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Politics : President Barack Obama -- Ignore unavailable to you. Want to Upgrade?

To: koan who wrote (44204)	11/10/2008 4:26:06 PM
From: LLCF	Read Replies (1) \| Respond to of 149317

Random notes: I was banned so I thought I'd reply briefly: <<All the "brokers" were told what to promote and what to let fail...they didn't let the banks and brokerage houses fail until it was too late did they?>> Actually, there was nothing "propped up" until now. It's not like they strung AIG and BStears along and tried to keep them alive. Look at their stock prices... they have not always been forthright in the leverage they took on and what the volatility of their securities worth might do in a real downturn (I worked on wall street for many years including I-Bank). Where securities got "marked" was entirely up to them and wide market swings in the underlying prices were 'ridden out' without most really knowing during the good times... till that became impossible. Then......... CRUNCH. So... to the extent that they haven't been allowed to fail (from what, this year?) sure... I agree with that... the government should AT LEAST seize all these companies equity. BUT... really, the warnings out there were never (that I know of) actualy failings in official "earnings" or other obvious things... these companies showed HUGE earnings till the bitter end. Now... why are EVEN REPUBLICANS (they invented the idea after all) dashing about with "bailout packages"?? Becuase since Gram's legislation deregulated derivative 'netting agreements' among other things, banks have not had to have all their contracts "on the books" NOR mark them to market for their shareholders. If I owe you a billion, you owe Joe a billion and he owe's me a billion... that can be "netted out" and not shown. There are now about a QUADRILLION worth of notional contracts between all major banks. These are agreements based on all sorts of payments and cash flows from a mirad of underlying global and domestic securites. If you let people fight over who is in line for these payments in court the financial system could literally disappear overnite as NO bank would know what their assets are... at would all depend on who paid of what. So although each bank knows what their exposure is to say "Bear Stears"... they also have to worry about "Merrill Lynch" let's say because Merrill has a lot of contracts with Bear Stearns and a daisy chain might start. Long story short... no bank will be allowed to go into court and get it's bones picked like the olden days without tons of regulators and guarantees that the "COUNTERPARTIES" (you'll be hearing more about that term in the news shortly I have a feeling) will be netted out and paid off. So long story short... if regulators knew that they would end up being on the hook to clean this mess up... they would have never allowed the amount of leverage and lack of oversight that they did. JMO DAK