Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The US Today: What Happens When You Let Investment Bankers Run a Country

Politics / Credit Crisis 2009 May 24, 2009 - 08:15 AM GMT

By: Graham_Summers


Best Financial Markets Analysis ArticleIf you’re like me, you’ve probably looked at the US recently and wondered what has happened to your country. I’m not talking about the GOP/ Obama situation nor am I referring to capitalism vs. socialism…

I’m simply talking about basic common sense items like: stay out of debt, don’t do anything if it doesn’t make sense, do you homework before signing a contract, etc.

Indeed, the American government (I’m including the Federal Reserve in this category) began charting a strange course as a country when the Financial Crisis first accelerated with Bear Stearns’ collapse in February ‘08.

Granted we’d flirted with government intervention several times before (Chrysler in the ‘70s, Long-Term Capital Management, etc.). But we’ve since taken it to a whole new level. The basic risk of capitalism (failure) has been removed from the equation for most major US businesses. However, this risk was removed at the expense of increasing the US’s debt load and putting the dollar at risk.

Pushing to remove risks so you can pursue insane business practices? Crazy deals that offer little benefit to the parties? Doing things quickly without actually considering the consequences?

Sounds a lot like investment banking doesn’t it?

Investment banking as an industry runs almost completely contrary to wealth creation since it thrives on fees rather that capital appreciation. Investment banking is about making DEALS (any deals) regardless of whether the deals make sense or benefit both parties (after all, the advisors to the deals, the investment bankers, get paid based on commission and free stock).

Indeed, investment banking is one of the few industries on the planet in which you can get rich by creating debt for others to pay off. Goldman Sachs, as you know, is an investment bank. And this financial crisis is riddled with former Goldman Sachs execs.

Hank Paulson is the most famous. In the private sector you’ve got John Thain of Merrill Lynch, Robert Steel of Wachovia, Ed Liddy of AIG. On the government side of things, you’ve got Hank Paulson as Treasury Secretary, World Bank President Robert Zoellick, Neel Kashkar who’s in charge of running the Troubled Asset Relief Fund (TALF), and others.

You can see the “investment banking” stamp everywhere.  Consider the deals the Feds have created and consider the actual benefit they offer to the parties involved:

  • Bear Stearns/ JP Morgan
  • The US taxpayer/ Fannie Mae and Freddie Mac
  • The US taxpayer/ AIG (and all of its counterparties)
  • Merrill Lynch/ Bank of America

All of these deals were terrible. All of them were rushed through. And all of them were allowed because of lax regulation/ poor analysis. To this day no one in the mainstream media seems to have adequately analyzed these deals in a way that includes actual numbers. Instead we get dopey adages like “it’s about stemming the tide,” it’s important to “stop the bleeding,” “it’s about saving the system.”

You can also see the “investment banking” stamp on the Federal Reserve.  Two years ago, the Fed owned $800 billion worth of Treasuries. Today, its balance sheet contains $2.1 trillion worth of assets, only $543 billion of which are Treasuries. And with only $51 billion in capital, the Fed is leveraged at 42 to 1!

Tons of junk assets that aren’t properly valued? Refusal to reveal the real worth of your balance sheet? Leveraged to the hilt?

Sounds like investment banking!

To me this financial crisis is nowhere near over for one simple reason: we continue to perpetuate the VERY same business practices that created it in the first place. It’s like a junkie getting clean by continuing to use dope. In the US government’s case, it’s just that the junkie has super clever explanations and jargon to explain why this is a good idea. The reality is that it’s not. And it’s going to end very, very badly.

Covering all of these items in detail (as well as how to prepare your portfolio to deal with them) would take too long for one little essay. So we at Gains, Pains, &Capital have put together a FREE special report on how to prepare for the Second Round of this financial crisis. You can download it FREE at

Swing by today to pick up your copy.

Be Safe,

By Graham Summers

Graham Summers: Graham is Senior Market Strategist at OmniSans Research. He is co-editor of Gain, Pains, and Capital, OmniSans Research’s FREE daily e-letter covering the equity, commodity, currency, and real estate markets. 

Graham also writes Private Wealth Advisory, a monthly investment advisory focusing on the most lucrative investment opportunities the financial markets have to offer. Graham understands the big picture from both a macro-economic and capital in/outflow perspective. He translates his understanding into finding trends and undervalued investment opportunities months before the markets catch on: the Private Wealth Advisory portfolio has outperformed the S&P 500 three of the last five years, including a 7% return in 2008 vs. a 37% loss for the S&P 500.

Previously, Graham worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He’s lived and performed research in Europe, Asia, the Middle East, and the United States.

    © 2009 Copyright Graham Summers: - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in