Streams

Following Up: Seeing it Coming

Friday, February 06, 2009

Heidi Moore, Wall Street Journal reporter and lead writer for the Deal Journal blog, discusses the idea that no one on Wall Street saw the financial meltdown coming.

Guests:

Heidi Moore

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Comments [30]

superf88 from

WSJ editor: "We wouldn't publish that stuff before the crash because nobody would have bothered to read it."

-- And then papers wonder why people call them worthless?

Feb. 10 2009 09:00 PM
James B from NYC

# 18 above: "what are we making as a nation, what is the foundation for all this growth and we saw little to none."
Well, did u & u'r friends see all of the housing being built during the real estate boom? Those houses & apartment buildings are REAL new wealth. The problem was that the credit bubble which created the demand for that suppy was simply getting us ahead of ourselves. Financial institutions outside of the regulated financial sector advanced many people who were not credit-worthy loans for amounts they were not able to repay. But the REAL wealth that was created as a result of this misguided lending is still standing there. The government can now deficit finance a huge purchase program to buy that real estate from their owners for mark down prices & then turn around & put them on the market for sale or purchase to FINALLY eliminate the problem of homelessness in America.

Feb. 07 2009 02:42 AM
James B from NYC

I can think of at least 5 or 6 books critical of Alan Greenspan's credit bubble, scores of books & articles bemoaning the deficit spending spree the Federal government has been on for the past 25 years & many books warning of the currency-debauching consequences of that credit bubble & deficit spending. Many other books have warned of the equally dire consequences of American's recent mass abandonment of thrift, frugality & prudent financial behavior to embrace lifestyles of profligacy & financial irresponsibility. The problem has been that such warnings went unheeded because they told us that the idea of 'free' never does anything but deceive us into believing in it. THERE AIN'T & NEVER WILL BE ANY FREE LUNCH. Ordinary people bought houses & many other things they couldn't afford on credit, the terms of which they did not & maybe could not understand.

Hyman P. Minsky, Schiff, James Grant, Roubini, Stephen Leeb, many of the 'gold bugs', monetarists & scores of others.

Feb. 07 2009 02:39 AM
superf88

Brilliant & hilarious (and precient as well -- the link below is a republishing)

http://www.futurestrat.com/outlook-dec08.htm

Feb. 06 2009 12:43 PM
Tom from Manhattan

This website truncated another link...!?

RE: Derivatives Bubble

From 2002-2008, the nominal value of all over-the-counter derivatives ballooned from $106 to $531 Trillion (a half-quadrillion dollars).

Google these phrases, which were some of the very few reports by the NYT and a Dow-Jones publication:
-- "Taking Hard New Look" [& Click on the graphic.]

--MarketWatch AND Derivatives

Feb. 06 2009 12:29 PM
Susan from East Millstone, NJ

She mentioned the over-specialization of business reporters as one factor in there not having been an earlier ruckus over the financial meltdown. But the Journal hired a reporter who had predicted it as early as 2005, and promptly assigned him small-corner stories.

For a CJR interview with Mike Hudson:

http://www.cjr.org/the_audit/audit_interview_michael_hudson.php?page=all

Feb. 06 2009 11:56 AM
Catherine from Massapequa

Does anyone remember what bankrupted Orange County, CA? Derivatives!
And all the reporters, government officials, fund managers, brokers, insurers (AIG) and Bush government's purposfully inept regulators are "off the hook" because these derivatives were "too complicated." Due diligence needs to remember the past. But the past is hard to learn from when greed is the alternative.

And excessive bonuses necessary? All employees under 7 figures incomes always have to tighten. Those with 7 figures... NEVER

Feb. 06 2009 11:54 AM
Laurie

Many people saw it coming. The problem is not that people did see that all bubbles eventually burst. The problem was that no one can predict market timing. People were hanging in wanting to make just a bit more money before casing in their chips, to make yet one more big score.

Then when Bush got on tv and yelled "fire!" is a crowded theater when he proclaimed an urgent gigantic crisis that had to be dealt with by Congress by the end of that weekend, everyone realized "now is the time" and they cashed in all at once.

Feb. 06 2009 11:53 AM
Tom from Manhattan

Sorry, this website won't allow me to paste that link.

For NYT's Case-Shiller Index interactive, just google:
"Home Prices Across the Nation"

Feb. 06 2009 11:46 AM
PJBeee from Ridgewood NJ

How true. Dissent is much too often not tolerated. Alan Greenspan seemed to "forget" that he was working for the people. If he had called this "properly", and sounded an alarm way in advance of the coming crisis, he would have been out of a job. This is fantasy, because he never would have done so as a laissez-faire "trust the markets" kind of guy. Sad, isn't it?

Feb. 06 2009 11:45 AM
zuwena from manhattan-Harlem

Oh please, Heide, lets stop making excuses for this complete demonstration of greed and the big "Me". How can you say that these financial managers were being pushed by their shareholders when everyone can see that they didn't pay any attention to the shareholders. Just recently when Pres. Obama suggested that the heads of companies accepting public funds should have limits on their financial expenditures--just what the shareholders should have been doing or were ignored when they attempted to do it, or were just beaten down. Until the financial giants and US accept that we were duped in the name of greed we will not be able to climb out of this mess.

Feb. 06 2009 11:44 AM
hjs from 11211

"CEO in ivory tower surrounded by yes men" sounds like the bush model

Feb. 06 2009 11:43 AM
Frank from Brooklyn

Brian,

I am no economist or Wall Street Guru. I am an artist. And I must say that me and my friends who had little to gain from this "mania" saw it coming for years. We thought, what are we making as a nation, what is the foundation for all this growth and we saw little to none. All we saw was a war economy-and one not big enough to support all the crazy growth in houses in the countryside. Not just suburbs of NY. But in Indiana, Ohio, PA. We couldn't focus the problem, but we new this was without foundation.

Feb. 06 2009 11:43 AM
Frank from Brooklyn

Brian,

I am no economist or Wall Street Guru. I am an artist. And I must say that me and my friends who had little to gain from this "mania" saw it coming for years. We thought, what are we making as a nation, what is the foundation for all this growth and we saw little to none. All we saw was a war economy-and one not big enough to support all the crazy growth in houses in the countryside. Not just suburbs of NY. But in Indiana, Ohio, PA. We couldn't focus the problem, but we new this was without foundation.

Feb. 06 2009 11:43 AM
Tom from Manhattan

Whoops, the NYT Case-Shiller interactive is here:

[Note: Vegas, PHX & MIA; Click "INFLATION-ADJUSTED RATE"]:
www.nytimes.com/interactive/2008/05/28/business/20071031_HOUSING_GRAPHIC.html

Feb. 06 2009 11:42 AM
Tom from Manhattan

Whoops, the NYT Case-Shiller interactive is here:

[Note: Vegas, PHX & MIA; Click "INFLATION-ADJUSTED RATE"]:
www.nytimes.com/interactive/2008/05/28/business/20071031_HOUSING_GRAPHIC.html

Feb. 06 2009 11:42 AM
MichaelB from Morningside Heights

I agree so much with the guest and last caller. It is our human nature and how we interact with each other -- the subtle coercive force that causes us to go along and to quash dissent.

We pay lipservice to independent thinking, but in reality we are sheep.

Feb. 06 2009 11:40 AM
Jeannie from Brooklyn

Your guest is wrong. Many people have talked prety accurately about this situation. In particular Roubini in an IMF forum "laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac." According the NYT article: http://www.nytimes.com/2008/08/17/magazine/17pessimist-t.html

Feb. 06 2009 11:40 AM
Tom from Manhattan

RE: derivatives bubble. Over-the-counter (OTC) derivatives--contracts written by physicists & mathematicians. Warren Buffet once called them financial WMDs. One type of derivative tied to real estate were credit default swaps (CDSs), which only amount to 10% of the derivatives market. From 2002-2008, the nominal value of all OTC derivatives ballooned from $106 to $531 Trillion (a half-quadrillion dollars).

[Click on graphic]: www.nytimes.com/2008/10/09/business/economy/09greenspan.html

WARNINGS:
www.marketwatch.com/news/story/megabubble-pop-2011-here-20/story.aspx?guid=%7B537F9AC4-DAE4-48BF-9ED1-A54AE6B6C0B9%7D&dist=MostReadHome

Perhaps the NYT had conflicts of interest about reporting these two pyramid schemes. In light of this unfolding disaster, please interview more academics--outside of the corporate/public media circuit--so we the public has an independent perspective or advance warning.

Feb. 06 2009 11:40 AM
Bill from Hempstead

I thought I heard on this show that the banks were big players in the oil market.

Feb. 06 2009 11:39 AM
Tom from Manhattan

>1 pyramid scheme was clearly evident, but underreported by corporate/public media. RE: real estate, I emailed many editors at the NYT on multiple occasions, imploring them to update their wonderfully telling interactive of Case-Shiller Index data on home prices using, updated monthly (OFHEO data are suspect). I even went so far as to tell NYT editors that they had a duty to report this obvious calamity--instead of moving luxury real estate. I appealed to their obligation to our country after Judith Miller's unwitting help in the Iraq campaign, which raised our risk-profile. Mind you, George Bush, himself, addressed our nation, stating [national] home prices never go down.

I explicitly pointed out metro-New York: The NYT's 20-year illustration clearly shows what was to become a 9-year stretch of median prices increases, immediately following a 9-year stretch of falling or stagnant prices. Regardless, NYT editors either didn't regularly update this telling interactive, or sometimes cut in half 20-year data, such that the 9-year stretch of falling prices was unseen.

[Note: Vegas, PHX & MIA; Click "INFLATION-ADJUSTED RATE"]:
www.nytimes.com/interactive/2008/05/28/business/20071031_HOUSING_GRAPHIC.html

Feb. 06 2009 11:39 AM
KC from NYC

Good point, caller. But: Plenty of people dissent. Millions protested against the Iraq invasion. Millions protested against TARP. The media simply didn't report it. And they continue not to.

Feb. 06 2009 11:39 AM
Robert from NYC

you're right sharon, brava. It's a corrupt mafia-like society we now live in.

Feb. 06 2009 11:38 AM
John Lobell from Manhattan

How about -- the carthesis is good -- clear out dinosaur industries like General Motors and the New York Times, so that new replacements can flourish. As long as we prop up these dinosaurs, we will prevent vital new industries from developing.

Feb. 06 2009 11:38 AM
Bill from Hempstead

That implies there a systemic risk in that those companies that underperformed could get bought out worst case...

Feb. 06 2009 11:38 AM
Robert from NYC

I watched Markopolos give his testimony to the committee and you bet my blood boiled but not nearly as much as soon after his testimony the SEC group was questioned and they all clammed up, and smugly I might add. Anyone who saw it coming and many did didn't care because even with the crash these folks have millions an billions in their accounts overseas and in the walls, probably, but they have money and they are the folks who will be there when the economy picks up and they will make even more millions/billions with the ones they have now. Baloney. I'm sure many are just sniggering under their breaths.

Feb. 06 2009 11:36 AM
Linda from CT

Peter Schiff saw it coming, and was practically laughed off the air by Fox News. He predicted the current situation to the letter, and was consistently ignored and even mocked.

www.youtube.com/watch?v=2I0QN-FYkpw
www.youtube.com/watch?v=9h2x7R8pxUs
www.kitco.com/ind/Schiff/oct062006.html

Feb. 06 2009 11:36 AM
KC from NYC

Sad. Dimon might lose one of his homes. I sure hope not, though; that would be the real tragedy.

Hey, if I'm still getting pre-approved credit card applications from Chase Manhattan (and I am), Dimon is either lying when he says Chase is going to lose money on credit card defaults, or he is totally incompetent. Or maybe both? Either way, why in the world is he being given a public forum to defend his job?

Feb. 06 2009 11:36 AM
Mike Levay from Staten Island

Two great videos of a guy named Peter Schiff.

Called the economic crisis early on and was ignored and insulted by numerous pundits on Fox News.

Courtesy of Andrew Sullivan's blog "The Daily Dish":

http://andrewsullivan.theatlantic.com/the_daily_dish/2008/11/vindication.html

http://andrewsullivan.theatlantic.com/the_daily_dish/2008/11/the-man-who-saw.html

Feb. 06 2009 11:35 AM
hjs from 11211

somebody got out in 2007 when the market was high
who made money and how much?

did the high oil prices trigger recession?

Feb. 06 2009 11:26 AM

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