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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (10043)	9/21/2008 1:51:08 PM
From: Hawkmoon	Respond to of 33421

Not saying that the ratings agencies shouldn't have some culpability here, but the only way to ensure it doesn't happen again is for everyone to take their medicine now. I think some people should go to jail over this. But it's going to be difficult to convict them when government officials knew, and in many cases, sanctioned/abetted their behavior. For example, permitting the 5 biggest investment banks run on 40:1 leverage seems insane. Presumably they were hoping to stress test their new financial computer models to see if the system could run at a faster velocity (which translates into higher economic growth). But when they fail to create the appropriate market clearing facilities for dealing with 62 Trillion in CDS obligations, it's clear the beast was about to devour it's "master".. And then we have the SEC failing to provide oversight on how the Ratings Agencies colluded with the Big Investment Banks to package, and then rate, all of those RMBS/CDO tranches which facilitated the inflation of real estate values. All of this was based upon subjective and unrealistic analytical models. And if you wanted to stay in the "game", you had no choice but to accept the analysis of the Ratings Agencies. You had to buy that toxic stuff because if you didn't, your competition would and you'd be crucified for "rocking the boat". And now all of this is exacerbated by "mark to market" accounting regs which ignore, intrinsic value of the asset underlying the security. John Mauldin is even calling for the suspension of FASB 157, which would go far to clearing up a lot of this mess, IMO: frontlinethoughts.com And NOW we have those very same Ratings Agencies using subjective and unrealistic analytical models to downgrade the credit ratings of the institutions who bought into (or insured) their original BS analysis. In some, the Ratings Agencies are either incompetent in analyzing risk, or they've become manipulative pathological liars who's models flip-flop depending on where the big money is betting. But it's certainly an issue when they've assumed nearly monopolisic control over assigning credit worthiness in such an arbitrary manner. But to get back on theme, if this situation was created by lack of regulation on the part of government agencies, then it's incumbent upon Government to play some role in providing mitigation and resolution, and thereafter preventing a reoccurence. Hawk

To: Jorj X Mckie who wrote (10043)	9/21/2008 2:34:41 PM
From: carranza2	2 Recommendations Read Replies (2) \| Respond to of 33421

My point....personally responsibility has to weigh in the equation at some point. These institutions made choices. They could have made other choices. They may not have been easy choices and would probably require them to not be at the top of the heap for a little while, but they could have survived for the long term. Personal responsibility is a fantasy in the 21st Century. I feel that our government has betrayed us. Crony capitalism and socialism for financiers is the order of the day. Wall St. has done more to destroy Main St. than anything else ever has. Fortunately for the policy makers and financiers who gave us this, the consequences will be not be felt immediately but throughout the course of several years, which is of course what they bank on. I think - I know - that I am not alone in feeling this. I am not by nature someone who feels like a victim at the slightest justification, but I do feel we have been collectively and serialy raped as a nation. There will be enormous social and political ramifications from this. Who knows what shape they will take, but they are coming.