Another nail in the coffin of the American Capitalist System.

Discussion in 'Economics' started by SouthAmerica, Nov 24, 2008.

  1. .

    November 24, 2008

    SouthAmerica: And some Americans still living in the world of illusion and they have not realized as yet that their capitalist system has died a sudden death during the year 2008.

    The article said: “by the U.S. government under a federal plan to stabilize the lender after its stock fell 60 percent last week.”

    The enclosed article includes a misspelled word instead of “stabilize” the correct word should be to “sanitize”.


    sanitize: To make sanitary, as by cleaning or disinfecting.
    To make more acceptable by removing unpleasant or offensive features from:


    “Citigroup Gets Government Guarantees on $306 Billion of Assets”
    By Bradley Keoun
    Bloomberg News – November 24, 2008

    Nov. 24 (Bloomberg) -- Citigroup Inc. will have more than $300 billion of troubled mortgages and other assets guaranteed by the U.S. government under a federal plan to stabilize the lender after its stock fell 60 percent last week.

    Citigroup also will get a $20 billion cash infusion from the Treasury Department, adding to the $25 billion the bank received last month under the Troubled Asset Relief Program. In return for the cash and guarantees, the government will get $27 billion of preferred shares paying an 8 percent dividend.

    The Treasury, Federal Reserve and Federal Deposit Insurance Corp. said in a joint statement that the move aims to bolster financial-market stability and restore economic growth. The decision came after New York-based Citigroup’s tumbling share price sparked concern that nervous depositors might pull their money and destabilize the company, which has $2 trillion of assets and operations in more than 100 countries.

    “It really was a must-do thing,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which manages about $85 billion. “If they’d let Citigroup go, that would’ve been disastrous.”

    Chief Executive Officer Vikram Pandit, 51, told employees on a Nov. 21 conference call that he doesn’t plan to break up the company. He and Chief Financial Officer Gary Crittenden said they don’t expect to sell the Smith Barney brokerage unit, two people who listened to the call said at the time.

    Citigroup’s board, led by Chairman Win Bischoff and independent director Richard Parsons, met the same day to discuss the bank’s options.

    Citigroup issued a statement last week saying the company has “a very strong capital and liquidity position and a unique global franchise.”


    What one may find interesting is to look at the core of what has really happened in terms of losses per financial company.

    What were the actual steps that ruined the financial system, and what does this imply to all valuation of all assets from this point forward ?

    When did this actually start in terms of what was a "normal" financial sector to the shift of what was not normal ?

    Next, what is the financial sector of the US going to look like in the next 10 years ?

    What portion of the US total economy is going to be considered "capitalistic" versus "socialistic" ?

    What role is common stock going to play versus debt that has government assurances ?

    The stock markets throughout the world have declined more than 50%....some more than 70%.....which means gains of over 100% are required to break even from the highs a few months ago.

    What about the word "suitability", know your customer rules imposed by the SEC to all brokerage firms ? Just what are the legal ramifications of losses to those who were under "suitability" blankets ?

    Which avenue should the US take ? Capitalist or socialist ?
    And what does this look like ?

    What is particularly sadly humorous is that no one was ahead of the curve....and now all you hear are individuals blabbing about their mostly inaccurate beliefs. Just turn on Bloomberg for five minutes, and one has had enough of so called experts. And unfortunately, some of these so called experts get to roll the dice again, putting policies into place that may not be beneficial to a sound economic system.

    There is a real chance that printing presses will go one to one against each other before all said and done.
  3. what has amazed the wold with the history of the Americans is their resilience.

    this was tested to the extreme with the events of WWII,

    it was cannonized in the songs of the era, one comes to mind: "Over There..."

    what has and continues to happen here in these United States are the renewal processes that rotate through approaches without the entire process failing, whether we are talking about the current financial crisis, or other major issues facing us in the 21st Century

    so, yes, there might be another nail in the coffin, but there also will be nails removed and use for other purposes....

    simply put, don't count us out....

    we ain't finished......
  4. .

    November 27, 2008

    SouthAmerica: I wonder how long it is going to take for the management of GM, Ford and Chrysler to grasp how the new economic system works here in the United States?

    Here are some clues for these guys and what they are supposed to do:

    The US government pumped US$ 150 billion dollars into the major 9 banks in the US in turn these banks are supposed to invest the money on obsolete companies to keep them alive a little longer.

    The US government pumped billions of US dollars into reckless managed banks such as Citi Group to keep that institution from a total meltdown – since Citi Group is a bank expert in bad investments then that bank should be able to dream up a bad plan to rescue the 3 US automakers.

    Citi Group don’t need to worry if the bad plan does not work out, since in that case all they need to do is ask the US government for another round of bailout money.

    After Citi Group lent the $ 25 billion dollars to the 3 US automakers – Citi Group could buy some kind of loan protection from AIG.

    The current issue of Fortune magazine (December 2008) has a cover story “GM – Death of an American Dream” – How General Motors got it so wrong for so long.

    It seems to me that most of the names that represented the American capitalist system are dying a quick death.

    A few months ago Goldman Sacks still was considered the jewel of investment banks in Wall Street – but almost overnight Goldman Sacks has been reduced to a the status of a very sick company that today it needs FDIC guarantees for them to raise any money - even a dime.

    Without US government guarantees today at the speed of light Goldman Sack's name has become completely worthless.

  5. The barbarians have already overrun America and their armies are forming up in Venezuela and we elected a Liberal!! It's reminding me of Rome A LOT nowadays... the wealthy Lawyer-Politician class members are grabbing all the money they can get, I wonder if the barbarians will kill them all off like they did when Rome ate the big one...
  6. .
    December 12, 2008

    SouthAmerica: I wonder why the United States economic capitalist system has been reduced to this?

    Another nail in the coffin of Wall Street and the American Capitalist System The collapse of the house-of-cards resulting on the melting down of Wall Street: in 2008 Wall Street has been reduced to sub-prime scandal, demise of most investment banking houses, gigantic industry implosion, fraud and a giant Ponzi scheme.

    Right now Wall Street might be spinning out of control - US$50-billion fraud is no small change - and which companies are in the other side of these transactions?


    Prominent Trader Accused of Defrauding Clients
    Published: December 12, 2008

    On Wall Street, his name is legendary. With money he had made as a lifeguard on the beaches of Long Island, he built a trading powerhouse that had prospered for more than four decades. At age 70, he had become an influential spokesman for the traders who are the hidden gears of the marketplace.

    But on Thursday morning, this consummate trader, Bernard L. Madoff, was arrested at his Manhattan home by federal agents who accused him of running a multibillion-dollar fraud scheme — perhaps the largest in Wall Street’s history.

    Regulators have not yet verified the scale of the fraud. But the criminal complaint filed against Mr. Madoff on Thursday in federal court in Manhattan reports that he estimated the losses at $50 billion. “We are alleging a massive fraud — both in terms of scope and duration,” said Linda Chatman Thomsen, director of the enforcement division at the Securities and Exchange Commission. “We are moving quickly and decisively to stop the fraud and protect remaining assets for investors.”

    Andrew M. Calamari, an associate director for enforcement in the S.E.C.’s regional office in New York, said the case involved “a stunning fraud that appears to be of epic proportions.”

    According to his lawyers, Mr. Madoff was released on a $10 million bond. “Bernie Madoff is a longstanding leader in the financial services industry,” said Daniel Horwitz, one of his lawyers. “He will fight to get through this unfortunate set of events.”

    Mr. Madoff’s brother and business colleague, Peter Madoff, declined to comment on the case or discuss its implications for the Madoff firm, which at one point was the largest market maker on the electronic Nasdaq market, regularly operating as both a buyer and seller of a host of widely traded securities. The firm employed hundreds of traders.

    There was some worry on Wall Street that Mr. Madoff’s fall would shake more foundations than his own.

    According to the most recent federal filings, Bernard L. Madoff Investment Securities, the firm he founded in 1960, operated more than two dozen funds overseeing $17 billion.

    These funds have been widely marketed to wealthy investors, hedge funds and other institutional customers for more than a decade, although an S.E.C. filing in the case said the firm reported having 11 to 23 clients at the beginning of this year.

    At the request of the Securities and Exchange Commission, a federal judge appointed a receiver on Thursday evening to secure the Madoff firm’s overseas accounts and warned the firm not to move any assets until he had ruled on whether to freeze the assets.
    A hearing on that request is scheduled for Friday.

    Regulators said they hoped to have a clearer picture of the losses facing investors by that court hearing.
    “We have 16 examiners on site all day and through the night poring over the records,” said Mr. Calamari of the S.E.C.

    The Madoff funds attracted investors with the promise of high returns and low fees. One of Mr. Madoff’s more prominent funds, the Fairfield Sentry fund, reported having $7.3 billion in assets in October and claimed to have paid more than 11 percent interest each year through its 15-year track record.

    Competing hedge fund managers have wondered privately for years how Mr. Madoff generated such high returns, in bull markets and bear, given the generally low-yielding investment strategies he described to his clients.

    “The numbers were too good to be true, for too long,” said Girish Reddy, a managing director at Prisma Partners, an investment firm that invests in hedge funds. “And the supporting infrastructure was weak.” Mr. Reddy said his firm had looked at the Madoff funds but decided against investing in them because their performance was too consistently positive, even in times when the market was incredibly volatile.

    But the essential drama is a personal one — one laid out in the dry language of a criminal complaint by Lev L. Dassin, the acting United States attorney in Manhattan, and a regulatory lawsuit filed by the S.E.C. According to those documents, the first alarm bells rang at the firm on Tuesday, when Mr. Madoff told a senior executive he wanted to pay his employees their annual bonuses in December, two months early.

    Just days earlier, Mr. Madoff had told another senior executive he was struggling to raise cash to cover about $7 billion in requested withdrawals from his clients, and he had appeared “to have been under great stress in the prior weeks,” according to the S.E.C. complaint.

    So on Wednesday, the senior executive visited Mr. Madoff’s office, maintained on a separate floor with records kept under lock and key, and asked for an explanation.

    Instead, Mr. Madoff invited the two executives to his Manhattan apartment that evening. When they joined him there, he told them that his money-management business was “all just one big lie” and “basically, a giant Ponzi scheme.”

    The senior employees understood him to be saying that he had for years been paying returns to certain investors out of the cash received from other investors.

    In that conversation, according to the criminal complaint, Mr. Madoff “stated that he was ‘finished,’ that he had ‘absolutely nothing.’ ”

    By this account, Mr. Madoff told the executives he intended to surrender to the authorities in about a week but first wanted to distribute approximately $200 million to $300 million to “certain selected employees, family and friends.”

    On Thursday morning, however, he was arrested on a single count of securities fraud, which carries a maximum penalty of 20 years in prison and a maximum fine of $5 million.

    According to the S.E.C., Mr. Madoff confessed to an F.B.I. agent that there was “no innocent explanation” for his behavior and he expected to go to jail. He had lost money on his trades, he told the agent, and had “paid investors with money that wasn’t there.”

    Although not a household name, Mr. Madoff’s firm has played a significant role in the structure of Wall Street for decades, both in traditional stock trading and in the development of newer electronic networks for trading equities and derivatives.

    In building those new trading networks, his firm had formed partnerships with some of the largest brokerage businesses on Wall Street, including Goldman Sachs and Merrill Lynch.

    Mr. Madoff founded Bernard L. Madoff Investment Securities in 1960 and liked to tell interviewers about earning his initial stake by working as a lifeguard at city beaches and installing underground sprinkler systems.

    By the early 1980s, his firm was one of the largest independent trading operations in the securities industry.

    The company had around $300 million in assets in 2000 at the height of the Internet bubble and ranked among the top trading and securities firms in the nation.

    Mr. Madoff ran the business with several family members, including his brother Peter, his nephew Charles, his niece Shana and his sons Mark and Andrew.


    Bernard Madoff, securities firm founder, charged with fraud
    Bloomberg News
    December 12, 2008

    The founder and president of Bernard Madoff Investment Securities was charged by federal prosecutors Thursday in an alleged $50-billion fraud at his advisory business.

    Bernard Madoff, 70, was arrested by the FBI and charged with a single count of securities fraud. He was released on a $10-million bond. He was also sued by the Securities and Exchange Commission.

    Madoff's New York firm was the 23rd-largest market maker on Nasdaq in October, handling a daily average of about 50 million shares, exchange data show.

    The firm specialized in handling orders from online brokers in some of the largest U.S. companies, including General Electric Co. and Citigroup Inc.