Topic: Banks Fucked

[Phil]

So, 3 of the top 5 US investment banks have collapsed in the space of 6 months. Bear Stearns and Merrill Lynch have been around for the best part of 100 years and Lehman Brothers about 150. All gone caput.

It's very easy to feel a sense of Schadenfraude (what a great word) about investment bankers joining the dole queue but you have to wonder what the future has in store for the rest of us. I mean these banks have been the cornerstones of the financial system for decades.

[Jake]

funny money and overall financial dependence in the industry is the cause. Lehman falls and Lynch is looking for help - thank you bank of america...who is next? who dependent on lynch?

[Dumah]

The sad thing is that it is never the bankers who suffer. Northern Rock, Fannie Mae, Freddi Mac, Bear Stearns all had government bail-outs for their own f*ck-ups. I don't blame the Fed & the treasury for letting Lehman fall as they have spent so much taxpayers cash already, but I just hope the fall-out isn't too bad.

The financial industry had waves of deregulation in the eighties & nineties and just went and on until they were out of control. They talked about self-regulation but it was all hollow words. Values go up, money is made, then things should reach a natural plateau and let the rest of the world catch up. Unfortunately some financial institutions forced values up again by fixing the valuation systems and hiding this in complex financial instruments that the rest of the financial world was too greedy or stupid to spot. So now you have huge amounts of financial assets that are worth less than they should be and everyone panics. This in turn forces values down again and we panic some more...

Unfortunately with banks, the rest of the world needs them so we have to suffer for their failures. It was a different story when things were going "well" - then they moved wealth and earnings to the country that would tax them the least. Now its gone bad they turn to the state and taxpayers with their caps in their hands - they privatize their profits and nationalize their losses.

Id like to say things will change after this but I doubt it. The banks will pick themselves, decide they want to make money again and the vicious circle will begin once more - see you all in 15 years for more of the same misery!

[Dumah]

Wow...looking back on that I'm getting more left wing as I get older - who'd have thought it!

[Steve]

I wont pretend i have any idea what your all talking about, because im clueless, but it dont sound good.

[Steve]

Merrill Lynch, 94 years old and also based in New York, agreed to sell itself to Bank of America Corp. for $50 billion in an emergency deal hashed out yesterday.

now THAT is disturbing

[Phil]

I wont pretend i have any idea what your all talking about, because im clueless, but it dont sound good.

In very simple terms it's like pass the parcel and works like this:

1. Your local bank gives you a mortgage to buy a house.
2. Your local bank gives lots of other people mortgages to buy houses.
3. Your local bank packages these mortgages up and sells the debt onto other organisations. Other banks, pension funds, hedge funds etc.
4. These debt packages get broken up, rebundled and flogged onto other organisations numerous times as part of the billions of dollars worth of debts that fly round the global banking systems everyday.
5. Your local bank realises that they can give a mortgage to any jobless schmuck with a pulse and simply flogg the debt (known as toxic debt) onto someone else, so they do this and get away with it for a few years.
6. Then one day, a few of the big players get suspicious of the debt that they have and start frantically re-evaluating the quality of the debts they own.
7. Everyone follows suit, the debt markets seize up and the ones holding all the toxic stuff find themselves up shit creek.
 

[Steve]

Ahhh......well fuck lol

[Dumah]

...this is a huge insolvency filing, the biggest in US corporate history, with $613bn or £340bn owed to creditors - equivalent to around a quarter of UK economic output.

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/09/bailing_out_banks.html

[PJYelton]

Ok, I'll ask the dumb question here, how will this affect the common American?

[Dumah]

Ok, I'll ask the dumb question here, how will this affect the common American?

No money for banks ot give you a loan...much higher margin on loans and mortgages that you will have to pay...thousands wiped off your pension fund...more likelyhood of yor employer going bust (higher interest & lach of debt available)...

Shall I go on?

[PJYelton]

No, thats enough to scare the shit out me, thanks

[Dumah]

i better be able to get all my retirement money!

Well the Dow Jones opened a little while ago and fell 3% and will probably fall to about 4% (if it follows the pattern of other countries markets)

While the Dow Jones and other index like it are not wholly representative, they are supposed to represent a diverse representation of the market. If your pension fund has a similar representation (which it should do) then its possible that your fund has fallen by close to that amount.

So deduct 4% from your current pension fund and realise that you lost that within the last few hours

[Dumah]

you're just scaremongering. It's people like you that create
panic. panic leads to chaos. chaos leads to.. violins...

Sorry if you think that...but my career revolves around this stuff & this occurrence is unprecedented. Governments fall fairly commonly...earthquakes & other natural disasters are common...but a Wall St Investment bank filing for bankruptcy - that's special. Your talking once, twice in a century. Typically, occurrences of this size have been followed with things like traders and bankers throwing themselves from tall buildings, we haven't seen that yet, but this is the type of news which historically does that

And the Dow is down 2.5% from its previous close. It's
fluctuating. I saw it at about 4% earlier this morning.

FTSE & CAC fell by 4% at the end of trading. Dax fell by 3%. All are European indices, and all fell because of Lehman

[Steve]

this is why i dont have a retirement fund or investments. Your money aint safe if its not in ur house anymore