Sometime back, I wrote about HSBC's bad attitude towards RBI guidelines of issuing passbooks and their hidden charges about the FREE ATM Cards. You can check out the post here. For the past two months, I have been having unpleasant set of experiences with HSBC which I would like to share it over here for the benefit of other readers. Escalations upto nodalofficer.im@hsbc.co.in does not elicit a standard response. Every response takes upto one week and it again just imitates as a copy-paste of the canned response, which provides an emphasis for us that they haven't bothered to care about our issues.

1. Block and reissue of Credit Card: I had an unfortunate incident of having credit card damaged about two weeks back. When I called HSBC Contact Center to report this, the bank executive offered to block the card and reissue at the charge of INR 100. I asked her to hold back block/reissue so that I can discuss this the next day. But she vehemently went ahead and blocked the card. A day later, when I logged onto Online@HSBC, I found the card account missing and only when I called PhoneBanking, the card block action of the phone banking executive came to my knowledge. I asked about any reissue. Fortunately this time, I had a courteous phone banker who offered me to waive the reissuance charge and arrange delivery of the replacement card. I think the number of courteous and active people in HSBC can really be counted with fingers. Since, after one proactive action, when I hoped that the card would reach in a week's time, it took a fortnight [3 times a week].
2. High Value Cheque Clearing Melodrama: I had to deposit a High Value Cheque from one of a Nationalized Bank to the HSBC account. The deposit happened at 0945 AM on Monday morning. I was expecting a SMS alert of Uncleared Balance ("Credit on Clearance") almost immidiately since the actual clearance itself was advised to be happening the same day and the funds would be available for clearance the same day night. But only on Tuesday afternoon, I got the cheque being sent out for clearance. And only on Thursday night, the cheque amount came to my account. I had three queries to HSBC through online@hsbc:
   1. Why was the delay in clearance of a high value cheque?
   2. What is the point of having a high value cheque cutoff time when it was slower than a MICR clearing?
   3. Would I be eligible for a interest payment for delayed clearance?
3. For all queries 2.1 through 2.3, I was getting standard canned response that 'You are sending a request through unsecured email. Please send your name, date of birth, mailing address' to assist you further. Alternatively, use our secure message option'. However, when I send a message through online@hsbc, it takes a fortnight for them to respond. I really want to know why does HSBC need all those crappy lengthy details like date of birth, address etc for a simple stupid query. Are they running a matrimonial bureau and are they going to cast my horoscope, do some bridal matches and arrange my marriage? :)
4. When I escalate each time through PhoneBanking, the guys just put on hold and vanish into the wild.
5. When I brought this to the attention of Nodal Officer, Chennai, about ten days later, some called me and asked for more details. She told she wants to check with branch and call me two working days later. And I was getting the response that the nationalized bank ("Canara Bank") branch did not participate in the high value clearing and hence it was routed through MICR. But my Canara Branch, when I checked with them, denies this allegation outright and baseless. I just wanted to share with you about some of the mean attitude of HSBC staff just to shift blame onto others and wash-off their moral responsibilities.

In Today's Dinamalar, there is a coverage of the article about delayed cheque clearances should be credited with a Fixed Deposit equivalent interest. I have again written to HSBC on this front. Let me share with you the message I get from.

Zimbabwe is to introduce a bank-note worth Z$100bn in response to rampant inflation - but the note will barely cover the cost of a loaf of bread.

Some Zimbabweans are already calling for higher denominations in a country where the official annual inflation rate has exceeded 2,200,000%.

Independent economists believe the real rate is many times higher.

Zimbabwe's meltdown has left at least 80% of the population in poverty, facing mass shortages of basic goods.

The country's central bank has introduced several new notes already this year in response to the hyperinflation.

In January, a Z$10 million note was issued, followed by a Z$50 million. By June the denominations had reached tens of billions.

BBC NEWS | Africa | Zimbabwe introduces Z$100bn note.

Why "supper"? Simply put, supper is the term usually used by my kids when refering to dinner-time here, and weekday dinners (or "supper") are usually nothing over-the-top or spectacular, just a fill-you-up on good food moment in the day. A necessary part of the day, without a lot of fluff. Kind of fitting as you'll see when we get to the cars that would be in this club.

I had stumbled across the supercar club idea back in 2000, and thought "novel idea"... but then dismissed it, and went back at my day job. This past week, the thought popped back in my head while parking at the Post Office to ship out some designs, and I parked next to a perfectly preserved Gremlin. (I know!! Bitchin'!!) How long has it been since you've seen one of those? Apparently, the three other folks checking it out had the same thought. (note to the owner of said ride: What I wrote on my card is serious. I want your car.)

If you're into exotics, you no doubt know of organizations like Group 20's incredible Super Car Club, or P1 Prestige and Performance Car Club, or a few others. The basic idea is a shared-access plan, wherein members have access to a number of exotics and luxury cars for about the same cost as owning ONE. Pretty slick, and not unlike shared-access plans for yachts, jets, beach mansions, islands and so-on. So, for like $30k per year, plus a $5-10k membership fee, you're driving a number of cool cars throughout the year, insurance included. Nifty if you're of the persuasion that can afford it. Me? Nope. I fall more in line with my nifty idea: The Supper Car Club.

Regular folks cruising regular (and occasionally rare!) cars. We'll round up a group of investors, and purchase a fleet of hand-picked, basic transportation cars from the past and present (if you can get 'em from the future, well, we'd like a word with you, too!). We'll set up a membership fee based on the value of the cars, say $75.00 to join, plus like $300.00/year, and base it all on a points system, allowing everyone access to the cars. You may buy extra points, or trade points for allowing off-use days for cars, etc. Naturally, cruising the Cavalier rag top in June would be double he points of the Cimmaron with the broken A/C, but hey, this is about exclusivity.

I can hear it now-- "Why would anyone want to drive a car like a Citation, or a Fairmont sedan, or an '80 El Camino with a broken tailgate?" NOSTALGIA. Unless you were some spoiled brat as a teenager, chances are that through college (or beyond if you draw cars for a living and have kids), you've driven some questionable-looking, as well as performing cars. And what always comes up in converations about those times past (or present... it happens)? "Man, I hated that car, but I miss it!" Admit it. That '79 Delta 88 with the door skins flapping in the breeze was pretty cool. You had FUN with it. I sure as hell did. And my friends still remember that car... even the ones I bump into so many years later... And think about it: If you're into cars like I am, you check everyhing out. Like the afforementioned Gremlin. I was drawn to that like flies on... oh wait, bad comparison... but you get the idea. A car that hits home will draw as much, if not more attention than some exotic ride. (consider Playboy's Farmer's Daughters specials--- I read it for the article on cobbler -- was that a fluke? The girl next-door is always more approachable, and often more realistic. I bet they sold millions. Cars are the same way, I've found.)

Admit it: You had this poster right next to that one with the white Lamborghini.

We'll offer typical high school and college-year cars, and even a few hot rod-style versions... Maybe '78 Malibu with a severe rake, N-50's and Jensen 6x9's on the package tray, or even a hand-me-down LTD in powder blue... The kind of stuff you had back then. Imagine pulling up to your reunion in a Camaro with a dented fender, a Moroso decal and sheepskin seat covers, just like you had back in school? Talk about keeping it real. No rental Caddy for you. Just bringing back memories, much like your mullet and parachute pants. And for those who were in all of the musicals, or had weird parents, we'll round up some used Volvos, VW's, and the cream of the crop:

...it's tres chic

(I'm showing the smaller cars so that we get the "green" folks on board. Fret not, my fellow size 34 EEE carbon-footprint friend, I'll be battling you for points on the Granada with the bad valve seals and cracked rings. We'll have a little something for everyone. AMC Eagle? We'll have THREE.) All told, I think that once the trendies see Justin Timberlake pull up at the ESPY's in the Monaco with the Keystone mags, bad paint and bubbling tint on the windows, this club will be hotter than some crystal and gold-leaf decoupaged Von Dutch hat in an LA boutique after seeing it on a video awards show. If you're in, hit me up... This will be huge, and a total blast. I have a line already on a Volare' wagon and a cherry Grand Prix...

More insight/design/lunacy over at www.problemchildkustoms.com.

http://news.yahoo.com/s/ap/20080709/ap_on_bi_ge/steve___barry_s_bankruptcy

That's why I made it available as a download.

It's time to take back your life.

Click the button in the upper right corner, or go to

http://www.lulu.com/content/2951946

John Bryan Stone

Whoever will be at the White House. Although:

Brad Setser on Sat. 12

http://blogs.cfr.org/setser/2008/07/12/too-chinese-and-russian-to-fail/

Too Chinese (and Russian) to fail?

I would certainly expect that Vice Premier Wang is on the phone to Paulson this weekend, politely asking how exactly the US plans to backstop the Agencies. (...)

MORE IN SETTSER's BLOG, quoted this morning July 17th by LEX, FT: "China and Fannie Mae", and in our static page: AAA Updates on subcrimes.

Its Medallion Fund--which uses computers and trading algorithms to invest in world markets--returned more than 50 percent in the first three quarters of 2007. It had about $6 billion in assets as of July 1. Simons registered that performance as subprime and related markets were collapsing, sending two mortgage-related hedge funds run by Bear Stearns Cos. into bankruptcy. The turmoil pummeled the Goldman Sachs Global Alpha Fund, a rival to Renaissance's funds, which fell more than 25 percent during the same time. Morgan Stanley's computer jockeys lost $390 million in a single day in early August.

From Bloomberg's profile of Jim Simons and his hedge fund management company, Renaissance Technologies

Now that most of the commentators on Dalal street have been proved wrong, we all stare at the future, thinking where are we headed next.

Some say the pain “may” be over one day, the other day they say there “might” still be some more downside. How can you have a view which is in may and mights. I have been following the stock market for a few years now. The targets for specific stocks are based on pure hunch of the speaker and seem to have no logic what so ever, and that is always followed by “may/might” theory.

Anyways, analyzing the current situation, what the sectors to look at and why. I will mention only about sector I know about or have studied.

1. Banking/Finance: The credit crisis has shown a spectacular uptrend in the last few months. This trend threatens to continue for a few more months as the credit criteria continue to tighten for all lenders. This trend will see a further increase in losses till we reach the peak before starting the downward journey. The credit cycle typically takes 24 months to stabilize, and we can expect things returning to normal only in the last quarter of 2009. Meanwhile, since lending will reduce, there will be lesser and lesser balance sheet by the day; hence one can expect lowering of profits because of runoffs as well. So a double whammy, lower revenues - because of lower new loans and older loans paying off and higher credit losses.

I would suggest staying away from all companies which are too focused on consumer lending.

1. Real Estate: This sector has reached a level of typical saturation, ala FMCG. The prices will not see much growth, unless they are differentiated products – like a “Healthy Living” township or “Build Tomorrows leaders” township. Smaller players will have to go niche, and larger players will have to go volume. If you are invested in a vanilla small player, please exit the counter. The home prices will remain more or less stable in tier 1 cities, may be 5-10% drop in suburbs. Tier 2 and tier 3 cities will crumble up to 20%, esp since the developers here are typically local builders, who can undercut larger players with their cost efficiencies. A branded national player may just end up being a status symbol in these cities. Also, the rentals in tier 2 and tier 3 are very low, taking the regular investment return out of picture for the investor. The speculative demand will die down for lack of growth prospects.
2. Commodities: Like all rallies, commodities rally is about to get over there will be a sharp correction in the prices of lot of commodities, largely because of speculator interest.

IT : Info tech stocks are a risky bet right now. The US slowdown has not yet gone into a full fledged recession yet. My guess is in the next 3 months we will see some bad news in this sector as bigger giants start looking at their spending.

As of March, by one estimate, there was a staggering $2 trillion invested in hedge funds worldwide, up nearly tenfold from 1999. Today, there are more than 9,000 hedge funds, 351 of which manage $1 billion or more. Traditional investment firms are bleeding talent to hedge funds, and there’s a lot of room left for this thing to run: A recent study by consulting firm Casey, Quirk and the Bank of New York predicts that institutional assets in hedge funds could nearly triple by 2010. Last year, the average hedge fund was just 5.3 years old.

Statistics on hedge funds from New York Magazine's post on hedge funds. As for the elite list

A year ago, there were only four $20 billion–plus outfits; now, there are seven—JPMorgan, Goldman, Bridgewater Associates, D.E. Shaw, Farallon Capital, Renaissance Technologies, and Och-Ziff Capital. The first U.S. hedge fund to offer its stock to the public, Fortress, gained 67.6 percent on its first day of trading.

BILL MOYERS: With me now is one of America's leading chroniclers of money, power, and politics, who says what's happening is the disgrace of Wall Street, its excesses paid for by people like those in Cleveland and millions like them around the country.

William Greider has spent forty years examining how powerful institutions affect ordinary people. Once a top editor of THE WASHINGTON POST, a columnist for ROLLING STONE, and now National Affairs Correspondent for THE NATION, he has produced a series of best-selling books: SECRETS OF THE TEMPLE: HOW THE FEDERAL RESERVE RUNS THE COUNTRY, ONE WORLD, READY OR NOT: THE MANIC LOGIC OF GLOBAL CAPITALISM, WHO WILL TELL THE PEOPLE: THE BETRAYAL OF AMERICAN DEMOCRACY, and this one, THE SOUL OF CAPITALISM. He's working on a new book with the title: COME HOME, AMERICA.

Good to see you in person.

WILLIAM GREIDER: Thanks Bill.

BILL MOYERS: What were you thinking as you saw that report from Cleveland?

WILLIAM GREIDER: Made me angry all over again, even though I know the story. And then I thought, "This is usury." This is a living example of what the Bible prohibited, which is the sin of usury. Most Americans have never heard of it probably.

BILL MOYERS: Usury?

WILLIAM GREIDER: Usury, to be clear about it, is rich people taking advantage of poor people by lending them money on terms that are sure to make them fail. All three of the great religions, Judaism, Christianity, Islam, had a moral prohibition against usury because they recognized that society can't function like that. People of great wealth and their institutions like banks naturally have the power to overwhelm people of lesser means. And you can't allow that in a decent society. It won't survive.

BILL MOYERS: Where were the gatekeepers? Where were the watchdogs? Why did it take the Fed so long to put an end to-

WILLIAM GREIDER: Well-

BILL MOYERS: -predatory practices?

WILLIAM GREIDER: To make the story overly crude, Congress repealed the law against usury. It was done in 1980 by a Democratic Congress, Democratic President. And, of course, the Republicans all piled on and voted for it. And that was the first stroke, only the first of many, in which they stripped away the regulatory laws from the financial system and from banking.

And that allowed the free market modernized gimmicks of one kind or another, all these things we're now reading about, to flourish. And that's where we are. I mean, the gatekeepers said to the banking industry and to the financial industry, "We don't think federal control or regulation is good for you, so we're, therefore, liberating you to do your own thing."

BILL MOYERS: So why did they do that in 1980? I mean, there was, of course, the rise of the backlash to regulation from 40 years of Democratic rule-

WILLIAM GREIDER: The-

BILL MOYERS: -there was the rise, the arrival of the conservatives with their free market ideology.

WILLIAM GREIDER: Right, right.

BILL MOYERS: What was the issue?

WILLIAM GREIDER: Well, the driver then, and it was a powerful driver, was inflation. And through the '70s, for lots of reasons inflation, which tends to undermine the value of financial wealth and money, was out of control. The Federal Reserve had lost control of it, not entirely its fault. But that set up a political climate that said the government is not working and that wasn't wrong at the moment. Let's get the government out of the way.

And that was very appealing as framed by Ronald Reagan and other conservatives. But I think it's fair to say most Democrats yielded to it against whatever their original instincts were because of political necessity. And then the third dimension, maybe the most important, was that you had this very powerful industrial sector, that is banking and finance, that wanted and had pushed for years to get out from under the regulatory controls, limits on interest rates, the law against usury, the merger of commercial banks with investment banks, which had been prohibited in the New Deal because it caused the disaster of 1929.

I can go on and on. But you see the pattern. And the point I keep trying to make to people is that history learned the hard way that you do need prudential controls on industries like banking 'cause they're so central to everybody's well being.

BILL MOYERS: Left to their own devices, they go too far?

WILLIAM GREIDER: Yeah. They will use their power to their own advantage. And that's what we're witnessing now, a kind of recklessness that was set free by political retreat and people, some of them were sincere. Some of them were just on the make. But here's our great American tension. We want an economy that's dynamic, that's growing, puts more jobs out there for people to get, rising wages, all that good stuff. And at the same time, we want an economy that's stable. And that means no inflation, steady as you go, so forth and so on.

And this is the, you know, this is the mortal condition. You're not going to escape that tension. Government is a powerful intervener that tries, ought to try, to balance those two desires. For many years, the Federal Reserve served that role and tried to strike a balance.

BILL MOYERS: And then what happened?

WILLIAM GREIDER: During the last generation, 25, 30 years ago, the Federal Reserve, the central bank that regulates money and credit, tipped hard in one direction.

BILL MOYERS: Toward?

WILLIAM GREIDER: Crudely put, toward capital, in favor of capital and against labor. It not only hardened the value of money by suppressing inflation, but it participated very aggressively in the role of stripping away regulatory breaks on financial system and banks. Declined to enforce many of its own regulatory powers that exist in law. And meanwhile, sort of kept a foot on the brake about economic growth and full employment and all those good things that might help working people by encouraging rising wages.

BILL MOYERS: So at the same time the Fed was helping to keep wages down in order to keep inflation from escalating, its policies were, nonetheless, helping banks and investors to inflate the cost of their-

WILLIAM GREIDER: Right.

BILL MOYERS: -the value of their assets beyond reality-

WILLIAM GREIDER: That's it.

BILL MOYERS: -right?

WILLIAM GREIDER: That's it. At one point, writing in "The Nation," I somewhat playfully and wickedly referred to Alan Greenspan, the Federal Reserve chairman, as the "one-eyed chairman." He can see inflation and wages and goods and services, the prices that consumer prices, even when it doesn't exist. And he'll put his foot down on the brake. But he doesn't see the inflation in the financial system at all.

And the inflation in the financial system is the value, the prices, of financial assets, most obviously stock, rose fantastically over 20, 25 years, two, three times the growth in the real underlying economy. Something's wrong there, right? How do these financial assets, which supposedly reflect the economy, suddenly become worth three times more?

BILL MOYERS: Yes. How did they?

WILLIAM GREIDER: Well, now we're back in the game, aren't we? With deregulation, with the help of the Fed, and with the success of the Super Bull market, everybody's animal spirits in the financial system became more animal. And they and they went for it, and they said, "If you'll get this rule out of the way or you let us make this kind of weird little gimmicky paper innovation, we'll do even better."

BILL MOYERS: Yeah, you-

WILLIAM GREIDER: And you had this force rising up, driving things higher in the stock market while, in many sectors of the economy, if not everywhere, people are saying, "Gee, this doesn't feel that good to us." And particularly working people.

BILL MOYERS: You've written about a fantasy, an illusion that led to the housing bubble. You wrote about a fantasy that was sold, an illusion that led to the housing bubble. Whose interest was it to sell a fantasy?

WILLIAM GREIDER: Well, the merchants of financial paper, to put it bluntly. I mean, the illusion was that you could dismantle or disregard fairly old-time traditional rules of proper banking and stewardship and that that would definitely allow prices, profits, everything to go still higher. But that they could somehow dissolve the risk in that for the society, not just for the society but for themselves.

One example of that was what you heard about in the sub-prime mortgage thing. Who is holding this mortgage that's been lent to these people who we know are going to fail 'cause their incomes just aren't sufficient? Well, it's kind of hard to say because this mortgage is designed as a securitized package of 1,000 mortgages. And you sell it in the financial market to investors all over the world.

And then they sell it to somebody else, and it moves round literally. So what you've done with this innovation is you've distanced the lender from the borrower. Each party, the guy who sold the mortgage, the bank, then the next, the guy who buys the bond, takes his returns upfront, sells it on, and you stripped away the responsibility for that lending. And that's a pretty good microcosm of what happened generally in the financial system.

BILL MOYERS: How is it that these banks wind up holding the rotten mortgage securities that of Fannie Mae and Freddie Mac?

WILLIAM GREIDER: There is a level of fraud here which shouldn't be neglected that, I mean, people lied to their customers' banks-

BILL MOYERS: -mortgage-

WILLIAM GREIDER: -banks, mortgage houses, lied to the people they were selling these bonds to. But as we heard, they also lied to the people who were borrowing the money. I mean, this is fraud with the conflicts of interest. There's an investigation underway now with a number of the biggest banks stuck with all this bad paper, this rotten mortgage securities. Who can they sell them to?

The otherwise savvy investors around the world have gotten burned already, so they won't touch them. I know. Let's sell them to our customers. And so they're literally taking the bonds out of their own portfolio as a bank and selling them to the banks' closed customers. Now, that's going to stop, too, because now everybody's onto the secrets.

WILLIAM GREIDER: I think you can get lost in the mechanics of how all this works. And it's pretty sometimes pretty dizzying stuff. I think the bigger message is that what some of our old folks knew turns out still to be true.

BILL MOYERS: Which is?

WILLIAM GREIDER: Which is the process of lending, borrowing, investing, all of those things, require a personal hands-on knowledge of what you're doing but also a level of integrity that, put it bluntly, does not exist at this time in our financial system.

BILL MOYERS: You see a direct connection between what happened to those people in Cleveland and across the country and the cozy relationship that you've often written about between Wall Street and Washington?

WILLIAM GREIDER: Yeah. Yeah. The point I want to make, though, is that this is deeper than politician rolling over for his campaign contributor, the guys who finance the Democratic Party or the Republican Party. They do that, too. But they were sold a fantasy, an illusion, which sounded wonderful about how markets make better judgments than government and the public. And that liberating finance and business from prudential rules that society imposes upon them will produce a bigger, better economy and better returns for everyone.

All those fantasies have been destroyed by these events, I mean, wiped out. And if you think about it, as we go through the hard months ahead, America's going to have to take some pain, right? In one form or another. The government's going to have to probably ask for some sacrifices.

How do they do that when the American people have just seen the government rush in three days, five days or less, to bail out the biggest, most powerful institutions in the country? That is, the financial investment houses and banks and major banks.

BILL MOYERS: In your opinion, the bailout of Freddie Mac and Fannie Mae, good or bad?

WILLIAM GREIDER: I think it's bad. I mean, I think the way they're doing it is terrible. It's not done in the public interest. The bailout is necessary. They are failing at the bailout. And I believe they're failing because they haven't gone far enough.

They need to start thinking of, okay, how do we save the folks? That is, the broad interests of the American people as a nation, as workers, as family, blah, blah, blah. And the way to deal with Fannie Mae and Freddie Mac and some others like it is to nationalize them. Make them agencies of the federal government. That's what they were originally. And they performed for many years a really valuable service to housing markets.

They sort of re-circulated the capital and the mortgages and so forth. Make them a sub-agency of government. Let the shareholders of Fannie Mae and the rest eat their losses. They were playing risk taker shareholders. Let them suffer the consequences of their wrong bets. And go back to a more normal configuration.

Not a casino. No private shareholders. Look, the bailout of Fannie Mae that they're proposing says, somewhat generously I think, we'll put $300 billion on the table to buy the shares of stockholders in Fannie Mae and Freddie Mac. And just us saying that should give them a lot of confidence. Well, yeah, wouldn't it if you've just had the federal government promise to buy your shares if you don't want to hold them anymore.

BILL MOYERS: Maybe that's why all the foreign investors rushed in yesterday to buy Fannie Mae and Freddie Mac-

WILLIAM GREIDER: It might have some connection, yes.

BILL MOYERS: -if they know the taxpayers are going to put the money in, they've got a pretty good-

WILLIAM GREIDER: They've got what you might call a no-lose proposition. And the other part of that, and this would be simple. You could pass this in three days. Restore the federal law against usury. That won't have too many details to it at first. But it'll be a general statement that the federal government is prohibiting the kind of outrageous predatory practices, which have become general in this country, of not just banks but other financial firms.

BILL MOYERS: Credit card companies and-

WILLIAM GREIDER: Credit card - yeah, it's a long list. We know those abuses.

BILL MOYERS: Put some limits, some boundaries?

WILLIAM GREIDER: Well, eventually you have to draw very precise boundaries, I think, and restore some structure that says, okay, you can get a return of X on credit cards, but you can't get a return of triple X, right? And that kind of regulation. And that's not easy to draw. It takes a while.

But the first law that would just reassure the public, we're against usury. Muslims are against it. Christians are against it. Jews are against it. And we're going to develop a government laws that prohibited and penalized these institutions when they get caught doing it.

BILL MOYERS: Excessive interest, owned loans.

WILLIAM GREIDER: Excessive-

BILL MOYERS: That's what you mean by usury?

WILLIAM GREIDER: That's the narrowest meaning. But the larger meaning is wealthy people, whether they're banks or individuals, ought not to be able to use their power, their wealth to exploit people who don't have wealth, great wealth. That's not too complicated. And I'm not being utopian here. I'm just saying that you can reestablish legal-slash-moral limits on the behavior of finance and their wealthy patrons. And if they don't want to observe those rules then they need not apply for emergency loans at the Federal Reserve or the Treasury Department.

BILL MOYERS: In other words-

WILLIAM GREIDER: You see what I'm getting at? And-

BILL MOYERS: Yeah, in other words, so-

WILLIAM GREIDER: -and this is a-

BILL MOYERS: -if there's a bailout, certain conditions on that bailout.

WILLIAM GREIDER: Absolutely.

BILL MOYERS: Not just a free pass.

WILLIAM GREIDER: And what they've done in the last year, now two or three times and they're going to do more is to say, "Oh, my goodness, the biggest investment bank, houses are in trouble. We don't usually lend directly to them. We only lend to big banks, but they're in trouble, too. Let's lend to both of them. Let's open the windows and pour out the capital, the liquidity, and so forth." And there wasn't a day that where they paused to say, "What are we getting in return? That these guys promise not to fail?" You see what I'm getting at? It's-

BILL MOYERS: I do.

WILLIAM GREIDER: -it's a wildly grotesque transaction where the public guarantees the life of these firms, and there isn't any effort that we know of to say, "And in return, you're going to behave in the following ways for the next ten years or maybe forever. We'll pass a law later that spells that out more clearly, but this is our starting demand." And I suppose they would say, "Well, we don't have time to do that. This is a crisis, blah, blah, blah." I don't buy that. I think that's a way to avoid those questions is not even mention them.

BILL MOYERS: You have been writing for a long time now that America's moving toward a corporate state. If we become one, can we exercise the self-correcting faculty that prevents us from hitting the iceberg out there?

WILLIAM GREIDER: One of the reasons I think politics is going to change fairly dramatically is that the Federal Reserve, accompanied by the Treasury Department and I think will be accompanied by the Congress, has crossed a very dangerous line in their bailout. They have essentially said, "We will put money on the table, taxpayers' money on the table, for any financial institution or business that is too big to fail." That is, if it fails, it'll send dangerous ripples through the economy.

And we've got a list now of maybe 30, 40, depending on how you count them, that we will be there to save you. I regard that as profoundly dangerous for the American Republic because once you cross that line and you have this special club that's privileged, that has benefits from government that nobody else can get, where do you stop it?

I mean, if I were running a big manufacturing company, I would have quickly run out and buy a subsidiary that's a bank or a financial firm that looks like a bank. And I would then try to get myself on that list. Who wouldn't? What's going on right now it's gotten a little attention - the union SEIU is fighting it, is these private equity firms, which are huge money pots of investors that take over and change corporations and come away with huge profits. The private equity firms are trying to buy into the banks and financial firms.

BILL MOYERS: And what would that mean?

WILLIAM GREIDER: That would mean that this private unregulated equity fund would be participating behind the door, so to speak, in the management of our regulated banks. But it would also, in a pinch, if it's big enough, maybe have a tap into that federal guarantee that if you're too big to fail, we'll be there for you.

BILL MOYERS: Even if-

WILLIAM GREIDER: You see what I'm getting at? And-

BILL MOYERS: I do. This morning in the "New York Times" one of the big stories in the business section is the financial industry is organizing to stop Congress from trying to regulate excessive speculation on oil and energy. They don't want this capacity for exploiting-

WILLIAM GREIDER: Well-

BILL MOYERS: -people's needs.

WILLIAM GREIDER: Well, I could lay us alongside that the Securities and Exchange Commission, which, remember in olden days, was supposed to defend us innocent investors against the guys running corporations. And that's why we have all these reports and so forth and so on. They announced this past week that they're going to go after the short sellers in the stock market.

The short sellers are the guys who say these folks at the corporate headquarters are lying to you or the folks at Citigroup are still not telling the truth about their losses and liabilities. So you see what I'm getting at. It's equivalent to saying we don't want anybody bad mouthing us in the middle of this trouble. And we'll try to penalize them if we can. Isn't that contradictory to the public interest?

BILL MOYERS: Have we hit bottom?

WILLIAM GREIDER: I don't think so. But I think the short answer is nobody knows. My sense is, partly because the rottenness, the bad assets and so forth and the inflated housing prices and all the other defaults have so much more to play out - I think they will then feed back, and are already, into real economic consequences for the general life of the economy.

BILL MOYERS: Meaning?

WILLIAM GREIDER: Well, people lose jobs. Unemployment will rise.

BILL MOYERS: Like Cleveland. Yeah-

WILLIAM GREIDER: And like, you know, a perhaps less vicious story because it'll be more gradual than what's happening in those neighborhoods in Cleveland. But then as that happens, the losses feed back into banks because they've got consumer loans, they've got car loans, they've got business loans. And even banks that have been more or less virtuous in their behavior will be impinged by that. So I'm not making some grandiose calamity prediction. I'm just saying we got a lot more pain to take in this society before this works out.

BILL MOYERS: Both parties have put the watchdogs to sleep, right?

WILLIAM GREIDER: A better metaphor, instead of putting them to sleep, would be castration.

WILLIAM GREIDER: I don't know what you want, I mean-

BILL MOYERS: Both parties of complict-

WILLIAM GREIDER: Putting them to sleep is just a metaphor that stops me-

BILL MOYERS: Both parties have been complicit in tipping the balance of power to capital, right?

WILLIAM GREIDER: I'm afraid so. That's right. I mean, if you go back over the last 20, 25 years, it was always portrayed as a cause of conservative Republicans, even right-wing Republicans. And that was, of course, true. But I think a majority of the Democrats were in collusion virtually every step of the way, and sometimes they led the way.

BILL MOYERS: Do you think Washington really knows what's going on? Do you think they really understand what's happening out there in Cleveland and places like that all over the country?

WILLIAM GREIDER: The short answer is, no, I've been in Washington as a citizen and resident for 40 years. And I'm still occasionally shocked by its ignorance of the rest of the country. And some of that is willful, of course. But some of it is just, it's a very nice life in Washington. You get used to certain protective qualities.

We saw that recently with these political players, who got good mortgages. How do they do that? Well, we know how they did it. And in any case, Washington doesn't yet see the depth of the problem.

If you ask me, well, who's figured this out? Who understands, at least in general terms, where we are? The guys in Washington? The politicians and their governing policy advisors? Or the dimwitted public? I would say the public. And I think there's a lot of evidence in that. You know, they keep seeing these polls where the public expresses doubt about this, about-

BILL MOYERS: Eighty-one percent of the people in the most recent polls say we're heading in the wrong direction.

WILLIAM GREIDER: I call that an extreme consensus. Why do the newspapers not celebrate that? They're always looking for consensus politics. Here's the American public, they've got an eighty-- you know, that's extraordinary.

WILLIAM GREIDER: We have an opening in this crisis for, this is really going to sound grandiose. We have an opening in this crisis for a deep transformation in American politics. I don't say it happens this year, next year, or it's going to take a number of years. But we are in the shock of reality. And people get it everywhere and see the blood in the streets. And you tell them how this worked and who did what to whom, and that's a basis for a new politics.

But it requires people - this is the hard part - to get out of their sort of passive resignation to, "Well, we follow the Democrats" or "we follow the Republicans" or "we let this group or that group tell us how to think" and engage among themselves in a much more serious role as citizens. And when, as they do that, they have to be willing to punish the political powers, in smart ways or crude ways, however they can, first, to get a place in the debate. But, secondly, to force the changing values of the system.

And I, this may be wishful, but I think in the next year, two years, five years, you're going to see both political parties floundering. What do we believe about all this stuff? We've told folks this, you know, lovely story for 20, 25 years about the magic of the marketplace. Do we still want to kind of prop that up? That's where they are now. They're still trying to prop up the marketplace vision and make it work again. It's over.

I think events will demonstrate that. So if they're not willing to change then we need to change the politicians. And that's all a bloody process and doesn't happen quickly. But that's why I'm optimistic.

BILL MOYERS: Bill Greider we look forward to your new book, the title of it will be-

WILLIAM GREIDER: "Come Home, America"

BILL MOYERS: And you come back to the Journal.

WILLIAM GREIDER: Thanks.

Source: http://www.economist.com/finance/displaystory.cfm?story_id=11751139

---

End of illusions

Jul 17th 2008
From The Economist

A series of articles on the crisis gripping the world economy and global markets starts where it all began—with America’s deeply flawed system of housing finance

The absurdity of this situation was highlighted by the way the discount window works. The Fed does not just accept any old assets as collateral; it wants assets that are “safe”. As well as Treasury bonds, it is willing to accept paper issued by “government-sponsored enterprises” (GSEs). But the two most prominent GSEs are Fannie Mae and Freddie Mac. In theory, therefore, the two companies could issue their own debt and exchange it for loans from the government—the equivalent of having access to the printing press.

...

They were set up (see article) to provide liquidity for the housing market by buying mortgages from the banks. They repackaged these loans and used them as collateral for bonds called mortgage-backed securities; they guaranteed buyers of those securities against default.

Cedric jokingly says, "vanity", and I don't think that's too far off the mark. Ha ha.

Nonetheless, I think we both stress that we're two guys concerned about the future of the country.

This all began when one day we casually began talking about politics. I told Cedric that I was a Democrat and he nearly spit up.

For the next several months we debated back and forth the merits and burdens of politics, "helping others", liberalism, conservatism, statism, fascism, socialism, Marx, Ron Paul, Barack Obama, and several other dorky political topics.

Wait... let me take a few steps back.

I, Ric, am a native Miamian, and graduated from Florida State University with a Bachelor's Degree in History and was raised in an ultra-liberal household.

Cedric, from Huntsville, Alabama, graduated from the University of Alabama - Huntsville and Birmingham with degrees in Finance and Psychology (respectively), and raised by apolitical parents.

So we're both game for having hours and hours of political conversations.

Anyway, Cedric won.

Several months later, I too tout the flag of Ron Paul, libertarianism (little "L" that is), and economic and social freedom. It's interesting how we come from pretty different directions and somehow manage to land on the same conclusion.

Honestly, I think that the thing that really speaks to me are the concepts of unintended consequences, understanding the economy, and examining the motives of Politicians. I think if anyone really takes the time to think about the ideas of freedom, liberty, and personal responsibility, then no one could honestly support anything strictly Democrat or Republican. They both require a lot of blind faith of leaders, and I definitely don't agree with that.

As for Cedric, he's interested in economics, feedback loops, decision making processes, the ideas of responsibility, the righteousness of coercion, the righteousness of the imposition of values onto others, political deception, and altruism.

But what I think we both care about greatly is questioning the motives behind the decisions that are made by our government for our lives, and preserving our freedom.  We really hope to maintain an open mindedness to the whole process and don't want to step into this with foregone conclusions.  In this pursuit we have a commitment to fair mindedness, to truth, and an open and logical discourse.

We really do want to hear any well thought out opposing view points.

Really, we've just had way too many conversations about this not to blog about it, and we hope that we may be able to communicate our beliefs to you by appealing to your logic.

This time, I’ll propose you all to follow me into one particular room called financial world. Okay don’t pout, please?! It does not mean that I will not diss every single dirty detail I encounter with all the hottest papa’s in this almighty fine town, it’s just that I grow up you know. I know that’s just a box of McSucky but what can I say?! I want to always be 21, trust me. But I guess my parents will Idul-Adhaed me (to borrow the phrase from Murat) as I will not graduate from school to always be 21.

This financial posts will be crazy, sometimes mandatory shocking, most of the time will urge you to bury your head with your pillows; but dare I say, they will give you new and necessary ambiences to give broader view about this world we’re living in at this very second.

Okay, I think you will be ready. Let’s make this happen! Well, where do I start?

What about you reading this link first, honey? Go ahead!

ARE YOU SURE YOU'VE READ IT?

Well now we can have conversation like two adults with cold heads. Do you know what bear is this man talking about? Certainly you did understood that we will not going to talk about something like saving polar bear, correct? *shout to Ajeng: POLAR BEAR is on edge of extinction! We should go to Blijdorp like RIGHT EFFIN NOW!*. And it has nothing to do with whatsoever animal in this world.

Financial world, especially equity and derivative markets, hates this bear like I hate worms on rainy days. As a courtesy from my beloved Investopedia, bear market is defined as:

a market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear market, selling continues, which then creates further pessimism. Although figures can vary, for many a downturn of 20% or more in multiple broad market indexes, such as the Dow Jones Industrial Average (DJIA) or Standard & Poor's 500 Index (S&P 500), over at least a two-month period, is considered an entry into a bear market.

Not to be confused with a correction, this is a short-term trend that has duration shorter than two months. While corrections are often a great place for a value investor to find an entry point, bear markets rarely provide great entry points as timing the bottom is very difficult to do. Fighting back can be extremely dangerous because it is quite difficult for an investor to make stellar gains during a bear market unless he or she is a short seller.

The opposite of this bear phase is known as bull phase. I have no slight idea about the name okay?! So if you have question, shall you ask about the implications and such and not about why the hell it is not named as elephant phase for crying out loud. As far as I have been studying –and clearly falling madly in love with- financial world, stock price is built from expectation and mostly news. If you happen to be fans of Robert Kiyosaki, he wrote once about his rich dad in Cash Flow Quadrant that any financial advices are better compared to no advices at all; but then he clearly stated that his rich dad has always determined his own decision based on his own research, not from someone else's information or even expectation.

The problem with this bear situation is that once the price goes down, not-so-well-financially-educated investors (or speculators or what have you) will sell their stocks quickly and maaaaan do they make it rain. Dude, that is so pity. I know 20% decreasing can be such a panic but let us see the bigger picture in here. I can give you much information about why this is a pity situation to sell your stocks and say adios to your pie of portfolio by now but told by a soon-to-be fresh graduate will only raise your eyebrows to back of your necks.

Read this article.

Even Warren Buffest, you know the richest man walking on this planet, strongly recommended to buy when the prices are down instead of blowing off your portfolio (NOTES: for companies with strong positive history of financial situation only). My finance teachers nodded their heads off with this proposal as well. Because when it recovers, it recovers quickly.

So the moral of this story will be that do not skip your finance class, people!!! Hehe, kidding! Of course, aside from being cool-headed in making such decision in our life. Step behind and see the big picture!

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SIPP members may invest on an individual basis and partners or directors may invest through their SIPPs to purchase the business premises from which they operate.

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This November, I'm voting for Barack Obama.

When I first made this decision, many colleagues were shocked. How could I support a candidate with a domestic policy platform that's antithetical to almost everything I believe in?

The answer is simple: Unjustified war and unconstitutional abridgment of individual rights vs. ill-conceived tax and economic policies - this is the difference between venial and mortal sins.

Taxes, economic policy and health care reform matter, of course. But how we extract ourselves from the bloody boondoggle in Iraq, how we avoid getting into a war with Iran and how we preserve our individual rights while dealing with real foreign threats - these are of greater importance.

John McCain would continue the Bush administration's commitment to interventionism and constitutional overreach. Obama promises a humbler engagement with our allies, while promising retaliation against any enemy who dares attack us. That's what conservatism used to mean - and it's what George W. Bush promised as a candidate.

Plus, when it comes to domestic issues, I don't take Obama at his word. That may sound cynical. But the fact that he says just about all the wrong things on domestic issues doesn't bother me as much as it once would have. After all, the Republicans said all the right things - fiscal responsibility, spending restraint - and it didn't mean a thing. It is a sad commentary on American politics today, but it's taken as a given that politicians, all of them, must pander, obfuscate and prevaricate.

Besides, I suspect Obama is more free-market friendly than he lets on. He taught at the University of Chicago, a hotbed of right-of-center thought. His economic advisers, notably Austan Goolsbee, recognize that ordinary citizens stand to gain more from open markets than from government meddling. That's got to rub off.

When it comes to health care, I am hoping Obama quietly recognizes that a crusade against pharmaceutical companies would result in the opposite of any intended effect. And in any event, McCain's plans in this area are deeply problematic, too. Take drug re-importation. McCain (like Obama) says he's perfectly comfortable with this ill-conceived scheme, which would drive research and development dollars away from the next generation of miracle cures.

But overall, based on his embrace of centrist advisers and policies, it seems likely that Obama will turn out to be in the mold of John Kennedy - who was fond of noting that "a rising tide lifts all boats." Over the last few decades, economic growth has made Americans at every income level better off. For all his borderline pessimistic rhetoric, Obama knows this. And I believe he is savvy enough to realize that the real threat to middle-class families and the poor - an economic undertow that drags everyone down - cannot be counteracted by an activist government.

Or maybe not. But here's the thing: Even if my hopes on domestic policy are dashed and Obama reveals himself as an unreconstructed, dyed-in-the-wool, big-government liberal, I'm still voting for him.

These past eight years, we have spent over a trillion dollars on foreign soil - and lost countless lives - and done what I consider irreparable damage to our Constitution.

If economic damage from well-intentioned but misbegotten Obama economic schemes is the ransom we must pay him to clean up this foreign policy mess, then so be it. It's not nearly as costly as enduring four more years of what we suffered the last eight years.

Hunter is the former staff director of the Congressional Joint Economic Committee and president of the Social Security Institute.