Posted by Harkavy at 9:03 AM, September 16, 2008
Running down the press:
Post: 'New York Shock Exchange'
Years ago in Phoenix, a huge, top-heavy, out-of-control cement-pumping truck crushed four lanes of cars at a stoplight on a busy street.
Not only awful but an awesome sight.
The same kind of feeling you get watching the out-of-control Wall Street schnooks flattening us.
Shock and awe, and we gave Wall Street its weapons of mass destruction.
Naturally, the Wall Street Journal has extensive coverage, but try the "Crisis on Wall Street" collection of stories at London's Financial Times.
That said, Eric Lenkowitz's lede in this morning's Post is a suitable on-the-scene report:
The epic collapse of Wall Street titan Lehman Brothers, combined with the virtual demise of Merrill Lynch and fears for the world's largest insurance company, sent stocks into a frenzied freefall yesterday as Wall Street grappled with financial chaos not seen since the Great Depression.
And what injuries did we onlookers suffer? Another Post story, this posted at 4 a.m., provides some answers: "NY WILL TAKE $1B HIT: GOV."
Yeah, but what about us? What about, for instance, the state and city pension funds? Further down, the story notes:
City Comptroller William Thompson assured current and former city workers that their pensions are in good standing because only a "minuscule percentage" of the money is invested in Lehman stock.
We'll see about that, because the fallout from Wall Street's greed will be long-lasting. The numbers are scary:
On Sept. 2, the first day of trading this month, shares of Lehman stock held by the city were valued at $32.2 million. They were worth $420,000 yesterday, when the stock closed at 21 cents.
The state's $154 billion pension fund owns about 5 million shares of Lehman common stock.
Jim Fuchs, a spokesman for State Comptroller Tom DiNapoli, said losses from Lehman could total about $400 million.
Lehman shares held by the state were worth about $80.6 million at the start of September and were valued at $1.05 million yesterday.
The New York State Teachers $100 billion pension also held an estimated 2.2 million Lehman shares. Officials didn't return repeated calls about the fund's potential losses.
The teachers' pension shares were worth about $36 million at the start of this month and about $462,000 yesterday.
Set aside those worries for a minute so you can read an excellent story that helps explain why this happened: David Lightman's "Wall Street crisis is culmination of 28 years of deregulation." The McClatchy piece is stark from the start:
No one cog in the federal government's machine of financial regulation let down the country by failing to prevent the latest shakeout on Wall Street. The entire system did.
After a "shit happens" explanation from the Milken Institute (an org set up by former Wall Street junk-bond goniff Michael Milken) — "They just haven't done a particularly good job" — Lightman extracts a great quote from someone who brings this crisis down to our level:
Kathleen Day, a spokeswoman for the Center for Responsible Lending, a consumer-oriented research group, explained the regulatory lapses more starkly: "The job of regulators is that when the party's in full swing, make sure the partygoers drink responsibly," she said. "Instead, they let everyone drink as much as they wanted and then handed them the car keys."
Sardonic, and then Lightman gets right to it. Not trusting that people will read down into his story, I hand you this long backgrounder passage:
Analysts and politicians are raising serious questions about the nation's financial regulatory system, which dates to the New Deal era.
On Monday, one Wall Street bank, Lehman Brothers, filed for bankruptcy protection and another, Merrill Lynch, sought comfort by selling itself to Bank of America for $50 billion. Earlier this year, the government helped enable the sale of faltering investment bank Bear Stearns to J.P. Morgan Chase, and more recently took over mortgage giants Fannie Mae and Freddie Mac.
Such troubles were supposed to have been prevented, or at least mitigated, by regulatory systems that the nation began to put in place after the banking system collapsed at the start of the Great Depression.
Many banks at the time were badly wounded by their personal and financial ties to securities trading. The 1933 Glass-Steagall Act, and later the 1956 Bank Holding Company Act, mandated the separation of banks, insurance companies and securities firms.
Those and many other federal laws stabilized the banking and securities markets, but by the 1970s, a stumbling U.S. economy led to a change in America's political-economic values. Ronald Reagan led a movement that came to power in 1980 proclaiming faith in free markets and mistrust of government. That conservative philosophy has dominated America for the past 28 years.
Even after taxpayers had to rescue deregulated savings and loans, or S&Ls, with a $200 billion bailout in the late 1980s, the push to loosen regulation paused only briefly.
In 1999, President Clinton signed the Financial Services Modernization Act, which tore down Glass-Steagall's reforms by removing the walls separating banks, securities firms and insurers.
Under President Clinton and his successor, the government became eager to promote home ownership. Interest rates were low, the market grew for loans to borrowers with weak credit and private-sector mortgage bonds boomed. About 38 percent of those bonds were backed by subprime loans. They are at the root of today's financial crisis.
Just this past July 25, the Wall Street Journal laid out some of that history:
'Amid Turmoil, U.S. Turns Away From Decades of Deregulation'
The housing and financial crisis convulsing the U.S. is powering a new wave of government regulation of business and the economy.
Federal and state governments alike are increasingly hands-on in their effort to deal with failing businesses, plunging house prices, worthless mortgages and soaring energy prices. The steps add up to a major challenge to the movement toward deregulation that has defined American governance for much of the past quarter-century since the "Reagan Revolution" of the early 1980s. In fact, some proponents today of a bigger oversight role for government are Republican heirs to the legacy of President Reagan.
Too late, of course.
I mentioned Glass-Steagall in a February 2005 item, but stupidly I buried it in a general rant about Bush and the war. Here's the relevant passage:
I'll get back to Iraq in a minute, but don't tell me about
Bill Clinton: He not only promoted NAFTA globalization without insisting on protection of workers and union rights, but he also helped re-create monopolies by embracing the 1999 repeal of the
Glass-Steagall Act (the FDR Era law that had prohibited banks from merging with securities firms), and by signing the
Telecommunications Act of 1996, which further deregulated phone companies and allowed even more mergers. It's their monopoly game, and they're the ones on Park Place. You're stuck on Baltic Avenue, at best, and your children will be renting, not buying.
Back to the present: There's much more meat in Lightman's McClatchy piece today, so check it out.
Al Jazeera: 'Markets devastated in Lehman's wake'
By the way, don't assume that this major Muslim medium is knee-jerk anti-Jewish. Or, maybe you can assume that.
Its coverage this morning includes a humane perspective about "the average American" that many U.S. outlets don't match. And the perspective is from a guy who's obviously Jewish:
Israel Adelman, a Fordham Financials trader on Wall Street, told
Al Jazeera that "people in upper government don't understand what the average American is going through".
"The customer is very squeezed right now, houses are worth nothing, people are up to their ears with credit cards debt," he said, describing the situation as a "confidence crisis".
"We've been making a lot of money from cheap money . . . we are the pinnacle of greed . . . we're going to pay for it all the way through next year. The bleeding is going to haemorrhage."
Of course, the other way to look at this quote is that Al Jazeera's millions of anti-Jewish readers in Arab countries get to have their prejudices confirmed by hearing a Jewish banker say, "We are the pinnacle of greed."
Wonder if Adelman realized how his observation about greed — accurate but applicable also to Wall Street's non-Jews — would be used.
Wonder if Al Jazeera called an obviously Jewish banker just for that purpose.
Wonder if Adelman will tell Al Jazeera the next time it calls, "No comment."
Daily News: 'Presidential race heads into final 50 days with Obama, McCain even'
At the other end of the scale of sophisticated agitprop this morning, Thomas DeFrank's lede:
John McCain has the mo, Barack Obama doesn't, Sarah Palin is a hotter commodity than they or Joe Biden combined — and no sane expert knows the winner.
Really. No insane expert knows, either. And no sane expert would brainlessly declare who's a "hotter commodity."
If you want something of substance about Palin — and also a good read — check out Steve Coll's piece in the latest New Yorker. In "The Get," Coll (a former Washington Post managing editor who penned the scintillating Afghan War book Ghost Wars and kicked ass on the Pat Tillman story four years ago), notes:
Palin's answers to
[Charlie] Gibson's questions made it clear that all the briefings and all the cramming that she could absorb in two weeks were not enough to endow her with what her résumé so plainly indicated that she lacked: sufficient exposure to national-security issues to serve as President, should she be required to do so.
She confirmed that she has never been abroad, apart from visits to Canada and Mexico, and a recent trip "that changed my life" to Kuwait and Germany, where she met American soldiers. She also said that she has never had occasion to meet a foreign head of state. She added, a little defensively, "If you go back in history and if you ask that question of many Vice-Presidents, they may have the same answer."
Perhaps she was thinking of the antebellum period. Since the dawn of the atomic age, of the thirty-one other Vice-Presidential candidates nominated by both major political parties, perhaps only Spiro Agnew, a governor of Maryland, had comparably scant exposure to the world beyond the United States at the time of his selection. However, Agnew did earn a Bronze Star during military service in France and Germany during the Second World War. (His Vice-Presidency ended with his resignation, in 1973—something to do with bribery payments, handed over in brown paper bags.)
Coll does give the Ashley Banfield lookalike her due, though Palin's positive attributes still don't justify her being a veep nominee — let alone the fact that she's not as smart as Banfield:
Palin is a natural orator, and in television interviews granted before she became a nominee for national office she came across as relaxed, funny, and self-possessed. In the ABC sessions, she told Gibson that when McCain invited her to join his ticket, "I didn't hesitate. . . . You can't blink. . . . I didn't blink." Palin leaned forward, radiating nervous energy. Gibson, with his large frame, sonorous voice, and reading glasses perched low on his nose, loomed over his subject, presenting an unfortunate image of male professorial condescension as he ticked through foreign-policy issues that he clearly knew better than Palin did. Even so, the Governor's anxious-sounding answers to his questions produced more than enough awkward moments to justify McCain's decision to hold her back for study hall.
Daily News: 'Bronx man hacks up ex, hides remains'
Speaking of cement and death . . .
A Bronx man confessed Sunday to hacking his ex-girlfriend into pieces and entombing her remains under layers of cement in New Jersey, police sources said.
Julio Flores, 32, even called the family of Jaritza Calderone, 28, to tell them they'd never see her again.
Daily News: 'The Milkman and His Wife'
Wish David Krajicek were writing today's crime stories. In the paper's continuing "The Justice Story" series on archival events, here's his lede on an 1886 case:
Elizabeth Singer jostled her 14-year-old son awake with awful news.
"Johnny, get up," she said. "Your father is killed."
She guided the boy into her bedroom so he could have a look.
New York: 'If McCain and Obama Can't Tap Into the Economy Message Today, They'll Never Do It'
Chris Rovzar's Daily Intel post yesterday is still well worth reading, in part because of the many links he provides to statements and stances by Obama and McCain.
Over at the Washington Post this morning ("Economy Becomes New Proving Ground For McCain, Obama"), Dan Balz and Robert Barnes provide a play-by-play of the candidates' latest reactions.
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Unlike Wall Street's short-sellers, I hate to burst anyone's bubble, but capitalism is not dead, despite the moaning and groaning from Davos to D.C.
From the Times:
