And people wonder why some sour on American capitalism

“GSO Capital Partners, a unit of Blackstone Group LP, agreed to lend money to Hovnanian on the condition that the company default on a small portion of its bonds, in an effort to trigger a payout on credit-default swaps.”

https://www.bloomberg.com/news/articles/2019-03-06/wall-street-wants-to-reform-cds-here-s-why-that-ll-be-tough

The financial sector is huge, accounting for 20% of GDP.

When the major players cheat we all suffer. The 2008 collapse was due in large part to Credi Default Swaps fraud, selling mortgage securities and then shorting them, and phony ratings. And now they are still doing it. The proposed changes are “voluntary”.

We know that works well. Even Greenspan admitted he was wrong when he held for years that the financial market could self-regulate. Credit derivatives are a $10 Trillion, with a capital “T”, market. That could cover a lot of healthcare, education and SS funding.

The money for a healthier, better educated and secure America is there folks.
Just in the hands of thieves and fraudsters. And it got there by redistribution…from the have nots to the have mores.

And the GOP wants to cut taxes and then social safety nets to pay for that.

That is where AOC is coming from. She may be overreaching a bit, but she has Americans in her heart.

Venezuela did not get Chavez and now Maduro by accident. They got there because the elite felt above the law and were corrupt. Venezuela was the richest in South America for a while. Except the wealth was concentrated at the very top.

We are not Venezuela for a lot of reasons. But damn if it doesn’t seem some on the right are trying really hard to get there.

And Trump is carrying their jockstraps.

IN MY NOT SO HUMBLE OPINION…this time.

Oh, please forget the lectures on the evils of socialism. That is not the subject nor the solution. A more equitable free market is the goal in which the cost of doing business includes social safety nets and benefits. Costs that are fair for doing business in the strong economy of a nation with good freedoms and the rule of law. And not a country in which the “oligarchs” steal, then rule, then steal some more. That’s Russia.

Still…in my not so humble opinion.

5 thoughts on “And people wonder why some sour on American capitalism

  1. RE: “The money for a healthier, better educated and secure America is there folks. Just in the hands of thieves and fraudsters. And it got there by redistribution…from the have nots to the have mores.”

    Is it your wish to take the trillions away from the bad guys and redistribute it back out to the good guys? I’m trying to imagine a way that could be done.

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  2. Stiffer financial rules would prevent this crap in the future. Taxation or lawsuits for some of the fraudulent gains today. We don’t want to cripple the financial sector, they do have an important role in an innovative capitalist economy.

    Nobody has paid the slightest penalty for 2008. Except the taxpayers.

    This is the kind of stuff that undermines and, frankly, endangers the free market economy in a capitalist system. 100’s of billion went to AIG to cover huge losses. And big chunks went straight through to GS to make them whole.

    It matter little about the political power in the White House or Congress. Except that the GOP refuses to regulate even now.

    The sense of entitlement by the elites, including our president, is not what this nation espouses as the ideals we are proud of…or should be. NYT’s report on the Trump family cheating on taxes was never disputed by the president. It was too blatant.

    There is a rot from the top. And blaming the poor, immigrants, legal or not, no prayer in school, abortion, Medicare for all, kneeling at games, etc., is all a smokescreen. We need infrastructure, affordable (not free)
    healthcare for all and education. Respect for families as in leave and childcare. Good legal aid for poor and working incomes.

    There is no reason for the financial sector to get a free ride by shuffling assets around with little or no oversight and yet with massive taxpayer guarantees. We take the risk, the elites get the rewards. Trump is business as usual. AOC is saying let’s balance the books a bit. She is asking for a lot. Just like the “Art of the Deal” preaches. Then coming down a bit sounds better.

    And this is not wealth envy. It is disgust with the utter contempt the elites hold for America. Remember “only little people taxes” br Leona Helmsley? Well that is the attitude today. And why we owe $22 Trillion and have annual deficits over a trillion. 79% of the wealth is held by 10% of Americans. 40% is held by 1%. We have financial obligations and serious debt. There is no money in our strata. But there is money and no reason to go into more debt in a robust economy. None.

    IMHO.

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    1. RE: “Stiffer financial rules would prevent this crap in the future. Taxation or lawsuits for some of the fraudulent gains today. We don’t want to cripple the financial sector, they do have an important role in an innovative capitalist economy.”

      I think it is immensely important to know the cause of a problem in order to fix it. As I understand it, two main causes are discussed with respect to the financial crisis of 2008:

      a) Greedy bankers made bad investments which fell apart.

      b) Government policy incentivized bad investment decisions on a broad scale, setting the stage for a “run on the banks.” When the run became worrisome, regulators reacted with arbitrariness and incompetence to save the bankers at risk, compounding the problem.

      Personally, I find (b) to be the more compelling explanation because it fits the facts better. There’s nothing inherently wrong with credit default swaps, for example. They continue to be used, even now.

      But either way the puzzle remains: How do we get the lost money back? It’s not like it is hiding inside mattresses someplace where it can all be brought out and returned to those who lost it or to pay for the Green New Deal. That’s just silly.

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        1. RE: “There was no ‘run on the banks.'”

          There was no public run on the banks. But within the financial industry there was a loss of confidence in Bear Stearns, which prompted investors to take dramatic protective measures. The effect was comparable to a bank run.

          If you’re interested, the two problem descriptions I have outlined are based on this video in which Richard Epstein (law professor) and John Taylor (economics professor) discuss the the origins and response to the 2008 crisis.

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