Seattle Bubble Forum Archive

One has to wonder if just about every bank and WallStreet firm is lined up to collapse and instead of having one GIGANTIC collapse over the course of a week leading to instant Depression and panic, that the "financial parade of champions" was lined up (lottery?) and each given their "failure date" corresponding to some predetermined interval. By serializing the announcements of failure over a long period of time perhaps the psychological impact is reduced. But that would be a conspiracy wouldn't it, and we in Seattle are much too smart to believe in any conspiracy.

So to sum up, instead of all the lemmings going over the cliff en masse, the lemmings are lined up in single file and only allowed to jump one or two at a time....

Just about every bank and WS firm drank the poisoned RE Kool-Aid so I think it is safe to say that there are a lot of fireworks left as the extent of rot, excess, and greed of the financials and RE industry, is "allowed" to be exposed.

Justice will only be served when those who benefited the most from all the greed and corruption are on the street...begging. But don't hold your breath....Mozillo is still a free man.

Allow me to apply Occam's Razor.

It's possible it's all one huge conspiracy whereby all this is hidden from the public and nobody has even made an unofficial leak to the media, but isn't it also possible that each institution took on a different amount of risk? If that is true, is it likely that those who took on the most risk would default first, perhaps pushing others who were on the verge in?

Or, to put this in a lemmings analogy. What if you tied every lemming to the same rope and let them run? Seems like some would fall first and they might drag the more careful lemmings down serially.

You also need to consider the financial condition of the institutions before the RE bubble. It certainly seems like some banks have enough assets to cover the losses, while the house-of-cards companies like Bear Stearns and Lehman are just biding their time hoping for a miracle (i.e. bailout).

Allow me to apply some common sense....

The banks and brokerage houses have been holding bags full of dog crap while telling everyone its truffles. It worked for quite awhile and many people convinced themselves that dog crap was the new delicious.

Then suddenly someone said, "you're buying and eating dog crap" and after abrupt denial those who had bought the crap became angry and then scared and then.....suddenly the charade was over.

Are you gonna tell me with all the warnings and rumbling for the last year that these bagholders never had a clue what was really in the bag? Where were the regulators, the accountants, and other safety nets that are there to prevent dog crap from being sold as truffles?

These companies hire the very brightest people out of elite Ivy League schools. Can you tell me with a straight face that nobody (in the companies or the government regulatory agencies) saw this coming a year ago? And since just about all of them bought bags of crap.....why string this thing out with weekly/monthly "surprises"?

The regulators should have demanded a full accounting by all the big banks and brokerages last summer when the odor from the bags first started to leak out. Everyone should have come clean, the scope of the problem established, and then an honest and open plan to deal with mess and make sure it never happens again.

Now sure what you expected to happen. Why would a corporation point out how weak it was? If you keep mum, and the markets more or less recover (or at least stabilize), you probably stay in business. If you announce in Nov 2007 that your company is essentially worthless, everyone sells their shares and now your company really is worthless. Try raising capital then.

Regarding oversight, as Lamont pointed out that was based on faulty models. There's no doubt that enough people were suspicious about the models that they should have been investigated...but they weren't.

It's not that your conspiracy is wrong, it's just so simple for these kind of speculative bubbles to form without proper oversight, that you have a far more complex hypothesis than is needed. I could explain why apples fall down by saying "trolls pull them towards the earth, and gnomes pull them up. The trolls are stronger, so they win." It's just an overly complex model given the evidence.