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I thought this was very funny!
Remarks by Governor Ben S. Bernanke Before the National Economists Club, Washington, D.C. November 21, 2002 Deflation: Making Sure "It" Doesn't Happen Here
....as I have stressed already, prevention of deflation remains preferable to having to cure it. If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation.
"And I would have gotten away with it too, if it weren't for you meddling blogger!"
Roh roh!!!
boy, i love the MMI.
You have AAA-rated mortgage securities trading with junk bond yields. That makes no sense.
yeah, either that or the rating doesn't make sense...
Paulson was doing the Sunday shouties today, and he says if congress just ratifies that trade deal with Colombia, all these icebergs will melt.
....as I have stressed already, prevention of deflation remains preferable to having to cure it. If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation.
Only, if the capital doesn't flee the dollar for other currencies or hard assets.
The academic economists fail to think like even a mediocre capitalist. That's their problem.
Thanks for playing though, Dr. Ben.
There are miles of difference between the complete uniformed idiot and the compleat informed idiot, I'd say.
160 visitors on a Sunday am? Wow, the BSC thing must be even more serious than I thought.
I have to admit, I mainly read the comments here for the metaphors. Pretty darn entertaining sometimes.
Tanta, I am cranky today and object to the honorific "Dr" Krugman. He's no more of a doctor than I am. "Professor" Krugman, OK.
In England, BTW, surgeons are "Mister." Ordinary, run-of-the-mill doctors are "Doctor."
Anyway, I hate doctors. Can you picture "Doctor" Conjure Bag? Conjure scoffs at the idea.
in any event, i want some of whatever Tanta took with her coffee this morning.
An analyst of the Subprimeoscene epoch might say, "The Muddle Methephor index came in surprisingly higher than analyst expectations today..."
And as Mr. Goldstone can tell you, few can predict who will be the next to feel the impact.
Um. Few complete uninformed idiots could predict this. I'd guess that an entire troop of moderately alert cub scouts could go take a look at some financial statements to see who else is overleveraged in the Alt-A sector and make a couple of pretty solid predictions, myself.
Word!
Seriously, that is what is so amazing to me about what is happening.
I have many friends, well educated, doing quite well, with NO IDEA as to the severity of the unraveling. For anyone who has made the attempt to pay even minimal attention to sources outside the mainstream media, it has been painfully obvious and enormously profitable.
Yes, but will the cub scouts guess the stock market will melt up before it melts down?
Missed quotes for Tanta
Oops
Tanta: Not so much snark at once, please.
We're going to need to keep our snark powder dry for the imploding train-wreck that is coming on like a chain reaction, abyss-staring, volcano of systemic-risk... er, ah, something.
You know what I mean.
I'm pre-posting this comment for applicability on Wednesday:
We're all millionaires now.
Lots of millionaires in Weimar Germany.
"overleveraged"
The manure spreader is teetering at the edge of the bridge. But it is an invisible manure spreader.
I remember watching Billionaire Boys Club years ago. They could not see the manure spreader until it was too late.
"Sir? Would you care for an extra heaping serving of snark smothered in hoocoodanode with a side of epicaricacy with your tea and bagel this morning?" "Why yes, do you know that clever little blog down on the internet? CR brand schadenfreude I've been told is very good and rumor has it their particular flavor is on sale and in great supply this morning." "Very good sir but If I may. One must be most careful to acquire only the well aged, timeless varieties. The shop has become quite popular and recent customers may not be of the types you prefer to associate with. You know, invest bankers, Fed Governors and the like." "Yes, by all means, exercise discretion and take care not to step in the Bear Stearns." "As you wish sir."
loan defaults surging in india..
good luck w/ BRIC and commodity bubble..
FT.com / Asia-Pacific / India - India faces wave of defaults
Keep this in mind going forward, along with the fact that SEC and FBI are in hyper-mode:
The advisory group also recommended that credit-rating agencies differentiate between ratings on complex investment products and conventional bonds. The ratings agencies also should disclose conflicts of interest, Paulson said.
SEC Chairman Christopher Cox said Congress recently gave the SEC the power to address issues including conflicts of interest involving credit-rating agencies. "We will use that authority to help restore investor confidence," he said.
At some point in time last year, I managed to lose the tag for MMI. I must have been hitting the cough syrup too hard.
Anyway, because I love you all so much, I just went through the archives and retagged all the old MMI posts. So if you click on the MMI tag, you get the whole collection.
I had forgotten just how incredibly bad some of them were.
"Professor" Krugman, OK
IMHO, Professor if a higher title than Dr.
I think at this time last weekend there were only 60 visitors online at this time. How cool would a CR graph of news to # Visitors Online be?
And how big of a dork am I to be analyzing this during Spring Break?
....as I have stressed already, prevention of deflation remains preferable to having to cure it. If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation.
INO Equities Stocks Indexes - U.S $ INDEX (NYBOT:DX) Price Chart and Quote
Code word: Short that pig!
Re: We're all millionaires now.
I'm not sure, but I think Bush will tell us to trade greenbacks in for walmart shopping cards... just a hunch, but I think the key will be to remove the currency and substitute some type of plastic card with a RF tag connected to posts here at CR, which will connect to IRS return.
wow, thanks Tanta!
Thanks for that Tanta, very nice, Re: beaver pelts and glass beads
Icy dead people.
scotty_at_the_helm | 03.16.08 - 11:43 am
As long as the card is made of solid gold and weighs at least 50 lbs., count me in.
Marcus Aurelius writes:
scotty_at_the_helm | 03.16.08 - 11:43 am
[re; Walmart Cards instead of greenbacks]
As long as the card is made of solid gold and weighs at least 50 lbs., count me in.
Marcus Aurelius | 03.16.08 - 11:45 am | #
Heck, they are already made of petroleum and weigh a 1/10th oz. Isn't that close enough?
Re loan defaults in India. There was a wire service story the other day on the astronomical suicide rate among farmers who have defaulted on loans (for seed, fertilizer, etc). I guess swallowing pesticide is the way you "just walk away" in desperately poor districts.
Latest from Goldman's Main Man:
Some critics contend that the Fed's move was akin to a government bailout something the Bush administration has repeatedly said it is against.
"Well, every situation is different. We have to respond to the circumstances we're facing today," Paulson said. "And my concern is to minimize the impact on the broader economy as we work our way through this situation, and again, the stability of our financial situation."
The financial system, he said, is "more fragile than we would like right now."
Asked whether other financial companies may be in a situation similar to Bear Stearns', Paulson did not directly answer. He did seek to strike a confident tone.
"Well, our financial institutions, our banks and investments banks are very strong," he said. "And I'm convinced that they're going to come out of this situation very strong."
mp writes:
Tanta, I am cranky today and object to the honorific "Dr" Krugman. He's no more of a doctor than I am. "Professor" Krugman, OK.
He has a PhD degree from MIT to be called "Dr". And you have ?
Way OT, but related to oil, dollars and the demise of Bear Stearns, glass beads and MMI:
round 4 trillion plastic bags are being used by the global community every year, taking the total economic impact of such items to billions of dollars a year in addition to posing risks to sustainable growth. Plastic grocery bags account for around 500 billion per year, or almost 1 million per minute.
According to data, 96 per cent of the world's plastic is not recycled, an expert claimed. Rehan Ahmed, senior environmental specialist, Public Commission for the Protection of Marine Resources, Environment and Wildlife, Bahrain, in his presentation said the use of plastics worldwide has increased many fold in the last five decades. "The percentage of plastic bags returned for recycling in the USA is only 1 per cent, half a per cent in Britain.
The number of plastic shopping bags used each year in the USA is 14 billion with an annual cost to US retailers for giving away "free" bags accounting for $4 billion. Approximately 100 million barrels of oil are required to make the world's plastic bags each year.
He has a PhD degree from MIT to be called "Dr". And you have ?
Confused | 03.16.08 - 11:51 am
GW Bush holds degrees from Harvard AND Yale. And we talk about our dollars being worthless paper.
I'm shorting Yale and Harvard - the ratings agencies for these entities (the public) have lost their freekin' minds.
Confused, as a practioner of the black arts, Conjure Bag is a "doctor." In addition, I have several "doctors" in my tackle box.
In ordinary usage, a "doctor" is a practioner of medicine.
As to what I have, well, that's none of your business.
practitioner, sorry.
Ethiopia's national bank has been told to inspect all the gold in its vaults to determine its authenticity.
It follows the discovery that some of the "gold" it had bought for millions of dollars was gold-plated steel.
The first hint that something was wrong reportedly came when the Ethiopian central bank exported a consignment of gold bars to South Africa.
The South Africans sent them back, complaining that they had been sold gilded steel.
An investigation revealed that the bank had bought a consignment of fake gold from a supplier, who is now under arrest.
Other arrests followed, including business associates of the main accused; national bank officials; and chemists from the Geological Survey of Ethiopia, whose job it is to assay the bank's purchases of gold and certify that they are real.
But what has clearly now got the government even more worried is that another different batch of gold in the bank's vaults has also been found to be fake, and this time it was gold which had been there for several years, after being seized from smugglers trying to take it to Djibouti
BBC NEWS | Africa | Fake fears over Ethiopia's gold
Every bubble has it's share of fraud
awesome quote for today:
Fannie Mae and Freddie Mac have published underwriting guidelines for the new loans. They're more restrictive than their rules for standard conforming loans - and more restrictive and confusing than many lenders were expecting. "They're a joke," says Brett Nicoletti, a senior mortgage consultant with Catapult Mortgage in Los Gatos. "They are too complicated and archaic for me to even want to use."
State to withhold more for disability insurance
I sincerely doubt that Mr. Professor Krugman is going to resent being twigged with "Dr. Krugman" in a post that is nothing but snark. Nonetheless, a doctorate is a doctorate. Just because the MDs decided to hog the term doesn't mean that universities weren't awarding "doctor" degrees outside medicine since the middle ages.
For the rest of the day you have to call me "Master Tanta." I have a diploma to back that up.
"They're a joke," says Brett Nicoletti, a senior mortgage consultant with Catapult Mortgage in Los Gatos. "They are too complicated and archaic for me to even want to use."
As I have said before, there is always a silver lining to a full-bore credit crunch. It grinds idiots like that out of the business. And we can all get behind that.
Tanta, are you acquainted with Master Yoda? Conjure has enormous respect for Master Yoda.
Tanta, you shall be known in the future as Saint Tanta!
Update:
March 16 (Reuters) - Investment bank Goldman Sachs (GS.N: Quote, Profile, Research) will announce asset writedowns of $3 billion when it posts earnings on Tuesday, Britain's Sunday Telegraph newspaper reported, without naming sources.
The company will report a fall of about 50 percent in first-quarter earnings, the newspaper said.
Morgan Stanley, Goldman Sachs Group Inc. and Bear Stearns Cos. all disclosed in regulatory filings Tuesday that they are cooperating with requests for information from various, but unspecified, regulatory and government agencies. Officials at the companies either declined to comment, or could not immediately be reached.
Conjure has enormous respect for Master Yoda.
I think you meant "For Master Yoda enormous respect Conjure has."
Asa writes:
Tanta, you shall be known in the future as Saint Tanta!
Asa
I for one sincerely hope the beatification is a great many years away.
"Well, our financial institutions, our banks and investments banks are very strong," he said. "And I'm convinced that they're going to come out of this situation very strong."
St. Louis Fed: Series: BORROW, Total Borrowings of Depository Institutions from the Federal Reserve
St. Louis Fed: Series: BOGNONBR, Non-Borrowed Reserves of Depository Institutions
I guess that's why all the reserves in the banking system have been borrowed from the FED.
i will just point out that you people have been slipping on using my formal title, rev. dr. mr. professor bacon dreamz, esq.
ahem.
Isn't Thornburg a flower (or maybe a weed) in the midst of the thornpatch?
Who will be left standing after most have been sucked into the vortex? Where will the unwashed finance their McMansions? It's boiling down to Bank of China or Bank of America.
I guess that pretty much sums up the banking/financial/mortgage sectors... banging around from iceberg to iceberg, totally clueless about which direction to steer.
The feeling of impending doom just continues to build. Applying logic to the current situation results in conclusions that are very disconcerting and getting worse by the hour. There are only a few hundred on this blog who seem to get it.
When I see the business name "Catapult Mortgage" my Muddled Metaphor Generator goes into overdrive.
The logo and marketing tagline possibilities are endless.
OT, but we need to toss as many bums out of this corrupt system as possible! Bear Sterns should not be bailed out, they need to collapse because they were corrupt and The Fed should not bail out crooks! Nepotism has helped destroy America; Nepotism is as destructive as terrorism!
Example: During a hotly contested race for Phoenix City Council, Laura Pastor touted her job directing a college-scholarship program as one of her most significant qualifications.
But records showed she got the job only months after her father, U.S. Rep. Ed Pastor, steered more than $1 million in federal funds into the same scholarship program.
College officials insisted that Pastor was the most qualified of 51 applicants for the job. But they refused to release the names and resumes of two competing finalists.
The newspaper sued the college system in Maricopa County Superior Court, and a judge ordered the records released.
Records showed that the other finalists were either better educated or had more experience in fields described as crucial for the job.
In addition, a hiring committee gave Pastor a lower score than at least one of the finalists.
Records also showed that Pastor was hired for $16,000 more than an advertised job description.
Ed Pastor said he did not know his daughter was applying for the job when he got the grant. Laura Pastor said she did not use her father's name to get the job.
"Where will the unwashed finance their McMansions?"
You uncle and mine, he got a printing press in the basement.
Catapult Mortgage? Are you serious? ROFL.
(OT) The better part of 200 visitors on a Sunday morning.
Evidently sometimes there are atheists in foxholes.
S.
More talk of corruption, as we await The Bush Antitrust Bailout for Bear Stearns & Friends:
Throughout his administration, President Bush has used so-called signing statements, rather than the budget, to modify acts of Congress he finds objectionable. Perhaps the best-known of these was issued after he signed the so-called McCain Amendment to the Detainee Treatment Act of 2005. That measure was intended to prohibit inhumane treatment of prisoners, including prisoners at Guantanamo Bay; and required military interrogations to be performed according to the Code of Military Justice. After signing the law, Bush issued a signing statement saying he would interpret the law in a manner consistent with the constitutional authority of the President to supervise the unitary executive branch and as Commander in Chief.
Such statements have become a hallmark of the Bush Administration. From the inception of the Republic until 2000, presidents produced fewer than 600 signing. Since 2001, President Bush has objected on constitutional grounds to sections of more than 750 laws.
But critics of the Bush Administration say they are not surprised at the presidents use of the budget to thwart the will of congress. They see the tactic as part of a pattern of restricting access to information. They cite the growth of public requests for information under the Freedom of Information over the last six years. In 2006, the total number of FOIA requests received in 2006 was 21,412,736, substantially larger than in 2005.
Archimedes Investments: Give me a place to stand and with a lever I will move the whole world.
Who you calling atheist? I worship at the Shrine of St. Tanta thrice daily.
Viewing with alarm said: "The feeling of impending doom just continues to build. Applying logic to the current situation results in conclusions that are very disconcerting and getting worse by the hour. There are only a few hundred on this blog who seem to get it."
I prefer to give my fellow man the benefit of the doubt, that the average person is a little more level-headed, and only a few hundred people are succumbing to panic.
S.
10:00 o'clock Mass is in 40 minutes from now on the best coast (left coast?) and some attend services on saturday.
Were knee deep in mud planting rice behind a water buffalo by August this year. Since TP will be in short supply the green back will do. It should be infinitely more abundant and infinitely worth less.
I prefer "Trebuchet Mortgage." French = sophistication.
IF YOU PEOPLE RESTART THAT STUPID RELIGIOUS FLAP FROM YESTERDAY THAT WRECKED AN ENTIRE THREAD I PROMISE YOU I WILL DISABLE THE COMMENTS.
ONCE IS ENOUGH.
For the rest of the day you have to call me "Master Tanta." I have a diploma to back that up.
I have a JD, but you can just call me juris.
And I wonder if Catapult Mortgage got the inspiration for their name from the Dear Leader?
"See, in my line of work you got to keep repeating things over and over and over again for the truth to sink in, to kind of catapult the propaganda."
George W. Bush
Iceberg, Goldberg. . .what's the difference?
[punch line to old joke]
Anyway, because I love you all so much, I just went through the archives and retagged all the old MMI posts. So if you click on the MMI tag, you get the whole collection.
There are a couple of them that are not called MMI, but are called Metaphore Watch, or something like that. Here is my favorite (which is not tagged):
Calculated Risk: Metaphor Watch: Bloomberg Takes the Lead
ONCE IS ENOUGH.
Anything to stop a panic in the commentplace.
so seb, who are you pretending to be today...
30 year old nit-wit
or
50 yr old, been aorund the world, nc triangle evangelist sun always comes up koolaid aficionado
Sebastian,
I notice your need to put nervous little smileys at the ends of all your posts recently. Is everything all right in the land on no recession possible? Is you pony feeling okay?
Fool me once, shame on you.
Fool me twice, shame onnn.... you.
"I notice your need to put nervous little smileys at the ends of all your posts recently."
Actually, that last one was more or less a putdown. The nervous little smiley says "just kidding." Only, not.
It is time for this administration to step up to the plate and bite the bullet before it is Deja' vu all over again.we simply can not afford to misunderestimate the gravity of fearing fear itself!
There are a couple of them that are not called MMI, but are called Metaphore Watch, or something like that. Here is my favorite (which is not tagged):
Thanks, Walker. I obviously needed to fix my search terms a little.
I picked up a few more, including that great Bloomberg article on possums that had us all going for weeks.
Rob Dawg said: "I notice your need to put nervous little smileys at the ends of all your posts recently."
If you're "seeing" a difference between a smiley and a "nervous" smiley, that just confirms what I've said all along about some of the posters here: They're seeing things that aren't there.
I just add-in an emoticon in an effort to lighten the atmosphere, which can sometimes escalate into (purposeless, counterproductive) unpleasantness.
S.
CR declaired this DOA last night, but the zombie still walks, if only in news form:
Citic Securities May Leave Bear Deal
China's Citic Securities Won't Guarantee Final Deal With Bear Stearns
March 16, 2008: 12:26 PM EST
NEW YORK (Associated Press) - China's Citic Securities Co. said late Sunday it can't guarantee it will reach a final agreement to buy into U.S. investment bank Bear Stearns Cos. after Bear's financial crisis triggered a bailout plan.
The statement coincides with Citic Securities' latest final earnings reports showing its 2007 net profit more than quintupled from a year earlier as the domestic stock market's bull run increased trading commissions and underwriting fees.
"We haven't signed any formal agreement, we haven't paid any money and we can't guarantee reaching a final agreement in the future," Citic Securities said in a statement.
It said it's still communicating with Bear Stearns on major terms of the deal and due diligence related to the deal hasn't been completed yet.
Citic Securities and Bear Stearns said in October that Citic Securities would take a 6 percent stake in Bear Stearns with an investment of $1 billion, while Bear Stearns would take a 2 percent stake in Citic Securities with a $1 billion investment.
Some people also seem to think I'm kidding when I make threats in caps.
I AM NOT.
You want to find a religion blog to post on, Teh Google is your friend.
"Master Tanta" sounds much less accessible than "Mistress Tanta".
I'm just sayin'...
On the doctor/professor rule. Traditionally in the United States, only MDs and DDSs were given the honorific of "Dr." PhDs did not use the title unless they worked as lecturers at a university; they were not professors, and therefore did not carry that title. Professor was a higher-status title. (Many years ago, I went out of my way to call one of my professors "Dr."; my friends laughed when I explained that my intention was to insult him by demotion.)
However, the doctor/professor rule has been bent to breaking by, for instance, the convention that psychologists are generally "Dr.", even though they are not MDs.
The one place where the rule holds fast is with lawyers. In the United States a law degree is not necessarily a post-graduate degree. It almost always is, in fact, but the degree is the Bachelor of Law; a JD is applied for separately. This is not true in countries descending from the Spanish tradition; there lawyers (and all PhDs, for that matter) use "Dr." That's why Fidel Castro is often referred to as Dr. Castro; he has a law degree.
In this instance the reference should be to Professor Krugman (as I believe he still teaches), even though I doubt that he would take offense at Dr., unless your intent is to insult the man. However, PhDs not attached to universities are often given the title of Dr. For instance, most people give Dean Baker the title, as he has a PhD, but does not have a university post.
My point is that the rule is very fluid, but goes something like this. Professor is always used with people who have university teaching positions above that of lecturer. This is true of visiting professors as well.
Outside universities, people who use their degrees professionally (psychologists, various kinds of consultants) use the title "Dr." Beyond that, it's a matter of personal preference, although I cringe when I see someone's letterhead with
Pretentious Person, PhD, which I consider akin to lawyers calling themselves Esquire (never done, that's a courtesy others give you, not one you bestow on yourself). So if your profession demands a PhD, as Dr. Baker's does, you may use the title is you wish. If, however, you have a PhD in comparative literature, but work as a barista, you wouldn't use the title.
Make sense?
OT: "Walking Away" in the Bay Area, from more-or-less innnocents to guys who are gaming the system.
More in foreclosure choose to walk away
"Mortgage Mistress Tanta" That has a good ring to it
Even though I am the dead Emperor of a vast empire, and although my various designations for my rank include Imperator, Augustus, Caesar, Princeps and Primus Inter Pares, I eschew titles in almost every social situation.
The common man may refer to me as Marcus. My close friends call me Bubba.
From this link Bob Dobbs provided. Hows this for "ruthless"?
A Discovery Bay man who asked not to be identified said he is "upside down" on his house by about $260,000. Instead of bemoaning the situation, he plans to capitalize on it.
"I refinanced a couple of years ago and pulled out $100,000 and put in a fabulous pool," he said. "Now I've got this fabulous pool and fabulous house, but it's not worth anything. Why shouldn't I be building equity over the next four to five years instead of playing catch-up?"
The man said he has not made a mortgage payment for five months.
"I'm playing the bank game," he said. "I'm playing chicken with them. I already got them to agree to put (the unpaid) payments on the tail end of the loan. What I'm really pushing them to do is to (adjust my mortgage) for the current market value and write off the rest. I'd love (to have it) lopped down to a $450,000 basis rather than $710,000."
If the bank won't negotiate, he'll walk away, the man said.
That kind of story sends chills down bankers' spines. To date, most loan modifications have involved freezing interest rates or repayment plans for arrears.
No religion?
Is it okay to put a plastic tantic icon on my dashboard?
Always an entertaining and informative read.
Preparing for the coming week, I am watching the Victory at Sea DVD episode on Pearl Harbor.
Tanta said: "Some people also seem to think I'm kidding when I make threats in caps."
I find you intimidating enough in small caps. I apologize for my complicity.
S.
"They're a joke," says Brett Nicoletti, a senior mortgage consultant with Catapult Mortgage in Los Gatos. "They are too complicated and archaic for me to even want to use."
For real!!! CATAPULT Mortgage. What an image. I guess most anything would be archaic to an outfit with such an
uptodate name. And too complicated as well. Even I can understand how a catapult works. But what were they catapulting? Mortgages? To Baghdad?
Inquiring minds want to know.
Nice prose / post Tanta.....
"The common man may refer to me as Marcus. My close friends call me Bubba."
I've got an old friend named Marcus, who is an M.D. and a Ph.D., and who is also a lecturing professor at a university. He likes to be called Doctor Doctor Professor.
In our youth, we got a kick out of the Major Major Major Major character in "Catch-22". Since Marcus is of German descent, he really wants to be called 'Herr' Doctor Doctor Professor.
Is that you, Bubba?
Thank you Tanta for having some boundaries.
It appears that as we get closer to the economic vortex, it's clear that the dissonance seems to get louder and louder.
Must be an indicator that we are getting close.
THX
"Tanta, you shall be known in the future as Saint Tanta!"
May I suggest Santa Clause?
Alpha_Bear | 03.16.08 - 12:55 pm
Sadly, no.
Watching posts evaporate in real time as soon as they catch Tanta's withering gaze seems like a foreshadowing of what is to come on Monday, as untold wealth disappears as bank shareholders race to the exits.
ot santa clause
tanta clause
I just packed a fat bowl and am fixin' to take a huge, Sunday Spectacular bong rip as I digest this Bear situation.
I'm gonna put a nugget aside for tomorrow lunch. I suggest others with a 420 secret do the same. And that IS investment advice.
but actually after the spanking we got over the religion thing we might just have to call her
tanta claws
Sebastian writes:
Rob Dawg said: "I notice your need to put nervous little smileys at the ends of all your posts recently."
If you're "seeing" a difference between a smiley and a "nervous" smiley, that just confirms what I've said all along about some of the posters here: They're seeing things that aren't there.
I just add-in an emoticon in an effort to lighten the atmosphere, which can sometimes escalate into (purposeless, counterproductive) unpleasantness.
Bob Dobbs noticed the same thing. Nervous little smileys are those that are tacked onto the end of an otherwise nasty post. Kinda like when you accuse people of reading exactly what you meant as being delusional. You are not using emoticons correctly, they neither excuse nor defuse unpleasantness. Here's hoping Tanat uses all caps to put a stop to all of us. I am done if that's any solace.
last para doug noland credit watch
404 - Error: 404
"There are now forecasts for a 100 basis point cut in the Fed funds rate for next Tuesday. Many are arguing that financial and economic developments support even more aggressive Fed rate slashing. I am reminded of the joke of the entrepreneur that loses money on every sale but is determined to make it up on volume. At this point, it should be apparent that rate cuts are destabilizing the system. They not only damage Federal Reserve credibility, they are battering confidence in the dollar and U.S. financial assets more generally. With the financial crisis having reached the core of the U.S. Credit system and the currency markets having turned disorderly, were now on Dollar Crisis Watch. One of my greatest fears has always been an unwieldy dislocation in the currency derivatives market.
May we discuss politics? Being at my essence both a Stoic and a Politician, removing politics from the discussion would effectively kill me (Stoicism being, nowadays, misunderstood and underutilized).
Would you allow the discussion of politics if I sacrificed a bull for you at the temple of Venus? (which will, of course, be renamed the Temple of Tanta)?
"There are now forecasts for a 100 basis point cut in the Fed funds rate for next Tuesday."
Cut it to zero and get it over with, they can't stop this train wreck and are only making it worse and more drawn out.
Joewhateva | 03.16.08 - 1:01 pm
The best advice dispensed here today.
In the United States a law degree is not necessarily a post-graduate degree. It almost always is, in fact, but the degree is the Bachelor of Law; a JD is applied for separately.
Just pulled my framed GW law degree from its usual spot (shimming a coffee table) - it's a JD. Have I been robbed? I mean, other than by Sallie Mae and Stephen Joel Trachtenberg ...
With apologies if this duplicates an earlier post:
Last night, Yves Smith put up a condensed version of Carmen Reinhart's testimony in Congress. It's a fine read.
"We may just have started to feel the pain" « naked capitalism
Tanta - will you ban emoticons too please? A scourge.
Erlkönig \tErlking
von J.W. Goethe \tTranslation by Hyde Flippo
Wer reitet so spät durch Nacht und Wind? \tWho rides so late through the night and wind?
Es ist der Vater mit seinem Kind; \tIt's the father with his child;
Er hat den Knaben wohl in dem Arm, \tHe has the boy safe in his arm,
Er faßt ihn sicher, er hält ihn warm. \tHe holds him secure, he holds him warm.
\t
«Mein Sohn, was birgst du so bang dein Gesicht?» \tMy son, what makes you hide your face in fear?
Siehst, Vater, du den Erlkönig nicht? \tFather, don't you see the Erlking?
Den Erlenkönig mit Kron und Schweif? \tThe Erlking with crown and flowing robe?
«Mein Sohn, es ist ein Nebelstreif.» \tMy son, it's a wisp of fog.
\t
«Du liebes Kind, komm, geh mit mir! \tYou dear child, come along with me!
Gar schöne Spiele spiel' ich mit dir; \tSuch lovely games I'll play with you;
Manch bunte Blumen sind an dem Strand, \tMany colorful flowers are at the shore,
Meine Mutter hat manch gülden Gewand.» \tMy mother has many a golden garment.
\t
Mein Vater, mein Vater, und hörest du nicht, \tMy father, my father, and do you not hear
Was Erlenkönig mir leise verspricht? \tWhat the Erlking promises me so softly?
«Sei ruhig, bleibe ruhig, mein Kind; \tBe quiet, stay quiet, my child;
In dürren Blättern säuselt der Wind.» \tIn the dry leaves the wind is rustling.
\t
«Willst, feiner Knabe, du mit mir gehn? \tWon't you come along with me, my fine boy?
Meine Töchter sollen dich warten schön; \tMy daughters shall attend to you so nicely.
Meine Töchter führen den nächtlichen Reihn, \tMy daughters do their nightly dance,
Und wiegen und tanzen und singen dich ein.» \tAnd they'll rock you and dance you and sing you to sleep.
\t
Mein Vater, mein Vater, und siehst du nicht dort \tMy father, my father, and do you not see over there
Erlkönigs Töchter am düstern Ort? \tErlking's daughters in that dark place?
«Mein Sohn, mein Sohn, ich seh es genau: \tMy son, my son, I see it most definitely:
Es scheinen die alten Weiden so grau.» \tIt's the willow trees looking so grey.
\t
«Ich liebe dich, mich reizt deine schöne Gestalt; \tI love you; I'm charmed by your beautiful form;
Und bist du nicht willig, so brauch ich Gewalt.» \tAnd if you're not willing, then I'll use force.
Mein Vater, mein Vater, jetzt faßt er mich an! \tMy father, my father, now he's grabbing hold of me!
Erlkönig hat mir ein Leids getan! \tErlking has done me harm!
\t
Dem Vater grausets, er reitet geschwind, \tThe father shudders, he rides swiftly,
Er hält in Armen das ächzende Kind, \tHe holds in (his) arms the moaning child.
Erreicht den Hof mit Mühe und Not; \tHe reaches the farmhouse with effort and urgency.
In seinen Armen das Kind war tot. \tIn his arms the child was dead.
Goethe
You know, if they would just give us all credit cards tied to our Helocs that we never have to pay back, we could end this crisis right NOW.
Send the bills to BB.
Interesting OT: Regulators are examining anti-money-laundering practices at Fidelity Investments brokerage-services unit.
Fidelity admitted yesterday that the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority have been probing its anti-money-laundering efforts for months. However, the Boston fund giant said investigators have already cleared four of the five divisions facing scrutiny.
The review, first reported by the Boston Business Journal, apparently stems from a lawsuit filed by David van Duyn, a Fidelity anti-money-laundering lawyer fired in 2006.
Would you allow the discussion of politics if I sacrificed a bull for you at the temple of Venus?
If you can find some way to make a thoughtful comment that elucidates the political (not just the governmental or regulatory, but the strictly political) dimension of economics and finance, then by all means do so. If you can be even mildly original with some offhand joke, fine.
If you just want to yank someone else's chain, see item 1.
No religion and no politics? How about crime and punishment for Wall street?
How about getting back on topic? Since the NYT article is such a bad description with regard to TMA's situation, can someone point me to a good one?
Seriously, I have been hearing some very conflicting stories of what is happening over there.
Well I've read all the comments and I still don't get the lettuce thing. But it's all been a bit weird.
Great story on gold-plated steel up there!!
But how do we know, we can trust The South Africans, maybe they are like Goldman's or Bear and they dumped the toxic gold off on to some dumb rube like Citi and the process of discovery has not occurred yet! Kinda like Goldman waiting to explain that $3 Billion hit, and then another hit, another, another....
Since the NYT article is such a bad description with regard to TMA's situation, can someone point me to a good one?
try their SEC filings.
I'm not a doctor, but I played one on TV.
Yeah, it was all so precipitous. Unless you're some blogger who has been harping on the looming Alt-A problem for a year or so. Then it's more like a--oh, no, not a--AAACK!---
Does anybody have any idea what Thornburg's securities are trading for on the secondary market?
Are these AAA securities with junk yields the top tranches of a CDO or just plain vanilla MBS.
Schnapster, try this:
Thornburg's a Huge Bargain After Monday's Crash -- Seeking Alpha
300+ comments, people with money in the game.
Per CBNC (Gasparino) - BSC will be sold for less than $15 per share...
c&c,
Is that from today?
Yes - here is the link (sorry):
JP Morgan Offers $15-$20 A Share for Bear Stearns - CNBC
And if the sale price is what many inside Bear expect, possibly less than $15 a share, these employees will be left with next to nothing
I have the most brilliant solution for bank and hedge fund troubles. So here it is:
FED should set up a company called JUNK-R-US at virtual Secondlife.com and park all the crap from the banks and hedge funds into this other dimension. They could even create their very own currency for that purpose! This way banksters and fraudsters would get a SECOND CHANCE! They NEED our HELP!
That thread was totally destroyed by religion? I found 27 references to "relig"in a 300 comment thread, including some posts with several. Most are to the end. With very rare exceptions, threads only manage 50 to 150 posts while on-topic. After that they either peter out or go off the rails. In keeping with the theme of this post, I'd say the thread was already dead and the religious bit was kind of an extended undead existence. And while that particular zombie did want to eat brains, it was too slow to catch anybody, like in your usual zombie movie. Just walk on to the next thread and let it be.
Is there any point in discussing Sebastian's motivations? He's a devil's advocate and serves a useful purpose but I doubt anybody can definitively discern his motivations by dissecting his posts. Not that it much matters what his motivations are anyway. That particular zombie discussion also wants brains, seems somewhat faster (based on catching more people), and is annoyingly persistent (also in keeping with zombie movies). Can we sew salt in its mouth or whatever it takes to kill it in this mythos?
S&P Religion:
March 14 - Standard & Poor's Ratings Services today announced that it has
refined its assumptions for surveilling global market value collateralized debt
obligations (CDOs).
In our view, recent pressure on loan prices and significantly higher
price volatility in the leveraged loan market have put market value vehicles
in jeopardy of tripping their overcollateralization coverage (O/C) tests. As a
result, we will more closely monitor those transactions that report their O/C
tests less frequently than daily. If recent price volatility persists,
collateral managers will continue to face challenges in maintaining O/C levels
above minimum requirements, and a cycle of failing tests and curing failed
tests may persist. In anticipation of this situation, we may place
transactions that are close to breaching their O/C thresholds on CreditWatch
negative, where we will keep them until an appropriate "cushion" is
re-established above the minimum O/C requirement.
Thanks. $15 equates to 2B. I hope this excludes tax payer money given out on Friday.
I can think of some metaphors to use with the name Bear Stearns.
Housing group challenges Fed's Bear Stearns deal
Expired
in a complaint filed with the Fed late Saturday, called the central bank's brokering of the deal "entirely illegal" and anticompetitive, and questioned whether sufficient Fed members had voted for it.
Check out the graph in this story:
This time the crisis is different
This time the crisis is different - Money Matters - livemint.com
Re: Lehman Brothers received a $2 billion (Rs8,100 crore) unsecured line of credit from 40 banks on Friday. Experts are predicting that the crisis will lead to record losses for insurance companies. This is no mere stock market correctionits a systemic financial crisis.
I guess I missed that on LEH??
Okay, back on-topic.
From the NYT: "The story of Alt-A and Thornburg also illustrates why the current credit crisis is different from past panics, like the market crash of 1987 or the crisis a decade ago when Long-Term Capital imploded. Those were rapid-paced events, which erupted and then faded from view. This is more akin to a slow-motion, chain-reaction car crash."
But if you look at the stock-market response it's almost exactly the same. In 1987 and 1998 the corrections were large but quick, lasting only a few months before the market formed a solid low and then began to rally again.
Also, these things often take a long time to reach the terminal point. As an example, Enron stock had been in a clear downtrend for a long time before the really bad news became public.
LTCM's early stellar returns deterioated substantially well before the ultimate melt-down.
The public is the last to know, and by the time they find out the damage has been done.
Just like our current "crisis."
Sebastian
Oh (never mind), as emily litella would say:
March 14 (Bloomberg) -- Lehman Brothers Holdings Inc. obtained a $2 billion credit line as the investment bank tried to blunt the stock's worst drop in almost eight years and assure investors the firm isn't short on cash.
The unsecured, three-year facility from 40 banks replaces an existing credit line, New York-based Lehman said today in a statement. JPMorgan Chase & Co. and Citigroup Inc., also based in New York, led the effort, the firm said.
Lehman announced the financing hours after Bear Stearns Cos. said it agreed to an emergency bailout by JPMorgan Chase and the New York Federal Reserve.
See: Emily Litella - Wikipedia, the free encyclopedia
What is all this fuss I hear about the Supreme Court decision on a "deaf" penalty? It's terrible! Deaf people have enough problems as it is!"
PeonInChief:
Make sense?
Gimme a break. I'm both a PhD-type doctor and a professor, of linguistics no less, and I assure you that none of what you're talking about is true. My students can call me Prof., or Dr., or Mr., or my first name, or "Yo!". Honestly, I have other things to worry about, and if I found out a student was trying to insult me by calling me "Dr" I'd have to laugh too.
It seems it does matter more in Europe, though:
Title Fight: US Academics Harassed over 'False' Credentials - SPIEGEL ONLINE - News - International
my law degrees say jd, llm, and djs (doctor of juridical science)
so i guess i was a dr the first time, then got demoted, then ascended again
fyi
about 35 years ago the aba suggested law schools awared a jd instead of llb because lots of pay scales like the federal civil service and state equivalents paid salary tracks by degree level attained and lawyers after 3 years post college were felt to deserve the same pay grade as phds and mds
thats where it came from
but the never changed master of laws, so a master of laws is considered more advanced than a doctor of law (jd = juris doctor)
also in latin doctor means teacher; "medicus" would be a physician as i recall...
im pretty sure roger bacon and his pals were handing out doctorates around the time of robin hood
and those were really earned believe me most people today could not make it thru the trivium and quadrivium that were required of universities then
(plus i dont think you got to wear underwear under those robes)
An anagram for Bear Stearns is Barren Asset.
Serious question BS and/or Thornburg. What is the benefit of buying the whole bag rather than letting the bag spill out and then only pick up the good stuff? Is there something about goodwill or tax benefits that essentially turn a bulk purchase into a taxpayer bailout plus?
I've excerpted this from the comments section of another blog by "anonymous". Very insightful, I thought:
"I don't think you quite understand the fundamental force that is driving the collapese in non-agency mortgage bonds.
Non-agency AAA's were originally created with coupons in the L+50 range. Effective durations in an environment of high prepayment speeds (CPR > 35%) were 2.5-3 yrs. Subordination levels were originally in the 27-30% range, and this grows over time as prepayments (or defaults) work their way through the pool.
Now, it only made sense to pay L+50 for these securities if you were able to apply a lot of leverage to them. No one in their right mind ever would have bought these bonds if all they thought they were receiving was a 6% yield to maturity. The yield is not commensurate with the fundamental risk profile of the borrower pool.
We are now in a world where (a) risk premia have increased dramatically; (b) leverage availability and cost is going up for everyone, (c) leverage is well nigh impossible to obtain for new entrants; and (d) the entire mortgage community can see that there are distressed sellers getting margin called who need to sell their bonds. Therefore, the marginal buyer of non-agency AAA's is not interested in buying the bonds at L+50. We're now demanding equity-like returns: L+750 at a minimum.
This spread widening is being complicated by the fact that prepayment speeds have slowed dramatically. CPR's are now around 15% or lower for many non-agency pools. Effective durations are now in the 5-7 year range. Ouch! Negative convexity strikes again.
So, what happens to the price of a bond with a coupon rate of L+50 if spreads widen 700bps and the duration extends to 6 years? You got it - the market price of the bond must decline by 42% due to basic bond math (chg price = chg in spread x duration). Hnce this is why non-agency AAA's are now quoted on the secondary market at 50-70 cents on the dollar.
The final issue that is complicating everything is the fact that most of the non-agency AAA's that were created the past 3 years were sold to leveraged investors (SIV's, conduits, hedge funds, insurance companies, banks, etc). Dealer haircuts for AAA MBS typically ranged in the 2-3% range. The spread widening is forcing dealers to raise haircuts and many of the leveraged investors are refusing to post more collateral. So the bond brokers are taking margin-called mortgages back on their books at 97-98 cents on the dollar, when the market bid is 50-70.
Now, roughly $1.5T of non-agency AAA's were created from 05-07. The equity base that originally supported these bonds was ~ $30B. That equity base has been wiped out and the market value of the bonds has dropped to $1T. The dealer community never wanted nor intended to be long-term mortgage investors; they don't have the capital structure for it, or the ability to dynamically hedge the duration risk. They are "moving companies" not "storage companies". But at the same time, they don't want to sell money good bonds at 50 cents on the dollar when they are on the books for 98. it would destroy the equity base of their firm(s).
Hence, you have what alan greenspan would call a conundrum: how do we find >$1T of new capital that is willing to invest in non-agency AAA's in the middle of a housing collapse and credit crisis? Because if we can't get the capital into the non-agency market very quickly, the broker dealer community will be unable to fulfill its financial intermediation function in an effective fashion.
That's the problem that's unfolding in the market. It's a huge technical overhang for anyone who wants to buy non-agency AAA's in size. The other problem is that most of the expertise on how to value non-agency MBS is on the sell side. it's a niche specialty on the buy side. outside of PIMCO and WAMCO, very few firms have the resources to take down $20B of non-agency MBS - let alone the $500B it will take to put a dent in the problem.
But don't worry. the situation WILL get cleaned up eventually. the risk-reward trade-off on some of these bonds is incredible. Anything that was issued before 07 will pay off at par, someday. Most of the 07 bonds (only the AAA's, mind you) will pay off somewhere in the 90's. And that's even if the ABX stays about where it is (remember, the ABX only measures the price of the last cash flow bond, which represents roughly 15% of the AAA stack). the key is that you have to be able to withstand downgrades.
The only other thing i've seen like it in my career was the early 80's, when you could buy 30 year zero coupon treasuries and lock in 15% risk free returns for a generation.
Posted by: anonymous at March 15, 2008 10:01 PM
Tanta, too bad about this thread.
If TMA goes bk, wouldn't that set off additional round of writedowns due to deterioration and forced sales of MBS in the Alt-A, prime and super-prime category?
Would still like to know who will be left standing in the wholesale lending arena other than the major banks.
Mr. Market is not going to like it if one of the few 'responsible mortgage lenders' bites the dust.
Fair Economist, thank you for your analysis of yesterday's thread.
I am no longer trying to control yesterday's thread. I am trying to control this one, in which the dangerous topic popped up rather early. You see, yesterday is gone. Today might still have some promise.
I made a big point of it because I periodically have to remind people about troll-feeding. And I also have to periodically remind people that bringing up incendiary topics that you know perfectly well will start a brawl just so that you can feel persecuted is a classic example of troll behavior. It has nothing to do with religion per se. And arguing about whether it is religion per se or not CREATES THE VERY THREAD KILLER I AM TRYING TO AVOID. Everything useful--plus a bunch of other stuff--that can be said on the subject was already said yesterday. It will be no better warmed over today.
I have no desire for this thread to turn into Sebastian-bashing, or even just lavishing attention on Sebastian, either. If the rest of you are as tired of that as I am, you know what you can do: don't take the bait.
Why should a 100% done deal at Bear automatically stop the run on the bank?
You have thousands of employees who have lost their investments in employer securities and now face getting fired. Lots of resentment there.
You have huge transition turmoil and turnover with any new buyer.
And you still have uncertainties in regard to legal risk, execution risk, etc.
Why wouldn't everybody who possibly can pull their money out of Bear Stearns Morgan Stanley on Monday?
Anonymous said: "This time the crisis is different..."
Indeed it is.
From the article: "Current estimates of the ultimate losses from the credit crisis go all the way to a trillion US dollars. While that sounds huge, its slightly more than 7% of the US gross domestic product (GDP). The costs to Japan as a result of its credit crisis have been almost three times as much, measured as a percentage of GDP...."
(asterisks mine)
S.
from link posted by c&c -
The deal will likely lead to massive layoffs at Bear as JP Morgan consolidates businesses. But Bear isnt alone.
Sources tell CNBC that CS First Boston will be cutting jobs this week in its investment banking department and big cuts are looming at Merrill Lynch Merrill Lynch & Co Inc, where middle managers are bracing for cuts of 10 percent across the board. Also sources say Lehman Bothers Lehman Brothers Holdings will likely be in for turbulence given its own holdings of risky commercial real estate bonds.
From anon's link:
"Current estimates of the ultimate losses from the credit crisis go all the way to a trillion US dollars. While that sounds huge, its slightly more than 7% of the US gross domestic product (GDP)."
Gee, $1 trillion. Is that all? Here I was thinking it was a lot of money.
Sebastian:
I remember that not too long ago this was only going to be a $500 billion crisis. The fact is that we don't have a real good estimate of how big it will be.
The writer should have emphasized "current estimate."
IMO, the final losses will be way beyond $1 trillion.
I have many friends, well educated, doing quite well, with NO IDEA as to the severity of the unraveling. For anyone who has made the attempt to pay even minimal attention to sources outside the mainstream media, it has been painfully obvious and enormously profitable.
Meltdown Man
Yup. I'm amazed that people are still acting as though this is some kind of routine cyclical slowdown that represents a buying opportunity for shrewd stock investors.
It's only fair to point out, though, that by this time even many mainstream media people and the people they (we) go to for quotes are beginning to get the idea. But it is naturally difficult for people to accept the idea that their world may be changing, for the worse, and permanently.
I also wonder if this event or cluster of events will ultimately be "enormously profitable" for any significant number of people no matter how foresighted they were.
Thanks, Anon. Now if someone could just distill those comments into something helpful.
My take is the Fed's TSLF announcement on 3/11 is what everyone is all excited about, but since TMA isn't a 'primary dealer' Goldstone can't just shovel those AAA securities over the the Fed on the 27th and go back to 8-hours of sleep a night.
BUT...I suppose a primary could either buy TMA and do just that, or buy them at haircut from TMA, and both would be winners. Either way, that TSLF plan brings them way up from 'junk', right?
Seriously, I have been hearing some very conflicting stories of what is happening over there.
As far as I can tell, they've been jazzing up their returns with the carry trade, funding debt with reverse repos.
Just like . . . everyone else. But it's "news" because it's Thornburg, and the press is still convinced that the essential point is the quality of loans that Thornburg originates, not the market price/leverage of the securities it buys.
As you may know, the "Onion" has a running metaphor joke. Here's a relevant sample:
World's Largest Metaphor Hits Ice-Berg | The Onion - America's Finest News Source
There are many more.
Sebastian, is there a link to that article? We're looking at 6 trillion in losses, not 1 trillion. The question is how much of that 6 trillion "counts." I'm curious whether the same methodology was used to determine what losses were relevant in both countries. Another issue is that because of low down payments a bigger proportion of the losses will feed into the financial system in the US than it did in Japan.
One argument in favor of a less gruesome outcome is that Japan had a massive crash in equities coincide with a massive crash in real estate. We have separated the two bubbles.
funding debt with reverse repos.
funding assets with reverse repos.
For some reason talk "Master Tanta" triggers thoughts of the ultimate snarker, Wodehouse's Jeeves, who's always refering Wooster as his "young/able/high-born/... master", though clearly Tanta is more in the Jeeves (or perhaps the affable Aunt) role than Master Ben "Bertie" Bernanke:
T: "Possibly the plan I suggested might be considered open to that
criticism, sir, but faute de mieux----"
B: "I don't get you, Tanta."
T: "A French expression, sir, signifying 'for want of anything better'."
A moment before, I had been feeling for this wreck of a once fine thinker
nothing but a gentle pity. These words jarred the Bernanke pride, inducing asperity.
B: "I understand perfectly well what faute de mieux means, Tanta. I did
not recently spend two months among our Gallic neighbours for nothing.
Besides, I remember that one from school. What caused my bewilderment was that you should be employing the expression, well knowing that there is
no bally faute de mieux about it at all. Where do you get that
faute-de-mieux stuff? Didn't I tell you I had everything taped out?"
T: "Yes, sir, but----"
B: "What do you mean--but?"
T: "Well, sir----"
B: "Push on, Tanta. I am ready, even anxious, to hear your views."
T: "Well, sir, if I may take the liberty of reminding you of it, your plans
in the past have not always been uniformly successful."
(adapted from Right Ho, Jeeves, by P. G. Wodehouse)
"One argument in favor of a less gruesome outcome is that Japan had a massive crash in equities coincide with a massive crash in real estate. We have separated the two bubbles."
The only difference here is that we are now experiencing a massive crash in real estate, coinciding with a massive crash in equities.
funding assets with reverse repos
If you're going to get all picky and stuff about coherent comments, OK, "assets," Dr. Bacon Esq.
anonymous and shapster
see s hartwell at 223 pm at seeking alpha
Thornburg's a Huge Bargain After Monday's Crash -- Seeking Alpha
good look at the numbers
makes it clear that leverage and market psychology are major factors regarding thornburg
Could the old saying "the tip of the iceberg" now become "the tip of the Thornburg"?
@John Stark Yup. I'm amazed that people are still acting as though this is some kind of routine cyclical slowdown that represents a buying opportunity for shrewd stock investors.
Remember this oldie?
Prudent investors are now buying stocks in huge quantities and will profit handsomely when this hysteria is over.
John Jakob Raskob (just before the 1929 crash)
Well, at least he finished the Empire State Building on time ...
shanpster sorry for the mis spell
iOT, but we need to toss as many bums out of this corrupt system as possible! Bear Sterns should not be bailed out, they need to collapse because they were corrupt and The Fed should not bail out crooks!
Crooks should be thrown in jail. Those who were negligent should be found liable and made to pay damages. But if we need some kind of bailout of the institution to save the economy--(finger in the dike metaphor)--then let's do that.
If my neighbor sets his house on fire by smoking in bed, I still want the fire department to come and put it out before it spreads to my house.
And if the captain of my cruise ship gets drunk and hits an iceberg, I still want someone to come and save me.
(Sorry if this posts twice, Haloscan, you know.)
Winston said: "I remember that not too long ago this was only going to be a $500 billion crisis. The fact is that we don't have a real good estimate of how big it will be."
Exactly. We also don't know how small it could be or if $500 billion is about right.
Neither do we know what the impact of compensating factors will be. For example, lower borrowing costs will be a positive factor.
We can also look at other numbers for perspective. For example, even $1 trillion loss is only 5 quarters of operating earnings for the SP500, painful, but not permanently crippling. Especially when you consider that the losses are heavily concentrated among a relatively small number of companies and sectors, with lots of other companies and sectors doing well.
http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS
Any final answer must include both the positives and the negatives.
Sebastia
...there is always a silver lining to a full-bore credit crunch. It grinds idiots like that out of the business. And we can all get behind that.
It feels like the idiots are the ones holding on and the smarties have jumped ship.
mock - thanks. At least you didn't spell it with a c.
That post you referred to was insightful, but it was made on 3/4, before the whole TSLF doodad came out. My thought earlier was that the Fed did them a huge favor (even if indirectly) by allowing the TSLF to accept non-agency AAA. I was just hoping that someone a little more familiar with it could break down exactly how that might play out for TMA.
back when I was approaching hooding for a MS, I looked into the difference between the MS and phD degrees. In meadival times the two terms were synonymous and referred to a person who had sufficient mastery of a subject as to be able to teach it.
As our illustrious hostess has so amply demonstrated her ability to teach the subject of mortgage paperwork, she (in my mind at least) as earned her advanced degree and is entitled to respectful titles. Although I would prefer the sainted title remain many years in the future.
OK, "assets," Dr. Bacon Esq.
true fact: i have the coolest business cards in the history of the world. sure, my phone number and email and company and stuff don't fit on the front (my name is embossed in bright purple triple-sized "Snell Roundhand"), but i'm pretty sure that's not the point of business cards anyways.
And in other news for cub scouts, this from yesterday's NYT:
"Wall Street firms like Bear Stearns conduct business with many individuals, corporations, financial companies, pension funds and hedge funds. They also do billions of dollars of business with each other every day, borrowing and lending securities at a dizzying pace and fueling the wheels of capitalism."
NEWS ANALYSIS; A Wall St. Domino Theory - NY Times
bacon - yeah, but is your lettering in silian rail?
Investors await Bear report, Fed meeting
Yahoo! 404 - Page Not Found
masaccio,
I especially liked 'fueling the wheels'. Good old NYT - right on topic.
Tanta:
MSM for its own reasons has at best ignored the magnitude of the possible meltdown. But I believe that the majority of posters at CR believe that the economy will been THE major problem for the next president.
It is actually the political blogs that have move things in the political debate. I am writing to these blogs asking them to bring the economic problems into political discussion.
I invite others to do so as well
"Wall Street firms like Bear Stearns conduct business with many individuals, corporations, financial companies, pension funds and hedge funds. They also do billions of dollars of business with each other every day, borrowing and lending securities at a dizzying pace and fueling the wheels of capitalism."
perhaps their present problems are due to the fact that all this dizzying effort generates nothing of value to anyone away from Wall Street.
Paulson: "Every economy goes through some ups and downs".
Treasury Secretary Henry Paulson says U.S. economy in a "tough patch"
Paulson says economic stimulus plan will make "real difference" starting in May.
All you meltdowners need to get a grip. Mr. Paulson (of Goldman Sachs no less) says it's going to be OK. No need to worry.
PS - my post is sarcastic so please do call me names.
That is - don't call me names except Mr. Bad Typer.
from prof. krugman on hank paulson today:
"Do not send the man who declared, back in April 2007, that the housing correction had reached bottom and that the subprime problem was largely contained to all the Sunday talk shows to declare that our financial institutions, our banks and investments banks are very strong. It just feeds the panic."
We all already know what the unwinding will reveal: Bankruptcy at every level.
All that's left to determine is if the FED's response will cause inflation or deflation on the way down. For the solvent and liquid, knowing the answer to that question will mean the difference between pain and utter agony.
Indian banks in trouble.
And to think we exported so many jobs to them, now we have exported are crazy bank problems also.
Outsourcing at its finest.
FT.com / Asia-Pacific / India - India faces wave of defaults
Seems that Bear Stearns will have to bare sterns and(thanks HousingBubbleBlog!) have some Joshua Trees applied.
"reliable" New York Times?
Did you really say that?
MSM for its own reasons has at best ignored the magnitude of the possible meltdown.
It's not about "reasons." Remember what the MS in MSM stands for: mainstream. Conventional wisdom. What the average person wants to hear. No Cassandras need apply. Even so, astute mainstream media readers probably got a bit nervous if they listened closely and gave the facts before them a little bit of thought. It's not as though there was no hint of any of this in the mainstream media two or three years ago--or before the dotcom meltdown before that. It's just that most of us choose to ignore the prophets of doom because their message is so unpleasant. And there are always plenty of cheerleaders ready to flash the buy sign with their pompoms.
All the way back to the Old Testament, the prophets of doom like Jeremiah had a lot of competition from the false prophets who said we could all muddle through just as we did before.
OT but related to what someone wrote above:
Is there a good layman's primer on the causes and effects of the decade long Japan malaise? A lot of people are pointing to that as the possible model of what we are going to go through.
I have a passing familiarity with the Japan situation based on my occasional travels there plus the large effect the situation there has on the Hawaiian economy, but know there are large gaps in my knowledge.
Plus, I feel the potential for an analogous situation is low based on the following differences:
1) The unwinding of the Japan bubble was not only based on the domestic popping of the RE market, but also due to buying overpriced foreign assets (e.g. rock center) which also plummeted.
2) The decline of the yen to the dollar and other world currencies, after an overt three decade long preference for maintaining a weak currency - I have no idea which way the cause and effect goes here, but suspect like most spirals, its a little of both.
3) Structural problems (caused by both law and culture) by which the economy was locked into a 70's (in Japan) employment model, so that large firms couldn't restructure to gain efficiencies and eliminate obsolete positions/functions, nor small firms and mom and pop operations merge and consolidate to also gain efficiencies.
4) Negative population growth due to (Japanese) baby boomer preferences for small families (similar to US and Western Europe, but even more so) and effectively negligible immigration. (Note I am no arguing for or against any specific immigration policy, just that two countries with different policies will more than likely experience different macroeconomic effects.
Like I said above, if anyone knows of a good primer (or a few of different viewpoints) I'd love to see it to evaluate my gut assumptions above.
"reliable" New York Times?
Did you really say that?
Yup. If your project is looking for some purple prose to giggle over, there is nothing more reliable than the NYT.
A huge car container ship hit an iceberg causing the cars on top of the ship to go flying onto the iceberg and hit it in a chain of explosions.
But then another iceberg collided with the side of the container ship and the cars along the side of the container ship fell onto that other iceberg igniting the fuel in their gas tanks. This caused a financial bonfire that reached all the way back to the container ship.
Then the owners of the container ship and the insurance company syndicate learned of this and their stocks and bonds crashed. Banks called in their loans. The iceberg of their corporate debts rose up out of the financial ocean.
The executives of the insurance companies received margin calls for their personal portfolios. Their hidden leverage was suddenly uncovered for all to see.
This set off a chain reaction of economic collapse caused by the below the water line chunks of two different icebergs.
The only other thing i've seen like it in my career was the early 80's, when you could buy 30 year zero coupon treasuries and lock in 15% risk free returns for a generation.
Great post....
But, at the time the 15% yields on zeros didn't look risk free after a decade of double digit inflation. And those were Treasuries! No worry about the "homeowner's put", fungibility ("market for lemons"), and homeowners stripping the wiring from the collateral.
The market will clear, but only once the Federal Reserve is able to assure the market it can retain price stability. Currently, there is a huge risk of holding MBS in either a 70's/30's scenario.
BTW, we hear about these things selling for 50-70 cents on the dollar but where are they selling and who's buying?
Someday this war's gonna end
I went to my church this morning to pray that Sebastian is right and all of the rest of us are wrong. Standing around afterward with a dozen nice people who got to talking housing. They could not understand why houses are not selling in their neighborhoods and were wondering if there was some problem with the market. No clue! I could not bring myself to throw out any relevant data gleaned from CR and Tanta. Too cruel.
May I say that beatification is only the first step to sainthood? And miracles are required to achieve same also? If Tanta said mkts would be up Monday, and so it was, that would be sufficient. But it ain't gonna happen, so . . .
Also, Cubans call lawyers abogados, or in my case abogada, so they call me doctora. I am embarrassed to say that I feel flattered.
I believe BSC has a large CDS portfolio, which was one of the reasons customers pulled their funds. If the CDSs are not held by an independent GSE, who would want to buy BEAR at any price? But if BSC fails it will set up a chain reaction of failed swaps, down grades and writedowns. The Fed can't let this happen. No one will buy Bear, it will just twist in the wind until the crisis is past (or it is struck by an iceburg).
JP Morgan Offering $15-$20 A Share for Bear Stearns
JP Morgan Offers $15-$20 A Share for Bear Stearns - CNBC
Bear Stearns, JPMorgan Aim to Strike Sale Agreement, People Say
Bear Stearns, JPMorgan Strive for Sale, People Say (Update2) - Bloomberg.com
Could someone explain how ownership of one of these MBS bonds relates to mortages on the underlying homes, ie if one were to buy one of the bonds at 10 cents on the dollar does that give you the right to foreclose and gain ownership of the homes that have loans that went bad?
I just hope the guy running "Catapult mortgage" is running another business rehabbing foreclosed properties, perhaps "Too Tall Wall Services".
Steelcurtain -
You need a primer on how Mortgage Backed Securities (MBS) work. Regardless of what price is paid for a bond, it is about buying a revenue stream. Buying these instruments has nothing to do with gaining ownership of homes.
Try this ubernerd post on how a basic MBS works. I know it's long.
Once you wrap your head around that, you should check out this interactive showing how CDOs are created out of MBSs.
There are even more mixed metaphors in that article. This zombie Goldstone is racing around during e near death experience (hell if someone who was running around in a coma asked for it I'd have forked over money too).
We might end up broke with no money for food, but then we can feed on ourselves like the alt-A precipitous event does (how does an event eat itself in fact how does anything).
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American Heritage:
USAGE NOTE: The adjective precipitate and the adverb precipitately were once applied to physical steepness but are now used primarily of rash, headlong actions: They made a precipitate decision. He withdrew precipitately from the race. Precipitous currently means steep in both literal and figurative senses: the precipitous rapids of the upper river; a precipitous drop in commodity prices. But precipitous and precipitously are also frequently used to mean abrupt, hasty, which takes them into territory that would ordinarily belong to precipitate and precipitately: their precipitous decision to leave. This usage is a natural extension of the use of precipitous to describe a rise or fall in a quantity over time: a precipitous increase in reports of measles is also an abrupt or sudden event. Though this extended use of precipitous is well attested in the work of reputable writers, it is still widely regarded as an error.