EPTUS Politics Mega-thread - Page 553
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Read the rules in the OP before posting, please. In order to ensure that this thread continues to meet TL standards and follows the proper guidelines, we will be enforcing the rules in the OP more strictly. Be sure to give them a re-read to refresh your memory! The vast majority of you are contributing in a healthy way, keep it up! NOTE: When providing a source, explain why you feel it is relevant and what purpose it adds to the discussion if it's not obvious. Also take note that unsubstantiated tweets/posts meant only to rekindle old arguments can result in a mod action. | ||
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corumjhaelen
France6884 Posts
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DoubleReed
United States4130 Posts
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DeltaX
United States287 Posts
On October 21 2013 03:23 corumjhaelen wrote: Thats still doesn't explain it, as my understanding is that they choose this sort of deal rather than a trial in great part for PR reasons. I think it is more: They know they did SOMETHING wrong and feel the government can prove it (say, 80%+ chance of guilty verdict). Given that, the primary purpose of a trial would be to come up with a number for the penalty. This penalty could be literally anything and very likely to be much much higher than what the government is asking for now. People generally don't like banks, so potential penalties are also quite unpredictable. With the possibility of an even bigger judgement than 13B, the bank will likely need to keep money in reserve to cover 100% whatever the government says it is asking for at the start of the trial. Stockpiling this money would significantly hurt stock prices for 2-3 years in addition to the PR issues you mentioned. Now you just look at risk vs reward. If you lose at trial, there goes 3 years of profits. I don't think any bank could really risk that if they felt they had more than a 5-10% chance of losing. Lastly, not having to admit to anything gives you a better negotiating position against other people with civil claims. If you lose vs the government, people will come out of the woodwork to sue you since its basically free money. | ||
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revel8
United Kingdom3022 Posts
On October 21 2013 04:00 DeltaX wrote: I think it is more: They know they did SOMETHING wrong and feel the government can prove it (say, 80%+ chance of guilty verdict). Given that, the primary purpose of a trial would be to come up with a number for the penalty. This penalty could be literally anything and very likely to be much much higher than what the government is asking for now. People generally don't like banks, so potential penalties are also quite unpredictable. With the possibility of an even bigger judgement than 13B, the bank will likely need to keep money in reserve to cover 100% whatever the government says it is asking for at the start of the trial. Stockpiling this money would significantly hurt stock prices for 2-3 years in addition to the PR issues you mentioned. Now you just look at risk vs reward. If you lose at trial, there goes 3 years of profits. I don't think any bank could really risk that if they felt they had more than a 5-10% chance of losing. Lastly, not having to admit to anything gives you a better negotiating position against other people with civil claims. If you lose vs the government, people will come out of the woodwork to sue you since its basically free money. That is my understanding as well. JP will take a hit, but everyone knows they can afford it, as they have declared a reserved fund to cover this, so it won't shake investors confidence in JP's ongoing viability and liquidity. JP still comes out ahead from these acquistions as they purchased Bear Stearns and Washington Mutual for a fraction of their value (I think these two firms had about $20 billion combined market capitalistion in 2007). Washington Mutual was acquired for about $2 Billion initially but had assets of about $300 Billion! Bear Stearns had about $400 Billion in assets too, it was acquired by JP for $10 a share, a year before it had traded at $170 a share! Bear was bought for about $250 million, a tenth of it's value the week before! Obviously JP had to assume liabilities for bad debts but this was limited by the nature of their purchase deals which essentially meant a lot of the toxic assets were not included in their acquisition of WaMu and it was the US Taxpayers (via the Treasury) who had to eat $29 Billion of toxic assets from the Bear sale to JP. Dimon (JP CEO) even bragged in 2010 about acquiring $500 Billion of assets from WaMu and Bear! So I think sympathy is somewhat misplaced here. Yes, the acquisitions were done at the urging of the Fed but JP could have declined but they knew it was a great deal for them too. JP were trying to buy WaMu in early 2008, so had done due diligence and knew what it's true value was. | ||
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JonnyBNoHo
United States6277 Posts
On October 21 2013 03:23 corumjhaelen wrote: Thats still doesn't explain it, as my understanding is that they choose this sort of deal rather than a trial in great part for PR reasons. I don't think you understand what's being discussed. The issue is whether or not JPM should be liable for the wrongdoings of BS or WaMu, not whether or not JPM should have gone to trial rather than taken a deal. Edit: On October 21 2013 03:46 DoubleReed wrote: Honestly I think a lot of the issue is moot until the banks are broken up. They don't even have to be doing stupid irresponsible things to threaten the economy if the bank is too big to fail/jail. I don't see what one has to do with the other. Solving TBTF doesn't resolve this issue or many of the other issues in the financial sector. | ||
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corumjhaelen
France6884 Posts
Both sides got their PR stuff (JPM is a victim and the gov gets some money in and doesn't let banker do what they want), we have no real clue of what went on, and we're supposed to be satisfied. Well i'm not. | ||
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revel8
United Kingdom3022 Posts
On October 21 2013 06:28 JonnyBNoHo wrote: I don't think you understand what's being discussed. The issue is whether or not JPM should be liable for the wrongdoings of BS or WaMu, not whether or not JPM should have gone to trial rather than taken a deal. Edit: I don't see what one has to do with the other. Solving TBTF doesn't resolve this issue or many of the other issues in the financial sector. Yes, JP should assume liabilities of companies they acquire. By JP agreeing to pay these penalties, are they not agreeing that they are actually liable for these wrongdoings and hence are paying the fine? | ||
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JonnyBNoHo
United States6277 Posts
On October 21 2013 06:38 corumjhaelen wrote: You're the one who's not getting it, but we're used not wanting to get things if they don't match up with your own "neutral" vision of things. Both sides got their PR stuff (JPM is a victim and the gov gets some money in and doesn't let banker do what they want), we have no real clue of what went on, and we're supposed to be satisfied. Well i'm not. So what's the government's PR stuff? Is the government claiming that most of this isn't BS or WaMu? | ||
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JonnyBNoHo
United States6277 Posts
On October 21 2013 06:53 revel8 wrote: Yes, JP should assume liabilities of companies they acquire. By JP agreeing to pay these penalties, are they not agreeing that they are actually liable for these wrongdoings and hence are paying the fine? Normally, yes. But as I pointed out in my other post, these acquisitions were not normal. They were done at the request of regulators in a very short time span. | ||
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Sub40APM
6336 Posts
On October 21 2013 06:57 JonnyBNoHo wrote: The flip side of that is both BS and Wamu fell into JPM's lap. This is just them returning part of their government-earned gains back. Normally, yes. But as I pointed out in my other post, these acquisitions were not normal. They were done at the request of regulators in a very short time span. | ||
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revel8
United Kingdom3022 Posts
On October 21 2013 06:57 JonnyBNoHo wrote: Normally, yes. But as I pointed out in my other post, these acquisitions were not normal. They were done at the request of regulators in a very short time span. Yes, but JP agreed to the acquisitions. Yes the regulators wanted it and indeed encouraged it, but they did not coerce the acquisitions. Also JP agreed to it because of the assets they gained, the price was a reflection of the risk. Any liabilities that were to be excluded in the acquisitions would have been stipulated in the purchasing contract. The fact that this became a dispute that involved the lawyers would indicate that the liabilities in question were not stipulated in the contracts and so legal advise was consulted. Now a settlement has been reached after negotiations, it appears that JP are agreeing that they are indeed liable for the charges and are paying a penalty for the agreed sums. The details of the settlement have not actually been finalised or made public yet, so the above is slightly speculative. JP knew they were buying companies in dire straits, this is why they picked them up for a fraction of their true value. They saw an opportunity and took it. The risk of the purchases was reflected in the price. The JP Board themselves seem very happy with Dimon's actions in making these acquisitions for the prices paid, the costs incurred and the penalties that have been levied. JP shareholders have also endorsed Dimon since 2008, so if he had acted contrary to their benefit (long-term) in 2008 they would have got rid of him. Obviously they may change their mind in the future in view of this further short-term hit but we will have to see. JP seem to be complaining that they are being penalised despite the fact that they made these purchases at the urging of the Treasury. They seem to feel that their penalty should be mitigated and reduced because of this. I doubt that there was an agreement that this purchase would negate any further prosecution for their own financial crimes and misdemeanors or result in leniency in any of their own wrongdoings. Investment banks operate for their own financial benefits and the purchases of WaMu and Bears were done in line with this policy. The fact that this benefited the Treasury and the markets at the time is secondary to that motivation. | ||
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{CC}StealthBlue
United States41117 Posts
Far from chastened by the debt debate, tea partyers and conservative groups signaled Thursday they’ve concluded they didn’t lose, but rather were sabotaged from within by weak Republicans — and they took the first steps to oust one of them. Mississippi state Sen. Chris McDaniel announced he would challenge U.S. Sen. Thad Cochran in the Republican primary next year, a day after the GOP’s senior senator voted to end the 16-day government shutdown and grant President Obama more borrowing authority. Mr. McDaniel immediately saw a flood of support from the outside groups that had rallied against this week’s debt and spending agreement. “Our country can’t afford any more bad votes that stem from old friends and back-room deals,” said Daniel Horowitz, deputy political director of the Madison Project. “And as witnessed from the recent budget battle against Obamacare, we cannot win against Democrats if we don’t grow our conservative bench in the Senate.” Source | ||
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Sub40APM
6336 Posts
Seems like good news for the Democrats as the Republicans tear themselves apart. | ||
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Danglars
United States12133 Posts
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zlefin
United States7689 Posts
But yes, given the way people have been talking, it was very predictable that more moderate republicans would take the hit; which is why many republicans who knew the shutdown was a bad thing voted to continue it anyways. I certainly don't mind if Boehner and McConnell are replaced; it's not like they did anything good anyways (well, Boehner didn't, not so sure about McConnell). | ||
KwarK
United States43879 Posts
On October 21 2013 13:40 Danglars wrote: Cruz and the Tea Party's position on Obamacare is as popular as ever amongst the Republican electorate. It's kind of funny hearing from the left within their echo chamber wondering why there continues to be opposition and why the opposition won't just bend over. There was not a chance that anyone but moderates would emerge feeling chastened. The cause continues, and the pressure is still to replace unreliable big-government type Republicans with limited-government conservatives. The eventual goal is replacement of Boehner and McConnell to give leadership slots to principled leaders. Civil war in a FPTP electoral system is not going to bring them any power. You can't attack your own party for not having as much of a hardline on your single issue as you do, the party doesn't work like that. It's a coalition, it has to be for it to gain enough support to have a meaningful chance in a FPTP system. People who care about ending Obamacare do not make up a majority of the population, you need to take that crowd and ally it with the social conservatives, religious right, libertarians and the rest and try and get votes that way. Their attempts to ideologically purify the Republican party will only dismember it, they don't seem to understand that they actually need the people whose views they disagree with. | ||
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oneofthem
Cayman Islands24199 Posts
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KwarK
United States43879 Posts
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oneofthem
Cayman Islands24199 Posts
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Sub40APM
6336 Posts
On October 21 2013 13:40 Danglars wrote: Cruz and the Tea Party's position on Obamacare is as popular as ever amongst the Republican electorate. It's kind of funny hearing from the left within their echo chamber wondering why there continues to be opposition and why the opposition won't just bend over. There was not a chance that anyone but moderates would emerge feeling chastened. The cause continues, and the pressure is still to replace unreliable big-government type Republicans with limited-government conservatives. The eventual goal is replacement of Boehner and McConnell to give leadership slots to principled leaders. You realize that the people with whom Cruz and the Tea Party are popular represent an absolute minority of American voters right? But yes, keep fighting the 'big government type' Republicans, keep spending money to drown each other in bile in the primaries | ||
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