(no subject)

[rm]

Right. So for those of you who don't know part time job is doing media analysis on US politics and the banking and financial industries. It's been a rough week.

Right now, I'm working on data about the "collapse" of Canary Wharf.

That is, the inevitable financial real-estate mess as all its tenants go bankrupt. But really? I have to do this? And I can't drink coffee? Are you fucking serious?

Comments

[lllvis.livejournal.com]

Wow. Sorry you're being run ragged (it sounds like it anyway), but it also sounds like an interesting arena to be looking at right now. Given how the market has done this week, it's not too difficult to look at the economic panorama and presume nobody's really got a clue as to what's going on right now.

If you're frazzled, stop here!


Dad and I disagree a little bit on the "if the government didn't bail out these institutions it'd likely be worse" but I'm uncomfortable with the idea of taking a 'wait and see' approach as well.

The mortgage industry I kinda get...the loans they were creating and who they were able to sell them to spelled trouble. How far back does that go? To the Community Reinvestment Act or even before then? And I'm not talking about Nixon getting us completely off the gold standard, I think that's a whole different problem!

[rm.livejournal.com]

When I finally have a moment to breathe, I really want to write about what I'm seeing.

I'm basically working with the WSJ, FT (US), Barrons, WashPost, NYT, LATimes so what I see is how media affects sentiment and how sentiment feeds the crisis, but what I also see is a decent aggregation of analyst commentary on it all, and it's just amazing to me the degree to which people see what they want to see -- including the analysts, where it's at least a conscious strategy.

And yeah, as a tax-payer, I think it sucks ass that any of my money is going to this bullshit, but I also think getting some real control over Fannie and Freddie was long overdue. I also think that letting AIG go down would have made things 5 times worse.

The real question is what's going to happen with Wachovia and WaMu. If they both go down I think we're going to see further unexpected cascades, through banks we thought had resolved their issues.

[lllvis.livejournal.com]

Wow. Ok, I'll very much look forward to when you have a chance to write about it all!

Being the nature of the beasts, I certainly don't mind oversight...but since money wields such influence I don't think we'll happily get to where we ought to be in that regard. I'm sure there are more dominoes to fall, and somewhere in here I'd like to think there are heads that should roll. But CEO's and what have you tend to have no (or exceptionally little) accountability, and it'd be a process protracted over decades I'm sure, and it shouldn't be.

I also tend to disagree with the media sentiments that we're in the throes of another Great Depression (which was worldwide, not just here), but lately it is looking like the vanguard for getting into one if we're not careful.

[rm.livejournal.com]

I also tend to disagree with the media sentiments that we're in the throes of another Great Depression (which was worldwide, not just here), but lately it is looking like the vanguard for getting into one if we're not careful.

This is what scares me Working with the media reflection of actual data shows the power of sentiment. Playing on LJ while I'm doing it and watching memes and postings shows me how sentiment works here. If I posted every piece of scary financial news I think people should know, and then every person on my friends list with over 200 friends reposted it, and we assume that trend continues across LJ, and that 90% of the people taking in the information don't know jack about economics, that process alone has the potential to create bank runs.

[lllvis.livejournal.com]

Yup. I had the same idea about 'creating bank runs' given the tone of the news I was hearing yesterday.

[jfargo.livejournal.com]

*nods* The ability to spread (mis)information through the power of our own personal medias, be they blogs, websites, email, or anything else, is amazing. Unfortunately, it seems that it can easily do more harm than good in situations such as these.

[sethg]

I once tried to explain to a co-worker how fractional-reserve currency works. She got an expression on her face not unlike a character in a horror story who is gradually realizing that no, the monsters are not just in her imagination.

[newsbean.livejournal.com]

When you have time to breathe, I will be quite interested in reading it.

I hadn't realized that your work for the Germans is basically my job, too. It's an interesting business right now, but at times I really really wish that I didn't acutely understand what was going wrong. (I would love to just be oblivious, but since I can't get that I'm hoping for just a dollop of blissful ignorance.)

[sethg]

The Community Reinvestment Act only applies to banks; banks generated a lower proportion of subprime mortgages than non-bank entities, such as mortgage brokers.

From what I've read, the not-so-short summary of How We Got Into This Mess goes something like this:

(1) Financial wizards come up with ways to bundle lots of grade-B debt into packages and sell pieces of the packages a grade-A debt, on the assumption that even if some borrowers in the packages are certain to default, they're not all likely to default.

(2) Insurance companies check the financial wizards' math and say "yes, this is grade-A debt, so for a very small fee we will guarantee your customers against default".

(3) The crowd goes wild. Everyone wants a piece of this action. They're even willing to borrow money to invest in these securities.

(4) The demand puts pressure on various not-entirely-savory parties, such as mortgage brokers, to create grade-B debt, so that it can be packaged. Therefore lots of people with dubious credit get grade-B mortgages. And some people with good credit get grade-B mortgages, because they don't realize that they qualify for grade-A mortgages, and the brokers get a higher commission for the grade-B stuff.

(5) Because of various hiccups in the economy, a lot of people with the grade-B mortgages stop being able to pay, all at the same time, which is the sort of thing that the financial wizards and the insurance companies thought couldn't happen. Now all these big investment firms are holding onto paper whose true value is totally uncertain. (If we knew they were worthless, then we could escape from this mess in a more orderly fashion.)

(6) Now we have the modern equivalent of a run on the bank--many deep-pocketed prestigious Wall Street firms suddenly have to pony up cash. Except that they did all of these investments with borrowed money. Which means that not only are they at risk of becoming insolvent, but their creditors are at risk of becoming insolvent, and their creditors' creditors are not feeling too safe themselves...and if you play "six degrees of Lehman Brothers" then you've pretty much covered the entire world financial infrastructure.

(7) The central banks, which unlike all the other players in this game have the power to print money, say OH SHIT.

[lllvis.livejournal.com]

Ah. Thank you, that is very helpful. So very much like calling in leveraged purchases and such and actually having to deal in cash rather than assets.

Thanks much!