So if the banking system is going downhill, won't the dollar go with it? Wouldn't it be a better idea to convert some cash over to universal valuable assets like gold and silver?

Just wondering since I'm just learning as things go along. Also, why is this inching close to major crisis? Whats wrong with banks buying each other out? Isn't this similar to Bank of America did during the 90s? Again, honest question since I'm not understanding thingslike some on here.

 

This is the way I see it, without having looked into this in great detail:

The problem isn't necessarily with bank take-overs, such as Bank of America buying out Meryll Lynch, although it presents its own shakeups and uncertainties, specifically to the stock market.

The problem is with something like Lehman Bros, where the bank files for bankruptcy. We don't want the government covering its losses, since this is directly out of our own pockets. The insurance will have to be paid out, only as long as the insurance company has the money to do so. If it doesn't, then the insurance company collapses, meaning every other bank that was insured with it all of the sudden has no insurance. This can trigger quite the chaos, as you can imagine.

Although these bank collapses are not as innocent as they'd like to believe, especially the housing collapse which occurred just so suddenly. There are a LOT of deals being made on this crisis, losses are funneled, money is funneled, ownership transfers, and so on...

 

Here, no sooner did I finish writing the post above as this came through my RSS feed.

Crisis Threatens Insurance Giant

Concerns are mounting about the future of US insurance giant AIG as investors fear a domino effect in the aftermath of Lehman Brothers' collapse.

...

AIG is under pressure to raise money after posting three quarterly losses in a row totalling $18.5bn (£10.3bn).


Below is from its subdivision AIA in Singapore

Tan Peng Hock, 60, said he did not mind surrendering a policy worth about $42,000 despite possible losses.

"I prefer to hold cash for the time being. It's better to be safe than sorry," Mr Tan told the Reuters news agency.

Now, imagine everyone going to get their money... only to find the company has about 5% to 10% of the money they should have.

Here's more:

"Its tentacles reach into every part of the economy," Matthew Bishop of the Economist told the BBC.

He said the consequences of the firm's collapse would be devastating for the financial system.

"It's worse than insurance policies not being valid. They are writing derivative contracts and these have the potential to leave a lot of other banks holding massive losses that they will have to deal with."

 

You are correct. It is my opinion that the dollar is going to get much weaker because of this for 2 reasons...
#1 - The Fed is going to cut the interest rate again to help people try to refinance to payments they can afford - that as opposed to all the banks forclosing on homes that sit on the market and don't sell because people can't afford them. When the Fed drops the rate, it makes our dollar get weaker against other currencies. It is easier for them to come here and borrow against our money cheaply, they can buy our goods more cheaply, and they get the favorable exchange rates to boot.

#2 - The big reason this will impact the US so heavily is because the crisis is over our real estate and mortgage issues. It is American property that is in default here. That means it is our capital that is going to be put on the market to the highest bidder. Also, these are American financial institutions that are going under. That means their capitalization is what has died, and these American companies are going to have all their assets sold off to the highest bidders as well. We all know who the highest bidders will be and where they are based from, right? London, Geneva, Hong Kong, Beijing, Dubai, etc.

The problem with banks consolidating even more is that there is less competition. Also, the control over the market becomes far greater. This has historically been the problem in a capitalistic society.

Another point I'd like to make is that we typically think of a bank as some kind of sovereign institution that has assets, holdings, and pretty much runs or controls themselves. Couldn't be further from the truth of what REALLY goes on behind the cloak of modern banking. Let's pick on Bank of America for a bit...
Bank of America Corporation (BAC)
Market Cap: 115.23B
P/E (ttm): 13.92
EPS (ttm): 1.82
Div & Yield: 2.56 (7.60%)

Major Holders...
% of Shares Held by All Insider and 5% Owners: 1%
% of Shares Held by Institutional & Mutual Fund Owners: 60%
% of Float Held by Institutional & Mutual Fund Owners: 60%
Number of Institutions Holding Shares: 1348

TOP INSTITUTIONAL HOLDERS
Barclays Global Investors UK Holdings Ltd 181,112,472 shares 3.97% of shares outstanding $4,323,154,706 value as of 30-Jun-08
STATE STREET CORPORATION 165,567,382 / 3.63 / $3,952,093,408
VANGUARD GROUP, INC. (THE) 138,310,289 / 3.03 / $3,301,466,598
FMR LLC 105,234,132 / 2.31 / $2,511,938,730
Capital Research Global Investors 103,697,440 / 2.27 / $2,475,257,892
Capital World Investors 94,766,950 / 2.08 / $2,262,087,096
AXA 93,349,397 / 2.05 / $2,228,250,106
WELLINGTON MANAGEMENT COMPANY, LLP 71,438,047 / 1.57 / $1,705,226,181
Bank of New York Mellon Corporation 61,653,718 / 1.35 / $1,471,674,248
MORGAN STANLEY 54,719,404 / 1.20 / $1,306,152,173

TOP MUTUAL FUND HOLDERS
Capital Research Global Investors 103,697,440 / 2.27 / $2,475,257,892
VANGUARD 500 INDEX FUND 42,225,539 / .93 / $1,600,770,183
WASHINGTON MUTUAL INVESTORS FUND 41,065,000 / .90 / $980,221,550
INVESTMENT COMPANY OF AMERICA 36,700,800 / .80 / $876,048,096
VANGUARD TOTAL STOCK MARKET INDEX FUND 31,519,011 / .69 / $1,194,885,707
VANGUARD/WINDSOR II 27,929,211 / .61 / $1,048,462,580
FRANKLIN CUSTODIAN FUNDS-INCOME FUND 26,000,000 / .57 / $1,072,760,000
VANGUARD INSTITUTIONAL INDEX FUND-INSTITUTIONAL INDEX FD 25,897,643 / .57 / $981,779,646
COLLEGE RETIREMENT EQUITIES FUND-STOCK ACCOUNT 25,781,537 / .57 / $977,378,067
SPDR TRUST SERIES 1 25,737,332 / .56 / $1,293,815,679

What you should see from this is that Bank of America is mostly owned and controlled by... other banks and financial institutions. It should not be alarming to find Barclays UK at the top of the list. They are also the big holder in ExxonMobil, Marathon oil, Hess, and most other major oil players. They are also major holders in Wachovia Bank NA (3rd at 4.46%), JP MOrgan Chase (1st at 4.59%), Citigroup (1st at 4.41%), Chemical Bank (5th at 3.76%), and so on.

If you begin to go up the chain one more time, you will see that the bankers and investors listed as major holders of Bank of America are further owned by more financial groups, but fewer of them. They are also more exclusive and privately owned - not publically. We studied this phenomenon earlier in this thread - in particularly with Barclays UK, which is 26% privately owned.

So in summary, there is a pyramid effect that is in place around the world, in which the companies that the average person deals with (common companies like Exxon, WalMart, Bank of America, Ford, GM, etc) are at the bottom of the pyramid. As we go up through the layers of ownership, the pyramid gets narrower and converts from the investments of common shareholders (people like you and I who own a few thousand shares of the company) into investments of mutual funds and 401k mamagers, up to the next level of preffered-class shares that are held by financial groups and banks (this is the level where control is embedded via preffered shares), and even further up you find the groups that own the banks and financial groups, then at the top of the pyramid you find a very small group of families that own the groups that own the banks.

Now, to answer your question directly - having the above explanatin as the backdrop - the "major crisis" is that this collapse (or at least consolidation) of the banking/finance industry is just putting that much more power and control into the hands of those who are already heavy players in the game. We are inching ever-closer to a "king of the world" situation in which that king is the leader of the family that controls "the bank" that controls the world through finances. That scares the bajeezes out of me.


I sincerely appreciate the honesty and candor of your question, and I hope this has explained something to you in a way never previously done. I also hope that you will take this personally and start doing your own research about these players and how their game is played. My suggestion would be to start with any large company you think might be doing something shady, unjustified, or abnormal, and start looking into them. Look up their stcks and see who owns them. Then see who owns their owners. Look at their business dealings and how they have been created and who they benefitted. I think you will be amazed at what you find and how often it comes back to a small group of the same companies and people.
---> Quick example... we mentioned Chase Bank earlier. As an investment bank, what would they care about the uprising of a band of rebels in Mexico? Apparently, they cared enough and had enough influence over the president of Mexico to help incite a war against the rebels as noted in this quote.
"On January 13, 1995 the Chase Manhattan Bank sent a memo calling on the Mexican government to crush the indigenous Zapatista uprising, stating "While Chiapas, in our opinion, does not pose a fundamental threat to Mexican political stability, it is perceived to be so by many in the investment community. The government will need to eliminate the Zapatistas to demonstrate their effective control of the national territory and of security policy." The memo was authored by Riordan Roett who claimed it was "essential, from the investor point-of-view, to resolve the Chiapas issue as quickly as possible". Chase Bank spokesman John Anderson responded on March 13, saying that the statements "in no way represent the views of the Chase Manhattan Corp.," despite being written on bank stationery and being distributed in a research document representing the bank. The memo was distributed just two days before Mexican president Ernesto Zedillo ordered a military crackdown on the Zapatista rebels.
Related articles...
Chase Bank says Mexico memo 'not policy.'
US Bank Orders Hit on Marcos

The truth is out there, you just need to look for it... nobody is going to hand it to you.
I would be more than happy to help you in any way - just say the word.

 

Just an FYI... Let's look at the three big companies in trouble...

Who owns Merrill-Lynch?
% of Shares Held by All Insider and 5% Owners: 10%
% of Shares Held by Institutional & Mutual Fund Owners: 52%
% of Float Held by Institutional & Mutual Fund Owners: 58%
Number of Institutions Holding Shares: 672

TOP INSTITUTIONAL HOLDERS
Temasek Holdings (Private) Limited 86,949,594 / 5.69 / $2,757,171,625
STATE STREET CORPORATION 81,935,612 / 5.36 / $2,598,178,256
DAVIS SELECTED ADVISERS, LP 60,026,072 / 3.93 / $1,903,426,743
AXA 48,345,162 / 3.16 / $1,533,025,087
Barclays Global Investors UK Holdings Ltd 40,698,727 / 2.66 / $1,290,556,633 (Barclays UK is into everything... )
LORD ABBETT & CO 31,359,644 / 2.05 / $994,414,311
VANGUARD GROUP, INC. (THE) 29,543,141 / 1.93 / $936,813,001
Clearbridge Advisors, LLC 24,352,951 / 1.59 / $772,232,076
PRICE (T.ROWE) ASSOCIATES INC 24,099,828 / 1.58 / $764,205,545
MORGAN STANLEY 18,691,718 / 1.22 / $592,714,377



NOW...


And who owns AIG...
% of Shares Held by All Insider and 5% Owners: 13%
% of Shares Held by Institutional & Mutual Fund Owners: 73%
% of Float Held by Institutional & Mutual Fund Owners: 84%
Number of Institutions Holding Shares: 1184

TOP INSTITUTIONAL HOLDERS
FMR LLC 160,817,676 / 5.98 / $4,255,235,706
AXA 132,593,871 / 4.93 / $3,508,433,826
DODGE & *** INC 114,148,972 / 4.25 / $3,020,381,799
STATE STREET CORPORATION 96,320,952 / 3.58 / $2,548,652,389
Barclays Global Investors UK Holdings Ltd 94,039,496 / 3.50 / $2,488,285,064 (did I mention Barclays UK is into everything?)
Capital Research Global Investors 90,182,600 / 3.35 / $2,386,231,596
VANGUARD GROUP, INC. (THE) 78,906,131 / 2.93 / $2,087,856,226
DAVIS SELECTED ADVISERS, LP 73,991,712 / 2.75 / $1,957,820,699
FRANKLIN RESOURCES, INC 45,658,943 / 1.70 / $1,208,135,631
WELLINGTON MANAGEMENT COMPANY, LLP 32,756,840 / 1.22 / $866,745,986


NOW...

Who owns Lehman Bros...
% of Shares Held by All Insider and 5% Owners: 3%
% of Shares Held by Institutional & Mutual Fund Owners: 79%
% of Float Held by Institutional & Mutual Fund Owners: 81%
Number of Institutions Holding Shares: 496

TOP INSTITUTIONAL HOLDERS
AXA 65,706,019 / 9.46 / $1,301,636,236
FMR LLC 39,508,981 / 5.69 / $782,672,913
Clearbridge Advisors, LLC 39,152,716 / 5.64 / $775,615,303 8
Barclays Global Investors UK Holdings Ltd 27,197,060 / 3.92 / $538,773,758 (did I mention AGAIN that Barclays UK is into everything?)
WELLINGTON MANAGEMENT COMPANY, LLP 25,532,766 / 3.68 / $505,804,094
JANUS CAPITAL MANAGEMENT, LLC 22,463,080 / 3.23 / $444,993,614
STATE STREET CORPORATION 21,734,886 / 3.13 / $430,568,091
VANGUARD GROUP, INC. (THE) 20,079,171 / 2.89 / $397,768,377
Norges Bank Investment Management 17,527,013 / 2.52 / $347,210,127
PZENA INVESTMENT MANAGEMENT, LLC 11,603,523 / 1.67 / $229,865,790




Just match the colors between the three... only names in black appear once.
Isn't it amazing how many of the same players just keep coming up?

REMEMBER - Barclays is the one who was going to buy-out Lehman Bros over the weekend, but backed out, now showing interest in only buying a portion of the company that handles "U.S. broker-dealer business, including equity, fixed income, M&A advisory and other parts."
Does it not get the gears grinding when you think that Barclays is a major holder in Lehman already (4th largest holder of controlling shares), yet they allowed the business to get into this kind of shape? Or was it really a surprise to them? And why would you wait so late to even begin talks about a takeover or buyout? And why would you even be interested in just a part of that company TODAY as indicated in this article?

C'mon guys... doesn't something smell just a little bit fishy?

 

Proud

I colleague of mine (who once worked for Lehman Brothers in the UK) said to me last week that Jewish owned banks just don't go bust... make of that what you will.

 

After hours it was announced that AIG might be taken over by the government.

 

If they let AIG fall, it will spell quite the catastrophy. This way, they are trying to delay it. Though, this just means that the burden of paying for its failures went from the bankers directly to the taxpayers.

 

I'm still trying to understand how a company that made $4B in profit on $46.7B in revenue in 2007 AND featured on Fortune 500's list, ranking 47th... could suddenly collapse?

http://money.cnn.com/magazines/fortu...shots/780.html

EDIT: Ditto 2008's results...

http://money.cnn.com/magazines/fortu...ist/index.html

 

The numbers don't make any sense because they don't have to. Whichever numbers will serve the needed purpose - those are the numbers that are published at a given point in time.

It smells like massive accounting fraud... Just look what's happening. The companies started losing money on mortgages. So they passed the losses to the taxpayers. By the use of some creative accounting, they dumped it all into Freddi Mac/Fannie Mae, Lehman Bros, and AIG.

Finance sector is very, very smart and very deceitful.

 

Hey it looks like you guys have figured out that rich people run the world. Hats off to you!

I'll check back on this thread when the proletariat has seized the means of production.

 

AIG is government-owned as of this morning's news...

Fed rescues AIG, Barclays buys Lehman U.S. unit

"The bailout, made amid a cataclysmic week for the financial sector, marks a reversal of Washington's vow not to step in and calls for the U.S. Federal Reserve to lend up to $85 billion to AIG for two years in exchange for a 79.9 percent equity stake."

Funny... the Federal Reserve is not controlled by Congress or the President.
So how is it that they have called for the Fed to step-in and lend them $85B?
Another thing... if you are LENDING something to someone, you expect it back and/or charge interest. When you are BUYING something, you get a good or service in exchange for the money... like shares in the organization.

What I'm saying is, Congress did not just "rescue" AIG... congress just approved the move that the Federal Reserve WANTED to make, superceeding any SEC or regulatory approvals that would have been needed if it were a commercial buyout or takeover. AND, it was just that - a takeover. The Fed now holds 80% of AIG for pennies on the dollar, since AIG fell from $19/share to a low of $1.74/share.

"AIG will pay interest at a steep 8.5 percentage points above the three-month London Interbank Offered Rate, equal to about 11.4 percent. That gives AIG a big incentive to embark on a massive asset sale program to pay back the loan quickly. "
Crazier things have happened, but I won't hold myb reath waiting for it.


""What the U.S. government is doing is basically delaying the recovery of the economy really by keeping AIG alive and by going back to the printing press to issue more U.S. dollars, which long term should be negative to the U.S. dollar," said Ronald Chan, chief investment offer for Asian equities with Fortis Investments in Hong Kong, where he oversees about $1.5 billion."
YUP! This guy nailed it. He won't be around much longer.

""We're essentially continuing a system where profits are privatized and ... losses socialized," said Nouriel Roubini, a professor at New York University's Stern School of Business, adding that automakers, airlines and other struggling businesses will be lining up for a government bailout. "
This guy Roubini is interesting to watch... we was an economic advisor to the IMF from 2001 to 2004. He's also right about this, too.


It is my humble opinion that the governmental agencies that should be regulating such business (like the SEC) should never have allowed AIG to become such a giant, with critical links into all aspects of the financial markets. It has essentially made itself a monopolistic entity. I think that violates the very cannons and principles of what the SEC was established to prevent. My point, this whole situation could have been avoided... but that's a whole 'nuther subject.

 

Like the kid in the back of the classroom, just because he doesn't speak up doesn't mean he isn't learning.

Please don't stop. This 52-year old kid has learned more from your history of economics than the rest of his life combined.

I did not go to college. But I can sure see that some that did, have really messed up this country (and possibly the world).

And with your help, I am beginning to see why.

Thank you,
jms

 

I am very humbled and honored to have made some difference to you.
From my heart - thank you for the response above.

I too am typically the kid in the back of the room. My father told me long ago, "If your lips are moving, you ain't learning anything." I was into my 20s before I really understood what he meant... and as usual, he was right. I typically lay-low and listen, then go verify things that I doubt or don't trust, then slowly begin to verbalize if at all. This thread has unintentionally become something different though. Maybe it's because of what we are all seeing happen right in front of us, maybe it's because there are so many educated and intelligent folks in this forum that are participating, maybe it's just that I'm more fed-up with the status-quo... I don't know... but as long as someone cares enough to read and be involved, and as long as the site owners and moderators don't mind, I would love to see us continue to monitor and discuss what is happening to our economy, our jobs, our leadership, and our futures. It pervades every aspect of our lives, from the food we eat to the cars we drive to the homes we live in. I think it warrants some "intellectual investment" and discussion.

Please talk to those you know and love and share what is going on with them too. You'll find it's not so easy to do without coming across as some kind of radical fruitcake, and you'll be surprised how many will doubt or disbelieve your claims. Just give them some facts, and let them draw their own conclusions.

Best Regards,
PP

 

So, if AIG would have been allowed to failed, how many banks would have suffered? Would the whole system have collapsed and allowed foreigners to come in and buy up our banking system for pennies on the dollar?

Part of me wonders why they feds were given a controlling interest in a company for money that is required to pay back? Shouldn't the fed buying stock not require payback in a interest type loan?

Also, who in Congress "told" the Reserve to do this?