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10/03/2008

Michael Bloomberg on the Crisis

Bull / Bear reading: 25.3 / 53.0 a/o 10/8

The following is from “Meet the Press,” Sunday, Sept. 28…Tom Brokaw with New York City Mayor Michael Bloomberg, who we’ve learned since wants to run for a third term even though current NYC law permits only two. 

[I have edited these excerpts slightly.] 

Brokaw: You’re in a three-way intersection. You’re the mayor of the city that’s at the epicenter of this Wall Street implosion, you’re a very wealthy investor, and you’re also the founder of Bloomberg Financial Services and Bloomberg News. You just watched Secretary Paulson. Were you reassured by his answers, or do you think we need to know more? 

Bloomberg: Well, I think number one, Hank’s the right guy for now. He knows what goes on on Wall Street, he understands these complex financial instruments in ways most people do not and most Treasury secretaries do not. So if I had to have one person at the helm today, I would pick Hank Paulson. But I think you’ve got to step back and say what’s the real problem here? There are two crises. One is the crisis in the financial market, a lack of confidence that almost closed down the financial system this past week and that Hank has to address. And it’s up to the Treasury, with the acquiescence of Congress, to do something quickly. And nobody knows exactly what they should do, but anything is better than nothing. You’ve got to restore the public’s belief and the market’s belief that we will go on. And this is not just an American problem, it’s financial markets around the world that are all interlinked and they’re all collapsing. The second problem, which is up to Congress, is a much longer-term problem and may be the genesis of the problem that we have today in the financial markets, and that is that people are losing their homes, deserted homes are destroying neighborhoods, people are losing their jobs. We have some industries that Congress tried to protect, and instead of protecting them they’ve caused them to not keep up in a competitive world with new products. We have an education system that isn’t preparing us for the future, and we have a retirement system that’s just not going to be there when we need it. So there are two things here: One you got to do quickly; one you really need a lot more thought about and that Congress should spend time debating. But I don’t know that there’s time for a lot of debate now. 

Brokaw: I’m wondering if there is a system, however, that you can build that is a kind of fail-safe system for getting some of those answers once you act with alacrity. This is a country now that has watched us go to war with, in the judgment of a lot of people, not enough questions being asked and being answered. The Patriot Act was passed very swiftly. A lot of people, Republicans and Democrats, believe that was a big mistake and that it needs to be restructured. Same thing with Homeland Security. But how do you build that in to getting the passage that needs to be done this week so that the taxpayer can be assured that they’re not just carrying Wall Street on their backs after all this irresponsible lending? 

Bloomberg: You can put some safeguards in, but you don’t have time to build in the safeguards that you should have for long-term. And we’re paying the price for the last years where we all wanted something for nothing, where we took risks because we were convinced that we would never have to pay, somebody else would pay on the downside, but we’d keep the profit. Congress has been unwilling to address the fundamentals of this country – an energy policy that makes sense, infrastructure, health care, all of these kinds of things. So you want something that overnight we can do, what Hank Paulson’s been arguing for a long time. 

Regulation’s a good example. Our regulation in this country is designed for the world of 50 years ago. We have separate regulation for different industries, except today those industries all do the same thing. Also, our regulation isn’t consistent with regulation around the world. And every company, every bank, your job, my job, all our jobs depend on commerce and what happens elsewhere in the world. And we have to find a ways to pull together; in Congress, not have all of the different oversight committees, in the executive branch not have all the different agencies, and not just think that we’re the only ones that can do this, but pull it all together. Paulson’s been talking about it for a long time. But I think it comes out of this instant gratification. We all were happy when the stock market was going up, we were all happy when there was all this money sloshing around in the economy, and everybody could get a loan whether they could pay it back or not. When companies went out and bought other companies and people got great bonuses, it was great. And nobody wanted to say, “Wait a second, this can’t go on forever.” I’m happy to say in New York, at least, we didn’t think it was going to go on forever and for the last couple years we’ve been salting away money. I don’t know that we’ve salted away enough, but we’ve been saying again and again nothing goes up in a straight line forever. 

Brokaw: We want to share with our audience what you had to say about society in general, not just Wall Street. This comes from the Daily News: 

“ ‘An I want it now’ society that refuses to live within its means, that’s partly responsible for the subprime-mortgage crisis,’ Mayor Bloomberg said. ‘I think you can’t blame just the banks,’ he said, taking borrowers to task. ‘They say, ‘I want the great American dream, I want it now, and I’m not going to wait until I put some money in the bank.’ That’s where we lost the moral compass of saying no to people who did not have the earning capacity to support a mortgage.’” 

Is Wall Street going to have to be completely restructured in terms of the regulations that govern it? 

Bloomberg: Paulson has always talked about reforming regulation. I think the first thing we need is more disclosure visibility. The problem is that nobody knows what any institution owns and what the terms of the securities they own are and what they’re worth. If that was out in the public domain, then there wouldn’t be this crisis of confidence. You could say “This company’s worth less,” “This company’s worth more,” “I don’t like what they own,” “I do like what they own.” But right now nobody knows what they own. In fact, the managements of a lot of these companies, I’m convinced, never knew what their traders were buying and what the risks were. And they, every day, wake up not having any idea what’s going to happen to them. When things were going up, it was great, nobody paid attention. We were all comfortable with letting that situation continue. Now, all of a sudden, things are going down for a variety of reasons. It started with maybe the increase in oil. It started with overbuilding in the real estate residential part of the market. It started with just the end of a cycle. Nothing goes up forever. And then all of a sudden we’ve said, you know, “What’s happening here?” So if you started with disclosure, then you could really approach the regulation issue. We need more regulation. 

But I think – let me get back to this bipartisan or partisan thing. What the Democrats have to understand is that while we do need to reform our regulation and we do need more restrictions, it is true that it is capitalism and free enterprise and companies that create jobs and wealth for every American. And what the Republicans have to understand is, while it may be capitalism and free enterprise and companies that create jobs, we have to have regulations that are realistic and they have to be followed. And I think if both parties could learn that and come together then there really isn’t that much difference between them, and they can go and take this country to the next level. 

Brokaw: But shouldn’t there be an urgency about that and a parallel track to this bailout? 

Bloomberg: Absolutely. Absolutely. But I think one is literally measured in weeks and the executive branch of government has to be the solution, and that’s the lack of confidence in our financial markets and in the institutions that make up those markets. The other is the longer-term focusing on the problems that, in the end, got us here. We spend money we don’t have. We have trillion dollar deficits. We have a birth rate that’s too low to support Social Security. We have a health care system that’s going to bankrupt us. We’re going to spend 25 percent of our GDP on health care, and we get worse health care than they do in Western Europe and they spend less money. Our public education system throughout this country – we worked hard on it in New York – but we have a long ways to go. 

We have an energy policy – we’re transferring our wealth overseas to a bunch of countries that don’t have the same values as us. In some cases, they’re using our money to finance terrorism against us. We’ve got to sit down – on infrastructure as well. There’s a whole list of things. Immigration. We don’t have an intelligent policy. Those are the things we’ve got to do. But that has got to be done in Congress.  It needs leadership from the other end of Pennsylvania Ave., from the White House, but it needs bipartisan cooperation no matter now this next election turns out. 

Source: msnbc.msn.com
 
---
 
Wall Street History returns next week.
 
Brian Trumbore



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-10/03/2008-      
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Wall Street History

10/03/2008

Michael Bloomberg on the Crisis

Bull / Bear reading: 25.3 / 53.0 a/o 10/8

The following is from “Meet the Press,” Sunday, Sept. 28…Tom Brokaw with New York City Mayor Michael Bloomberg, who we’ve learned since wants to run for a third term even though current NYC law permits only two. 

[I have edited these excerpts slightly.] 

Brokaw: You’re in a three-way intersection. You’re the mayor of the city that’s at the epicenter of this Wall Street implosion, you’re a very wealthy investor, and you’re also the founder of Bloomberg Financial Services and Bloomberg News. You just watched Secretary Paulson. Were you reassured by his answers, or do you think we need to know more? 

Bloomberg: Well, I think number one, Hank’s the right guy for now. He knows what goes on on Wall Street, he understands these complex financial instruments in ways most people do not and most Treasury secretaries do not. So if I had to have one person at the helm today, I would pick Hank Paulson. But I think you’ve got to step back and say what’s the real problem here? There are two crises. One is the crisis in the financial market, a lack of confidence that almost closed down the financial system this past week and that Hank has to address. And it’s up to the Treasury, with the acquiescence of Congress, to do something quickly. And nobody knows exactly what they should do, but anything is better than nothing. You’ve got to restore the public’s belief and the market’s belief that we will go on. And this is not just an American problem, it’s financial markets around the world that are all interlinked and they’re all collapsing. The second problem, which is up to Congress, is a much longer-term problem and may be the genesis of the problem that we have today in the financial markets, and that is that people are losing their homes, deserted homes are destroying neighborhoods, people are losing their jobs. We have some industries that Congress tried to protect, and instead of protecting them they’ve caused them to not keep up in a competitive world with new products. We have an education system that isn’t preparing us for the future, and we have a retirement system that’s just not going to be there when we need it. So there are two things here: One you got to do quickly; one you really need a lot more thought about and that Congress should spend time debating. But I don’t know that there’s time for a lot of debate now. 

Brokaw: I’m wondering if there is a system, however, that you can build that is a kind of fail-safe system for getting some of those answers once you act with alacrity. This is a country now that has watched us go to war with, in the judgment of a lot of people, not enough questions being asked and being answered. The Patriot Act was passed very swiftly. A lot of people, Republicans and Democrats, believe that was a big mistake and that it needs to be restructured. Same thing with Homeland Security. But how do you build that in to getting the passage that needs to be done this week so that the taxpayer can be assured that they’re not just carrying Wall Street on their backs after all this irresponsible lending? 

Bloomberg: You can put some safeguards in, but you don’t have time to build in the safeguards that you should have for long-term. And we’re paying the price for the last years where we all wanted something for nothing, where we took risks because we were convinced that we would never have to pay, somebody else would pay on the downside, but we’d keep the profit. Congress has been unwilling to address the fundamentals of this country – an energy policy that makes sense, infrastructure, health care, all of these kinds of things. So you want something that overnight we can do, what Hank Paulson’s been arguing for a long time. 

Regulation’s a good example. Our regulation in this country is designed for the world of 50 years ago. We have separate regulation for different industries, except today those industries all do the same thing. Also, our regulation isn’t consistent with regulation around the world. And every company, every bank, your job, my job, all our jobs depend on commerce and what happens elsewhere in the world. And we have to find a ways to pull together; in Congress, not have all of the different oversight committees, in the executive branch not have all the different agencies, and not just think that we’re the only ones that can do this, but pull it all together. Paulson’s been talking about it for a long time. But I think it comes out of this instant gratification. We all were happy when the stock market was going up, we were all happy when there was all this money sloshing around in the economy, and everybody could get a loan whether they could pay it back or not. When companies went out and bought other companies and people got great bonuses, it was great. And nobody wanted to say, “Wait a second, this can’t go on forever.” I’m happy to say in New York, at least, we didn’t think it was going to go on forever and for the last couple years we’ve been salting away money. I don’t know that we’ve salted away enough, but we’ve been saying again and again nothing goes up in a straight line forever. 

Brokaw: We want to share with our audience what you had to say about society in general, not just Wall Street. This comes from the Daily News: 

“ ‘An I want it now’ society that refuses to live within its means, that’s partly responsible for the subprime-mortgage crisis,’ Mayor Bloomberg said. ‘I think you can’t blame just the banks,’ he said, taking borrowers to task. ‘They say, ‘I want the great American dream, I want it now, and I’m not going to wait until I put some money in the bank.’ That’s where we lost the moral compass of saying no to people who did not have the earning capacity to support a mortgage.’” 

Is Wall Street going to have to be completely restructured in terms of the regulations that govern it? 

Bloomberg: Paulson has always talked about reforming regulation. I think the first thing we need is more disclosure visibility. The problem is that nobody knows what any institution owns and what the terms of the securities they own are and what they’re worth. If that was out in the public domain, then there wouldn’t be this crisis of confidence. You could say “This company’s worth less,” “This company’s worth more,” “I don’t like what they own,” “I do like what they own.” But right now nobody knows what they own. In fact, the managements of a lot of these companies, I’m convinced, never knew what their traders were buying and what the risks were. And they, every day, wake up not having any idea what’s going to happen to them. When things were going up, it was great, nobody paid attention. We were all comfortable with letting that situation continue. Now, all of a sudden, things are going down for a variety of reasons. It started with maybe the increase in oil. It started with overbuilding in the real estate residential part of the market. It started with just the end of a cycle. Nothing goes up forever. And then all of a sudden we’ve said, you know, “What’s happening here?” So if you started with disclosure, then you could really approach the regulation issue. We need more regulation. 

But I think – let me get back to this bipartisan or partisan thing. What the Democrats have to understand is that while we do need to reform our regulation and we do need more restrictions, it is true that it is capitalism and free enterprise and companies that create jobs and wealth for every American. And what the Republicans have to understand is, while it may be capitalism and free enterprise and companies that create jobs, we have to have regulations that are realistic and they have to be followed. And I think if both parties could learn that and come together then there really isn’t that much difference between them, and they can go and take this country to the next level. 

Brokaw: But shouldn’t there be an urgency about that and a parallel track to this bailout? 

Bloomberg: Absolutely. Absolutely. But I think one is literally measured in weeks and the executive branch of government has to be the solution, and that’s the lack of confidence in our financial markets and in the institutions that make up those markets. The other is the longer-term focusing on the problems that, in the end, got us here. We spend money we don’t have. We have trillion dollar deficits. We have a birth rate that’s too low to support Social Security. We have a health care system that’s going to bankrupt us. We’re going to spend 25 percent of our GDP on health care, and we get worse health care than they do in Western Europe and they spend less money. Our public education system throughout this country – we worked hard on it in New York – but we have a long ways to go. 

We have an energy policy – we’re transferring our wealth overseas to a bunch of countries that don’t have the same values as us. In some cases, they’re using our money to finance terrorism against us. We’ve got to sit down – on infrastructure as well. There’s a whole list of things. Immigration. We don’t have an intelligent policy. Those are the things we’ve got to do. But that has got to be done in Congress.  It needs leadership from the other end of Pennsylvania Ave., from the White House, but it needs bipartisan cooperation no matter now this next election turns out. 

Source: msnbc.msn.com
 
---
 
Wall Street History returns next week.
 
Brian Trumbore