Stickman Homecoming: April 2, 2009

I helped caused this mess-- I intend to help clean it up.

Tiptoe thru the tulips-- history of bubbles

     "Extraordinary Popular Delusions and the Madness of Crowds" by Charles MacKay (1841)

     "Manias, Panics and Crashes" by Charles Kindleberger

          -Minsky Model

          -Lender of Last Resort

          -Controlled Ambiguity

          -Too Big to Fail

"We're gonna need a bigger boat!"

       -Chimerica

Wow-- nothing really new but this one is really different!

     1979 Inflation rears its ugly head, prime rate breaks into the teens, tops out at 21.5%

     1982 Henry Kaufman and the bull market for bonds

     1987 October 19th

     1991-1995 Real Estate Crisis/S & L Debacle/ Junk Bonds/ Golden Age of Drexel -- RTC

     Commercial Real Estate Actul  Loan Losses $50 billion

     1998 Long Term Capital Management/ Asian Flu/ Russian Currency Crisis/ Oscar Meyer Weiner Realty         Roast

     2001 Dot Com Bubble Bursts; Age of Greenspan; Never Short the Fed

     2004-2007 Every Credit has some level of  AAA

     2008 Subprime starts a nuclear reaction-- How a $500 billion problem  (okay call it a trillion) turned into a $100 trillion meltdown

     Fannie and Freddie

      The Madoff Ponzi Scheme

      Evisceration of Trust

      The problem the rating agencies

     2009 Commercial Real Estate

            Shut down of Securitization market

            Financial Crisis becomes economic crisis

           Credit Losses versus liquidity losses

          Diminishing cash flow versus roll-over risk

           Deleveraging- Car going 80 mph gets thrown into reverse the laws of physics take over

          Need for Speed Bumps

     Too Big to Fail or Too Big to Succeed?  A Doctrinal Re-assessment

     Controlled Ambiguity

     The Art of Toast Making

Mark-to-market accounting/FAS 157

SIVs and off-balance sheet exposure

Margin Calls

Sub-prime

CDO/CDO Squared/Synthetic CDOs and other Financial Exotica

Credit Default Swaps $62 Trillion Omelette

Bear Stearns Yes-- Lehman No-- AIG Yes

TARP Pee-Pips and other financial follies?

Asset Liability Mismatch

Rules of Engagement

     Share the pain equitably and fairly

     Single election remedy problem: LIAR Loans and NINJA Loans

     Consensual restructuring/ Chapter 7/ Chapter 11/ The keys are in the mail/ Government Intervention

     When things get ugly

            AIG Bonus Problem

             Tyrrany of the Majority

Solutions:  Anybody got any good ideas?

    Innovation and Entrepreneurship

   Shakespeare:  First thing we do is kill all the Lawyers

   Other tools: fraudulent conveyance/ unjust enrichment/impossibility of performance/ ultra vires

   Change mark to market/ fas 157

    Prohibit/disaffirm all non-correlative hedging credit and speculative derivatives

    Eliminate the Information Discount

   Will Geitner make it?

   Whose in Charge

   Rebuilding Trust

    Rebuild confidence

   Never let a good crisis go to waste

   The $17 trillion question

   Premier Wen: You gonna pay me back Obama?

    We're gonna need a bigger boat!

    Turning an Ocean Liner in the harbor -- David Gergen

     Moment of great fortunes; change in sensibilities

     Financial values versus ethical values

     Capitalism at a crossroad

     The bottom billion