A Cover of The Financial Crisis 2008?
Here is the working preface. (meaning: I just had the overall book idea this morning.)
October 6, 2008. It was early in New York on Rockefeller Plaza at NBC.
A place where the mention of Rockefeller drew contrasting opinions
based on what economic class you came from or currently held at
present. His was a fortune made in Standard Oil; Rockefeller’s behemoth
was then broken apart into 27 companies, and the famed ‘seven sisters’:
Exxon, Mobil, Shell, BP, Chevron, Gulf and Texaco. By 1999, these oil
giants would remarry with almost zero objection to their offspring. But
today was not about oil – even as it had soared to all-time highs just 3
months prior of nearly $150 per barrel – but instead, about the
economics of the “credit crunch.”
Before another hectic day of following the casino-like markets would
take hold of an imperiled nation’s imagination, the mood was decidedly
uncertain even after the announced $700 Billion dollar ‘bailout’ or
‘workout plan’ was approved during a 2-week span by U.S.
congressional leaders on the Friday prior. The leaders had thrown
together a bill at the insistence and design of Treasury Secretary Henry
Paulson, ex-Goldman Sachs CEO, to buy up mortgage back securities
and other illiquid assets that banks and finance companies were unable
to sell amidst the crisis of confidence seen on the Wall Street markets,
European floors and newly emerging Asian trading sectors.
With more news of national banks from across the pond being 100%
insured by their governments, namely Germany, the 4th largest economy
by GDP, people with enormous financial stakes and reputations to
protect were speaking to Americans.
Jim Cramer, a 25-year trader of stocks, a former Goldman Sachs
employee and host of CNBC’s Jim Cramer’s Mad Money was a guest on
NBC. His call to action for folks nearing retirement age was “ to remove 5
years worth of money,” from the market. This after a weekend of
contemplation about where the markets where heading. Many folks
called this a ‘chicken little’ panic call, shouting ‘fire’ in a smoke-filled
room and other ways to express over reaction to recent events. Cramer
though was panicking back as far as August 2007 during the first shock wave of events that would inevitably become the worse banking collapse since the days of Herbert Hoover and the Great Depression.
The string of collapses in long-standing institutions, some that
survived through the Depression Era, made it harder to swallow for
people like Cramer that had more than one CEO of an investment bank
tell him things: “We’re ok. Just a short-term hiccup. Just need an infusion
of fresh capital.” Lehman Brothers had been one of those firms – now
gone after establishment back during honest Abe’s timeframe. [Added: And Kramer's own Bear Stearnes dilemma.]
Gone was the ability of banks to lend to each other too. They had free-
wheeled hundreds of billions of dollars in the housing market from coast
to coast, sea to overseas, at sub-prime lending rates with adjustable
kickers. As a result, the borrower usually got overmatched intellectually
and financially, and took their only recourse: skip out on the house and
leave the bank or lending institution to resell the home. Meanwhile,
packaging up thousands of homes of various investment qualities and
labeling them Mortgage Backed Securities, Credit Default Swaps,
Collateralized Debt Obligations to be offered on an open market only lent
more fuel to this 3-alarm fire. As these packages got divvied up further,
combined in unique ways that only a Rubix Cube master could solve or a
Ph.D. candidate in quantum physics might find interest to mull over, the
investment bankers suddenly looked like Masters of a Failing Urban
Housing Project more than any Universe known to these bonus-baby
millionaires.
The U.S. Economy has grinded to a standstill. Hefty layoffs have
ensued. The U.S. car industry is in steep decline due to lack of loan
approvals and abysmal choices of inefficient cars, trucks and SUVs.
Financial services have taken a beating. Construction of new homes is
nearly non-existent in several key markets, such as California, Nevada,
Florida and Michigan. The commodities exchange have rollercoastered
from all-time highs and back down as asset deflation on homes and cars
has strangled people’s ability to shed or service debt or live within their
means. The Perfect Storm of 2008 has not come to an end. It has reached
landfall status, hitting the United States, Europe and Asia at nearly cat 5
strength. The devastation of this financial crisis will be measured in
trillions of dollars lost. The economic machine of the United States is a
$14 trillion dollar-per-year economy, but this storm will suck possibly 50-
100% of 300,000,000 Americans productivity for an entire year before it
is all done.
The explanation of why it happened, who got victimized and what the
events were to cause such a catastrophe will be seen through the prism
of an ordinary citizen with his eyes and ears tuned to this channel of
economic despair and policy blunders.
The overall goal may be seen as two fold: to shed light on behavior
and ideas behind the financial hurricane and to see the ramifications to
all people of various social-economic backgrounds. The calm before the
storm that contributed to lagging response to the problem from decision
makers may ultimately prove to be the most salient topic broached.
No matter the analysis, many have and will suffer from the greatest
crisis of nearly 4 generations. And no one will forget how they survived
during it.
