Dealbreaker Editor: "Wall Street Is Broken"

These headlines are very scary. How bad is this really? Are we looking at soup kitchens? Should we put what little money we have under the pillow?

We're already calling it Black Sunday. It's very, very, bad, and things may deteriorate further. This is as bad as anyone alive has ever seen it. Wall Street is broken, the independent investment banks that have existed since the Great Depression are passing from the scene and we may never see their kind again. Your money is safe if it's in an FDIC insured account [one day readers, we will figure out what that is], although even there it is threatened by inflation. There aren't many places to hide. I'm sorry that's so negative but these are dark times.

How come the government didn't do a bailout this time the way they did for Fannie and Freddie?

Fannie and Freddie were different from Lehman in five ways. First, Fannie and Freddie were much bigger. Second, Fannie and Freddie were far more deeply connected to the political machinery in Washington. Third, the government decided that Lehman could be allowed to fail without bringing down the rest of the financial system while Fannie and Freddie were seen as more central to our financial and real estate economies. Fourth, internationally, Fannie and Freddie were widely viewed as pseudo-arms of the US government and their bonds were heavily owned by foreign governments. Their failure was viewed a possibly sparking a foreign policy crisis.

Finally, Lehman's timing was wrong. The sense was that the bailouts were creating "moral hazard," encouraging risky behavior by shielding Wall Street from the consequences of risk. The government was looking for an opportunity to show that we're still a free market society, where those who profit from good times feel the pain from the bad times. Allowing failure was seen as a necessary act of creative destruction.

Read the whole story here.

Comments

[Rule Of Law]

Fools--wake up. Wall Street is not broken.

Everything that is happening has been planned for a very long time and is playing out exactly as envisioned. The greatest transfer of wealth--the robbery of America--is happening Just as Wall street and the Republicans intended it to.

To now blame it all on incompetence or lack of vision and foresight, poor economic policy or deregulation run amok is short sighted and delusional thinking that allows these modern day robber barons off the hook for their deliberate Crimes!

No! Wall Street is not broken. America is Broken!

[mrcontinental]

You tell'em RoL. This was designed to steal the greatest accumilation of wealth (the baby boomers) ever in the hands of the average citizen. I predicted this years ago and everyone laughed. Millions who thought they could retire soon WILL NOT be able to. And this is FAR from being over...this is the bottom of the second inning at best.

[Rule Of Law]

mrcontinental, really good to hear from you. This gilding of the lilly by the press to make us believe that this highly trained master class has somehow just screwed the pooch makes me mad enough to march. I am about to give up on these small minded individuals who think that, ooops, accidents happen! EVERY TEN YEARS! Like eclipses and comets and other natural occurences that can be predicted years in advance. Someone wrote today that we are beyond pity because every 4 years we let the 1% fool us again. And again....

The Robber Barons of today are every bit as avaricious, brutal and self interested as those of a century ago--perhaps even more so as they know there is no manifest destiny, only power and the will to use it. And we, sheep, deserve no pity willingly letting ourselves be led to the slaughter.

[howardley]

Not only Wall Street is broken but the real economy is in a very bad shape too. To underestand what is a recession and why it happens I suggest to read this informative article:
http://democracyandsocialism.com/Articles/WhyRecession.html

[Icantbelieveher]

And McCain is going to give everyone more tax cuts. It's a lie. He's lied about everything else and is saying whatever he needs to say to get elected. I don't think he has any plans whatsoever to cut any taxes!! And if he does, he will totally destroy this country!

[kkuchenb]

This the third time today I've read that stupid phrase "creative distruction." If you are a normal person with a normal job and normal retirement savings, this is destructive distruction.

And let's not forget that McCain wants to do what Bush tried to do, to privatize Social Security, which means gambling your savings in this broken market.

[FogBelter]

"Creative Destruction" is the excuse that the drunk in the 4x4 uses on the cop when he tries to explain driving through the glass wall of a Mini Mart ... doesn't carry much weight.

[Bjarni]

Firstly, I'm not in favor of the Privitizing of Social Security.
But in case you didn't know, alot of that money has already been spent.
So much for secure money for retirement. Government has done a good job of spending our forced "savings"

[Rule Of Law]

This is nothing more than the long range plan of the top financial firms that will be left standing, coming to fruition before Bush is out. This is world wide consolidation of the life blood of nations. Nothing less. Goldman-Sachs and all their trainees in Government service, like Paulson, Greenspan, Rubin and on and on, are pulling the levers of the machine, and we had better get wise to it, or hold on for that proverbial bumpy ride.

[javaman]

FDIC has $50 billion. There are over $1 trillion in banks. Now, call me crazy, but some how I don't think all the money is going to be covered. But what do I know?

Next question: where does bill gates keep his dough?

[Mike169]

The Dow is down 504 points. We haven't seen this since Bush ! was in office. Getting the picture folks?

[BlueZoo]

This is Wall Street's Bastille Day! Off with their heads! The greedy bastards need a comeuppance!

[larry278]

When you hocked your blade to meet a margin call, you can't do any cutting unless you plan to bite their heads off. That does work for snakes, if you're careful.