Andrew Horowitz on bailout money going towards year-end bonuses

As if the economic bailout by U.S. taxpayers isn't enough to make you sick to your stomach, new information has come to light that several banks are planning to pay billions of dollars in year-end bonuses from the bailout funds they received. Investigations are beginning into the nine banks that took in the first $125 billion -- the same $125 billion that was supposed to be used to unclog the credit system which was preventing banks from providing much needed funds for individuals and businesses.

There are many feathers in a ruffle over this and New York Attorney General Andrew Cuomo and several congressmen are furious that over $20 billion has already been earmarked as bonus funds for management and employees. Unbelievably, that is just the estimates from Goldman Sachs, Morgan Stanley and Merrill Lynch. There are six more banks that are also working on similar heists.

~ Andrew Horowitz, "$50 billion of bailout going to employee bonuses," MSN.Money Blog, October 31, 2008

AEI's Desmond Lachman on the housing bust

[U]nless there’s government intervention on a big scale... we’re really not going to bottom.

~ Desmond Lachman, American Enterprise Institute, "Nev., Mich., Fla. lead ‘underwater’ homes list; New report underscores staggering depth of U.S. housing recession," msnbc.com, October 31, 2008

Bill Laggner on hedge funds, SEC disclosure fight

You are getting more and more layers of intervention in the most entrepreneurial piece of the investment world. There is a real sense of frustration about this because people want to keep their strategies under wraps. And as long as it is legal, why is the government looking?

~ Bill Laggner, "Hedge funds gird for SEC disclosure fight," Forbes.com, October 3, 2008

Friedrich Hayek on class exploitation

There has never been a worse and more cruel exploitation of one class by another than that of the weaker or less fortunate members of a group of producers by the well-established which has been made possible by the "regulation" of competition.

~ Friedrich A. Hayek, The Road to Serfdom, page 129

Karen De Coster on Warren Buffett, stock tout

Warren Buffett is an admired man. He is admired, even by the middle and lower classes, for his frugality, wisdom, no-nonsense delivery, plain-folk personality, and yes, his hard-earned wealth. Readers may know that I deeply respect this man because I reflect on his business acumen frequently. But his latest column puts him in the role of being a propagandist for the government and its bull market-perpetual bubble-sustainable boom doctrine. The government and its Wall Street cronies are big on building "investor confidence" these days, especially when it comes to selling you on the stock market game and the ever-increasing Dow. Warren Buffett is working to convince you, the unsophisticated investor, to have unmitigated confidence in the market so that you will continue to buy and prop up market fantasies, even in a time of rapid decline and volatility.

~ Karen De Coster, "Warren Buffett, Government Propagandist," LewRockwell.com, October 23, 2008

Citadel's Ken Griffin on market sentiment

I have never seen a market as full of panic as I've seen it in the past seven or eight weeks.

Ken Griffin, founder, Citadel Investment Group, "Citadel's Griffin says firm will change amid turmoil," MarketWatch, October 27, 2008

Despite big losses from Citadel's main hedge fund this year, Griffin said that the recent turmoil has created the best opportunities he's seen since he started trading roughly 20 years ago:
"We're very excited about the positions in our portfolio in the months and years ahead."

(Citadel's largest hedge fund, known as Kensington/Wellington, fell 35% this year, through Oct. 17, according to Chief Operating Officer Gerald Beeson.)

Noriel Roubini on the need for fiscal stimulus to prevent a financial meltdown

Given the collapse of private aggregate demand, consumption, residential investment and non-residential investment in structures are falling, and capital expenditure by the corporate sector was already falling before the latest financial shock and will now be plunging at an even faster rate. You need to give a boost to aggregate demand to ensure that an unavoidable two-year recession does not become a decadelong stagnation.

Since the private sector is not spending, and since the first fiscal stimulus plan (tax rebates for households and tax incentives to firms) failed miserably as households and firms are saving rather than spending and investing, it is necessary now to boost public consumption of goods and services via a massive spending program (a $300 billion fiscal stimulus).

The U.S. government should have a plan to immediately spend on infrastructure and new green technologies; also unemployment benefits should be sharply increased, together with targeted tax rebates only for lower income households at risk; and federal block grants should be given to state and local government to boost their infrastructure spending (roads, sewer systems, etc.). If the private sector does not or cannot spend, old-fashioned, traditional Keynesian spending by the government is necessary. It is true that the U.S. already has large and growing budget deficits; but $300 billion of public works is more effective and productive than spending $700 billion to buy toxic assets.

… Radical action can – and should – be taken to control the damage and prevent this meltdown from occurring.

~ Nouriel Roubini, "The New New Deal," Forbes.com, October 9, 2008