-----Original message----- From: Michael Luscombe [EMAIL PROTECTED] Date: Wed, 26 Nov 2008 20:05:43 -0800 To: [email protected] Subject: [Stratalist-ot] Re: View from inside Wall Street
> > A touch of perspective: > > http://www.voltagecreative.com/blog/wp-content/uploads/2008/11/ > bailout-pie.png > That site is too busy. And the link is annoying. (For some reason, cutting and pasting won't get both lines.) Here's some additional perspective from Urgent Agenda: We get some of our best information here at Urgent Agenda from informed readers. Reader Ray Cleveland alerts us to a remarkable set of statistics comparing the federal payouts being made to deal with today's financial crisis with payouts made in the past. Consider: If we add in the Citi bailout, the total cost now exceeds $4.6165 trillion dollars. People have a hard time conceptualizing very large numbers, so let's give this some context. The current credit crisis bailout is now the largest outlay In American history. Bianco Research crunched the inflation adjusted numbers. The bailout has cost more than all of these big budget government expenditures – combined: • Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion • Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion • Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion • S&L Crisis: Cost: $153 billion, Inflation Adjusted Cost: $256 billion • Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion • The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est) • Invasion of Iraq: Cost: $551b, Inflation Adjusted Cost: $597 billion • Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion • NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion TOTAL: $3.92 trillion That is $686 billion less than the cost of the credit crisis thus far. The only single American event in history that even comes close to matching the cost of the credit crisis is World War II. Original Cost: $288 billion, Inflation Adjusted Cost: $3.6 trillion. The $4.6165 trillion dollars committed so far is about a trillion dollars ($979 billion dollars) greater than the entire cost of World War II borne by the United States: $3.6 trillion, adjusted for inflation (original cost was $288 billion). Bianco Research, which crunched the numbers, is often quoted in financial news stories. Ray Cleveland goes on to note a Bloomberg report that the total bailout this time represents $24,000 for every man, woman and child in the United States. It seems to me that Americans, including many journalists, still don't understand the enormity of the federal bailouts and the implications for our economic system. The federal government now has equity stakes in major American banks and corporations. True, it can get some or all of the money back in the future, as the economy grows once more - if it grows. There are no guarantees. And we are far from out of the woods. > > On 26-Nov-08, at 2:45 PM, Bruce Johnson wrote: > > > <http://tinyurl.com/5s5w2b> > > > > Excellent article about the current economic mess as told by Wall > > Street insiders. > > > > None of this 'blame it all on the poor folks and ACORN/CRA' stuff. It > > was straight-up financial fraud, mainly by the subprime lenders, the > > ratings agencies and the investment banks. > > > > The money quote: ( [] added by me) > > > > "That�s when Eisman finally got it. Here he�d been making these side > > bets [buying credit-default swaps] with Goldman Sachs and Deutsche > > Bank on the fate of the BBB tranche [lowest quality mortgage-backed > > bonds] without fully understanding why those firms were so eager to > > make the bets. > > > > Now he saw. > > > > There weren�t enough Americans with shitty credit taking out loans to > > satisfy investors� appetite for the end product. The firms used > > Eisman�s bet to synthesize more of them. Here, then, was the > > difference between fantasy finance and fantasy football: When a > > fantasy player drafts Peyton Manning, he doesn�t create a second > > Peyton Manning to inflate the league�s stats. But when Eisman bought a > > credit-default swap, he enabled Deutsche Bank to create another bond > > identical in every respect but one to the original. > > > > The only difference was that there was no actual homebuyer or > > borrower. The only assets backing the bonds were the side bets Eisman > > and others made with firms like Goldman Sachs. Eisman, in effect, was > > paying to Goldman the interest on a subprime mortgage. In fact, there > > was no mortgage at all. �They weren�t satisfied getting lots of > > unqualified borrowers to borrow money to buy a house they couldn�t > > afford,� Eisman says. �They were creating them out of whole cloth. One > > hundred times over! That�s why the losses are so much greater than the > > loans. But that�s when I realized they needed us to keep the machine > > running. I was like, This is allowed?� " > > > > There's a term to describe this: "Ponzi Scheme" > > > > > > -- > > Bruce Johnson > > University of Arizona > > College of Pharmacy > > Information Technology Group > > > > Institutions do not have opinions, merely customs > > > > > > > > > > > > > Francis Drouillard, PE Novato, CA 94945 --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "StrataList-OT" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [EMAIL PROTECTED] For more options, visit this group at http://groups.google.com/group/StrataList-OT?hl=en -~----------~----~----~----~------~----~------~--~---
