A Wall Street Week Of Biblical Proportions

With Talk Of An Impending Financial Armageddon, The Gov't Takes Unprecedented Action. But Where Will It Lead?

(CBS)  We're taking stock this morning of the economic whirlwind that swept from Wall Street across the world this past week. Our Cover Story is reported by Martha Teichner:

---

At least the Dow ended the week up … 410 points Thursday, 366 points Friday, a glimmer of optimism that the economy might not be allowed to implode after all.

From the moment word reached Wall Street Thursday afternoon that Treasury Secretary Henry Paulson was about to meet with congressional leaders about a massive bailout plan, stocks soared.

The photo op after the meeting was a picture of cooperation and bipartisan unity.

Then there was Paulson, looking like a man in a hurry, announcing his plan:
"We must now take further, decisive action to fundamentally and comprehensively address the root cause of our financial system's stresses."

And President Bush, speaking to an audience larger than Wall Street, on Friday morning: "Investors should know that the United States government is taking action to restore confidence in America's financial markets so they can thrive again."

Confidence … there is no more ephemeral, or essential, component in what amounts to a huge gamble that our leaders can pull our economy (perhaps even the global economy) back from the brink of collapse. Yes, that's apparently how bad things had gotten.

"These are the most difficult times I think our markets have faced in the last 200 years," former Securities and Exchange Commissioner Harvey Pitt told Martha Teichner.

Pitt spent a dozen years at the SEC and was its head from 2001-2003.

"Certainly it's been historical; it could've been Biblical," said Mark Zandi, chief economist of Moody's Economy.com and author of the book "Financial Shock: A 360º Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis" (FT press). "I mean, I was waiting for the locusts to fly through my office at one point."

"This could be comparable to the Great Depression in terms of just its effect on financial markets," said Robert Reich.

Now a professor at Berkeley, Reich was Labor Secretary under Bill Clinton. We asked him what lots of Americans are asking: How did it come to this?

"The people who were issuing warnings were not listened to," he said, "partly because Wall Street is very powerful in Washington. Wall Street kept on saying, 'Well, don't worry about anything, we have everything under control, we don't need more regulation.'"

Regulatory firewalls were put in place to prevent the financial excesses that led to the Great Depression. By the 1970s, banks and securities firms, caught up in major turf wars, lobbied for deregulation … and got it.

"We had over-leveraging in many of these firms," said Pitt, "and the net result was that people were leveraged, in some cases, as high as 100 to one."

People were also making piles of money by trading in packages of questionable mortgages and complicated, unregulated securities, called derivatives.

"Derivatives, essentially, are bets on how stocks or how bonds are going to move, and they're called derivatives because they are derived from those movement," said Reich.

But what if you bet wrong? That, say, the housing market will just keep going up but instead, the subprime mortgage meltdown happens? The whole house of cards collapses, taking Bear Stearns, Fannie Mae and Freddie Mac, Lehman Brothers, Merrill Lynch and AIG with it.

"We're scared, we're panicked, we don't even trust our money market mutual funds, which we all thought was one step removed from the mattress," said Zandi.

How's this for scared: Last Wednesday, after problems emerged in several funds, investors pulled nearly $90 billion out of others.

"Confidence, or the lack thereof, is what's driving this mess that we're in," Zandi said.

Which is why the U.S. government felt it had to intervene … fast.

"I am convinced that this bold approach will cost American families far less than the alternative: a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion," Paulson said this week, in announcing the government's bid to bail out struggling financial institutions by purchasing their bad debt, at the cost of hundreds of billions of dollars.

We know a little more today about the proposal Paulson took to Congress: it would give the Treasury two years and $700 billion of taxpayer money to buy up distressed mortgages.

And then there's this scary number: $11,315,000,000,000, to which the federal debt ceiling would have to be raised, from the current $10.6 trillion dollars.

So will the bailout end the crisis?

"I think we're in the sixth inning of a nine-inning game," Zandi said, "and I don't think this is a double-header. So I think we're closer to the end than the beginning."

"Until we know for certain we've reached the bottom, that up-and-down motion is just going to continue," Reich said.

"I think that there will be a certain amount of continued difficulty through the end of the year," Pitt predicted.

But first there's tomorrow, when markets around the world take their next vote of confidence on the American economy as it prepares for emergency shock treatment.

[generey]

Nothing but a big game, played by the "big boy''s" with the little people as pawns. Same story, different day.

[jswilliams451]

The days when we allow the capital markets to be run essentially like a big casino are OVER.

That model has obviously failed miserably. We (the public; the taxpayer; our government) are going to get control of this situation for the time being. And in the future, the capital markets are going to be TOLD what they can and can%u2019t do.

Those that don%u2019t like that, can pull their money out, and put it in their mattress for all we (the public) care. And I say good riddance.

I mean, get real. The public (government) just had to step in, and prevent another Great Depression. If ANYBODY thinks after the dust has settled on all this, that they are just going to be allowed to move forward, business as usual, then you are SADLY mistaken, my friend.

The firestorm of new regulations and enforcement vehicles coming down the road in the next few months is going to make Baghdad %u201Cshock and awe%u201D look like a firecracker.

If you want to be allowed to buy or sell something, that you DON%u2019T EVEN OWN, you can just put your money in some Podunk third world foreign market that will allow you to do anything you *** well please. The United States Taxpayer has had ENOUGH!!!

Again, good riddance.

[truthislife1]

No matter what is read or printed, this was very, very close to a complete enconomic meltdown. This was close!!!!

[txgrouch2006]

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury...with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship..."

Attributed to Tytler, but true origins are in dispute.

Now, what happens when the MEMBERS OF CONGRESS discover that THEY can vote THEMSELVES largess from the pubic treasury?

Many of the members of Congress LENT money. THEY ARE BAILING THEMSELVES OUT.

[txgrouch2006]

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury...with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship..."

Attributed to Tytler, but true origins are in dispute.

ONE more question: WHO has put himself in the position to BE THAT DICTATOR???

[jswilliams451]

No bailout plan for Wall Street should be passed without adding a bailout for individual homeowners that that losing their homes as well.

Bail out Wall Street, and not help the individual???

No stinking way!!!!

[txgrouch2006]

The days when we allow the capital markets to be run essentially like a big casino are OVER.
Posted by willia451 at 09:29 AM : Sep 21, 2008

It''s a "casino" only for ignorant investors who buy stocks blindly without researching the businesses that issued the stock to borrow money.

For those who KNOW what they''re doing, it''s an opportunity for UNLIMITED gains from INTELLIGENT lending to business that have a PROMISING future.

Warren Buffett has spent his life doing that.

[jydavis1]

Looks like the Wall Street Elite has pulled of the greatest heist in history while continuing to laugh at you America ...

YOU CAN FIGHT BACK:

take the majority of your money out of the banking system - a) it isn''t safe anymore and b) whatever you do leave will surely be used against you .. STOP FEEDING THE BEAST..

Spend a little money on a safe and have direct access to your cash !

DIVEST FROM THE STOCK MARKET - PUT YOUR MONEY IN REAL ESTATE, GOLD/SILVER AND LAND -- THE DOLLAR WILL SOON BE WORTH LESS AND EVENTUALLY WORTHLESS..

STOP THE ELITE FROM EXPLOITING YOU WITH YOUR OWN MONEY !

[creeper00]

"Restore confidence"?

In what? Our economy is air. We''re shipping our manufacturing offshore as fast as we can. Both our country and its citizens are going bankrupt. Our politicians are corrupt and our Constitution is in tatters.

Bush thinks he can throw money at this problem and it will go away. Where does he think that money is coming from, anyway?

[hypnotoad72]

Bush thinks he can throw money at this problem and it will go away. Where does he think that money is coming from, anyway?

Posted by creeper00
---

Liberals? :)

[jmurrieta11]

You go bankrupt from medical bills or lose your house after losing your job--McClone says "tough *******, that''s the magic of the marketplace."

Billionaires and lobbyists lose money in their pyramid schemes--McClone says "send in the Bluebellies, save our billionaires".

So Republican "fiscal conservatism" means fat government (read: taxpayer) bailouts for rich fiscal conservatives when they lose money due to their own greed.

But your mom or dad gets brain cancer, the doctor bills eat you alive, and NO HELP from the Repugs!

Time to blow away this evil empire of Bushit, Dik, McClone, and Bush Baby.

[Jjesse285]

Thank God that someone have sense enough to know that we we need a new Marshal in town and from the world perspective, with me being a black republican,it about time and thank God again!

[ceefeebee]

We all by now know that the Wall Street Big Shots (WS-BS) call the shots for all of us here and other affected helpless citizens of the world. Who but the WS-BS can bring the US Treasury and the US President and the US Congress to bail them out and further enrich them for their past and future criminal financial wrong doings and shenanigans? Applicably, do we now say - %u201CWALL STREET IS THE ROOT OF ALL EVILS%u201D?

After these now current THRILLION DOLLARS (TD) bailouts these WS-BS will again be sued by the states attorney generals. This WS-BS will gladly settle the lawsuits promptly in billions of fines without paying personal fines and jail sentencing. The thing they would not tell us for sure is that the billions fines will come from the TD bailouts monies and government guarantees.

And even before they received the actual TD bailouts, they are now back to speculative investing in the STOCK MARKET (SM) with our savings monies, our retirement funds and our insurance annuities, etc. Very apparent from the current 2 days great SM action surges that these WS-BS are behind the buying frenzy.

The bailout monies come from FDIC and US Treasury who issue debts securities payable in future reckonings by our children and future grandchildren in income tax surcharges. Why then would we people worry and care if we are not the one to be taxed? Why be agitated by these WS-BS doings, we just leave these problem to our children and future grandchildren for them to pay the bailouts?

[ubrew12]

"With Talk Of An Impending Financial Armageddon, The Gov''t Takes Unprecedented Action."

The entire ''wealth system'' in America now appears to be rigged so that the gov''t privatizes profits, but socializes losses. Thats a recipe for transferring wealth from ordinary taxpayers to Wall Street highfliers deemed ''too big to fail''.

They talk about the importance of ''confidence'' on Wall Street. This bailout, placed together with our national debt, is making me lose confidence in more than just Wall Street. I''m losing confidence in this countries continued ability to function as a capitalist democracy.

An $11 trillion debt is a multigenerational rip-off. As a Baby Boomer, I might want to skip the country before the young ''uns start sharpening their guillotines. My guess is they''re not going to be too picky when they start looking to exact revenge. The Boomers presciently coined the phrase, ''Dont trust anyone over 30''. Sad that they were talking about themselves, 40 years in the future.

[rushlimpdrug]

"Oh dear, you are so ignorant about how things work.
. . . ."
Posted by Bhoogren at 10:55 AM


You are confused.

No one ever bailed out the average American.

You make no sense at all.

Of course you will enjoy working for China,
or India (can you say, "Welcome to Walmart"?)

[irreverent1-2009]

Welcome to the United Socialist States of America! Since our government is taking over these major investment houses they need to clean sweep their Ceo''s and corporate boards. Their replacements should have their salaries capped and offered no bonuses, perks or severance packages until they show they can perform and make these companies actually viable. The previous management should be made to go back to their elite alma mater business schools and confess their failures.

[donnie9557]

''The Politicians with huge talent started leaving the government in droves back in the late 70''''ss and early 80''''s. They left because they did not want to abuse themselves dealing with the raw, savage spewings of a spoiled citizenry without character who were trashing the USA.''

I believe that issues are desperate. That things like civil rights aren''t things that people give up and abandon because ''citizens are insulting them''. But they''re real.. real and genuine axioms of change. And not jobs. Not ''positions''. Like a law were a mood..

[donnie9557]

A politician is a guy or gal with an issue.

[barbaraf4]

My greatest fear about the current economy is that this bailout scheme is just another nail in the coffin.

AIG was trying to raise $79 million to avoid bankrupcy, so we gave them $85 billion for bailout. This makes no sense.

I would like to see a spreadsheet showing exactly where this $700 billion is going and some guarantees that this isn''t mostly covering salary and bonus'' for the bigwigs.

Mainly I would like to know we aren''t going to continue to throw good money after bad.

[toby2957]

At the end of Bill Clinton''s presidency we had the highest budget surplus in our nation''s history. Now, eight years of near total Republican rule and we have an economy in the toilet, and endless war, spiraling debt, home values evaporating, record fuel, food and heating costs, massive financial institutions failing and collapsing and then being paid for by corporate welfare through taxpayer funds, and the neocons STILL try to blame the democrats. These are the facts. It''s just so incredibly pathetic.

It is quite simply not possible to be patriotic American and vote for McSame. The ONLY reason anyone might want to vote for McSame is if they hate minorities and/or want to advance a radical religious agenda (Much like Iraq has done in their government).

Stop the hate. Be a patriot. Vote Obama/Biden 2008!

[barbaraf4]

"Stop the hate. Be a patriot. Vote Obama/Biden 2008!" Posted by Toby2957
~~~~~~~~~~~
I agree. The Republican zombies are like lemmings.

[ubrew12]

Bhoogren said: "You misuse the word "socialize". We are "subsidizing", "bailing out", etc. "Socializing" is the form of government you want."

My point is: its ''capitalism'' when these guys are making money, and we the taxpayer are supposed to stay out of it and watch the wizards at work. Then, when they start losing money (because all they were building with that furious trading was a house of cards), its ''socialism'', a government where NO ONE deserves welfare more than your WallStreet banker. Thats blatantly unfair

[jswilliams451]

How can ANYONE say the USA is anti-business???? That makes ZERO sense. We''ve had an administration for 8 stinking years that have allowed business to just about do anything it wants!!!

And look where THAT has gotten us!!!!!

No Wall Street bailout without a Main Street bailout.

Help the little guy too.

[ubrew12]

During the last five years of his tenure as CEO of now-bankrupt Lehman Brothers, Richard Fuld''s total take was $354 million. John Thain, the current chairman of Merrill Lynch, taken over this week by Bank of America, has been on the job for just nine months. He pocketed a $15 million signing bonus. His predecessor, Stan O''Neal, retired with a package valued at $161 million, after the company reported an eight billion dollar loss in a single quarter. And Bear Stearns Chairman James Cayne? After the company collapsed earlier this year and was up for sale at bargain basement prices, he sold his for more than $60 million.

[donnie9557]

''No matter what you say or argue about, they left, in droves. The brightest and best went into the private sector and never looked back.''

Then they didn''t have issues they believed in, did they.

[barbaraf4]

"During the last five years of his tenure as CEO of now-bankrupt Lehman Brothers, Richard Fuld''s total take was $354 million. John Thain, the current chairman of Merrill Lynch, taken over this week by Bank of America, has been on the job for just nine months. He pocketed a $15 million signing bonus. His predecessor, Stan O''Neal, retired with a package valued at $161 million, after the company reported an eight billion dollar loss in a single quarter. And Bear Stearns Chairman James Cayne? After the company collapsed earlier this year and was up for sale at bargain basement prices, he sold his for more than $60 million." Posted by ubrew12
~~~~~~~~~
Sounds like a very successful Pyramid Scheme. It could have lasted forever as long as money continued to come in from the unwashed masses.

[barbaraf4]

"Why aren''t we seizing the assets of all the corporate executives that caused this in the first place. They knew exactly what they were doing and new what was going to happen. Now the rest of us have to pay for these low lifes to live as multi millionaires." Posted by funzie50
~~~~~~~~~~~~~~~~~`
One word: OFFSHORE

[pvperson]

From the AP, "The Bush proposal that would dole out huge sums of money to Wall Street firms and bankers is a mere three pages in length and is vague in terms of determining which institutions would qualify or say what %u2014 if anything %u2014 taxpayers would get in return."

yeah, that sounds republican to me.

[ubrew12]

Again, why is the government buying these worthless assets?

Why aren''t we simply buying the worthless banks that own them?

Same amount of money, but with the latter, the taxpayer gets dividends when the economy turns and the banks start earning (hopefully honest) profits again.

Once the cost of the bailout has been paid back to the taxpayer (plus interest), the government sells its interest in the companies so they can be fully private again, and capitalism can go on its merry way again (hopefully with a beefed up and refocused SEC on the beat).

[pensacola98]

The title for this article refers to an event of "BIBICAL PROPORTIONS" shows how CBS NEWS cheapens the act of reporting news. It implies only Christians were affected by the news.

This expression clearly offers no healthy place for Non-Christian investors, citizens or market investors and is offensive and must discontinue.

A better expression, such as "Global Proportions" is far more acceptable than "Bibical Proportions".

Slang expressions such as "Koscher" which is alright for Jewish people, aren''t expressive that things are alright for those of other religions.

Religious slangs are divisive, and show the limitations of one''s education.

[yeswecan09]

I guess we can all now honestly admit that trickle-down economics does not work.

[ubrew12]

tuckerndfw said: "If the crisis is that severe, it needs much more than a week to find a solution. A solution that does not give one person a blank check with no oversight."

My friend, I am a lawyer in Nigeria, representing an Indian man imprisoned against his will. He needs only $10,000 to be released from prison, and in his gratitude he will offer 10% of his fortune of $3 million to his benefactor. But, he needs this money soon, or he will miss his daughters wedding...

[ubrew12]

nextGenMan said: "but not ONE Penny for American Homeowners."

Bhoogren said: "Good, the morons do not deserve a penny. "

You''re not even going to ''let them eat cake''?

[wl7bzh]

A politician is a guy or gal with an issue.

Posted by donnie9557 at 11:14 AM : Sep 21, 2008

If the guy or gal has an issue, have you considered 2.4 mu Penicillin in each cheek? Should clear it up unless they''re allergic.

[ubrew12]

tuckerndfw said: "why is the gov''t buying anything?With $700 billion, taxpayers could start our own bank and screw_ the banks going broke."

interesting idea. Bhoogren might have a problem with it... (he''s got a deep anger toward credit-addicted homeowners but is strangely quiet about credit-addicted multi-millionaire banking CEOs).

[lmartink]

It''s socialism. The government is taking over worthless assets in the name of socialism. And you saw all of the leaders there, Republicans as well as Democrats. And Bush will sign it.

And it''s to save their buddies and campaign donors in big business and Wall Street. The country buys worthless assets, Bush and his crew bail out their big camapaign donors and we get the bill to pay.

Only problem might be that the country becomes impoverished, posed for easy takeover by anaother country.

[runningralph]

Real estate has been overpriced for decades due to ambitious developers and real estate agents. Banks made unwise (sub-prime) loans due to liberal pressure from liberals in government. Liberalism leads to collapse. Greed leads to over development. Oil prices are way overpriced due to gamblers in the commodities market taking advantage of consumers love of big vehicles and country living. OSHA, ISO 9000, environmental concerns, government red tape, make it hard for a factory to make money in the US. With all thes negative forces the US economy has over 90% employment rate, obesity epidemic, high illegitimate birth rate, high drug addiction rate, high dropout rate, low fitness for military duty. It seems like US citizens have brought all these problems on themselves by not being conservative and prudent, but due to a solid capitalist system still enjoy a relatively high employment rate and standard of living. Be conservative. LIberalism leads to collapse.

[ubrew12]

nextGenMan said: "can you explain the intricacies of this Republican Socialist Nationalization of Banks - both domestic and foreign? "

9/11

That explains everything to some people

[ubrew12]

runningralph said: "Be conservative. LIberalism leads to collapse. "

I just wish those liberals in West Europe would collapse a little faster. As it is, they are going to own the U.S. in a few years. And if they don''t, the Chinese will. I mean, aren''t the Chinese still communists, and isn''t that about as ''liberal'' as you can get?

[jumkey]

Good, let the credit addicts learn to act like adults.

Posted by Bhoogren

Yeah, that would be Wall Street, right? Oh, or course, you meant only half of the stupid "credit addicts".

Unless you have a basement full of gold and guns Bhoogren you''re in the same boat as everyone else, and you were put there by those the credit addicts you disdain - including your Wall Street betters.

Mumbling to yourself about how stupid everyone else is while you shuffle through the soup line is, well, stupid.

[ubrew12]

tuckerndfw said: "Seems to me Congress should establish a national bank to which failing banks could apply for loans to prop up their failing banks. BUT, only if they put up solid collateral."

Ok. Now I like it: putting out loans instead of bailouts. So the banks have to pay it back.

[ubrew12]

The financial community keeps saying that we need to restore ''confidence'' in it.

But what does taking a $9.6 trillion debt and blowing it up to $11 trillion do to the ''confidence'' in the U.S. as a credit-worthy nation? Our dollar is already taking it on the chin because of a lack of confidence in our ability to pay our debts. This makes everything we buy, but especially gasoline, ALOT more expensive, so we end up paying for tax cuts at the pump.

If Bush hadn''t doubled the national debt already, maybe such a bailout would be feasible. But, as it is, I agree with tuckernfw that any assistance to the banking community should be in the form of loans rather than simple cash.

Lets get our money back: we''re going to need it.

[ubrew12]

tuckerndfw said: "Giving Paulson $700 billion to give to his wealthy friends is a stupid idea. Congress should reject it without further debate. "

Heres the $700 billion question: do you think Congress will?

[smurfcrusher]

"These are the most difficult times I think our markets have faced in the last 200 years," former Securities and Exchange Commissioner Harvey Pitt"

What a surprise. The worst President in our history lords over the worst financial disaster in our history.
Republicans are abandoning conservative regulation like rats from a sinking ship. They undid the protections that were designed to prevent a second Great Depression, and we nearly experienced something worse.

When will fools, like runningralph understand that, lacking appropriate regulation, greedy and unethical profiteers will game the system for all it''s worth?

This is not a "liberal" issue. His petty posturing is so absurd as to warrant a "very conservative" amount of credibility.

This problem was avoidable. Regulation is necessary to prevent a "race to the bottom" with respect to tactics used to make profit. If you financially reward unethical behavior by removing regulations that prevent it, don''t be surprised if some people take you up on the offer.

We have been here before. Reagan deregulation, S&L $75Billion mess. Deregulation leads to collapse, not liberalism.

[smurfcrusher]

"So McCain, who now poses as the scourge of Wall Street, was praising financial deregulation like 10 seconds ago %u2014 and promising that if we marketize health care, it will perform as well as the financial industry!"

Posted by gun_tower

I''m sure it would! But given that I might need some healthcare, I''d rather not let the healthcare system collapse -er, "perform as well as the financial system".

[ubrew12]

Naomi Klein: "During boom times, it''s profitable to preach laissez faire, because an absentee government allows speculative bubbles to inflate. When those bubbles burst, the ideology becomes a hindrance, and it goes dormant while big government rides to the rescue. But rest assured: the ideology will come roaring back when the bailouts are done. The massive debts the public is accumulating to bail out the speculators will then become part of a global budget crisis that will be the rationalisation for deep cuts to social programs, and for a renewed push to privatise what is left of the public sector."

[smurfcrusher]

"No kidding. Its a "Free market" until it collapses then they screech "Give me welfare!"

Posted by nextGenMan

More like a greedy free-for-all. The Republicans loot the coffers anytime they get a chance. Like Halliburton''s no-bid contract for $Billions. Or the energy sector and how they allowed rolling blackouts in California a few years ago to boost the price of electricity.

Only after price caps were imposed, which of course the Republicans opposed, did all the "broken" plants miraculously get fixed and the problem vanished nearly overnight.

This is because delaying and lying about capacity no longer was profitable. Don''t expect the Republicans to admit it though.

[jswilliams451]

This is TAXPAYER MONEY. We''re bailing out Wall Street, and NOT providing that same relief, to the individual Homeowner???? Those that are losing their homes???

That''s just not going to happen. The TAXPAYER will not stand for it. When it becomes clear, we are bailing out Wall Street, without bailing out Main Street as well, the screams will be so loud, you will be able to hear them in SPACE!!!

NO WALL STREET BAILOUT, WITHOUT A MAIN STREET BAILOUT TOO!!!!

[harp1963]

All the money went somewhere. It didn''t just disappear. Scammed again by the thieves who operate within the laws of the system created by their buddies in government. The U.S. Government, the greatest mafia in the history of the world.

[smurfcrusher]

"Apparently you and the Republicans you worship are clueless too since you let it fail and are now begging for socialism welfare."

Posted by nextGenMan

Not so much... as the article mentions, warnings were ignored. They knew they were looting the system, they just wanted to grab every last buck before pulling their pockets inside out and acting like the sky was falling.