It seem that many come to this message board to discuss issues, such as this, from the point of view of “economics”, when in fact economics assumes, to a large extent, that western markets are operating openly, freely and in a regulated manner. Nothing could be farther from the truth.
An interesting exposé of the crash of 2008, and its causes, can be found at deepcapture com:
tinyurl com/PENSONfinancial (replace the space with “.” on the address line to access)
An excerpt from within is as follows:
“…It is time we know more about this strange outfit Penson Financial. For most of its existence, it seemed there was no reason whatsoever to pay any attention to Penson. To be sure, it was no titan of Wall Street. It was an obscure little brokerage–in Texas. Calling its volumes “moderate” would have been charitable. They were, in fact, tiny.
That changed at the end of 2007, when Penson Financial became, literally overnight, the single biggest brokerage on the planet Earth. In terms of volume, no brokerage was bigger. No brokerage had more power to move the markets. Not Goldman Sachs. Not anyone.
In 2008, Penson Financial retained that status—the biggest and most powerful brokerage on the planet Earth. Indeed, it got even bigger. Its volumes continued to soar, peaking in the fall of 2008, as the financial system melted down, a calamity which this nation almost did not survive (as U.S. officials, including Treasury Secretary Hank Paulson, made clear at the time).
By this point, it seems everyone knows the cause of that financial crisis—weak banks. Too much leverage, too much exposure to mortgages and property.
DeepCapture agrees with that viewpoint, but thinks that there is a “rest of the story” to be explored. In later chapters of this series, we will do that, and will come to better understand why the mortgage markets collapsed, and how the banks got so weak.
What we will see is this: there were people who wanted the banks to be weak. Those people went to great lengths to ensure that the banks’ leveraged balance sheets were loaded with bad property and toxic mortgage derivatives.
But by 2008, it suffices to say—the banks were weak. There are some intelligent people who believe that banks like Bear Stearns and Lehman Brothers were so weak that it was inevitable that they would collapse.
But on September 18, 2008, the SEC issued an “Emergency Order” stating that the collapse or near collapse of every major bank in the nation was BY NO MEANS (emphasis added-wrong words? Eliminate to obtain authors real meaning.) inevitable. According to the SEC, the problem–the “Emergency” — was that manipulative short selling had caused the banks’ stocks to go into death spirals, making it impossible for even the healthier among them to raise new capital. …”
Interesting that a firm like Penson Financial could have been one of the factors in Lehman’s collapse without even being mentioned at the link supplied in this topic.