Written By Luke Walker

Despite the many unified voices of discontent, echoing from streets wherever the ‘Occupy’ protests persist, in cities all over the world, the question of whether a clear message has been made is still debatable.

So, what exactly is the clinical psychology of the ‘Occupy’ movement? Is there a unified message? Does a single philosophy, or even a common goal or interests exist?

When we study such phenomena we tend to gravitate towards a physical model where we associate all of the actors involved as a whole and in a very critical sense. This method can be successfully employed when, for example, observing a hive of bees, in which, the entire swarm works together as a unit, towards a common goal. In such a study, physical observations can easily reveal clues related to biology and breeding habits, instinct, and group behavior, and can reveal important social indicators.

The bee model however, may not be applicable in the OWS scenario, where the physical indicators may conceivably be construed as, for example, as inarticulate statements or crude placards held by select protesters, or the lewd and unruly behavior of others, as portrayed in clips and sound bites of network news.

There are simply too many differential factors involved in comparable human studies. OWS is a movement composed of thousands of different people, all with vastly different experiences, from drastically divergent geographical, national, religious, ethnic and socio-economic backgrounds. There are too many competing philosophies and far too many grievances to study in such narrow and strictly physical method. Far deeper consideration of all elements must be analyzed.

Critics will claim that the protesters are nothing but a rag tag group of spoiled, middle class white teens and young adults, all with obscure demands, crying over disparities that do not really exist for them, inequities they have not yet been burdened with, and for entitlements that the protesters have not earned, and thus do not deserve. They claim the protesters want a hand out, a portion of wealth that does not belong to them, that they want entitlements, welfare; socialism. This claim may be have some degree of accuracy, for we have yet to hear a clear demand. Advocates of the protesters too have made up their minds, but in contrast, that the protests represent a much-neglected and long overdue debate about it means to be poor or middle class in modern society, and if a difference even exists. To supporters, the movement represents a clear indication that the poor have been institutionally marginalized to a breaking point, and that the fine line, which once may have separated the economic spectrum of poor and middle class, particularly in America, has become so indistinct that perhaps it may no longer even exist.

Additionally, they believe that the governments of the world have committed grave injustices by financing banks and corporate fat cats to perpetuate extravagant salaries and gluttonous bonuses; a reward for their many misdeeds, not least including the global recession and all of the havoc it has generated; an indisputable result of these very institutions own flippant behavior and categorical misjudgments. Supporters believe OWS is a protest against economic injustice, not a rally against wealth or the wealthy, not against the free market, or capitalism, not even against excess. It is an objection against business as usual, in which the few in power reap the rewards of the many.

The question was TARP fair? Did the banks deserve a bailout when millions of working Americans could have been directly benefited had even a fraction of the inestimable bailout been redirected to the hands of working men and women, instead to the bankrolls of corrupt banks and other financial institutions; especially when it was their own greed which led to their peril to start with? This sentiment may be a prime war cry in the minds of many protestors, but it cannot be ignored that TARP may have prevented a great depression, the result of which, may have been far more bleak than they otherwise were. On the other end of the spectrum the very core of what America represents; its foundation as a free market capitalist bastion, the very fabric of our constitution, which in theory would allow every man and woman an equal opportunity to bask in the fruits of his or her own labor, regardless of race, sex, or class. No matter how lowly their status or humble their upbringing.

History has shown us that this notion is perhaps more a fable than fact. America was after all, appropriated by theft, larceny, and murder. It was literally built on the backs of enslaved peoples. America was made wealthy by oppression and exploitation, and made powerful by brute force, intimidation and its accumulation of all the aforementioned and newly acquired resources. Historically, it has always been a select few who have truly basked in the fruits of these exploits. This is not to argue the many merits and virtues of our country, democracy or constitution, but an underlying dark fact that cannot be dispelled.

The protesters believe they have seen a folly in TARP and corporate bailouts, and a fallacy of the American dream. A dream, they believe, that may have once been obtainable to some, but only during a very diminutive sliver of our nation’s history when all the winds were blowing in the right direction for a small moment in time. We had won the war, literally and figuratively, and there was perhaps room for more to share in that fleeting prosperity. OWS represents a belief that those times have passed, and that perhaps it can no longer be ignored that the inequities of the poor and quality of living for most has markedly diminished.

The Question, “Is it unreasonable to expect a small piece of the pie, especially when we have all contributed to its preparation? “, may offer a glimpse of insight into the clinical psychology of the political movement.

The bottom line is this. As where critics will argue it is the fault of the individual for not obtaining the same success that the top 1% of our nation that enjoys 99% of its wealth and prosperity, is due strictly you their merit and not to luck, is not only a mathematically incalculable improbability in a nation of 300 million, but a patent fiction. All one need do is look to the character and listen to the words of the elite class. It may very well be and could remain, precisely what it appears to be at face value; a is a mixed bag of elements, expectations, and broad discontent, which may never be summed up into a neat, unified or concise mission statement. Although the OWS message may not be as eloquent as some of us may like, but perhaps it is enough to perpetuate the conversation.

The winter is approaching, there is already a chill in the air, and we cannot expect the protest to last indefinitely, certainly not in the cold winds of the northeast, but one undeniable fact remains; a message has already been sent; and no matter how vague it may be, the dialog will persist.

The title says it all, but here’s a bit more detail…

From NY Times:

Goldman Sachs has agreed to pay $550 million to the Securities and Exchange Commission, one of the largest penalties ever paid by a Wall Street firm, to settle charges of securities fraud linked to mortgage investments.

The S.E.C. filed a lawsuit against Goldman in April, accusing the bank of securities fraud. The settlement came just days before Goldman is scheduled to report its second-quarter earnings.

Under the terms of the deal, Goldman will pay $300 million in fines to the Treasury Department, with the rest serving as restitution to investors in the mortgage-linked security. Goldman will not admit wrongdoing, though it will admit that its marketing materials for the investment “contained incomplete information.”

Haha, yeah, it contained incomplete information. Like, “this investment’s goal is to turn you upside down and watch the money fall out of your pockets and into our hands.”

And here’s more from the S.E.C.’s director of enforcement, Robert Khuzami…

“Half a billion dollars is the largest penalty ever assessed against a financial services firm in the history of the S.E.C.,” Mr. Khuzami said in a statement. “This settlement is a stark lesson to Wall Street firms that no product is too complex, and no investor too sophisticated, to avoid a heavy price if a firm violates the fundamental principles of honest treatment and fair dealing.”

Is it bad that this has me smiling ear to ear?

I mean, with the financial regulations bill being passed today and this decision coming day, there’s obviously a new sheriff in town who’s trying to make sure that what went down in 2008 (and the years leading up to the meltdown) will never happen again.

And yes, businesses are crying foul, but meanwhile they’re sitting on record cash hordes, so their complaints ring pretty hollow to me.

Long story short, Goldman Sachs got what they deserved.

Human error? Computer error? Greece? Spain? China?

WHAT IN THE HELL IS GOING ON?!?!?!

Wall Street Journal tries to sort out the mess…

A bad day in the financial markets was made worse by an apparent trading glitch, leaving traders and investors nervous and scratching their heads over how a mistake could send the Dow Jones Industrial Average into a 1,000-point tailspin.

At its afternoon low, the Dow had plummeted 998.50 points, its biggest intraday point drop ever. The swing from its intraday high was 1,010.14 points.

The Dow eventually rebounded to close down 347.80 points, or 3.2%, at 10520.32, its worst percentage decline since April 2009. Stocks from Dow components Procter & Gamble and 3M suffered precipitous declines. At one point shares of P&G tumbled 37%.

Okay, but what happened?!?

Traders theorized that an initial trading error triggered a piling-on effect from computerized trading programs designed to sell when the market moves lower. At the same time, pre-set orders form individual traders and investors to sell on declines during market downturns were likely triggered.

The volatile moves in many stocks likely triggered a wave of additional trades as hedges such as limit orders and options strategies kicked in. That could have caused the market to plunge further.

Oh…I see…the market worked exactly how it was supposed to…and nothing stopped it.

Well…we’ve heard all about automated systems trading stock so fast that it’s virtually unstoppable…haven’t we Goldman Sachs?

And to that point…

Accelerating the declines, high-frequency hedge funds, which use computers to trade at super high speed, appeared to pull back from the market as prices collapsed. These hedge funds have grown to account for a significant amount of trading volume, and their absence likely created a void into which prices fell.

Scared yet folks? No? Then you can’t see the forest fire for the falling trees.

But let’s talk about Greece for a moment. The country recently secured some loans from the IMF and the European, but investors aren’t convinced…

It seemed to sneak up on us, the issue of Greece indebtedness. The problem isn’t complicated: the country borrowed way too much and now is struggling mightily to pay back what it owes. Now, its financiers in Germany and elsewhere in Europe are facing massive losses.

The danger had been percolating in Europe for a while. But only this week did it seem to sink in with U.S. investors how closely related Greek’s problems were to our own. Some on this side of the Atlantic believed the rest of Europe would step in and provide a bailout to protect the rest of the continent. Now some believe the package that was announced by the European Union and the International Monetary Fund won’t work or won’t be enough, raising questions about how the European Central Bank has handled the crisis.

And all of this hullabaloo has sent Asian stocks tumbling…

Investors continued to exit riskier assets—with many Asian markets now down heavily for the week—on escalating concerns that Greece’s debt problems could engulf the weaker European countries.

Regional currencies were sharply lower, including the Korean won, which fell to a three-month low against the U.S. dollar of 1,169.50 won. The euro, which plumbed 14-month lows of $1.2510 against the U.S. dollar Thursday, was steadier in Asian trade although analysts expect more pain ahead for the common currency.

Japan’s Nikkei 225 was down 3.8%, after a 3.3% fall Thursday, with Australia’s S&P/ASX 200 down 2.3% at 4468.70, briefly touching a low of 4427.30, South Korea’s Kospi off 3% and New Zealand’s NZX-50 lower by 1.9%. Taiwan’s Taiex index was off 2.4% and in China the Shanghai Composite Index lost 2.2%.

One thing’s for sure…if Wall Street was looking to minimize government intervention and thwart new regulations…the timing of this glitch couldn’t have been worse.

More as it develops…

This nifty little video provides a good breakdown of what went down and why.

Basically, it boils down to what we all suspected: grossly irresponsible lending brought about by deregulation.

It seems so obvious in retrospect.

(h/t: The Crisis of Credit)

So, what caused the current financial crisis? No, not the specific events but rather the underlying cause, the cultural fault. David Brooks believes there are two competing schools of thought. It’s the greed theory vs. the stupidity theory.

Brooks begins with the greed theory:

[T]he U.S. financial crisis is a bigger version of the crises that have afflicted emerging-market nations for decades. An oligarchy takes control of the nation. The oligarchs get carried away and build an empire on mountains of debt. The whole thing comes crashing down. [The] remedy is clear. Smash the oligarchy. Nationalize the banks. Sell them off in medium-size pieces. Revise antitrust laws so they can’t get back together. Find ways to limit executive compensation. Permanently reduce the size and power of Wall Street.

Next, the stupidity theory:

[O]verconfident bankers didn’t know what they were doing. They thought they had these sophisticated tools to reduce risk. But when big events — like the rise of China — fundamentally altered the world economy, their tools were worse than useless.
…
The stupidity narrative suggests we should preserve the essential market structures, but make them more transparent, straightforward and comprehensible. Instead of rushing off to nationalize the banks, we should nurture and recapitalize what’s left of functioning markets.

One of my guiding principles is never blame on malice what can be blamed on stupidity. Obviously, greed played a significant role in the crisis, but I’ve never thought it was a form of coordinated greed so much as it was a lot of individual greed that blinded most of those in the financial industry to the massive flaws in the system. Simply put, greed led to stupidity which led to the crisis.

I know it’s satisfying to blame everything on the greedy elites — populist anger is the in thing. But here’s the problem: you can’t eradicate greed. Lots of people will always act out of self interest, no matter the system and no matter if they’re in the public or private spheres. We can’t say “the system caused greed, let’s jettison the system and create a new one” because every system is susceptible to greed. What we can say is that the system, as it exists now, propagates stupidity, so let’s reform the system.

Both the greed theory and the stupidity theory lead to the conclusion that change is necessary. But how we change is predicated on where we see the faults. In the long run, I think we’re better off trying to increase smart decision making than we are trying to create a system impervious to greed.

And after the AIG mess, I say we give it to him. How we allowed one company to take down the entire system still feels unreal to me. How on earth could we allow that to go down? Crazy, crazy, crazy.

But it did happen and we are suffering massive fallout as a result, so we have to make absolutely sure we’re protected. And, like it or not, the only way to do that is give the government more power.

From Bloomberg…

The authority would allow the Treasury, in collaboration with the Federal Reserve, regulators and the president, to step in and more easily combat problems at systemically important institutions on the verge of failure, said the official, who spoke on the condition of anonymity. AIG has received $182.5 billion in government bailout funds, according to the Government Accountability Office.

“We must ensure that our country never faces this situation again,” Geithner is expected to say according to excerpts of his testimony obtained by Bloomberg News. “To achieve that goal the administration and Congress have to work together to enact comprehensive regulatory reform and eliminate gaps in supervision.”

The expanded powers, which require Congressional approval, could help monitor risk and detect problems across an array of financial-services firms to prevent shocks to the global economy such as the one caused by the collapse of Lehman Brothers Holdings Inc. in September. [...]

It would also ensure proper accountability when taxpayer funds are provided to institutions in extreme circumstances, like AIG, which is now 80 percent owned by the government. The authority would provide the government with various tools including the ability to break contracts on executive compensation commitments, like those at the center of the furor over the insurance-giant’s $165 million in bonuses.

More transparency and more accountability.

What’s not to like about this?

And remember, since global commerce is so tied to our banking system, we have a responsibility not only to our taxpayers, but also the rest of the world. Because don’t kid yourself by thinking that China’s public calls to consider replacing our currency in the reserve basket didn’t come as a direct result of letting firms like AIG overleverage themselves to the point of insolvency.

Krugman doesn’t like it because it doesn’t punish the behavior that got us into this mess in the first place. And while I have a soft spot in my heart for that line of reasoning, his idea of nationalizing the banks is a non-starter. I wish he realized that, but nonetheless.

Marron makes the point that Geithner’s plan won’t solve the entire problem, but it will allow us to actually price these assets once and for all, and that will rid ourselves of the “catching a falling knife” problem that is plaguing the mortgage backed securities right now. Because they could be worth a lot more than many think, but nobody wants to put money into something that everybody knows will go down. And that will, in turn, get it all moving again. At least that’s the hope.

Take a look…

Part One

Part Two


(h/t: The Big Picture)

If you thought $700 billion was a lot of money, well..

It is.

But $2 trillion is.. ridiculous.

This is Danielle Ivory from ANP.

Congress and the new administration have been focusing their attention on strengthening oversight for the Treasury’s TARP program, but meanwhile few are paying any attention to the Federal Reserve.

Since September, the Fed has lent out about $2 trillion (Bloomberg reported 1.2 trillion in November), but it’s keeping the names of its recipients a big secret.

And while the Treasury’s bailout package has a $700 billion cap, there’s no limit to how much money the Fed can lend.

The American News Project sat down with Washington newcomer, Congressman Alan Grayson (D-FL), who actually used his five minutes of valuable Q & A time in a Financial Services hearing to do some serious Fed fact-finding.

You can see the story or get the embed code here.

Or follow Danielle’s reporting on twitter here.

And visit Acorn Project for more music like this.

Hi, this is Danielle Ivory from the American News Project. My colleague, Lagan Sebert, and I just published a new video on the bailout and a lack of serious oversight.

Today, Henry Paulson urged Congress to release the second half of the $700 billion of the bailout money. But no one seems know what banks have done with the first $350 billion. Despite the fact that Congress wrote more than one hundred pages about oversight in the bailout bill, they left a gaping hole.

All of the content on ANP is available for free! If you like the piece, please feel free to post it on your blog, or replay on the radio or tv.

http://americannewsproject.com/videos/186

How do you make $50 billion disappear (other than by giving it to AIG)? Well, longtime investment manager Bernard Madoff has done just that. And now he’s under arrest.

Madoff, the former chairman on the NASDAQ, is accused of running a Ponzi scheme with his hedge fund that has cost investors as much as $50 billion in losses. This makes the case one of the largest incidents of fraud in American history.

Apparently, his firm generated very consistent, very high returns for many years in a row. That’s easy to do with a Ponzi scheme. Until, of course, you run out of suckers and the money dries up. If the allegations are true, I hope Madoff goes away for a long time. But, as always, this level of fraud is fueled not just by the huckster but by those who buy into the idea that there’s an easy way to make a buck. If the recent economic crisis has proven anything, it’s that get-rich-quick schemes never work.

The week has started well for world markets as stock exchanges across the globe have rallied or are rallying to post significant gains. The increases are attributed to the coordinated global efforts to unfreeze credit markets, particularly the European Union’s and the United Kingdom’s decisions to fully back bank accounts and infuse troubling banks with billions in government funds.

We’ll see of the rally continues here in the U.S. There’s no doubt that there are and still will be numerous financial problems. But there’s at least the chance that the world has avoided an all-out panic. Let’s hope so.

Christopher Hitchens thinks so.

It’s all about kleptocratic business leaders, weak-willed politicians and the complete absence of accountability for the empowered class.

Just a taste:

Now ask yourself another question. Has anybody resigned, from either the public or the private sectors (overlapping so lavishly as they now do)? Has anybody even offered to resign? Have you heard anybody in authority apologize, as in: “So very sorry about your savings and pensions and homes and college funds, and I feel personally rotten about it”? Have you even heard the question being posed? O.K., then, has anybody been fired? Any regulator, any supervisor, any runaway would-be golden-parachute artist? Anyone responsible for smugly putting the word “derivative” like a virus into the system? To ask the question is to answer it. The most you can say is that some people have had to take a slightly early retirement, but a retirement very much sweetened by the wherewithal on which to retire. That doesn’t quite count. These are the rules that apply in Zimbabwe or Equatorial Guinea or Venezuela, where the political big boys mimic what is said about our hedge funds and investment banks: the stupid mantra about being “too big to fail.”

Yes, it’s one of Hitchens’ polemics, but it’s worth the read.

The global economic troubles worsened today as major markets around the world have fallen 6-10%. The situation has deteriorated to the point that the world’s financial ministers and central bankers will meet in Washington this weekend in an attempt to coordinate a global response.

Unfortunately, no one really knows what will calm global markets. On the heels of the United States’ $700 billion bailout package, countries from Japan to Britain to China to Iceland have made serious steps to shore up their nation’s banking system by infusing money into the system and/or cutting rates to encourage lending. So far, stock markets have shrugged off such maneuvers and continue to fall.

I keep hearing references to the Great Depression. And while I am nervous about the current situation, I also know our nation and most other nations are taking steps never even considered in 1929 and the early 1930’s. We have likely already reached or will soon reach the natural bottom of this market correction – any greater declines will be panic based. So, the key is to stop the panic before it snowballs.

Hopefully, this weekend’s meeting in Washington will come up with ways to do just that.

Another bad day for Wall Street as the Dow lost 7% and fell below 9,000.

Since a year ago today, the Dow has shed 39% of its value.

It’s not pretty out there.

A few weeks ago I decided that I’m just going to throw away my next IRA statement without opening it. This is looking like a better and better idea.

Apparently, American retirement plans have lost $2 trillion over the last 15 months. That’s 20 percent of their value. And that doesn’t include what people have lost in just their regular stock portfolios.

This is going to leave a lot of people feeling poorer.

How do you feel?

I suppose it would have been nice if the $700 billion bailout was the magic bullet needed to right our economic ship. But after today’s tumult on Wall Street, it’s pretty clear we’re not out the woods.

At one point today, the Dow was down 800 points, but managed to close “just” 370 points down. How bad of a day was it? Only 264 stocks rose on the NYSE. 2,986 dropped. That’s the kind of broad-based sell-off indicative of a recession.

And it’s not localized here in America. Major exchanges in Europe and Asia are also seeing large declines as the entire world is realizing that global credit markets are in bad shape and the leading economies around the world are slowing.

While we have not had the official two quarters of negative growth needed to officially declare our economy in recession, we’re clearly headed for a rough patch.

The next president has his work cut out for him – not just in managing our federal government’s reaction to a recession but in working with international partners to ensure our nascent global marketplace doesn’t collapse into a crisis.

Here’s an interesting fact pulled from the AP about the bailout bill’s failure:

Thirteen of the 19 most vulnerable Republicans and Democrats in an Associated Press analysis voted against the bill despite the pleas from President Bush and their party leaders to pass it.

The article doesn’t say who these 19 are but this figure tells us something about the psychology behind the vote. I had hoped that most nay votes were based on principle but, as I dig into the matter, it seems typical politics played its usual role. Apparently, Nancy Pelosi gave a very partisan speech before the vote and some Republicans claim that’s why they voted nay. First of all, if true, Pelosi was foolish to give anything other than a “I’m glad we’re all coming together” speech. Anything less would be terrible leadership. That said, any Republican who changed his or her vote just because Pelosi was less than diplomatic is a childish fool.

So, it seems as if some representatives voted no simply because they were too scared of tying their name to such major and potentially risky legislation. And some voted no because they didn’t like a speech. Given that they all probably have money in the stock market, I wonder how they feel about their less-than-principled stand now?

To be clear, I fault not a single Republican or Democrat who voted no out of a principled objection to the bill. But any representative playing politics with such an important matter should be ashamed.

As an addendum, here’s the roll call, in case you were wondering.

Thanks to reader BenG for alerting me to the Pelosi speech angle.

The more I read on the current financial crisis and the more I think about the ramifications, the more I realize that September 2008 will probably have as much of a lasting effect on our nation as has September 2001. That’s because what we’ve witnessed is not just a political failure and not just a financial failure. This is a cultural failure.

Victor David Hanson has it right when he lays the blame at all our feet. Yes, insufferable Wall Street greed played a major role as did incompetent, ignorant, servile and just plain corrupt Washington politicians. I’d like to lean back in my chair, point fingers and quietly absolve myself and all the rest of us who neither work on Wall Street nor in Washington. But I can’t.

A lot of us took part in the credit-shuffling game that was the real estate boom. I was even one the lucky ones who sold a property at a ridiculous profit. I didn’t intend for my home to be such a tremendous investment, but I sure as heck didn’t care what cultural forces or what financial shenanigans made my windfall possible. I took the money. Gladly.

A lot of other people did too. And many of those who eventually got caught holding the bag were not innocent victims of the system. They were players. They knew they were taking out unsustainable loans but they believed the profits they could make in the market more the justified the risk. They were stupid and wrong. Their banks were stupid and wrong. Our culture that demanded easy credit and high returns was stupid and wrong.

We took the wealth and prosperity part of the American Dream and jettisoned the hard work part. We believed that the house flippers on TV were smarter and more interesting than the people and businesses doing real work and slogging out real, if mundane and small-margined, profit. Even as many of us decried our nation’s free-spending, gilded-age ways, we grumbled when our investment accounts fell short of the high returns enjoyed by others.

Blame the Wall Street profiteers. Blame the Washington imbeciles, cowards and thieves. They deserve our scorn and whatever punishment the law allows. But $700 billion is not the indulgence that absolves the rest of us. We have much harder tasks ahead if we really want to get our nation back on track. Now, I don’t know how to change a culture. Chances are, it will take much more than a rocky autumn to make most people stop lusting after easy credit and high investment returns. These bailouts might just be postponing the needed reckoning.

But I’d like to think that these last few weeks have at least opened the eyes of enough of us – have made enough of us realize that wealth is not something that can be generated quickly if we want to generate it sustainably. That sounds like commonsense. But, apparently, most of us had, in one way or another, forgotten the realities of markets. The market has shown us our folly. Let’s see if enough of us can remember the lesson.

Big thanks to Jimmy for this.

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