November 28, 2024
From the Federal Reserve History.
“In 2007, losses on mortgage-related financial assets began to cause strains in global financial markets, and in December 2007, the US economy entered a recession. That year, several large financial firms experienced financial distress, and many financial markets experienced significant turbulence.”
From its peak in October 2007 until March 6, 2009, the DJIA fell 54%, the biggest decline in US stock market history. The stock prices of financial giants Citigroup and AIG plummeted over 90% due to their exposure to subprime loans.
In one of more than 100 warnings issued over the immediate six months preceding the global financial system collapse, Bill Cara warned the Cara Community that the US securities system and its major banks would cause an impending disaster. Little did he know at the time how quickly it would happen.
Posted by Bill Cara on June 8, 2007 on billcara.com
Reported originally as Gem #38 of a selection of Bill Cara’s postings between March 1 to August 23, 2007
There is nothing like a punch to the nose to knock you down, followed by a whiff of the smelling salts to re-focus the mind and get you back in the fight. So, let me apply some consciousness-raising analysis.
As I have been saying for many years, the capital markets are not a level playing field. In no other facet of society do we permit such blatant conflicts of interest. I speak of our problem where Humungous Bank & Broker has been permitted by legislation (the US Securities Act and Regulations, 1933, 1934) to act simultaneously as principals, agents, sales advisors, fiduciary managers, and self-regulators. In recent generations, the leaders of HB&B have even furthered their interests by (i) advising and directing the affairs of governments, including the establishment of a concept known as the US Plunge Protection Team (PPT), and (ii) creating self-benefiting financial products like credit swaps and ETF’s.
Once upon a time in America, in 1929, there was a great market crash, followed by an economic period known as the Great Depression. What happened then was that the leading capitalists of the day pushed the legislators in Washington to enact the most abusive, egregious piece of legislation the free world has ever known – the Securities Act of 1933.
What happened at that time was precisely what is happening today: a credit bubble (caused by debts to buy homes, cars, and stocks) that ballooned to a point where speculation became so extreme that the capital markets became unstable. I lay those problems at the feet of the bankers, as I do today, and when the bubble burst on Black Tuesday, October 29, 1929, those bankers lost their wealth and influence over the market. Ergo, the legislation of 1933 and 1934 was enacted to give bankers power to control the owners and managers of capital, their clients.
Is there a sea change in capital markets underway today? Yes, but not in the way most people think when they look at red arrows popping up all over computer monitors. That is a temporary and fleeting phenomenon that will soon be resolved by even higher prices of stocks and bonds.
The sea change underway today is the collective understanding and assessment by the owners and managers of capital that for almost 75 years their market has been hijacked by bankers and they have lost many, many trillions of dollars as a direct result. Even the government, as atrocious as its management performance has been over the years, cannot come close to the theft of our wealth by bankers and their Friends & Family.
Just like in 1929, we are headed toward a “Financial Armageddon,” precisely as Wall Street-savvy Michael Panzner described in his 2007 book of the same name. The clock has been ticking for 75 years, but I don’t think we have ten years to avoid another Black Tuesday (Oct. 29, 1929).