Saturday, October 04, 2008

The Last Three Weeks in the Financial System: Quotes & Observations

Like pretty much everyone else, I've been watching the news unfold about the financial world, and the bit of a sticky wicket they've gotten themselves (and us all) into, with the sense that I was watching an utterly surrealistic drama. Being no whiz on high finance, I’m not going to attempt any big analysis. But I still wanted to simply record a few phrases that I saved, ones that leapt off the screen as I read them, crystalizing the profound hard-to-believability of what's just gone down.

Let's hope we can look back at this, someday not too far off, and say, "Whew! Good thing we got out of that one in not too bad of a shape. Thank goodness we escaped the worst of that!" Not that I see that as exactly likely, but hey, let's be positive! : - 0

Specifically, here at last is a moment when doing business mainly by constructing all these houses of cards, trying to build prosperity and/or wealth based on no productive work, investing in mental constructs not tied to any physical correspondence, is shown as the empty and ultimately useless approach it is. Oh, and even better, done without any much regulatory oversight or, y'know, rules.

Here are some of those quotes, much of them in the carefully measured words of the New York Times, made all the more startling because the Times is not what you'd call a paper known for sensationalism.
This one was a good, nutshell explanation of why the potential collapse was so widespread:

"Outside the public eye, Fed officials had acquired much more information since March about the interconnections and cross-exposure to risk among Wall Street investment banks, hedge funds and traders in the vast market for credit-default swaps and other derivatives. In the end, both Wall Street and the Fed blinked."

Lehman Files for Bankruptcy; Merrill to Be Sold
(9/14/2008 )

"Days away from a complete meltdown of our financial system"

"As Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the Banking, Housing and Urban Affairs Committee, put it Friday morning on the ABC program 'Good Morning America': 'The congressional leaders were told that we’re literally maybe days away from a complete meltdown of our financial system, with all the implications here at home and globally.'”

".. .a week that has shaken the core of the American financial system."
I mean, who'd-a thunk it: Lehman, Merrill, among the handful of firms that were routinely described as the very Pillars of the Financial System! This has got to be the best use of the word "incredulity" that I've ever seen.
And from MSNBC:
The "Bankruptcy of 'law of the jungle' capitalism"

"This crisis underlines the excesses and uncertainties of a casino capitalism that has only one logic — lining your pockets," said German lawmaker Martin Schulz, chairman of the Socialists in the EU assembly. "It also shows the bankruptcy of 'law of the jungle' capitalism that no longer invests in companies and job creation, but instead makes money out of money in a totally uncontrolled way."
- "U.S. gambles blamed for world’s financial crisis" (10/1)

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