Wall Street shudders under Lehman collapse

Que Sera, Sera

They gambled, and lost... my sympathy for bankers doesnt extend particularly far.

I'm alright Jack ..

An old established firm gets destroyed and thousands of people loose their job, not to mention the losses of private and institutional investors. And you can bet that the clever bastards who engineered this incredibly cynical money making scheme will still walk away with their pockets bulging.

This whole sub-prime fiasco is down to pure, unadulterated GREED. Off with their heads!

Surprised? This is global capitalism at work

Has been stated in a lot of places, but it's worth repeating. The root of the problem is that capitalism as become a game too easy for the powerful to play. The game is as follows: you and I can play. If I win, I collect the benefits. If I lose, you (the public) will have to shell out some cash to compensate for my losses.

The real question that has to be made is: where are all the profits? These same people that have gone bankrupt have previously enjoyed a time with record breaking profits and growth rates. Where is all that?

I hope that this does not happen in Europe. Politicians, were they not corrupted by the money given to political campaigns, should call the managers of financial institutions to be held responsible of their acts.

I absolutely refuse to give even one cent of my money to compensate any losses incurred by those greedy monkeys. My tax money should go to help the unemployed live decently

......until the greedy prepare the next bubble.

Stop it now

Before the vultures land, gloating about Lehman bringing it all on themselves, consider that there are 5000 people in the UK without jobs today. Consider the good that Lehman Bros. did in the industry as well. Today's industry wouldn't have survived without venture capitalists and Lehman were one of the first to underwrite the first internet companies, sparking the market.

Granted, they've made money, but no-one does things in this world for free - it's called capitalism for a reason. If you don't like it, move to Russia

@AC Stop it now

Heh how is moving to Russia going to help if I dont like capitalism? Some very rich, uber capitalists living there.

House overpriced too much for too long

The housing market has been the subject of many people trying to extract ever more money from it.

@Mortgages - Tim Robson - look forward to the time when you _can_ get a mortgage and how much it'll be for, the most likely scenario is that house prices will be returning to realistic levels, and dropping to the levels of the 1990's:

http://www.housepricecrash.co.uk/graphs/generated/homepage.png

Who knows - maybe lower.

Hopefully the estate agents will have got a dose of reality as well and will now behave themselves when valuing a property (well it's worth hoping for at least) and the banks have hopefully learnt their lessons and will be more careful about how and who they lend to.

For those people with houses at the moment look forward to some disappointment in seeing your houses' value dropping. Maybe concentrating on making it your home rather than an investment opportunity would be a better use of time and effort.

I suspect that the rental market will be rather more popular than it has been for some time, with house purchases being rather more of a special event than current generations have got used to.

Anyway - I'm off to teach cheer-up lessons for the Samaritans.

ttfn

Capitalism, or just a "brokers pyramid scheme"?

Hoards of NINJAs (NoInvestmentsNoJoborAssets) who haven't got a hope in hell of being able to repay massive mortgages, being conned into thinking they can, produces an (initially profitable and *potentially* huge) stream of income on which huge profits can be made.

These contracts are then consolodated and resold to institutions around the world, making the handful of people who promoted and backed them (i.e. dishonestly rated them as AAA+ and bought them on behalf of the institutional investors for commission) *stupendously* rich.

The collapse of the pyramid (as the poor saps at the bottom aren't coming in fast enough to keep the whole game moving) pulls down the insitutions around it and bankrupts the people who fell for the impossible dream while the winners walk away scot free.

It looks entirely criminal from where I'm sitting, and it's hardly a shock given how many commentators have been warning about *exactly* this inevitable consequence over the last ten years. Heads should roll, and in the past (South Sea Bubble etc.) they did.

This is a kind of "grand theft" which really makes a mockery of the law and its inability to act against globalised commercial entities.

Average salary....

....at Lehman was around $330,000 according to BBC/Newsnight. Jesus H Christ, must be some earners there! Hard to be sympathetic IMHO.

Plus they paid out $6 Billion in bonuses last year (!) and also walked away from a Korean bank offering $26 a share in a rescue package just four weeks ago....

Still cannot understand why no-one lifts a finger to help struggling manufacturers but when banks are threatened it's all hands to the pump.

We need to get back to actually making things in the UK economy that other people want to buy.

Did someone fire up the Twat-O-Tron early?

@The bloke who thinks he can choose where his taxes are spend - Wake up and smell the reality.

@The "greedy bankers" people - People are greedy, it's human nature. Banks and private enterprises exist to make a profit. It's up to the government and their regulatory bodies to restrict those profits in favour of good business practice and what's good for the economy. Tony and Gordo wanted the nation to have the feelgood factor of a 'booming' economy so they let the banks cause this problem.

@The "stuff them, it won't bother me" brigade - With the current scale of the lay offs the national economy is seriously under threat. House prices fall, service industry jobs in the capital disappear and the treasury has to cut public services to plug the huge shortfall in taxes. The ripples will spread out until everyone, including provincial network admins, feel the pinch.

@AC

Exactly, getting fed up with idiots stating "tough that bankers won't get their 100K bonuses, boo hoo". What about the cleaners, canteen staff and the put upon office clerks? They were not making 100K bonuses were they? What about pension funds and other tied up investments? Now all the majors have a problem unravelleing the exposure held against Lehman's, this isn't all about barrow-boy bankers and their loses, this affects everyone to a greater or lesser extent. Grow up cretins!

hahahahahhahahahahahaha @AC 23:26

So we've got Lehman Bros to thank for Doubleclick, Phorm, every other advertising / malware peddler turning the inernet into an ad-infested cesspool? Wicked.

Granted, they've gone out of business, but it's capitalism. Sauce for the goose is sauce for the gander, it's just in this case the gander has fucked off with a stash of golden eggs that he stole from the goose. Nevertheless he wants our sympathy because he once gave an egg to a callow chicken, in return for a year's supply of omlettes. Naw, mate.

Choose your window! Who's next?

@Anonymous Coward - "If you don't like it, move to Russia"

I think you're mistaking El Reg for Have Your Say. For your information, spEak You’re bRanes can be found at http://ifyoulikeitsomuchwhydontyougolivethere.com; I suggest you take yourself there to find out the general consensus amongst right-thinking people about half-thought-out ramblings such as your own...

Have a nice day

Stockmarket owl... (Yes, a LOLcat)

http://mine.icanhascheezburger.com/view.aspx?ciid=2016281

How on earth...

How on earth did they manage to go $613bn into the red?

This is a truely astronomical figure. To put it into perspective, this amount of money is equavalent to around two thirds of the UK 2007-2008 budget. Yes you could run Britain for 8 months on what these idiots have managed to loose.

How long didi it take for them to rack up these losses and where has all this money gone.

Someone somewhere has got to be $613bn up. It can not have vanished into thin air.

The truely scary thing is that as these muppets are asset and fund managers so this money is most likely someone elses. They will have taken the returns from good investments that should have gone to investors and used them to shore up bad bad investments until finally the pot runs dry. You can be sure that the brokers got their commisions though and the idiots responsible for this will walk away with pockets stuffed with cash

How about ..

Seizing the assets of everyone on the board, every damn last penny, house, car, holiday villa, and pay those 5000 people some severance (we can throw them a cardboard box to live in). This will send out a nice little message to these maggots, that feeding off us has consequences.

I really hate the fact that the management always walks away unscathed by any thing that happens the company and they usually walk away with millions. Just one day I’d love to see someone held accountable ... but that's a dream I have.

Mines the one with the millions in the pocket.

similar to

people made shedloads as a names at lloyds, but soon as I had a loss year, the UK gov had to refund it all.

As someone said, all the ones who enjoyed years of mega profits n bonuses should have to pay the redundancies, same as when my business folded the bank took all my personal assets to pay themselves off, leaving my 2 staff with nothing.

Share the wealth

Firstly - $70bn from the US Treasury? What a farce - those self-obsessed prats shelled out $711bn dollars on weapons and combat alone - (let's call this "defense".

Perhaps Homeland Security should focus more on the people at home and the political terrorists who are letting this happen around them.

Paris, because if I whispered the right words in her ear could help by giving some of her $1bn inheritance...

It never ceases to amaze me...

...how so many 'clever' high-paid people will fall for the old "Get Rich Quick" scheme that Sub Prime was.

Idiots, one and all.

@there goes any hope of my buying a house in the next few years

Eh? Rates are almost certain to drop after this debacle, and prices are freefalling too. So if ever there was a good opportunity to buy a house, it's now. :)

Everybody panic!

Didn't our housing market follow the same path until recently?

Flog as many mortgages as possible, everywhere and anyhow, and worry about the impact later.

The amount of "For sale" signs i see around is growing rapidly, and the estate agent windows that were previously full of houses are now full of rented accomodation. Meanwhile the stories of record reposessions grow as people initial interest-free periods begin to run out.

We're going the same way, Northern Rock was just a pre-warning tremor.

/paris, cos even she wouldn't flog her house to a gypsy

Strategic resources

Perhaps financial companies and markets should come under the auspices of a national security and national strategic resources law. Any action that could cause national instability would meet with severe punishment for the directors of said organisations. This could include unlimited jail sentences, confiscation of all personal assets perhaps. The wages of greed.

The "Crash" is hardly a victimless crime - and it is a crime - it is not just vagaries of a market - the financial markets are not like the weather - they are controlled and manipulated by people.

5000 people in the UK have just lost their jobs - it is highly likely that many more will. They are victims, does anyone know what the knock-on effect to the families will be?

It is time to make the punishment fit the crime in financial circles - if the company loses 5000 jobs then the directors must pay the 5000 salaries for a specific period of time (otherwise it's the state that pays - i.e. you and me as some of the few remaining tax payers). If they can't pay then put them in jail and throw away the key. Harsh? The directors of most financial organisation do not appear to give a monkeys about their employees or customers - why should we have any concern for them.

The End

This is bad...

...you see, there is this executive order that you can read on YouTube, and it says that in the event of a big crisis (read into that what you will) that the President and the Department of Homeland Security shall take over and make sure the day to day running of the US continues; you know, running Congress and the Senate and that sort of thing.

If the US economy hits another Great Depression (and it might) then Palin will be taking over.

She will push the big button on Russia because she thinks God will love her for it, and there will be MAD.

You won't need to wait for the LHC to pick up speed in Spring folks...

We're all doomed!

<Ahem>

I'll get my radiation proof coat...

@AC Monday 15th September 2008 23:22 GMT

"I absolutely refuse to give even one cent of my money to compensate any losses incurred by those greedy monkeys."

You already did - Northern Rock.

The real story...

A hunt is on for two individuals; one a former employee and the other described as a "coloured gentleman", who have been implicated in the collapse which allegedly involved a wager to the value of one dollar.

The Lehman Brothers, Randolph and Mortimer, are currently unavailable for comment.

Awww the poor bankers in London

I have very little sympathy for the banking sector, and as for the 5k who lost there jobs I suppose they can sell there v expensive cars and maybe sell there half a million pound houses and downgrade to something a little more cost efficient. The only knock on effect thats going to have any impact is that the wine bar round the corner that sells a glass of chardonay for £5, will see a downturn in sales.

Theres no more job security working for a banking institution as there is working for ASDA (Walmart), the only real downsize is that someone who was on a ASDA salary could adapt to unemployment benefit and be able to find employment for around the same salary as they previously had a lot easier than a Banker in the City of London.

People live to there means, and the skill is adapting when that changes.

@AC - Stop it now

I completely agree. Its all too easy to say stuff like "they brought this on themselves" blah blah blah... but we do have to spare a thought for those without a job today.

This is getting outta hand real quick. The damage being done by this sub-prime mortgage crisis is going off the scale. It's about time the fuckers who engineered this were rounded up and some jail time was handed out.

Oh that's right, we can't round them up... 'cos they're all laughing their asses off in the Maldives or somewhere, while the little guy gets shafted... again!

There will be more

If we go above the current "trader vision" of the market and look at it from the whole market perspective it looks pretty much like a game theory problem. These have a very nasty habit to become less and less stable as the timing parameters become smaller and smaller. Essentially, in mathematical terms, if we represent the market as a set of differential equations, they become what is known as "stiff". If a "stiff" problem continues to be approached through normal computational methods the solution will no longer converge.

Here however comes the really interesting bit as the market it is a cascaded problem where solutions to local problems are fed back into the "big" one. So while the market itself becomes more and more jittery and less stable, the players themselves can find local short term maximums and gain more and more money. In fact, a large portion of the notion of realtime trading actually from a mathematical perspective is based exactly on this - riding the instability waves.

However, as you increase the stiffness of the problem there will be points where the waves will no longer be waves. It will simply go out of bounds. The market will collapse. We are probably not far off from there.

The only way of backing out of this is to introduce gradually increasing delays in trading and mandatory holding periods and to make banks as a whole (not traders themselves) and exchanges provide mandatory control over the trade players which looks into the market (or the group of traders operated from a bank) as a game theory problem and kills trades that are likely to destabilise it.

Unfortunately, banks are way off from this. To some extent this is deliberate as the fraud known as realtime trading brings in quite a lot of bacon and who cares that one day it will all go apeshit. This is also the reason why banks will fight tooth and nail any attempt to introduce stability this way. You do not kill the goose that lays golden eggs and who cares that the next few will not be golden and be 2/3rd of Plutonium critical mass.

Lehman wasn't 152 years old..

This was pointed out by someone else, but American Express bought and then later spun off Lehman Brothers.

Sieze them

The underlying cause of this whole sorry state of affairs is human greed. Plain and simple.

It's happened before and it'll happen again but for now those responsible NEED to face a summary firing squad and their assets, all of them, siezed to help us, the World, out of this mess.

This should send a clear message that while it's okay to be a Capitalist and make money, rip the arse out of it and we'll fucking shoot you.

Remember kids, "fun's fun but to hell with carry-on."

The first law of econodynamics is: Conservation of Wealth

Wealth cannot be created or destroyed, only changed in form.

Think about it...

should have mentioned..

whilst the subject of "insurance" has been raised, there MAY be a problem in this market, as well (..and some people think it could be VERY bad):

http://en.wikipedia.org/wiki/Credit_default_swap

my thoughts :)

in the zeitgeist movie, the 3rd part of 3, they state that the federal reserve is a cesspitt of greedy reformed masons and illuminati and that they engineered the 30's crash and ww1 and other stuff, thru pumping and dumping. but that's a WHOLE another debate! ;)

relax the credit, people get carried away, move in and pick over the bones, take what's you want. (apparently some 6,000 banks were schnaffled up after the 30's depression).

don't know enough about that to offer an opinion, tho it should NOT be ignored or not looked not or talked about, imo.

in britains case "boom & bust brown" (as i like to call him), since 1997, (just after this latest uber pump of all pumps started), decided to keep house prices and the community charge OUT of the RPI calculations. bascially IF you ignored house prices and the ever increasing community charge, inflation was "fine"!

...no need to put up interest rates! (money stays cheap, the party continues).

IF (hindsight is soooo clear), these two indicators HAD been included, then interest rates would have HAD to be put up, 98/99/2000-ish to put a brake on the runaway madess of property prices..and we MIGHT not have balooned to these ridiculous valuations of these piles of bricks wood and glass, just so's "new labour" can keep the swing voter (middle class undeciders) happy. pathetic.

i thought that a correction was due around that time. i sold a property in 2003, CONVINCED it was all about to go (ahem) "tits up". now it looks as tho things might even fall back to that level anyway.

finance IS strategic, it CANNOT be left to the market. markets are bear pits of greed. individuals pensions and nest eggs are the priorities NOT the "common wealth" (ironic phrase!). i worked at the stock exchange pre big bang and LIFFE when it was in the guardian royal exchange buildings, next to the BOE, in 88-90, i've seen and smelt this greed first hand.

f*ck bailing out banks, let them collapse. the head pig at northern rock was just some wide-boy gambler, yet we bailed him out. i fancy buying a ferarri and a nice house..if it all goes "titsup" for me, do you lot mind if the government bails me out?!

we have a VASTLY over inflated opinion of our worth, imo and this WELL overdue correction will help us return to reality..

cheers,

bill

p.s. stuff and nonsense: http://www.eupeople.net/forum

"the good that Lehman Bros. did in the industry"

Funniest comment I've heard in a long time! LOL

Repossession isn't the end of your debt...

@AC:

"The banks lost their bet and the people lost their homes (and here's the plus side: they also lost their debt)."

Just because you are repossessed doesn't mean your debt is cancelled. I had my home repossessed in the last bout of insanity in the early 90s. 4 years later the mortgage bastards wrote saying "btw you still owe us £50K coz we sold your flat for half its market value and you are still liable for the rest"

When I informed them that I had fuck all ability to pay or any assets or they threatened bankruptcy so I called their bluff and told them to do it. However, having come close to bankruptcy already i know that I could declare personal bankruptcy faster than they could do it to me so I told them "come on if you think you're hard enough!". I never heard from them again.

@JonB - you didn't think about it did you...

You can reduce the value of a TV by trashing it, but the organisation you bought it from still has the money you paid for it.

Unless you value your time as worthless then writing software isn't creating something of value from nothing. And, when you get paid for it, that bit of wealth must have been taken from someone else - like customers of the organisation you're writing software for perhaps.

Even burning a bank note doesn't remove wealth from the system, it just means that little bit can't be exchanged for anything else, it's stuck as a pile of ash.

All we do by earning and spending money is move it around a system. Sometimes people or organisations manage to build up a stockpile, but eventually the equilibrium has to be restored. Or, as seems more likely the case, the pendulum swings in another direction.

Lehman's and others thought that the housing market was creating wealth from nothing and could therefore carry on ad-infinitum - this little adjustment has shown how wrong they were. Like others have said, it's like thinking that pyramid scams create wealth from nothing, they don't, it has to come from somewhere.

BTW, it was an *invite* not an instruction. Why did you assume it was an instruction? Judging others by your own standards maybe?

@batcat (2)

"BTW, it was an *invite* not an instruction."

Plus it was deliciously amusing, especially as (slightly inebriated I admit) I read it and thought "hand on, you're thinking about energy", fired up the tw*t-tron but then read the title.

Good sum up in the rebuttal, but you missed the doozy that stumps most people - namely that there isn't fixed wealth in the world, the world's economy doesn't balance out to zero and that money is just a concept (point out it's a "promise to pay the bearer on demand" and ask them "but what does that mean" in a deep and meaningful voice)

*Then* you can tell them to think about it - works everytime, despite my cluelessness :-)

(AC due to anyone who may recognise the debate...)

"Someone somewhere has got to be $613bn up. It can not have vanished into thin air".

Actually- that's exactly what has happened- the value of the debts exceeded the value of their holdings, because the holdings turned out to be over-valued. That supposed value evaporated, due to problems with supply of capital into the market that those holdings were based on.

Whether this over-valuation was due to incompetence, criminality, or a simple change in the market will no doubt come out in the future but I'm betting 1/3rd on the first and 2/3rds on the second.

Also: The comments page here reveal a great many people in need of a refresher on Adam Smith's works- start with Wealth of Nations and follow that with Theory of Moral Sentiment.

A precis of the best bits- the Market is the arbiter of all, value is subjective and wealth isn't a a pizza (If I have too much of it, it doesn't mean you have to feed your family with a greasy Domino's box). Contrary to BatCat and his first law of econodynamics, the great thing about wealth is it *can* be created- otherwise we'd all still be living in caves (Let's skip Bin Laden- his domicilliary arrangements are not best explained by the invisible hand).

Lehman's (Laymans? Lemons? Layermans? How do you say it?) did a service to the world by providing liquidity, pushing cash to places it was needed. Yes, they made a profit, but thar ye go- tis the nature of the beast, Ishmael. There's an irony in that liquidity was probably what did them in (as with virtually all failed businesses), but the function of banks is indispensible.

Or more accurately- Banks are only dispensible if you think North Korea is a paradise.

And finally, from poster above: "I don't like unfettered capitalism because it always ends in misery... Perhaps some kind of regulated free market with a social safety net is required?"

The point of capitalism is it's unfettered- capitalism= freedom. The unrestricted movement of money, the creation of individual wealth, the right to own your own assets are hallmarks of freedom and capitalism both. Intervention in markets is the problem from which ills spring. In the cases of corporate fraud and failure like Enron/Worldcom/Barings etc, the intervention is from criminal management. In the case of the privatised Railway, it's from inept government. Build that better mousetrap and require a bit of gouda to enjoy it's pleasures, and the mice will come, or if they can't afford the price of entry, they'll save until they can, or get a better job in cheese futures or whatever. It's when a well-meaning (or stupid) politician proposes subsidies for rodents on restricted dairy intakes to help them onto the mousetrap ladder that things usually start going wrong.

Paris like Mice.

@Solomon Grundy - drilling for money?

Even extracting natural resources isn't creating wealth. The products derived from the raw materials are ultimately exchanged for someone else's wealth when they buy them. Commodities are just another vehicle for moving wealth round the system.

I still maintain there *is* a fixed amount of wealth in the system - otherwise, why don't governments just print more money? Printing more money reduces a currency's value, the equilibrium is restored.

It's just not possible to become more wealthy without it being at someone else's expense.

In answer to the "Someone somewhere has got to be $613bn up. It can not have vanished into thin air" question - the fact is, the $613bn didn't exist in the first place, it was based on a massive over-valuation delusion. So nobody is up $613bn, but nobody has really lost $613bn either.