Forum Post: OWSourcing: Is there anything we all can do beside sending her $$?
Posted 13 years ago on Dec. 3, 2011, 9:41 a.m. EST by qazxsw123
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Wall Street gears up to stop Elizabeth Warren
By Greg Sargent / WashPost
Wall Street executives have been quite open about the fact that they really, really don’t want to see Elizabeth Warren get anywhere near the Senate. And it looks like they’re about to ratchet up their efforts to help Scott Brown prevent it from happening — including the influential U.S. Chamber of Commerce.
The Center for Public Integrity reports today that Wall Street and K Street lobbyists are firing up the fundraising on behalf of Brown in a big way. The report quoted multiple big finance types saying Brown’s reelection campaign is crucial, and it noted — without sourcing — that the U.S. Chamber “will be engaged early and heavily in Massachusetts with ads.”
Asked for comment, a Chamber spokesman, J.P. Fielder, emailed me: “Stay tuned.” He declined to say more, claiming he couldn’t discuss the group’s potential political activities, but the Chamber spent big on ads to help get Brown get elected in 2010, so more is likely now on the way. This comes after the New York Times reported that Warren’s “enemies” on Wall Street are getting ready to throw themselves behind Brown, who they view as a key ally, with “new intensity.”
Here’s why this is important: It suggests these powerful interests may think Warren has already shown she’s a threat to Brown. Yesterday, national Republicans were dismissive of a new online poll finding that Warrren is statistically tied with the incumbent. But the unusually early involvement of outside groups suggest that GOP-aligned special interests may in fact see Warren’s challenge to the Senator they’re backing as a serious one.
Here’s another data point. The Rove-founded Crossroads GPS recently went up on the air with a six-figure ad buy slamming Warren for embracing Occupy Wall Street. Yet only weeks before that, Crossroads’ spokesman went on record saying the group was unlikely to get involved in the race unless it “tightened.” Which would suggest the race has ... tightened.
Asked for comment on the U.S. Chamber and other activity gearing up, Warren campaign manager Mindy Myers emailed:
“She stood up to Wall Street and the big banks, demanded and won oversight and consumer protections they didn’t want. No one should be surprised they don’t want her in the Senate.”
The question is whether influential liberal groups will start spending big on the race to match the right. Environmental groups have spent some money — environmentalism is a resonant issue in Massachusetts, particularly among independents — but the big money has yet to flow. Warren herself has embarked on an unusually early and aggressive effort to introduce herself to the state with a minute-long biographical spot backed by six figures, and for now, it’s basically her versus her long time antagonist: Wall Street.
By Greg Sargent | 02:25 PM ET, 12/02/2011
Making sure everyone knows what she stands for would be a great start ! She's a rare voice in a wilderness of financial deceit and decadence. Republicans are no longer the party of fiscal responsibility. Someone needs to be. http://www.vanityfair.com/politics/features/2011/11/elizabeth-warren-201111 In November 2008, Warren received a call from Senator Harry Reid. Lehman Brothers had collapsed two months before; A.I.G.’s bailout had just been upped to $150 billion, and Congress had passed TARP. Reid asked Warren to head the congressional panel overseeing the $700 billion bailout. The job was vague, with no clear goals, but Warren would turn it into a tough, prosecutorial committee. She did real investigations, grilled government officials, and issued blunt monthly reports demanding more accountability from banks and better returns for the taxpayer. She held public hearings that were televised, asking the questions that many taxpayers wanted asked—and questions that bankers and Treasury officials did not want to answer.
Perhaps the most widely watched hearing is the one that took place in September 2009. A video of part of that hearing can still be found on YouTube, under the title “Elizabeth Warren Makes Timmy Geithner Squirm.” It opens with Warren asking the question that was on the minds of many taxpayers: “A.I.G. has received about $70 billion in TARP money, about $100 billion in loans from the Fed. Do you know where the money went?” What followed during the rest of the hearing was the spectacle of the Treasury secretary tripping over his words, his eyes darting around the room as Warren, calm and prosecutorial, kept hammering him with questions. At another hearing, in December 2009, Geithner appeared to be barely able to contain his annoyance, at one point almost shouting at her. Warren’s questioning “was masterful,” says Neil Barofsky, who ran the TARP oversight for Treasury. “She eviscerated him.” But Warren would pay a price for those hearings.
“Geithner hated her,” says a former administration official. Part of it was seen as personal because she had scorched him in public. But the whole thrust of her work on the oversight panel—getting the facts out to the public—was at odds with Geithner’s perceived conviction, shared by the Wall Street establishment, that the details of the banks’ TARP rescue should be hidden from public scrutiny whenever possible in order to give the banks time to recover, an assessment that a Treasury spokesperson disputes, insisting that “Secretary Geithner initiated unprecedented disclosure requirements for financial institutions.”
According to Barofsky, however, “Treasury’s descriptions of what was happening were very skewed towards the positive and often incomprehensible. There was this reluctance towards transparency,” and Warren’s work on the oversight panel “helped bring light in a lot of dark areas.” As Treasury sought to cosset the banks, never requiring them, for example, as Barofsky points out, to explain what they were doing with their billions in TARP bailout money, Warren persisted. She went on television shows to criticize the government’s secrecy, the huge bank bonuses, the fact that even after the bailout the banks had escaped disciplinary measures. Obama’s top economic advisers, according to a former administration official, thought Warren was “a pain in the ass.” On Wall Street, Warren was regarded, says one bank vice-chairman, as “the Devil incarnate,” and, according to another executive, a “showboater,” who didn’t really know what she was talking about.
But her sin was actually quite the opposite: she knew what she was talking about. Wall Street’s power in Washington, says a former congressional staffer who worked on the Dodd-Frank bill, has been built partly on the fact that few people outside Wall Street understand the esoterica of finance—the intricacies of C.D.O.’s and the labyrinthian structures of credit-default swaps. And that knowledge is used to control and confuse. But Warren did understand. Says Carolyn Maloney, a New York Democratic representative, “She understands the information as well as the top players in the business.” She knew the secret handshake, the secret language—and she used it against “that tight little group,” as Warren would refer to Wall Street C.E.O.’s and Washington officials who basically controlled the terms of the bailout.
Just finished reading your post/watching the video and more. Thanks for sharing the Vanity Fair article; I had not seen it. E. Warren would make a great senator; besides her vast knowledge on the affairs of W.S., she seems beyond corruption. Most refreshing.
What is your take on MF Global?
http://www.reuters.com/article/2011/12/03/us-mfglobal-funds-idUSTRE7B203J20111203
I just found this article about the off balance sheet accounting that explains in a bit more detail exactly what went wrong. It's the leverage these guys are allowed to use ----------and to hide that gets them into so much trouble. MF Globals behavior seem like simple theft, like loosing at the poker table and stealing a few chips from the guy next to you in the hopes you can win it back before you go broke or get caught. Except with MF your the bank and the guy next to you is your client. I just don't know how safe it is to let companies who are taking care of customer accounts do trading with company funds. I think maybe they should have to do all trading with their own personal accounts or with a separate company(In the free market where they say they want to be) but for sure no betting should be done off the books.
http://www.reuters.com/article/2011/12/02/us-mfglobal-accounting-idUSTRE7B02PS20111202 The off-balance-sheet accounting methods that Enron and Lehman Bros made famous in their epic failures years ago have a modern-day poster child: MF Global.
Like its predecessors, the bankrupt brokerage formerly run by Jon Corzine took advantage of an accounting maneuver to keep certain financial obligations off its books, making the firm look less indebted and thus less a risk than it really was.
On Thursday, Mary Schapiro, chairman of the Securities and Exchange Commission, told a committee of Congress the SEC was investigating the accounting treatment that helped mask MF Global's exposure to risky foreign sovereign debt.
The fact that MF Global was able to use the technique highlights how off-balance-sheet moves are evolving as quickly as new accounting rules intended to stop them. Earlier this year, the Financial Accounting Standards Board changed its rules to bar an off-balance-sheet loophole that had helped Lehman Brothers get into trouble in 2008.
The fixes of FASB often are too specific to keep firms from trying new tacks, said several analysts, academics and former regulators. "They keep trying to put a Band-Aid on this thing, but you've got this problem that is huge and requires major surgery," said Penn State University accounting professor Ed Ketz.
WITHIN THE RULES
MF Global's version complies with current accounting rules. Other Wall Street firms use it too, though generally for ultra-safe U.S. Treasuries, which the government promises to repurchase at face value.
In MF Global's case, the off-balance-sheet accounting itself didn't cause the firm's downfall, but it allowed MF Global to use borrowed money to make billions of dollars in ultimately catastrophic bets on European sovereign debt - and obscured the risk those bets posed to the company.
Nothing was done to force MF Global to respond until the U.S. Financial Industry Regulatory Authority demanded that MF Global's broker dealer business put aside more cash and liquid assets to absorb any losses in its European bets. Moody's downgraded the firm, setting off a rapid drop in confidence that ended with the firm's October 31 bankruptcy.
Moody's senior analyst Al Bush told the Wall Street Journal last month his firm was surprised to learn that MF Global's large off-balance-sheet position was not being held for clients, but was the firm's own bet.
Thanks for the clarification; the metaphor at the poker table was most useful. Am still a bit fuzzy about the word/concept of leverage. Also, do you know what MF Global betted for or against? that the Eurozone would get better or disintegrate?
And talking about Enron. Did you see that great docu called: ENRON, the smartest guys in town? pretty excellent, and then today, an anniversary of sorts:
http://www.usatoday.com/money/companies/management/story/2011-12-03/enron-10-years-later/51592092/1?loc=interstitialskip
OK leverage. leverage is using a smaller amount of money to secure a larger amount of an asset. Almost all derivatives use leverage our whole banking system uses leverage. I'll give you an example of futures, one type of derivative. A futures contract is for 1000 barrels of oil. The may oil is at $100 a barrel so the contract secures your right to buy1000 barrels of oil for $100,000 in may. It costs you $7,500 for the contract. with that $7,500 you will make or loose any difference in that $100,000 so if oil goes up to $103 and you sell your contract you will make 3$ a barrel X 1000 so a $3000 dollar profit on your $7,500 bet. That contract contains leverage of 13 or $100,000 divided by $7,500. Now if oil goes down to $90 a barrel you would loose $10 X 1000 = $10,000 or all of your $7,500 investment plus $2,500 that you would need a taxpayer bailout for. Leverage is important in this crisis. Banks use leverage. It used to be around 6 or 7 I think. They put up assets as collateral (like government bonds) and then they can lend many times that much to customers Say they put aside $10,000 in bonds for collateral at 6X leverage they can lend $60,000, at 30X leverage they can lend out $300,000 for their $10,000. When the housing meltdown hit banks were using 30X leverage. MF Global was using 44X leverage. I think they were making money on the spread between what their loans were costing them and what euro's were paying in interest. Because they were so leveraged a small move in the price of Euro bonds would be disastrous ------and it was. Leverage is like crack to traders. I messed around with a fake futures trading account last year. They give you 100k in play money and a realistic trading platform. I lost $150k in two weeks shorting silver it turned around and eventually showed a small profit. If it had been real I would have needed an extra 50k in my account to hold on to the trade while hoping it would turn back my way. (think MF Global)If I'd bet the other way I'd have made an extra150k with my 100k -----------------you can see how attractive that kind of leverage would is, especially playing with other peoples money. Yes saw the Enron one. More fun fun fun with derivatives and creative accounting !
makes sense now:
In the latest sign of how MF Global's failure is continuing to cascade across the commodity industry, Tofteland and other farmers who have yet to recover more than a third of their money from the bankrupt broker now find themselves in a cash crunch that risks rippling far beyond the futures market.
Some farmers have had to postpone purchases of land or equipment. Tofteland still expects to sow his 1,000 acres in the southwest corner of the state, but may have to borrow money to do so.
Still, the delay in returning billions of dollars in customer funds more than a month after MF Global filed for bankruptcy is starting to affect actual decisions on the farm. This threatens to cloud the outlook for U.S. crops, warn farmers who have been ratcheting up pressure on the bankruptcy trustee to move faster to disperse any cash he secures.
"That's pretty serious when you're raising food for the country and the world," Tofteland said.
For most farmers, the fact that their broker may have taken as much as $1.2 billion of customer money for its own use is bad enough. But the seasonal business of farming is now being disrupted since regulators still can't account for the missing funds, or even agree how big the hole is.
http://www.reuters.com/article/2011/12/06/us-mfglobal-agriculture-idUSTRE7B509620111206
Funny you should post right now I was just about to put this on the forum page. Dylan Ratigan on leverage http://www.dylanratigan.com/2011/12/06/leverage-the-dynamite-strapped-to-our-markets/. I just got done reading about the "Investment trusts" of the 1920's brought down wall street in1929 -------leverage. Really wild. They made these derivatives of stocks pretty much like CDO's where they took a basket of stocks and layered them. Then they would sell the top layer as a stock so that the buyer would make all the profit of the top layer ------example: if the stock market went up %20 the top layer would go %60 and then in a fit of wall street mania they would make leveraged funds of the investment trusts and sell them as stock ---------so maybe a %20 move in the market would be a %180 move in that stock ------------and then they let people buy on margin, so these poor investors who thought they had a piece of something had toilet paper. Kind of like now
You would think we wouldn't have let this happen again so soon.
Thanks for the Trading derivatives 101 crash course (pun intended). Now I get it. Essentially, you place a contract for X$$ and keep the money + profit if you win, lose the contract $$ if you lose, plus the difference in the bet. You said you used 'fake' accounts, was that for training purposes? As for leverage, I now get the full picture. In real life, we all do this, everyday, but with more caution that banks. Meanwhile, and please don't get offended, what is it that a trader produce exactly, meaning, is it something useful for society? In other words, why is it that we frown on Las Vegas gamblers but think WS trading is okay. [I am happy to stand corrected!]
In a perfect world commodity traders give liquidity to the market. You have a ton of pork bellies to sell, no one needs pork bellies at the moment so a trader steps in and buys them hoping to make a few bucks when he sells them later and you have enough of a commitment to buy more pig food. The reality that I've read is %95 of commodity trades are just gambling, so pretty much I'd say there's not much of value to society there. In another perfect world You have a great new idea that might change the world, you want to expand your company so you decide go public and sell shares. Traders and investors buy in this gives you the money to grow hire more people etc. As your company grows the traders will be replaced by long term investors but they gave you your start. In the real world there's this awful thing called convertible debt financing that hedge funds use to basically rob the company and small investor blind. High speed computer trading does nothing but steal nickles and dimes out of hard working Americans 401k's. Most of the games on wall street have some underlying value -----------like the whole mess we are in was based on mortgages certainly mortgages on their own are useful, not hacked up (also known as securitized ) into frankenbonds and then bet against with super highly leveraged credit default swaps. Some of the wall street products are amazingly useless and yes they are pure gambling. I think it's the percentages that are upsetting. I don't know if it is calculable but I'd say these days it's 5%useful and 95% gambling lots of it less regulated than Vegas and we as citizens have become responsible for the losses due to the threats to our bank deposits. I am not even a little bit offended by you , I'm offended and disillusioned by what I've learned, by banks, the fed, Goldman Saks, hedge funds etc.
Very useful explanation, thanks.
Distressing, but at the same time, if you're able to deconstruct a concept, you can reconstruct it. So, what I see is that even with only 5 percent of its usefulness, it is still a useful system (giving cash to those who are more creative, risk taker, etc., so they can push forward with their venture, leading to a potential good to all). What we need then is proper legislation as well as enforcement of laws, monitoring of the markets, to ensure that the 95 percent is decreased so that the pros are above the cons to make the system do what it's meant to do. So, in my book, there's hope for redress/redemption.
Exactly ! You need futures for business to hedge, you need options so that stockholders can protect their investments, the capitalist system of citizens being able to be part owners of companies is great and banks need some leverage for lending for homes and business loans. It's the wild wild west system we have at the moment that needs to change I personally would like to see the return of Glass/Steagall and get wall street out of our banking system. When you read about MF Global using 44X leverage don't you wonder who's giving them that leverage? Are banks lending their leveraged funds to each other to trade with instead of to folks who are trying to start a small business? where does the 15X leverage that hedge funds use to gamble with come from (the job of a hedge fund is purely to make money for investors nothing useful at all)? One of the questions that drove me nuts when the banks fell and we were being talked into bailing out AIG was who were the counter parties? I knew they made 100/1 bets that real estate would never go down(AKA credit default swaps) I knew those bets went bad but it took a long time to find out that Goldman Saks was one of the biggest recipient of the taxpayer funds used to pay off that bet. What if Hank Paulson had told Goldman --------tough luck you made these crap CDO's it's your problem now. I guess the left will have to become the fiscal conservatives cause the right seems to like the wild wild west system.
Get real, there is not a single candidate that will be elected unless they are as corrupt as the elected candidates before them
Bernie Sanders?
Does Ms. Warren want the embrace of the OW movement?
http://www.nytimes.com/2011/11/19/us/politics/wall-street-rallies-around-scott-brown-for-senate-race.html?pagewanted=all
"Ms. Warren, a law professor and consumer advocate who has described herself as an intellectual godmother of the Occupy Wall Street movement. "
As OW moves on to occupy houses and other property, I'd be interested in seeing how she spins that.
define embrace.
I assume that she wants people to support her, so she can win her Congress seat and do precisely what the movement wants to happen: regulate Wall Street, bring justice and defend the taxpayer.
OK, what is people publicly associated with some Occupy "unlawful" action endorsed her or started working on her campaign?
You know in all likelyhood Congress is going to be at least as right wing as it is now.
Re: You know in all likelihood Congress is going to be at least as right wing as it is now.
Not if we get rid of most incumbents like they did in Spain.
good luck with that.
We should stop being fearful. As they say: shit happens!
You deal with it by being aware, ready, but mostly, transparent, good faith, straight forward, apologetic when needed, prompt in dealing with the issue and very firm about moving on and changing the narrative?