Jezebel
Today the Federal Reserve, hot on the heels of saving Wall Street, elected to cut interest rates once again, by 75 basis points. And while the stock market had a screaming orgasm over this, I did not personally think it was such a great move. Herewith, a dissenting opinion.
Fuck the Street. Please, Ben Bernanke, just fuck them. Raise interest rates to fucking 10% for the month if you must, just to master cleanse all those fuckers of their liquidity addictions. And seriously, that $30 billion in cash you promised JP Morgan? Fuck that. Just text Jamie Dimon tomorrow afternoon and say you can't make it, maybe he can find some sovereign growth sugar daddies in one of the Emirates or maybe China? I mean, China's got all the jobs now anyway, they might as well control a few more multinational companies in the lead-up to the Olympics, right? They'll probably even overpay for them, what with all this Tibet noise. But really, how hard can it be to scrounge up $30 billion if Goldman managed to cough up $21 billion on Christmas bonuses? Anyway, like I said, not your concern; fuck them. I wouldn't say this if I hadn't thought about it at least as hard as the average overleveraged hedge fund short-seller when he pushed down on the panic button that got us into this mess, Ben Bernanke.And by "us," I mean Bear Stearns, because I personally have weighed the odds and I'm pretty sure I personally have nothing at stake here, no matter what you do, Ben Bernanke. My balance sheet, while admittedly lacking much in the way of assets, is also blissfully insensitive to short-term market and/or interest rate fluctuations.
Thanks to my industry, indeed, my own financial situation has been governed by a recessionary state of constant layoffs and downsizing for years and years — and I'm lucky enough to have one of those jobs they haven't figured out how to do better in Hyberabad. And I'll let you in on something, Ben Bernanke; my finances have zero correlation with those of the stock market. I'm not alone in this; most Americans are actually earning less than they were in real terms than they were in 1999. They can handle a few quarters of recession because they've been handling it.
Some of my morning commenters would have me believe bailing out JP Morgan is the only way to minimize "collateral damage on Wall Street and thus the economy," but really, whose economy are we talking about here? The buying power of the minimum wage employee is at a 51-year-low.
So fuck the Street, Ben Bernanke; just this once, just for, like, a quarter or something. You don't have to play rough; I'm not asking you to nationalize any industries or institute land reform or anything, just give them a little scare. They chose this path, you know. They chose to worship Ayn Rand and wear those Paul Smith shirts and pay zero money down on their Hamptons summer homes and obnoxiously, whenever confronted by someone like myself at a bar, claim that the Market Solves Everything. Let the market solve this one for them. People are eating dirt for dinner in Haiti, Ben Bernanke; you can let Bear Stearns go to bankruptcy court.
Sure, some financial institutions might get pissed for a minute. They didn't lend Bear Stearns all that money to leverage the shit out of their delusional bets that the housing market would keep going up up up only to spend years in bankruptcy court for the sake of reaping fifty or sixty cents on the dollar. But you know what? They probably also lent money to Goldman Sachs and Jeff Greene and John Paulson to leverage the shit out of the lucky hedge funds that bet it would all end in failure. They lent money to all those short-sellers who bet the price of Bear Stearns stock from $67 all the way down to $2. Sure, that's what makes our economy so "dynamic", Ben, but does that make it any more virtuous than a legalized Ponzi scheme?
What if there were some sort of cascading ripple effect? everyone wants to know. What of all that IRRATIONAL FEAR? But you just tell them, Ben Bernanke, that they should maybe sit quietly in their illiquid asses and reflect on what the fuck made them think it was rational to buy into all this fancy housing market bullshit in the first place. Just ask them, Ben Bernanke, what they thought was rational about people in Southern California taking out mortgages with monthly payments equivalent to five months' rent?
Because the housing market never made much sense to me, Ben Bernanke. I mean, there we were a couple years ago, with a war on, a slowing economy, oil roaring up toward $100 a gallon or whatever, skyrocketing energy prices sending other commodity prices through the roof... just where were the buyers who were supposed to keep bidding up those houses so everyone could continue pumping the economy with home equity loans? I'll tell you where a lot of them are now: sitting at home, watching network TV and avoiding opening their mail. Sort of like Bear Stearns with that portfolio of mortgages, mortgage-backed and asset-backed securities no one wants to put a value on just yet.
But you know? Eventually they'll open the envelopes, see what they've got, realize it's probably not the end of the world and start moving money around again. Assets are only "illiquid" till someone — the market? — figures out how to make them liquid again!
And if it is the end of the world, there's always the hope of an early death a la Ken Lay. Right?
Comments
$21 billion on Christmas bonuses?
I'm in the wrong business.
Well, okay. I'm sold.
Fuck 'em.
@Political Party Girl: Me too. However, having interacted with a couple Goldman financial-types on another message board, I don't think that even all that money would make me happy, as I'd have to work with egotistical turds like that.
Poor and happy...that's me! :)
thank you! and fuck all those Wall Street assholes who howled [and got] less regulation, relying on the "hand of the market" instead. The hand of the market squeezed their balls, and they went crying to Uncle. Can anyone say "downer cow"?
I have a lot of varying opinions about this whole mess. And one is that the Bear Stearns bail-out was BULL SHIT.
Also, to answer the question of the hour, this is an interesting commentary about how this crap affects everyone.
Well said but you forgot to mention that the motherfuckers have started sneaking in references to a $500 billion taxpayer bailout. That happens, the hell with pitchforks - I'm willing to chip in on a fund to take these guys out professionally.
I'm pretty sure I personally have nothing at stake here, no matter what you do, Ben Bernanke.
actually moe you do, we all have total stake it it. this type of bailout has direct correlation with the steady drop in earning power of average americans. this bailout means the federal reserve will pump out more debt dollars to that in turn reduces the value of the dollar even more. so we're all paying for this bailout. the dollar will continue to buy less and less and less. that's why all investors and foreign markets are bailing on the dollar.
Ok, feel free to hate on me and call me names and bitch me out. But a recession is part of the economic cycle, correct? You can't be all economic-boom all the time, correct? There's a low point, then a high point, just like every cycle. So why are we acting like OHMAHGADZ RECESSION END OF THE WORLD. Yeah, it reallllly sucks, but it is bound to happen. Right?
Here, here! You like capitalism so much, big banking people? Live by it, die by it.
"collateral damage on Wall Street and thus the economy,"
Wait, I think I wrote that! Did I just make it in one of Moe's diatribes? And why am I actually happy about it? :)
Yea, Moe! At least you have not been stampeded by all of this vague, not-yet-clearly-explained fear mongering.
The taxpayers have to prop up these scheming theives, why? So a couple of investment banks go under, and a handful of people in the real economy have to wait another week or two for their loans to go through? So what? We'll all be just fine.
These welfare-hogs-in-braces are the same ones who justify their outrageous leverage-based takings as their "market worth." Now is the time for them to learn that leverage works both ways.
If the good people in Cleveland have to let the market work in bad times as well as in good, then so should the bad people in Wall Street.
Thank you.
I mean, where the hell is Adam Freaking Smith now with his invisible hand? Blame the stupid poors for buying houses! Save the precious rich, for they are only guilty of being too generous to the poor poors!
@misssgolightly: I am not an expert myself. My first instinct is to say "yes, it's just the normal ebb and flow of the economy." On the other hand, I can't help but think how it could have been avoided.
Technical point about how lowering rates affects the average person - lots of debt is tied to prime (Home Equity loans, credit cards, etc.) & that index does down in step with these rate cuts. So it does help your average over-levered consumer, of which there really are a lot these days....
@Political Party Girl: Funnily enough, there were tons of articles out at the time the Goldman bonus numbers were released that their employees could have bought all of Bear and had money left over for their Hamptons pads with just their bonuses!
@marin79: Right. It's bad for the savers, better for the overextended. I know it's backward logic, but true from the perspective of numbers.
Yes! Finally a reason to post my favorite video about economics:[www0.gsb.columbia.edu]
For those who don't follow the Federal Reserve, Dean Glenn Hubbard of the Columbia Business School was also on the short list to succeed Greenspan, and the students at CBS put this music video together.
I don't think it really has much to do with protecting the market. It's about the Fed Board of Directors protecting their Bear Stearns buddies, the uber-rich assholes that invite them for cocktails and prime rib in their exclusive clubs, and sailing off the coast of Kennebunkport, and golfing in Scotland.
If Bear Stearns went bankrupt -- as they rightfully deserve to do -- there would be investigations, the creditors would look closely at the multi-million dollar bonuses they all skimmed for themselves while the company's house of cards was rippling in the cold breeze of reality. There might even be criminal charges on top of civil suits. The whole back-slapping rot of corporate and government corruption might be exposed -- EXPOSED! -- to the masses. It's worth wasting the value of the dollar to avoid seeing your breathren in jail or reduced to living in a sub-let, for goodness sake!
@misssgolightly: Except that this time the dollar is dropping like a stone internationally, and no one can stop it.
Which means, yes, it affects us. And I don't think there's anything we can do about it. Except emigrate.
Also the entire system of debt based economy is collapsing in the US, because no one will loan us more money.
So yeah, we're screwed.
FYI it's Hyderabad.
And btw, Moe, I do agree with your general sentiment here. I can certainly understand how lots of people fucking hate Wall Street these days and want them to pay. But if that situation actually happened, Wall Street would be taken down completely. And remind me again the consequences of when that happens??? I think it happened in 1929
@aspiringexpatriate: I'm going to look for jobs in Vancouver tonight.
@Archetype: Actually deposit rates at banks do not move in lockstep with rate moves (on either the cuts or the hikes). In general they move about 25bps for every 100bps change in rates depending on the competition. Most people don't move their checking accounts b/c of the rates, so there isn't a ton of incentive by the banks to pay more. But you're right it does have some effect, just not as much as you might think. Clearly the borrowers are getting more of a benefit.
Lowering rates isn't just for the market, it stimulates the entire economy, but we're going to have to wait about three or more quarters to see that.
You know, lower rates, lower borrowing costs, more investment, more productivity, more growth. I'm pretty sure more growth is what the Fed really wants here. What people seem to ignore in all this is that cutting interest rates, creating jobs and having low unemployment at near frictional levels doesn't mean shit so long as the Fed keep expanding the money supply.
@misssgolightly: No hate from me... you're right, the economy is cyclical, and what goes up [like housing prices] must come down again. But there are so many things happening at once [housing bubble, oil prices, job market, etc.] that are putting such a squeeze on the already-squeezed middle class that I think a bit of the freaking out is justified. Especially because some things like the housing bubble could've been prevented or lessened. ESPECIALLY if someone had seen fit to blow the whistle ["tattle", to refer back to the discussion on the "sisters betraying each other" thread] on shady practices in real estate.
Also the crisis affects you if we start to veer into stagflation territory. Because coupling a recession with inflation is awesome.
And by awesome I mean, your grocery and gas bill are going to start to a hurt a whole lot more.
@misssgolightly: You're absolutely right. The economy has highs and lows; it should look like gently rolling hills if it's managed right. The problem this time is that Greenspan kept blowing up the bubble to make Bushco look good so the economy climbed a peak into clouds of irrationality. Now, we go down into the valley of deep doo-doo until some kind of balance is achieved.
@aspiringexpatriate: But they just raised the limit on my credit card! I'm just trying to do my American Duty and stimulate the economy by spending more than I make. Otherwise the terrorists win. Luckily I am being sarcastic, and I can still open my mail worry free. For now.
@Archetype: Actually, the Fed rate cuts aren't lowering home equity or other mortgage rates, b/c banks are now, suddenly, coming to their senses wrt risk. They are not lowering home loan rates in response to Fed cuts, in fact prime mortgage rates have gone up four times in the past month. So...still screwed.
I'd also like to thank the IRS for the nice letter they sent to my husband and I explaining that we do not get a refund check. Of course not. I know, woe is me, but the California middle class gets so freaking screwed. Too rich to qualify for any stimulous, bit rich enough to pay $600k for a 1000 sf house, pay our honest fixed mortgages, eco-gas taxes, college loans without being able to write off the interest, and welfare to everyone. Sweet. I feel like a sucker. And every teenager in america has a nicer cellphone/ wardrobe than me.
@sjct: You don't have a fucking clue what you're talking about. The Fed's decision was based on saving all of Wall Street b/c of the effects to the economy. It really is that simple.
@MissNadine: What about other lending rates like for consumer credit?
Like I said, I am in no way an expert, so I love to learn about this stuff......
Heeeheee. I mean, this is the thing, so these dicks wanna use sneaky underhanded subprime lending tactics that bankrupt already struggling families? Ok, fine (well not really, but they're gonna do it anyway). I'm still poor no matter what. Is a Bear Stearns buyout gonna drive down the price of gas? Or raise minimum wage? Or fundamentally, realistically ever offer me or many around me a step up economically?
Not so much.
Is my neighbors subprime forclosure going to get UNFORCLOSED?
Is anyone really gonna be any less poor?
I'm hardly gonna open my wallet lovingly to these turds when one of their idiotic schemes goes bustola.
Oh wait, no...yes I am.
@marin79: Yeah, but that's still a bitter pill, no?
I am really tired of executives fucking around and then being rewarded.
@marin79: You go girl! You tell 'em what's up!
@sjct: Um, the tech stock bubble/unprecedented economic expansion happened in the mid to late 1990s, which was Bill Clinton's era. If I remember correctly, the bubble bust in spring 2000.
@sabbaticalplease: oops, stimulus check
@marin79: And you don't appreciate a fucking rant when you see one. And nothing, my dear, is that simple.
@Archetype: Like credit cards? Rates on those are sticky downwards--meaning it takes longer to adjust down than to go up with prime rate changes. I should say that if you have an ARM, the rate cuts are helpful b/c the rate the mortgage adjusts to is tied to the Fed rate. And mortgage rates are still less than a year ago, but they're ticking back up slowly.
While we're talking to Moe, et al...I would like to officially file a complaint that marin79 does not have a star next to her name yet. Her financial analysis over the past couple of days has been rockin' my socks!
@MissNadine: But lots of people who are in sub-prime loans have ARMs, correct?
@MissNadine: But you're describing prime as in the borrower with high credit. Any home equity loan that floats off of the prime index (different thing) would benefit from the rate cuts.
You're spot on about mortgage rates in general. Unless it's a conforming balance (where the bank knows they'll be able to sell it to an agency), they're charging high rates and being extremely selective in terms of lendin