I had the unfortunate experience this week of watching my coworkers (and friends) get called to the "new" bosses office one by one to receive there walking papers. As each person did (to quote one of them) "the walk of shame", the rest mingled about wondering who was going to be summoned next. It soon became apparent as we mingled that this layoff would be far more reaching and "transformitive" than we had expected. In the end 6 out of 9, including the "old" boss where relieved of their jobs.
In nearly 15 years of work i have never been this close to a major layoff. Often in the past you would have an idea who was going to get whacked because they often where slackers or had some issue working with people. This time seemed different.
The callousness of management to the whole matter was just shocking. Especially since many months of time and effort before this event were spent telling us how it was important to have integrity and that they were managing the company with integrity. Several weeks of consistent lying have shattered any illusions about managements intentions. In the end we are all pawns to be used up and spit out when we are no longer useful.
What is odd about the whole situation is that in my 15 years of work i have been through as many layoffs, but have never been affected until the last year. I was laid off from my previous employer not even a year ago and then nearly laid off from this one. I do not know if it is a sign of the times in general or something specific to engineering, but either way I do not want to be caught in this situation again.
I finally realize that in spite of all the education and experience i have, that i am just a factory worker. I have a job not a career. It is this realization that inspires me to find a solution to the problem of having to work for people like this, but for now I have a job and it's a job I'm lucky to have.
--Staff
Friday, February 13, 2009
Tuesday, February 10, 2009
What an awesome plan!
Well the latest plan from Treasury Secretary Timothy Geithner did not impress the markets today. I think the plan put forth was in fact not a plan at all. The primary reason for the sell off (beyond the resistance at the 50 day moving average) was that the market could see that they have no plan to "fix" things. It actually seems odd that they bothered having a news conference at all, given the lack of details. Maybe they figured they better just say something since they have been alluding to a new plan for sometime. Just as Obama is pushing for the stimulus with the argument "we need to do something?" , he must have forced the treasury to just do something as well.
Unfortunately the problem of bad assets is not easily solved. The ideas put forth look very similar to the original TARP plan which was abandoned. The problem is simple. If you buy the banks bad assets what do you pay? If you pay too much you have little effect as you cannot buy very much bad paper and you are sure to incur large losses for taxpayers. If you pay too little the banks need to write down the assets to the price paid which could deplete their capital more and maybe reveal they are insolvent. This is why the "bad bank" ideas will not work as envisioned.
I suppose looking back at the Resolution Trust Corporation method you should be able to help the situation. But the thing is those assets came from banks that were closed, hence the government accepted they were insolvent. The real issue now is that no one wants to admit the banks are insolvent. The reason I'm guessing is because of all the derivatives.
The derivatives essentially link all the banks together so tightly that if one fails, they all fail. These derivatives are very diverse and are not limited to housing. This is one of the fallacies of the view that "if we fix housing everything will be okay." My guess is that many of these derivatives are nothing more than side bets. Think of the movie Caddy Shack where the guys are behind the bushes and betting on if the kid will pick his nose, then eat it.
Now side bets are fine if you have the money to lose, but it is becoming apparent they bet with borrowed money. Even if you win the bet, if the person you bet against can't pay, you lose. So the issue is all these banks made extremely large bets with each other. If anyone of them goes down they take out the others because the losers can't pay. Also it highlights that the banks may not have diversified their bets very well either. If a bank tried to be a little conservative and hedge some big bets, but the guy that took the hedge went out of business, you have no hedge at all. Or if they were arbitraging in some way by betting both sides but getting (in betting parlance) some "juice", if one or both sides can't pay, the surefire can't lose bet is a bust.
The crux is that this is bigger than housing. This is part of a larger speculative debt bubble and it will take more than a few talking heads talking in vague terms to get through this.
--Staff
Unfortunately the problem of bad assets is not easily solved. The ideas put forth look very similar to the original TARP plan which was abandoned. The problem is simple. If you buy the banks bad assets what do you pay? If you pay too much you have little effect as you cannot buy very much bad paper and you are sure to incur large losses for taxpayers. If you pay too little the banks need to write down the assets to the price paid which could deplete their capital more and maybe reveal they are insolvent. This is why the "bad bank" ideas will not work as envisioned.
I suppose looking back at the Resolution Trust Corporation method you should be able to help the situation. But the thing is those assets came from banks that were closed, hence the government accepted they were insolvent. The real issue now is that no one wants to admit the banks are insolvent. The reason I'm guessing is because of all the derivatives.
The derivatives essentially link all the banks together so tightly that if one fails, they all fail. These derivatives are very diverse and are not limited to housing. This is one of the fallacies of the view that "if we fix housing everything will be okay." My guess is that many of these derivatives are nothing more than side bets. Think of the movie Caddy Shack where the guys are behind the bushes and betting on if the kid will pick his nose, then eat it.
Now side bets are fine if you have the money to lose, but it is becoming apparent they bet with borrowed money. Even if you win the bet, if the person you bet against can't pay, you lose. So the issue is all these banks made extremely large bets with each other. If anyone of them goes down they take out the others because the losers can't pay. Also it highlights that the banks may not have diversified their bets very well either. If a bank tried to be a little conservative and hedge some big bets, but the guy that took the hedge went out of business, you have no hedge at all. Or if they were arbitraging in some way by betting both sides but getting (in betting parlance) some "juice", if one or both sides can't pay, the surefire can't lose bet is a bust.
The crux is that this is bigger than housing. This is part of a larger speculative debt bubble and it will take more than a few talking heads talking in vague terms to get through this.
--Staff
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