"The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale." --Thomas Jefferson

Wednesday, November 12

Merry Christmas...Now Go get yourself a Ferrari

Do you remember the seagulls on "Finding Nemo"? Mine.mine.mine.mine.mine.mine. I found their human equivilents.

I wonder sometimes why there is so much distrust in the financial services industry. Probably for the following reasons.

1. American Express Financial Advisors. It always made me wonder why anyone would think it was a good idea to get your financial planning advice from a credit card company. To boot, earlier this week AMEX credit card division abandoned its status as a credit company and gained Federal reserve approval to be a bank holding company so it could be eligible for Federal TARP funding. It apparently needs $3.5 Billion to stay in business.

2. E-trade. The do-it-yourself-because-you-know-better-than-a-professional website that touts being the discount broker is also asking the government for $800 Million. It's apparently made some bad investments in home equity loans. sniff...sniff.....

3. American International Group. Our favorite "world's largest corporation" AIG has spent the initial $85 Billion from the taxpayer and now wants a piece of the financial pie. But not much. Just another $40 Billion.

4. Merrill Lynch. A standard of supposed strength in brokerage houses is now a subsidiary of the Bank of America. Obviously a good acquisition since Bank of America is asking the government for $15 Billion in addition to the $10 Billion Merrill Lynch already received. "Honey, we are bankrupt. But my friend has a Ferrari and I bought it so it wouldn't be repossessed."

5. Goldman Sachs and JP Morgan. The last two investment bankers in the world. Not anymore. They have died their hair and got a little plastic surgery and are now bank holding companies-enabling them to ask the treasury for a sugar-daddy loan. Apparently they have a need to reach their hand in the treat bag as well. At the tune of $25 Billion a piece.

This hasn't stopped Wall Street Bankers from getting their year end bonuses. Somewhere around $200,000 a piece. Merry Christmas to you. ooops.. I mean Happy Holidays.

I can't understand why people are so cautious about big corporations that handle their money. It just doesn't make any sense. Do you think if I sit hear with my mouth wide open, do you think the government would drop something in my mouth for doing nothing? Oh yeah...that's the welfare program. Silly me.


Liza Romero said...

Hi Kirk!

Enjoyed your post and now have questions & some thoughts back...

So...what *would* happen if all the banks did not get their loans?

And, why don't we have enough (in Govt) set aside to assist, unfettered? Isn't it because we are already over-extended to the tune of trillions of dollars?

The timing is bizarre enough that I'm still waiting for the mighty savior (lack of capitalization) to be annnounced, a few years hence. A saving remedy that none would accept today (because things aren't bad enough). Maybe that 'inevitable' shift toward a one-world-currency, like I heard analysts on the news chirping on about the other night. They blame the conversion of currency for why international banking is floppy these days, for one example of a possible solution.

I feel bad about J.P. Morgan. I liked them.

Anyway, so what happens? If every bank became insolvent, would not the government become the owner of all loans anyway (aside from insane market meltdown)?

And, if your home loan then belongs to them, would we not then be subject to whatever 'fun extras' that transfer comes with?


Kirk said...

Capitalism works for the good and the bad. It punishes greed and rewards sound investment. Those who made horrid loans and decisions with their money (and investors money) need to have what they own repriced. We are all having to do the same thing with our retirement savings accounts right now. I don't expect the government to step in and refund my retirement to what it was before. Right now the greed of 40 and 50 % returns is punishing those who participated. Choice-Consequence. I don't antipicate a one world currency solving all of these problems. Gov't doesn't understand the rainy day fund because they figure if they need it, they can just ask the citizens for a loan in the form of tax increase. We as a country live way beyond our means. The banks that participated in these loans are the ones that would fail. Not all banks were this stupid. Many still required good credit and enough down on the house for the occupant to have a stake in the mortgage. I believe that Capitalism would and will find a way to correct the problem through the ingenuity and creativity of the American people. Thanks Liza...

Michelle said...

Amen. It's more than a little maddening when you realize what the money is partially going toward (bonuses, etc.)

Brien said...

JP Morgan is spinning circles in his grave right now. Funny nose and all.

I'm an economics moron, and I freely admit it. But I know enough to know "capitalism" doesn't need to be fixed. Our market isn't broken....it's doing exactly what it's supposed to be doing right now.

I think we've come to confuse capitalism with greed, wealth, and risk-free living.

Kirk said...

You're right. Capitalism works. Unfortunately, our government seems to take it upon itself to save these industries that have so completely run their businesses in an irresponsible way. Ford and GM have made the same mistakes as the banks. They have made big trucks and SUV's and made a lot of money with the assumption that gas prices in America would never matter. Now their lack of ingenuity has come to punish them and they are asking the taxpayer to help them now that they are dealing with their own consequences. I don't want to see them fail but i also don't believe that when consequence faces us for bad decisions we should run and ask for someone else to bear the burden. It may be because it's also a gospel principle that I feel so strongly that we are responsible for our own actions. What lessons will be learned from bad choices if the consequences are avoided?

Brien said...

I agree. But I also wonder how much responsibility we hold as the general public. We gleefully went along for the over-indulgance ride. Someone had to buy all those big trucks and SUVs and sign for all those horrible mortgages and swipe all those credit cards.

I do think the public was taken advantage of. But I don't think we're innocent, either. Except for me. I'm always innocent.

P.S. Your blackberry addiction is showing.