Charlie Rose

winter  11/01/2009 09:41 AM Report

Guaranteed faith in our government will never be restored, that is if power brokers even care if it ever is, unless someone is prosecuted for this financial coupe that everyone believes has been leveled at taxpayers by wall street. Goldman or the ratings agencies have fostered a consesus on main street that the crooks have control of their government. The greatest absurdity is that they're now passing out bonuses in the light of day right in front of the ignorant masses faces. It just makes you want to give up and take up a hobby.

concord  04/28/2009 10:46 PM Report

My understanding is that oil prices are expected to rise again when the world economy eventually recovers. There seems to be general agreement that the age of plentiful, cheap oil is over. I'm not sure if people are ignoring this absolutely colossal elephant because they are in denial, because we already have enormous problems and they don't want to deal with another one, etc. Any number of consequences can be predicted from oil going back to $100+, but one that comes to mind is that most of the airlines will go out of business. Air travel will be reserved for the wealthy, and the rest of us will have to take the train or boat. We are headed into uncharted territory.

Perhaps a best-case scenario is that our economy will not grow the way we have been accustomed to, because everything will be more expensive, since everything depends directly or indirectly on the price of oil. It will be harder, if not impossible, for the U.S. government to pay off the enormous debt we are incurring. The Peak Oil theorists, who appear to be mostly credible, sincere experts, believe the worst case is going to occur in less than five years: world oil production will start to decline and that will be the end of the world as we know it.

The father of the Peak Oil theory, M. King Hubbert, predicted that world Peak would occur between 1995 and 2005. If they are off in their timing by five, ten, or fifteen years makes essentially no difference because we are not taking any substantive steps to reduce our dependence on oil. Hubbert's repeated warnings that American oil production would peak around 1970 were dismissed by the federal government and the oil industry. The Peak Oil theorists believe that history is going to repeat itself, because people are apparently unable to learn.

IRISH  04/28/2009 02:35 PM Report

Excellent program that had fulfilled the need for media to enable people to better understand the banking crisis and its complexity. Too much of media on business, banking and investing is providing only "shouting points" with vacuous content to fit the supposed economic/financial illiteracy of people.

jnakuci  04/28/2009 01:37 AM Report

Blankfiend thanks for clarifying that up. I am only a college senior and I don't have a complete understanding of the intricacies of this crisis.

Blankfiend  04/28/2009 01:01 AM Report

Anybody remember Alan Schwartz talking about his Bear Stearns holding company having $17 billion of capital cushion?

Lest we confuse a liquidity crisis with a solvency crisis...

Blankfiend  04/28/2009 12:42 AM Report

Of course GS' VAR is way up - the US Government has so ingrained the moral hazard of too big to fail that GS and others have virtually no internalized downside to their gambling.

Blankfiend  04/28/2009 12:39 AM Report

A debt for equity swap would reduce the amount of money a bank owes to its bondholders. Dollar for dollar, this would increase the bank's capital by two dollars for every dollar of debt converted to equity. This would help the debt side of the bank's ledger (liquidity). It would NOT insure against insolvency, as the value of the assets (toxic, er, umh, legacy) may not be enough to serve as collateral for the debt side of the ledger.

Blankfiend  04/28/2009 12:34 AM Report

Bill Ackman has some excellent observations, but the following comment I would disagree with:

"I’d like to talk about incentives for a second,

because I think it relates it all this stuff. When you think about incentives of a bank’s CEO today, he’s a fiduciary for the common stockholders. Even if he believes his bank is insolvent, he can’t come out and say that, right?"

To make my counterpoint, I would quote John K Gailbraith, from The Economics of Innocent Fraud:

“The Myths of investor authority, of the serving stockholder, the ritual meetings of directors and the annual stockholder meeting persist, but no mentally viable observer of the modern corporation can escape the reality. Corporate power lies with management – a bureaucracy in control of its task and its compensation. Rewards that can verge on larceny. This is wholly evident. On frequent recent occasions, it has been referred to as the corporate scandal.”

jnakuci  04/27/2009 11:52 PM Report

Great show, but I am slightly confused regarding the debt for equity swap. As I understand it, such a transaction would replace current debt for equity. Unless I am mistaken, this would insure the holding company from being insolvent. If I am mistaken please correct me? But, if I am correct then this still leaves the liquidity issue and if these banks need to raise more capital then they would need to issue new public offering and thus that would further reduce the value of the current shareholders. If that is correct then why would current bond holders want to do this, especially for Citigroup of BofA? If they do exchange bonds for equity then the value of their shares would decrease. If anyone has answer please comment.

zparis  04/27/2009 04:06 PM Report

I suggest addressing the insurance sector at some point in these great interviews. First, insurers are also struggling (and not only the AIG's financial division) mainly in the life sector with guaranteed type products such as variable annuities. Second, and to pick up on Bill's point about converting debt into equity, let’s keep in mind that insurers have largely invested in bank's debt including in the so called "Tier1" type of instruments. Converting those instruments into equities with limited or no coupon at all would put insurance companies and their policyholders in trouble. Thank you

balder  04/27/2009 03:56 PM Report

Answer to REMant:

You cant abolish the Federal Reserve if you want to keep the fiat money system. Something has to controll the amount of money in circulation, else you get hyperinflation. One way to keep controll of the money-supply is back the money by gold. If back it by gold, its possible to abolish the Fed.

But I DO think that the Fed should be owned by the goverment, and not like now be on private hands. When it is banks that controll the Fed and the supply of money, we get a failed system because in my view the banking sector becomes to powerful. The result are these big, crazy bailouts paid by the ever poorer american tax payer.

balder  04/27/2009 03:39 PM Report

First, i wanna congratulate Charlie Rose for a very good show. I do think that the quality of the show this winter suffered a litle, probably due to the fact that they had lay off people because of the financial crisis.

Hopefully funding coming back somehow, and the show has the staff needed to get hold of interesting guests and to make preperation for good conversations on a wide variety of topics. At least i think this particular show was great.

Secondly, I have a comment about the ideology of globalisation. The economists embrace it because it brings more trade and more posperity. And they often point to the period between 1870 and 1914 as a free trading era, that was unforunately interrupted by protectsionism and world wars.

But economists underestimate how politically destabalising globalisation is. They view World War One as an unfortunate event that suddenly struck like lightning from blue sky. Ideologically blinded, they dont realise that the globalisations between 1870 and 1913 led to massive movements of people, and this created so much tension that we got two world wars following right after it. It was the globalisation, with all its tensions and theat to the world order by emerging Great powers like Germany and Russia that created the mess that followed the next 30 years.

Nowadays the ermerging powers are China and India, and i think the world is going to once again pay a high price for the globalisation ideology. Probably(hopefully) not world wars, but still there will be great imbalances and a rocky road ahead, both financially and politically.

REMant  04/27/2009 02:28 PM Report

Nice discussion. We haven't had ordinary capitalism since at least 1913. I think debt for equity reasonable, and, as I understand it, receivership required by law, which the govt is flouting. I think going forward we need to shove the fractional reserve requirement up considerably, even all the way to 100%, and make banking really dull. Or you could simply get rid of the Fed and FDIC etc, and let banks, which make stupid loans and their depositors, go belly up. It has to be realized, as Greenspan soberly acknowledged, that these institutions have created a considerable moral hazard. On the toxic assets problem tho I am inclined to agree with both points of view - that they should be valued as they are now, and that they should be valued for what they might fetch in the future - so I think that the best thing we could do is to make those ppl who want to take the risk in holding them, actually take that risk, and remove the entire business from the rest of banking. Debt for equity seems a way to do that. But I came up with an idea several weeks ago of forming new banks with the toxic assets as capital, for shareholders to do with what they will, and see if they can entice the owners of distresssed properties to join in, and then both houses and assets will be priced, but in a way that doesn't implicate anyone else, and the rest of us can go on with our lives. If the govt was interested in aiding the situation it could buy some of the properties in order to provide disaster relief, or to forestall it, somewhat as the German car exchange idea.