By now most Americans have heard about sub-prime mortgages and the havoc they’ve wreaked on financial firms and the economy.
But on Sunday, 60 Minutes had a great story on the next mortgages that will become everyday words to Americans. And they’re called “Alt-A” or “Option Arm” mortgages. Check out the video story after the fold and more. (more…)
Just before the previews started at a showing of Slumdog Millionaire on Saturday night, my ear caught the two 40-something guys behind my wife and I talking about Bernard Madoff’s giant Ponzi scheme.
“That makes like 10 people we know who were caught up in this,” said one of the guys.
As I pretended to listen to what my wife was saying I focused on their conversation – hoping to hear a name I might know.
John Meriwether has had an eventful post-Liar’s Poker career.
Actually it’s been spectacular.
This subject is quite personal for me, since my wife, Stacey, has worked at Morgan Stanley since 2000. She is not an investment banker, nor an executive, so I’m not sure how these plans to cut bonus pay would affect her. She works as a researcher/analyst on asset managers, e.g. mutual funds. Morgan uses her work and that of her colleagues to recommend asset managers to Morgan clients.
Her research division had nothing to do with the high leverage that Morgan took on or its investments in mortgage-backed securities. Her division has continued to make solid, consistent profits for Morgan Stanley.
So if Rep. Barney Frank and Sen. Bernie Sanders are talking about cutting the bonuses of EVERY employee at every financial institution that has received part of the the bailout money I couldn’t be more opposed to the idea. Is it fair to penalize thousands of people for actions they had nothing to do with? And it is more than likely that these employees will be penalized in some way (either by losing their job or receiving less compensation) by their employer without the hand of government getting involved (I get into this later).
Check out this interview Bernie Sanders (I-VT) recently did with CNBC. At the 1:56 mark a host chimes in:
“Senator your proposal looks rather punitive and mean spirited…It’s one thing to say to take bonuses away, when you’re getting federal money, from the big brass, that got us into this mess, but you want bonuses deprived of every Wall Street employee…You want the secretary at Goldman Sachs not to get a $30,000 bonus that she could put back into the economy. And she did nothing wrong.” (more…)
A few weeks ago, California Governor Arnold Schwarzenegger said his state might need a $7 billion loan from the federal government just to keep making payroll and securing basic services. Virginia faces a $3 billion shortfall, our very own New York has a $2 billion hole in its budget and there are many more states facing huge deficits. 
This wouldn’t be as much of a problem if state governments didn’t have state laws or constitutional amendments that demand a balanced budget. They just can’t run a deficit and be done with it (what would the federal government do if that was the case in D.C.?). Many states were in a precarious position with the slowdown in the economy and the credit crisis has only exacerbated their woes.
But what is bad for state governments could be good for investors.
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