I'm in construction and my joke has been that I'm learning to play harmonica or that I'm scouting out the best parks. I must not be a good comedian because nobody laughs.

I ask the electricians and the HVAC guys (the trades that are there before me) what jobs their companies have lined up. --Nothing-- I thought that when the Hudson County Plaza job I've been on for the last year or so ends in a month or so it would take a year or so before the new jobs started to dry up. Now I'm not so sure.

Everyone that has gotten laid off (losers) so far keeps reporting to my coworkers about the ever increasing out of work list at the hall. (Mostly losers but I fear now being padded by motivated people.)

I only call the hall when I get laid off (so I can collect unemployment if I need to) and then never call back (I'd never join a club that would have me as a member). So who knows what they know? I'll get on the horn (after I lay around for awhile and try recording a few songs with my ever frustrating computer recording gambit - do those genius tech people have any conception that the average person isn't a computer genius and gets very angry that he has to spend an hour using the Google to find the answer to the simplest questions? Latency blah blah... I'm so smart... blah blah blah... you're so stupid... blah blah blah... -Sound Blaster X-Fi Elite Pro, Motherf*cker-. Now shut the f*ck up) and call around. But getting on the horn and calling around for work... now... Whoa... I don't like it... My thought has always been that it'll all work out. And it always has. Now? I don't like being the canary in the coal mine... SPOOKY

Especially because I'm in this position I'm going to say this:

It's hard to find one of you who still supports Chaney/Bush. Or cops to believing in them. Or to even being a Republican. BUT I'M THROWING IN YOUR FACE WHAT I TOLD YOU IN THE SPRING OF 2000. THAT MORON IS TOO STUPID TO RUN THE UNITED STATES.

Thanks.

For those quibbling with the use of the term "Great Depression II" - read Paul Krugman's piece from a few days ago: http://www.nytimes.com/2009/01/05/opinion/05krugman.html?_r=1&em

Here are the salient points from the article:

"The fact is that recent economic numbers have been
terrifying, not just in the United States but around the world. Manufacturing, in particular, is plunging everywhere. Banks aren?t lending; businesses and consumers aren?t spending. Let?s not mince words: This looks an awful lot like the beginning of a second Great Depression ? It turns out, however, that preventing depressions isn?t that easy after all."

"Under Mr. Bernanke?s leadership, the Fed has been supplying liquidity like an engine crew trying to put out a five alarm fire, and the money supply has been rising rapidly. Yet credit remains scarce, and the economy is still in free fall ... Here?s my nightmare scenario: It takes Congress months to pass a stimulus plan, and the legislation that actually emerges is too cautious. As a result, the economy plunges for most of 2009, and when the plan finally starts to kick in, it?s only enough to slow the descent, not
stop it."

"Meanwhile, deflation is setting in, while businesses and consumers start to base their spending plans on the expectation of a permanently depressed economy ? well, you can see where this is going. So this is our moment of truth. Will we in fact do what?s necessary to prevent Great Depression II?"

Wall Street: It's payback time

An angry mob of investors and taxpayers is assembling, and they want to see some executives' heads on pikes. The question for the courts will be, Who was just foolish with our money - and who was lying, cheating, and stealing?

By Roger Parloff, senior editor
January 6, 200

(Fortune Magazine) -- In today's dire financial climate, what exactly should a CEO say when it's time to hold that quarterly earnings call with analysts and the media?

On the one hand, he could try refreshing candor and say, "Look, let's be honest. This sucker could go down." The problem with this approach is that it tends to ensure that the company will indeed go down - that afternoon. The stock price will plummet, lenders will call in their loans, banks and customers will freeze the company out, credit agencies will downgrade it, and soon our commendably honest CEO will notice a half-dozen satellite television trucks - those modern-day vultures - double-parked outside the lobby.

Or there's Plan B. The executive could exude confidence and willfully paint a disingenuously rosy picture featuring lots of gilded lilies. The problem with this tack is that, while it might get the company through a rough patch, the executive is certainly committing civil fraud, and if the company crashes and burns anyway, he may also go to prison.

It's no defense for an executive who bends the truth to say that he did so only to prevent a run-on-the-bank-type situation, says one criminal-defense lawyer. (The lawyer requests anonymity because in this climate, he notes, such an on-the-record statement might lose him some business opportunities.) Even if the executive thinks that short-sellers are spreading lies about his company, he can't respond in kind. If he does, this lawyer says, "he's betting the farm. He's betting his life."

Today's crisis has placed under the forensic microscope scores of reassuring assertions made by CEOs and CFOs during earnings calls or "investor day" gatherings or breezy, on-camera flirtations with Maria Bartiromo that have proved, sometimes within hours, breathtakingly off the mark. Were the officials honestly relying on flawed business models - or lying through their teeth?

It's not just the Securities and Exchange Commission, New York State attorney general Andrew Cuomo, and hordes of civil plaintiffs lawyers who want to find out. According to understated disclosures in SEC filings or newspaper reports, federal criminal prosecutors in Manhattan, Brooklyn, Newark, Los Angeles, San Francisco, Seattle, and Alexandria, Va., are all poring over e-mails and other records right now trying to answer that question in regard to high-level officers at such formerly blue-chip companies as Lehman Brothers, AIG, Washington Mutual, Countrywide Financial, Fannie Mae, and Freddie Mac.

To be clear, we're not talking here about sensational, not conceivably legal, out-and-out Ponzi schemes, like the $50 billion one that former Nasdaq chairman Bernard L. Madoff has been arrested for, or brazen forgery and criminal impersonation, like the $100 million spree that glitzy New York litigator Marc S . Dreier has been accused of. Crimes like those typically have only one of two defenses: (a) "It wasn't me," or (b) "Okay, it was me, but I was sleepwalking on Ambien at the time." This article is, rather, about an entirely different category of accusation. The probes being discussed here concern statements that ultimately proved incorrect, but which reasonable, straight-faced people can, and vigorously do, contend were honest when made.

The level of fury surrounding these inquiries is of a different order from what we saw with, say, the backdating scandals or the Enron and WorldCom failures. Today's credit collapse has already vaporized about $9 trillion in investment capital, while ripping another trillion in assorted bailout money from the pockets of enraged taxpayers - also sometimes known as "jurors."

So there's an angry mob with pitchforks assembling, and they want to see some heads on pikes. While former Enron CEO Jeff Skilling could at least try to have his case transferred out of Enron-devastated Houston, the credit-crisis targets will have no such card to play. This time the corporate shenanigans have wrecked the globe. "This is the ugliest enforcement environment I've ever seen in my professional career," says one criminal- defense lawyer, who also asks for anonymity.

"People are hot," observes John Dowd, who heads the white-collar unit of Akin Gump Strauss Hauer & Feld. "It can get toxic pretty quickly."

People have a right to be angry, but anger is not the best frame of mind in which to mete out due process. Here, the process that is due requires distinguishing foolish mistakes from lies and fraud - a line that can get surprisingly fine. To the chagrin of John Q. Public, there will be serious defenses in most of these cases.

To begin with, bad business models - even business models that in retrospect look like prescriptions for disaster - are not crimes as long as they are fully disclosed to investors. And the fact that lenders were hawking outlandishly risky mortgages to people who were terrible credit risks was, in fact, no secret in America: It was bipartisan national policy. The fact that exotic mortgages (like "pick a payment option" AR Ms and "Alt-A" loans with no documentation of the buyer's assets or income) were then being packaged into complex derivative securities - some rated AAA by Moody's, S &P, and Fitch - was not just well known but also hailed as ingenious by some of the putatively best financial minds in the country.

If CEOs did not foresee the imminent train wreck that, looking back, seems so inevitable, neither did former Federal Reserve chairman and erstwhile "maestro" Alan Greenspan, who has recently, if self-servingly, termed our predicament a "once-in-a-century credit tsunami."

Accordingly, Carl "Chip" Loewenson Jr., cohead of Morrison & Foerster's white-collar defense unit in New York City, sees an impending collision of two powerful opposing forces. "No one - not Fannie, not Freddie, not Lehman, not AIG, not [SEC chairman Christopher] Cox, not [Federal Reserve chairman Ben] Bernanke - thought it would get as bad as it has gotten," he says. "This weighs against proving criminal intent.

"On the other hand," Loewenson continues, "there is a long populist tradition in our country that insists on finding villains in any economic downturn."

The job of the prosecutors is not to ferret out the root causes of what went wrong with the economy. That's a task for historians. The prosecutors are to look for unambiguous, intentional wrongdoing - and since a lay jury will be the official scorer here, the simpler the wrongdoing, the better. While it might be true, for instance, that investors were misled by the way companies handled mark-to-market accounting of derivatives, a prosecutor who makes that the centerpiece of his case will end up with a swearing contest between opposing accounting experts - a morass in front of a jury.

So prosecutors will keep it simple. "The kinds of things that get our attention," says Benton Campbell, the U.S. Attorney for the Eastern District of New York, in an interview, "are fundamentally very familiar: lying, cheating, and stealing."

Let's start with lying, which brings us back to those earnings conferences that executives face every three months, the handling of which gets trickier as the company's prospects get dicier.

The poster boy for criminally false upbeat statements during a crisis is Ken Lay, the founder and chairman of Enron. Lay resumed control of the company late in the game, after Skilling abruptly resigned as CEO in August 2001, less than four months before Enron's bankruptcy filing, when the company's goose was already pretty well cooked. Lay was convicted almost exclusively for his preposterous happy talk during those final days: "The balance sheet is strong." "The third quarter is looking great." "Enron stock is an incredible bargain at current prices." (Lay's convictions were overturned automatically when he died before his appeal could be heard.)"

Though a jury found that Lay crossed the line, lawyers disagree about where that line is. If you ask a class-action lawyer, he'll tell you it's not a complicated issue. "When you speak, you need to tell the whole truth," says Gerald Silk of Bernstein Litowitz Berger & Grossmann.

But if you ask a lawyer who advises corporations, you'll get a very different answer. "The reality is, you've put your finger on one of the most difficult situations that will come up in counseling executives of corporations," says one who does that for a living and insists on anonymity. "You can't lie," he says. "You're trapped between serving the best interests of shareholders and the legal requirement not to lie. You need to thread the needle." (Now you see why he wants anonymity.)"

Continuing down U.S. Attorney Campbell's list of sins, after lying we come to cheating and stealing, rubrics that comfortably embrace insider trading, another crime that's easy for jurors to understand. Though Lay wasn't charged with insider trading, prosecutors did highlight that he had been, without disclosure, selling $24 million of his Enron stock at the same time he was urging investors and employees to buy. Yes, the sales were "involuntary" in that they were required to meet margin calls, but the government does not consider such sales as fundamentally different from any others. They are still voluntary in the sense that the investor could theoretically post cash or other collateral if he really wanted to keep the stock badly enough. The SEC is, in fact, currently scrutinizing whether certain CEOs made margin-call sales of company stock without disclosing inside information, according to a person in a position to know.

In addition, once prosecutors subpoena documents and e-mails from a company, they may stumble across other easy-to-prove crimes - "pickoffs," one former prosecutor calls them. (Lay was convicted, for instance, of four felonies for having used personal bank loans, which he paid back on time, for purposes the banks hadn't anticipated - a transgression not known to have ever been prosecuted criminally before then.) An easy-to-prove standby charge is obstruction of justice, if the target is believed to have destroyed documents or lied to investigators. (Think of tech bubble inflater Frank Quattrone, Enron enabler Arthur Andersen, or ImClone stock dumper Martha Stewart. Quattrone's and Arthur Andersen's convictions were overturned on appeal, but each defendant had suffered plenty by then.)"

Finally, there is at least one criminal investigation underway that does not concern either executives' questionable statements or insider trading. Attorney general Cuomo and the Manhattan U.S. Attorney's office have publicly announced that they are working jointly on a broad inquiry into allegedly manipulative or fictitious trading in credit default swaps. Based on the documents being sought, prosecutors appear to hypothesize that short-sellers, perhaps with assistance from bank or brokerage officials, faked trades in these instruments to artificially signal to the market widespread panic over a company's condition when, in fact, such sentiments had not existed before the manipulative trading itself.

What follows is an overview of some of the companies that prosecutors are known to be looking at and some of the likely problem areas relating to each. In most cases, the questionable statements highlighted here have already become the focus of civil shareholder suits alleging fraud.

Bear Stearns

A likely template for the prosecutions to come was set last June, with the indictment of Ralph Cioffi and Matthew Tannin, the founder and portfolio manager, respectively, of two Bear Stearns hedge funds that had collapsed 12 months earlier. (Cioffi and Tannin have pleaded not guilty, and their attorneys declined to comment on the case.)"

Cioffi and Tannin lost $1.4 billion of their clients' money by making the bad business decision to invest it in a highly leveraged portfolio of instruments called CDO-squareds, which were backed in part by subprime mortgages. But losing money is not a crime. Cioffi and Tannin were charged with making false statements in the final months of the funds' demise. The indictment alleges, for instance, gaping discrepancies between the men's reassuring public statements to investors (e.g., "We're very comfortable with exactly where we are," on April 25, 2007) and their despairing private e-mails days earlier (e.g., "If we believe the [internal report is] A NYWHERE CLOSE to accurate I think we should close the funds now," on April 22, 2007)

Nevertheless, many observers of the Bear Stearns prosecution are skeptical that the charges will hold up when the e-mails are presented in context. People change their minds rapidly and radically during any crisis, as they consult others and learn additional facts. These observers are even more dubious that the funds' investors were in the dark about risk. Cioffi and Tannin ran a hedge fund, after all, meaning that their investors had to be, by law, supersophisticated.

Plaintiffs class-action lawyers claim that Bear's problems should not end there. Two months after the hedge funds collapsed, CEO James E. Cayne assured investors that "the balance sheet, capital base, and liquidity profile have never been stronger. Bear Stearns' risk exposures to high-profile sectors are moderate and well controlled." Seven months later the company sought emergency funding from the Federal Reserve and was quickly sold to J.P. Morgan Chase (JPM, Fortune 500).

Of course, as the world has seen, a lot can change in seven months, so it will be hard to prove that Cayne did not believe what he was saying. A tougher case is presented by his successor, Alan Schwartz, who was saying much the same thing as late as the morning of March 12, 2008, just 36 hours before seeking emergency funding. "Our liquidity and balance sheet are strong," Schwartz told CNBC's David Faber. "We don't see any pressure on our liquidity, let alone a liquidity crisis."

Although federal prosecutors in Brooklyn were asking some questions immediately after the company's collapse, there does not appear to be any active criminal inquiry. Counsel for Schwartz declined to comment, as did U.S. Attorney Campbell.

AIG

On Sept. 16, 2008, AIG was saved from bankruptcy by a taxpayer-funded bailout. It is currently being propped up with federal loan commitments and investments potentially totaling $150 billion. It acknowledges being under scrutiny by the U.S. Department of Justice and the SEC and says it's cooperating fully.

Though AIG's core (and heavily regulated) insurance businesses are healthy, the company appears to have been sunk by its small, formerly lucrative financial products unit. This group, headed by Joseph Cassano, effectively insured the holders of certain bonds against default by writing contracts known as credit default swaps. In particular, it insured the safest "super-senior" tranches of collateral debt obligations (CDOs), which, though backed in part by subprime mortgages, were originally considered very safe by credit-rating agencies and rated AA .

In August 2007, a month after those agencies downgraded hundreds of CDOs, Cassano spoke to investors in a conference call. "It is hard for us, without being flippant," he said, "to even see a scenario ... within any kind of realm of reason that would see us losing $1 in any of these transactions."

In a sense, Cassano's prognostication was not as far off as one would think. Even today very few CDO tranches insured by AIG FP have actually stopped paying as anticipated. But what Cassano and AIG were not disclosing - and at that stage might not themselves have appreciated - was that if market confidence in the CDOs fell sufficiently, AIG could be forced to post billions of dollars in cash collateral to protect the counterparties to its credit default swaps. It would also face writedowns in the value of its credit default swap portfolio, causing huge quarterly losses, sending the company's stock price lower, threatening its own credit rating, and making it harder for the company to raise new capital. Thus, even without cash losses, the unit's portfolio could start the company on a downward spiral to oblivion.

The question that civil plaintiffs lawyers are homing in on - and, it stands to reason, that government investigators would also look at - is precisely when AIG's officers began to appreciate that risk and whether they made sufficient disclosure at that point. Thus, while Cassano's statement above, 13 months before the bailout, might have been defensible, as time passed it might have become less so. Corporate officials have an ongoing duty to update old information that "remains alive in the marketplace," if an investor might reasonably rely on it.

Based on documents made public at an Oct. 7 hearing before the House Committee on Oversight and Government Reform, supplemented by additional disclosures in a New York Times article of Sept. 28 and a Wall Street Journal article of Oct. 31, the timeline looks like this:

In early September 2007, AIG internal auditor Joseph St. Denis learned that AIG had received a multibillion-dollar collateral call on its credit default swaps, according to a letter he wrote to the House oversight committee this past October. Alarmed, St. Denis sought more information about the valuation of the credit default swaps. In late September 2007, Cassano allegedly refused him access to it, saying, "I have deliberately excluded you from the valuation of [the swaps in question] because I was concerned that you would pollute the process," according to St. Denis's letter.

St. Denis resigned. As collateral calls continued, Cassano's unit concluded that writedowns were necessary on the swaps portfolio. But there was no accepted way to assign value to the novel and illiquid instruments.

In its third-quarter earnings statement AIG reported a modest loss attributable to the swaps write-downs. It also acknowledged - without quantification, to be sure - that it was having some differences of opinion with counterparties about how much collateral it needed to be posting for those swaps.

Then, on Nov. 29, a PricewaterhouseCoopers partner addressed AIG's audit committee, with AIG CEO Martin Sullivan present, and related certain concerns the auditor had about possible "material weaknesses" in the accounting valuation process AIG's financial products unit was using.

Just six days later both Sullivan and Cassano addressed investors at New York's Metropolitan Club, giving an in-depth, generally reassuring presentation about AIG's credit default swaps portfolio. Sullivan stressed that AIG "has accurately identified all areas of exposure to the U.S. residential housing market," that "we are confident in our marks and the reasonableness of our valuation methods," that "we have ... a high degree of certainty in what we have booked to date," and that "AIG's exposure levels are manageable."

Cassano also spoke, saying, "We are highly confident that we will have no realized losses on these portfolios during the life of these portfolios." There was no explicit warning about the dire impact that the collateral calls and unrealized losses might have in themselves. Still, Cassano did give a detailed presentation of the valuation methodology his unit was using to price the portfolio for purposes of the write-downs.

Two months later, on Feb. 11, AIG disclosed in an SEC filing that its outside auditor was declaring that there were "material weaknesses" in that valuation process. A bout two weeks after that, AIG issued its results for the last quarter of 2007 using a different valuation technique. It resulted in a $5.3 billion net loss, driven in large part by more than $11 billion in write-downs on its credit default swaps portfolio. The rest, as they say, is history.

A spokesman for AIG declined to comment, and lawyers for Cassano and Sullivan did not respond to detailed messages seeking comment.

Lehman Brothers

Lehman's parent company filed for Chapter 11 protection on Sept. 15, 2008, the largest bankruptcy in history. Officials of the company are now under scrutiny by federal prosecutors in Brooklyn, Manhattan, and Newark.

U.S. Attorney Campbell's office, in Brooklyn, is scrutinizing statements that Lehman executives CEO Dick Fuld Jr. and then-CFO Ian Lowitt made in an emergency conference call to preannounce third-quarter earnings on Sept. 10, 2008, just five days before the bankruptcy filing, according to a person familiar with the situation. The call was convened after word had leaked out the day before that talks between Lehman and the Korean Development Bank about a possible investment had broken down. Among other things, Fuld assured investors that "we are on the right track to put these last two quarters behind us," while Lowitt stressed, "Our liquidity pool also remains strong at $42 billion." The question today is essentially, How does $42 billion vanish in five days, and did Lehman officers know then of any harbingers of doom that they weren't sharing?

The Manhattan federal prosecutor's office, meanwhile, is focused on whether Lehman was overvaluing its commercial real estate holdings shortly before bankruptcy (even though it had already marked them down significantly), according to a person familiar with the situation. The former head of Lehman's global real estate group, Mark Walsh, is therefore among the executives coming under the microscope.

In Newark the U.S. Attorney's office, together with New Jersey state regulators, is looking at a major capital-raising effort Lehman launched in June 2008, just three months before bankruptcy, when it issued $4 billion in common stock and $2 billion in preferred. Among the big investors was the fund that provides pensions for New Jersey's state and municipal employees, which invested $180 million, of which it has already lost at least $115.5 million.

It is not unusual for corporate officers to meet officers of big investors personally before such capital raisings, so any oral representations made to fund officials will presumably be closely scrutinized, as will all the SEC filings and conference call statements prior to the filing, including statements by CEO Fuld, then-CFO Erin Callan, and Callan's predecessor, Christopher O'Meara, who was then chief risk officer.

A spokesperson for Lehman Brothers said the company is cooperating fully, but otherwise declined to comment. Attorneys for Fuld and Walsh declined to comment, while a lawyer for Callan did not answer detailed messages seeking comment. Lowitt and O'Meara could not be reached.

Fannie and Freddie

Both Fannie Mae (FNM, Fortune 500) (the Federal National Mortgage Association) and Freddie Mac (FRE, Fortune 500) (the Federal Home Loan Mortgage Corp.) were placed into conservatorship on Sept. 7, 2008, in what was then the largest federal bailout in history. Each has since acknowledged that it is under investigation by federal prosecutors and the SEC, and says it is cooperating fully. Though it is still unclear what the focus of the probes is, the companies' former CEOs, Daniel Mudd and Richard Syron, have been accused of fraud in civil suits for making reassuring statements, which proved ill founded, about their companies' capitalization levels.

Civil lawyers alleging fraud have also been incensed by Fannie Mae's preferred stock offering in May 2008 - just four months before it was seized - because Fannie assured investors then that it was more than adequately capitalized, and provided only very perfunctory, opaque warnings about an accounting rule change that the Federal Accounting Standards Board had proposed in April. It wasn't until July 7, two months after the offering, that bank analysts at Lehman published a report explaining that the change, if adopted, would bring $2.27 trillion in mortgage-backed securities onto Fannie's balance sheet for the first time, meaning that Fannie would need to add $46 billion to meet its capital requirements - an unattainable sum.

Though the analysts predicted that Fannie would "probably" get an exemption from the rule before it took effect, the damage was done, as it fueled the perception that Fannie (and Freddie too, which would need $29 billion in additional capital under the rule change) was already insolvent and was being sustained only by an accounting mirage.

Fannie's stock fell about 20% that day and lost more than half its value over the ensuing week. A t the end of that month Congress gave the Treasury Department authority to seize Fannie and Freddie if necessary. Two months later the Treasury did.

Spokespeople for Fannie Mae and Freddie Mac declined to comment, as did counsel for Mudd. Syron did not return phone messages.

The mortgage originators

Needless to say, several of the subprime or low-documentation mortgage originators - ground zero for today's crisis - are reportedly under criminal and SEC scrutiny, including New Century Financial Corp., American Home Mortgage Investment, Countrywide Financial Corp., Golden West Financial, and Washington Mutual. In the civil shareholder suits that have already been filed against them, their officers have generally stressed that they genuinely believed their companies were advancing the noble goal, actively promoted by both the Clinton and Bush administrations, of making the American dream of homeownership a reality for less-well-off citizens. They were overtaken, they insist, by seismic market forces whose speed, breadth, and severity nobody foresaw, and which have already caused the failures of more than 300 lending institutions since 2006.

The problems will arise where the executives tried to distinguish their companies from the pack by highlighting their allegedly superior underwriting techniques, higher-quality portfolios, early anticipation of the downturn, or other purported advantages that proved to be insufficient at best and fictitious at worst. Some officials, like CEO Angelo Mozilo of Countrywide Financial, portrayed the growing market turmoil as an opportunity: "This will be great for Countrywide at the end of the day," Mozilo told CNBC's Bartiromo in March 2007, "because all the irrational competitors will be gone."

In all these cases, prosecutors and the SEC will likely be scrutinizing the executives' stock sales as the crisis played out, looking for both insider trading and evidence of the executives' true state of mind. Civil plaintiffs accuse Countrywide's officers, for instance, of selling $848 million in stock during the year and a half before the company's sale to Bank of America (BAC, Fortune 500) in January 2008, including $474 million worth sold by CEO Mozilo alone. In a particularly unseemly twist, most of the stock was allegedly sold back to the company itself as part of a $2.4 billion buyback program initiated in October 2006. (Neither Mozilo's counsel nor the Countrywide press office responded to detailed inquiries.)"

How does it all play out? Criminality is about deviance, so the more widespread undesirable conduct turns out to have been, the more difficult it becomes to treat it as criminal. The collapse of the Bear Stearns hedge funds in July 2007 was shocking, as was the demise of their parent company eight months later. Likewise, Fannie's, Freddie's, Lehman's, and AIG's failures were all stunners. But by the time Washington Mutual fell, indignation was beginning to flag. It does not appear that the subsequent near collapses of Wachovia and Citigroup (C, Fortune 500) - each once unimaginable in itself - has yet triggered any criminal scrutiny at all (although Golden West, which Wachovia bought in 2006, is reportedly being looked at).

Fairly or unfairly, those who came under scrutiny first - because their companies failed first - are likely to experience the greatest pressure. The reference point here is former CEO Greg Reyes at Brocade, who was convicted and sentenced to prison for backdating. Brocade came under criminal investigation in late 2005 after a disgruntled employee dropped a dime on it, well before the Wall Street Journal revealed, in March 2006, just how widespread options backdating was.

Though it later became difficult to distinguish what had happened at Brocade from what had happened at, say, Apple or Pixar, the latter companies appear to have been permitted to resolve their problems entirely through civil channels. (In addition, as the breadth of a scandal spreads, simple issues of investigatory manpower arise. Criminal cases are time-consuming to prepare, and, as the New York Times reported in October, the FBI just doesn't have enough agents to simultaneously fight terrorism and form a dozen company-specific investigatory battalions, each on the scale of the mighty Enron Task Force.)"

Undoubtedly a few out-and-out scoundrels will be exposed, and they will be convicted criminally. Most of these situations, however, will be handled civilly, by the SEC and plaintiffs lawyers, which is as it should be. And then, inevitably, there will be the sadder, closer calls. Some executives may have made misleading statements under trying circumstances - ones that had far graver consequences than anyone ever imagined, but that were misleading nonetheless. It may turn out that one of the many risks that these financial wizards mispriced was the risk of lying and getting caught.

http://money.cnn.com/2009/01/05/news/ ... payback.fortune/index.htm

What Obama does or does not do will have very little to do with the outcome. It is a global situation now. It is all based on human perceptions, attitudes, fears, hopes and dreams. That is all the economy is based on. It is not and never will be a science.

Obama's new stimulus plan looks like it's no different from what Bush has done in the last 8 years, um were f%&$!

Yikes

Investors Dump $89B in U.S. Securities in Historic Fire Sale

By David J. Lynch
USA TODAY
January 5, 2009

The deep river of private money that helped knit together the global economy has abruptly dried up, new government figures show.

As the global financial crisis grew more severe this summer, foreigners sold almost $90 billion of U.S. securities ? the greatest quarterly fire sale by overseas investors since the government began keeping track in 1960. U.S. investors also are retrenching; they unloaded about $85 billion worth of foreign holdings in the quarter, says the Commerce Department's Bureau of Economic Analysis.

"We've had a global panic. Everyone is pulling their money home," says economist Adam Posen of the Peterson Institute in Washington, D.C.

That's bad for economic growth in the U.S. because it threatens to starve capital-hungry companies and entrepreneurs. But it's especially serious for emerging-market countries that rely heavily on outside financing. Capital flows into countries such as South Korea, Turkey and Brazil were evaporating even before the mid-September Lehman Bros. bankruptcy made things worse.

The reversal of private capital flows signals an abrupt end to a nearly two-decades-long era of financial globalization, says economist Brad Setser of the Council on Foreign Relations. Private flows into and out of the U.S. for purchases of stocks, corporate bonds and federal agency bonds have dropped from around 18% of economic output to near zero "in a remarkably short period of time," Setser says.

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Bingo! I don?t necessarily agree with Reganomics but I do agree that free markets and capitalism have gone out the window with all this. To go a step further, take a hard look at the laws we have, versus the laws in other first world countries, the principals the US was founded upon have eroded a bit.

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You have a point, and you use to key term " free market". I may bitch and moan about my paltry teacher's salary, but I have been and still am a believer in a true free market. I'm old enough to remember the economic mess in the seventies, and I was thrilled to cast my first vote for Ronald Reagan,

But it seems that the Republicans, and business people who claim to be free marketers only act like free marketers when it's profitable to them. Would a true free marketer give an enormous government loan to businesses which are failing due to their own greed, and stupidity? I wonder if Re.agan would have voted for these bailouts, and I think he wouldn't.

I think Reagan would have agreed with me and let the chips fall where they will.

And watch "the Commanding Heights". You'll see that governments don't have all that much to say about free and regulated markets. It's more like when the inherent problems of each market start to cause problems, the voters elect the person who promises to change that. It's no accident that Obama was elected in November.

So what. While people in financial services (the life blood of the NYC economy) are widely reviled while being either laid off or taking huge pay cuts; the UAW refuses to take a cut to save the firms they work for. Good riddance to them.

Obviously they are hoping for a big payback once Obama is in power. A lot of people are going to chip in about "fairness" once they realize that political power is more important than producing what people want to pay for in a free market.

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I agree for some but not for my friends in the finance industry who have support positions at these firms. Think things like IT, HR, ect. their payscale is only slightly higher than if they had a position at a non-finance firm. I think all of the finance buildings in Jersey City dubbed "Wall Street West" housed support operations.

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Right on, when times were good, people in that sector reaped these obnoxious bonus amounts and for what?
Give me a break, no one feels bad for any of these institutions or its employees!!!

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yeah, I hear ya. Years ago, when I was working as a teacher, my financial world friends were all sitting around the kitchen table in my apartment talking about their Christmas bonuses and what they planned to do with them. My roommate planned to go on a sailing trip, one was buying furniture, and others were paying off the big credit card bills they had run up on stuff like expensive clothing and meals out.

I said, " You guys wanna see my bonus, and proceeded to pull out a pencil engraved with " Happy Holidays from *****Middle School". It was all very funny, but is it fair? I say, " What goes around comes around".

A timely video given the current job environment:

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The goal isn't to get the UAW to "man up". It is to get rid of all unions in this country. Conservative Republicans don't negotiate to make things work better, they deem something evil and try to get rid of it altogether. Like they did with deregulation. We're seeing how well that worked.

I mentioned folks either being laid off or dinged on their bonuses as an explanation for why the NYC metro area is in deep trouble (but nowhere near a depression).

In terms of your ignorance, "bonus" for people in financial services and related businesses is more accurately described as "variable compensation."

I might consider feeling bad for "most people" after they take a 45% pay cut, watch many around them lose their jobs, and man up so that their firm can survive. I don't see UAW workers doing this.

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Recession-Plagued Nation Demands New Bubble To Invest In

ONN
July 14, 2008

WASHINGTON?A panel of top business leaders testified before Congress about the worsening recession Monday, demanding the government provide Americans with a new irresponsible and largely illusory economic bubble in which to invest.

"What America needs right now is not more talk and long-term strategy, but a concrete way to create more imaginary wealth in the very immediate future," said Thomas Jenkins, CFO of the Boston-area Jenkins Financial Group, a bubble-based investment firm. "We are in a crisis, and that crisis demands an unviable short-term solution."

The current economic woes, brought on by the collapse of the so-called "housing bubble," are considered the worst to hit investors since the equally untenable dot-com bubble burst in 2001. According to investment experts, now that the option of making millions of dollars in a short time with imaginary profits from bad real-estate deals has disappeared, the need for another spontaneous make-believe source of wealth has never been more urgent.

"Perhaps the new bubble could have something to do with watching movies on cell phones," said investment banker Greg Carlisle of the New York firm Carlisle, Shaloe & Graves. "Or, say, medicine, or shipping. Or clouds. The manner of bubble isn't important?just as long as it creates a hugely overvalued market based on nothing more than whimsical fantasy and saddled with the potential for a long-term accrual of debts that will never be paid back, thereby unleashing a ripple effect that will take nearly a decade to correct."



"The U.S. economy cannot survive on sound investments alone," Carlisle added.

Congress is currently considering an emergency economic-stimulus measure, tentatively called the Bubble Act, which would order the Federal Reserve to? begin encouraging massive private investment in some fantastical financial scheme in order to get the nation's false economy back on track.

Current bubbles being considered include the handheld electronics bubble, the undersea-mining-rights bubble, and the decorative office-plant bubble. Additional options include speculative trading in fairy dust?which lobbyists point out has the advantage of being an entirely imaginary commodity to begin with?and a bubble based around a hypothetical, to-be-determined product called "widgets."

The most support thus far has gone toward the so-called paper bubble. In this appealing scenario, various privately issued pieces of paper, backed by government tax incentives but entirely worthless, would temporarily be given grossly inflated artificial values and sold to unsuspecting stockholders by greedy and unscrupulous entrepreneurs.

"Little pieces of paper are the next big thing," speculator Joanna Nadir, of Falls Church, VA said. "Just keep telling yourself that. If enough people can be talked into thinking it's legitimate, it will become temporarily true."

Demand for a new investment bubble began months ago, when the subprime mortgage bubble burst and left the business world without a suitable source of pretend income. But as more and more time has passed with no substitute bubble forthcoming, investors have begun to fear that the worst-case scenario?an outcome known among economists as "real-world repercussions"?may be inevitable.

"Every American family deserves a false sense of security," said Chris Reppto, a risk analyst for Citigroup in New York. "Once we have a bubble to provide a fragile foundation, we can begin building pyramid scheme on top of pyramid scheme, and before we know it, the financial situation will return to normal."

Despite the overwhelming support for a new bubble among investors, some in Washington are critical of the idea, calling continued reliance on bubble-based economics a mistake. Regardless of the outcome of this week's congressional hearings, however, one thing will remain certain: The calls for a new bubble are only going to get louder.

"America needs another bubble," said Chicago investor Bob Taiken. "At this point, bubbles are the only thing keeping us afloat."

? Copyright 2008 Onion Inc. All rights reserved.

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Why?

NYC counts record number of homeless families

Associated Press - December 22, 2008 10:55 PM ET

Corrected Version

NEW YORK (AP) - The number of homeless families staying in New York City shelters has hit its highest level in 25 years.

The Coalition for the Homeless says a record 9,720 families stayed in shelters in the month of November. That breaks a previous high of 9,500 in September 2007. It's 13% higher than a count of 8,607 families in May.

The coalition says it's the highest number of documented homeless families since the city began keeping count in 1983.

Homeless advocates fear the number could jump even higher if the economic turmoil in the city worsens.

City Department of Homeless Services officials say the city is equipped to handle the increase and is serving all homeless families.

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Me and colleague argue about this topic all the time. The picture above claims that one of the causes of the great depression was "overproduction of agriculture" but the truth of the matter is that one of the reasons many historians argue that the GD lasted as long as it did, and people couldn't afford food, waited in soup/food lines, etc was precisely because under the new deal, many farmers were paid *not* to farm, thus increasing the cost of food. You can read more about that, HERE. In deflationary environments such as the Great Depression, the last thing you want to do is increase the cost of something that everyone consumes.

Incidentally, the recent fall in Crude Oil/Gasoline/Heating Oil is a welcome change as that money goes directly into consumers pockets (or more to the point, goes directly to pay off consumers credit cards & home loans).

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Semantics, Semantics. I'll rephrase. We were either undertaxed or we received more government services/obligations than we paid for. So I support shrinking government in principle. But practically speaking, a combination of government cuts and increased taxes (the debate over who and how to tax is never-ending) would ultimately put us on more stable, sustainable economic footing, IMO.

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No. However, I'm not for cutting taxes either.
I'm all for demand-side governmental intervention at this point. Government should spend spend spend in the short-term.
Make no mistake, it's not gonna prevent the balloon from deflating, but it will most likely prevent the balloon from popping violently allowing the economy more time to adjust and reallocate capital and resources towards truly valuable endeavors (as opposed to the many falsely valuable endeavors of the past decade such as engineering mortgage securities, building houses/condos, making $200 headphones, building SUVs, making "I love George Bush" T shirts, etc.).

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Name one country that is more diverse ethnically and/or economically than the United States of America and I'll gladly hand over ALL the money in my savings account right now.

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The most Amazing thing about this Madoff Scandal is that it was reported to the SEC over 3yrs ago, and they did nothing to investigate it. Barron's also wrote a negative story about Madoff in 2001. The complaint from 3yrs ago detailed about 27 red flags that explained why the fund was either a) illegal insider trading or b) outright fraud (the world's largest Ponzi scheme). If you're so inclined, you can read the documents sent to the SEC here: http://www.ritholtz.com/blog/2008/12/ ... red-sec-madoff-complaint/

Thanks for the memories Chris Cox...

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It is a discussion on whether or not we are heading for another Great Depression. Hence, the title is appropriate. But thanks for dropping by to express your disapproval of the title without reading the thread.

i would have read it if you called it "economic downturn". i don't need a thrill to get interested

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Walnut, dude, it's called "Sensationalism". Had I titled this thread " Economic Downturn " whould anybody bother to read it? Huh? Huh? I think not.

i'm sorry i disagree iwth you. it's NOT going that way. if food is still on the table, clothes on people's backs with heat and electricity then this is NOT a depression. a recession - yes. it's a shame that people have seen their "riches" evaporate. when i see these same people on a bread line then maybe we can talk.

it's like my little cousin who is complaining that he's only getting 4 presents for xmas instead off the normal 20! yes that's a huge reduction. but he's still getting 1 present. actually he's getting 4x that. sounds better than most of the world to me

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The person who started this thread did not say this IS a great depression but it's starting to go that way. You know it's bad when highly successful people are starting to feel the effects of a bad economy. A lot of people have seen the wealth they had literally evaporate in a couple of months.

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I'm in agreement that the bonuses and salaries relative to the work are wildly out of porportion, but to abruptly yank that much money out is going to be very very bad for the rest of the economy. Sure, big shot banker can't buy a new sportscar this year -- boo hoo, I feel really bad for him -- but at least he probably has enough money saved up, a college degree, etc. in order to land on his feet and be able to survive comfortably. The people that truly suffer from the low and/or nonexistent bonuses this year are the multitude of service, retail and hospitality workers that make their living off the money these d-bags spend.