Quote:
Originally Posted by Rexmons
I think one of the reasons Lehman didn't find salvation in that meeting was because the Feds wouldn't give the potential buyers the same insurance policy (non-recourse loan) they gave JP Morgan when they bought out Bear Sterns a few months ago.
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Why not buy Lehman for pennies on the dollar? Appreciate the reason for these meltdowns. In doing due diligence, nobody understands what is inside Lehmans. The spread sheets are so Enron style perverted. Phrases such as black hole and black box are used to describe Lehman. Yes, the government guarantee is necessary because no one knows how bad Lehman Bros really is. Six months later and no one can figure out what Lehman Bros is.
Why have 3 out of 5 investment banks folded? Greed is good. Profits - not the product - are their purpose. In each case, the spread sheets were manipulated using the new Enron style accounting methods. Reported today was being created and was known most of five years ago. What changed? Government regulations for the past seven years have been ignored or relaxed. Lip service has been paid to risk management. Off balance entities are now common on spread sheets - used to hide excessive risk and massive losses from years ago. Even mortgages are written without any consideration for whether the home owner can pay. Even the government entities Fanny Mae and Freddie Mac were encouraging Americans to take on more debt. A game so wildly promoted that even home equity loans became popular.
Why so much debt? Since George Jr took office, income of the average American has dropped 2%. No problem. He will 'feel' wealthier if he can live in a home he cannot afford. So we must eliminate 'evil' regulations that keep him out of that house.
Meanwhile, higher debt also means the rich can get even richer. Only creditors have been getting rich this past decade. A ponzi scheme that is now starting to collapse. Turmoil in the finance industry, if limited to corrupt practices, would not affect other industries. But the underlying problem is fictional wealth created by these money games and masked by Enron style accounting. Enron style accounting is why no one will touch Lehman Bros.
The average American should expect his net worth to drop maybe 20% in these few past and future years as things like houses and equities drop back to what they were really worth and inflation rages when interest rates are cut to "stimulate" the economy. I say 20% - a conservative number. This George Jr economy is was only created by throwing money at the rich. We still have things like "Mission Accomplished" to pay for. The Chinese, et al eventually must be paid for financing the bubble.
Just another example of Living Standards dropping years later due to fiscal mismanagement. After all, Cheney said deficits don't matter (while he enriched Halliburton).
The 1920s stock market crash did not result in job losses in the 1920s. The crash was followed by job losses years later - in the early 1930s. That is the relation between financial markets and the economy. 700+ banks have folded? When did we see so many banks fail so quickly? And why? Answers to those questions should have Americans worried since fiscal mismanagement has been encouraged by one federal government. Hell. They would not even prosecute Enron until embarrassed by the AG from Oklahoma. Let the free market be free?
Nobody knows what is in those Lehman Bros balance sheets. A black box that nobody trusts because perverting the accounting is good.