Wall Street BullSh*t

[My first post to the Politics & Opinions surface blog! :p]

I believe there can be good regulation and there can be bad regulation. Some people want no regulation at all, but I'm sorry, that just doesn't work (Look at It's Time to Regulate to see my thoughts on the subject) . The same goes for over-regulation. Either extremes causes problems no matter what you think and that's just fact. The key is to find balance.

Now, for the credit card regulation. I'll start with the positive part of the regulation (which was passed). Here is a Yahoo Finance Article that's gives an overview of the recent law signed. Here is an excerpt:

The new credit card rules, which go into effect in nine months, prohibit companies from giving cards to people under 21 unless they can prove they have the means to pay the debt or a parent or guardian co-signs. A customer also will have to be more than 60 days behind on a payment before seeing a rate increase on an existing balance. Even then, the lender will be required to restore the previous, lower rate if the cardholder pays the minimum balance on time for six months.

And consumers also will have to receive 45 days' notice and an explanation before their interest rates increase.

I was reading this article in Yahoo Finance today and the first paragraph was as follow:

"U.S. stocks slid on Thursday as signs of further jobs weakness and a disappointing Fed regional survey fueled doubts about prospects for a quick economic recovery."

Now, who in the world is expecting a "QUICK RECOVERY"? When you look at the institutional investors, they're still bearish on the economy. And whether you like it or not, they're the ones who typically produce major movements in prices.

Nevertheless, for every person who speaks against the green shoots there is a CNBC ‘fool' stating that the road is clear and we're getting a V recovery (That is, straight upwards). I don't know who is right, but I would agree that we're not going to see a V recovery.

The general consensus in my opinion is that we're in for an L recession, which means that we will be in the bottom for a while. Plus, have our habits really changed? Have we fixed the things that brought us into this financial meltdown?

NO! Well, for most part. Somethings have changed, but the core problems are still prevalent.
 

Remember those mortgage problems? Have those been fixed?

Sub-prime mortgages had it's time and now the Option ARM and Alt-A mortgages are about to hit the spotlight (Link to Yahoo Finance Article).

Here is another politics of finance post.

Moving beyond the point that we need to regulate [through new regulation OR ENFORCEMENT of current regulations that failed]....

The question is: Who's to blame for the current crisis? Or, is there even anyone to blame?

If you're talking to a regular everyday person, they'll probably say it was the banks for making wrong bets and generating excessive risk and the mortgage lenders for making loans they knew people would eventually default on it.

If you talk to someone from Wall Street, they'll say it was the homeowners who bought houses they could not afford.

I think both of them are partly responsible for the mess; however, I believe that Wall Street and the financial institutions have a much bigger part of the blame.

Forget Fantasy football, let's have some Fantasy Accounting!

I have been covering some touchy topics lately, therefore, I decided to put in my 2 cents on the mark-to-market fiasco.

The matter is very complex, however, I will only cover the surface of the subject.
 

Congress

First, I don't think Congress is the right people to be dealing with the issue. Most of them have never been an accountant before and don't know what they are talking about [for most part]. My feelings are similar to that of Barry Ritholtz from The Big Picture. Here is an excerpt:

We all know Wall Street has an ego. And we also know that a lot of people in the finance business think that they deserve BONUSES even when...the company they work for is not making money!

After seeing a great post by Jake from Econompic Data, I decided to write about my view on the subject here in the blog.

First, here is the "Investment Banker Matrix" which clearly states how Wall Street sees bonuses.

According to Investopedia, a bonus is:

" A reward paid to an employee at the end of the year. Many year-end bonuses are tied to performance metrics and the amount can vary depending whether certain milestones are met. Year-end bonuses are usually made up of lump-sum payments used to reward the individual for hard work and dedication. "

However, the real definition of a bonus has become: "you get one, no matter what".

The main argument for the "bonus no matter what" stance is that if it is done otherwise, the ‘talent' will be hired by competition. In a healthy economy where most companies are doing well, I could see that being a strong consideration.

However, Business Week had reported that up to  October 2008, more than 130,000 jobs had been cut in the finance sector. Now, that's right when the finance extravaganza began! Therefore, with all the job losses, the " I'm going to go work somewhere else" attitude may not work because firms are not hiring.

So, when Merrill Lynch [which failed/was bought out and reported massive losses in 2008] hands over