Wall Street May Be Cheering but the Rest of Us Are Not

Now that the Dow Jones Industrial Average has regained 10,000, a feat one year in the making, Wall Street has plenty to cheer about. It is ironic that it made the mark, rising 144 points today on news that JPMorgan Chase posted a third quarter profit of $3,600,000,000, far exceeding expectations. So the bailouts worked, the financial institutions are back to serious business, raking in the cash as usual. Things are so good that Goldman Sachs, AIG and others are poised to hand out record bonuses in the billions of dollars, more than in 2007 when the economy was still apparently booming.

Unfortunately, this does not sit well for many of us, Wall Street may be cheering but the rest of us are not. Why on earth did we expect these institutions to have a heart and be grateful that we saved them? Too big to fail has created unprecedented levels of arrogance on the part of these financial institutions that they have made a mockery of us all. These institutions are not lending to us. They have increased their fees and interest rates on their credit cards. They have revoked our credit lines and so on. They are simply gouging us on every level and they are rewarding themselves for it.

I feel bad for the President but the rest of us on Main Street did not end up benefiting, absolutely nothing trickled down.

Goldman Sachs

Goldman Sachs' posting of a $2,000,000,000 profit during the second quarter, even after repaying the the $10,000,000,000 TARP loans to the Treasury definitely raises the ire of the common folk. Even I, as rational as I try to be, immediately threw up the moniker "Goldman Sucks" after parsing the news. No matter how you slice it, it just doesn't smell right.

Why is Goldman now considered the strongest bank in the United States? Could it be that the former Treasury Secretary, Henry Paulson, Jr was previously the Chairman and CEO of Goldman Sachs? Wasn't it Paulson who designed the $700,000,0o0,000 TARP plan and urgently shoved it down Bush's and Congress' throat - Bail out the financial industry or the United States economy would collapse? Didn't AIG funnel Goldman some $12,000,000,000+ out of the $167,000,000,000 in bailout funds it received? I guess Goldman paid back the Taxpayers with Taxpayer dollars while we wait for AIG to repay those funds, if ever. How is that for financial engineering? Also, in this whole conflict of interest financial conflagration Goldman became a bank allowing it to borrow billions from the Federal Reserve at 0%. Has it repaid these funds? How much did it value its toxic assets with the suspension of the mark-to-market accounting rule? I guess I'll just value my house at $1,000,000 because I say it is. Oh look I am rich.

Certainly there must be positive elements in all of this manuevering but it will be a stretch to get me to acknowledge or accept them.

Irrational Exuberance Again?

Darn It! I missed another rally, again! The Dow went up nearly 500 points today on the hope that Treasury Secretary Geithner's re-hash of ex-Treasury Secretary Hank Paulson's original Toxic Asset Recovery Plan will work. Essentially, private investors will be given financial aid to buy up those toxic assets from the banks. If investors buy in then the market will continue its upward trend, it seems, having gone up 1300+ points in the last 2 weeks. On the other hand, this sudden run-up reeks of irrational exuberance. Joy that the government will take on a seemingly bottomless trove of mind-numbing debt is well, mind-numbing.

Nevertheless, the market's recent performance does give credence to the notion that the market is hovering around bottom. Man, it would be nice to ride its return to glory. Alas, us "poor middle class folk" will largely miss out on this and the next run-up due to shortage of funds. Having the ability to invest now in this down market would definitely help to minimize the losses in our existing retirement accounts. It will take many years for those accounts just to return to their 2007 values, the last time many us felt "rich." So the only way to actually get ahead in the future is to have some "new" money in the market while it returns our existing investments and retirement accounts back to their "old" value. It is really annoying to have the old axiom play out again, "needing money to make money".

Unfortunately, this time around is much more bile-inducing than it was previously since the solution to fix the economic crisis is essentially an elaborate "trickle down" solution. By saving the financial institutions and their stewards, read rich Wall Streeters, the economy will be stabilized and the rest of us should just be thrilled that we get to keep our job or that a new one will be created for us or that we get to keep our homes. Some consolation prize. I'd prefer the Bernie Madoff's family consolation prize; he goes to jail but the rest of them get to live richly for the remainder of their lives off of those ill-gotten gains. It ain't fair, I tell ya. Life is not fair but it would be nice to be in the "protected class."

Today's rally signified another financial bounce of air, but it is the type of air that we still wish will put enough confidence in the markets to change the status quo. We need businesses to have confidence to reduce further layoffs and for investors to put their money back into the markets and for money to start flowing again. I sound like I have drunk the koolaid. Am I not just repeating the party line? It is annoying. I search daily for new ideas but there is only lots of criticism about current plans; there are no different solutions posited, only arguments about the details of what we already have before us. While we all want out of the pain and the doom and gloom and want it to be over ASAP, can the excess of the last few decades really be turned around within such a short time? Are we asking too much? By eschewing the principles of Capitalism by not allowing the system to fix itself, can Capitalism regain its footing after all of this stimulus?

Taking the easy way out may very well be to our detriment. I hate having to think like this but they always say, "no pain, no gain." So, by trying to head off all of that pain caused by greed and excess, are we not really fouling the system some more. It is paradoxical that we have to use the very same financial tactics that got us into this mess to get us out of this mess. I am very sorry about that since more of the same did not work out so well for Iraq, for instance which, incidentally just celebrated 6 years of combat and we didn't even have a moment of silence in remembrance. All we had was just silence. The Iraq war is far from over and a "surge" in troops in Afghanistan is all but certain but now war has become the least of our problems. Go figure.

Greed

Well if you want to see greed in action, it is out on the street for everyone to witness. AIG has come to embody the greed in its most naked form, pure and unadulterated. They symbolize all that is wrong with the bailouts as they continue to lavish bonuses and perks upon themselves after taking taxpayer dollars.

The conspiracy theorists must be having a field day. Hank Paulson effectively took our tax dollars and funneled them to his buddies on Wall Street with little or no oversight. They made us look like fools; we handed them trillions to help them remain solvent but instead they kept their same behavior and rewarded themselves, so locked in their greed, that they have exercised no conscience.

Can we trust anyone to do the right thing with our money? Now What?

The Dow Plunges Nearly 400 Points as Street Rejects Geithner's Plan

I am still trying to figure out why the market tanked so hard today. I thought Wall Street was waiting with baited breath for the stimulus package to be passed which it was. Last week the market rallied on its supposed passing but did not drastically tank when it did not, it was ultimately sent back for more tweaking. Granted the tweaking was ridiculous since the Senate and House Bills were only a few billion dollars off and in a bill worth over $800 billion, the supposed tweaks were muscle flexing without any true consequence.

Anyhow, Wall Street must have been disgruntled with the new Treasury Secretary's proposal for the remaining TARP funds. I am understanding that the market went down nearly 400 points because it is possible that Investors did not like the fact that additional funds would be needed - everyone knows that the proposals are not nearly what is required but we are too far in debt to provide the truly costly package that is needed, they did not like the public-private investment partnership that was proposed - well the financial institutions have soaked up the first round of TARP funds plus the trillions from the Treasury and the Federal Reserve and still have not freed up the credit markets opting to keep the money to shore up their balance sheets and underwrite their bonus packages, and lastly they did not like that there were not anymore specifics on the remainder of the TARP funds because he mentioned that banks would be held more accountable and their balance sheets would now be "stress-tested" for market viability before they received more funds.

Apparently there is confusion in the plan, it did not explain the whole "bad-bank" proposal that would now buy up bad assets, Paulson's original plan that was never implemented, and it seemed to indicate that banks receiving bailout funds must adhere to more stringent rules where they would be required to lend but mostly the Street is unhappy because Treasury Secretary Geithner did not provide enough specifics of the whole plan. Too Bad.

The market certainly went hopping and ga-ga over Paulson's original 3 page bailout proposal to Congress but now that the Treasury Secretary states that the financial crisis is still bad and there is still lots of risk, the Street is choking. It seems to me that Investors are plain old mad that the Government is not promising to do all the spending itself; it expects Investors to help out. All the Investors want is a full-fledged Government Guarantee of funds. They did not get it today. Good. Let's start playing by some rules. Wall Street can't continue to reap bonuses without some skin in the game.