Thursday Morning Edition

People keep asking what the OWS protesters want. Honestly, I don’t really know. But I do know what some of them are angry about, income inequality, student loan debt, unemployment, crony capitalism, and now that one has been critically injured in Oakland I think the movement, if that’s what they’re calling it, will face a critical test. Can they maintain their commitment to non-violence in the face of law enforcement and city leaders losing patience with their occupations? Also, winter and cold weather are quickly materializing, how will this factor affect their resolve? There is also concern among the protesters themselves that there are anarchists among their ranks which may undermine the peaceful image they’re trying to maintain.

The LA Time has a good rundown of the dilemma facing city officials and police departments across the country. I thought it was a little derelict though that they didn’t mention the Iraqi Vet who was critically injured in Tuesday nights clash with Oakland PD.

Looming large is the cautionary spectacle of Oakland. Police there arrested about 100 protesters before dawn Tuesday, using tear gas and riot gear to break up encampments — only to face a massive evening protest and threats of continued unrest from angry backers of the movement.

Leaders in other cities said they don’t want a repeat of that chaos, but it’s unclear how they will eventually oust protesters who refuse to leave.

Even in Los Angeles, where city leaders have greeted the demonstrators warmly, there are signs of protest fatigue and increasing anxiety about what happens next.

Los Angeles Mayor Antonio Villaraigosa, who earlier this month had ponchos distributed to rain-soaked Occupy L.A. protesters, said Wednesday that the encampment next to City Hall “cannot continue indefinitely.”

Villaraigosa has instructed city officials to draft a plan for another location for the demonstration.

Here’s a little more about the wounded protester and highlights of attempts to break up the occupation.

OAKLAND, Calif (Reuters) – More than 1,000 activists protesting economic inequality reclaimed a downtown Oakland plaza late on Wednesday, a day after demonstrators were driven out and an Iraq war veteran was critically hurt in clashes with police.

The severe injury of Scott Olsen, 24, a former U.S. Marine who friends said served two tours of duty in Iraq, became a rallying cry among Occupy Wall Street supporters in Oakland and beyond as organizers urged protesters back into the streets.

Police kept their distance as protesters returned to the scene of Tuesday’s confrontations, while protesters largely avoided provoking them, although one activist defiantly set up a single, small tent in the square after midnight.

The “Occupy Wall Street” protests, which began in New York City last month, take issue with a financial system they say most benefits corporations and the wealthy. They are critical of U.S. government bailouts of big banks, high unemployment and economic inequality.

Loosely organized protest groups have since sprung up across the United States and in countries around the world. Tensions were building in several cities where authorities have been treading a fine line between allowing peaceful protest and addressing concerns about trespassing, noise and safety.

In an early morning raid in Atlanta, police evicted dozens of protesters from a downtown park and arrested 53 who refused to leave. They were allowed to camp in the park for three weeks, but Mayor Kasim Reed said he decided to evict them because of fire code violations and crowd control issues.

Kristof discusses some of the issues he thinks are driving the protests.

That alarmist view of the movement is a credit to the (prurient) imagination of its critics, and voyeurs of Occupy Wall Street will be disappointed. More important, while alarmists seem to think that the movement is a “mob” trying to overthrow capitalism, one can make a case that, on the contrary, it highlights the need to restore basic capitalist principles like accountability.

To put it another way, this is a chance to save capitalism from crony capitalists.

But, in recent years, some financiers have chosen to live in a government-backed featherbed. Their platform seems to be socialism for tycoons and capitalism for the rest of us. They’re not evil at all. But when the system allows you more than your fair share, it’s human to grab. That’s what explains featherbedding by both unions and tycoons, and both are impediments to a well-functioning market economy.

Capitalism is so successful an economic system partly because of an internal discipline that allows for loss and even bankruptcy. It’s the possibility of failure that creates the opportunity for triumph. Yet many of America’s major banks are too big to fail, so they can privatize profits while socializing risk.

The upshot is that financial institutions boost leverage in search of supersize profits and bonuses. Banks pretend that risk is eliminated because it’s securitized. Rating agencies accept money to issue an imprimatur that turns out to be meaningless. The system teeters, and then the taxpayer rushes in to bail bankers out. Where’s the accountability.

36 Responses

  1. For my part, one of the most striking things about the Occupy protests, and the Tea Party protests, is the absence, thus far, of alternatives. That is to say, neither group seems to be pointing to an alternative to what we have now. Each seems to be arguing for certain adjustments, reforms, tinkering. Call it what you like.Apparently this is mirrored by the world of celluloid. I've heard and read that Margin Call doesn't, in the end, point to an alternative. Wall Street, a deeply entertaining, sleazy film that was an invitation to indulge in greed, did end by pointing to an alternative. The difference seems striking and, perhaps, rather dispiriting. Assuming, of course, that one believes that a genuine alternative is needed.

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  2. lms, you have nicely captured many of my assessments of OWS, thanks. nathaniel, I don't expect either TP or OWS to bring ready-made solutions to the table. I think their value is in framing a discussion that this country needs to have. Our Congress certainly is not discussing the things most people in this country believe need to be addressed.BTW, nathaniel, do I know you from PL or are you here through other auspices?

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  3. There's video of the incident (or an incident) at the Oakland protest here: http://reason.com/blog/2011/10/27/watch-a-cop-lob-a-flash-grenadit really looks like a flash bang was thrown directly at a crowd of people who were coming to the aid of an injured man. on a happier note, my family drives by the DC occupy site at Freedom Plaza every evening on our way home. my 2-year-old says, "look they're still having their party"

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  4. I saw that NoVA and it jibes with eye witness accounts. Oakland PD aren't exactly known for diplomacy and they've probably given the protesters a new lease on life. I saw pictures in my local paper this morning of a peaceful sit-in up in Oakland last night and that's a very unusual phenomenon for our paper. I think the fact that Olsen is a vet really hurts the image of the cops up there, rightly or wrongly.Thanks okie. I think the protests are at a pivotal moment so we'll see.

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  5. "Capitalism is so successful an economic system partly because of an internal discipline that allows for loss and even bankruptcy. It’s the possibility of failure that creates the opportunity for triumph. Yet many of America’s major banks are too big to fail, so they can privatize profits while socializing risk."This is how you build on the movement. income inequality, student loans, etc. don't have the same sway with people as this point, IMO.put it this way. I don't care that CEOs make 400+ times the lowest paid employee. or the top 400 make X times the rest of us. I do care that regulatory capture, government and monetary policy have created a situation where the chosen few are immune from their mistakes.

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  6. The open letter to that 53% guy in the Daily Kos provides a view of what the OWS movement wants.-They don't want 'getting by' to mean having to work 60-70 hours a week.-Expanding access to the American Dream means as a society we have to make new pledges to each other we didn't make before, which is uncomfortable for some, but at the least we all ought to commit to the idea that a single wage earner working 40 hours a week can provide for a family.-Entrepreneurs, financiers and business people should not be rewarded by the government when they screw up, nor should they avoid the pain their actions have inflicted on the rest of us.-No one is exempt from the rules most of us have to follow. http://www.dailykos.com/story/2011/10/12/1025555/-Open-Letter-to-that-53-@%5B1494217052%3A2048%3AGuyAlso, a web search on 'what ows wants' should provide a wealth of info on the subject.Personally, I'm not sure how putting pressure on municipalities by building camps will create the change desired in our national/global financial, judicial and economic systems. I don't see how the dots connect.

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  7. Yeah, I agree, and it captures a sentiment that is non-partisan so would actually unite a larger segment of the population.

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  8. put it this way. I don't care that CEOs make 400+ times the lowest paid employee. or the top 400 make X times the rest of us.NoVA, while I think you got my perception quite right with your opening quote about TBTF privatizing profits while socializing risks, I DO care about CEO pay comparisons and income inequality. I do not care about them per se, but I very much care about how that came to be. These are symptoms, not causes, and I cannot ignore the symptoms if I care about the causes.

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  9. I don't really have anything to add other than to say I agree. Complaining about student loans or income inequality just creates an easy avenue for Scott and QB to dismiss the movement as one of entitlements. Questioning to what extent these institutions are free from the downside of capitalism is a lot less divisive and harder to dismiss. That said and I don't think lmsinca disagrees with this, the government has played a large role in protecting these institutions. Thanks for a great post lmsinca.I put up a post on a case that was recently heard by the 6th Circuit.

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  10. NoVAHockey – Most of the commentary from public figures sympathetic to OWS makes exactly the same point you do. I'm referring to Matt Taibbi, Elliot Spitzer, and Elizabeth Warren to be precise. However, if you listen to the protesters themselves, they are actually anti-capitalist and anti-republican form of government in favor of "consensus based decision making" and some sort of mutual support system outside of the capitalist economy. This is why I don't "support" OWS because I find their platform, such as it is, too incoherent to support.Also, I believe this article from the local Richmond paper pretty much sums up the differences between the Tea Party and OWS approach."RICHMOND –The Richmond Tea Party is lashing out at Richmond Mayor Dwight C. Jones for what it sees as the city's preferential treatment of the Occupy Richmond protesters encamped at Kanawha Plaza.The tea party group is sending Jones an invoice for the charges incurred for the Tax Day rallies it has held at the plaza the past three years, arguing that the Occupy Wall Street offshoot group squatting there has been using the park illegally and free of charge since Oct. 15."The tea party keeps being compared to the occupiers. Well, in the way we're treated, there's no comparison. It's like a slap in the face," said Richmond Tea Party spokeswoman Colleen Owens.Owens said her group has shelled out about $10,000 for the three rallies held there, including a rental fee for use of the park, various permits and other expenses. She added that the rallies were scheduled with the city months in advance and that the group held fundraisers to cover the required costs, which included police presence and portable toilets."The city of Richmond is allowing Occupy Richmond to blatantly break the law day after day while forcing other groups to strictly comply," a news release from the tea party group said."

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  11. "These are symptoms, not causes, and I cannot ignore the symptoms if I care about the causes."that's a fair point, okie. but i think emphasizing the unfairness of that shifts focus from the causes. I'm much more sympathetic to "this inequality is based on system of socializes loses" than "this inequality is inherently unfair" or a problem in isolation, which is the impression that I think a lot of people have. If the talking point is 400 control X amount or 400 times the rest of us, it leaves off the crucial part of the equation.

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  12. "These are symptoms, not causes, and I cannot ignore the symptoms if I care about the causes."Bingo. Excessive profits and compensation is a symptom of a market being out of whack and successful rent seeking and regulatory capture. Which perfectly describes Wall Street finance.But just taxing the proceeds to generate more government spending isn't the solution to income inequality. The solution is to enforce anti-trust laws to fix the market distortion that is generating the excess profits in the first place.Steve Pearlstein has the answer:Cure for excessive Wall Street compensation: Price warsThe fact that the bipartisian political establishment is united in resisting anti-trust enforcement including breaking up the banks convinces me that it's the correct solution.

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  13. thanks for the links jnc4p. the tea party complaint about the inequitable treatment is something that's bubbling up here in DC from the homeless population. the Post had a story in the local section yesterday that quoted a few homeless men questioning why they are run off from the park when they put up a tent, yet these "rich white kids" can do as they please. others, however, figure this situation beats the shelters and have latched on are are teaching the kids how to prepare for the winter.

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  14. "BTW, nathaniel, do I know you from PL or are you here through other auspices?"Here because I claim bro-ship with Mr. Willis.

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  15. "I do not care about them per se, but I very much care about how that came to be."I can take a stab at explaining executive compensation. Up until the 1980s, CEOs were paid largely in cash, not stock. Because tax rates were so high, they accepted lower salaries, but got much more in perks. Because these perks were often not disclosed in annual reports, they became systematic abuses. Academics eventually came up with a name for this – agency costs – which describes the phenomenon where the interests of management (the agent) is inconsistent with the owner (stockholders). Armand Hammer, the CEO of Occidental Petroleum, became the poster child of agency costs by spending half a billion dollars of corporate money on an art collection and an art museum named after himself.Certainly the high tax rates of the 50s through the 70s explained a lot of this. Companies were able to deduct company cars, housing, country club memberships etc and the CEO wasn't taxed on them, making them a more tax-efficient way of compensating CEOs.Eventually the excesses of Hammer brought about a sea change in executive compensation, led largely by large public employee pension funds like CALPERS and the corporate raiders of the 80s (guys like Carl Icahn). They wanted the fate of the CEO to be tied to the fate of the stockholder, which meant more compensation in stock and less in cash. As you can imagine, tying compensation to the stock market at the beginning of the biggest bull market in history meant that a pay package of $2 million could end up being $5 million after all is said and done, especially if a lot of it includes options. For the workers, who are paid in cash, there is no windfall.CEOs do in fact have a track record, and the corporate boards pay attention to the performance of their competitor's stock. If the naming of Mr. X as CEO can make the company's stock market value jump by $400 million, it is worth throwing $50 million to get Mr. X onboard.Now people can object to the fact that CEOs are often paid for presiding over a bull market, and boards are becoming more sophisticated in adjusting pay to what the CEO can actually control. But the movement from cash compensation to stock compensation is here to stay. And given that stock compensation is riskier than cash due to a vesting period and the vagaries of the market, it has to be higher than cash.On the other side, health care costs account for a much larger part of their compensation, so wages have fallen behind as health care costs have swelled. Not only that, but lower level employees are finding that their jobs are more and more automatable, and therefore their compensation is more tied to the cost of technology, which continues to drop.

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  16. There's also a limit on the amount of cash salary that can be considered a business expense for corporate tax purposes, correct?

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  17. @jnc4p:re Pearlstein.Know what is wrong with his analysis, and why fees aren't going to change? Underwriting.Pearlstein does not understand the business. When GM agrees to underwrite $15 billion of stock for GM, what does that mean? It gets fees of course, but the bigger issue is that it just bought 478 million shares of stock from GM at $33 a share. If the stock drops 25 cents to $32.75 they are break-even. For every buck the stock drops they are out half a billion dollars.Now I realize that the issue is syndicated, and customers do commit (verbally) to buy stock, but if GS commits to do the deal and they cant sell all the stock, GS owns whatever they can't sell. This happened in the bond market at the beginning of the financial crisis – banks underwrote bond issues for LBOs and were unable to sell them. So investment banking deals work out 90% of the time, but when they don't, they really don't. And when you consider the absolute size of the dollars involved, building in a 75 basis point cushion is not unreasonable, especially in a stock where there is no trading history and you own the whole damn issue.Pearlstein seems to think the banks get fees and take no risk. But that isn't the case. I have read enough Pearlstein to believe he doesn't understand Wall Street and doesn't really want to. The Washington Post should try and poach someone from the Wall Street Journal or Bloomberg who understands the mechanics of things.

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  18. "There's also a limit on the amount of cash salary that can be considered a business expense for corporate tax purposes, correct? "I believe so.

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  19. I invited Mr. Sullivan. Nice first reference, Mr. Sullivan. Do you post at Ain't It Cool? 🙂

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  20. jnc (and ashot):Excessive profits and compensation is a symptom of a market being out of whack and successful rent seeking and regulatory capture. Which perfectly describes Wall Street finance. Jeez, it comes from all sides, doesn't it. Either WS is an unregulated free-for-all with no oversight whatsoever, or it is actually manipulating the creation of a vast web of regulations all designed to fill its coffers. In either event, we know that it's creating Bad Things all over.But it remains unclear to me why, if you think income inequality is a Bad Thing that needs to be rectified, the focus should be on Wall Street at all. Of the 100 richest people in America only 13 of them made their money in the finance industry, and most of them did so running hedge funds, not running the scourge-of-our-times banks. And Wall Street is littered with the remains of now-defunct hedge funds as testimony to the fact that they, at least, have hardly been exempted from the capitalistic consequences of their failures.

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  21. "Jeez, it comes from all sides, doesn't it. Either WS is an unregulated free-for-all with no oversight whatsoever, or it is actually manipulating the creation of a vast web of regulations all designed to fill its coffers."I think the first part of that is largely a strawman. But the other issues is why can't it be some of both? The vast web of regulations can be manipulated to have gaps that are beneficial to Wall Street.

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  22. ashot:I think the first part of that is largely a strawman…Google the phrse "unregulated wall street" and take a look at a few of the 1 million plus hits that come back.The vast web of regulations can be manipulated to have gaps that are beneficial to Wall Street.It is undoubtedly true that the participants within the finance industry attempt to influence the creation of new regulations in order to protect or enhance their business. In this they are no different from participants in any other industry or business. I am all for reducing this influence in the only way possible…reduce the amount and complexity of the regulations imposed.But the larger question remains. If income inequality is the bugaboo, why the singular focus on Wall Street?

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  23. Further to Pearlstein,Investment banking is now subsidizing equity research and equity sales & trading. Historically, research was funded by commission dollars, but the commission business is a loss leader business dominated by machines. Which means if banking business declines, investment banks are going to get out of the research business altogether or will charge clients for reports. But, part of the reason why fees aren't going down is that they are necessary to keep all of the other traditional functions up and running.I could see a market where the professionals again have a huge informational advantage over retail investors. Retail investors are going to have to rely on Motley Fool writers who won't have the benefit of cribbing Merrill Lynch research reports, and will be competing against hedge funds with armies of CFAs. For guys like me who don't use street research and pay 1/2 a penny a share to trade, this is great. But hey, look on the bright side, retail investors – you can trade for the price of Whopper value meal!

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  24. "I think the first part of that is largely a strawman."I'm not sure it's a strawman (I mean, maybe it is within this group, but I've certainly heard both arguments made seriously). The more interesting point Scott made is how many of the richest people aren't bankers and don't come from Wall Street, and aren't in finance. So if Wall Street and the big banks and AIG, etc., helped lead to our current financial collapse, most of the very richest people in the country weren't actually involved. A couple of observations: most countries with robust economies have income inequality. To my knowledge, countries with improving economies and growing GDP tend to have increasing income inequality. Simultaneously, the financial bubbles that tend to preceded an economic collapse, or recession, are also accompanied by increases in income inequality. Sometimes I feel like we're talking about stopping tornados by putting an end to weather. The same things that lead to changing seasons, spring rains and winter snows and turning leaves in autumn also leads to typhoons and hurricanes and tornadoes. A healthy economy leads to a degree of income inequality, just as a dynamic and innovative economy tends to suffer bubbles of some sort. Unlike some of my conservative brethren, I'm not unsympathetic with OWS. But to some extent I can't help feel but that they are protesting gravity, or the unidirectional nature of time. "We want our cake, and also to eat it!" "Results without Effort!" "We Want Only the Good but Not the Bad!" "Benefits without Risk!" . . . etc. Do not mistake that with sympathy with the put-upon rich, for whom the target on their back is the natural outcome of their wealthiness. If they didn't want the OWS vilifying them, they should have done the smart thing and been poor. Or just do what Buffet does–live a modest life, while being hugely wealthy, and agitating for higher taxes on rich people.

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  25. Scott: " If income inequality is the bugaboo, why the singular focus on Wall Street?"Specific, coherent symbolism over messy, chaotic, dreary substance? The reality is that our economic doldrums have a million inputs. They have happened before and will happen again. They involve outsourcing, immigration, the information revolution, Moore's law, the real estate bubble, the Eurozone, birth rates, population growth (or shrinkage), state and local regulation, fuel prices, etc., etc., etc.. And on and on. And how do you protest changes in the labor market due to the productivity gains made possible by maturing technology in computers and communication and databases? If our manufacturing wasn't being outsourced, it would just be more automated, so every few years one worker could do the jobs that, four years ago, took two.There's not much fun in protesting the fact that you are living during important but difficult shifts in economy and culture, so blame Wall Street and Mr. Moneybags from the Monopoly game and make a party out of it!

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  26. "But the larger question remains. If income inequality is the bugaboo, why the singular focus on Wall Street?"TARP.

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  27. jnc:I'm guessing here, but….In tax year 2009 one needed an adjusted gross income of about $340K to be in the top 1% of income in the US.I think the perception is that the largest concentration of folks with AGI'S in that realm can be found in Wall Street firms.FWIW, I'm not convinced income inequality itself is the bugaboo.

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  28. I think the singular focus on Wall Street is strategic, symbolic and evidence of bias/ignorance. Strategically, Wall Street is easy to vilify for a wide variety of reasons, many that are incorrect or unfair. Also Occupy Wall Street sounds better than Occoupy Wall Street, K Street, the Capitol, the White House and City Hall. That's just too much to say. Symbolically it represents more than just banks. And it does show bias/ignorance as to the true causes of income inequality and our economic problems. Just like how the Tea Party didn't exist until a Democrat became President and largely continued the policies of a Republican President including continuing tax cuts. I understand there is a scale of difference between the amount of debt incurred by Bush and Obama, but I thought the Tea Party objected to a bigger government more spending in general as opposed to 1 trillion in debt is cool, but 2 or 3 is just unAmerican.

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  29. "Now I realize that the issue is syndicated, and customers do commit (verbally) to buy stock, but if GS commits to do the deal and they cant sell all the stock, GS owns whatever they can't sell. This happened in the bond market at the beginning of the financial crisis – banks underwrote bond issues for LBOs and were unable to sell them.So investment banking deals work out 90% of the time, but when they don't, they really don't. And when you consider the absolute size of the dollars involved, building in a 75 basis point cushion is not unreasonable, especially in a stock where there is no trading history and you own the whole damn issue.Pearlstein seems to think the banks get fees and take no risk. But that isn't the case. I have read enough Pearlstein to believe he doesn't understand Wall Street and doesn't really want to. "I think Pearlstein addressed this point directly in his article:"The fee pot is divided in three: Twenty percent is an underwriting fee for the banks' guarantee that they will buy the entire issue even if nobody else will. That was once an important consideration, but in today's markets, the investment banks ensure that no IPO goes forward unless the entire offering is pre-sold. As a result, the underwriting fee is now a pure windfall"More to the point, I agree with the underlying analysis regarding how investment banking tends towards a natural monopoly:"This story, first reported by Bloomberg News and confirmed by several government and Wall Street sources, goes a long way in explaining why so many people on Wall Street get paid so much more than everyone else. A handful of established firms control access to global financial markets and use this power to extract monopoly-like profits and funnel them to their executives and employees.The reason for the lack of price competition is pretty simple: The banks know that if they start offering big discounts, all their rivals will be forced to do the same. In the end none of them would gain a competitive advantage, but all of them would wind up with less money. The only winner from a price war would be their customers.This kind of cozy competition only works in markets where it is virtually impossible for upstart firms to gain a foothold by offering a lower price.Size is part of it: An investment bank has to be big enough and have strong enough relationships with thousands of institutional investors and money managers to be able to market large stock and bond offerings in a matter of days.Given the huge sums of money that are raised through these offerings, it may seem silly for a company to try to save a few million dollars in fees by eschewing the established players, who invariably claim they are so much wiser and more experienced that they will be able to get an extra 50 cents for each share of stock or shave the interest rate on a bond by an eighth of a percentage point. There's no way to prove they are right, but there's no way to disprove it either — and surely nobody's ever been fired for going with Goldman Sachs."It will be interesting to see if there will ever be a disruptive player enter this market, like an eBay for IPO's.

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  30. "The fee pot is divided in three: Twenty percent is an underwriting fee for the banks' guarantee that they will buy the entire issue even if nobody else will. That was once an important consideration, but in today's markets, the investment banks ensure that no IPO goes forward unless the entire offering is pre-sold. As a result, the underwriting fee is now a pure windfall"First of all, the underwriting fee is a fee for services rendered. Doing the due diligence, canvassing borrowers, trying to get the best price, being willing to be the buyer of last resort is not a windfall – it is payment for a service. So high profile IPOs are fully oversubscribed in this market. That is a temporary phenomenon, and don't forget issuers will beat up on the banks to bid the highest price for their paper. Most underwriting is not high-profile IPOs anyway – it is bond issues. Where underwriting really, really matters is in bond issues. There is no "exchange" for corporate bonds – it is a completely broker-driven market. And if the bank underwrites the paper, it has a reputational obligation to buy the paper back if the customer wants to sell it. So what happens if Goldman underwrites a corporate bond which tanks immediately on issue? Say the issuer's competitor just pre-announced lousy earnings. It may not affect the issuer at all – for that matter it might be good, but it doesn't matter. All bonds in the sector are getting hit, and the new issue is no exception. Imagine a conversation between Goldman and its customer who just bought $10 million bonds to this morning. It sounds more or less like this:Buy-side trader: (who is seething after hearing from his friends that avoided this POS that it is tanking): "Hey. Where are you guys on these XYZs?"Goldman trader: Um, they're a touch weaker, I have some to go at 99 1/4. Do you care?"Buy side trader: "Don't care. What is your market?"Goldman trader (who is already lugging paper and doesn't want any more): "Um, I am in touch with a buyer a little lower, give me a sec to wake him up"Buy side trader: "I don't think you understood my question. WHERE IS YOUR BID? ASSHOLE."Goldman trader (with the head of the desk standing right behind him shaking his head) "I can bid 98 for 5 million"Buy side trader: "You assholes just sold $200 million worth of paper this morning at par and now you are 98 for 5 mil only? Fuck. You."Now, if the buy-side trader was a huge customer like PIMCO, the Goldman trader will probably bid him par (and eat the loss) because he doesn't want to ruin the relationship. It all depends. So even if you pre-sell the paper, that isn't the end of the story. And if you underwrite too many turkies, customers start avoiding your paper.Now imagine a world without underwriters. The customer buys bonds from some sort of electronic exchange and then wants to sell the paper. If there are no customers interested in buying more, the customer is screwed. At least with a bank who underwrote the issue, the customer can badger the desk to buy it back. Not so for an exchange. Because of that, the investor is going to bid down the issue. So while an Ebay for IPOs could theoretically work, I doubt that issuers would be willing to accept the pricing uncertainty that a Dutch Auction would require or the issue size uncertainty that a best-efforts issue would require. And last but not least – remember our conversation. Goldman may never deal with XYZ again, but will certainly deal with PIMCO again. So who do you think they are more interested in keeping happy?

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  31. jnc:TARP.The four largest recipients of TARP funds:Fannie MaeFreddie MasGeneral MotorsAIGOf the top 10 borrowers of TARP money, who still has not paid it all back with interest?Fannie MaeFreddie MacAIGGeneral MotorsGMAC (Ally Bank)ChryslerDoesn't make a lot of sense to me to focus on Wall Street.

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  32. "I invited Mr. Sullivan. Nice first reference, Mr. Sullivan. Do you post at Ain't It Cool? :)"The more meaningless and juvenile something online is, the more I seem to like it.PH33R MY LEET SKILLZ.

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  33. "TARP.The four largest recipients of TARP funds:Fannie MaeFreddie MasGeneral MotorsAIGOf the top 10 borrowers of TARP money, who still has not paid it all back with interest?Fannie MaeFreddie MacAIGGeneral MotorsGMAC (Ally Bank)ChryslerDoesn't make a lot of sense to me to focus on Wall Street."The initial recipients, but a chunk of that went to pay off the counter-parties at 100 cents on the dollar, AIG and Goldman Sachs being the most obvious example.

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  34. Mr. Sullivan, I once did a day where I got first on almost every Ain't It Cool Post. Forget the day–but everyone, I was first. Freaked people out. Involved determining the article ID of the next post and than having a reload plugin refresh that URL ever 30 seconds until I saw the new article show up. Mad skillz I had, that day. Mad skillz. Yessssss.

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