Dr. Housing Bubble Blog: Casino Finance on Wall Street

07 May

Casino finance – Wall Street lost $1 trillion in wealth before recovering most of it because of a missed keystroke? The cronyism and gambling of the banking financial sector.

from Dr. Housing Bubble Blog by drhousingbubble

Well that was an interesting ride.  The U.S. stock markets fell a stunning 9 percent intraday before coming back up to end the day “only” being down by 347 points.  The Dow at one point was almost down by 1,000 points.  As I have mentioned for many years, Wall Street is now basically one giant casino to serve the purpose of the crony bankers.  CNBC had an early report that the market bust was brought on by a trader that put in a “b” instead of an “m” and caused one hell of a crazy trade.  If you believe that crap then you probably also believe that California’s 23 percent underemployment rate is also a sign of a healthy market.  One tiny keyboard stroke caused a $1 trillion wealth decline before the markets pulled back?  The entire stock market is one orchestrated casino and what probably happened is computer programs were triggered and started selling off since volume in the market has been low virtually throughout the entire one year rally.

This was the biggest intraday decline since 1987:

Even for buying a book online, I usually get two confirmation windows making me double check the order.  You’re telling me those Bloomberg Terminals don’t have that?  Yeah right.  Some people will believe anything the crony banking system will feed to them.  In reality people are realizing in Greece that many other countries have similar debt structures.  Not as bad, but certainly detrimental to their future growth.  Too much debt is not a good thing.  Didn’t we learn that in the housing bubble?  Apparently not.

In other news, Freddie Mac didn’t misplace that “b” and came out with a $6.7 billion loss for the first quarter:

“(Freddie Mac) Net worth deficit was $10.5 billion at March 31, 2010, driven primarily by a significant adverse impact due to the change in accounting principles. …

The Federal Housing Finance Agency (FHFA), as Conservator, will submit a request on the company’s behalf to Treasury for a draw of $10.6 billion under the Senior Preferred Stock Purchase Agreement (Purchase Agreement).”

In other words, the big giant GSEs are now going back to the well for more money.  Remember those days when we were told we were going to turn a profit on Fannie Mae and Freddie Mac.  That at least served for a good laugh.  The bankers gave us the worst of nationalization by passing on the junk from the banks but kept the actual societal benefit of nationalization by keeping the profits (have you noticed that Wall Street is still pumping out bonuses?).

Make no mistake, this is a direct battle against the working class and middle class of America.  Some don’t want to acknowledge this because they enjoy the way the crony banking system is setup.  Who has done the best since the bailouts?

Source:  Bloomberg

“It seems incredible that financials are now scaling their 2006/2007 heights again,” Reid wrote in a research note published yesterday. “The dramatic imbalances are re- occurring.”

In July 2008, Reid said that U.S. banks had made “excess profits” of about $1.2 trillion in the previous decade, compared with how much they should have made based on economic growth, and that those excesses would be wiped out. Since then, U.S. financial firms have written down the value of their assets by about $1.15 trillion, according to Bloomberg data.”

Remember those arguments about bonuses and how we “had” to give their executives big bonuses because they would lose some of that grand talent?  After all, being unable to distinguish letters on the keyboard is certainly reason enough to offer someone a golden parachute.  Most Americans just need to look at what is really going on.  Housing values are still near their lows countrywide even in the face of unprecedented bailouts.  We have put out over $12 trillion in bailouts and backstops to Wall Street.  For this price, we could have paid off every single one of the 51+ million mortgages in the U.S.  Talk about freeing up consumer spending!  But the reality is, the money was never intended for you.  It was intended for the gamblers on Wall Street and more importantly, the banking gamblers that actually make money on the failure of our real productive economy.

Some fail to make the connection that when you incentivize bad behavior it will go unchecked.  Just look at the option ARMs and Alt-A loans.  This is the perfect example.  Useless toxic waste mortgages that were pushed by mortgage brokers because they got massive commissions instead of putting people into traditional mortgages.  These folks claim that they were doing their job but these same people wouldn’t have lent these borrowers one cent of their own money.  They didn’t care because it was ultimately the taxpayer that was going to pay the bill.  If you default in a year, what do they care?  Wall Street had a bigger fool and funneled this stuff into pension funds and other investors globally.  Hey, who cares if some poor Norwegian now owns a mortgage bond for a house in Atlanta that is now occupied by raccoons and feral cats?

When it all went bust, the bill came to you, the average and prudent American.  By the way, this is where the majority fall.  You have your crony criminal Wall Street bankers which represent a small portion of our population and on the other side you have the scammers in our population.  Yet the majority of Americans are sensible and they understand that what is occurring is a direct front to the middle class.  Think of everything that has gone up in your life; health care costs, education costs, food, and housing:

And wages have been stagnant for over a decade so the brunt has been felt by the majority.  But not for Wall Street.  And let us distinguish what we mean by Wall Street.  We have companies like Google or Apple that actually produce a product and most Americans are fine with them earning whatever they can get.  They aren’t asking for handouts or cheap government backed money.  Then you have the investment banks that are betting and creating toxic mortgage products and things like CDOs that actually made things worse.  How does this even help the market?  I hear from “free market” Ayn Rand believers that actually think we’ve been living in a free market for decades.  Really?  Social Security?  Medicare?  The U.S. Military?  They preach these hollow mantras because in their mind, things work out for them.  But when you look at surveys most Americans don’t believe this nonsense because they live in the actual economy:

Only 13 percent of Americans think economic conditions are good or excellent.  Yet we have a small group that is operating in a different universe, and this is the same group that came on bended knee to bailout the banks back in September of 2008, and somehow forgot about their free market promise.

Anyone that has taken basic courses in psychology and human behavior understands these people have a severe case of cognitive dissonance.  They are unable to see beyond their conviction that we are a free market when in fact, we are not in many large areas.  We heavily subsidize housing (have since the Great Depression).  We do this through tax breaks on mortgage interest deductions and cheap mortgages.  This is targeted government policy (aka not a free market).  Yet right now, we have the worst of both worlds since the government is basically operating as Wall Street’s lackey and raiding the taxpayer’s wallet.  Has any real reform happened?  Not at all and that is why we can actually have a 1,000 point drop in a day when someone didn’t close their Skype window correctly.

Glad today we lost $1 trillion but gained most of it back because someone was unable to use the keyboard correctly.  Aren’t you glad your tax dollars are going to investment bankers for this kind of casino finance?

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