Hedge fund president speaks of panic and collapse - New York Times

[SOS]

From the New York Times - March 15, 2008

"Wall Street Domino Theory" page one:

“You get to where people can’t trade with each other,” said James L. Melcher, president of Balestra Capital, a hedge fund based in New York.
“If the Fed hadn’t acted this morning and Bear did default on its obligations, then that could have triggered a very widespread panic and potentially a collapse of the financial system.”

http://www.nytimes.com/2008/03/15/business/15risk.html

The house of cards built by Wall Street and their deregulating cohorts in Washington is nearing it's end.
Let's thank all of them for putting their profits above the interests of the American people.

[PerfectSage]

1. It's only just begun.

At least another 2.5 years of bear market left.

[Earth_First]

2. Question is: How many more times can the Fed act in order to prevent the collapse?

...and how with the overall public react to such a collapse.

Methinks not long.

Secondly, I fear to speculate on the latter.

[roamer65]

4. The Federal Reserve can act as may times as it wants.

What it now cannot stop is the coming hyperinflation, without tanking the economy. They're not going to do what Paul Volcker did in raising interest rates to 21%.

[femrap]

11. I wish they'd bring Volcker back...

the Fed is destroying our currency...and maybe that is their intent so they can change the currency into a North American currency???

We should be protesting the Fed Res, not the Capitol.

[HamdenRice]

20. Volker was a terrible, politicized fed chairman!

He purposely brought down Jimmy Carter by raising interest rates to astronomical levels, ushering the Reagan presidency.

[femrap]

23. OPEC brought down Jimmy Carter....I

was in the 'gas lines.' The Hostage Crisis didn't help either. OPEC caused our recession.

If you don't raise the interest rates (which NZ and other countries are doing), you end up with staggering inflation and lowered dollar values.

The Fed needs to tighten.

I was making 18% in momey markets...it was great. I had annuities at 10 to 11% tax-deferred. If you had cash, it was great. Munis were paying 8% TAX FREE!

[AP]

22. Volker was so wrong about the economy! As soon as Greenspan replaced him and dumped money supply

policies, the economy improved.

And if there was any doubt that it was Volker's policies that were the problem, when the UK dumped similar strategies a couple years later, their economy also shot up.

[femrap]

24. And now look where we are thanks

to Greenspan....on the edge of an abyss like none other. Got your gun?

[AP]

26. That still doesn't make Volker a sound alternative.

And the problem today has less to do with Greenspan's policies pre-2001 and more to do with backing down to Bush during Bush's first month in office (remember when Greenspan said tax cuts weren't sound strategy, and they met behind closed doors, and Greenspan came out singing a different tune?).

[femrap]

33. Volker would have shoved his cigar down

W's throat. Of course, one of his loved ones would have been run over by a car....

The Deregulation of Greed has caused this mess. And now our currency will be worthless.

[EnviroBat]

31. That's exactly what they are attempting to do.

This "Global economy" that they are fostering requires a level playing field. That means breaking America into submission. I sincerely believe these people should pay dearly for their greed, and the damage they've done to this nation.

[femrap]

34. I would like nothing more than to put these

Greedmongers in jail with only bread and water...but it will be the 'little people' that suffer. We should be raising interest rates like other countries are doing...but we have to save the 'big boys.' Bear Stearns should just go bankrupt instead of letting the Chinese in on the deal.

I hear that pictures of banksters are being put up on lamp posts as 'Wanted Posters.' They are criminals.

[tekisui]

6. The Fed Fixes are coming more frequently and having a smaller impact

Not many more tricks up his sleeve.

[jwirr]

8. That is the real question. How long will anything they do work to

assure the people that nothing is wrong. It is kind of a reverse "wolf, wolf". The more times they act to avert the fall the more they are convincing the people that there is real problems that are just not going away. Their bailouts only work if we have confidence that it will work.

[bdamomma]

28. I heard that the Fed is going to do something tomorrow.

[marmar]

3. It just delayed the inevitable.....

n/t

[Mike03]

5. Anticipate More of This

Bear isn't the only institution in serious trouble. As Warren Buffet once said, "Where there's one cockroach, there are hundreds."

One institution I'm very concerned about is Washington Mutual. But there are probably many others.

In the case of Bear, there will most likely be an orderly liquidation of its assets, parts and pieces by J.P. Morgan, et al.

[unblock]

16. orderly scavenging of assets, that is

jp morgan facilitated this bailout so as to cherry-pick what's salvageable, leaving bear to handle the liabilities in bankruptcy court -- itself another form of bailout.

[Warpy]

7. I got one of those feel good calls from my financial guy this AM

and he said the same thing about the Bear Sterns bailout, even used the words "domino collapse."

As far as I can tell, this is only going to delay the inevitable. The problem is these pseudobanks like Bear Sterns packed their portfolios with assets marketed by hedge funds as structured investment vehicles, assets that were so exotic that nobody knew what the hell they were or how much they were worth. In August, it finally dawned on everybody that these were nothing but bad debts in Florida and California, hacked apart and repackaged as assets by hedge funds.

This has been causing a lot of folks at the top to be in panic mode since August. Since most of this stuff represents only parts of mortgages, sometimes the parts that were paid, sometimes the parts that had no chance of being paid, nobody knows exactly how much damage there is and where it is coming from.

Anybody who's holding this kind of bad paper and counting it as an asset is going to be in serious trouble. That's mostly institutional investors plus a few big private investors who got greedy. No institution is going to escape unscathed, which is why money is moving out of stocks and creating bubbles in the commodities markets right now.

This is a long way from being over.

[cliss]

9. This is unprecedented.

The Fed just bailed out an INVESTMENT Bank. As opposed to a Commercial Bank.
Bear Stearns does not handle commercial accounts, and yet they got a bail out worth.....how much?
How many billions?

I think this is the first time the Fed has done this.
There was an investment bank back in the 90's which was in trouble. They allowed it to fail.
And yet not now.

Just goes to show ya...the Dominoes are swaying.

[girl gone mad]

10. WIdespread panic and collapse..

in the hedge fund and derivatives markets would be a much better result than widespread starvation and poverty that will result from continued bailouts.

[MilesColtrane]

29. We're hosed either way.

It's all intertwined.

Real banks and real pension funds have some of their assets in those collapsing derivatives.

[1776Forever]

12. Wildcat trucker on Malloy last night said he's done in 2 weeks.

Can you say "shortages?" You better learn!
:wow:

[nashville_brook]

14. you mean, he can't afford to drive?

[1776Forever]

17. That is what he said - costing him $1000 a week.

:eyes:

[nashville_brook]

18. jesus. thanks for clarifying. that's shocking.

[nashville_brook]

13. you know Bear-Sterns type collapse in que... it's gonna happen. and what then?

[spanone]

15. bu$h* talks free market and then bails out bank.....hmmmmm

[meow2u3]

19. Do you mean Wall Street finally has to tell the truth about the economy?

The Bushies might have a collective stroke. We can't allow the truth to come out! :sarcasm:

[bdamomma]

30. I hope the bushies do have a stroke.

[Eurobabe]

21. How deep does this shit go? Should I yank my 401K from Merrill, are they next?

:shrug:

[HCE SuiGeneris]

25. Just a matter of when...

[krkaufman]

27. Well, it's not like it hasn't been successful for them.

The country's wealth has largely been shifted further to the wealthy, and they'll be little harmed by any economic hard times. As always, the burden will fall on the poor and working class.

[bdamomma]

32. oh, that's too bad, I would love to see the wealthy squirm.