Food for the Soul and Pocketbook!!

NASHVEGAS

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Agenda I guess keeps the virtual world separated from the real world especially in gambling! Nevertheless I wanted to share a friend of mine's summary of recent events....not meant to be a political statement but a macro-economic statement and imo my friend is spot on....thought you might find it interesting!!

"Yea, I've been following all of this for several weeks now. It takes a long time for this all to unwind, though. The Federal Reserve "printing money out of thin air" is exactly what Ron Paul was always talking about when everyone thought he was crazy. Now maybe everyone will see that he isn't, even though no one ever sees him on TV news.

Every time the Federal Reserve bank develops some new way of getting money to the Banks at discounted rates (First the anonymous Term Auction Facilities, now this $200 B 28 day loan window), they decrease the value of your savings account and of the dollar. That's the "inflation tax" that people talk about. [Btw, Elliot Spitzer was fighting this sort of bail-out behavior on Wall Street, but was just forced to resign right before this whole bail-out happened]

AND:
Today, Bear Stearns, the huge U.S. Investment bank started back in 1923, failed. It went bankrupt. The Federal Reserve gave it more money through J.P. Morgan (another bank, since they couldn't loan directly) to keep it alive. Banks in Europe have been failing for several weeks now, but the U.S. News seems to not report much of it. The multi-billion dollar hedge funds are liquidating, too. What has happened is "leverage" which is when you take out a loan at 5% interest to buy something that yields 9% interest... you make the difference in profit, or 4%. The hedge funds did this several times over, sometimes 30 times, making millions or billions of dollars!!! The problem is: if the original money goes bad, everything that was purchased by that money on leverage, also goes bad, so it "unwinds" very quickly, and even on relatively small margin calls. If something is "leveraged up" 5 times, then a failure of just 20% of the value erases it all.

I think this is set to be worse than the "stagflation" of the 70s, and the Savings & Loan crisis and LTCM and dotcom collapse. About 500 Trillion dollars in these credit and debt securities that are no longer selling and causing the "credit crunch" are out there in the world. The world's GDP is only about 65 Trillion dollars, which means there's far more money to be lost than there is total wealth and production on the entire planet. There's also a recession happening during the credit crunch.

There are a lot of very big problems, but what will probably end up happening is this: the Fed will continue to buy up all of this very bad debt in the markets, which will continue to push up inflation drastically. Otherwise, the economy could collapse on itself.

There's not much that any of us can do except make sure that all debts are paid ASAP and that you save as much as possible. "Live within our means, or live beneath your means"..."
 

RobWin

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Great article (or letter from friend) Nash, Thanks for posting...looks like my boy Ron Paul actually does know what the hell he is talking about...too bad more people didn't realize that sooner...and I agree with all the points your friend was making in the letter too, especially about the worlds GDP average...too many people out there that don't even have a clue what the hell GDP really means and stands for and the same could be said of the National Debt...you would not believe the friends of mine who say that I'm crazy when I tell them that we have been borrowing money from China for the last few years in order to stay afloat and they think I'm nuts (well maybe a little...LOL).......

But that is fact and also another big topic that Ron Paul tried to tell the folks about and no one wanted to listen...the sad thing is that it will most likely take a major downturn or collapse of our economic system before most of the people out there actually wake the hell up and realize that this country has been sold out to these foreign governments for years now and especially now that our dollar is trading so low on the world market,,,actually at all time lows on the world market...these foreign governments are just like wolves standing on the edge of the field waiting on the sick sheep to fall so they can move in and capture more and more of our sovereignty here...and it is only going to get worse if something big does not step in and stop the bleeding !!!
 

RobWin

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You know now that I actually think about it, I think this country would be in much better shape in the future if the school systems made it mandatory for kids starting out in Jr High School were required to take a course in Economics and then two more courses of it in High School...it definitely would not hurt....unless it was actually taught by the government...LOL
 

NASHVEGAS

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You know now that I actually think about it, I think this country would be in much better shape in the future if the school systems made it mandatory for kids starting out in Jr High School were required to take a course in Economics and then two more courses of it in High School...it definitely would not hurt....unless it was actually taught by the government...LOL
agree and not to step on toes but I actually spoke with not just people on this forum this week but many (who say they are businessmen/women) and they did not know supply from demand moreless microeconomics from macroeconomics....I suppose I should not have been shocked but I was!!
 

RobWin

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agree and not to step on toes but I actually spoke with not just people on this forum this week but many (who say they are businessmen/women) and they did not know supply from demand moreless microeconomics from macroeconomics....I suppose I should not have been shocked but I was!!

I hear ya man...and I feel the pain...well you already know that though...LOL,,, I think it boils down to the way that most of them were taught economics, if they actually were,,,the text books need to definitely be re-written as the global commerce market has merged into arenas never crossed or impacted before by such microcosms that can cause such a trickle down effect no one realizes it's coming...
 

NASHVEGAS

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I reallocated almost all my investments this week. Also having been very much a part of the S&L crisis plus Tax Reform of 1986 when the ability to write off passive losses against ordinary aka active income was taken away with no one being grandfathered (and somehow survived where I saw some aquaintances--mostly in syndication deals--go to bed worth millions and wake up broke the next morning) I am cutting back including my BandM gambling trips. Better safe than sorry!!:)
 

RobWin

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Couldn't agree more Nash...time has come for the Ole Belt to start tightening up a couple notches...I was actually doing some research this week on "Survival Mode" during times of economic collapse and other scenarios and there were some really great articles that I read that were written by some of the old timers that actually lived thru the meltdown of 29 and also articles written by their kids too...

Some of the other stuff I've been reading lately basically has to do with general survival techniques that can apply to your life and situation in general...real interesting stuff,, how to stock up on supplies,, what types last the best,, areas to stay away from,, etc. etc....some good reading there,, but not for the faint of heart.....
 

GGW Laurie

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I reallocated almost all my investments this week. Also having been very much a part of the S&L crisis plus Tax Reform of 1986 when the ability to write off passive losses against ordinary aka active income was taken away with no one being grandfathered (and somehow survived where I saw some aquaintances--mostly in syndication deals--go to bed worth millions and wake up broke the next morning) I am cutting back including my BandM gambling trips. Better safe than sorry!!:)
...youve always given me good advice on how the construction market was going and i didnt take it to heart, NOW IM LISTENING!!!!!.
 

NASHVEGAS

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...youve always given me good advice on how the construction market was going and i didnt take it to heart, NOW IM LISTENING!!!!!.
On the micro side I good preach about the housing market forever but the macro side is more unpredictable, mix the credit crunch (where if you knew how to breath you could borrow money that will go full circle to those who are your best credit risks and seek to borrow for example $ 1oooooo to build a few homes at a 50% LTV, that same banker NOW even on a solid deal with proper much tougher underwriting will look at you like you just asked to borrow one billion dollars not one million dollars) with inflation which for some reason the government claims barely exists (hello, the drop in the dollar, 700% or so increases in commodities like oil,silver,copper,etc. all which trickle down) with deflation in housing which has always generally been Americans primary appreciating asset..... Not sure without research if all 3 of these have occured at the same time. I know we had "the misery index" of 1981 and 1982 of 21% including inflation and unemployment. Hope we do not have "the jump off the building index" in our future but we came real close this past Monday if the Fed did not make the unprecredented move of opening it's discount window to not just banks as always but now Wall Street....Maybe the Fed could open it to failing online casinos:D
 

RobWin

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I want you guys to keep an open mind now when you read what I have written here as I'm sure a lot of you if not all will simply just think this is conspiracy theory but what I'm about to tell you can and has been proven if you only dig deep enough...remember this rabbit hole runs real deep as this plan was initiated back in 1913 and in 1913 America was a free country and Woodrow Wilson was President....

Then a band of powerful bankers achieved their fathers and their great grandfathers goal and since then, America has never been the same, soon the world will not be the same as these three powerful bankers J.P Morgan, Paul Warburg and John D. Rockefeller finally achieved their long term goal to start a silent COUP D'ETAT by secretly taking control of the American Government thru the Federal Reserve System that they were instrumental in getting started...(This is proven Fact)...and the rabbit hole deepens....Who's heard of ARAMCO Oil before....and don't forget the name that I just mentioned above J.P. Morgan who just this week played a huge role in the buy out of the the huge U.S. Investment bank known as Bear Stearns, that was started back in 1923, that failed and went bankrupt and The Federal Reserve gave it more money through J.P. Morgan....starting to see any connections here folks....

Here's an excerpt from the older article that is the primer for the more recent article that I am going to give you a link to in my next post and you can read for yourself how deep this rabbit hole really starts to go with names you all will be real familiar with...enjoy !!! :D

"According to an April 29, 2002 report in Britain's Guardian, ARAMCO constitutes 12% of the world's total oil production; a figure which has certainly increased as other countries have progressed deeper into irreversible decline.

ARAMCO is the largest oil group in the world, a state-owned Saudi company in partnership with four major US oil companies. Another one of Aramco’s partners is Chevron-Texaco which gave up one of its board members, Condoleezza Rice, when she became the National Security Advisor to George Bush. All of ARAMCO’s key decisions are made by the Saudi royal family while US oil expertise, personnel and technology keeps the cash coming in and the oil going out. ARAMCO operates, manages, and maintains virtually all Saudi oil fields – 25% of all the oil on the planet."

Oh It gets better....read the rest
You do not have permission to view link Log in or register now.
 

NASHVEGAS

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I will check it out t-row. That said my op post was based on present macro-economic issues and concerns as I prefer to avoid the political issues although I acknowledge that both issues certainly may not be mutually exclusive!!!...I think Barney Frank is going to be occupied for awhile so not even going to waste my time reading about BF and online gambling issues as it is so far down the chain at present (kinda like the still active 17 year old lawsuit I am involved in as a shareholder of a Portland,Oregon Savings and Loan against the DOJ...the DOJ can delay I guess forever....we won the lawsuit at the Supreme Court level in 1996 and then 12 more years of litigation still on going to determine damages...no end in sight...the DOJ thought they would wear us out financially and they miscalculated...)!!
 

RobWin

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I will check it out t-row. That said my op post was based on present macro-economic issues and concerns as I prefer to avoid the political issues although I acknowledge that both issues certainly may not be mutually exclusive!!!

Exactly Nash, and in no way meant to de-rail the point of your original post, but that is the point of my post too which may actually take a few more posts over the next week or so to totally link it all up for the audience...LOL,,, bout forgot, (audience...not in the DJ booth right now...LOL)

...I think Barney Frank is going to be occupied for awhile so not even going to waste my time reading about BF and online gambling issues as it is so far down the chain at present (kinda like the still active 17 year old lawsuit I am involved in as a shareholder of a Portland,Oregon Savings and Loan against the DOJ...the DOJ can delay I guess forever....we won the lawsuit at the Supreme Court level in 1996 and then 12 more years of litigation still on going to determine damages...no end in sight...the DOJ thought they would wear us out financially and they miscalculated...)!!
That does have intrigue written all over it...maybe you can share some more details sometime when you feel comfortable about it...maybe in a PM or email...;)
 

NASHVEGAS

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Here ya go Rob: This intial background is below since the website was not commenced until about 7 years ago and already 10 years into the case at the start of the website. The site is Link Removed ( Old/Invalid) then picks up going back 7 or more years ago til present. Note there is a typo on the initial page that says March 15,2007. 2007 should read 2008....You really have to surf the site with the Past Updates section which commences on the site in the year 2001 and gives you updates for every year since til present on the case including the actions of the DOJ!

The Plaintiffs In The Case Of Benj. Franklin Federal Savings and Loan (BENJ) Shareholders vs. the United States
1.. What was Benj. Franklin Federal Savings and Loan Association?Founded in 1925 in Portland, Oregon, Benj. Franklin was a large, successful and widely respected thrift when it was seized by the federal government in 1990.

2. Who brought the case?
Shareholders of Benj. Franklin brought this suit on September 14, 1990, in the United States Court of Federal Claims with the help of Don S. Willner, a prominent and well respected Portland, Oregon, attorney, on behalf of an estimated 6,500 shareholders.

3. What was the condition of the thrift industry in 1982?
Interest rates were over 15% at a time when the thrift industry was invested in long-term mortgages charging about 8%. The entire industry was on the verge of bankruptcy, as was the FDIC, the government agency that insured the thrifts to protect the depositors.

4. What was the government’s response to this crisis?
It encouraged healthy thrifts to acquire failing thrifts with various government incentives, including treating the minus net worth of the failing thrift as the capital asset of goodwill and writing it off over a long period of time. This program was known as Supervisory Goodwill Agreements.

5. What is this suit?
As part of this government program, Benj. Franklin in 1982, by agreement with the government, acquired a failing thrift, Equitable Savings and Loan in return for a 40-year amortization of the supervisory goodwill. Benj. and the government made a similar agreement in 1985 concerning the acquisition of Western Heritage Savings and Loan. These agreements had the full approval of the Federal Home Loan Bank Board.

6. Was this 40-year agreement necessary?
Neither Benj. Franklin nor the federal government would have entered into this agreement if not for the 40-year amortization. The lengthy time period was necessary for Benj. to recover the Equitable losses through economies resulting from the merger and from use of Equitable’s unusual franchise to do business in Washington and other states.

7. What happened to Benj. Franklin between 1982 and 1989?
It prospered, expanded, made a profit in 16 consecutive calendar quarters and became the number one mortgage lender in the Portland metropolitan area and had strong lending positions in other major areas of the northwest.

8. What happened to the thrift industry in 1989?
Some thrifts, especially in the southwestern United States, defrauded investors and depositors. Congress responded by passing a law in 1989 called FIRREA, which among other provisions, retroactively revoked agreements for the long-term amortization of goodwill. With the goodwill removed, Benj. Franklin was instantaneously declared insolvent and was seized by the government on February 21, 1990.

9. How does the lawsuit stand?
Suing the government is expensive and lengthy. Over 4,000 shareholders have contributed to the funding of the suit, most at a fair share of 25 cents per share. In 1995, Chief Judge Smith ruled that these shareholders had the right to bring this suit (“shareholder standing”). In 1996, the U.S. Supreme Court ruled in a companion case that the government had breached its contract for long term amortization of goodwill. In 1997, the Judge decided that the government breached its contract with Benj. (granting “summary judgment on liability”). Trial on the issue of how much damages should be awarded started on January 11, 1999, and with frequent intervals, finished on September 17, 1999. Our experts testified that the value of Benj. at the time of trial if it had not been seized would have been $944,000,000. Government experts testified that the damages to Benj. due to the seizure was zero! We do not know when the case will be decided, but hope it will be soon.

10. How have we been keeping the shareholders informed?
Over the ten-year period, we have written eleven up-dating reports to those shareholders whose names we have in our records. Benj. has not had a transfer agent for many years. We believe our extensive but incomplete list of shareholders is the only accurate one in existence. The accuracy of our list, in our opinion, is assured by way of funding contributions of $.25 per share, by many who agree and support our cause.

Of the 7,705,000 that were issued, well over 2,000,000 shares are missing. Could this be you? We invite you to join with us to expand and further insure the accuracy of ownership list, as well as promptness in locating you, if we win. Send all checks in the amount of $.25 per share to:

Don S. Willner, Trustee

BFSLF (Benj. Franklin Shareholders Litigation Fund)

1415 The American Bank Building

621 SW Morrison Street

Portland, OR 97205

Include name, address, phone number, and exact amount of shares.

11. Why did we establish this website?
We want to do an even better job of communicating with the shareholder family. If you have additional questions, please click “on contact”. We will periodically update the website with answers to your question. We will also provide you with information on the progress of our litigation.
 
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NASHVEGAS

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@RW...I did see a partial damages payment check in 2006 believe it or not but BENJ's attorney felt this case could have been over in the early 1990's....no interest is paid as the DOJ drags this on going on 18 years now....also this case has been thru both the donkeys and elephants in control of the executive and legislative branches of government....also the Judge (especially Smith) has admonished the DOJ for not settling these cases in the late 1990's and 30 billion dollars was set aside in the budget maybe 10 years ago or more to settle a 100 plus iirc Supervisory Goodwill cases...Is it not the DOJ that keeps saying all online gambling is illegal and why? Read this case a little closer and maybe people will understand it is not about whether it is illegal or not or what the lawyers who know nothing assure you, it is about the DOJ doing whatever it wants (even ignoring Judges and basically the Supreme Court) and how many could fight the DOJ going on 18 years....I still think some US affiliates are in for a little surprise before all is said and done. Doubt players at least criminally (pay your taxes) will be the target of the DOJ...I called the Bank bailouts a week ago Thursday (in the CM May get together thread) and Bear Stearns was a $6 billion company then with Schwartz the CEO just having assured all a day or two before how well Bear Stearns was doing and "it was biz as usual". I got lucky on the prediction as the news broke the following morning!! Ironic??, yes!!
 
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GGW Laurie

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You know now that I actually think about it, I think this country would be in much better shape in the future if the school systems made it mandatory for kids starting out in Jr High School were required to take a course in Economics and then two more courses of it in High School...it definitely would not hurt....unless it was actually taught by the government...LOL
we had a course in economics when i was in the 9th grade and no it wasnt home ec either lol. i feel the same way, it should be taught in jr. high and high school ........laurie
 

NASHVEGAS

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ENRON HAS BEEN LISTED IN MY PROFILE AS THE WORST CASINO IMHO FOR A LONG TIME

An excerpt from the well respected "THE MOTLEY FOOL"....a good read and imo will have a trickle down to all forms of the gaming industry:

A Nation of Enrons
By Seth Jayson March 20, 2008


An understatement: We are living through a time of considerable market and economic turmoil. Since we stand to see trillions of dollars' worth of assets vaporize in the ensuing mess, we ought to take a look at history to see how we got into it, and how investors can get out.

Half a decade ago, the entire nation was shocked when award-winning "innovator" Enron turned out to be little more than a cash-shredding pyramid scheme. The crucial failing for investors was Enron's use of opaque, "mark-to-market" accounting. The problem comes when the market is batty (or doesn't exist), so you instead mark your assets to a model, especially one that's wrong, either because you made an error or because you based it on exceedingly generous assumptions.

In the end, we learned that Enron's accounting was pretty much mark-to-fairy-tale, with the company booking enormous gains from assumed future profits on schemes (like bandwidth trading) that sounded great, but had little chance of producing anything besides headlines.

Andy Fastow, meet Fred and Ethel
You might think we'd learned our lessons about fantasy accounting after Enron, but you would be wrong. Things actually got worse. The infection moved to the comfy-sounding "homeownership" market. Against a star-spangled, feel-good backdrop touting the "American Dream," our recent mark-to-model mania tripped up a lot more than one big company. In fact, it swept through the entire banking world. (Bear Stearns (NYSE: BSC) is not the first to choke on lousy, poorly modeled mortgage-backed securities "income," and I'll eat a Miami condo if it's the last.)

But more dangerous yet was the way this mania also infected millions of aspiring real-estate moguls. The most widespread mark-to-model fantasies were actually committed not by some easy-to-blame Wall Street suit, but by Fred and Ethel down the street.

It was flawed models (and the habit of booking earnings on these models) that enabled financial companies to concoct the elaborate securities that funded the bubble. And yes, the bank CEOs who paid themselves handsome bonuses ahead of the hurricane deserve a public flogging. But they weren't the only ones making out like bandits. While Wall Street was booking fantasy profits on bad assumptions about real estate, Fred and Ethel down the street were operating under their own mark-to-model dreams.

Really ...
In their model, house prices always go up. In their model, you can pay any price for a home, so long as you can make the monthlies with a teaser-rate ARM, never mind the upcoming adjustment to 9%. In their model, you avoid that via a refinance down the line with an equity cash-out to boot. In their model, it's OK to buy on a less-than-forthcoming, Alt-A "liar's loan," because there's no real punishment for lying on a mortgage application -- particularly if everyone's doing it. With this model, it makes sense to buy three other homes, in order to flip them later. And it makes sense to extract HELOC cash from the home, based on fantasies about continually increasing "equity."

This is not so different from what Enron was doing. Fred and Ethel were marking up the value of their assets (the home) to a model (their belief that real estate prices always go up) and then spending the "income" immediately, on iPods, Hummers, $250 jeans, and fancy vacations. This happened all over the country, and millions of people behaved the same way. In fact, the American Fantasy of owning a home (for no money down) that would provide leveraged, 10% annual returns for a decade, is precisely what enabled those Wall Street suits to do what they did. It takes two to tango, folks. And this was the biggest dance party in economic history.

Last year's model got ugly
Alas, this dream's "income" wasn't actually matched by real cash flows, just bank loans -- precisely the problem at Enron. The "income" was all hot air. And now that the "income" from home appreciation has turned negative, it must be supported by cash mortgage payments. But many people can't pay those bills, the mortgages are defaulting in huge numbers, and now, we are all paying a price, even those of us who didn't throw our money into a flimsy, overpriced McMansion.

Stocks have been creamed. The losses at those companies most directly victimized by their own housing-bubble ineptitude -- Bear Stearns, Citigroup (NYSE: C), and Wachovia (NYSE: WB) -- are easy to understand. But, of course, the losses have extended much further than that. Even mighty Apple (Nasdaq: AAPL) has dropped like a rock, as investors wonder how many iPods can be sold in Foreclosureville, U.S.A. And if they can't afford their beloved iPods, what will they buy? That's the thinking that has crushed everything from trendy togs-sellers like Zumiez (Nasdaq: ZUMZ) to carmakers like GM (NYSE: GM). Consumers are spending less, and we appear to be headed directly into a recession.
So ugly it's cute?
By now, it ought to be clear that I have been, and remain, one of the most vocal econo-bears you will find on these pages. I am certain that systemic failure has steered us into a terrifying run at the ditch, to be followed by a painful, protracted rough patch. It was all spawned by greed gone amok on Wall Street and Main Street..................
 

RobWin

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The crucial failing for investors was Enron's use of opaque, "mark-to-market" accounting
The crucial failing for Enron's Investors was a crooked ass corrupt CEO and short stint Chairman named Kenneth Lay...no reason that the buck should stop anywhere else but I guess they can always give everything a fancy name like "mark-to-market" accounting....

And yes, the bank CEOs who paid themselves handsome bonuses ahead of the hurricane deserve a public flogging
A little time with Bubba over at ADX Florence Facility {(ADX) in Florence, CO.} would be more like it...:D

Consumers are spending less, and we appear to be headed directly into a recession

Where the hell has this guy been for the past eight months..."We Appear To Be Heading Into A Recession"...jeezeus krist...he's obviously been listening to too many White House Press conferences...:rolleyes:

I am certain that systemic failure has steered us into a terrifying run at the ditch, to be followed by a painful, protracted rough patch.

No shite Sherloc !!!


Thanks for the article Nash, got my day off to a fun start...and it reminded me that there are still folks living around and among us that spend most of their time in Keebler Cookie Land...:lolup::lolup::lolup:
 

NASHVEGAS

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The crucial failing for Enron's Investors was a crooked ass corrupt CEO and short stint Chairman named Kenneth Lay...no reason that the buck should stop anywhere else but I guess they can always give everything a fancy name like "mark-to-market" accounting....


A little time with Bubba over at ADX Florence Facility {(ADX) in Florence, CO.} would be more like it...:D



Where the hell has this guy been for the past eight months..."We Appear To Be Heading Into A Recession"...jeezeus krist...he's obviously been listening to too many White House Press conferences...:rolleyes:



No shite Sherloc !!!


Thanks for the article Nash, got my day off to a fun start...and it reminded me that there are still folks living around and among us that spend most of their time in Keebler Cookie Land...:lolup::lolup::lolup:
You are welcome, did not mean to raise your BP:oops::oops:, sheet works out...as for Lay (not that I wished it but I bet many did), payback was HELL,huh!!!
 

RobWin

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Treasurys Plan Would Give Fed Wide New Power

Treasurys Plan Would Give Fed Wide New Power

By EDMUND L. ANDREWS
Published: March 29, 2008

WASHINGTON The Treasury Department will propose on Monday that Congress give the Federal Reserve broad new authority to oversee financial market stability, in effect allowing it to send SWAT teams into any corner of the industry or any institution that might pose a risk to the overall system.

The proposal is part of a sweeping blueprint to overhaul the nations hodgepodge of financial regulatory agencies, which many experts say failed to recognize rampant excesses in mortgage lending until after they set off what is now the worst financial calamity in decades.

Democratic lawmakers are all but certain to say the proposal does not go far enough in restricting the kinds of practices that caused the financial crisis. Many of the proposals, like those that would consolidate regulatory agencies, have nothing to do with the turmoil in financial markets. And some of the proposals could actually reduce regulation.

According to a summary provided by the administration, the plan would consolidate an alphabet soup of banking and securities regulators into a powerful trio of overseers responsible for everything from banks and brokerage firms to hedge funds and private equity firms.

While the plan could expose Wall Street investment banks and hedge funds to greater scrutiny, it carefully avoids a call for tighter regulation.

The plan would not rein in practices that have been linked to the housing and mortgage crisis, like packaging risky subprime mortgages into securities carrying the highest ratings.

The plan would give the Fed some authority over Wall Street firms, but only when an investment banks practices threatened the entire financial system.

And the plan does not recommend tighter rules over the vast and largely unregulated markets for risk sharing and hedging, like credit default swaps, which are supposed to insure lenders against loss but became a speculative instrument themselves and gave many institutions a false sense of security.

Parts of the plan could reduce the power of the Securities and Exchange Commission, which is charged with maintaining orderly stock and bond markets and protecting investors. The plan would merge the S.E.C. with the Commodity Futures Trading Commission, which regulates exchange-traded futures for oil, grains, currencies and the like.

The blueprint also suggests several areas where the S.E.C. should take a lighter approach to its oversight. Among them are allowing stock exchanges greater leeway to regulate themselves and streamlining the approval of new products, even allowing automatic approval of securities products that are being traded in foreign markets.

The proposal began last year as an effort by Henry M. Paulson Jr., secretary of the Treasury, to make American financial markets more competitive against overseas markets by modernizing a creaky regulatory system.

His goal was to streamline the different and sometimes clashing rules for commercial banks, savings and loans and nonbank mortgage lenders.

I am not suggesting that more regulation is the answer, or even that more effective regulation can prevent the periods of financial market stress that seem to occur every 5 to 10 years, Mr. Paulson will say in a speech on Monday, according to a draft. I am suggesting that we should and can have a structure that is designed for the world we live in, one that is more flexible.

Congress would have to approve almost every element of the proposal, and Democratic leaders are already drafting their own bills to impose tougher supervision over Wall Street investment banks, hedge funds and the fast-growing market in derivatives like credit default swaps.

But Mr. Paulsons proposal for the Fed echoes ideas championed by Representative Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee.

Both see the Fed overseeing risk across the entire financial spectrum, but Mr. Frank is likely to favor a stronger Fed role and to subject investment banks to the same rules that commercial banks now must follow, especially for capital reserves.

The Treasury plan would let Fed officials examine the practices and even the internal bookkeeping of brokerage firms, hedge funds, commodity-trading exchanges and any other institution that might pose a risk to the overall financial system.

That would be a significant expansion of the central banks regulatory mission.

When Fed officials agreed this month to rescue Bear Stearns, once the nations fifth-largest investment bank, they pointedly noted that the Fed never had the authority to monitor its financial condition or order it to bolster its protections against a collapse.

In two unprecedented moves, the Fed engineered a marriage between JPMorgan Chase and Bear Stearns, lending $29 billion to JPMorgan to prevent a Bear bankruptcy and a chain of defaults that might have felled much of the financial system.

For the first time since the 1930s, the Fed also agreed to let investment banks borrow hundreds of billions of dollars from its discount window, an emergency lending program reserved for commercial banks and other depository institutions.

But Mr. Paulsons proposal would fall well short of the kind of regulation that Democrats have been proposing. Mr. Frank and other senior Democrats have argued that investment banks and other lightly regulated institutions now compete with commercial banks and should be subject to similar regulation, including examiners who regularly pore over their books and quietly demand changes in their practices.

In a recent interview, Mr. Frank said he realized the need for tighter regulation of Wall Street firms after a meeting with Charles O. Prince III, then chairman of Citigroup.

When Mr. Frank asked why Citigroup had kept billions of dollars in structured investment vehicles off the firms balance sheet, he recalled, Mr. Prince responded that Citigroup, as a bank holding company, would have been at a disadvantage because investment firms can operate with higher debt and lower capital reserves.

Senator Charles E. Schumer, Democrat of New York, has taken a similar stance.

Commercial banks continue to be supervised closely, and are subject to a host of rules meant to limit systemic risk, Mr. Schumer wrote in an op-ed article on Friday in The Wall Street Journal. But many other financial institutions, including investment banks and hedge funds, are regulated lightly, if at all, even though they act in many ways like banks.

Mr. Paulsons proposal is likely to provoke bruising turf battles in Congress among agencies and rival industry groups that benefit from the current regulations.

Administration officials acknowledged on Friday that they did not expect the proposal to become law this year, but said they hoped it would help frame a policy debate that would extend well after the elections in November.

In a nod to the debacle in mortgage lending, the administration proposed a Mortgage Origination Commission to evaluate the effectiveness of state governments in regulating mortgage brokers and protecting consumers.

The bulk of the proposal, however, was developed before soaring mortgage defaults set off a much broader credit crisis, and most of the proposals are geared to streamlining regulation.

This plan would consolidate a large number of regulators into roughly three big new agencies.

Bank supervision, now divided among five federal agencies, would be led by a Prudential Financial Regulator, which could send examiners into any bank or depository institution that is protected by either federal deposit insurance or other federal backstops. It would eliminate the distinction between banks and thrift institutions, which are already indistinguishable to most consumers, and shut down the Office of Thrift Supervision.

Any effort to merge the Commodity Futures Trading Commission with the S.E.C. is likely to provoke battles.

Yet another proposal would, for the first time, create a national regulator for insurance companies, an industry that state governments now oversee.

Administration officials argue that a national system would eliminate the inefficiencies of having 50 different state regulators, who have jealously guarded their powers and are likely to fight any federal encroachment.

Arthur Levitt, a former S.E.C. chairman who has long pushed for stronger investor protection, said his first impression of the plan was positive. Even though the S.E.C.s powers might be reduced, Mr. Levitt said, the plan would create a broader agency to regulate business conduct in all financial services.

Its a thoughtful document, he said. Im intrigued by the fact that it puts an emphasis on investor protection, and that it establishes an agency specifically for that purpose, which would operate across all markets. I think thats a very constructive first step.
 

RobWin

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Paul Lectures Bernanke:

Paul Lectures Bernanke: U.S. Moving Towards Fascism

Congressman says we've "given up on the Republic, freedom, the marketplace and sound money"

Paul Joseph Watson
Thursday, April 3, 2008


The Federal Reserve's insistence on rewarding its own failures by granting itself new powers was harshly rebuked by Congressman Ron Paul during yesterday's Joint Economic Committee meeting, as Paul all but accused Ben Bernanke of contributing economicallly to a broader move towards fascism in America.

"There's a political philosophy that advocates merging together the interests of business and government at the same time with a loss of civil liberties of the people and I'm afraid we're moving in that direction," said the Congressman, citing warrantless searches, lack of medical, Internet and financial privacy as well as the loss of habeas corpus since 9/11.

"I see....the proposal by the Treasury as a massive move to a lot closer association of business and government," said Paul, adding that a military-industrial complex, a medical-industrial complex and a media-industrial complex were already in place.

Paul was refering to the Treasury Department's recent proposal to give the Fed, "Broad new authority to oversee financial market stability, in effect allowing it to send SWAT teams into any corner of the industry or any institution that might pose a risk to the overall system," as the New York Times reported.

"We should be regulating the government - when you think of the authority you as the Chairman of the Federal Reserve can do, it really goes unaudited and very little oversight," said Paul, adding that the creation of the President's Working Group on Financial Markets meant that "we had really given up on the Republic, freedom, the marketplace and sound money".

"It looks like this is a massive increase in the combination of government and big business," said the Congressman.

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