Posted by
Eric Jay on Thursday, October 09, 2008 7:00:00 AM
Wow!!! $7 Trillion Lost In Bear Market
The S&P Down 37%, Dow Down 35%...
It is way worse than I originally thought, dismal doesn't even begin to describe the loss. $7 Trillion1in market capitalization lost, that's $7,000,000,000,000.00, I think...
Holy Moly Batman! We've got a problem. How many taxpayers have seen the value of their homes tumble2, tumble by upwards of 30% and more in my neck of the woods, Southern California. But, that was just the beginning...the beginning of a meltdown of epic proportions.
Housing, sub-prime loans, Fannie Mae and Freddie Mac, financial institutions worldwide have failed. The demise of all, not one or two, but every one of the Investment Banks in the United States have now fallen- Goldman Sachs, Lehman Brothers to name just two. JP Morgan became a federally chartered bank, no longer an Investment Bank. There are different regulations between an investment bank and what we would view as a "normal" bank. Lending standards are different, and the biggie, capital requirements are very different. Result: the credit market has virtually frozen 3.
We have seen giant lending institutions that led the stampede to easy money fail- Countrywide, gone, many other mortgage lending institutions, failed. We have seen "normal banks" eviscerated, WaMu and Wachovia on the selling block. Thankfully, there are still a few great banks, banks that maybe were a little more conservative and didn't go hell-bent on the sub-prime mess. Mind you, they too have suffered large losses, but they were able to absorb those losses and go out to be a buyer of some of these failing institutions.
Right now Wells Fargo and Citicorp4are battling for the right to purchase Wachovia- in whole or in parts. Citicorp made a sloppy buyout, with bank regulators blessing and taxpayer money. They offered a paltry (well, in this market that is a pile) $1.00 per share tender. Taxpayers were on the hook courtesy of the FDIC. White Knight Wells Fargo5 stepped with a favorable offer for both taxpayers and shareholders. Without the blessing of the FDIC and sans taxpayer money Wells has offered $7.006 per share in a stock deal that also benefits shareholders with a carryover tax loss, lowering their taxable profits. Currently the three banks along with the FDIC are trying to hammer out a deal that will satisfy all parties. The negotiations seem to split Wachovia 7 in two, with Citi getting branches in the North East and Mid Atlantic while Wells will get a branch network in the South East and California. This is probably the deal that really interested Wells Fargo (wily CEO and President of WFC), as they strive to be the market leader in their respective markets. Just a little stock tip, take it for what it is worth ($0) buy Wells Fargo Stock! Pick your buy points, though.
Okay, all of this is well and good you might say, but what am I saying? Well, let's be honest and place the blame squarely where it belongs: Democrats. The Democrats nursed Fannie and Freddie. Carter and Clinton, while originally being magnanimous in trying to open homeownership to minorities, foisted the Community Reinvestment Act down the banks' and taxpayers' throats. It was "community organizers" that inflamed the situation by forcing banks to comply in lending to borrowers who could not afford to maintain mortgages and had dubious credit histories to begin with. Now mind you the taxpayer is at fault too. Greed and maybe just a normal climbing of the real estate ladder, buying larger and larger homes, going for bigger and bigger loans. But if you can afford it, why not, that's capitalism and that's the American Way. It is thanks to the likes of Chris Dodd, Barak Obama, Barney Frank, Chuck Schumer and the Democratic Party that gorged on the stinking trough that it created.
Chris Dodd, Barack Obama and Barney Frank were the highest recipients of campaign donations from Fannie and Freddie. They were the ones in control of the Banking and Finance Committees responsible for oversight of the mortgage giants. When Republicans from the President of the United States, Senators such as John McCain, Fed Chairman Alan Greenspan all repeatedly warned of the
impending crisis. Efforts at reform and strong oversight were met with repeated efforts of defeat, as Democratic cronyism fomented Fannie and Freddie status quo ante. And, for a "community organizers," in the likes of Barack Obama, were champions for sub-prime lending, they led the charge to ensure that banks and lending institutions were adhering to the CRA standards. Some by rather forceful means, bullying a bank if it wanted to expand. I have seen this personally working in the banking system.
If you are angry, then tell me why you are planning on voting for Barack Obama and for any Democrat for the Senate and/or House? Why are we not taking our anger out on Democrats. They have been in charge of the Congress for 2 years. They were going to change Washington, Madame Pelosi where is the change. And, being as the favorability ratings for Congress are worse then President Bush (something like 9% versus 22% respectively). Why is it that Barack Obama is leading in the polls? Why is it that so many have fallen for the chameleon, for the empty suit that is Obama?
Want to lay blame for the current "Great Depression?" It belongs to the man of the people, Barack Obama. That is why the market is tanking (see a previous post talking about the market direction and the presidential tracking polls).
Barack Obama is not fit to be the most powerful man in the world, he should not be elected President of the United States. There I said it, and boy I feel much better this morning!
Notes_______________________________________________________________________________________________________
5In an effort at full disclosure, both my wife and I are employed by Wells Fargo- arguably the strongest bank in the nation with great leadership at the helm, if I may say so.