Tag Archives: Banks

Bailouts – Reality vs. Fiction

Would Einstein find it insane that the governing elite would encourage the 4 biggest banks, that were the main culprits in creating a worldwide financial collapse, to actually get bigger? The largest banks in the U.S. now control 72% of all the deposits in the country versus 68.5% in 2008.

 

The Too Big To Fail are now Too Bigger To Fail. Rather than liquidating the bad debts, breaking up the insolvent banks, selling off the good assets to well run banks, firing the executives, and wiping out the shareholders & bondholders foolish enough to invest in these badly run casinos, the powers that be chose to protect their fellow .01% brethren and throw the 99% under the bus.

 

The Fed’s latest actions in cooperating with foreign central banks to undertake liquidity swaps of dollars for foreign currencies is another reason why Congress needs enhanced power to oversee and audit the Fed.

 

For More: http://townhall.com/columnists/ziadabdelnour/2012/02/22/bailouts__reality_vs_fiction/page/2

Wall Street Power – Facts v/s Fiction

Having been on Wall Street for around three decades now, I am often asked – mostly by foreign investors – , what’s so special about Wall Street that gets people’s attention the world over and what are the facts from the fiction when it comes to this “Mecca of Finance”.

 

Here are some of my personal thoughts.

 

I guess it all started when the Panic of 1907 occurred and the New York Stock Exchange fell 50% in a year peak to trough, JP Morgan bought stocks and called up a few other Wall Street titans to buy. This prevented a total collapse of the financial system and the US economy.  JP Morgan did this ostensibly to protect the country. But sometimes doing the right thing at the right time is a necessary expense to build your brand and to prove to the government and your critics that you yourself don’t need to be regulated – so you and your tight oligopoly can continue making obscene profits in normal times…. I believe this is around the time Wall Street was really shaped- followed by the creation of the Federal Reserve in 1913 and all other regulatory agencies over the next 20 years.

 

So what makes Wall Street so powerful and what are the facts from the fiction out there?

 

Let’s start by the most obvious.

 

1. Wall Street is important because that’s where the money is. When they asked John Dillinger, a famous bank robber, why he robbed banks, that was his answer.

 

2. The titans from Wall Street banks have been closely tied to Presidents, Treasury secretaries, finance ministers, CEOs and prime ministers for a long time. So, quite simply, the folks who run Wall Street care about power and they know how to get it. Money is the means Wall Street titans use to accumulate power and they love it. They love having it. Getting more of it. Befriending those who have it, and befriending those connected to the powerful.

 

3. Money is Wall Street’s currency to get power. When I fundraised for Romney, I spent a lot of time on Park Avenue. All the fundraisers were held there. Well 90%…. Then I got a glimpse of how things worked. These folks all gave a ton of money and did a ton of fundraising. Like, a boatload. So when you’re a leading candidate for President, you go to the wealthiest financier’s homes late at night for meetings, so you can ask them for advice they were going to give you anyway, while they make sure they have continued access to you so they can work those levers of power to their advantage – or at least not let the government get in their way.

 

4. Besides political fundraising, Wall Street does tons of highly relevant tasks and favors to big governments, big companies, big pensions and billionaires. If you’re one of those people, Wall Street can and will get you the money you need or want, for a fee. That’s if you need a lot of it and you can pay it back -even if you have to print it or confiscate it. Argentina, I’m looking at you.

 

5. Wall Street knows the folks with the real money who are seeking investments and hedges and speculative positions. Wall Street knows how to transfer all types of risks – currency, market, credit, interest rate, company, litigation and other risks – from those who want to get rid of it to those who are willing to be paid to take it.

 

6. Wall Street also knows market making and price discovery and efficiency. It will trade and trade and trade money and financial instruments and commodities and lots of other things in its various forms. So, Wall Street is important. And it uses its importance to be powerful.

 

7. To date, the Secretaries of Treasury have come from Goldman Sachs, Morgan Stanley, Merrill Lynch, etc…. When they leave the government, they go back to those elite banks. Summers, Geithner, Rubin, etc… all went to banks or private equity funds when they left government work at some point (Summers was at a fund after leaving Harvard).

 

8. Certainly everybody’s hands are a little bit dirty when it comes to the global financial crisis. A lot of dumb mistakes were made all around. Some of them were idiosyncratic in nature (you can pinpoint many questionable trades made by both investment banks and hedge funds), and some of the mistakes were systemic in nature (think Fannie and Freddie).  You can easily assign blame to any market participant you want to, but at the end of the day, if you construct a pie chart of all the blame-able people in 2008, my hunch is that hedge funds would make up a very small portion of that pie. The reason is that they do not control public policy and regulations (which play a huge role in bringing about the crisis), nor do hedge funds put on as much risk as other market participants do because they simply do not control that much capital. Fannie, Freddie, pension funds, insurance companies, foreign central banks, investment banks, etc., dwarf the hedge fund industry by many, many orders of magnitude. I think it’s fine go out of your way and blame the 20-something hedge fund trader at Magnetar or Paulson for constructing trades which have a vested interest in seeing the mortgage market fall apart, because there’s something probably morally questionable about that, but understand that they didn’t cause that market collapse because they can’t. And before you say anything: Yes, I am probably biased being a Wall Street financier myself but No, I did not work in the hedge fund industry during the relevant time period.

 

9. If you think the Hollywood movie “The Wolf of Wall Street” is of any characterization of the real Wall Street, you are delusional. Nothing to do with reality and I frankly expected much better from an overrated Scorsese or a supposedly brilliant De Caprio.  The movie is total fantasy addressed basically to an ignorant public and/or third rate stockbroker wannabees who know squat but think they know it all and are hustling like the movie producer and lead actor to dump their crap to the world… Sorry to spoil your enthusiasm.

 

10. On the same note, if you think that Wall Street abides by any of the propaganda as per below you are equally delusional. Time for a rude awakening.

 

  • We don’t care about social costs
  • We worship the invisible hand
  • We don’t care about the environment
  • We all go to business schools
  • We’re all elitist and are all rich
  • We’re all conservatives

I met Hank Paulson very briefly after he left Treasury. I name dropped a current deputy secretary of state I knew he would know from Goldman Sachs. He had a business going, helping big important governments around the world. This meeting led me to a number of similar meetings to the high and mighty which gave me a real glimpse trough luck and fate and hard work of how the financial elite work.

 

Bottom Line: Consider it like this.  Imagine if all supermarkets, grocers, and other sellers of food closed suddenly.  We need food to survive and function and would shrivel up and die without it.  Now imagine if the major retailers of consumer electronics closed.  The effect would be hugely significant throughout our society, but we would be able to continue on.

 

To major corporations, Wall Street is the “supermarkets, grocers, and food sellers.”  Wall Street provides them with the lifeblood, money, that they need to continue their operations.  Thus, Wall Street has power over them.

 

Now that you know who runs America and the world, I strongly suggest to anyone of you wanting to build a career in any industry to spend some time there – even a stint – . It is an experience second to none which will benefit you in the long run while truly learning how the “money world” works.

 

Share your thoughts….

Media is Most Effective Weapon of Mass Oppression Humanity

Seventeen years ago, I read a book called The Evolving Self. Though I didn’t realize it at the time, it profoundly affected the direction of my life.

Since reading that book, I have dedicated my life to coming ever closer to getting a glimpse of the universal order, and of our part in it.

After years of research and analysis, I’ve come to the conclusion that we, in fact, live in a neo-feudal society built on debt and mental slavery.

That may sound like over-the-top rhetoric, and it obviously sounds extreme to propagandized and conditioned minds, and yes, it is extreme. However, it is the unfortunate reality of the present situation. The facts are there for the rational and unbiased mind to absorb and comprehend.

Let’s start by giving some context and perspective on present circumstances by breaking down some economic data. As Thomas Jefferson once said, “Enlighten the people generally, and tyranny and oppressions of body and mind will vanish like evil spirits at the dawn of day.”

Read More: Media is Most Effective Weapon

Thank you

Ziad K Abdelnour

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The Challenges and Opportunities in Turkey

Challenges and Opportunities Turkey

Challenges and Opportunities Turkey

Turkey is today at the center of the world with on one side Russia, on another side the Gulf countries, and on the other side the Central East Asian countries., it is without a doubt turning into a tourist and financial and investment center in the region second to none.

Having bounced back from its own profound financial crises in 1994 and 2000, Turkey is indeed well prepared today to ride out the current global economic storm.

With the bank’s capital adequacy ratios at more than 17% — it is clear that Turkish banks are today very liquid and stable, even despite the adverse global market conditions we are facing.

Because of the country’s political stability since 2003, its financial market stability, and the liquidity of its banks, investors are today flocking to Turkey to invest in there.

In the last 30 years for example, and up to 2003, Turkey had only $5 billion or $6 billion in foreign direct investments. Since 2003, the country have had more than $15 billion to $20 billion in direct investments as equity.

Read More: Opportunities in Turkey

Thank you

Ziad K Abdelnour

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How can we Avoid another 2007-2008 type Financial Crisis in the Future?

Financial Crisis

The financial system may well have recovered more quickly if the bailouts hadn’t happened, but the suffering in the meantime would most likely have been unacceptable

The financial system may well have recovered more quickly if the bailouts hadn’t happened, but the suffering in the meantime would most likely have been unacceptable. Everyone who had savings would have seen them wiped out and a great many businesses would have ceased trading because they depend on credit for their cash flow, resulting in mass unemployment. Military coups in previously stable democratic countries could not have been ruled out and the prospect of extreme left or right wing groups taking control would have been a real possibility. The global economy was able to absorb localized banking collapses such as that in Iceland or of Lehman Brothers, but the human cost of a wider collapse would have been far worse.

The bailouts have been “successful” in the sense that some stability has returned, but they have not solved the underlying problem. Despite commitments in some areas to split up retail and investment banking and to improve capital ratios, the moral hazard remains because banks know they are too big to fail and will be bailed out again should the need arise. Only a total, irreversible disengagement of government from the financial sector could resolve this, and that is politically unrealistic. The main issue remains that the real cost of the bailouts is that they have reinforced the promise which was the root cause of the problem, that governments are there to rescue the banks when they fail.

Continuous Reading: How can we avoid another 2007-2008 type Financial Crisis in the Future?

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