Lehman Brothers, AIG, Wamu, Merrill Lynch: Get in Line, Folks, Here We Go
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Lehman Brothers Expected To File for Bankruptcy
As I write this, it is Sunday night on Wall Street, but most of the major players in that neighborhood are having a less than restful weekend. After calling an emergency meeting of the heads of major Wall Street investment firms in a frantic attempt to get them to pool their resources and thereby broker a sale of the troubled investment firm Lehman Brothers, Federal Reserve Chairman Benjamin Bernanke has so far failed to pull another rabbit out his hat. No more bail-outs, no more rabbits: that hat is so empty you can hear the wind whistling through the graveyard if you put your ear to it.
It looks like Lehman will be going belly up tomorrow.
That's a problem. It's a problem because the U.S. government just took over the two largest mortgage firms in history: Fannie Mae and Freddie Mac; in an effort to reassure jittery foreign investors who were starting to pull out of U.S. mortgage backed securities thus causing a global slowdown. No sooner were foreign investors calmed, than things went sour again.
Fannie and Freddie, it turns out, were cooking the books even more flagrantly than suspected. The amount of bad debt that American taxpayers have to shoulder will almost surely be much bigger than anticipated. In spite of that fact, the Bush administration made the controversial decision today not to include the Fannie/Freddie mess in the national debt, which is already twice what it was last year even without the bail-out portion.
AIG, one of the largest insurance companies in the world, is now looking too shakey to stand, with inadequate reserves to back the products it insures, and will likely not make it through the coming week unless someone infuses an enormous amount of cash into the ailing giant. Merrill Lynch is frantically brokering an 11th hour deal with Bank of America due to similar debt issues, and Washington Mutual is widely expected to fail very, very soon.
That's a lot of bad news.
The Lehman Brothers failure will be the biggest bank failure in history, and it looks like two or three big institutions are lined up right behind it.
One widely held fear is that when the market opens tomorrow, 'short sellers' may start to bet against other financial institutions that have heavy investments in mortgage and HELOC products, thus driving financials down rapidly and possibly even causing bank runs.
Hopefully, I will look at this column tomorrow after work and chuckle at my doom and gloom unnecessarily sourpuss attitude. On the other hand, if things unfold in the worst possible way, I may come home from work (at the corporate call center of a major regional bank with financial issues) sooner than I think. We shall see.
I Want a Bail-Out
On a personal note, I received a note from the escrow department of my mortgage company Friday informing me that the mid-sized rust-belt city in Indiana where I still own a house (in a bad neighborhood because I can't sell it at any price, I've tried) has decided to raise in my taxes $600 a year, causing a shortfall in my escrow account. So, I can send them $600 or pay $50 more a month for the coming year on the mortgage.
I do have the house rented, but this means the rent will now be less than the mortgage payment. The house is worth, at most, half of what I paid for it three years ago, but I can't sell it for half of what I paid for it. I can't sell it at all. The city it is located in has no work, no money, an eroding tax base, and big problems with foreclosures and vacant properties. The city is dealing with this problem by hiking taxes on the homes in the worst neighborhoods, which of course forces the owners into foreclosure, and puts the city in the business of selling the foreclosed properties for pennies on the dollar.
So, the city is exacerbating its own problems, literally eating itself.
This is happening to me personally at the moment, but it is also happening to lots of people and lots of cities all over America right now. I'm telling this story to show that what is happening is more complex than it might seem on the surface, and also to show that the effects are spreading rapidly as cities get more and more desperate for money just to maintain the costs of operating local government. Nevermind community services or schools, the challenge of just staying afloat is causing lots of local governments to make decisions that will almost certainly turn every city doing this into Flint Michigan or Inner Detroit. (Most of the abandonned properties in the worst slums of Detroit have unpaid tax liens, which is one of the reasons they stand vacant and decay.)
I'm going to try to hang onto my little Indiana house and hopefully sell it when the smoke clears, whenever that may be, but it won't be easy, and lately it has been getting harder fast. This year, all of my most basic expenses on all fronts have gone up by at least a third, but my paycheck has not gone up at all--in fact it is getting smaller because I can't seem to sell anything, and commission once was a big part of what made my job viable (and bearable). At the same time my pay is dropping, my boss is riding my butt constantly about what a crappy sales job I'm doing, as if it is personally my fault that our entire financial system is melting down. People are getting fired right and left, and most of them are (were) way better employees than I am.
I was thinking that I should have gone to that Wall Street meeting with Bernanke today myself because seriously, my bail-out is cheap compared to Lehman Brothers and at least they could have bailed somebody out (me!) and that would have been so much more cheerful than the news of the moment.
Oh well. Coulda, shoulda, woulda...
You know, I'll be honest, I'm getting nervous. We're putting our pellet stove in today, because we probably won't be able to get by on the one tank of oil I put on a charge card--last winter we went through four tanks. One fill cost around $700 in August, and God knows what it will cost after this hurricane business in the Gulf. So we'll be burning wood and cherry pits, OK. And we did grow a garden this year and filled up the freezer. Good. So far so good.
But things keep getting rapidly worse, not just nationally, but personally. I do think that there is a chance we are in for something incredibly ugly, and soon.
I hope I'm wrong.
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Comments
You know, I remember reading about homeownership reaching record levels about four years ago, and I thought to myself that at least Bush could say he did something good. Now it seems that even that "accomplishment" was a joke.
The truly sad part is that this problem is so enormous that I'm not sure any one person is going to have the solution to the problem. I know for damned sure, though, that McCain isn't going to solve it. How can a person who has so many homes he can't remember them all relate to someone in your position?
I'll say this was a great hub, but it is with tempered enthusiasm since I suspect it is little consolation for you, with the reality of what you are facing.
Jim Henry, aka crashcromwell
Pam: As usual you always educate. I thought WAMU was a safe bank and opened an account a few weeks ago! Yikes, maybe the olden method of keeping money under a mattress may be a better option.
By the way, that's a charming picture of little Pam. LOL!
Good hub!
Great hub again Pam. Ill be quit be honest I havent watched the news in litterally 6 months, but it will be interesting to see what happens over the coming days and weeks. Thanks for opening my eyes a little bit. I heard about the freddie fannie deal, but not of any of this. Good luck to you wethering the storm. I am having to batten down the hatchs myself
Wait - you have a mortgaged property that you can't sell. And the renters are paying you less than the cost of the mortgage and property taxes. You probably can't pass the, um, "savings" on to your renters, because you're probably in a rent-controlled contract with them. So the options would seem to be between waiting until it lapses and hiking the rent on the next go-round, or... just letting them collect on the mortgage, cutting your losses, and running. It's up to you, Pam - but you do seem to keep hanging on to your assets with the "in for a penny, in for a pound" approach. I'm sorry to be the one to tell you, but you know the house always wins. And this country definitely is Vegas at its most tacky and sordid. You know what's going on - can you really see the smoke clearing any time soon? If you can, I hope you're right - but I think any clear-up will be about the size of those economic stimulus checks. Vampires aren't typically good blood donors.
All the best to you, Pam. I'm sorry this world is bringing people so much hardship.
Jerilee, that sounds awful!OMG. And I thought my city was bad! I'll have to do a hub sometime soon on my code enforcement shakedown there, just for some comic relief. I leaned a piece of cardboard against my trash can one day and got a letter saying I would be charged $300 'plus removal costs' if it wasn't removed within 10 days. It literally was a piece of cardboard--not a pile of cardboard, not a pile of anything. I took photos before and after that are pretty funny--but the craziest thing was, all around me were abandonned properties with MONTHs worth of trash thrown in the front yard... But see, I was THERE, that's the thing. Great comments, holy cow!
Thanks Scott and Crash, it's getting weird isn't it? Some days I think about shutting off the news too, but I have to know what's happening for my economics blog, which pays me, so, no eye-closing for me. Thank you for commenting.
Violet sun, thanks for the compliment! Well, it's Monday morning---maybe WAMU will be ok? I guess we'll find out!
Satori, to be honest I'm about a hair away from declaring bankruptcy. I'm current on all my bills, but I'm sinking deeper and deeper in debt everytime something goes wrong, and things keep going wrong. My stay in the hospital in May put me in collections even with insurance and even with sending regular payments. I had to charge oil and charge the wood pellet stove when I realized there might not BE oil when we needed it. My son-in-law's mother is renting the Indiana house and if she has to get out she'll move in with him & my oldest daughter and they are barely hanging on as it is. She's only in my unsold house because their unsold house was foreclosed and sold at tax sale this spring. But I'm about exactly one disaster or emergency away from saying, screw it. Honestly just covering the basics is hard right now and yeah I work half-time at the bank, but then I come home and write ALL THE TIME, and Bill works about 60 hours a week. It's getting grim around here. On the up side, lots of tomatos still coming on in the yard. (o:
Oh Pam. I've grown to rely on your hubs to explain how things really are Stateside, and I looked for your hub straight away this morning, as I was sure that you would write about Lehman Brothers, and that I would actually understand what was being said (I don't always when I read the financial pages. Generally way too much jargon). The trouble is that the banks underpin society in more ways than we know. When you start taking out the sub-structure everything gets a little wobbly, and once enough of the sub-structure is removed, the whole edifice collapses into the basement.
I'm sorry that everything is so dire for you right now. I've been through tough times myself in the eighties when we last had a property meltdown, and I feel certain that this latest financial earthquake will be practically off the Richter scale. I saw Alan Greenspan on the news last night and he looked like a frightened rabbit caught in the headlights. I think that the global economy really will implde this time, and that community based economies are what will emerge from the wreckage. Only time will tell.
Hi Amanda, thank you for the vote of confidence in my ability to explain this stuff--I wish I knew how to FIX this stuff! lol! Seriously, I think you are right, I think this could be pretty bad. I guess we'll get through it and move on--that's what generally happens, but wow, what a mess.
I'm not really in a dire situation, I'm just getting overwhelmed with debt. We're still eating, we live indoors, we have each other and my lovely kids and our health, so you know, it's just numbers. At some point I will just stop paying all these bills and file for bankruptcy if I have to---I guess if it's good enough for Lehman Brothers, it's good enough for me. So far, I've been keeping up, except with the medical ones, which, well, that's another hub altogether...
Hi Pam-- I'm holding my breath till the opening bell this morning. I think its going to be pretty bad--but we knew this was coming, didn't we Thank you not only George Bush but Ronald Reagan too for removing all the banking regs and making this possible. I'm hanging curtains in the cardboard box and you and Bill are still invited over for Little Friskies--keep your fingers crossed and fasten your seatbelt. Here we goooooooooo.
The only upside to this is it will take the spotlight off Sarah Palin and put it back on the economy which is good for the Demoocrats.
Hi robie2!
Well, at just before 2:00 it's bad but amazingly not that bad. Governor Corzine allowed AIG to borrow money from itself (don't ask-it's way over my head!) which will buy it some time, and the stock of the bank where I work is bumping along the bottom just as it has been for months now. I'll take you up on that Little Friskies invite! We'll bring something fresh from a local dumpster and have a grand old time!
Great hub. I'm not a pessimist - I'm a cautious realist. I think things will get worse before they get better. Let's hope we all weather the upcoming storm.
I agree livelonger. In a way, this correction is for the best in the long run. I think people will come out of this more self-reliant, more cautious, and wiser. Maybe not the people at the top, but the rest of us will be. Thanks for your comments.
Great Hub Pam,
I'm with Satori on this one. I have two such houses myself. The rent I collect is HALF my mortgage and taxes now. It's the only way I can hang onto the places and now the renters are starting to miss payments because they're out of work too! I think this is my last month. I'm walking away, taking the credit damage, and dealing with the fall-out later. I have a feeling that a huge portion of America will be with me.
I'm a pessimist on this economy. The US isn't going to recover and neither is the world...
I feel ya, dlarson. I'm one disaster away from where you are right now--and since I work for a big regional bank, that disaster might not be far away. My employer is on a short list of 'troubled' banks, but the agony has really been drawn out. I moved to Michigan from Indiana to take the bank job, and the job and the move have been a nightmare, although once we got settled into the house in Michigan I do admit I like it better than the Indiana situation. That city is dying and very conservative--this one is at least more open and there are more white collar jobs even though the Michigan unemployment rate is high. At least I'm in a blue state near lots of good universities now.
I think 2009 will be consistently bad. No one with a positve outlook has been right yet. I think a lot of 'experts' knew all along it would be this bad, they just weren't about to say so on the record--they have bills to pay too so they lie. Good luck to you and thank you for your comments.
Sorry pgrundy. You're not wrong.
Entropy.
While I'm very sorry that this mess is impacting you so seriously I can't say I'm all that sad that the end is apparently imminent.
All we have is this tiny house in New Mexico, no money, no savings and no jobs. We’ve got little left to lose.
There’s just no way all this mess can be turned around before the proverbial shit hits the proverbial fan.
Hi Pam,
I feel your pain. I bought my dream house that sat off the street in the woods, surrounded by a stream, old tall trees, an in-ground cement pool, cabana,,,the house itself was over 80 yrs old, at least the original part. To make a long story short, I had to sell it at a loss six years ago, due to never ending repairs and tax hikes, and didn't have enough of a down payment on a real home. I ended up in a mobile home community. In the xix years I've been here, the rent on the property has gone up 5% per year. Oh, wait, this year they cut us a break, I think it was only 4%. Between the rent and the mortgage, I'm paying now what I couldn't afford to pay on my real home. I just thank God my mortgage is a fixed rate, and if I can hang on, I'll see daylight in about ten more years.
For the past four years I was working a 2nd job, which just went belly up about a month ago. I've had to use credit cards for some things, and am doing my best to cut costs. I make no unnecessary trips. I plan out my errands to be done on the way home. Bills I mostly pay online. Anyway, I better leave it at this or I'll be writing my own hub.
My prayers are with you and I wish you the best. We're all in this together,
Trish
Astrologically speaking, August 1, 2008, the Solar Eclipse in the sign of Leo, triggered a major stock market adjustment with in six months (Feb. '09). The new President will have to be a magician to get us out of what's yet to come!
ColdWarBaby & Trish, I think lots of people like us are suffering at a personal level and worried, but what we hear about is Lehman Brother and AIG. At some point (and I am so there, trust me) you just want to say, oh screw Lehman Brothers and AIG. I have the same pile of nothing I had when it all started, so screw them anyway.
How's that for deep analysis!? LOL!
Paulie Walnuts, I love that kind of stuff. Electing a magician actually isn't that bad an idea. I got this thought today, what if they both change their minds---like, whoops! Just kidding! Did we say we were running? We meant running AWAY not running for President! Bye! Thanks for your thoughts Paulie!
Pam, I'm finding that I'm looking for your latest hub to decipher the financial chaos and goings on of late. You have a writing style that's refreshingly honest and allows truth to emerge from the purest sincerity.
Gas prices have spiked, my insurance is due and I need toilet paper. I'm hanging on by a thread. literally. Who's going to bail me out??
Hi summer10! I hear ya! I've been at the out-of-TP crossroad before, which is why I walk softly and carry a big purse! lol! Seriously, it may be wrong to steal a roll of toilet paper from a public place, but on a scale of 1 to 10 with ten being mass murder and 1 being picking your nose, I think stealing toilet paper is maybe a .001. It's barely even on the scale, you know. You hang in there. And get a big purse!
Hi Pam--stopped back in for the evening wrap up--Dow off 500 points. AIG still hanging in the balance. We'll see if that shoe drops tomorrow. Meanwhile, I think Paulie Walnuts has the right idea :-)
See you in the morning (yawn)
Had to laugh at your TP comments. In many countries, especially Asian, there is no such thing as TP in public places, because thefts became more the rule than the exception. So you must bring your own at all times. What's hilarious to me is that our American icon -- the 711's in these same countries -- hand out free TP tissues to their customers -- it's a big hit and reason to shop in their stores. Is that the direction we might be going in the future?
Dear pgrundy,
great hub. I'm sorry that the giants are already down, if not dead.
Hi robie! Well, if nothing else this makes our days more interesting, no? Hmmm...I wonder which corporate giant will fall today?
Benson thank you for commenting. It is sad, but they totally had it coming.
Jerilee, that is amazing, the 711 TP thing. I feel encouraged now, because when they lay me off at the bank I can maybe get THAT job! LOL!
711's everywhere in the world. Best overseas jobs are teaching english, especially in Asia, where being a native speaker and an online TEFL certificate will get you hired on the spot. Many of the schools will foot the airfare, and provide you with a furnished apartment. That's how my son came to live in Hong Kong, how my nephew got to Japan, and another newphew moved to Singapore. I think Benson's right.
I think we're all in for a back to the past way of life. My parents and grandparents got by with bartering and staying home - making their own entertainment out of stories and tricks they played on each other. Trouble is, it's hard to find that kind of neighbor now...but maybe we'll all learn to help each other again.
When I was first married, back in the 70's, (ouch!) we "pooled" our food with another young couple, got together for dominoes and old movies; and looked at the stars at night for entertainment. Many times we made soup out of leftovers we both had and played cards until the wee hours. I had 2 old dresses, 2 pairs of jeans and about 5 or 6 t - shirts, 2 pairs of shoes. We had enough, we never missed a meal, but living was frugal. I don't want to do that again, but I think we are in for some really hard times; living in the land of plenty is going to involve losing things we have, and re-grouping.
I hope we all are able to find some joy in other parts of life, it sure won't be cruising the streets in our new car. Sobering times will require us to dig deep and uncover what really matters.
We have no choice. Voting for change will help, but even that will take years. But, it 's a start.
Nope, voting won't help. Rather, it's irrelevant. Things will get better eventually, but it does not depend on whom you vote for :)
But I do agree to the rest of your comment, though :)
When I saw the news about Merrill Lynch and Lehman Brothers, I was shocked. Last night I heard that somebody's stocks dropped 500%. It's like I woke up one morning and the world had tilted on its axis. I have no doubt this is the result of long term probs, it's just that I don't normally read about them.
The possible consequences of all this, plus the phenomenal gas hikes, is enough to make your head spin. I now keep an eye out for news, because this feels like a very big deal indeed.
I know this stuff hits you guys first (Americans) before it gets to us, so you have my sympathies as you prepare to hunker down and make your way through the rough patches.
Best of luck, Pam.
..and my husband can't figure out why I will not get our house refinance so he can get us a new deck and the back stairs moved so they meet code! Oh and the charges for getting building permits is stupid. I mean I had to wonder why I had to get a permit for our back deck to be replaced after the contractor we had took off after he destroed the one that was there. In the coeds it says that if you are replacing it then you don't have to have a permit. I also says that if it wasn't 5000.00 then you don't have to get a permit. When the inspector came out to inspect the new chimney he told us we had to et a permit.
I told my hubby we are not refinance for at least next year. We will see.
Hi Pam, and all my other Hub Pages friends.
Well, all the stuff we've been discussing on Pam's other hubs for the last few months is finally hitting the fan in a big way.
Misha is right. Doesn't matter who wins the election - the damage has been done over the past 20 years or more, and I don't think it is fixable in the short term.
I want to offer some encouragement, but I can't find any words that don't sound like empty platitudes.
Eric G.
You know it occurred to me, with the system collapsing around our ears we can certainly use HubPages to collaborate and share information on how to live off the grid. The U.S. is one domino in a chain - wherever people haven't been keeping in control of their governments and corporations, this is the inevitable result. That procludes essentially any English-speaking country with much of a "settled-in" infrastructure - which leaves out Canadia, but that's about it.
We could start writing Hubs on how to live off the grid - self-sufficiency, growing your own food, how to use desktop computers to automate things like crop-growing and weaving, how to build solar panels, new options that are out there, and so on. By far my most successful Hub to date has been "Ten Quick Ways to Make Money" - because everybody's feeling the pinch, and it's only going to get worse. In a somewhat macabre way, we're catching a new trend ahead of the curve here. So writing Hubs oriented on that would be successful now, and would only become increasingly successful as the situation continues to deteriorate. Sites like eHow and Instructables can provide some great ideas for Hubs, and we can use Google to discover what new, as-yet-unheard-of solutions, techniques and options exist out there to do those kinds of things better. We can use our Hubs to promote that sort of self-sufficiency, not to mention political research and change. All of those things would help us succeed individually, while promoting changes that would improve things in society.
It's just a thought. I know the collective self-involved mindset of our generation and our parents is what has let greed, corruption and a lack of accountability destroy society. If we applied ourselves to a better mindset, we could transform this place - the world - into somewhere worth living in. Somewhere we actually wanted to be.
Hi Jerilee, Misha, Eric, Shirley, Satori, Lady Guinevere and Mariesue!
Just finished my finance blog after a grueling shift this morning at the bank. I've got the worst referral (to sales) percentage on our team and I've got all these kids dogging me about it while my supervisor is on vacation--Here the world is falling down around our ears and they are like, "Get more callers to sales, we need more, more!" I admit I suck at it lately, but my heart isn't in it, and I keep thinking, hell, we'll all be lucky if this bank even exists in another month, get off me! I hate being bad at what I do, I hate my own attitude, but I can't seem to snap out of it lately. Meanwhile 80% of the customers are just calling to cuss at me because they are broke. What a zoo scene, Holy Cow. When my finance blog goes up I'll post it. It's called "Who Are These Lehman Brothers and Why Should I Care About Them?"
Might was well laugh a little.
As I was headed home there was news of a federal bail-out for AIG. I can see why they would be talking about that, but I can't see HOW. My head is spinning. If AIG goes down it will drag some huge banks down with it, but our government is soooooo in debt already. At some point don't our 'rescues' become meaningless? Our national debt is twice what it was last year without including Fannie & Freddie in the number.
Thank you for all your comments. I need chocolate. While there still is some.
I'll be back though.
I just read that the ceo of Lehman brothers paid himself $22 million last year, so I don't think he'll be all that worried. Enjoy your chocolate Pam. Little things help.
Pam,
Goodness gracious, all kinds of things happening at once! Nicely written hub. I have to admit, its getting really difficult not to panic with my stock portfolio as I watch it decline day by day. Today saw a moderate rebound, but I think this was temporary in nature. Look out below in the near term!
Hey CJ....how does one of the 'little people' go about getting a portion of that? Does this guy look like the sharing type? Happen to have his address and phone number?
Hi CJ. I expect there will be all kinds of calls for punitive action against these CEOs but nothing will come of it. The last I heard, both Fannie & Freddie CEOs had retained attorneys to negotiate their golden parachutes when people started to kvetch about their multimillion dollar severance packages. I think Ken Lay is on a desert island somewhere ordering up Mai Tais. These guys never get in any trouble.
Shirley, no doubt. Get his address! You go girl!
02SmithA, I peeked at my 401K today and I don't even want to talk about it. I'm going to be working until I die it appears.
I hope that you are able to recoup the money you put in on your Indiana home, and the financial upheaval that we're on the verge of facing is getting to be ridiculous. Good hub by the way.
Thanks talented_ink! Yes, I read that the Fed is definitely negotiating putting taxpayers on the hook for $75 billion more to bail out AIG, another institution it has deemed "too big to fail." Wow. Each day that goes by my grandkids' grandkids get a stiffer bill. They can stop saving these rich guys anytime and it would be just fine with me. Seriously, if I lose my bank job I'll probably have to walk away from the Indiana house. This is getting completely insane. Thank you for your thoughts.
"Too big to fail"... It reminds me of that adage that people always say.
"Just take care of the little things. The big things will take care of themselves."
I guess they were right.
Ken Lay is dead. No Mai Tais for him. http://money.cnn.com/2006/07/05/news/newsmakers/la
Good hub though.
Hiya Satori, I think that's our problem in a nutshell lately--the big things have been taking care of themselves a little too well for a little too long.
MasterGerund, I know Ken Lay is officially dead, I just thought it was darn convenient the timing of his demise. I think he's living with Elvis somewhere. Elvis gives away the Cadillacs and Ken Lay repos them the next day. Thanks for your comments!
Hi Pam - another great if troubling hub. Regarding some of the comments - I agree with Misha and Eric that the damage has been done and more pain (how much?) is inevitable. But I disagree with their view that it doesn't matter who wins the election. Who would you rather have at the helm in a storm - a self-serving maverick or someone with the intelligence to understand the meaning of "all in the same boat"?
What a well written and sad hub Pam. Sadly, you are not alone. I am in the real estate business and live in a city that has been very resilient to the real estate market, but things are still tough. If I had some advice that would provide you relief I would pass it on, but I do not. All I can say is that you still have your health and family and that means a lot.
Hi Paraglider! I agree, I think it's important that Obama wins, but will he? Hard to call at this point. It's an ugly campaign that's for sure, but how on earth anyone could think McCain could fix this after voting to deregulate the financial sector over and over is beyond me. As I write this some fool from the Reagan administration is on CNN saying that what needs to happen first to fix all this is to cut taxes paid by major corporations. Yes, that's gone well so far...
RyanRE, thank you for your comments! My sympathies--real estate can't be any more fun than banking right now. Yes, at least we have our health and each other. That's what really matters anyway!
Any remedy for financial crisis in America? Privatisation plays a major role for the present situation?
I just recently joined Hubpages, so this is my first comment to a hub. I must say, as a new father, I'm not feeling very optimistic for my son's future. What kind of landscape will he be growing up in? Will he have opportunities or will he just have "options." (I think we can all understand the difference these days.) I'm struggling to make ends meet with a college degree. What will it look like for Caleb? Right now, I'm serious when I say that thinking about it brings tears to my eyes. Cooked books, bail-outs, increasing prices everywhere and decreasing or stagnant paychecks....I don't understand much about investments and other financial stuff. I'm one of those artsy creative types that has a hard time concentrating on something "serious" for more than 10 minutes. But, God gave me a brain and even I can see that this mess is only getting bigger.
Is there a fix to this? Can any administration really come up with enough policies, etc to fix this? Ultimately, the real burden will always fall on us. We're the average Joes, the ones that pay the taxes and purchase the goods and provide the services and then pay for other services. We will always be the ones that take the real heat. I don't know that any real change will come until we as a society begin to re-evaluate how we live and how we spend, and so forth. I don't put any hope in a politician to bring me relief. Our political scene is a joke to me any more. How can we trust what is ever said? Is it truth, or is it just empty platitudes spit out to salve fears and sway minds? I hate to be so cynical about it, but the last 2 presidents we've had have not given me much reason to trust the Big Cheese. Lies and half-truths and hidden agendas.
But, I still have a place to live, I still have food on my table, I have a family and friends that love me, and I have a healthy, beautiful little boy to bring my smiles and give me a reason to do what I have to so that he will at least have a shot for tomorrow.
Hi Caleb's Dad! Weclome to HubPages. I love it here. You won't find a nicer group of people anywhere on the web. Things look pretty dark right now, but I think some things really do need to fall apart. It might not be all bad. Once the smoke clears, I think there will be work to do and we will all need to pitch in and do it. One of my best fantasies is a parallel economy that could grow up, comprised of people who choose to live "off the grid", barter & trade, go back to growing and preserving their own food and generating their own energy, and learning the art of craft and craftmanship again. I can see this kind of society growing out of hard times, and that wouldn't be all bad. So much of what we think we 'have' right now is just empty. Something surprising always happens, even in the worst situations. We don't know what new will come of this, or when, but something will.
Thank you for taking the time to comment! Hang in there. Your son will take his cue from you--if you are resourceful, respect your creative abilities, and don't take this world personally, he will be fine.
In hopes of inspiring some "hope", I thought I'd remind people that there were more millionaires created after the Great Depression than any other time in history, and then again after the recession in the 80's. The coming depression (make no mistake about it, it's coming) will be a great transfer of wealth for those who are ready for it. Remember, the money that exists in America today isn't going to just disappear, it just won't be in OUR pockets anymore.
I recommend people educate themselves about how money works in the world, not just in America, but on a global scale. Read Robert Kiyosaki's "Cash Flow Quadrant" for starters. It will open your eyes to a different way of thinking about money. According to some leading economists and investors, the market will continue to spiral out of control until it finally bottoms out in about two years. For those who are prepared and those already very wealthy, it will be like playing Monopoly for real. And everything will be on sale...
Paradigm Shift - {{Remember, the money that exists in America today isn't going to just disappear}} Hasn't it already disappeared? There is money and there are debts. Let's say America did what a typical housholder would do in hard times - pay off all debts, call in all credit, and see what's left over. How do you reckon the bottom line would be looking?
Hi Paradigm Shift and Paraglider, I saw an amazing thing on TV yesterday. It was some stock market 'expert' explaining that the Fed is actually printing more money to create the money to loan to A.I.G., but he said, don't worry, because the Fed has the authority to print as much money as it wants to. Out of money? Ba! We'll print some more! lol!
Actually, they're right about the Fed printing money for AIG. If you take a dollar bill out of your pocket (assuming you still have any. I don't!) and look at it, it's labeled Federal Reserve Note. That's right. Our money is already issued by the Federal Reserve, not by the US Treasury. It is still "signed" by the Secretary of Treasury, but that's a technicality.
I think it's a good thing for the American people to realize the reality of their money, but I'm not sure the current circumstances are a good time for them to find out. Now is not a good time to lose confidence in that, too!
Hi, Pam
This week in the markets has been a real rollercoaster! I finally had a chance to read your hub.
It doesn't shock me at all that, in the largest pullback of real estate values I've ever seen, inner city property owners would receive higher tax bills from the cities. Why doesn't it surprise me? Because so many government workers, from small towns to the US Government, are brain-dead!
You are so right! They exacerbate a problem that is already HUGE. Through their tunnel vision they only see things from their own point of view, not from a macro economic view; the city government needs money so, the obvious way to get it is raise taxes.
Today, Thursday, has been a day filled with speculation about exactly what kind of plan the Feds will use to help these huge companies stay in business. If the SEC had been doing their job to begin with, this would not have been half the problem it has become; there have been specific rules about how short-selling is carried out, but it has never been enforced. So, as short sellers smelled blood, they piled on to the ruin of Lehman, AIG and Bear Stearns. If the SEC was doing their job, this would never have happened. A few greedy hedge fund guys made a butt-load of money at the expense of these companies who employed hundreds of thousands of people.
All AIG needed was a "bridge" loan from the Fed, not a takeover! Now, it may be, that the common shareholders will be wiped out, which does not give the share price a chance to rise to make the company more valuable again SO THAT a loan could have been paid back. AIG has real, solid, money-making divisions within it but had a liquidity problem that could have been solved even if it never should have happened at all. Lehman had a lot of leveraged money, not at all like AIG's solid assets. So I get not bailing out Lehman but saving AIG.
Now, here's the big question; will the Fed find a way to screw this up and wind up charging the tax-payers or can they actually own 80% of AIG and make it viable so that it makes money (perhaps by being sold off in pieces0 and thus, the taxpayers get re-paid? Someone on CNBC said it best yesterday;if you like the way the DMV and the IRS is run, then you'll like the way the FED runs AIG!!!!!
Good hub and great food for thought and discussion.
Madison
Oh, now short sellers are a scapegoat. LOL
Hey Madison!
I wondered the same thing about AIG--why wasn't the bridge loan sufficient? Why the takeover? I mean, think about it: Even the regulations we do have are not being enforced, our government right now turns everything it touches into crap, so yeah, let's turn over the biggest insurance company in the world to the US government. Why do I not feel reassured? It bothers me. A lot.
Now they are talking about setting up an organization to buy up the bad debt like they did with the S& L fiasco, but I don't know--it's an awful lot of bad debt. I confess I don't understand how that would work. (Hint, hint: A future Madison hub? No advice, just an explanation of what the hell they are talking about!)
My home town (well, about 300,000 population, so home city) has a rep for corrupt city government but they've really sailed over the edge the past couple of years. You should hear realtors talk about them. Whoa!
Misha--yes, it's those darned short sellers! Let's get 'em!
I guess Lehmann was not lucky enough as AIG to be bailed out by the funds of federals bank, or else IF AIG had hit the dust too like lehmann then I am sure DOW and nasdaq owuld would crash through the floor just out of sheer panic.
How a 17th bext company ranked by fortune get bankruptt???
read her here to know how and why lehmann brother got bankruptt.
http://hubpages.com/hub/How-Lehman-Brothers-became
This type of stuff really hurts you badly. I felt sorry for you.
yeah, this thing is creating a financial tsunami.
this is what happened 244 years ago when the British wanted us to keep paying them more of our hard earned dollars. That is why we need some true patriots to through these leaches overboard. As you may know Biden wants us to keep paying taxes as a sign of our patriotism and Obama was in bed with the ones who designed the mortage crisis. What we need is true patriots. McCain/sarah Palin 08
Hellow every one. I have this small brain bug that's been bugging me a lot ... it goes like this ..How come a billion dollar industry blows up in a day. You wake up one morning boom gone. Investment banking rely upon forecasting and risk analysis rite so why no one predicted this.
@Harry - this billion dollar industry has not blown up in a day.
It's been on the slide for 20 years, but the guys pushing it off the cliff have neglected to tell us.
Jerilee Wei says:
15 months ago
Another great hub! Life certainly is a lot more complex. Our city has decided to save a 1/2 million dollars a year, by closing down the local utility company's offices. Now, we get to pay all of our utilities at the local Amscot, etc. in cash. We also get to pay an extra dollar fee for the privilege of standing in line at such a place. Have any questions or complaints? We now get to talk to a computer on the phone, or we can email them. They will supposedly email us a reply in 48 hours. Can hardly wait for the next power outage or incorrect bill!
Then, they sent us all letters making it sound like we'd won a prize -- we now are going to pay an extra $80 a month for the next six months to increase our original security deposits. This is because they've determined all customer deposits, are too low. Apparently, too many people are fleeing the state without settling with them. Those of us left behind are stationary targets.
The local telephone and cable companies are billing customers for two months in advance, instead of just the upcoming month. Doesn't mean you get a bill every other month, as soon as you pay one, you get a new one -- due upon receipt. Today's best discovery was that the local fast food chain is adding a $.39 fee to each bill for "eating-in." My husband's threatening to order "to go" and eat in, using his bag for a placemat or tray. Let me off the planet.