[A-List] Freddie and Fannie

[Anyutka]

What is difficult about Henry's work is what makes it so valuable, and
sometimes a hard go for people outside of finance to follow.  By walking his
readers painstakingly through the various instruments that serve finance
capitalism, Henry is generously opening a window on a world in which most of
us don't participate.....yet whose consequences shape our world today almost
in its entirety.

What makes this work so unique is that Henry is not only analyzing this
world, he is participating in it.  He handles these various instruments in
his professional life, they are familiar and ordinary to him - while their
very basis and functioning is exotic to most of us.  It's the difference
between knowing the rules of a complex card game and playing the game
routinely.  I assure you that most market participants are not going to take
the time to do this; in fact, they have no interest whatsoever in having
laymen, esp. thoughtful and intelligent layment, understand what they are
doing and really prefer that the general level of ignorance remain as close
to universal as possible, and they routinely obscure the tools of their
trade in order to protect them and their very privileged selves from
challenge.

The modern world of finance is indeed "rich" as the newspapers are so fond
of saying - the instruments employed are often convoluted and obscure.  It's
isn't Henry who is engaging in "obscurantism," but the nature of much of
the beast he is describing for us.  Again, I wish to underscore how very
useful this information is to any individual no matter their own prejudices
and politics.

In a world of hypothecated currencies and paper instruments, the
opportunities for manipulation are almost infinite.  The elites like this,
in that it's much easier to "pump and dump" (just one technique) and swindle
value away from
an IRA account or mutual fund than it is to seize the family farm.  As we
work our way through super imperialism, I would suggest keeping this thought
in mind as Michael's book describes, very broadly speaking, the looting of
foreign countries through finance. The mechanisms employed to obtain those
transfers are based in the paper economy.

To really appreciate Henry's work a reader needs a basic understanding of
money, of monetary systems.  The sophistication Henry presents can only
confuse someone who doesn't have the basic understanding.  Yes, it's true I
am a supporter of gold, but that is not why I have repeatedly suggested the
A-List read Rothbard's "The Case Against the Fed."  This book explains the
basic deal of gold vs fiat, and it will give a reader a sound basis in
things monetary in the most painless and economical format I have ever
discovered.  From that understanding, it is possible to grasp what Henry is
on about, and to develop coherent thinking of one's own.  You may or may not
come to agree with me, or with Henry, or some other analyist about what
ought to be done - but you will understand the arguments and processes!
Even a good Marxist can only profit by getting this basic understanding of a
system (gold) now denigrated if not abhored, but which served man for
millenia (and of how fiat emerged, and under what premises it was accepted.)

We really are very fortunate to have Henry's input here, and with such an
intelligent audience I hate think we are like those Keynes was describing
when he remarked with self-satisfaction, "Not one man in ten thousand will
ever understand it (central banking)."

-A.

PS Modern finance is a complex, convoluted, and, at times, even obscure
system, but with very clear and definite goals.  Henry's post on seignority
is a real eye-opener in this regard, and I hope each of you reads it twice!


----- Original Message -----
From: "Henry C.K. Liu" <hliu at mindspring.com>
To: "The A-List" <a-list at lists.econ.utah.edu>
Sent: Sunday, February 29, 2004 6:30 PM
Subject: Re: [A-List] Freddie and Fannie


> "Not having time" is a poor excuse when you have time to make claims but
> not time to deliver. You need to put your money where you mouth is,
> particularly when you identify yourself as a "pedagogue," or having the
> decency to keep you substantiated charges to yourself.
>
> Others seem to have different opinion.
> Letter to the editor of Asia Times:
> I just read and reread [Henry C K] Liu's column of February 26, which
> despite its title [Blaming 'undervalued' yuan wins votes
> <http://www.atimes.com/atimes/China/FB26Ad01.html>] focused on US
> monetary policy and productivity. It is the most insightful column I
> have read in months and months, a brilliant analysis. It was terse,
> forceful, clear and well reasoned. Excellent!
>
>
>
> Bertrand Clarke (Feb 27, '04)
>
> tony black wrote:
>
> >Henry,
> >
> >(Accompanied by a wee touch of embarrassement)....I meant that 'public
> >reply' to Marg as a 'private' one....I realize, of course, that such does
> >not mitigate the content of what I said.....Nevertheless, do not allow
one
> >voice of dissent (or is it disgruntlement?)  to dissuade you from lending
> >your expertise. As I have said, if and when I feel inclined - and able -
to
> >'clarify' I will do so. 'Till then, let the 'charge'
> >stand...unsubstantiated.
> >
> >Regards,
> >
> >Tony Black
> >
> >
> >----- Original Message -----
> >From: "Henry C.K. Liu" <hliu at mindspring.com>
> >To: "The A-List" <a-list at lists.econ.utah.edu>
> >Sent: Sunday, February 29, 2004 5:49 PM
> >Subject: Re: [A-List] Freddie and Fannie
> >
> >
> >
> >
> >>I can of course refrain from further posting to stop the "obscurantism."
> >>As I recall, these posts were in response to specific requests.
> >>
> >>Henry C.K. Liu
> >>tony black wrote:
> >>
> >>
> >>
> >>>Marg,
> >>>
> >>>Though I respect the expertise as such as Henry's, at the same time I'm
> >>>afraid - and I speak here as a pedagogue - that my opinion of these
> >>>
> >>>
> >economic
> >
> >
> >>>'enlightenments' is considerably less sanguine. To be frank I find them
> >>>unclear  - even obscurantist - and awkwardly written.  If and when I am
> >>>
> >>>
> >able
> >
> >
> >>>to decipher them I realise that what is being said could have been
> >>>
> >>>
> >phrased
> >
> >
> >>>in a much simpler, often more broadly significant manner....This could
> >>>
> >>>
> >just
> >
> >
> >>>be me, of course, but I trust my instincts on these matters.....In
truth,
> >>>
> >>>
> >if
> >
> >
> >>>I had the time (which, unfortunately, I don't) I would like to *fully*
> >>>digest a few of Henry & Co.'s ramblings and present it back to them in
a
> >>>fashion that normal mortals could actually understand....you know,
using
> >>>such things as 'metaphors' and such....I'm afraid the A-list only
suffers
> >>>
> >>>
> >>>from this sort of incestuous inner-sanctum jargon...
> >>
> >>
> >>>Tony
> >>>
> >>>----- Original Message -----
> >>>From: "viveka" <kaliyuga at humboldt1.com>
> >>>To: "The A-List" <a-list at lists.econ.utah.edu>
> >>>Sent: Sunday, February 29, 2004 11:52 AM
> >>>Subject: Re: [A-List] Freddie and Fannie
> >>>
> >>>
> >>>
> >>>
> >>>
> >>>
> >>>>Henry,
> >>>>
> >>>>Thanks for forwarding your article which I read in its entirety and
> >>>>understood only in small measure, not because of your lack of clarity,
> >>>>
> >>>>
> >but
> >
> >
> >>>>because economics is, as you state at the outset, quite complex.
> >>>>
> >>>>You make mention of securitizations and, I believe, you have
addresssed
> >>>>
> >>>>
> >>>>
> >>>>
> >>>this
> >>>
> >>>
> >>>
> >>>
> >>>>issue in the past, but I would ask your opinion as to the long term
> >>>>viability of such financial vehicles.  The matter is close to my
heart -
> >>>>
> >>>>
> >>>>
> >>>>
> >>>and
> >>>
> >>>
> >>>
> >>>
> >>>>wallet! - as I work for a company that buys sub and non-performing
> >>>>
> >>>>
> >loans,
> >
> >
> >>>>tries to make them perform and then bundles them up into
securitizations
> >>>>which are sold on the open market.  As the "coordinator" for such
> >>>>
> >>>>
> >efforts,
> >
> >
> >>>>I'm intimately aware of the wasted financial costs to bring these to
> >>>>
> >>>>
> >>>>
> >>>>
> >>>market.
> >>>
> >>>
> >>>
> >>>
> >>>>Between the lawyers, rating agencies, auditors, etc., each
> >>>>
> >>>>
> >securitization
> >
> >
> >>>>costs upwards of a million dollars.  Further, while the rating
agencies
> >>>>
> >>>>
> >>>>
> >>>>
> >>>feel
> >>>
> >>>
> >>>
> >>>
> >>>>less pressure to "bless" a deal, all the other parties have a vested
> >>>>interest in making the deal happen, regardless of its viability,
because
> >>>>
> >>>>
> >>>>
> >>>>
> >>>of
> >>>
> >>>
> >>>
> >>>
> >>>>the huge commissions they make.
> >>>>
> >>>>So, my question to you is two fold.  First, is this true of most
> >>>>securtizations, namely, that the monetary incentive of going forward
is
> >>>>
> >>>>
> >>>>
> >>>>
> >>>too
> >>>
> >>>
> >>>
> >>>
> >>>>great to effectively curb risky transactions?  And, secondly, given
the
> >>>>
> >>>>
> >>>>
> >>>>
> >>>fact
> >>>
> >>>
> >>>
> >>>
> >>>>that there is no regulatory agency that oversees these transactions,
and
> >>>>that there is the possibility, if not the likelihood, that they can
grow
> >>>>well beyond the value of the collateral on which they are based, that
> >>>>
> >>>>
> >>>>
> >>>>
> >>>there
> >>>
> >>>
> >>>
> >>>
> >>>>would be a securitization bubble that would seriously impact the
various
> >>>>institutional investors that hold these assets in their portfolios.
As
> >>>>
> >>>>
> >>>>
> >>>>
> >>>you
> >>>
> >>>
> >>>
> >>>
> >>>>are aware, many of these institutional investors represent retirement
> >>>>accounts and insurance companies, so the impact on their portfolios
> >>>>
> >>>>
> >>>>
> >>>>
> >>>directly
> >>>
> >>>
> >>>
> >>>
> >>>>affects working people as well as the wealthy.
> >>>>
> >>>>Again, thanks for your comments.
> >>>>
> >>>>Maggie
> >>>>
> >>>>
> >>>>
> >>>>
> >>>>
> >>>>
> >>>>
> >>>>
> >>>
> >>>
> >>>
> >>>
> >>>
> >>>
> >>
> >>
> >>
> >>
> >
> >
> >
> >
> >
> >
>
>
>