when traditionally shorting a bond or stock represents the potential for unlimited losses. So is it is any wonder that bond markets are stricken when it's now so very simple to short them to death by speculating in the CDS markets against them?
And is it any wonder that we're not likely to see a financial recovery until the CDS markets are regulated, and speculative manipulations by "fast money"? Who would dare to issue a bond now when they realize that folks can just buy a CDS against it and almost immediately force a devaluation of their bond? After all, what the risk to a purchaser of a CDS? Only 100% of their money, not the unlimited risk of loss that would occur if they actually shorted the bond.
And the financial surety markets, the normal sellers (insurers of bonds) of CDS contracts, have been gutted. They thought the premiums they were collecting were easy money. And that's how AIG got creamed. They sold CDS's, the value of which they believed were were tremendously distorted. And they got squeezed!! And any other major seller of a CDS will be wiped out so long as it's less risky to short bonds (via buying CDS contracts) than it is to issue (and insure via selling CDS contracts) the actual bond.
None of this was Bush's fault. It was Wall Street and the global financial markets. Actually, if anything, we can blame JPM.. After all, they created the CDS concept.
Hawk |
