Our financial system is crumbling this week.

[G. Keenan]

Debating the merits of organic food is really the final frontier. What else does GRB have left?

I don't think we ever fully resolved the wine question. We aren't ready to take on organic food yet, imo, until we settle that.

[ghostrunner]

Whether or not it has anything to do with being organic, I do find that organic food tastes better than what you get in the store much of the time. Bananas and tomatoes in particular.

In some cases, I think organic food can taste better. Certainly, fresh tomatoes (organic or not) typically taste much better than those that have to be shipped. On the other hand, I've found many organic foods to be quite similar to their "industrial" counterparts (just at higher prices), and others to be substantially worse. While there are many serious problem with modern agriculture, improved technology and techniques have raised human living standards enormously. It's not just a scheme to poison people with "unnatural" foods.

I don't know what all is involved, but it also seems that in engineering/modifying the food you buy in the store, they seem to be more concerned with size rather than flavor. I suppose there's a reason for that, but tomatoes and oranges seem to get bigger and less tasty. I don't remember the last decent orange I got from a grocery. It's almost like you have to buy the smaller clementines and tangerines in order to get a good flavor. Same thing with grapes. Apples don't seem to have this problem, for whatever reason.

Having said all that, I don't have any problem with GM foods in principle.

[cpebbles]

Apparently John Thain, the CEO of Merrill Lynch, has withdrawn his request for a $10 million bonus this year after being taken to task for it by the Wall Street frigging Journal. He argued he deserved it in return for all the money he saved stockholders by arranging ML's sale. I guess he'll just have to live on the $83.1 million he received last year by hiding the impending disaster heading for the company.

Previously, he had argued that the lending firms should hold onto the bailout funds they received to prop themselves up in the short term instead of investing the money, which is of course what the money was given for.

[Hungary Jack]

Apparently John Thain, the CEO of Merrill Lynch, has withdrawn his request for a $10 million bonus this year after being taken to task for it by the Wall Street frigging Journal. He argued he deserved it in return for all the money he saved stockholders by arranging ML's sale. I guess he'll just have to live on the $83.1 million he received last year by hiding the impending disaster heading for the company.

Previously, he had argued that the lending firms should hold onto the bailout funds they received to prop themselves up in the short term instead of investing the money, which is of course what the money was given for.

A $10M bonus is pretty paltry by Wall Street standards, but he is getting a ton of pushback on this, and I thought I read that he had reduced his request to $5M. His salary is $750k.

[Freed Roger]

Apparently John Thain, the CEO of Merrill Lynch, has withdrawn his request for a $10 million bonus this year after being taken to task for it by the Wall Street frigging Journal. He argued he deserved it in return for all the money he saved stockholders by arranging ML's sale. I guess he'll just have to live on the $83.1 million he received last year by hiding the impending disaster heading for the company.

Previously, he had argued that the lending firms should hold onto the bailout funds they received to prop themselves up in the short term instead of investing the money, which is of course what the money was given for.

A $10M bonus is pretty paltry by Wall Street standards, but he is getting a ton of pushback on this, and I thought I read that he had reduced his request to $5M. His salary is $750k.

A guy's got to eat - don't he?

[AWvsCBsteeeerike3]

http://www.cnbc.com/id/28155366

this is a pretty good explanation of what is wrong right now....this lady is pretty smart and pretty much spot on, I believe. It seems like the market has some positive momentum over the past couple weeks getting back above 9K for a bit, but that seems ill-advised.

[Hungary Jack]

I am nervously awaiting the other shoe to drop here in Chicago, where the economy is so very dependent on local, regional, and global commerce (O'Hare is one of the world's busiest ports). If consumers slow down, many local companies will cut jobs. The region is also fairly exposed to the auto industry (IIRC, roughly 5% of the area's $320 B GDP is in the auto sector). Business at my retail store has been surprisingly brisk (knock on wood), but everything I have learned suggests it is counter-cyclical. The county and local budgets are heavily dependent on sales tax and real estate tax receipts, so employment in these areas will likely come under pressure. So I think things can get pretty rough here for awhile.

Re the credit situation, I wonder how much lending slack can be taken up by smaller and regional banks while the big banks sort out their capital structure and balance sheets. Chicago has many small and regional banks that, by most appearances, are healthy. We even have several mid-market investment banks that have avoided the CDO mess.

[AWvsCBsteeeerike3]

Re the credit situation, I wonder how much lending slack can be taken up by smaller and regional banks while the big banks sort out their capital structure and balance sheets. Chicago has many small and regional banks that, by most appearances, are healthy. We even have several mid-market investment banks that have avoided the CDO mess.

This is exactly what I was wondering. Do these smaller/mid-market banks get their money from the bigger banks that are puckering up right now, or do they have their own capital that they loan out?

This could be a great, great opportunity for them. If the larger banks that developers/investors/entrepeneurs get their money from are suddenly unable to loan them the money (ie, the larger banks), they will be forced to go to other banks, and will have a track record of making solid plans/good credit on which to stand. They should be fairly safe investments and the banks will possibly have a line at their door of which loanees to loan to.... or not....I could have made that all up in my head.

[Freed Roger]

I am nervously awaiting the other shoe to drop here in Chicago, where the economy is so very dependent on local, regional, and global commerce (O'Hare is one of the world's busiest ports). If consumers slow down, many local companies will cut jobs. The region is also fairly exposed to the auto industry (IIRC, roughly 5% of the area's $320 B GDP is in the auto sector). Business at my retail store has been surprisingly brisk (knock on wood), but everything I have learned suggests it is counter-cyclical. The county and local budgets are heavily dependent on sales tax and real estate tax receipts, so employment in these areas will likely come under pressure. So I think things can get pretty rough here for awhile.

Re the credit situation, I wonder how much lending slack can be taken up by smaller and regional banks while the big banks sort out their capital structure and balance sheets. Chicago has many small and regional banks that, by most appearances, are healthy. We even have several mid-market investment banks that have avoided the CDO mess.

I'm trying to be hopeful, but from what I read, the fallout hasn't hit several markets yet, as you mention. - some large retailers may be screwed after the holidays, commercial real estate, credit card companies may have to tighten the screws.

The fallout could eventually extend to fed state local govt workers and school teachers as the shock waves hit. Not only does govt have an eroding tax base, but when the actuarial numbers come thru, I suspect the pension funding requirements alone will be crushing. Private schools are in a world of hurt.

I have several family members in markets mentioned, that live up your way, and over Thanksgiving they were very nervous about the situation. Regular folk.

Those fortunate to be in counter-cyclical busn, and can stay above the fray may emerge stronger from this recession. As oft-mentioned, goods and investments are usually at a discount now and foreseeable future. The economic pie will be smaller, but they will have a larger piece. none of this does you any good if your jobless though.Even the winners though will be paying higher taxes. It may not come from the Fed, but its going to come from somewhere as states, local fire depts, and school districts suffer and need revenue.

[Hungary Jack]

Re the credit situation, I wonder how much lending slack can be taken up by smaller and regional banks while the big banks sort out their capital structure and balance sheets. Chicago has many small and regional banks that, by most appearances, are healthy. We even have several mid-market investment banks that have avoided the CDO mess.

This is exactly what I was wondering. Do these smaller/mid-market banks get their money from the bigger banks that are puckering up right now, or do they have their own capital that they loan out?

This could be a great, great opportunity for them. If the larger banks that developers/investors/entrepeneurs get their money from are suddenly unable to loan them the money (ie, the larger banks), they will be forced to go to other banks, and will have a track record of making solid plans/good credit on which to stand. They should be fairly safe investments and the banks will possibly have a line at their door of which loanees to loan to.... or not....I could have made that all up in my head.

Banks get a lot of their capital from deposits from individuals and businesses through checking accounts, savings accounts, cd's, and other deposits. They take these deposits and make loans up to $20 in loans for every $1 in deposits. The ratio of capital they keep to loans outstanding is known as "reserves" and is governed by the FDIC.

Investment banks, on the other hand, get their capital from high net worth individuals, borrowing (cheap money has fueled a lot of their activity until lately), and stock markets (public ownership). They have more lenient rules than commercial banks. Goldman and Merril are now commercial banks because of their need for capital.

As long as commercial banks don't make too many bad loans, things are fine. The bigger commercial banks went head on into the subprime mortgage frenzy, and are now bearing the consequences. Several also bought mortgage backed securities (mortgage bundles) originated by other banks to include in their capital reserve portfolio. When these securities tanked in value and became illiquid (no buyers for them), the banks capital reserves suddenly became a concern with the FDIC.

My impression is that the smaller banks largely stayed away from the subprime lending and mortgage security market. They kept to their same boring business model, and are now much better off for it. I have talked to a few small bankers who have basically stated this. But they are also having problems finding worthy borrowers and worthwhile loans.