How did we get into this Financial crisis??
This is really a two part issue..The first, was the reversal of the Glass Seagull Act.
You ask, what is the Glass Seagull Act?
The Glass-Seagull Act was enacted during the Great Depression to restrict the securities activities and affiliations of banks and has long been seen as having separated commercial banking. The act was intended to protect banks, prevent conflicts of interest and other abuses and safeguard the financial system. Rubin said supporters of the act today say Glass-Seagull is necessary to protect the federal deposit insurance system.
This was enacted in 1933 and was the course of business until 1999..When the repeal of the Glass Seagull Act led by Robert Rubin former Treasury Sec. under Bill Clinton and others of the CFR, has produced our current investment dilemma of the breakdown of the residential mortgage investment sector and created financialization, a relatively new term used to discuss the emergence of a new form of capitalism in which financial markets dominate over the traditional industrial economy.
The CFR is The Sovereign in North America's commerce, investment and governmental activity and endeavors and through the CFR and it's agents , primarily Sanford Weill, Bill Clinton and Robert Rubin repealed the Glass Steagall Act in 1999.
It must be said, that to repeal this Act, must come from Congress and it's here, where both Republicans and Democrats rewrote the law and was signed by then, President Bill Clinton.
As mentioned above, the act was the sole purpose to keep Banks, which during this period, was built on a foundation of solid assets and a business model that didn't allow banks to deviate into elements of questionable or gambling assets into the world of derivative trading..
In 1999 when the repeal was signed into law, it was meant to modernize the country's financial system and allow banks to became gambling house i.e.; Banks/Investment Banks..This allowed them to parley or move solid bank assets into tradable securities as in options, convertible bonds, future contracts and on it goes..
So now we come to the Second part of the current Financial crisis which is the Sub-Prime..
When the law was repealed and signed, Bill Clinton, ordered Fannie and Freddie to except loans from local banks in inner city and other minority jurisdictions to back home loans on individuals, who otherwise would not be eligible for such a major acquisition, due to low credit rating and other factors..Local banks were continually pressured by minority groups like Acorn and Congressional Democratic leaders to underwrite these mortgages.
So everything appeared on the surface to be fine, and the ideology that every American has a right to own a home, without showing proper credit rating and questionable employment history finally took a toll.
Banks before the repeal of Glass Steagall had to show a foundation of assets and cash related to debt and in the 1980's a well known practice called Mark to Market..
Mark to Market is an accounting methodology of assigning a value to a position held in a financial instrument based on the current market price for the instrument or similar instruments. When these mortgages became a real issue with respect to delayed payments and foreclosures started to rise, banks took these undesirables and bundled them up as Sub-Prime and went into the world of Wall Street as a trading instrument and many world banks came onboard and everyone was in money heaven.
The foreclosure rate started to rise at a rapid rate and remember, Fannie and Freddie continued to underwrite and back these banks holding these mortgages from defaulting...Banks as they do, is to protect their assets and maintain the requirements within banking regulatory laws were concerned with Mark to Market accounting, that when said property goes to 0 balance or worth, balance sheets and asset base, could present a imbalance and make the banks appear insolvent..
As we now have experienced, many banks went under and since they kept many of these notes on their books and with Mark to Market had no choice.
This of course also effected the underwriter, Fannie and Freddie holding assets that were virtually or near worthless..
Then the domino effect began and a major meltdown occurred as we now know, is a severe collapse of the world Financial Institutions.
Through it's infamous wisdom, the government without addressing the Mark to Market accounting, just went on as usual and infused large capital into banks and Fannie and Freddie..All this did was try to fill the void, or large hole to shore up these same institutions to no avail..This problem became so severe that the first Tarp was sucked up like a huge vacuum cleaner with little resolve.
So now we have this spending/stimulus package that will not work and only create down the road a major global disaster not seen since the great depression..The reason why I say this, is history has repeatedly dictated that unwise spending does not work and only exacerbates and compounds the problem going out. In the short term, this may work, but the cusp of the problem is the burden of debt it carries..Normally under this scenario, foreign countries have always been eager to buy US debt through Bonds and safe US Treasury notes as a safe haven..The only problem is, all these countries are facing similar problems and have no more investment capital let alone to carry their own debt.
Japan is a perfect example why spending doesn't work..They, for years spent on infrastructure and built many "Bridges to No Where" and now we have learned they are contracting at an alarming rate, now over 10%..This is not good and others will follow.
Since almost every country in the world is in the same predicament, countries that traditionally buy up foreign debt and the hallmark of this was USA safe haven securities, will not happen and some have eluded that China will own the foreign debt is as well, a non-starter.
This spending package is nothing more than Toxic Financing or Spiral Financing that will effect you in ways unimaginable..Obama promised a middle tax cut, this is delusional thinking on his part...If I had to make an assessment, your taxes will rise at a rate never seen in this country..This spending package will have your taxes raised every year for the next 30 years at additional $2800 for every taxpayer and still we will never get even.
And now they are talking about another round of spending to again, shore up the Auto Industry and Financial sector..
What is the outlook? World leaders will not have a choice but to bring into order a "NEW WORLD Order" that will affect your life and your children not seen since the fall of the Roman Empire.
Of course this is my take.
Have a good day
Varok
http://www.stockmarketquarterly.com
Where investors build their portfolio one stock at a time.
This is really a two part issue..The first, was the reversal of the Glass Seagull Act.
You ask, what is the Glass Seagull Act?
The Glass-Seagull Act was enacted during the Great Depression to restrict the securities activities and affiliations of banks and has long been seen as having separated commercial banking. The act was intended to protect banks, prevent conflicts of interest and other abuses and safeguard the financial system. Rubin said supporters of the act today say Glass-Seagull is necessary to protect the federal deposit insurance system.
This was enacted in 1933 and was the course of business until 1999..When the repeal of the Glass Seagull Act led by Robert Rubin former Treasury Sec. under Bill Clinton and others of the CFR, has produced our current investment dilemma of the breakdown of the residential mortgage investment sector and created financialization, a relatively new term used to discuss the emergence of a new form of capitalism in which financial markets dominate over the traditional industrial economy.
The CFR is The Sovereign in North America's commerce, investment and governmental activity and endeavors and through the CFR and it's agents , primarily Sanford Weill, Bill Clinton and Robert Rubin repealed the Glass Steagall Act in 1999.
It must be said, that to repeal this Act, must come from Congress and it's here, where both Republicans and Democrats rewrote the law and was signed by then, President Bill Clinton.
As mentioned above, the act was the sole purpose to keep Banks, which during this period, was built on a foundation of solid assets and a business model that didn't allow banks to deviate into elements of questionable or gambling assets into the world of derivative trading..
In 1999 when the repeal was signed into law, it was meant to modernize the country's financial system and allow banks to became gambling house i.e.; Banks/Investment Banks..This allowed them to parley or move solid bank assets into tradable securities as in options, convertible bonds, future contracts and on it goes..
So now we come to the Second part of the current Financial crisis which is the Sub-Prime..
When the law was repealed and signed, Bill Clinton, ordered Fannie and Freddie to except loans from local banks in inner city and other minority jurisdictions to back home loans on individuals, who otherwise would not be eligible for such a major acquisition, due to low credit rating and other factors..Local banks were continually pressured by minority groups like Acorn and Congressional Democratic leaders to underwrite these mortgages.
So everything appeared on the surface to be fine, and the ideology that every American has a right to own a home, without showing proper credit rating and questionable employment history finally took a toll.
Banks before the repeal of Glass Steagall had to show a foundation of assets and cash related to debt and in the 1980's a well known practice called Mark to Market..
Mark to Market is an accounting methodology of assigning a value to a position held in a financial instrument based on the current market price for the instrument or similar instruments. When these mortgages became a real issue with respect to delayed payments and foreclosures started to rise, banks took these undesirables and bundled them up as Sub-Prime and went into the world of Wall Street as a trading instrument and many world banks came onboard and everyone was in money heaven.
The foreclosure rate started to rise at a rapid rate and remember, Fannie and Freddie continued to underwrite and back these banks holding these mortgages from defaulting...Banks as they do, is to protect their assets and maintain the requirements within banking regulatory laws were concerned with Mark to Market accounting, that when said property goes to 0 balance or worth, balance sheets and asset base, could present a imbalance and make the banks appear insolvent..
As we now have experienced, many banks went under and since they kept many of these notes on their books and with Mark to Market had no choice.
This of course also effected the underwriter, Fannie and Freddie holding assets that were virtually or near worthless..
Then the domino effect began and a major meltdown occurred as we now know, is a severe collapse of the world Financial Institutions.
Through it's infamous wisdom, the government without addressing the Mark to Market accounting, just went on as usual and infused large capital into banks and Fannie and Freddie..All this did was try to fill the void, or large hole to shore up these same institutions to no avail..This problem became so severe that the first Tarp was sucked up like a huge vacuum cleaner with little resolve.
So now we have this spending/stimulus package that will not work and only create down the road a major global disaster not seen since the great depression..The reason why I say this, is history has repeatedly dictated that unwise spending does not work and only exacerbates and compounds the problem going out. In the short term, this may work, but the cusp of the problem is the burden of debt it carries..Normally under this scenario, foreign countries have always been eager to buy US debt through Bonds and safe US Treasury notes as a safe haven..The only problem is, all these countries are facing similar problems and have no more investment capital let alone to carry their own debt.
Japan is a perfect example why spending doesn't work..They, for years spent on infrastructure and built many "Bridges to No Where" and now we have learned they are contracting at an alarming rate, now over 10%..This is not good and others will follow.
Since almost every country in the world is in the same predicament, countries that traditionally buy up foreign debt and the hallmark of this was USA safe haven securities, will not happen and some have eluded that China will own the foreign debt is as well, a non-starter.
This spending package is nothing more than Toxic Financing or Spiral Financing that will effect you in ways unimaginable..Obama promised a middle tax cut, this is delusional thinking on his part...If I had to make an assessment, your taxes will rise at a rate never seen in this country..This spending package will have your taxes raised every year for the next 30 years at additional $2800 for every taxpayer and still we will never get even.
And now they are talking about another round of spending to again, shore up the Auto Industry and Financial sector..
What is the outlook? World leaders will not have a choice but to bring into order a "NEW WORLD Order" that will affect your life and your children not seen since the fall of the Roman Empire.
Of course this is my take.
Have a good day
Varok
http://www.stockmarketquarterly.com
Where investors build their portfolio one stock at a time.
