5 ms·

Did you read the article? there is some information in there: "Goldman and Morgan Stanley, applied for, and received, federal permission to become bank holding

Did you read the article? there is some information in there: "Goldman and Morgan Stanley, applied for, and received, federal permission to become bank holding companies." Now they can borrow from the Fed for 0% interest. What did they do with the money - certainly not loan it to real businesses - they bought 10 year T bills that pay 3% to 4%. That is the quickest scam to explain. But basically these "Investment Banks" are not investing any money in the real economy - they are just making bigger and bigger gambles with the explicit knowledge they are "too big to fail" and we will be on the hook for when their bets don't go the right way for them.

cynicalkane 17y ago
I work in the industry, and I heard about the bank holding thing the hour it was announced. I don't think investment banks should have access to Fed money, but the argument for this is a bit more subtle than Taibbi's article. Furthermore, the idea of investment banks as giant casinos is wrong. A bank like Goldman does not make a large number of directional bets, and when they do, they win on average. (They've certainly been winning throughout the crisis.) That a large number of banks lost a lot of money because of a government-fueled housing bubble is not Goldman's fault.
- asmithmd1 17y ago
  I think we probably agree more than disagree. Morgan Stanley and Goldman are not banks so they should not have access to Fed money. And sure, they should be allowed to make whatever bets in whatever size they want - as long as they are small enough to fail. If they are too big to fail them I am on the hook for when their bets go bad. Any business that is too big to fail is too big. We successfully broke-up Standard Oil and AT&T and we are much better off for it.
  - cynicalkane 17y ago
    I agree with this. In fact, what scares me the most about the state of finance in the US is that, instead of well-meaning and meaningful reform, we have idiotic and impotent populist rage.
    - rrhyne 17y ago
      Right. We shouldn't be pissed off we are getting screwed by the people writing your checks. I love it.
- jbooth 17y ago
  "Government-fueled housing bubble" [citation needed] Are you gonna cite that law from the 1970s that said banks needed to make mortgages available to poor people and minorities? If so, please explain why no subprime housing bubbles happened between the 1970s and 2005 or so?
  - prodigal_erik 17y ago
    Also why requiring the same, not lower, lending standards is somehow a mistake. And why mortgage brokers wrote so many loans that contributed to the problem, when they aren't even affected by the CRA law. (The answer to that is: Wall Street was eager to buy them.)
  - cynicalkane 17y ago
    What we have here is someone who Did Not Do The Research. The housing bubble first began picking up steam in 1997. Here's a pretty chart: http://1.bp.blogspot.com/_pMscxxELHEg/SfcAHzHg0UI/AAAAAAAAFIg/26xKHm3x83o/s1600/CSFeb2009.jpg http://1.bp.blogspot.com/_pMscxxELHEg/SfcAHzHg0UI/AAAAAAAAFI... This time coincides with a remarkable expansion of government-sponsored lending via FNMA and FHLMC, eventually reaching over 2 trillion dollars of liabilities. During that whole time, the executives of those corporations quacked about how safe their loans were and their institutions were, and bemoaned the expansion of sub-prime lending. Well, guess which two mortgage banks have taxpayers on the hook for over $100 billion. Hint: they're not GS and J.P. Morgan.
    - jbooth 17y ago
      Well, hey, never blame your industry when you can attempt to tar the government that just bailed your sorry selves out. (and yes, that includes you, even if your bank was not directly involved). Nice chart. I went to college with Shiller's kid, believe it or not. Anyways, it looks like things pick up more in the early 2000s than 97 to me. My explanation? Super low federal interest rates that were kept way too low for way too long (for political reasons), and an unappetizing stock market in the early 2000s. Money seeking a return had to go somewhere, and that's where it went. If you were in the field at the time, you'd probably have a similar memory. It's what my friends in the industry were saying circa 2003. None of them were talking about Fannie and Freddie -- they only adopted that when it became a convienent excuse 5 years later. Since you're an expert, I'd love to see a citation regarding that "remarkable expansion of govt sponsored lending" by Freddie and Fannie at the time? Specifically, was it driven by an act of government or was it market-driven?
- rrhyne 17y ago
  I could tell by your first response you get paid by the profits of the very cons Taibbi is railing against. Answer these questions: So you are OK with front running clients? Forget about legal... that's moral? So you are ok with these banks getting dollars at 0% from the tax payer and lending them back to the taxpayer at 3-30% interest? You are ok with big banks not loaning to small business and entrepreneurs? Likely becuase those are uncredit worthy loans right? How credit worthy are the big banks who screwed us in the first place? I'm betting as long as you get paid, you'll be able to justify all kinds of cons.
  - cynicalkane 17y ago
    This is a baseless ad hominem attack. I work for the Chicago Mercantile Exchange. We are not a lending operation. We do not receive money from the Fed. We do not do front-running or flash ordering. The latter is legal, but we do not do it for ethical reasons. Our response to the Lehamn Brothers crisis was measured in minutes, and the time taken to close all their trades measured in days. Our money comes from being a conservative, sound organization; from traders trusting us to clear their trades, and we cleared every trade on time since I don't even know when. We have not failed to clear a trade in the last 110 years. This is the "con" from which I make my money, but you could have figured this out yourself by clicking my profile instead of making things up. I am not justifying "cons". I am defending what I believe. I believe in intelligence over populism, capitalism over socialism, and correctness over incorrectness. What's your excuse? I actually don't want to know what you think; I'm responding only because people are upvoting your comment when they should be downvoting it.
    - rrhyne 17y ago
      Forgive me for my incomplete understand of the CME's profits. Does the CME clear trades for JPM or any other large bank? If so you profit indirectly from those institutions. Regardless, too many people who profit directly or indirectly from Wall Street and it's surrounding economies are apologists for the TBTFs actions. Back to my questions. You agree with Taibbi on front running/flash. 2 more to go.

cynicalkane 17y ago

I work in the industry, and I heard about the bank holding thing the hour it was announced. I don't think investment banks should have access to Fed money, but the argument for this is a bit more subtle than Taibbi's article. Furthermore, the idea of investment banks as giant casinos is wrong. A bank like Goldman does not make a large number of directional bets, and when they do, they win on average. (They've certainly been winning throughout the crisis.) That a large number of banks lost a lot of money because of a government-fueled housing bubble is not Goldman's fault.

asmithmd1 17y ago
I think we probably agree more than disagree. Morgan Stanley and Goldman are not banks so they should not have access to Fed money. And sure, they should be allowed to make whatever bets in whatever size they want - as long as they are small enough to fail. If they are too big to fail them I am on the hook for when their bets go bad. Any business that is too big to fail is too big. We successfully broke-up Standard Oil and AT&T and we are much better off for it.
- cynicalkane 17y ago
  I agree with this. In fact, what scares me the most about the state of finance in the US is that, instead of well-meaning and meaningful reform, we have idiotic and impotent populist rage.
  - rrhyne 17y ago
    Right. We shouldn't be pissed off we are getting screwed by the people writing your checks. I love it.
jbooth 17y ago
"Government-fueled housing bubble" [citation needed] Are you gonna cite that law from the 1970s that said banks needed to make mortgages available to poor people and minorities? If so, please explain why no subprime housing bubbles happened between the 1970s and 2005 or so?
- prodigal_erik 17y ago
  Also why requiring the same, not lower, lending standards is somehow a mistake. And why mortgage brokers wrote so many loans that contributed to the problem, when they aren't even affected by the CRA law. (The answer to that is: Wall Street was eager to buy them.)
- cynicalkane 17y ago
  What we have here is someone who Did Not Do The Research. The housing bubble first began picking up steam in 1997. Here's a pretty chart: http://1.bp.blogspot.com/_pMscxxELHEg/SfcAHzHg0UI/AAAAAAAAFIg/26xKHm3x83o/s1600/CSFeb2009.jpg http://1.bp.blogspot.com/_pMscxxELHEg/SfcAHzHg0UI/AAAAAAAAFI... This time coincides with a remarkable expansion of government-sponsored lending via FNMA and FHLMC, eventually reaching over 2 trillion dollars of liabilities. During that whole time, the executives of those corporations quacked about how safe their loans were and their institutions were, and bemoaned the expansion of sub-prime lending. Well, guess which two mortgage banks have taxpayers on the hook for over $100 billion. Hint: they're not GS and J.P. Morgan.
  - jbooth 17y ago
    Well, hey, never blame your industry when you can attempt to tar the government that just bailed your sorry selves out. (and yes, that includes you, even if your bank was not directly involved). Nice chart. I went to college with Shiller's kid, believe it or not. Anyways, it looks like things pick up more in the early 2000s than 97 to me. My explanation? Super low federal interest rates that were kept way too low for way too long (for political reasons), and an unappetizing stock market in the early 2000s. Money seeking a return had to go somewhere, and that's where it went. If you were in the field at the time, you'd probably have a similar memory. It's what my friends in the industry were saying circa 2003. None of them were talking about Fannie and Freddie -- they only adopted that when it became a convienent excuse 5 years later. Since you're an expert, I'd love to see a citation regarding that "remarkable expansion of govt sponsored lending" by Freddie and Fannie at the time? Specifically, was it driven by an act of government or was it market-driven?
rrhyne 17y ago
I could tell by your first response you get paid by the profits of the very cons Taibbi is railing against. Answer these questions: So you are OK with front running clients? Forget about legal... that's moral? So you are ok with these banks getting dollars at 0% from the tax payer and lending them back to the taxpayer at 3-30% interest? You are ok with big banks not loaning to small business and entrepreneurs? Likely becuase those are uncredit worthy loans right? How credit worthy are the big banks who screwed us in the first place? I'm betting as long as you get paid, you'll be able to justify all kinds of cons.
- cynicalkane 17y ago
  This is a baseless ad hominem attack. I work for the Chicago Mercantile Exchange. We are not a lending operation. We do not receive money from the Fed. We do not do front-running or flash ordering. The latter is legal, but we do not do it for ethical reasons. Our response to the Lehamn Brothers crisis was measured in minutes, and the time taken to close all their trades measured in days. Our money comes from being a conservative, sound organization; from traders trusting us to clear their trades, and we cleared every trade on time since I don't even know when. We have not failed to clear a trade in the last 110 years. This is the "con" from which I make my money, but you could have figured this out yourself by clicking my profile instead of making things up. I am not justifying "cons". I am defending what I believe. I believe in intelligence over populism, capitalism over socialism, and correctness over incorrectness. What's your excuse? I actually don't want to know what you think; I'm responding only because people are upvoting your comment when they should be downvoting it.
  - rrhyne 17y ago
    Forgive me for my incomplete understand of the CME's profits. Does the CME clear trades for JPM or any other large bank? If so you profit indirectly from those institutions. Regardless, too many people who profit directly or indirectly from Wall Street and it's surrounding economies are apologists for the TBTFs actions. Back to my questions. You agree with Taibbi on front running/flash. 2 more to go.