Quote from Pa(b)st Prime:
A Pabst re-post:
Pabst defending a Jewish Central Banker would be like Alan Dershowitz arguing on behalf of the NRA but when ET sentiment is shorting Greenspan, Pabst knows he should be a buyer.
A few facts/observations.
1. If not for Greenspan its doubtful there would still be Index futures and options. Landis should know that. After the 1987 crash the S&P futures market was as popular in the media and Congress as Dick Fuld is today. Program trading and portfolio insurance were the CDO's of their day. Greenspan lobbied hard to Congress on the need for risk transference via futures. If he'd been anti-futures or had blamed futures for the crash us traders would be without a livelihood.
2. To hear people who applaud Bernanke's rate cuts now bemoan Greenspan's rate cuts is RIDICULOUSLY DISINGENUOUS. Think this economy sucks? The post tech collapse, post 9/11 economy SUCKED WORSE. If anything Greenspan was TOO RESTRICTIVE the last half of 2000. By 2003 he was RAISING rates-he raised them FOURTEEN TIMES before he left the Fed in 2006.
3. No one has the BALLS to mention the REAL elephant in the room. It's FDIC insurance. If you owned a bank and sent your depositors a memo last year saying, "housing loans are risky, buying securities could be fatal so instead we're buying Treasuries, hence our offered CD rate will be LOWER than anyone else's." What do you MORONS think the response would be from your depositors? They'd tell you to F...off. They'd say, "My deposit is INSURED, I don't care about the risk your institution takes. That's YOUR problem. I WANT MY YIELD! Or I'll place my account at Citi."
4. If these troubled lending institutions were partnerships instead of publicly traded corporations PERHAPS they would've been more prudent with risk. To ASSUME that as fact IGNORES the trader TRUISM-People add to losing trades! Do you think ONLY US manage positions like panicky reckless gamblers? Like everyone else the Dick Fulds of the world thought if they cost averaged a bounce would allow them an out. Didn't happen.
5. When an asset collapses in price and there's massive loans tied to that assets viability then no matter how the liability is spread around the losses are STILL GOING TO BE EXTRAORDINARY. If a Hurricane wipes out Miami no matter if one or a thousand insurers wrote policies the dollar damage IS THE SAME AMOUNT.
Those who play the blame game usually have the self reflection capability and intellect of ants......
New Post:
I can add another thought or two. I always keep in mind a quote I heard 20 years ago from Michael Millikan. He said-I paraphrase because I'll never find it-"the initial high yield security deals done at Drexel represented solid value because strong balance sheets backed up the offerings. As these bonds were successfully launched more and more money flowed in seeking similar opportunities. Paradoxically each subsequent offering contained more risk. There weren't enough low risk opportunities to fulfill the amount of money flowing in."
Markets rally on liquidity endlessly chasing supply. Econ 101. That liquidity manifest itself in money being available for mortgages, it chased GOOG, it bought Treasuries, it also bought zillions of non-dollar assets like apartment buildings in Rio. AS ALWAYS-irregardless if there's a Fed, a Greenspan or even a United States once the last extra dollar is spent there becomes a "buyers strike"-no buyers left on the sidelines-and as asset holders seek bids to liquidate into, the bids aren't big enough to stabilize prices. As Soros will tell you, the bigger the vacuum up the harder and faster the corresponding move down.
While Greenspan may be "shocked" that execs would trade their companies into the ground, there's little surprise. Individuals and yes institutions blow up all the time. Jeez I've seen E.F. Hutton, Drexel, Kidder Peabody, First Boston, Enron, Continental Bank-I'm probably missing quite a few-all blow up just since Greenspan was Chairman!
The nuance that even Greenspan misses is it's FAR BETTER to "lose" BSC and LEH to over zealous mortgage back buying than to lose insured FDIC accounts. In a perverse way thus far- without conceding the worst is over-the "system" has actually transfered risk from market neutral depositor to market bullish investor pretty well. Unlike Greenspan, the media or Congress I have zero lament for the loss of any Investment Bank. Hell there was a billion in losses on Chicago trading floors on Sept opex-all shorts ironically-and not a peep. Few would suggest the Don Wilson's of the world aren't intelligent risk takers. What Congress nor the media understands but EVERY TRADER OR GAMBLER had BETTER understand, three consecutive rolls of snake eyes will come up time to time. Most of this analysis is along the lines of "if I'd just released the dice a second earlier as I cocked my wrist I'm quite certain I would've rolled a 4-1 instead of snakes." Fallacious 20/20 hindsight BS.....
One last irony. The judgmental, wise-guy, blame everyone else Print Media to this day makes the lions share of ad revenue off of developers schilling new homes onto the public. The MSM made NARY A PEEP about the excesses apparent not the past 8 years or even the past 16 years but I'd argue the past quarter century. Hearing the MSM criticize anyone is like CNBC trying to suddenly reinvent themselves from market Cheerleader to investor watchdog. The disingenuous duplicity is comical yet horrifying.....
