Wal-Mart Downsizes in Japan

WEEKEND EDITION
Brokers threatened by run on shadow bank system
Regulators eye $10 trillion market that boomed outside traditional banking
By Alistair Barr, MarketWatch
Last update: 2:37 p.m. EDT June 20, 2008SAN FRANCISCO (MarketWatch)—A network of lenders, brokers and opaque financing vehicles outside traditional banking that ballooned during the bull market now is under siege as regulators threaten a crackdown on the so-called shadow banking system.
Big brokerage firms like Goldman Sachs (GS:GS , which some say are the biggest players in this non-bank financial network, may have the most to lose from stricter regulation.
The shadow banking system grew rapidly during the past decade, accumulating more than $10 trillion in assets by early 2007. That made it roughly the same size as the traditional banking system, according to the Federal Reserve.
While this system became a huge and vital source of money to fuel the U.S. economy, the subprime mortgage crisis and ensuing credit crunch exposed a major flaw. Unlike regulated banks, which can borrow directly from the government and have federally insured customer deposits, the shadow system didn’t have reliable access to short-term borrowing during times of stress.
Unless radical changes are made to bring this shadow network under an updated regulatory umbrella, the current crisis may be just a gust compared to the storm that would follow a collapse of the global financial system, experts warn.
Such vulnerability helped transform what may have been an uncomfortable correction in credit markets into the worst global credit crunch in more than a decade as monetary policymakers and regulators struggled to contain the damage.
Unless radical changes are made to bring this shadow network under an updated regulatory umbrella, the current crisis may be just a gust compared to the storm that would follow a collapse of the global financial system, experts warn.
“The shadow banking system model as practiced in recent years has been discredited,” Ramin Toloui, executive vice president at bond investment giant Pimco, said.
Toloui expects greater regulation of big brokerage firms which may face stricter capital requirements and requirements to hold more liquid, or easily sellable, assets.
‘Clarion call’
“The bright new financial system—for all its talented participants, for all its rich rewards—has failed the test of the market place,” Paul Volcker, former chairman of the Federal Reserve, said during a speech in April. “It all adds up to a clarion call for an effective response.”
Two months later, Timothy Geithner, president of the Federal Reserve Bank of New York, and others have begun to answer that call.
“The structure of the financial system changed fundamentally during the boom, with dramatic growth in the share of assets outside the traditional banking system,” he warned in a speech last week. That “made the crisis more difficult to manage.”
On Thursday, Treasury Secretary and former Goldman Chief Executive Henry Paulson said the Fed should be given the authority to collect information from large complex financial institutions and intervene if necessary to stabilize future crises. Regulators should also have a clear way of taking over and closing a failed brokerage firm, he added.

Banking bedrock
The bedrock of traditional banking is borrowing money over the short term from customers who deposit savings in accounts and then lending it back out as mortgages and other higher-yielding loans over longer periods.
The owners of banks are required by regulators to invest some of their own money and reinvest some of the profit to keep an extra level of money in reserve in case the business suffers losses on some of its loans. That ensures that there’s still enough money to repay all depositors after such losses.
In recent decades, lots of new businesses and investment vehicles have evolved that do the same thing, but outside the purview of traditional banking regulation.
Instead of getting money from depositors, these financial intermediaries often borrow by selling commercial paper, which is a type of short-term loan that has to be re-financed over and over again. And rather than offering home loans, these entities buy mortgage-backed securities and other more complex securities.
A $10 trillion shadow
By early 2007, conduits, structured investment vehicles and similar entities that borrowed in the commercial paper market and bought longer-term asset-backed securities, held roughly $2.2 trillion in assets, according to the Fed’s Geithner.
Another $2.5 trillion in assets were financed overnight in the so-called repo market, Geithner said.
Geithner also highlighted big brokerage firms, saying that their combined balance sheets held $4 trillion in assets in early 2007.
Hedge funds held another $1.8 trillion, bringing the total value of asset in the “non-bank” financial system to $10.5 trillion, he added.
That dwarfed the total assets of the five largest banks in the U.S., which held just over $6 trillion at the time, Geithner noted. The traditional banking system as a whole held about $10 trillion, he said.
“These things act like banks, but they’re not.”
— James Hamilton,Economics professor
While acting like banks, these shadow banking entities weren’t subject to the same supervision, so they didn’t hold as much capital to cushion against potential losses. When subprime mortgage losses started last year, their sources of short-term financing dried up.
“These things act like banks, but they’re not,” James Hamilton, professor of economics at the University of California, San Diego, said. “The fundamental inadequacy of their own capital caused these problems.”
Big brokers targeted
Geithner said the most fundamental reform that’s needed is to regulate big brokerage firms and global banks under a unified system with stronger supervision and “appropriate” requirements for capital and liquidity.
Financial institutions should be persuaded to keep strong capital cushions and more liquid assets during periods of calm in the market, he explained, noting that’s the best way to limit the damage during a crisis.
At a minimum, major investment banks and brokerage firms should adhere to similar rules on capital, liquidity and risk management as commercial banks, Sheila Bair, chairman of the Federal Deposit Insurance Corp., said on Wednesday.
“It makes sense to extend some form of greater prudential regulation to investment banks,” she said.
Separation dwindled
After the stock market crash of 1929, the U.S. Congress passed laws that separated commercial banks from investment banks.
The Fed, the Office of the Comptroller of the Currency and state regulators oversaw commercial banks, which took in customer deposits and lent that money out. The Securities and Exchange Commission regulated brokerage firms, which underwrote offerings of stocks and corporate bonds.
This separation dwindled during the 1980s and 1990s as commercial banks tried to push into investment banking—following their large corporate clients which were selling more bonds, rather than borrowing directly from banks.

Brokers threatened by run on shadow bank system (Continued)

By 1999, the Gramm-Leach-Bliley Act rolled back Depression-era restrictions, allowing banks, brokerage firms and insurers to merge into financial holding companies that would be regulated by the Fed.
Commercial banks like Citigroup Inc. (

:
JPM, , ) signed up and developed large investment banking businesses.
However, big brokerage firms like Goldman, Morgan Stanley and Lehman didn’t become financial holding companies and stayed out of commercial banking partly to avoid increased regulation by the Fed.
Run on a shadow bank
The Fed’s bailout of Bear Stearns in March will probably change all that, experts said this week.
Bear, a leading underwriter of mortgage securities, almost collapsed after customers and counterparties deserted the firm.
It was like a run on a bank. But Bear wasn’t a bank. It financed a lot of its activity by borrowing short term in repo and commercial paper markets and couldn’t borrow from the Fed if things got really bad.
Bear’s low capital levels left it with highly leveraged exposures to risky mortgage-related securities, which triggered initial doubts among customers and trading partners.
The Fed quickly helped J.P. Morgan Chase, one of the largest commercial banks, acquire Bear. To prevent further damage to the financial system, the Fed also started lending directly to brokerage firms for the first time since the Depression.
“They stepped in because Bear was facing a traditional bank run—customers were pulling short-term assets and the firm couldn’t sell its long-term assets quickly enough,” Hamilton said. “Rules should apply here: You should have enough of your own capital available to pay back customers to avoid a run like that.”
Bear necessity
A more worrying question from the Bear Stearns debacle is why customers and investors were willing to lend money to the firm in the absence of an adequate capital cushion, Hamilton said.
“The creditors thought that Bear was too big to fail and that the government would step in to prevent creditors losing their money,” he explained. “They were right because that’s exactly what happened.”
“This is a system in which institutions like Bear Stearns are taking far too much risk and a lot of that risk is being borne by the government, not these firms or the market,” he added.
The Fed has lent between $8 billion and more than $30 billion each week directly to brokerage firms since it set up its new program in March. Most experts say this source of emergency funding is unlikely to disappear, even though it’s scheduled to end in September.
“It’s almost impossible to go back,” FDIC’s Bair said on Wednesday.
With taxpayer money permanently on the line to save big brokers, these firms should now be more strictly regulated to keep future bailouts to a minimum, Bair and others said.
“By definition, if they’re going to give the investment banks access to the window, I for one do believe they have the right for oversight,” Richard Fuld, chief executive of Lehman, told analysts during a conference call this week. “What that means, though, particularly as far as capital levels or asset requirements, it’s way too early to tell.”

Super Fed
Next year, Congress likely will pass legislation forcing big brokerage firms to be regulated fully by the Fed as financial holding companies, Brad Hintz, a securities analyst at Bernstein Research and former chief financial officer of Lehman, said.
Legislators will probably also call for tighter limits on the leverage and trading risk taken on by large brokers, while demanding more conservative funding and liquidity policies, he added.
Restrictions on these firms’ forays into venture capital, private equity, real estate, commodities and potentially hedge funds may also follow too, Hintz warned.
This may undermine the source of much of the surging profit generated by big brokerage firms in recent years.
A newly empowered “super Fed” will likely encourage these firms to arrange longer-term, more secure sources of borrowing and even promote the development of deposit bases, just like commercial and retail banks, the analyst explained.
This will make borrowing more expensive for brokerage firms, undermining the profitability of businesses that require a lot of capital, such as fixed income, institutional equities, commodities and prime brokerage, Hintz said.
Such regulatory changes will cut big brokers’ return on equity—a closely watched measure of profitability—to roughly 15.5% from 19%, Hintz estimated in a note to investors this week.
Lehman and Goldman will be most affected by this—seeing return on equity drop by about four percentage points over the business cycle—because they have larger trading books and greater exposure to revenue from sales and trading. Goldman also has a major merchant banking business that may also be constrained, Hintz added.

MER, , ) will see declines of 3.2 percentage points and 2.2 percentage points in their return on equity, the analyst forecast.
If you can’t beat them…
Facing lower returns and more stringent bank-like regulation, some big brokerage firms may decide they’re better off as part of a large commercial bank, some experts said.
“If you’re being regulated like a bank and your leverage ratio looks something like a bank’s, can you really earn the returns you were making as a broker dealer? Probably not,” Margaret Cannella, global head of credit research at J.P. Morgan, said.
Regulatory changes will be unpopular with some brokerage CEOs and could result in a shakeup of the industry and more consolidation, she added.
Hintz said the business models of some brokerage firms may evolve into something similar to Bankers Trust and the old J.P. Morgan.
In the mid 1990s, Bankers Trust and J.P. Morgan relied more on deposits and less on the repo market to finance their assets. They also operated with leverage ratios of roughly 20 times capital. That’s lower than today’s brokerage firms, which were levered roughly 30 times during the peak of the credit bubble last year, according to Hintz.
However, both firms soon ended up in the arms of more regulated commercial banks. Bankers Trust was acquired by Deutsche Bank (DB:DB
:
DB, , ) in 1998. Chase Manhattan Bank bought J.P. Morgan in 2000. 
Alistair Barr is a reporter for MarketWatch in San Francisco.~~~~~~~~~Note: This is an article I saved in my favorites file,from June of this year. I’m glad I did.

...discerning Japanese shoppers (who view “low prices” as a sign of low quality, and can afford to shop elsewhere)...

With “over $1 billion” already in the pot, a failure in Japan could make Germany look like a stroll in the park.

Anyone remember when we could “afford to shop elsewhere”? And there’s that pesky word ‘discerning’ again.

“There are a lot of issues here, but what they add up to is the end of the age of Wal-Mart,” contends Richard Hastings, a senior analyst for the retail rating agency Bernard Sands. “The glory days are over.”

Ken V,
Amen to that!

What’s going on here? Why not let the free market work? Bankruptcy courts know how to sort out assets and reorganize companies so they can operate again. Why the extraordinary measures for Fannie, Freddie and AIG?

The answer may have less to do with saving the insurance business, the housing market, or the Chinese investors clamoring for a bailout than with the greatest Ponzi scheme in history, one that is holding up the entire private global banking system. What had to be saved at all costs was not housing or the dollar but the FINANCIAL DERIVATIVES industry; and the precipice from which it had to be saved was an “event of default” that could have collapsed a quadrillion dollar derivatives bubble, a collapse that could take the entire global banking system down with it.

The Anatomy of a Bubble

Until recently, most people had never even heard of derivatives; but in terms of money traded, these investments represent the biggest financial market in the world. Derivatives are financial instruments that have no intrinsic value but derive their value from something else. Basically, they are just bets. You can “hedge your bet” that something you own will go up by placing a side bet that it will go down. “Hedge funds” hedge bets in the derivatives market. Bets can be placed on anything, from the price of tea in China to the movements of specific markets.

“The point everyone misses,” wrote economist Robert Chapman a decade ago, “is that buying derivatives is not investing. It is gambling, insurance and high stakes bookmaking. Derivatives create nothing.” They not only create nothing, but they serve to enrich non-producers at the expense of the people who do create real goods and services. In congressional hearings in the early 1990s, derivatives trading was challenged as being an illegal form of gambling. But the practice was legitimized by Fed Chairman Alan Greenspan, who not only lent legal and regulatory support to the trade but actively promoted derivatives as a way to improve “risk management.” Partly, this was to boost the flagging profits of the banks; and at the larger banks and dealers, it worked. But the cost was an increase in risk to the financial system as a whole.(Cont.)

Since then, derivative trades have grown exponentially, until now they are larger than the entire global economy. The Bank for International Settlements recently reported that total derivatives trades exceeded one quadrillion dollars – that’s 1,000 trillion dollars.3 How is that figure even possible? The gross domestic product of all the countries in the world is only about 60 trillion dollars. The answer is that gamblers can bet as much as they want. They can bet money they don’t have, and that is where the huge increase in risk comes in.

Credit default swaps (CDS) are the most widely traded form of credit derivative. CDS are bets between two parties on whether or not a company will default on its bonds. In a typical default swap, the “protection buyer” gets a large payoff from the “protection seller” if the company defaults within a certain period of time, while the “protection seller” collects periodic payments from the “protection buyer” for assuming the risk of default. CDS thus resemble insurance policies, but there is no requirement to actually hold any asset or suffer any loss, so CDS are widely used just to increase profits by gambling on market changes. In one blogger’s example, a hedge fund could sit back and collect $320,000 a year in premiums just for selling “protection” on a risky BBB junk bond. The premiums are “free” money – free until the bond actually goes into default, when the hedge fund could be on the hook for $100 million in claims.

And there’s the catch: what if the hedge fund doesn’t have the $100 million? The fund’s corporate shell or limited partnership is put into bankruptcy; but both parties are claiming the derivative as an asset on their books, which they now have to write down. Players who have “hedged their bets” by betting both ways cannot collect on their winning bets; and that means they cannot afford to pay their losing bets, causing other players to also default on their bets.

The dominos go down in a cascade of cross-defaults that infects the whole banking industry and jeopardizes the global pyramid scheme. The potential for this sort of nuclear reaction was what prompted billionaire investor Warren Buffett to call derivatives “weapons of financial mass destruction.” It is also why the banking system cannot let a major derivatives player go down, and it is the banking system that calls the shots. The Federal Reserve is literally owned by a conglomerate of banks; and Hank Paulson, who heads the U.S. Treasury, entered that position through the revolving door of investment bank Goldman Sachs, where he was formerly CEO.~~~~~~~~~"It’s the Derivatives,Stupid! Why Fannie and Freddie and AIG had to be bailed out."Sept,08,Cyrano2

ddrb,

“Derivatives create nothing.” They not only create nothing, but they serve to enrich non-producers at the expense of the people who do create real goods and services.”

Sounds a lot like the anti Wal-Mart crowd, they create NOTHING, to enrich people who are non-producers, at the expense of the people who DO create real goods and services!!  If Wal-Mart is as ‘bad’ as you say it is, it should be EASY for another business to come in and take it down, just like Wal-Mart did to K-Mart!!  All they would have to do, is take the ‘bad’ things that Wal-Mart does and do the opposite!!  And, if they can’t make it doing that, it wasn’t all that ‘bad’ to begin with!!

Think about it, if stores like Target, did what you say are the ‘right’ things to do and you are right, they should soar to the top of the list!!  But, if you are ‘wrong’, they will ‘drop like a rock’!!  And the fact that the other stores DON’T do what you say are the ‘right things’, might just mean that they know something that you don’t!!

Question:  Why is it, that no one is creating a business model that challanges Wal-Mart, like Sam Walton did to K-Mart?

RDS: I could never discredit YOUR lack of creativity as effectively as you so effectively ,discredit yourself.

Think about it, if stores like Target, did what you say are the ‘right’ things to do and you are right, they should soar to the top of the list!!

Target knows better than that, RDS—as a matter of fact, the only real difference between those guys and WM are some drop-celings and a slightly different merchandise mix.

Otherwise, they share many of the same “people issues” as WM.

And the fact that the other stores DON’T do what you say are the ‘right things’, might just mean that they know something that you don’t!!

Well-put…

An excellent description of the ‘race to the bottom’. As long as Wal-Mart dominates retail, no one can do the ‘right things’ and conpete.

When it comes to consumption the US is obviously way below Japan.  The United States of Lawful Prey.

There is scarcely anything in the world that some man cannot make a little worse, and sell a little more cheaply. The person who buys on price alone is this man’s lawful prey. ~ John Ruskin

Ken V: And let’s not forget the role that the US Chamber of Commerce has played in the “race to the bottom"as head “cheerleader” for deregulation of the financial market and anti-union erosion of worker’s rights and wages.To wit:~~~~~~~~U.S. CHAMBER CREATED CURRENT FINANCIAL CRISIS, NEW REPORT SAYS
Filings show AIG paid U.S. Chamber $23M to eliminate oversight and accountability

WASHINGTON, DC—The current financial crisis was caused by U.S. Chamber’s aggressive lobbying to eliminate accountability and oversight, says a new issue brief that also exposes payments from bailed-out AIG to the Washington corporate lobby.

Today, U.S. Chamber is the loudest supporter of a $700 billion taxpayer bailout, even though it spent the last decade fighting to eliminate corporate accountability – one of the major factors that led to the current financial crisis.

U.S. Chamber has been paid millions by large corporations to limit the rights of shareholders, roll back Sarbanes-Oxley reforms, prevent disclosures to investors, and protect boardrooms while preventing consumers from holding them accountable.

The issue brief also details payments from American International Group (AIG) to U.S. Chamber totaling $23 million from 2001 to 2005.  AIG, coined by one commentator as “the new Enron,” was represented by U.S. Chamber while engaging in massive corporate fraud before receiving a government bailout this month.

“U.S. Chamber has sought to destroy any check on corporate excess, accountability and greed,” said American Association for Justice CEO Jon Haber.  “By conducting the dirty work of Enron, Exxon, AIG, and a host of other negligent corporations, U.S. Chamber has put countless Americans in financial jeopardy.”

The issue brief summarizes a small selection of U.S. Chamber lobbying and litigation that has put Wall Street ahead of Main Street and corporations above everyday Americans.  To read “Behind the Bailout: How U.S. Chamber Created the 2008 Financial Crisis,” visit: http://www.justice.org/pdf/uschamberbehindthebailout.pdf.

Chamber of Commerce
Chamber of Commerce
Big-Business Umbrella Group’s Anti-Union Agenda
The U.S. Chamber of Commerce, the nation’s most powerful business lobbying organization1, has been campaigning against unions, fair labor practices, increases in the minimum wage, and legal protections for America’s workers for nearly a century.  The Chamber’s anti-union initiatives are just one part of its multi-issue agenda.  Unlike other anti-union organizations, this prominent lobbying force does not hide its alignment with big business.

Headquartered in Washington, DC, the Chamber has an annual budget of $150 million2 and 300 staff members.3 With President Thomas J. Donohue at the helm, annual contributions to the hamber from its largest corporate members rose from $600,000 to $90 million in less than a decade.4 Since he took office in 1997, Donohue has built a more aggressive and politically-powerful Chamber not afraid to take on controversial issues at the request of its large corporate donors and the Bush White House.5 This direction has caused the Business Roundtable and other moderate members of the business community to distance themselves from the organization.6

Even when Donohue first took office Business Week expressed caution at his “frontal assault on unions,” commenting that “Polls show strong public support for giving workers their piece of an expanding economic pie.”7 Although an increasing number of its member organizations pursue cooperative and socially-responsible labor relations, the Chamber continues to advocate against unions, and appears to be ramping up its attack. 

The Role of the U.S. Chamber of Commerce in the Anti-Union Network

Lobbying
In 2004, the Chamber spent $24.5 million lobbying the federal government.8

The Chamber works closely with the Bush administration9 and prominent anti-labor conservatives on Capitol Hill such as Rep. Charlie Norwood (R-GA), head of the House Subcommittee on Workforce Protections.  An anti-workplace safety zealot, Norwood was given the Chamber’s Spirit of Enterprise Award for his pro-Chamber voting record.  Norwood caused controversy this year for his insensitivity during Congressional hearings on the Sago mineworkers tragedy, and for lobbying loudly against renewal of the Voting Rights Act.
The Chamber lobbies to oppose pro-worker legislation, including the Family Time and Workplace Flexibility Act, Fair Minimum Wage Act, and an expansion of the Family and Medical Leave Act.10

Among the Chamber’s legislative priorities is opposition to the Employee Free Choice Act , which would strengthen labor law and provide workers with the right to union representation via the card check process when a majority present signed union authorization cards to their employers.11 On May 4, 2006, the Chamber sent a letter to all Republican members of Congress urging them to support the Secret Ballot Protection Act,12 which would outlaw union recognition through card check.  The Chamber also operates a website urging its members to pressure Congress on the issue.13
Litigation
Its recent litigation efforts include an attempt to strike down a California law prohibiting the use of tax dollars for anti-union activity, and litigation to overturn county “Peace Agreement” ordinances.14

The Chamber recently filed amicus briefs in two significant cases before the National Labor Relations Board to argue for rulings that limit the ability of workers to form unions.  One case could define millions of workers as supervisors, revoking their right to organize, and the other could effectively quash the card check method of organizing.15

The Chamber has also lobbied the Bush administration on nominations to the National Labor Relations Board,16 and succeeded in placing one of their staffers on the Board.  In 2002, President Bush appointed Michael Bartlett, then Director of Labor Law Policy for the Chamber, to sit on the five-member Board in a recess appointment that lasted nearly one year. 
Sponsoring propaganda
For decades, labor-community coalitions have joined together to hold corporations accountable for their treatment of employees.  Recently, the Chamber published a briefing book aimed at attacking the motives and methods of these so-called ‘corporate campaigns.

Coalition for a Democratic Workplace (CDW)
The deceptively-titled astroturf group claims a workers’ rights agenda and a grassroots base representing “rank-and-file workers from across the country” who are opposed to the Employee Free Choice Act.

MEMBERSHIP: Grassroots claim conceals corporate agenda.  CDW masquerades as a workers’ rights group, mimicking the rhetoric and even logo of legitimate organizations.  Not surprisingly, no workers are named as members on CDW’s website, but hundreds of national, deep-pocketed groups and their affiliates are—including the National Association of Manufacturers, the U.S. Chamber of Commerce, and the National Retail Federation.
U.S. Chamber of Commerce
The nation’s most powerful business lobbying organization co-chairs the Coalition for a Democratic Workplace.

RESOURCES: The Chamber’s war chest.  In 2006, the Chamber spent a record $72 million on lobbying.  VP for labor policy Randel Johnson told The New York Times, “We’ve targeted [The Employee Free Choice Act] as our No. 1 or No. 2 priority to defeat.”

TACTIC: CDW and Chamber join forces to make “people feel pain.” Operating from the same playbook and talking points, both CDW and the Chamber have launched extensive media campaigns in target states to shame and reprimand House Representatives who voted to pass the Employee Free Choice Act, and intimidate Senators out of following suit.  In a Congress Daily article about the expensive ad buy, a Chamber spokesperson said, “We’re making people feel pain.” ~~~~~~~~~~~American Rights at Work

Basel II is an international business standard that requires financial institutions to maintain enough cash reserves to cover risks incurred by operations. The Basel accords are a series of recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision (BSBS). The name for the accords is derived from Basel, Switzerland, where the committee that maintains the accords meets.
Basel II improved on Basel I, first enacted in the 1980s, by offering more complex models for calculating regulatory capital. Essentially, the accord mandates that banks holding riskier assets should be required to have more capital on hand than those maintaining safer portfolios. Basel II also requires companies to publish both the details of risky investments and risk management practices. The full title of the accord is Basel II: The International Convergence of Capital Measurement and Capital Standards - A Revised Framework.

The three essential requirements of Basel II are:

Mandating that capital allocations by institutional managers are more risk sensitive.
Separating credit risks from operational risks and quantifying both.
Reducing the scope or possibility of regulatory arbitrage by attempting to align the real or economic risk precisely with regulatory assessment.
Basel II has resulted in the evolution of a number of strategies to allow banks to make risky investments, such as the subprime mortgage market. Higher risks assets are moved to unregulated parts of holding companies. Alternatively, the risk can be transferred directly to investors by securitization, the process of taking a non-liquid asset or groups of assets and transforming them into a security that can be traded on open markets.

LAST UPDATED: 28 Jan 2008~~~~~~~~~~~~~~NOTE: The U.S. has received a couple of time extensions to come within the terms of this accord. According to my understandin, the deadline is around the corner. Is this the real reason behind the “credit crisis”?

ddrb,

“RDS: I could never discredit YOUR lack of creativity as effectively as you so effectively ,discredit yourself.”

And, what proof do you have of my doing this, except that my views don’t agree with yours?  Show me what the anti groups have ‘Created’, other than complaints!!  Your groups advocate ‘Destruction’, not ‘Creation’!! Have you offered any viable comments other than how Wal-Mart should ‘share the wealth’, with everyone, except the Walton’s, Lee Scott and the shareholders, the very people who make Wal-Mart possible?

Hey Asshole… Yeah YOU, RDS...

Here’s a new term to add to your lexicon, RDS: “casino capitalism.”

“my views don’t agree with yours?”

You sure know how to understate things RDS.  No lie.  While you are busy singing songs of praise from your WalMart Hymnal for the likes of “the Waltons, Lee Scott, and the shareholders” [of WalMart], its people like myself, ddrb, Ken V, Bobby and a few others who like to focus on WalMart, the George W. Bush Administration, and now Wall Street, which collectively have conspired to damage not only the economy of our country, but the economies of other countries around the world.  These same “forces,” also further ruined America’s already precarious reputation in the world.

Yes, for me the new term is “casino capitalism.” I’m going to automatically substitute this every time I hear you or any Neocon spouting off about “capitalism” and the “global economy.” People like Henry Paulson have got to go!

“This crisis underlines the excesses and uncertainties of a casino capitalism that has only one logic — lining your pockets.  It also shows the bankruptcy of ‘law of the jungle’ capitalism that no longer invests in companies and job creation, but instead makes money out of money in a totally uncontrolled way.” ~German lawmaker Martin Schulz

While you are busy singing songs of praise from your WalMart Hymnal...

Ladies and Gentlemen, it’s SanDiegoView...part deaux!

...its people like myself, ddrb, Ken V, Bobby and a few others...

In a single sentence, Mr. Screwed managed to discredit himself.  Nice!

...WalMart, the George W. Bush Administration, and now Wall Street, which collectively have conspired...

Now, it’s a conspiracy!  Will wonders never cease?

I was wondering how you people were going to do the “12 degrees of Wal-Mart” thing as it related to Wall Street’s recent recklessness.  Way to go!

Yes, for me the new term is “casino capitalism.”

This is the only thing I may agree with you on, Mr. Screwed—however, to tie it all in to Wal-Mart (which, like ‘em or not, is actually a pretty well-run company) is just plain neurotic.

Time to take your meds.

Is English a Second Language For You, bbrd?

The word was “conspire,” not “conpiracy.” I never used to word “conspiracy” to explain what has happened and is happening today on Wall Street and in our government.

My dictionary defines the word conspire as “acting in harmony toward a common end.” A part of this “acting in harmony,” often entails secret agreements.

You don’t think WalMart and its team of lobbyists use “secret agreements” to get what they want from lawmakers in Washington?  Just how naive are you?  You don’t think that Henry Paulson’s years at Goldman Sachs involved a few “secret agreements?”

I don’t have any need for meds.  You, on the other hand should get off whatever you’re on.

Screwed:We are in a “kakocracy. “Consider these terms:
‘Kakocracy’: ‘Governance’ by the worst elements of society exclusively in their own interests and to the permanent detriment of all other classes and members of society except their cronies.

‘Sib’: A sophisticated deception which reverses normal perceptions. The victim, whether actual or imagined, is the perpetrator. Beware of those who protest too much, in this context.

‘Slide’: A prepackaged, falsely constructed ‘consensus’ mindset which precludes further analysis or investigation, yielding a public perception preferred or intended by the kakocracy.

No mention has been made of WalMart’s investment in Japan’s Samurai bond market. THIS MAY have a little something to do with WalMart downsizing in Japan.To wit:~~~~~~~~Samurai Bond Market Shut by Lehman Roils Investors (Update1)

By Oliver Biggadike

Sept. 26 (Bloomberg)—The fastest-growing part of the global corporate debt market, samurai bonds, has come to a standstill since Lehman Brothers Holdings Inc. became the first borrower to default on the securities since Argentina in 2002.

``The Lehman shock is fatal to the samurai bond market for now,’’ said Koyo Ozeki, head of Asia-Pacific credit research at the Tokyo unit of Pacific Investment Management Co., manager of the world’s biggest bond fund. ``Investors believed Lehman and others were too big to fail.’’

The samurai market was one of the only bond markets to expand in a year when the subprime mortgage contagion caused corporate sales to decline 24 percent in the U.S., according to data compiled by Bloomberg. Citigroup Inc., Wal-Mart Stores Inc. and Goldman Sachs Group Inc. led 2.6 trillion yen of samurai sales, up from 2.2 trillion yen in all of 2007.

Lehman’s Samurais

Lehman, whose samurai debt included 22 billion yen of 2.23 percent notes maturing 2017, 56 billion yen of 1.69 percent securities due in 2012 and 25 billion yen of 0.94 percent notes maturing on Dec. 19, shut off that source of funding. .

The firm, once the biggest U.S. underwriter of mortgage backed securities that helped spur the seizure in credit markets, sought protection from creditors in the biggest bankruptcy. Lehman owes its 10 largest unsecured creditors more than $157 billion, including $155 billion to bondholders, according to its bankruptcy filing.

Lehman’s failure, combined with the U.S. takeovers of Washington-based Fannie Mae, Freddie Mac in McLean, Virginia, and New York-based insurer American International Group Inc. roiled markets already wary of investing in anything except government debt.
`Very Reluctant’

``Investors don’t know which banks will survive and which banks will collapse,’’ said Tetsushi Nagato, a credit analyst at Schroder Investment Management Japan Ltd., whose parent company manages about $259 billion. ``Most Japanese investors are very reluctant to tap into the samurai market right now.’’

The yield on New York-based Goldman Sachs’s 18.3 billion yen of 2.11 percent notes due January 2013 rose to 5.26 percentage points above benchmark yen swaps yesterday, from 1.1 percentage points when the debt was sold in January, Bloomberg data show.

Japanese banks and insurers including Mitsubishi UFJ Financial Group Inc., the nation’s biggest lender, have announced 249 billion yen of potential losses tied to Lehman’s collapse.

Feudal Warrior

``We’ll take a wait-and-see approach when it comes to investing in U.S. companies,’’ said Yuki Sakurai, a director in the financial planning department at Fukoku Mutual Life Insurance Co. in Tokyo. ``We can’t help but feel cautious.’’

Samurai bonds, named after the nation’s feudal warrior class famed for their sharp, curved swords, started in 1970 when the Manila-based Asian Development Bank, funded by regional governments to reduce poverty, issued the debt.

Sales rose this year as the lowest Japanese government-bond yields in three years encouraged investors in the world’s second- largest economy behind the U.S. to buy higher-coupon corporate debt. At the same time, borrowers could obtain lower rates in Japan than in their home markets.

New York-based Citigroup was the last U.S. company to issue samurais, raising a record 315 billion yen from three-year, 3.22 percent notes this month before the Lehman bankruptcy.

Wal-Mart of Bentonville, Arkansas, sold 100 billion yen of samurais in July, the first by a foreign retailer in 29 years. The coupon on the five-year portion of the sale was about half what Wal-Mart committed to pay on similar-maturity notes sold in the U.S. on April 8, excluding adjustments for currency swaps.

The failure of securities firms including Lehman and Bear Stearns Cos. reminded Japanese investors of what happened in their country in the 1990s.
Japan’s banking system imploded after a real-estate bubble burst, saddling the nation’s financial sector with as much as 30 trillion yen in bad loans and prompting the government to orchestrate a rescue and reorganization.

Last Updated: September 25, 2008 23:52 EDT ~~~~~~~~

...a pretty well-run company...

That, boys and girls, is what is known as damning with feint praise.

I guess it all depends where you look, bb. Germany, South Korea, Japan, and the UK not-so-well-run and now we hear rumblings coming out of Mexico and China.

quality fade: the deliberate and secret habit of widening profit margins through a reduction in the quality of materials.

I wonder how much (if any)of WalMart’s employee retirement funds were pumped into mutual funds that may have failed?And from WHOM WalMart purchased these high fee funds?The W/M employees filed a lawsuit recently alleging WalMart bought funds that were purcheased from high fee ,high cost sources -yet provided low yield,when more cost effective instruments were available to provide a better return to the retirees. Coincidentally, ERISA is one of the issues WalMart~~~~ To wit:The 401(k) suit against Wal-Mart—Braden v. Wal-Mart was filed in March and is currently seeking class-action status—claims that the company breached its duties as a fiduciary by allowing its 401(k) plan participants to be charged “unreasonably expensive” fees. In its answer, Wal-Mart said disclosures about such things as “how investments options were selected” or “revenue sharing arrangements” are “demonstrably immaterial to any investment decision faced by participants.”

In addition, Wal-Mart accused the suit of disregarding the relation of the fees to the overall costs of administering the plan and ignoring “the economics of participant directed individual account plans.” The company pointed out that the Employee Retirement Income Security Act (ERISA) does NOT call for plan fiduciaries to consider ONLY price when selecting investment options or select the least expensive options.

The case was filed on March 27, 2008, against Wal-Mart on behalf of the Wal-Mart Profit Sharing and 401(k) Plan under the Employee Retirement Income Security Act of 1974, or ERISA. Braden v. Wal-Mart Stores, Inc., alleges that Wal-Mart and others, as fiduciaries of Wal-Mart’s retirement plan, failed to act solely in the interests of the participants and beneficiaries of the Plan, and failed to exercise the required skill, care, prudence, and diligence in administering the Plan’s assets from January 31, 2002, through the present.

The complaint claims Wal-Mart selected and offered to Plan participants UNREASONABLY expensive retail funds, despite the ready availability of reasonably priced high-quality investment options. As a result, the plan squandered tens of millions of dollars of participants’ retirement savings in order to pay for overpriced mutual funds, which, on top of everything, significantly underperformed their benchmarks. This resulted in larger fees being spent on inferior products.

Based on conservative estimates, the Plaintiff in Braden estimated Wal-Mart’s actions have caused the plan to waste over $60 million of participants’ retirement savings on excessive fees and unreasonable expenses alone – and will continue to do so at the rate of $20 million per year if allowed to continue. In addition, the complaint describes at length what the Plan would have been worth had it made responsible investment choices – for example, at year end of 2007, the Plan Investment Options were worth $2.861 billion, while an investment in index funds would have been worth $3.002 billion, or $140 million more.

The suit is seeking Wal-Mart and defendants to “make good to such plan any losses to the plan,” as well as any other equitable or remedial relief as the court may deem appropriate. The plaintiff is seeking the Court to adopt the measure of loss most advantageous to the Plan, putting the participants in the position they would have been had the plan been properly administered. This could be in the hundreds of millions of dollars. It is believed this class action could number over 1,000,000 participants. ~~~~~~~~~WMW~~~~~~~~~~~~Note: In its answer, Wal-Mart said disclosures about such things as “how investments options were selected” or “revenue sharing arrangements” are “demonstrably immaterial to any investment decision faced by participants.”..What was that about arrogance again? And what about driving down costs,and driving a hard bargain?Seems like the 401k investors are the ones being squeezed instead of the vendors,in this case purveyors of high priced mutual funds, according to the legal complaint. Oh, incidentally, ERISA is one of the issues W/M has been spending LOTS of lobby $$$$ on lately ,up on Capital(not a typo)Hill. Coincidence?

...up on Capital(not a typo)Hill.

Here’s a “freebie” for you, ddrb (or, as I call it, throwing a bone to my favorite dog).

instead of “(not a typo)”, most writers use (sic).

Furthermore, stop re-quoting ~~~~WMW~~~~, it makes you look like some sort of ass-kisser…

..most writers use (sic).

Yeah, Double D, what’s the matter with you? Quit trying to develop your own style and conform like “most writers” do!

I think the Capitol/Capital word play was a little too subtle for bb, however, I am not recommending you write down to him or his ilk.

It’s not what you say, it’s what people hear. ~ Frank Luntz

“it makes you look like some sort of ass-kisser…” ~bbrb

Now this is something you’d know all about, bbrd.  If RDS ever makes a sudden stop, you’ll be halfway up his lower digestive tract.