[Vision2020] Manchester United

Wed Sep 24 12:58:15 PDT 2008

I will work through your comments about the "bail-out" and comment as 
warranted. However, I must offer the following to correct the record.

AIG is a sponsor of Manchester United, not an owner. In fact, it has 
been reported that AIG is the largest sponsor of a sports team in the 
world.  Thus, you will note that Man U jerseys carry the AIG 
logo.  Man U is owned by Michael Glazer (an American) and the Glazer 
family. [http://www.iht.com/articles/2008/09/21/business/AD22.php]

At 06:24 PM 9/21/2008, you wrote:
>Tom --
>
>I'm going to have to (probably) agree with Jeff on this one. FDIC only
>insures consumer banks, and SIPC provides a very limited amount of
>protection -- it only insures investors against assets endangered by
>the failure of a brokerage, rather than against the assets themselves
>dropping in value. Neither has a lot to do with the utter market
>collapse that's going on around us right now. Some of it could've been
>prevented by re-regulating the financial markets; other elements have
>always been poorly regulated.
>
>The first problem was the explosion in subprime and exotic mortgages.
>Here, part of the problem was the incentive structure for mortgage
>brokers: individually, they received a commission on the mortgage;
>however, since the mortgage frequently no longer belonged to the
>original broker when the borrower defaulted, they didn't care. So long
>as the housing boom was moving fast enough to get the mortgage off the
>balance sheet by the time it came due, no one cared*.
>
>The second problem was the explosion in the sale of mortgage-backed
>securities. This, essentially, was a trillion-dollar attempt to spin
>straw into gold. Large banks packaged high-risk mortgages together in
>such a way as to -- supposedly -- balance the various risks against
>each other in such a way as to make the investments safe. They then
>leaned on the ratings agencies to rate these securities either AA or
>AAA (essentially, as safe debt to purchase), which they did.  One
>would think that the financial geniuses that run Wall Street would
>know that there's no honest way to make 2 + 2 = 5. But there you have
>it.
>
>Third, leverage. The debt to asset ratio being carried by Wall Street
>was ludicrous. The SEC had granted exemptions for the big five
>investment banks, allowing them to take out loans at anywhere from
>30:1 to 40:1. Of the five companies granted that exemption, only one
>-- Goldman Sachs -- is still in anything resembling a decent state.
>The higher your leverage, the more you depend on outsmarting the
>market to outrun your debts. Worse, *your* debts are in someone else's
>accounts receivable column. If you drop into bankruptcy,
>congratulations: your creditors can all take the number in their
>accounts receivable and divide it by the amount to which you're
>leveraged. This causes ripple effects across the entire financial
>sector.
>
>I've got no problem with the government spending taxpayer money to
>bail out Wall Street. The CDOs (mortgage-backed securities) that the
>government is thinking of purchasing probably do have some underlying
>value. But if we're going to be buying a ton of bad debt, we should be
>canny consumers: we don't take on $700 billion worth of debt without
>getting something in return. An equity stake in every company from
>whom we buy CDOs should be fine. The US taxpayer having a seat on the
>board of directors of every major Wall Street firm would also provide
>an elegant solution to the regulation problem: each firm is regulated
>(by a federal trustee) to the extent it couldn't keep its own house in
>order*.
>
>-- ACS
>
>* Incidentally, despite what John McCain's commercials might be
>telling you, Fannie Mae and Freddie Mac had very little to do with
>this business. The definition of a 'subprime mortgage' is a mortgage
>which neither Fannie nor Freddie would take. Fannie and Freddie's
>problems were largely caused by (a) investor panic, (b) their
>attempts, while wearing their 'private corporation' hats, to compete
>at a level of risk higher than they ought to've, and (c) a massive
>liquidity crisis caused by everyone wanting to sell mortgages and no
>one willing to buy.
>
>** Also incidentally, as a US taxpayer, you might be happy to know
>that since the AIG bailout, you now own a one-three-hundred-millionth
>stake in Manchester United, which I am told is a soccer team. They
>used to be a property of AIG: now they're yours. They're quite good.\
>
>On Sun, Sep 21, 2008 at 5:35 PM, Tom Hansen <idahotom at hotmail.com> wrote:
> > Paul -
> >
> > It is my impression that this economic crapshoot was instigated by
> > deregulation of the industry under both Reagan and Bush Sr..
> >
> > It used to be that it was difficult (stringent requirements and constant
> > federal monitoring) for banks, S&Ls, and other financial institutions to
> > qualify for FDIC/FSLIC "protection".  Once Reagan removed these 
> requirements
> > and Bush Sr. drastically limited (if not eliminated) federal
> > monitoring, banks approved loans to people/businesses that possessed no
> > viable capability of ever repaying the loans and investment firms made
> > investments that would make third-world countries cringe.  These financial
> > institutions were not concerned about going "out of business", not as long
> > as they had that FDIC/FSLIC sticker on their doors.
> >
> > So, as Bush Jr. tries to pass himself and potentially McCain (who
> > coincidentally has been in the Senate since Nixon left the White House) as
> > heroes to the American people, remember who made this all possible.  Hint:
> > It wasn't Obama.
> >
> > Tom Hansen
> > Moscow, Idaho
> >
> >
> >
> >
> > ________________________________
> >> Date: Sun, 21 Sep 2008 16:59:05 -0700
> >> From: godshatter at yahoo.com
> >> To: vision2020 at moscow.com
> >> Subject: [Vision2020] Why are we bailing out all these large corporations?
> >>
> >> If a large corporation is about to go bankrupt because they loaned money
> >> without proper collateral behind it and without a determination that the
> >> person taking out the loan could reasonably pay it back, shouldn't we
> >> let it crash and burn? Isn't that what is so casually referred to as a
> >> "market correction"?
> >>
> >> I've heard it stated that there is something different about this
> >> situation - it's more dire and it could have a snowball effect on the
> >> rest of the economy or even the globe. Does anyone here know enough
> >> about this to explain that?
> >>
> >> What is so important about this situation that would result in the
> >> necessity for an Iraq War-sized expenditure?
> >>
> >> Or is it a case of the rich looking out for the rich, which I'm
> >> half-tempted to believe is the case.
> >>
> >> Paul
> >>
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