GameStop, shorts and Reddit. Storming the Capital...

[welch]

It wasn't a Ponzi scheme, and those folks buying GameStop knew exactly what they were doing. Sure, they could lose money, but to them it was worth it to strike back against what they see as elitist oppressors. They were not only buying the stock, they were holding it so the hedge funds would have difficulty covering their positions.

The "bank bailout", though, was aimed at saving many commercial banks, the ones that offer checking accounts and savings accounts. Some investment banks, like Bear, Stearns and Lehmann, collapsed. So did a few idiotic commercial banks, such as Wachovia and Washington Mutual.

The bailout was aimed at saving wealthy and connected people in high places. The government could have simply nationalized the failing banks, booting out their dysfunctional senior management. Instead, Uncle Sam handed money to these institutions, and allowed the problem children to remain onboard.

WaMu was in trouble long before the Great Recession hit. The place was so freaking disorganized that it was hard to open an account there. While waiting in one of their branches, I saw how they treated their customers, turned around and walked out the door. That place was a joke, and likely would have failed or been sold even without the recession.

- Those small investors certain stuck it to the big guys, to those who have the resources to survive a day's losses and the pipes into the exchange that allowed them to sell immediately. GameStop is now at $50 or $60. Unless small investors bought-to-hold at prices less than $50, they have lost money. By all reports, many people emptied savings accounts.

- TARP? It would be good if the US took over the banks and replaced them with a single national bank, but that is a long, long way from reality. Back in 2008 / 9, if nearly all banks had been allowed to fail, nearly everyone would have found their bank accounts reduced to zero. Those deposits are covered by FDIC, yes, but how would FDIC have replaced everyone's money?

[Pendragon]

- Those small investors certain stuck it to the big guys, to those who have the resources to survive a day's losses and the pipes into the exchange that allowed them to sell immediately. GameStop is now at $50 or $60. Unless small investors bought-to-hold at prices less than $50, they have lost money. By all reports, many people emptied savings accounts.

You are still looking at it in terms of money. That is not what it was about, at least for the rebels on Reddit. True, the hedge funds will live to see another day, but they were forced to get some very substantial loans to do so. That was not optional on their part. They lost control of the situation, and THAT is what this was all about. For the wealthy elite, such loss of control, a temporary denial of power, had them freaking out. Making these smug manipulators bounce off the wall must have been singularly gratifying to the little guys.

- TARP? It would be good if the US took over the banks and replaced them with a single national bank, but that is a long, long way from reality. Back in 2008 / 9, if nearly all banks had been allowed to fail, nearly everyone would have found their bank accounts reduced to zero. Those deposits are covered by FDIC, yes, but how would FDIC have replaced everyone's money?

Replace all the banks with a single bank? Do you mean a single government-owned bank? I can't imagine anything that would be worse. Socialism didn't work for the Soviet Union and it wouldn't work for the US. What I was suggesting is that the US government should have taken control of the failing banks, put a team of technocrats in charge, and then recapitalize the banks. Once the banks were restored to profitability, the government could sell them and recoup at least some of the cost.

The 2008 recession was a direct consequence of repealing the Glass-Steagall Act, which was enacted to prevent just such a disaster from reoccurring. Those who forget history are condemned to repeat it, and the Democrats and Republicans teamed up to do exactly that. A two-party oligarchy is better than a one-party dictatorship, but nowhere near as effective as a multiparty democracy. Fat chance of that happening anytime soon in the US, though. The Republicans and Democratic elite may disagree publicly, but for each the other is the devil they know.

[welch]

You are still looking at it in terms of money. That is not what it was about, at least for the rebels on Reddit. True, the hedge funds will live to see another day, but they were forced to get some very substantial loans to do so. That was not optional on their part. They lost control of the situation, and THAT is what this was all about. For the wealthy elite, such loss of control, a temporary denial of power, had them freaking out. Making these smug manipulators bounce off the wall must have been singularly gratifying to the little guys.

- TARP? It would be good if the US took over the banks and replaced them with a single national bank, but that is a long, long way from reality. Back in 2008 / 9, if nearly all banks had been allowed to fail, nearly everyone would have found their bank accounts reduced to zero. Those deposits are covered by FDIC, yes, but how would FDIC have replaced everyone's money?

Replace all the banks with a single bank? Do you mean a single government-owned bank? I can't imagine anything that would be worse. Socialism didn't work for the Soviet Union and it wouldn't work for the US. What I was suggesting is that the US government should have taken control of the failing banks, put a team of technocrats in charge, and then recapitalize the banks. Once the banks were restored to profitability, the government could sell them and recoup at least some of the cost.

The 2008 recession was a direct consequence of repealing the Glass-Steagall Act, which was enacted to prevent just such a disaster from reoccurring. Those who forget history are condemned to repeat it, and the Democrats and Republicans teamed up to do exactly that. A two-party oligarchy is better than a one-party dictatorship, but nowhere near as effective as a multiparty democracy. Fat chance of that happening anytime soon in the US, though. The Republicans and Democratic elite may disagree publicly, but for each the other is the devil they know.

The US government guided the destruction of the least credit-worthy banks in 2008 and '09, finding each of the salvagable banks a surviving bank to take over. Such as Wells Fargo taking over Wachovia. That amounts to taking control of the failing banks, putting a team of technocrats in charge, and recapitalize them. The surviving banks repaid their TARP loans.

Anyone who gets wiped out by having bet on sticking it to the man will have lost big time. Hedge funds merely had to turn around and sell their newly bought GameStop, and they have the accounts and pipes to trade in a flash. The financial institutions were utterly stupid, overcome by greed and foolishness, when so many of them were crushed in 2008. The banks that made the mortgage loans, those that packaged ("securitized") them, those that rated mortgaged backed securities, those that created "innovative financial instruments", those that insured these Collateralized Debt Obligations got hurt, and deserved to be hurt.

Yes, Glass-Steagall was meant to stop it from happening (again). Happens I was a "software engineer" writing systems for banks, mostly, and finishing by working for the bank-owned non0profit that provides the messaging system by which banks move money across borders. Saw commercial banks dig tunnels under the Glass-Steagall wall because they saw that the investment banks had a higher rate of profits. The commercial banks wanted some, buying investment banks and selling off lines of business that had reliable profits at lower rates. In the mid-to-late '90s, some banks electrocuted themselves by reaching into derivatives. I thought it was sick and dangerous for them to go so heavily into ever-more-risky businesses. By the time Congress demolished Glass-Steagall, the wall had been gone, in practice, for years.

The issue, I think, was that Wall Street traded bank stock, and wanted commercial banks to have the same returns as investment banks.