Are we supposed to believe that the Fed accepted the value placed on the MBS by Bear Stearns, rechecked it themselves, then had Blackrock confirm it, but the Market was unable to see the value?
If they could see it's value, why did they presume no one else would?
And why not sell it now on the market for 29 billion?
Apparently they realize no one will believe their assessment!!!!
They KNOW that the market has NO CONFIDENCE in Bear Stearns, the Fed, and Blackrock!
"...
Global debt underwriting volumes tumbled 50 percent from July through March, a more than $2 trillion drop from the same period a year earlier, according to data from Oppenheimer. U.S. debt issuance fell by more than $1.3 trillion, or 55 percent.
``There is little room in the system to `pick up the slack' vis-à-vis corporate lending,'' Whitney wrote in a report to clients dated yesterday.
More than 80 percent of corporate funding came from capital markets in 2007, according to Whitney. She said such a ``massive extraction of liquidity'' in the past nine months, is bound to slow the economy. The U.S. economy grew at an annual pace of 0.6 percent in the fourth quarter, and probably slowed to a 0.2 percent rate in the first quarter, according to the median estimate of analysts surveyed by Bloomberg News.
..."
love the fact the Fed wont give fair market value as of today for $30 B assets they took as collateral for BSC back-stop. Geithner asks for confidentiality from Senate committee, says they'll give QUARTERLY fair value. maybe that's all Fed will ask of financials going forward: no more daily mark-to-market, just give us your best guess on a quarterly basis on the down-low. we wont tell the world you're bankrupt and your shitty assets ought not be levered > 30:1. look out below.
Section 13(b) may be a memory, and a discomfiting one at that, but Section 13 paragraph 3 (that language originally found in a 1932 highway bill) is alive and well in the Federal Reserve Act. As we've seen from the above illustrations, this amendment allows, in unusual and exigent circumstances, a Reserve bank to advance credit to individuals, partnerships and corporations that are not depository institutions. At least five members of the Federal Reserve Board must agree with the credit advance, and the Reserve bank must show that such credit was not available elsewhere.
As much as the crisis hit with ferocious speed, so was the FED reaction. They really turned it around swiftly. We have to cut the FED some real slack here. One of the greatest jobs ever done by a central bank, IMO. It really looks like Sebastian is right and ECRI gets it wrong for the first time - this will not be a recession. We'll get one quarter of negative economic growths and that's it. Oh, yes and Jas has it wrong, too - but that's not really something new.
O-Joe
I never thought we would see a coup in America, and they put on the internet and Tv to allow people to watch. Why didn't they just do this behind closed doors?
Unless you think your assets are worth more than someone will pay
from the little guy who think's his house is worth $500k to the big bankers who think their company is worth $30B, they all think their assets are worth more than anyone will pay - and it's scaring them.
A trick I used to play with other kids when I was 12 was to begin to push someone into a pool and then pull them back quickly.
I would then say "Aren't you glad I saved you!" and we all laugh at the obvious joke of seeking reward for saving someone I put in jeopardy in the first place.
O-Joe I guess would thank me with genuine sincerity for saving him from me pushing him in.
Realtors are not the only ones showing people how to get new loans before walking on the old one. Mortgage brokers have it figured out as well. This is never going to end now that the heroin of easy debt has caught on.
Re: At least five members of the Federal Reserve Board must agree with the credit advance, and the Reserve bank must show that such credit was not available elsewhere.
The Fed involvement in this extortion-like negotiation was a matter done under duress, i.e, this forced negotiation and panic did not allow for free market efficiency and a capitalistic solution to this problem.
What do you call this besides extortion? How can anyone explain away market manipulation and insider trading???
All this comes down to is "preservation of the system" - period. It's a bail out, no question. Does it suck for tax payers? Sure.
But what's the alternative?
Reminds of the chapter in Reminiscence of a Stock Operator when Livermore stopped shorting stocks at the request of JP Morgan - it was about preservation of the system, and that came before any personal agendas. I think we're seeing the same thing here.
It sucks, but I think the alternative is "suckier".
Re: As we've seen from the above illustrations, this amendment allows, in unusual and exigent circumstances, a Reserve bank to advance credit to individuals, partnerships and corporations that are not depository institutions
Where are the details? How long ago was this, and all we have is a bogus rough draft of a portfolio which is linked to the very general concept of a credit extension, which may or may not be a loan. Where are the details of this transaction and the terms of a contract with American taxpayers????
"As much as the crisis hit with ferocious speed, so was the FED reaction. They really turned it around swiftly. We have to cut the FED some real slack here."
If Bear Stearns would have ignored Bernanke's testimony last spring summer and fall and simply read a few post by CR or Tanta, they would have had a year or more to shore up their balance sheet and any need for emergency action would have been eliminated.
I guess Roubini won't be called to testify: This colleague is right. But in some sense this decomposition does not include many other losses that are unrelated to mortgages: losses from commercial real estate loans; losses from consumer credit (auto loans, credit cards, student loans), losses on holdings of leveraged loans, losses on holdings of impaired or defaulted muni bonds, losses on commercial and industrial loans, losses on defaulted corporate bonds, losses on CDS when corporate bonds default.
Some of these losses are, of course, not net losses of national wealth as most of these assets are inside assets, i.e. assets of one economic agent and liabilities of another economic agent. But some other of these losses are real as they represent outside assets: the lost equity in homes and the stock market, the deadweight economic losses from bankruptcy and foreclosure, etc. But even losses related to inside assets matter as they may impair the balance sheet of creditors (say banks and financial institutions), reduce their capital, limit their ability to lend, thus leading to a credit crunch that causes other real losses in the form of foregone output, production and income (GDP losses).
Either way we are only at the beginning of a process of realizing, acknowledging, writing down and accounting for the full variety of financial and real losses that the worst financial crisis since the Great Depression and the most serious recession in decades will entail. So the recent partial recovery of equity markets after the Bear Stearns is delusional; conditions in credit markets and money markets remain extremely strained and the onslaught of weak macro and financial news has not reached its peak yet. So the worst for the real economy and financial markets is ahead of us, not behind us.
folks, the financial system is walking on thin ice. take a look at the participants in CAPCO and maybe you will understand the Bear situation:
The broker/dealers that receive CAPCO's Excess SIPC protection are:
A.G. Edwards & Sons, Inc.
Bear Stearns Securities Corp.
Credit Suisse Securities (USA) LLC
Edward D. Jones & Co. L.P.
National Financial Services LLC
Goldman Sachs & Co.
Goldman Sachs Execution & Clearing, L.P.
Lehman Brothers Inc.
Neuberger Berman LLC
Morgan Stanley & Co., Inc.
Morgan Stanley DW Inc.
Raymond James and Associates
Ridge Clearing & Outsourcing Solutions, Inc.
Robert W. Baird & Co.
Pershing LLC
First Clearing, LLC
No other firms currently receive Excess SIPC protection from CAPCO.
Q. How is CAPCO funded?
CAPCO is capitalized by its 15 member firms and has a very strong reinsurance program consisting of two monoline financial guaranty reinsurers, each of which is rated AAA by Standard and Poor's.
Visit the CAPCO site. So much good info there along with the latest 3/26/08 S&P rating report (Outlook revised to negative, A+ affirmed.)
Geithner --- 'Absent a forceful policy response, the consequences would be lower incomes for working families, higher borrowing costs for housing, education, and the expenses of everyday life, lower value of retirement savings, and rising unemployment.'
I dont want to add to the panic, but one thing that is getting little in the way of attention here is the question of whether investors should have investments in their name or street name. Many brokerage accounts are automatically opened as margin accounts, or with margin features, which means if a brokerage runs into trouble, you become just another creditor.
Granted, alls well that ends well if your broker (Bear Stearns) is acquired by another (JP Morgan), assuming the acquiring broker remains in good shape.
If youre not willing to take that chance, one suggestion is to transfer your account to a custody-type account at a trust company or bank trust department
In follow-up to my CAPCO post, basically, if Bear failed, we would have the mother of all bank runs... on all banks. But, they are not saying this in congress today. They are not even mentioning CAPCO...
Re: ""Under more normal conditions we might have come to a different decision" with respect to Bear Stearns, Mr. Bernanke said."
Yes.... if they would have not cared about that darn market opening in Japan, maybe a better situation would have evolved, like a free market negotiation, with this deal being public and allowing Congress to be part of the solution, instead of The Fed usurping power over the weekend.
At 2 o'clock on Friday morning, a few scant hours after his pessimistic report to the President, Mr. Dodd and other exhausted Democratic lawmakers placed a telephone call to a weary Treasury Secretary Lawrence H. Summers to report that they had clinched a deal with Mr. Gramm to repeal the Glass-Steagall Act of 1933. After eluding its advocates for decades, the agreement to deregulate Wall Street, favored by many of the nation's most powerful business interests, was struck.
The meeting in the middle of the night was the final chapter in a saga that began in 1934, when Senator Carter Glass himself tried to undo the law that put his name into the history books. The meeting capped a month of posturing, brinkmanship and dealmaking in Washington. And its outcome is expected to bring about one of the most important changes in decades in the laws governing the nation's financial system.
This account of the roller-coaster ride of the Financial Services Act of 1999 is based on interviews with leading Democratic and Republican lawmakers, senior officials at the White House, the Federal Reserve and the Treasury Department, and industry executives and lobbyists.
So much for the charade in the morning! It will be a reply of what happened wed with no questions, no replies and tax payers on the hook for a $29 billion hand out to crooks!
scotty very slow 2 see | 04.03.08 - 12:22 am | #
The Senate should ask Ben for a list of the companies that are too big to fail. If "too big to fail" means the taxpayers are on the hook for them, we should be getting their profits.
The $29B handout to JPMorgan (to backstop the Bear purchase) is the first of what will end up being many handouts to those agencies, banks, and hedge funds that created this mess in the first place. This is welfare for the uber-rich.
JS - ["too big to fail" means the taxpayers are on the hook for them, we should be getting their profits]
Exactly right. If there's an implicit guarantee that these outfits get propped up with taxpayer money their activities need to be scutinized and their profits shared with the taxpayer.
I find the bit about how different decisions regarding Bear would have been made under "normal" conditions hillarious. Bear would NEVER run into trouble during "normal" conditions!
Saying that we only bail-out banks under extraordinary circumstances is to say that we ALWAYS bail-out banks. What other time will a major lender run into trouble where their survival is in question if conditions weren't abnormal?
I gave you a list of TBTF above.. notice that JPM is not on the CAPCO participants list. I'm wondering if that is why they were chosen to takeover Bear.
"I have gone from a Bushy Fox News watching conservative to a liberal America hating leftwinger."
The leftwingers are just as much up there in this love-fest with B-52 as the wretched neo-cons. Where are the paleo-cons?
Dodd, 63, who intends to seek a sixth term in 2010, has fences to mend. A new poll says that his approval rating dropped during his yearlong presidential campaign from 60 percent to 51 percent.
This crook had a chance to stand up for America and failed.
See also: Repeal the Glass-Steagall Act of 1933
See: Section 13(b) may be a memory, and a discomfiting one at that, but Section 13 paragraph 3 (that language originally found in a 1932 highway bill) is alive and well in the Federal Reserve Act. As we've seen from the above illustrations, this amendment allows, in unusual and exigent circumstances, a Reserve bank to advance credit to individuals, partnerships and corporations that are not depository institutions. At least five members of the Federal Reserve Board must agree with the credit advance, and the Reserve bank must show that such credit was not available elsewhere.
If they are so confident in the collateral why not make it public and then sell it?
Because the collateral is "illiquid", so the mere act of selling in volume would drive the price down.
Look at it this way. Just because the current best bid for Wal-Mart stock is for 100 shares at $55, that does not mean you could take 100 million shares and sell them for $5.5 billion. But that is the "market value" you could state for those shares on your own books.
Now, if the Fed were to buy those 100 million shares from you for $5.3 billion (i.e., at 29/30 of the "market value", which is essentially what they did for JPM), with the intent to liquidate those shares slowly over the next 10 years, how much risk would that be putting on the taxpayers? Would you call that a "$5.3 billion bail-out"?
The answer, I think, is "it depends".
Say what you will about the Bernanke Fed, but you cannot accuse them of lacking creativity. Whether it will all ultimately work is an open question, IMO. They certainly prevented -- or maybe just delayed -- a major meltdown on March 14. We'll see what happens next.
Re: if the Fed were to buy those 100 million shares from you for $5.3 billion (i.e., at 29/30 of the "market value", which is essentially what they did for JPM), with the intent to liquidate those shares slowly
The regulators and financial industry together are like the mafia -- you know they're a bunch of crooks and all in on it, but you'd be hard pressed to prove it or to do anything about it.
Fascism will do that to you. Its been going on since 2002 and unfortunately the 2006 Democratic Congress victory shows that they have learned that fascism is good for them also, so expect it to continue until the country is ruined.
So, Bear Stearns loses 80% of its liquidity (around $10 Billion) in one day. According to BB, the Fed is comfortable with JP Morgan eating only $1 Billion of potential Bear losses, and also that having the taxpayers at risk of $29 Billion of Bear's risk. Why? Losses of $1B followed by $29B would be extraordinary and completely unexpected of course!
How do we know they prevented anything? You are buying into the new Fed blackmail, which is standard procedure for shitty fascist governments. "If you dont give Bear money, the entire world will explode". "If you don't let us wiretap, you will be murdered by terrorists". "If we don't stop Saddam right now he will nuke every city in this country". etc, etc, etc. Stop buying the bullshit blackmail to force unscrupulous deals down your throat and the unscrupulous deals will stop without the world ending.
Unlike some central banks, and barring changes to current law, the Fed is relatively restricted in its ability to buy private securities directly.12 However, the Fed does have broad powers to lend to the private sector indirectly via banks, through the discount window.13 Therefore a second policy option, complementary to operating in the markets for Treasury and agency debt, would be for the Fed to offer fixed-term loans to banks at low or zero interest, with a wide range of private assets (including, among others, corporate bonds, commercial paper, bank loans, and mortgages) deemed eligible as collateral.14
The Fed is allowed to buy certain short-term private instruments, such as bankers' acceptances, that are not much used today. It is also permitted to make IPC (individual, partnership, and corporation) loans directly to the private sector, but only under stringent criteria. This latter power has not been used since the Great Depression but could be invoked in an emergency deemed sufficiently serious by the Board of Governors. Return to text
Effective January 9, 2003, the discount window will be restructured into a so-called Lombard facility, from which well-capitalized banks will be able to borrow freely at a rate above the federal funds rate. These changes have no important bearing on the present discussion. Return to text
By statute, the Fed has considerable leeway to determine what assets to accept as collateral. Return to text
It is also permitted to make IPC (individual, partnership, and corporation) loans directly to the private sector, but only under stringent criteria. This latter power has not been used since the Great Depression but could be invoked in an emergency
Where is the stringent criteria, where is this loan??? Where are the details??? These crooks should be hung!
Re: The Fed can purchase various different instruments including buy equities
The Fed isn't buying, the Fed is selling!
Re: You remember...there's a run on the bank just when George and Mary are heading off on their honeymoon, and evil financier Potter offers shareholders of the old Bailey Savings & Loan fifty cents on the dollar for their accounts.
"Don't you see," George exclaims to a roomful of worried depositors, "Potter isn't selling, he's buying!" Actor Jimmy Stewart goes on to deliver an impassioned speech on how the principles of shared responsibility, patience, and faith should form the basis for our financial markets, as well as for our communities.
It falls on deaf ears, of course. What keeps everyone from selling out to Potter (gleefully played by Lionel Barrymore) is George's offer of his life savings as a temporary pay-off, which they greedily use up.
These testimonies are a bunch of crap regardless of how "forthcoming" anyone appears to be.
Just once, I would like to see someone stand up and display a "SHOW ME YOUR T!TS" t-shirt at one of these meetings while Bailout Bernanke is blabbing away.......
I have gone from a Bushy Fox News watching coservative to a liberal America hating leftwinger.
Oh Lord, then maybe you need a new hobby. If any of this is not understandable to you, or bothers you, then it's a good thing you weren't running BSC, JPM, or a Fed governor. I'm stilly mystified at why there is all this blather about this. So much energy and virutal ink spilt over things that most likely will not happen.
You guys have done it to me. I actually agree with OJoe. Crisis averted, shallow downturn, orderly unwinding with PE ratios returning to normal over the next 2 quarters as forward earning aren't going to be what people think. Business as usual.
President Franklin Roosevelt signed a bill into law that added Section 13(b) to the Federal Reserve Act, which authorized the Federal Reserve to make credit available for the purpose of supplying working capital to established industrial and commercial businesses, according to the Federal Reserve Board's 1934 annual report.
In the depths of the Depression, the country's relatively nascent central bank, arguably still struggling to find its role in the U.S. economy, was being asked to get into the lending business, and much to the chagrin of one Rep. C.L. Beedy:
The Federal Reserve banks, 12 in number, which were never designed to do business with any individual or any person, but were banks of issue or rediscount to deal with other banks, ought never, in my opinion, to be put into the lending business. It is a perversion of the original purpose for which those banks were established.
I was watching the markets (and futures) that weekend. It sure "felt" like something very bad was going to happen on Monday.
Also, Bear Stearns really is counterparty to $2.5 trillion (or maybe $10 trillion or $13.4 trillion) worth of transactions. So it is at least plausible that a bankruptcy would have set off an "unfortunate" chain reaction.
So I believe the evidence is on the Fed's side here, and I do not think I am alone in believing this... But of course, I do not know for sure.
Personally, my biggest complaint is that the BSC shareholders were not wiped out. If taxpayer money is at risk in any way, the equity holders should get exactly zero and the executive management should get fired, a la Sweden.
This entire testimony is a farce. Bears marks on their mortgage securities are bogus and the market knows this. So does the fed. Hence the ten year holding facility.
Mortgages and treasuries are the backbone of our banking system. Wall street greed has ruined mortgages as collateral.
The most illuminating disclosure so far was Geithner's revelation that he was uncomfortable lending money directly to BSC - Too much risk. They were levered like a hedge fund on crap assets.
I'm with Beedy on this, this coup is a perversion and smacks of treason, in reagrd to these crooks and creeps being in bed with the stock market in Japan...... The Fed does not state that it has power to manipulate the stock market in Japan, so smells like treason to me...
For who, a bunch of over-leveraged hedge funs that arenot regulated in the casino of chaos? Let them fail, because they need to learn that when you play with derivative napalm that sometimes you get your village burned up!
When Hoover said that nobody had starved, FORTUNE magazine used his statement as the title of a bitter dissent: 95 people suffering starvation were admitted to New York City hospitals during 1931, and 20 of them died; 27% of the schoolchildren in Pennsylvania in 1932 were suffering from malnutrition. Roosevelt's first bill for federal relief passed Congress in May ("God save the people of the United States," protested Republican Senator C.L. Beedy of Maine), but the $500 million appropriation had to be disbursed through the states. By nightfall of Hopkins' second day as Federal Relief Administrator, he had telegraphed seven Governors and arranged more than $5 million in emergency grants. MONEY FLIES, read the headline in the Washington Post.
The only gun they were under was the opening of the Asian markets. Thats why this deal is a joke, there was no need to rush through any crooked deal other than to prevent a -400 day on the DOW. They could have easily allowed Bear to borrow like all of the other IB's on Monday. There was a lot of things they could do to stall a bankruptcy and orderly dispose of the corpse. Instead they gave JPM $30b, the top guys $10/share ($66m for bankrupting a company is nice!) and are now trying to hide the details and tell everyone to go fuck themselves. That is the real problem here, their actions do not say "we had to save the day", they say "we chose to be crooked and say we were saving the day". There were plenty of good options to stop a meltdown, they just chose the path of most corruption.
LOL! No, bulls still firmly occupy that position, otherwise they'd have taken note of all the prior CR posts noting increasing unemployment, increasing delinquent debt, decreasing economic activity, etc. Despite the minor improvements in the ISM indices, they still show contraction. Even Bernanke has gotten more pessimistic.
No, the BSC debacle was simply one bullet dodged, but the gunfire continues unabated.
Roosevelt's pioneering experiments in public works and welfare were schizophrenic from the start. Everyone agreed that the dole was demoralizing. Said the mayor of Toledo: "I have seen thousands of these defeated, discouraged, hopeless men and women cringing and fawning as they come to ask for public aid."
So I always keep hearing how the Fed is really a private concern of the banks themselves.
Well, if the banks were so concerned about the financial system's viability, why not pony up themselves? Treasury could certainly have said, "Geithner, if the banks on your board want a smoothly running financial system, they'll just have to pay for one. No allowance on the remittances."
Re: "other than to prevent a -400 day on the DOW."
Who gives a crap if stocks went down 5%....it's a stock market that has volatility and it still is overvalued. Why should it be held up in a synthetic attempt to save Paulson'e $700 milion personal fortune of bernanke's million, of the insiders of wall street........everyone with a brain is out because of this extreme risk, so why overvalue the market and connect artificial loan manipulation to this deal, like a nazi economy looking for ways to hide debts and bad bets?
Do you have any contacts with people close to the rating agencies? I'm still wondering why we're not seeing any more MBS/CDO downgrades. It's not like the real estate market hasn't deteriorated further.
The FED can only accept AAA MBS that's not on credit-watch, so it strikes me as highly suspicious that ratings activities on these securities has been effectively suspended.
No, the BSC debacle was simply one bullet dodged, but the gunfire continues unabated.
tj, what gunfire? where? everyone was on here a couple of weeks ago drooling at the prospect of total financial meltdown. the Fed intervened and it didn't happen. Now things seem to be orderly, even if some have to take big write-offs. The numbers are contracting? Of course they are, big deal. It's part of the business cycle.
My indicator for a bottom is now the threads on here. There was a time when people were thoughtful, gave data, learned opinion and that has been replaced with something similar to Fox news or Jerry Springer. The more bizzare the posts get, and the more worked up over the BSC episode (which, I predict, will be written about in econ textbooks as brilliant for a long time) the more I sense we're near a turning point on sentiment, and that is a key driver.
I do not believe there is any upturn in Qs 3 and 4, but I do believe that this will be a shallow, but more lengthy downturn patch.
Clover goes to the gable wall and brings Benjamin with her. She asks Benjamin to read for her what is on the gable wall. All the commandments are gone, and all that is written there now is All animals are equal, But some animals are more equal than others.
I'm just astonished when I hear the Fed (Geithner) arguing that urgent action was necessary, or else housing and equity prices would go down. Amazing! Blow a bubble, and then protect it at all costs (to the taxpayer)...
And do they really think they can prop them up! Good luck with that!
Bernanke expressed optimism for the second half of 2008. "Growth should resume in the 3rd quarter and accelerate into years end." When asked what data supports his view the FED chair said "Sebastian said so, do you know Sebastian,Senator?"
The Federal Home Loan Bank Act is a United States federal law passed in 1932 under President Herbert Hoover in order to lower the cost of home ownership.
It established the Federal Home Loan Bank Board to charter and supervise federal savings and loan institutions. It also created the Federal Home Loan Banks which lend to S&Ls in order to finance home mortgages.
The act was notably amended by Financial Institutions Reform, Recovery and Enforcement Act of 1989, which transferred regulation of thrifts to the Office of Thrift Supervision.
Man, it should be illegal to lie in Congressional testimony, even if the lie is couched in financial terms that make it not obvious.
If you analyze the statements, they are in obvious conflict. There is a market price for any security at all times; junk CDO's are selling even now to speculators for pennies on the dollar. A liquidity crisis is a fancy way to say you didn't want to sell the assets you had because that would reduce their market value, and you'd have to reduce their paper value as a result, which would affect your on-paper capitalization. The only way they were adequately capitalized is if they had enough assets to sell at market to cover debts that were called in. They didn't. Therefor, they were not adequately capitalized at that point (in fact, they were probably net negative in assets).
It's the equivalent of saying something is true because... look over there! A bald-faced lie, from the very person who's supposed to prosecute people for lying about corporate financial info, just to justify the Fed's bailout. Despicable.
Painful to the middle-class... but shallow to the IBs and other banks.
Interesting, I sort of agree...it is going to be painful for the middle-class. But also for the upper and upper middles too, as hedges are blowing up, stocks are not done being bearish (wait until earnings continue to disappoint) and other investment vehicles lose value. I'm saying that the unwind will be orderly, not that it will be bloodless. The pain is going to be shared here.
energycon, I'll go with someone that knows the meaning of "non-sequitor". And typing has what to do with cogent thought? Please explain and cite references. Otherwise your one of the ones not contributing I spoke of.
Angry, I don't really see a bottom yet either. I'm just saying that the panic phase is over and there is no systemic meltdown on the horizon. Again, that doesn't mean pain, it means we can move on.
JJL - The banks can't fail with these guys in power. Sure they can lose money, but with the steepenning yeild curve, they will be able to print money shortly.
It would have been some pretty crazy fireworks though... "bombs bursting in air" type stuff !
LOL...yes, a good global financial crisis may have had a certain "they had it coming" type of feel to it...sigh. That why I think everyone on here is mad at the Fed. They were the cops called into the party just as it was getting loud
Interesting,
yeah after the FED rate is at 0, the banks will not pass any of this along to the borrower, so the pocketed spread may well be the gift they need. Thanks federal reserve!
Ok, I admit, the treason issue is difficult to explot, but I think the case here today is purgery and the lies being told and accepted in a netwrok of collusion; we have no details on this loan and the deal was done under duress and people at this hearing are giving false and misleading information to taxpayers.
If you can bust Clinton for purgery, same goes for these crooks!
Clinton admitted in taped grand jury testimony on August 17, 1998, that he had had an "improper physical relationship" with Lewinsky. That evening he gave a nationally televised statement admitting his relationship with Lewinsky which was "not appropriate".[5]
[edit] Perjury charges
In his deposition for the Jones lawsuit, Clinton denied having "sexual relations" with Lewinsky. Based on the evidence provided by Tripp, a blue dress with Clinton's semen, Starr concluded that this sworn testimony was false and perjurious.
During the deposition, Clinton was asked "Have you ever had sexual relations with Monica Lewinsky, as that term is defined in Deposition Exhibit 1, as modified by the Court?" The judge ordered that Clinton be given an opportunity to review the agreed definition. Afterwards, based on the definition created by the Independent Counsel's Office, Clinton answered "I have never had sexual relations with Monica Lewinsky." Clinton later stated that he believed the agreed-upon definition of sexual relations excluded his receiving oral sex.[citation needed]
If all it took was a second-rate IB to go bankrupt to cause systemic meltdown, wouldn't it be safe to assume we are very close to a systemic meltdown still? If Bear going under can cause it, then any number of large entities having trouble can also cause it, I don't think Bear was in a particularly unique position compared to its peers.
Conjure Bag was wrong! Midnight came and I can still get money out of my ATM.
No conjure called midnight and he was right. But just after the stroke of 12, BB slipped on the 29B glass slipper and the Bear didn't turn into a pumpkin, but got married to a studly bank.
And, in case you missed it, he said on another thread that he was now cautiously buying into financials.
Your points have merit. I have to say though, I've been a stock bear since 1997 and it has served me well.
But it is absolutely amazing how long these over-valued (imo) trends can continue. I almost lost faith in my convictions during internet boom. Same with the housing boom. That's why I don't go short. The timing is too hard to predict.
wouldn't it be safe to assume we are very close to a systemic meltdown still
No, because now everyone knows that the Fed will step in and stop it. So now we're going to get to see what's under everyone knickers as they are forced to play their hands. The panic was all about NOT knowing what would happen. Now we know.
Limited knowledge base, but the issue with most alternatives is scaling up.
I think it is a largish contributor to the power matrix on the alt side (second? third?), so it has demonstrated viability in that context. Likely to be bigger going forward as are all alts, but sourcing the fuel appears to be the critical issue along with a generic unintended consequences in a major ramp up.
"Under more normal conditions we might have come to a different decision" with respect to Bear Stearns, Mr. Bernanke said.
"More normal" circumstances being if they hadn't sat on their arses the last 7 years doing nothing to prevent this problem in the first place, he means? Sheesh.
"More normal" being a Democratic administration that hires someone who gives a cr*p about their job instead of their rich buddies.
That's why I don't go short. The timing is too hard to predict.
Exactly. And I do agree...I am bearish as I believe that most stocks are over-valued given the forward earnings projections that I make. You just have to look for what got oversold, or what will do well in this environment. The rest, and the DOW, will not end the year significantly different from the way it began.
cooking ramen in my percolator said: "O-Joe converted to Sebastian's way of thinking?... You're one and the same!!"
If that's what you think, you haven't been reading my posts closely enough. Although I could be wrong, I thought that O-Joe went through a brief, mild period of uncertainty.
Doesn't that seriously increase risk of a meltdown in reality? Now instead of avoiding it they can say the Fed will solve the problem. I do not have much faith that the Fed will be able to solve every problem that is thrown at it, especially if those problems become even larger due to this moral hazard they have created.
One speculative thought on that, distributed generation with biomass - some threads back some of the engineering heads (dryfly and ?) mentioned a hobby shop project of a wood stove fired steam turbine...hang a coil and such off of that and voila!
Fed is ready to cut rates again and I assume take beenie babies as antique art collateral worth 1000 X market value
If The Fed can value securities now, why didn't they value them 3 years ago and stop the housing bubble from getting beyond the frothy stages of 2005, 2006, 2007, 2008???
Why are they stepping in now and why did they fail to to value these derivatives before?? The reason is obvious, Paulson and friends needed a safety net! This is not about policy, it's about corruption and collusion and nepotism!
One convert and one fence-sitter, out of 257 visitors on-line. More good news for me.
There are two precepts to live by Sebastian. Moderation in all things, including your economic lookout, and trying to go through life causing the least disturbance as possible. That, however, does not mean you don't call bullsh&t when you see it, present company excluded of course.
Oh yeah, I recall some folks thinking we will get bulk discounts if we go to a major construction ramp - likelier the opposite as bottlenecks emerge and competition for finite capacity bids up costs.
You are a fool if you look for market turning points by monitoring the sentiment of commentators at this blog.
Really? I called the top of the RE market here in Boston by listening to people and watching numbers, and I'll do the same thing this time. The more shrill people get on either side of an issue means that they are starting to talk more loudly to drown out their own doubts. Sort of like calling someone else a fool because it makes you feel better about yourself.
I use cocktail banter as an indicator too. But I tend to view the people on this board as early adopters and would not be willing to use them as a counter indicator.
It pisses me off to no end that these people come before Congress with prepared, peppered speeches handcrafted by SIFMA lawyers to goose the listeners with pre-planned issues, versus having on-the-fly exchanges as if in a court of law.
Angry Saver - biomass energy might not be the best longterm. It takes food from people. One day soon, a decision will have to be made - food or energy ? I wouldn't want to be on the wrong side of the final choice.
It's too bad solar stocks are priced so high. Check the P/E on FSLR... sick
I called the top of the RE market here in Boston by listening to people and watching numbers, and I'll do the same thing this time.
It all depends on who you listen to. You can listen to the general public and it will give you a good idea of future housing market conditions, because the housing market participants are mostly the general public.
On the other hand, you cannot listen to CR blog commentators to determine bank liquidity and solvency, because they are not even participants in those markets, therefore their sentiment has nothing to do with the markets.
Anyway, fundamental problems will eventually work themselves out no matter what the sentiment of the market participants are.
Christopher Cox is the worst SEC Chairman in the history of the SEC. He is the only regulatory "cop" that can't find any criminals. With all the fraud on Wall Street (Siv's, CDO's, derivatives, back dating options, theft of taxpayer dollars) Cox can't find anything to charge anyone. AMAZING! Impeach Cox he has failed the oath of his office.
DOW JONES NEWSWIRES Another bailout of a bank like Bear Stearns by the Federal Reserve "must not happen again," said Sen. Jim Bunning, R-Ky., at a hearing Thursday. "I do not like the idea of the Fed getting involved," Bunning told Federal Reserve Chairman Ben Bernanke and others. "That is socialism." The hearing is about the U.S. role in staving off a collapse of Bear Stearns last month.
-Wayne
Wayne Mulligan | Homepage | 04.03.08 - 2:03 pm
That's the stupidest thing I've ever read at this blog. It wouldn't be so goddamned dumb if the people being "bailed Out" had to surrender all of their assets - both personal and corporate, including overseas holdings, trusts, etc. - and were hit with a lengthy prison sentence.
This is the only reality there today, i.e, opening the window 90 hours early or on the weekend would have prevented The fed from abusing antitrust legislation and usurping authority from Congress; they would have done the job of a Fed, and not looked like retarded crooks!
Schwartz, however, argued that opening the discount window earlier, and to all non-banks, would likely have prevented Bear Stearns from having to be bailed out. He said it is 'highly, highly unlikely' that Bear Stearns would have to be rescued if the window were opened earlier, and said part of the problem is that the window was just opened for a single entity, which made the situation look worse for Bear Stearns.
'When you make an emergency situation available for one particular bank, that does not shore up confidence in that particular bank,' Schwartz said.
Schwartz's argument is tied to his belief that the crash in confidence in Bear Stearns was not accidental.
Though he has no specific evidence, Schwartz said the pattern 'looked like more than just rumors. It looked like people wanted to induce a panic.' As soon as Bear put out facts to quash one rumor, he said, another one immediately appeared. 'We could never get the facts out faster than the rumors.'
The key point, he said, is that it would be much harder to start such a run on a commercial bank because people know that the bank could always turn to the Fed for loans against its collateral. 'The rumors are deflated by the fact that people know they have a liquidity source.' The Bear Stearns rumors, that the company had no place to turn for loans against its collateral, were what made them a self-fulfilling prophecy
But I tend to view the people on this board as early adopters
Most people yes. There are a lot of regulars here that I think have great insight, even though I don't agree with some of them all the time. But lately the tone has changed...and I've lurked here for a lot longer than I've posted. It seems lately we're turned from reasoned economic/housing insight to just a lot of complaining about general policy and stating over and over again that everything is going to hell in a handbasket. I mean, come on, when people start posting about the Fed's "illegal" activities and whinging about using taxpayer money when none has been used yet, you know something's up.
For a while it was glodbugs pestering, now it's the rabid "abolish the Fed people" who might be reading Mish's tiresome posts on the subject. The concept of a Central Bank isn't going anywhere. Ron Paul attracted no attention. The Fed is going to get expanded powers after this, not reduced. So the question remains, how do we make money and what is good for business, because, at the end of the day, if business is humming along everyone makes money...employee and stockholder alike. And honestly, that's all anyone really cares about...paying the bills, having a decent house, putting the kids through school, driving a good car...etc etc
Bear Stearns Cos. Chief Executive Officer Alan Schwartz said the fifth-largest U.S. securities firm may have survived if the Federal Reserve acted sooner to lend money directly to investment banks.
``It is highly, highly unlikely in my personal opinion that we would be in the situation we find ourselves in today'' had the Fed provided financing earlier, Schwartz told members of the Senate Banking Committee today.
The Fed agreed to provide emergency funding to New York- based Bear Stearns on March 14 after a run on the company put it on the verge of bankruptcy. JPMorgan Chase & Co. has agreed to buy Bear Stearns for $10 a share, a fraction of its value earlier last month.
To parahrase tj & bear, lets see some data that demonstrates improvement in J6P balance sheets - like fewer hardship loans from 401k plans, wage income rising faster than the cost of food, fuel and health care, improvements in consumer sentiment, CEO & CFO sentiment, and oh yeah, housing - if the plankton aren't thriving the whales will starve.
I don't know folks. This mortgage mess and all the resultant handouts really bring me down.
I think we're facing hard times. That's my gut. Nothing that happened today at the Senate hearings changes that. If anything, I think we're facing more inflation in the price of necessities.
Here's a counter indicator: people now view $100/bbl oil as a positive.
I'm just can't invest if that's the "good" news.
But that is just it - business was humming along and people (J6P) were NOT making money - real incomes stagnated while debt expanded and the share of GDP going to corporate profits was the most since the 'Great Softish Patch'...and now the credit spigot is getting tightened.
On the other hand, you cannot listen to CR blog commentators to determine bank liquidity and solvency, because they are not even participants in those markets
Everyone is a participant in the market Sweet, everyone.
I subscribe to the position that people's sentiment has a lot to do with what the market...ANY market is going to do. At the height of a frenzy, people are talking loudly because, in their insides, they know it's stupid and they're trying to drown that thought out. So at the top of the housing bubble, the cocktail/blog/new/grocery store line banter got more loud and prevanlent as the first signs of cracking occured. That was the top. The covergence of a lot of data and analysis I was doing, and the human datapoints, not any one of them.
The same thing will happen at the bottom now. As signs point to upturn, people will do the same thing in reverse in the same places. I am just saying that I'm seeing signs of that now.
Take it as you will. But I'm agreeing with mp and conjure although I'm not yet buying...there are some values now in financials as we're past the bottom now for the sector. The Fed just provided the floor.
And honestly, that's all anyone really cares about...paying the bills, having a decent house, putting the kids through school, driving a good car...etc etc
Exactly. That's why the talk here is about the Fed, the monetary system, etc. Because past policy has created a situation where an increasingly large segment of the population CANNOT pay the bills.
Also, some of us care about the future for our children. The consequences of our past policy will eventually be paid for.
Why do you have a problem with people who want to abolish the Fed, discuss different monetary systems, or complain about the government? Does it challenge your assumptions about the future?
The New York Fed presented a one-page description of the portfolio. The assets include investment-grade securities and residential and commercial mortgage loans, all of which were current on principal and interest as of March 14. The staff of some lawmakers will be able to review the full list on a confidential basis, the statement said.
Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said the SEC was ``seemingly unaware'' of Bear Stearns's plight.
Bear Stearns Chief Executive Officer Alan Schwartz said in testimony that the fifth-largest U.S. securities firm may have survived if the Fed acted sooner to lend money directly to investment banks. ``It is highly, highly unlikely in my personal opinion that we would be in the situation we find ourselves in today'' had the Fed opened the window earlier, Schwartz said.
In a question-and-answer period, Bernanke said the primary dealer facility was put in place March 16 to prevent a run on other brokers, and said it would have to be closed once the emergency conditions in markets subsided.
Monitoring Banks
The New York Fed has examiners at the major investment banks'' so the central bank has thedirect capacity to assess the financial condition of these institutions,'' Geithner said.
They are not going to disclose this portfolio to the public, but use GAAP???
The New York Fed presented a one-page description of the portfolio.
The staff of some lawmakers will be able to review the full list on a confidential basis, the statement said.
``It is highly, highly unlikely in my personal opinion that we would be in the situation we find ourselves in today'' had the Fed opened the window earlier, Schwartz said.
In a question-and-answer period, Bernanke said the primary dealer facility was put in place March 16 to prevent a run on other brokers, and said it would have to be closed once the emergency conditions in markets subsided.
Monitoring Banks
``direct capacity to assess the financial condition of these institutions,'' Geithner said.
Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said the SEC was ``seemingly unaware'' of Bear Stearns's plight.
It wouldn't be so goddamned dumb if the people being "bailed Out" had to surrender all of their assets - both personal and corporate, including overseas holdings, trusts, etc. - and were hit with a lengthy prison sentence.
Which people do you mean? The customers of the bank who were bailed out? The bank employees? Bank shareholders?
If anyone should suffer after a bail-out it is the irresponsible customers who were stupid enough to do business with the bank in the first place. We need to put the fear of God into banking customers so that they start choosing the institutions they do business with based on financial health rather than the best deals, fees, or willingness to be counterparty to the riskiest of derivative contracts.
The way it is now we will always have a race for the bottom as customers always rush to the worst managed banks they can find, safe in the knowledge that the government has their backs.
real incomes stagnated while debt expanded and the share of GDP going to corporate profits was the most since the 'Great Softish Patch'
So energycon, how is that related to current circumstances? There are many interlocking reasons for this. I was at a forum with Cathy Minehan (if you know who she is) a couple of years ago and she was talking about jobs and globalization. Her words were "the genie is out of the bottle, get used to it. technology made it possible and it's going to cause dislocation. So learn to adapt." And she was right. This is another period of dislocation.
The answer, of course, is education because the skillsets needed now are different than 10 years ago. Manufacturing jobs will not come back, and even if manufacturing came back the jobs would be far less because of automation. So it's more complicated than pointing at a bunch of Government policies and some IBs. Or even easy credit that masked the stagnant wages. The demise of unions, global wage arbitrage, automation and technology, all these are putting pressure on the job/wage factor.
Good points. I'm suspicious of high prices. I never felt wealthier when my house price was soaring. And I certainly don't feel wealthier with 4.1% CPI either.
I feel wealthy based on increasing purchasing power and stability. Valuations and reall yields are the key. Prices are just numbers.
Oil at ~$104/bbl is an inflation adjusted tie for the previous all time high, and currently we don't have the costs of $80-$90 dollar oil fully priced through the economy (end of October).
In all the transcripts, a very small amount of information received on a confidential basis from, or about, foreign officials, businesses, and persons that are identified or identifiable was subject to deletion. All deleted passages, indicated by gaps in the text, are exempt from disclosure under applicable provisions of the Freedom of Information Act.
You are right on when you talk about real incomes and J6P balance sheets.
The bottom will be in when much of the debt has been purged, and peoples expectations of the future are bleak.
J6P may be aware that hard times are coming, but not to the extent that will be required to correct the imbalances(CAD, energy imports, savings rate, etc.).
Please point out in any of my posts where I used the word "rally" or implied it. Otherwise quote me verbatim and give evidence to the contrary. You know, the way we used to do it around here.
In all the transcripts, a very small amount of information received on a confidential basis from, or about, foreign officials, businesses, and persons that are identified or identifiable was subject to deletion. All deleted passages, indicated by gaps in the text, are exempt from disclosure under applicable provisions of the Freedom of Information Act.
Now you are being deliberately obtuse - first the debt needs income to service it - and second, even if the income is there (a largish assumption) we're talking a more than one quarter exercise in consumer balance sheet repair.
If the debt isn't serviced than cue secondary effects aka the feedback loop...
Risk-Based Capital Standards: Advanced Capital Adequacy Framework Basel
II
AGENCIES: Office of the Comptroller of the Currency, Treasury; Board of Governors
of the Federal Reserve System; Federal Deposit Insurance Corporation; and Office of
Thrift Supervision, Treasury.
ACTION: Final rule.
SUMMARY: The Office of the Comptroller of the Currency (OCC), the Board of
Governors of the Federal Reserve System (Board), the Federal Deposit Insurance
Corporation (FDIC), and the Office of Thrift Supervision (OTS) (collectively, the
agencies) are adopting a new risk-based capital adequacy framework that requires some
and permits other qualifying banks1
One commenter expressed concerns that some of the confidential information
requested in the proposed reporting templates was also contained in the public disclosure
requirements under the proposal. As a result, some information would be classified as
confidential in the reporting templates and public under the disclosure requirements in the
final rule.
You seem to suffer delusions of infallibility - an air of superiority. Good luck wit' dat
LOL Marcus did you actually read your snotty post before you wrote it? First you mis-quote me totally, and then you use STFU as if you were someone who had any authority to order that for someone!
Now, what I said was that I agreed with mp and conjure on another thread where we were discussing this...that financials have been pulled back from the brink. He was suggesting there were buys, I said I agreed, but was being more cautious and not yet buying. So exactly how does this realte to your point?
President Robert Mugabe's government raided the offices of the main opposition movement and rounded up foreign journalists Thursday in an ominous indication that he may use intimidation and violence to keep his grip on power.
Where to next? Lower dollar, higher gas, tight credit, massive increase in bankruptcies, higher unemployment, stagnant wages, increased global competition, feckless leadership, corporate and accounting fraud, debt default privately, corporately, and nationally, middle class squeeze (resulting in NO middle-class), and the list could go on.
In other words, same o'l, same ol'.
I want the bulls to post all of the positive aspects of our economy by which we will be saved from the massive financial fraud perpetrated on the American people over the past 10 years.
These are the same people who believe that Bush is a shining example of what an MBA from Harvard can do for an enterprise.
Why do you have a problem with people who want to abolish the Fed, discuss different monetary systems, or complain about the government?
Because they want to do it here, which is just plain rude. I'm sure there's blogs dedicated to goldbugs, monetary reform and The End Times. This ain't it. This is a blog with a community of people sharing opinions and experience regarding the housing and mortgage markets, with the occasional diversion into general economic conditions.
energyecon is once again right on about current oil prices not yet having worked their way through the economy. What makes this even worse however, is that as oil prices continue to rise, the percentage of energy costs in a finished product increases, causing further energy price rises to have a larger impact.
Simply put, oil going from 60 to 100(66% rise) actually has a worse impact than oil going from 20 to 40(100% rise).
Read it? I wrote it. If you think it's not accurate, back up and read your own posts.
After you do that, lay out for me and everybody else how the BSC situation reflects stability in the global banking and financial markets. Give us some good news ("the cancer didn't kill you - today", is not good news). Show us how the fundamentals of our economy have benefitted from anything that has occurred in the financial industry over the past say, 5 years. Show me solvency of a major bank (if you can cut through the BS they claim - as in the hearing today). Show me the real price or value of a mortgage and/or its underlying asset originated in that period of time. Show me the creamy-goodness of the banking-governmental complex as we move forward.
I gave you my partial list, above. Now put up, or....
I love how people here are saying the "crisis is averted."
Really? So, having the Fed bail out the banks (and probably whoever else comes along with their hand out) is a good thing? Yeah, if the "crisis" was a bunch of executives not getting huge bonuses.
Not of these new-bulls has revealed how any problem is "fixed" in a crumbling, overleveraged, debt-buried economy with run-away inflation and vanishing jobs. I guess the Fed will fix all those problems too - just print a few million $$$ for everyone and we'll all be rich, right? Whatever...
Re: "Because they want to do it here, which is just plain rude. I'm sure there's blogs dedicated to goldbugs, monetary reform and The End Times. This ain't it. This is a blog with a community of people sharing opinions" ... Testimony on Bear Stearns
Everyone says education is the key. But that statement rings hollow to me. We have way more college graduates today than in 1970, yet real incomes are lower.
All the education in the world is not going to raise wages against a backdrop of billions of people willing and able to work for peanuts.
I'm not against globalization. I just don't think it's wise to purposely inflate people into poverty. I've been to Cleveland, Toledo, Pittsburgh, Trenton, Detroit, etc. Not good. Globalization & zero CPI inflation makes more sense to me.
The document is being called the "C & R" document because it reportedly states that if the United States defaults on loans and debt underwriting from China, Japan, and Russia, all of which are propping up the United States government financially, and the United States unilaterally cancels the debts, America can expect a war that will have disastrous results for the United States and the world
Everyone who predicted the housing bubble blowing up, and feared recession, and were upset at those who ignored warning signs, will find out that our heads will not explode afterall.
Afterall, look at Japan. They still have an economy, they still produce the greatest cars on the planet, their people aren't rioting in the streets.
If we go the way of Japan the no worries.
(Frankly we're all better off if our economy doesn't avoid a major blow-up, the slow bleed is more deadly.)
NEW YORK (Reuters) - Mobile phone maker Motorola Inc (MOT.N: Quote, Profile, Research) said on Thursday that it was cutting jobs and paying severance payments to around 2,600 workers, resulting in a net pre-tax charge in the first quarter of around $104 million.
You are constantly saying that no taxpayer money is involved (yet) so nobody should complain so I have a question. Do you think that if I get a free car insurance then it is not a gift until I have an accident?
Are you aware that in EU the Fed/Paulson action would be investigated as an unfair subsidy and likely fined? And that the Northern Rock nationalization (which in my opinion is less morally hazardous) is already being investigated?
Ipodius,
You see the increased shrillness of bears to be a turning point in sentiment and the evidence of a bottom. I see the increased talk by bulls and MSM and gov't officialdom that the crisis has been averted as evidence that just around the corner there is a cliff. Everybody got very excited over Bear's big weekend and the adrenline is playing out on both sides of this argument. There is no one-sidedness about what who's saying what.
Ipod,
I think I agree that the immediate risk of the total meltdown scenario has passed. All things considered the shotgun wedding of JPM/BSC was needed, just wish the Gov't could have gotten a better deal out of it. The window being open to the IB's will probably prevent the same happening to LEH or MER. While BAC shareholders were only partially bailed out, the bondholders were completely bailed out. The situation is unfair, but heck, even if the entire $30 B is lost, its probably pennies on the dollar compaired to the cost of the full meltdown. I still have longer term worries about the full meltdown, mostly focused on FNM/FRE and this stupid expansion of the conforming limit and expansion of balance sheets, but looks like we have kicked that can down the road for a few years. The financial sector still desperately needs to raise capital, and the most obvious sources of that capital is cutting/elimination of common dividends. In its role as regulator, the Fed should be demanding it just about across the board (this would be better than on a case by case basis since the Banks could claim that it wasn't a signal of their being singled out as capital deficent).
The second major source would be a drastic cutting back on bonuses. As offensive as the big bonuses were in 05 and 06 when everything was going well they are just Alice in Wonderland stuff for the 2007 year. The 05/06 bonuses just offend on the basis of equity and social stabilty, but the 07 ones help endager the entire finacial system. I know I'm dreaming but would love to see the top comp at any finanial institution be below 7 figures in 08. Put the money saved into reserves and retained earnings. When capital is rebuilt, banks can get back to lending and the economy can grow again. Moves like LEH's recent prefered offering should be repeated over and over again through out the system undil we get the leverage knocked down to reasonable levels.
Angry Saver sez: Everyone says education is the key. But that statement rings hollow to me. We have way more college graduates today than in 1970, yet real incomes are lower.
Yeah right - The problem is most of todays grads can't do eight grade math, can not tell you when the Civil War occured, think that irony has something to do with the laundry and believe UFO's land with more regularity than fixed wing aircraft. Sorry to show my age, but I fail to understand how most (not all by a long shot) 20 year olds manage to find thier own asses without parential help.
"We make the rules - the news, war, peace, famine, upheaval, the cost of a paper clip... you're not naive enough to think we're living in a democracy are you?
It was probably necessary to avoid some form of limited systemic breakdown.
BUT,
Nobody has been able to give me a good answer yet why the following occurred:
1) BSC shareholders got $10/share. If they got ZERO, the potential taxpayer obligation would have been about $1.25 billion less.
2) BSC bondholders had their situations IMPROVE significantly, as their debt is now JPM debt. They should also have taken a hit, and if somebody wrote CDS protection on those positions, well, those are the breaks. Nobody has been able to give me a credible argument why BSC bondholders getting wiped out would pose such a HUGE systemic meltdown that everybody is suggesting.
3) The Fed and Treasury are essentially appropriating taxpayer funds without Congress' approval. Not allowed.
Other than that, I agree that the Fed should have stepped in, but this deal sucks, and reeks of cronyism and looking out for the big guy.
Bear should have not been bailed out. When every thing was roses they moped up all the profit, then when the dog didn't hunt they went to the Fed for the bailout. If the MBS the fed received were worth 30 or 29 Billion then sell them this month and be done with it. The fed will be lucky to get 20% of the par value on this low grade junk. UBS brought into the investment grade story and every 3 months UBS is marking down this crap. What happened to Adam Smith?.
Kentucky spends more than $18,600 to house one inmate for a year, or roughly $51 a day. In California, each inmate costs an average of $46,104 to incarcerate.
cd said: "Kentucky spends more than $18,600 to house one inmate for a year, or roughly $51 a day. In California, each inmate costs an average of $46,104 to incarcerate."
And what have I been saying? That it's the cost of housing, generally, and not the cost of houses, specifically, that's the real problem in California and other "bubble" areas.
Imho, a key to getting taxpayers a good payoff for bailing out speculators is showing Big Media how it can profit obscenely by fighting gratuitous moral hazard.
Toward this end, please consider signing the online petition for The Learning and Earning Modernization, Moral Hazard Minimization and Entertainment Programming Talent Full Employment Act of 2008.
We the undersigned call on our elected representatives to see to it that the Federal Reserve opens its new loan program for non-banks the Term Securities Lending Facility to American media conglomerates that own a broadcast TV network. More precisely, to said conglomerates that use the loans to:
introduce particular online markets that provide people with new and improved ways to develop, demonstrate and profit from expertise (details below)
develop entertainment programming that, in part:
a) popularizes these markets
b) showcases high-performing market participants
Just because the amount of assets is 30 Bln Usd doesn't mean that is the limit on the gov's possible loss. Apparently these assets include derivatives which pay out, so an asset now worth 10 Usd could eventually have the Fed paying out 100 Usd or more. Maybe not, but we don't know, and nobody in Congress seemed to ask the 64000 dollar question: what is the maximum loss these assets could see? See Interfluidity via Naked Capitalism.
During the Bear Stern's hearing Senator Elizabeth Dole was up there digging in on the old GOP shibboleths of the 'GSE problem" at the same time the GSE's are the only ones making loans to homeowners according to the Wall Street Journal.
Someone should send the YouTube of her to every North Carolinian who's trying to buy, sell, or live in a single family residence and ask for a recall.
Well at least the bailout is now official. How many more though? Ultimately, taxpayers are backstopping investment banks. That sucks.
Are we supposed to believe that the Fed accepted the value placed on the MBS by Bear Stearns, rechecked it themselves, then had Blackrock confirm it, but the Market was unable to see the value?
If they could see it's value, why did they presume no one else would?
And why not sell it now on the market for 29 billion?
Apparently they realize no one will believe their assessment!!!!
They KNOW that the market has NO CONFIDENCE in Bear Stearns, the Fed, and Blackrock!
Bear will be swept under the rug. The Senators will pretend to fuss at the Fed, and the Fed will pretend to care, and then it will all be forgotten.
I am more interested in speculating on the point of no return. The point were other firms start lining up for their own ponies.
Will the Bear extortion model be played out again?
Will Ben and Co. give up at some point?
FT - False ideology at the heart of the financial crisis (one of the best media articles for today)
FT.com / Comment / Opinion - False ideology at the heart of the financial crisis
If they are so confident in the collateral why not make it public and then sell it?
The sale itself will do more to instil confidence in the market than all the secrecy and "faith" it requires now.
First, but not the last.
OT - please check out the RE agent selling people on walking from a mortgage but not until the use thier "good credit" and buy a new home first.
Who Knew?
FFDIC:
The story was commented on by naked capitalism as well...
Soros Lambasts Paulson, Call for Intervention « naked capitalism
OT - Bloomberg article by Meredith Whitney predicting a "profound impact" by credit slump on economy.
Credit Slump to Have `Profound Impact' on Economy, Whitney Says - Bloomberg.com
"...
Global debt underwriting volumes tumbled 50 percent from July through March, a more than $2 trillion drop from the same period a year earlier, according to data from Oppenheimer. U.S. debt issuance fell by more than $1.3 trillion, or 55 percent.
``There is little room in the system to `pick up the slack' vis-à-vis corporate lending,'' Whitney wrote in a report to clients dated yesterday.
More than 80 percent of corporate funding came from capital markets in 2007, according to Whitney. She said such a ``massive extraction of liquidity'' in the past nine months, is bound to slow the economy. The U.S. economy grew at an annual pace of 0.6 percent in the fourth quarter, and probably slowed to a 0.2 percent rate in the first quarter, according to the median estimate of analysts surveyed by Bloomberg News.
..."
love the fact the Fed wont give fair market value as of today for $30 B assets they took as collateral for BSC back-stop. Geithner asks for confidentiality from Senate committee, says they'll give QUARTERLY fair value. maybe that's all Fed will ask of financials going forward: no more daily mark-to-market, just give us your best guess on a quarterly basis on the down-low. we wont tell the world you're bankrupt and your shitty assets ought not be levered > 30:1. look out below.
The Greenspan Put has morphed into the Bernanke Bendover.
Section 13(b) is dead!
Long live Section 13[3]!
Section 13(b) may be a memory, and a discomfiting one at that, but Section 13 paragraph 3 (that language originally found in a 1932 highway bill) is alive and well in the Federal Reserve Act. As we've seen from the above illustrations, this amendment allows, in unusual and exigent circumstances, a Reserve bank to advance credit to individuals, partnerships and corporations that are not depository institutions. At least five members of the Federal Reserve Board must agree with the credit advance, and the Reserve bank must show that such credit was not available elsewhere.
As much as the crisis hit with ferocious speed, so was the FED reaction. They really turned it around swiftly. We have to cut the FED some real slack here. One of the greatest jobs ever done by a central bank, IMO. It really looks like Sebastian is right and ECRI gets it wrong for the first time - this will not be a recession. We'll get one quarter of negative economic growths and that's it. Oh, yes and Jas has it wrong, too - but that's not really something new.
O-Joe
I never thought we would see a coup in America, and they put on the internet and Tv to allow people to watch. Why didn't they just do this behind closed doors?
The Fed did turn around the losses of banker friends, very fast, but did so by usurping authority in a coup that amounts to treason!
Capital IS synonymous with liquidity.
Unless you think your assets are worth more than someone will pay
FT - SEC fails to douse debate over fair value
FT.com / Financials - SEC fails to douse debate over ‘fair value’
SEC Fair Value Measurements letter:
http://www.ft.com/cms/cb48e720-0028-11dd-825a-000077b07658.pdf
does anyone have a link to the story @ Goldman Sachs March 11 memo on BSC ?
I can't find it for the life of me
Dimon giving his statement now...
Ministry of Truth:
Unless you think your assets are worth more than someone will pay
from the little guy who think's his house is worth $500k to the big bankers who think their company is worth $30B, they all think their assets are worth more than anyone will pay - and it's scaring them.
A trick I used to play with other kids when I was 12 was to begin to push someone into a pool and then pull them back quickly.
I would then say "Aren't you glad I saved you!" and we all laugh at the obvious joke of seeking reward for saving someone I put in jeopardy in the first place.
O-Joe I guess would thank me with genuine sincerity for saving him from me pushing him in.
FFDIC-
Here's your money qoute - "measures so far are public relations exercises."
Realtors are not the only ones showing people how to get new loans before walking on the old one. Mortgage brokers have it figured out as well. This is never going to end now that the heroin of easy debt has caught on.
Re: At least five members of the Federal Reserve Board must agree with the credit advance, and the Reserve bank must show that such credit was not available elsewhere.
The Fed involvement in this extortion-like negotiation was a matter done under duress, i.e, this forced negotiation and panic did not allow for free market efficiency and a capitalistic solution to this problem.
What do you call this besides extortion? How can anyone explain away market manipulation and insider trading???
No, I think Dimon was the key player.
Look on the Fed website, and you'll find he's on the Board of Directors of the New York Fed. As well as being head of JP Morgan.
What a pack of thieving good ole boys.
All this comes down to is "preservation of the system" - period. It's a bail out, no question. Does it suck for tax payers? Sure.
But what's the alternative?
Reminds of the chapter in Reminiscence of a Stock Operator when Livermore stopped shorting stocks at the request of JP Morgan - it was about preservation of the system, and that came before any personal agendas. I think we're seeing the same thing here.
It sucks, but I think the alternative is "suckier".
-Wayne
"...with lower equity prices, further downward pressure on home values, and less access to credit for companies and households..."
That does define a brand new Fed mandate, for sure! Maintaining equity and home prices is now in their court.
<i>Geithner was the key player in this deal.</i>
Well, then he should be prosecuted first!
The Revolution Will Not Be Televised.
A coup by any other color.
Re: As we've seen from the above illustrations, this amendment allows, in unusual and exigent circumstances, a Reserve bank to advance credit to individuals, partnerships and corporations that are not depository institutions
Where are the details? How long ago was this, and all we have is a bogus rough draft of a portfolio which is linked to the very general concept of a credit extension, which may or may not be a loan. Where are the details of this transaction and the terms of a contract with American taxpayers????
"As much as the crisis hit with ferocious speed, so was the FED reaction. They really turned it around swiftly. We have to cut the FED some real slack here."
If Bear Stearns would have ignored Bernanke's testimony last spring summer and fall and simply read a few post by CR or Tanta, they would have had a year or more to shore up their balance sheet and any need for emergency action would have been eliminated.
I still want to know why that bastard Paulson slithered out of this and why he doesnt have to explain details about terms??
Nothing to see here, just Unfounded Rumors...move along please.
I guess Roubini won't be called to testify: This colleague is right. But in some sense this decomposition does not include many other losses that are unrelated to mortgages: losses from commercial real estate loans; losses from consumer credit (auto loans, credit cards, student loans), losses on holdings of leveraged loans, losses on holdings of impaired or defaulted muni bonds, losses on commercial and industrial loans, losses on defaulted corporate bonds, losses on CDS when corporate bonds default.
Some of these losses are, of course, not net losses of national wealth as most of these assets are inside assets, i.e. assets of one economic agent and liabilities of another economic agent. But some other of these losses are real as they represent outside assets: the lost equity in homes and the stock market, the deadweight economic losses from bankruptcy and foreclosure, etc. But even losses related to inside assets matter as they may impair the balance sheet of creditors (say banks and financial institutions), reduce their capital, limit their ability to lend, thus leading to a credit crunch that causes other real losses in the form of foregone output, production and income (GDP losses).
Either way we are only at the beginning of a process of realizing, acknowledging, writing down and accounting for the full variety of financial and real losses that the worst financial crisis since the Great Depression and the most serious recession in decades will entail. So the recent partial recovery of equity markets after the Bear Stearns is delusional; conditions in credit markets and money markets remain extremely strained and the onslaught of weak macro and financial news has not reached its peak yet. So the worst for the real economy and financial markets is ahead of us, not behind us.
folks, the financial system is walking on thin ice. take a look at the participants in CAPCO and maybe you will understand the Bear situation:
The broker/dealers that receive CAPCO's Excess SIPC protection are:
A.G. Edwards & Sons, Inc.
Bear Stearns Securities Corp.
Credit Suisse Securities (USA) LLC
Edward D. Jones & Co. L.P.
National Financial Services LLC
Goldman Sachs & Co.
Goldman Sachs Execution & Clearing, L.P.
Lehman Brothers Inc.
Neuberger Berman LLC
Morgan Stanley & Co., Inc.
Morgan Stanley DW Inc.
Raymond James and Associates
Ridge Clearing & Outsourcing Solutions, Inc.
Robert W. Baird & Co.
Pershing LLC
First Clearing, LLC
No other firms currently receive Excess SIPC protection from CAPCO.
Q. How is CAPCO funded?
CAPCO is capitalized by its 15 member firms and has a very strong reinsurance program consisting of two monoline financial guaranty reinsurers, each of which is rated AAA by Standard and Poor's.
Visit the CAPCO site. So much good info there along with the latest 3/26/08 S&P rating report (Outlook revised to negative, A+ affirmed.)
CAPCO Insurance
BSC ceo is still saying things are great...
They really turned it around swiftly.
Turned what around? Are banks now solvent?? Are housing prices rising??? Did unemployment claims drop???
Nothing has changed. Economic circumstances continue to deteriorate.
Geithner needs to provide terms for his extortion negotiation.
How long will Geithner be allowed to hold taxpayer cash?? What terms did Geithner negotiate?? How many years in prison should Geithner spend?
Dimon - "Good corporate citizens". Corporate philanthropy.
Under oath. What bullshit.
One day the Arabs, the Chinese or someone else will purposely crash our "house of cards."
As for capital cushion standards - clearly, they are not adequate.
Its the leverage stupid!
BSC ceo "its everyone else's fault.."
Is Caine playing bridge or golf and smoking pot today?
Funny how Schwartz fails to mention its role in underwriting trillions of bogus mortgages.
Ignore the cause, talk about the symptoms.
Dodd - "sorry for your employees"
I am sorry they mismanaged this company and caused US to bail them out!
Geithner --- 'Absent a forceful policy response, the consequences would be lower incomes for working families, higher borrowing costs for housing, education, and the expenses of everyday life, lower value of retirement savings, and rising unemployment.'
Ok, pinhead, like that's not already happening???
Updated: How to Keep your Investments Safe
Updated: How to Keep your Investments Safe - Herb Greenberg - MarketWatch
I dont want to add to the panic, but one thing that is getting little in the way of attention here is the question of whether investors should have investments in their name or street name. Many brokerage accounts are automatically opened as margin accounts, or with margin features, which means if a brokerage runs into trouble, you become just another creditor.
Granted, alls well that ends well if your broker (Bear Stearns) is acquired by another (JP Morgan), assuming the acquiring broker remains in good shape.
If youre not willing to take that chance, one suggestion is to transfer your account to a custody-type account at a trust company or bank trust department
In follow-up to my CAPCO post, basically, if Bear failed, we would have the mother of all bank runs... on all banks. But, they are not saying this in congress today. They are not even mentioning CAPCO...
"Under more normal conditions we might have come to a different decision"
No, Mr. Bernankie you wouldn't have these bastards are all joined at the hip, one goes down they all do just like dominos and you damn well know it.
He accepts NO responsibility for lousy lending or poor cash flow mgmt!
So, Discount Windows are not for investment banks to borrow money they are just there to give investors confidence?
Re: ""Under more normal conditions we might have come to a different decision" with respect to Bear Stearns, Mr. Bernanke said."
Yes.... if they would have not cared about that darn market opening in Japan, maybe a better situation would have evolved, like a free market negotiation, with this deal being public and allowing Congress to be part of the solution, instead of The Fed usurping power over the weekend.
This entire problem is due to the fact that JPM and Bear are not banks.....which is a fucking joke! See last night!
Re: scotty very slow 2 see writes:
Deal on Bank Bill Was Helped Along By Midnight Talks
The New York Times > Member Center > Site Help > Page Not Found spon=
At 2 o'clock on Friday morning, a few scant hours after his pessimistic report to the President, Mr. Dodd and other exhausted Democratic lawmakers placed a telephone call to a weary Treasury Secretary Lawrence H. Summers to report that they had clinched a deal with Mr. Gramm to repeal the Glass-Steagall Act of 1933. After eluding its advocates for decades, the agreement to deregulate Wall Street, favored by many of the nation's most powerful business interests, was struck.
The meeting in the middle of the night was the final chapter in a saga that began in 1934, when Senator Carter Glass himself tried to undo the law that put his name into the history books. The meeting capped a month of posturing, brinkmanship and dealmaking in Washington. And its outcome is expected to bring about one of the most important changes in decades in the laws governing the nation's financial system.
This account of the roller-coaster ride of the Financial Services Act of 1999 is based on interviews with leading Democratic and Republican lawmakers, senior officials at the White House, the Federal Reserve and the Treasury Department, and industry executives and lobbyists.
The Senate should ask Ben for a list of the companies that are too big to fail. If "too big to fail" means the taxpayers are on the hook for them, we should be getting their profits.
Bernanke hates my SRS! (I'm starting to hate my SRS too.)
The $29B handout to JPMorgan (to backstop the Bear purchase) is the first of what will end up being many handouts to those agencies, banks, and hedge funds that created this mess in the first place. This is welfare for the uber-rich.
This is insanity.
I am out of breath and frustrated beyond belief.
Up is down and down is up.
It's like I am running through a fun house of mirrors and pray for the day things make sense again.
Unfortunately that means that I am rooting against the welfare of my own country only to reassure myself I am not going crazy.
I have gone from a Bushy Fox News watching coservative to a liberal America hating leftwinger.
JS - ["too big to fail" means the taxpayers are on the hook for them, we should be getting their profits]
Exactly right. If there's an implicit guarantee that these outfits get propped up with taxpayer money their activities need to be scutinized and their profits shared with the taxpayer.
The value of the Bear assets was just fine according to Schwartz. It is irrational to tie the defaults underlying the assets to the assets themselves.
This guy is under oath.
Ave Joe,
I have enjoyed your posts a lot-- please let me remind you that hating the government is healthy in America and has nothing to do with hating America.
I know you know this, BTW.
I find the bit about how different decisions regarding Bear would have been made under "normal" conditions hillarious. Bear would NEVER run into trouble during "normal" conditions!
Saying that we only bail-out banks under extraordinary circumstances is to say that we ALWAYS bail-out banks. What other time will a major lender run into trouble where their survival is in question if conditions weren't abnormal?
JS,
I gave you a list of TBTF above.. notice that JPM is not on the CAPCO participants list. I'm wondering if that is why they were chosen to takeover Bear.
"I have gone from a Bushy Fox News watching conservative to a liberal America hating leftwinger."
The leftwingers are just as much up there in this love-fest with B-52 as the wretched neo-cons. Where are the paleo-cons?
Thank you Kou Jie!
I pray a lot, and today, I'm praying that Dodd gets his ass kicked and will soon be unemployed!
Political Candidates : Political Candidates News and Photos - chicagotribune.com
Dodd, 63, who intends to seek a sixth term in 2010, has fences to mend. A new poll says that his approval rating dropped during his yearlong presidential campaign from 60 percent to 51 percent.
This crook had a chance to stand up for America and failed.
See also: Repeal the Glass-Steagall Act of 1933
See: Section 13(b) may be a memory, and a discomfiting one at that, but Section 13 paragraph 3 (that language originally found in a 1932 highway bill) is alive and well in the Federal Reserve Act. As we've seen from the above illustrations, this amendment allows, in unusual and exigent circumstances, a Reserve bank to advance credit to individuals, partnerships and corporations that are not depository institutions. At least five members of the Federal Reserve Board must agree with the credit advance, and the Reserve bank must show that such credit was not available elsewhere.
CNBC Rumors did it to us! We were fine till Charlie G opened his mouth!
That guy from Fast Money had all those Puts @ $30. We were doomed!
Average Joe --
If they are so confident in the collateral why not make it public and then sell it?
Because the collateral is "illiquid", so the mere act of selling in volume would drive the price down.
Look at it this way. Just because the current best bid for Wal-Mart stock is for 100 shares at $55, that does not mean you could take 100 million shares and sell them for $5.5 billion. But that is the "market value" you could state for those shares on your own books.
Now, if the Fed were to buy those 100 million shares from you for $5.3 billion (i.e., at 29/30 of the "market value", which is essentially what they did for JPM), with the intent to liquidate those shares slowly over the next 10 years, how much risk would that be putting on the taxpayers? Would you call that a "$5.3 billion bail-out"?
The answer, I think, is "it depends".
Say what you will about the Bernanke Fed, but you cannot accuse them of lacking creativity. Whether it will all ultimately work is an open question, IMO. They certainly prevented -- or maybe just delayed -- a major meltdown on March 14. We'll see what happens next.
Re: This guy is under oath.
Did they really take an oath? Which one, or who's?
Re: if the Fed were to buy those 100 million shares from you for $5.3 billion (i.e., at 29/30 of the "market value", which is essentially what they did for JPM), with the intent to liquidate those shares slowly
The Fed can't buy shares of a company dumbass!
The regulators and financial industry together are like the mafia -- you know they're a bunch of crooks and all in on it, but you'd be hard pressed to prove it or to do anything about it.
Average Joe -
Fascism will do that to you. Its been going on since 2002 and unfortunately the 2006 Democratic Congress victory shows that they have learned that fascism is good for them also, so expect it to continue until the country is ruined.
All of us who wrote to Dod's committee to complain about the bailout, I think we just got the finger.
So, Bear Stearns loses 80% of its liquidity (around $10 Billion) in one day. According to BB, the Fed is comfortable with JP Morgan eating only $1 Billion of potential Bear losses, and also that having the taxpayers at risk of $29 Billion of Bear's risk. Why? Losses of $1B followed by $29B would be extraordinary and completely unexpected of course!
The Fed can't buy shares of a company dumbass!
They can't buy arbitrary mortgage-backed securities and CMOs, either...
Oh, wait, they did. Critical reading not your strong suit?
Mmmm...This is socialized capitalism at its finest...
Unlike some central banks, and barring changes to current law, the Fed is relatively restricted in its ability to buy private securities directly
The Fed is allowed to buy certain short-term private instruments, such as bankers' acceptances, that are not much used today
Nemo -
How do we know they prevented anything? You are buying into the new Fed blackmail, which is standard procedure for shitty fascist governments. "If you dont give Bear money, the entire world will explode". "If you don't let us wiretap, you will be murdered by terrorists". "If we don't stop Saddam right now he will nuke every city in this country". etc, etc, etc. Stop buying the bullshit blackmail to force unscrupulous deals down your throat and the unscrupulous deals will stop without the world ending.
Off topic: I hope Tanta covers this blog posting from this Realtor (TM):
"Buying a New Home Before Letting The Old Go Into Foreclosure"
Who Knew?: Buying a New Home Before Letting The Old Go Into Foreclosure
Unlike some central banks, and barring changes to current law, the Fed is relatively restricted in its ability to buy private securities directly.12 However, the Fed does have broad powers to lend to the private sector indirectly via banks, through the discount window.13 Therefore a second policy option, complementary to operating in the markets for Treasury and agency debt, would be for the Fed to offer fixed-term loans to banks at low or zero interest, with a wide range of private assets (including, among others, corporate bonds, commercial paper, bank loans, and mortgages) deemed eligible as collateral.14
WHERE ARE THE DETAILS OF THIS LOAN??????
***??
The Fed can purchase various different instruments including buy equities
Its sounds like the Jeff Skilling script - just say things were great and it was a run on the bank, repeat this same thing OVER AND OVER AND OVER...
It is also permitted to make IPC (individual, partnership, and corporation) loans directly to the private sector, but only under stringent criteria. This latter power has not been used since the Great Depression but could be invoked in an emergency
Where is the stringent criteria, where is this loan??? Where are the details??? These crooks should be hung!
Re: The Fed can purchase various different instruments including buy equities
The Fed isn't buying, the Fed is selling!
Re: You remember...there's a run on the bank just when George and Mary are heading off on their honeymoon, and evil financier Potter offers shareholders of the old Bailey Savings & Loan fifty cents on the dollar for their accounts.
"Don't you see," George exclaims to a roomful of worried depositors, "Potter isn't selling, he's buying!" Actor Jimmy Stewart goes on to deliver an impassioned speech on how the principles of shared responsibility, patience, and faith should form the basis for our financial markets, as well as for our communities.
It falls on deaf ears, of course. What keeps everyone from selling out to Potter (gleefully played by Lionel Barrymore) is George's offer of his life savings as a temporary pay-off, which they greedily use up.
The Fed is loaning money and not disclosing terms -- and that is why this bogus hearing today is as fraudulent as The Bear/JPM/Treasury?Fed Bail out!
These testimonies are a bunch of crap regardless of how "forthcoming" anyone appears to be.
Just once, I would like to see someone stand up and display a "SHOW ME YOUR T!TS" t-shirt at one of these meetings while Bailout Bernanke is blabbing away.......
I have gone from a Bushy Fox News watching coservative to a liberal America hating leftwinger.
Oh Lord, then maybe you need a new hobby. If any of this is not understandable to you, or bothers you, then it's a good thing you weren't running BSC, JPM, or a Fed governor. I'm stilly mystified at why there is all this blather about this. So much energy and virutal ink spilt over things that most likely will not happen.
You guys have done it to me. I actually agree with OJoe. Crisis averted, shallow downturn, orderly unwinding with PE ratios returning to normal over the next 2 quarters as forward earning aren't going to be what people think. Business as usual.
Nothing has changed. Economic circumstances continue to deteriorate.
tj & the bear
Bears now in rear-mirror mode?
O-Joe
Back to basics again and history:
President Franklin Roosevelt signed a bill into law that added Section 13(b) to the Federal Reserve Act, which authorized the Federal Reserve to make credit available for the purpose of supplying working capital to established industrial and commercial businesses, according to the Federal Reserve Board's 1934 annual report.
In the depths of the Depression, the country's relatively nascent central bank, arguably still struggling to find its role in the U.S. economy, was being asked to get into the lending business, and much to the chagrin of one Rep. C.L. Beedy:
The Federal Reserve banks, 12 in number, which were never designed to do business with any individual or any person, but were banks of issue or rediscount to deal with other banks, ought never, in my opinion, to be put into the lending business. It is a perversion of the original purpose for which those banks were established.
b --
How do we know they prevented anything?
I was watching the markets (and futures) that weekend. It sure "felt" like something very bad was going to happen on Monday.
Also, Bear Stearns really is counterparty to $2.5 trillion (or maybe $10 trillion or $13.4 trillion) worth of transactions. So it is at least plausible that a bankruptcy would have set off an "unfortunate" chain reaction.
So I believe the evidence is on the Fed's side here, and I do not think I am alone in believing this... But of course, I do not know for sure.
Personally, my biggest complaint is that the BSC shareholders were not wiped out. If taxpayer money is at risk in any way, the equity holders should get exactly zero and the executive management should get fired, a la Sweden.
This entire testimony is a farce. Bears marks on their mortgage securities are bogus and the market knows this. So does the fed. Hence the ten year holding facility.
Mortgages and treasuries are the backbone of our banking system. Wall street greed has ruined mortgages as collateral.
The most illuminating disclosure so far was Geithner's revelation that he was uncomfortable lending money directly to BSC - Too much risk. They were levered like a hedge fund on crap assets.
Menendez back up - let the fun begin.
I'm with Beedy on this, this coup is a perversion and smacks of treason, in reagrd to these crooks and creeps being in bed with the stock market in Japan...... The Fed does not state that it has power to manipulate the stock market in Japan, so smells like treason to me...
Bob Menendez is making me proud to be a New Jerseyan today
--
What is missing from any debate on this blog or any other economy related blog is:
Criminalization of the US Financial System and the Economy Aided and Abetted by the Fed and the USG.
Blind faith in the system must be sustained?
Jas
"valued at the same as BSC had them valued at"...
Bob Menedez for President!
Bond holders holy grail = to big to fail. Leverage up.
Re: unfortunate" chain reaction
The most illuminating disclosure so far was Geithner's revelation that he was uncomfortable lending money directly to BSC - Too much risk.
Exactly. But then WHY does the fed lend to other IBs with similar collateral at the discount window.
I'm from NJ. Trust me, Senator Menendez is no gem.
Re: ut then WHY does the fed lend to other IBs with similar collateral at the discount window.
'Capital is not synonymous with liquidity.'
Christopher Cox, SEC
The Fed is brainwashed with supply side retardation!
Super rare XXX American history:
When Hoover said that nobody had starved, FORTUNE magazine used his statement as the title of a bitter dissent: 95 people suffering starvation were admitted to New York City hospitals during 1931, and 20 of them died; 27% of the schoolchildren in Pennsylvania in 1932 were suffering from malnutrition. Roosevelt's first bill for federal relief passed Congress in May ("God save the people of the United States," protested Republican Senator C.L. Beedy of Maine), but the $500 million appropriation had to be disbursed through the states. By nightfall of Hopkins' second day as Federal Relief Administrator, he had telegraphed seven Governors and arranged more than $5 million in emergency grants. MONEY FLIES, read the headline in the Washington Post.
Nemo -
The only gun they were under was the opening of the Asian markets. Thats why this deal is a joke, there was no need to rush through any crooked deal other than to prevent a -400 day on the DOW. They could have easily allowed Bear to borrow like all of the other IB's on Monday. There was a lot of things they could do to stall a bankruptcy and orderly dispose of the corpse. Instead they gave JPM $30b, the top guys $10/share ($66m for bankrupting a company is nice!) and are now trying to hide the details and tell everyone to go fuck themselves. That is the real problem here, their actions do not say "we had to save the day", they say "we chose to be crooked and say we were saving the day". There were plenty of good options to stop a meltdown, they just chose the path of most corruption.
Bears now in rear-mirror mode?
LOL! No, bulls still firmly occupy that position, otherwise they'd have taken note of all the prior CR posts noting increasing unemployment, increasing delinquent debt, decreasing economic activity, etc. Despite the minor improvements in the ISM indices, they still show contraction. Even Bernanke has gotten more pessimistic.
No, the BSC debacle was simply one bullet dodged, but the gunfire continues unabated.
F.D.R.'s Disputed Legacy
Monday, Feb. 01, 1982 By OTTO FRIEDRICH
F.D.R.'s Disputed Legacy - TIME
Roosevelt's pioneering experiments in public works and welfare were schizophrenic from the start. Everyone agreed that the dole was demoralizing. Said the mayor of Toledo: "I have seen thousands of these defeated, discouraged, hopeless men and women cringing and fawning as they come to ask for public aid."
tj & the bear said: "...Despite the minor improvements in the ISM indices, they still show contraction..."
In the ISM indices, not the economy. Big difference.
Sebastia
So I always keep hearing how the Fed is really a private concern of the banks themselves.
Well, if the banks were so concerned about the financial system's viability, why not pony up themselves? Treasury could certainly have said, "Geithner, if the banks on your board want a smoothly running financial system, they'll just have to pay for one. No allowance on the remittances."
Re: "other than to prevent a -400 day on the DOW."
Who gives a crap if stocks went down 5%....it's a stock market that has volatility and it still is overvalued. Why should it be held up in a synthetic attempt to save Paulson'e $700 milion personal fortune of bernanke's million, of the insiders of wall street........everyone with a brain is out because of this extreme risk, so why overvalue the market and connect artificial loan manipulation to this deal, like a nazi economy looking for ways to hide debts and bad bets?
See MEFO bonds
JP Morgan paid 1.25B(equity) + 25B (loan to Bear) for 300B worth of assets but the feds paid 29B for 29B worth of assets ?
CR,
Do you have any contacts with people close to the rating agencies? I'm still wondering why we're not seeing any more MBS/CDO downgrades. It's not like the real estate market hasn't deteriorated further.
The FED can only accept AAA MBS that's not on credit-watch, so it strikes me as highly suspicious that ratings activities on these securities has been effectively suspended.
Anon,
The FED does care about the stock market, because bank's stock value goes directly to their overall capitalization.
No, the BSC debacle was simply one bullet dodged, but the gunfire continues unabated.
tj, what gunfire? where? everyone was on here a couple of weeks ago drooling at the prospect of total financial meltdown. the Fed intervened and it didn't happen. Now things seem to be orderly, even if some have to take big write-offs. The numbers are contracting? Of course they are, big deal. It's part of the business cycle.
My indicator for a bottom is now the threads on here. There was a time when people were thoughtful, gave data, learned opinion and that has been replaced with something similar to Fox news or Jerry Springer. The more bizzare the posts get, and the more worked up over the BSC episode (which, I predict, will be written about in econ textbooks as brilliant for a long time) the more I sense we're near a turning point on sentiment, and that is a key driver.
I do not believe there is any upturn in Qs 3 and 4, but I do believe that this will be a shallow, but more lengthy downturn patch.
ipodius - Ignoring the price-inflation secondary effects. I agree, shallow.
Painful to the middle-class... but shallow to the IBs and other banks.
Clover goes to the gable wall and brings Benjamin with her. She asks Benjamin to read for her what is on the gable wall. All the commandments are gone, and all that is written there now is All animals are equal, But some animals are more equal than others.
Animal Farm by George Orwell
ipodius,
What did the Fed do to shore up J6P's balance sheet? That's the only one that matters. They've simply delayed the inevitable.
I'm just astonished when I hear the Fed (Geithner) arguing that urgent action was necessary, or else housing and equity prices would go down. Amazing! Blow a bubble, and then protect it at all costs (to the taxpayer)...
And do they really think they can prop them up! Good luck with that!
From CNBC:
Bernanke expressed optimism for the second half of 2008. "Growth should resume in the 3rd quarter and accelerate into years end." When asked what data supports his view the FED chair said "Sebastian said so, do you know Sebastian,Senator?"
Oops, that last comment was me.
Me, not ScratchinMyHead, that is.
More OT History:
The Federal Home Loan Bank Act is a United States federal law passed in 1932 under President Herbert Hoover in order to lower the cost of home ownership.
It established the Federal Home Loan Bank Board to charter and supervise federal savings and loan institutions. It also created the Federal Home Loan Banks which lend to S&Ls in order to finance home mortgages.
The act was notably amended by Financial Institutions Reform, Recovery and Enforcement Act of 1989, which transferred regulation of thrifts to the Office of Thrift Supervision.
idopius,
I will go with Meredith Whitney rather than someone who cannot even type 'recession.
Man, it should be illegal to lie in Congressional testimony, even if the lie is couched in financial terms that make it not obvious.
If you analyze the statements, they are in obvious conflict. There is a market price for any security at all times; junk CDO's are selling even now to speculators for pennies on the dollar. A liquidity crisis is a fancy way to say you didn't want to sell the assets you had because that would reduce their market value, and you'd have to reduce their paper value as a result, which would affect your on-paper capitalization. The only way they were adequately capitalized is if they had enough assets to sell at market to cover debts that were called in. They didn't. Therefor, they were not adequately capitalized at that point (in fact, they were probably net negative in assets).
It's the equivalent of saying something is true because... look over there! A bald-faced lie, from the very person who's supposed to prosecute people for lying about corporate financial info, just to justify the Fed's bailout. Despicable.
Painful to the middle-class... but shallow to the IBs and other banks.
Interesting, I sort of agree...it is going to be painful for the middle-class. But also for the upper and upper middles too, as hedges are blowing up, stocks are not done being bearish (wait until earnings continue to disappoint) and other investment vehicles lose value. I'm saying that the unwind will be orderly, not that it will be bloodless. The pain is going to be shared here.
IPODIUS,
The fed probably did avert a financial panic, but I just don't see a bottom here.
To many with too much debt imo. Wall street and the government cannot deliver prosperity.
It's beyond me, but the government seems hell bent on perpetuating housing unaffordability. Just how is that going to help the economy?
energycon, I'll go with someone that knows the meaning of "non-sequitor". And typing has what to do with cogent thought? Please explain and cite references. Otherwise your one of the ones not contributing I spoke of.
ipodius - It would have been some pretty crazy fireworks though... "bombs bursting in air" type stuff !
O-Joe said: "...It really looks like Sebastian is right and ECRI gets it wrong for the first time - this will not be a recession..."
then ipodius said: "...My indicator for a bottom is now the threads on here..."
One convert and one fence-sitter, out of 257 visitors on-line. More good news for me.
S.
"Painful to the middle-class... but shallow to the IBs and other banks."
Banks should do reasonably well seeing that 70% of the economy is consumer spending....wait, that makes no sense. I am confused.
Geithner was the key player in this deal.
Geithner is also the smartest man in that hearing room. By a mile.
Angry, I don't really see a bottom yet either. I'm just saying that the panic phase is over and there is no systemic meltdown on the horizon. Again, that doesn't mean pain, it means we can move on.
JJL - The banks can't fail with these guys in power. Sure they can lose money, but with the steepenning yeild curve, they will be able to print money shortly.
Energyecon,
What do you know about the viability of biomass power plants?
It would have been some pretty crazy fireworks though... "bombs bursting in air" type stuff !
LOL...yes, a good global financial crisis may have had a certain "they had it coming" type of feel to it...sigh. That why I think everyone on here is mad at the Fed. They were the cops called into the party just as it was getting loud
Conjure Bag was wrong! Midnight came and I can still get money out of my ATM.
Interesting,
yeah after the FED rate is at 0, the banks will not pass any of this along to the borrower, so the pocketed spread may well be the gift they need. Thanks federal reserve!
Man, it should be illegal to lie in Congressional testimony, even if the lie is couched in financial terms that make it not obvious.
It is.
O-Joe converted to Sebastian's way of thinking?... You're one and the same!!
Ok, I admit, the treason issue is difficult to explot, but I think the case here today is purgery and the lies being told and accepted in a netwrok of collusion; we have no details on this loan and the deal was done under duress and people at this hearing are giving false and misleading information to taxpayers.
If you can bust Clinton for purgery, same goes for these crooks!
Clinton admitted in taped grand jury testimony on August 17, 1998, that he had had an "improper physical relationship" with Lewinsky. That evening he gave a nationally televised statement admitting his relationship with Lewinsky which was "not appropriate".[5]
[edit] Perjury charges
In his deposition for the Jones lawsuit, Clinton denied having "sexual relations" with Lewinsky. Based on the evidence provided by Tripp, a blue dress with Clinton's semen, Starr concluded that this sworn testimony was false and perjurious.
During the deposition, Clinton was asked "Have you ever had sexual relations with Monica Lewinsky, as that term is defined in Deposition Exhibit 1, as modified by the Court?" The judge ordered that Clinton be given an opportunity to review the agreed definition. Afterwards, based on the definition created by the Independent Counsel's Office, Clinton answered "I have never had sexual relations with Monica Lewinsky." Clinton later stated that he believed the agreed-upon definition of sexual relations excluded his receiving oral sex.[citation needed]
ipodius -
If all it took was a second-rate IB to go bankrupt to cause systemic meltdown, wouldn't it be safe to assume we are very close to a systemic meltdown still? If Bear going under can cause it, then any number of large entities having trouble can also cause it, I don't think Bear was in a particularly unique position compared to its peers.
Here is the current list of financial service firms gone belly up/having trouble in the UK. There, poor operating firms just go under:
35 todate:
The Financial Services Compensation Scheme - FSCS - Consumer home page - Latest News
Conjure Bag was wrong! Midnight came and I can still get money out of my ATM.
No conjure called midnight and he was right. But just after the stroke of 12, BB slipped on the 29B glass slipper and the Bear didn't turn into a pumpkin, but got married to a studly bank.
And, in case you missed it, he said on another thread that he was now cautiously buying into financials.
Ipodius,
Your points have merit. I have to say though, I've been a stock bear since 1997 and it has served me well.
But it is absolutely amazing how long these over-valued (imo) trends can continue. I almost lost faith in my convictions during internet boom. Same with the housing boom. That's why I don't go short. The timing is too hard to predict.
wouldn't it be safe to assume we are very close to a systemic meltdown still
No, because now everyone knows that the Fed will step in and stop it. So now we're going to get to see what's under everyone knickers as they are forced to play their hands. The panic was all about NOT knowing what would happen. Now we know.
Angry,
Limited knowledge base, but the issue with most alternatives is scaling up.
I think it is a largish contributor to the power matrix on the alt side (second? third?), so it has demonstrated viability in that context. Likely to be bigger going forward as are all alts, but sourcing the fuel appears to be the critical issue along with a generic unintended consequences in a major ramp up.
"Under more normal conditions we might have come to a different decision" with respect to Bear Stearns, Mr. Bernanke said.
"More normal" circumstances being if they hadn't sat on their arses the last 7 years doing nothing to prevent this problem in the first place, he means? Sheesh.
"More normal" being a Democratic administration that hires someone who gives a cr*p about their job instead of their rich buddies.
That's why I don't go short. The timing is too hard to predict.
Exactly. And I do agree...I am bearish as I believe that most stocks are over-valued given the forward earnings projections that I make. You just have to look for what got oversold, or what will do well in this environment. The rest, and the DOW, will not end the year significantly different from the way it began.
cooking ramen in my percolator said: "O-Joe converted to Sebastian's way of thinking?... You're one and the same!!"
If that's what you think, you haven't been reading my posts closely enough. Although I could be wrong, I thought that O-Joe went through a brief, mild period of uncertainty.
S.
ipodius -
Doesn't that seriously increase risk of a meltdown in reality? Now instead of avoiding it they can say the Fed will solve the problem. I do not have much faith that the Fed will be able to solve every problem that is thrown at it, especially if those problems become even larger due to this moral hazard they have created.
Angry,
One speculative thought on that, distributed generation with biomass - some threads back some of the engineering heads (dryfly and ?) mentioned a hobby shop project of a wood stove fired steam turbine...hang a coil and such off of that and voila!
generic unintended consequences in a major ramp up.
energyecon | 04.03.08 - 3:30 pm | #
lol... like the price of wheat skyrocketing....
Ipodius-
You are a fool if you look for market turning points by monitoring the sentiment of commentators at this blog.
But then again, I already knew you were a fool from many of your past posts.
Fed is ready to cut rates again and I assume take beenie babies as antique art collateral worth 1000 X market value
If The Fed can value securities now, why didn't they value them 3 years ago and stop the housing bubble from getting beyond the frothy stages of 2005, 2006, 2007, 2008???
Why are they stepping in now and why did they fail to to value these derivatives before?? The reason is obvious, Paulson and friends needed a safety net! This is not about policy, it's about corruption and collusion and nepotism!
One convert and one fence-sitter, out of 257 visitors on-line. More good news for me.
There are two precepts to live by Sebastian. Moderation in all things, including your economic lookout, and trying to go through life causing the least disturbance as possible. That, however, does not mean you don't call bullsh&t when you see it, present company excluded of course.
Energyecon,
Thanks. I'm looking at an investment in that sector. Combined cycle gasification. Primarily wood with coal as a supplement.
One thing that concerns me is that a bunch of these were built & moth balled in California.
Interesting Times,
Oh yeah, I recall some folks thinking we will get bulk discounts if we go to a major construction ramp - likelier the opposite as bottlenecks emerge and competition for finite capacity bids up costs.
You are a fool if you look for market turning points by monitoring the sentiment of commentators at this blog.
Really? I called the top of the RE market here in Boston by listening to people and watching numbers, and I'll do the same thing this time. The more shrill people get on either side of an issue means that they are starting to talk more loudly to drown out their own doubts. Sort of like calling someone else a fool because it makes you feel better about yourself.
Re: One convert and one fence-sitter, out of 257 visitors on-line. More good news for me.
You can't count yourself twice!
Ipodius,
I use cocktail banter as an indicator too. But I tend to view the people on this board as early adopters and would not be willing to use them as a counter indicator.
Just one guys opinion.
It pisses me off to no end that these people come before Congress with prepared, peppered speeches handcrafted by SIFMA lawyers to goose the listeners with pre-planned issues, versus having on-the-fly exchanges as if in a court of law.
No more of this crap!
So JPM paid less than 10C on the dollar for Bear assets?
Angry Saver - biomass energy might not be the best longterm. It takes food from people. One day soon, a decision will have to be made - food or energy ? I wouldn't want to be on the wrong side of the final choice.
It's too bad solar stocks are priced so high. Check the P/E on FSLR... sick
I want to get in, but damn, at that price ??
ipodius
Sort of like calling someone else a fool because it makes you feel better about yourself.
so true. so true. I appreciate your posts. You dont mince words. Thank you
I called the top of the RE market here in Boston by listening to people and watching numbers, and I'll do the same thing this time.
It all depends on who you listen to. You can listen to the general public and it will give you a good idea of future housing market conditions, because the housing market participants are mostly the general public.
On the other hand, you cannot listen to CR blog commentators to determine bank liquidity and solvency, because they are not even participants in those markets, therefore their sentiment has nothing to do with the markets.
Anyway, fundamental problems will eventually work themselves out no matter what the sentiment of the market participants are.
tj & the bear, I think there were some downgrades earlier this week - I just missed them.
Best Wishes
Christopher Cox is the worst SEC Chairman in the history of the SEC. He is the only regulatory "cop" that can't find any criminals. With all the fraud on Wall Street (Siv's, CDO's, derivatives, back dating options, theft of taxpayer dollars) Cox can't find anything to charge anyone. AMAZING! Impeach Cox he has failed the oath of his office.
DOW JONES NEWSWIRES Another bailout of a bank like Bear Stearns by the Federal Reserve "must not happen again," said Sen. Jim Bunning, R-Ky., at a hearing Thursday. "I do not like the idea of the Fed getting involved," Bunning told Federal Reserve Chairman Ben Bernanke and others. "That is socialism." The hearing is about the U.S. role in staving off a collapse of Bear Stearns last month.
-Wayne
Wayne Mulligan | Homepage | 04.03.08 - 2:03 pm
That's the stupidest thing I've ever read at this blog. It wouldn't be so goddamned dumb if the people being "bailed Out" had to surrender all of their assets - both personal and corporate, including overseas holdings, trusts, etc. - and were hit with a lengthy prison sentence.
You must like getting punked.
This is the only reality there today, i.e, opening the window 90 hours early or on the weekend would have prevented The fed from abusing antitrust legislation and usurping authority from Congress; they would have done the job of a Fed, and not looked like retarded crooks!
Schwartz, however, argued that opening the discount window earlier, and to all non-banks, would likely have prevented Bear Stearns from having to be bailed out. He said it is 'highly, highly unlikely' that Bear Stearns would have to be rescued if the window were opened earlier, and said part of the problem is that the window was just opened for a single entity, which made the situation look worse for Bear Stearns.
'When you make an emergency situation available for one particular bank, that does not shore up confidence in that particular bank,' Schwartz said.
Schwartz's argument is tied to his belief that the crash in confidence in Bear Stearns was not accidental.
Though he has no specific evidence, Schwartz said the pattern 'looked like more than just rumors. It looked like people wanted to induce a panic.' As soon as Bear put out facts to quash one rumor, he said, another one immediately appeared. 'We could never get the facts out faster than the rumors.'
The key point, he said, is that it would be much harder to start such a run on a commercial bank because people know that the bank could always turn to the Fed for loans against its collateral. 'The rumors are deflated by the fact that people know they have a liquidity source.' The Bear Stearns rumors, that the company had no place to turn for loans against its collateral, were what made them a self-fulfilling prophecy
But I tend to view the people on this board as early adopters
Most people yes. There are a lot of regulars here that I think have great insight, even though I don't agree with some of them all the time. But lately the tone has changed...and I've lurked here for a lot longer than I've posted. It seems lately we're turned from reasoned economic/housing insight to just a lot of complaining about general policy and stating over and over again that everything is going to hell in a handbasket. I mean, come on, when people start posting about the Fed's "illegal" activities and whinging about using taxpayer money when none has been used yet, you know something's up.
For a while it was glodbugs pestering, now it's the rabid "abolish the Fed people" who might be reading Mish's tiresome posts on the subject. The concept of a Central Bank isn't going anywhere. Ron Paul attracted no attention. The Fed is going to get expanded powers after this, not reduced. So the question remains, how do we make money and what is good for business, because, at the end of the day, if business is humming along everyone makes money...employee and stockholder alike. And honestly, that's all anyone really cares about...paying the bills, having a decent house, putting the kids through school, driving a good car...etc etc
BTW.
For those who think I'm a dick for calling ipodius a fool.
I'm stilly mystified at why there is all this blather about this. So much energy and virutal ink spilt over things that most likely will not happen.
Blather: foolish gibberish
I was simply responding to his assertion that all the talk here is foolish gibberish.
Bear Stearns Cos. Chief Executive Officer Alan Schwartz said the fifth-largest U.S. securities firm may have survived if the Federal Reserve acted sooner to lend money directly to investment banks.
``It is highly, highly unlikely in my personal opinion that we would be in the situation we find ourselves in today'' had the Fed provided financing earlier, Schwartz told members of the Senate Banking Committee today.
The Fed agreed to provide emergency funding to New York- based Bear Stearns on March 14 after a run on the company put it on the verge of bankruptcy. JPMorgan Chase & Co. has agreed to buy Bear Stearns for $10 a share, a fraction of its value earlier last month.
ipodius - where to next ?
SHK and tj & bear,
To parahrase tj & bear, lets see some data that demonstrates improvement in J6P balance sheets - like fewer hardship loans from 401k plans, wage income rising faster than the cost of food, fuel and health care, improvements in consumer sentiment, CEO & CFO sentiment, and oh yeah, housing - if the plankton aren't thriving the whales will starve.
I don't know folks. This mortgage mess and all the resultant handouts really bring me down.
I think we're facing hard times. That's my gut. Nothing that happened today at the Senate hearings changes that. If anything, I think we're facing more inflation in the price of necessities.
Here's a counter indicator: people now view $100/bbl oil as a positive.
I'm just can't invest if that's the "good" news.
I read chavez is now going to tax oil over 70 dollars a barrell.
Angry Saver - inflation adjusted, $100 oil isn't so bad. (it's the psychological number that freaks everyone out)
Inflation adjusted, gold's high is somewhere in the $2000s if I'm not mistaken.
Energyecon,
Don't forget the 20,000 payday loan stores. I don't think we have 20,000 McDonalds!
This deal should be voided for lack of due diligence!
ipodius,
But that is just it - business was humming along and people (J6P) were NOT making money - real incomes stagnated while debt expanded and the share of GDP going to corporate profits was the most since the 'Great Softish Patch'...and now the credit spigot is getting tightened.
On the other hand, you cannot listen to CR blog commentators to determine bank liquidity and solvency, because they are not even participants in those markets
Everyone is a participant in the market Sweet, everyone.
I subscribe to the position that people's sentiment has a lot to do with what the market...ANY market is going to do. At the height of a frenzy, people are talking loudly because, in their insides, they know it's stupid and they're trying to drown that thought out. So at the top of the housing bubble, the cocktail/blog/new/grocery store line banter got more loud and prevanlent as the first signs of cracking occured. That was the top. The covergence of a lot of data and analysis I was doing, and the human datapoints, not any one of them.
The same thing will happen at the bottom now. As signs point to upturn, people will do the same thing in reverse in the same places. I am just saying that I'm seeing signs of that now.
Take it as you will. But I'm agreeing with mp and conjure although I'm not yet buying...there are some values now in financials as we're past the bottom now for the sector. The Fed just provided the floor.
And honestly, that's all anyone really cares about...paying the bills, having a decent house, putting the kids through school, driving a good car...etc etc
Exactly. That's why the talk here is about the Fed, the monetary system, etc. Because past policy has created a situation where an increasingly large segment of the population CANNOT pay the bills.
Also, some of us care about the future for our children. The consequences of our past policy will eventually be paid for.
Why do you have a problem with people who want to abolish the Fed, discuss different monetary systems, or complain about the government? Does it challenge your assumptions about the future?
The New York Fed presented a one-page description of the portfolio. The assets include investment-grade securities and residential and commercial mortgage loans, all of which were current on principal and interest as of March 14. The staff of some lawmakers will be able to review the full list on a confidential basis, the statement said.
Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said the SEC was ``seemingly unaware'' of Bear Stearns's plight.
Bear Stearns Chief Executive Officer Alan Schwartz said in testimony that the fifth-largest U.S. securities firm may have survived if the Fed acted sooner to lend money directly to investment banks. ``It is highly, highly unlikely in my personal opinion that we would be in the situation we find ourselves in today'' had the Fed opened the window earlier, Schwartz said.
In a question-and-answer period, Bernanke said the primary dealer facility was put in place March 16 to prevent a run on other brokers, and said it would have to be closed once the emergency conditions in markets subsided.
Monitoring Banks
The New York Fed has examiners at the major investment banks'' so the central bank has thedirect capacity to assess the financial condition of these institutions,'' Geithner said.
"I do not like the idea of the Fed getting involved," Bunning told Federal Reserve Chairman Ben Bernanke and others.
ZOMG! a real, honest to goodness conservative... Don't be afraid... Where are from? who are your people?
ipodius:
Rally, huh? It's upwards from here, you say? Bernanke saves one bank, at cost to you and me, and the fundamentals no longer matter?
You seem to suffer delusions of infallibility - an air of superiority. Good luck wit' dat.
I suggest you put everything you own in financial stocks - after all, you called bottom. Or, you could be conservative and just STFU.
Heh.
Not wait an American taxpaying second:
They are not going to disclose this portfolio to the public, but use GAAP???
The New York Fed presented a one-page description of the portfolio.
The staff of some lawmakers will be able to review the full list on a confidential basis, the statement said.
``It is highly, highly unlikely in my personal opinion that we would be in the situation we find ourselves in today'' had the Fed opened the window earlier, Schwartz said.
In a question-and-answer period, Bernanke said the primary dealer facility was put in place March 16 to prevent a run on other brokers, and said it would have to be closed once the emergency conditions in markets subsided.
Monitoring Banks
``direct capacity to assess the financial condition of these institutions,'' Geithner said.
Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said the SEC was ``seemingly unaware'' of Bear Stearns's plight.
Marcus Aurelius - Same question:
Where to next?
It wouldn't be so goddamned dumb if the people being "bailed Out" had to surrender all of their assets - both personal and corporate, including overseas holdings, trusts, etc. - and were hit with a lengthy prison sentence.
Which people do you mean? The customers of the bank who were bailed out? The bank employees? Bank shareholders?
If anyone should suffer after a bail-out it is the irresponsible customers who were stupid enough to do business with the bank in the first place. We need to put the fear of God into banking customers so that they start choosing the institutions they do business with based on financial health rather than the best deals, fees, or willingness to be counterparty to the riskiest of derivative contracts.
The way it is now we will always have a race for the bottom as customers always rush to the worst managed banks they can find, safe in the knowledge that the government has their backs.
real incomes stagnated while debt expanded and the share of GDP going to corporate profits was the most since the 'Great Softish Patch'
So energycon, how is that related to current circumstances? There are many interlocking reasons for this. I was at a forum with Cathy Minehan (if you know who she is) a couple of years ago and she was talking about jobs and globalization. Her words were "the genie is out of the bottle, get used to it. technology made it possible and it's going to cause dislocation. So learn to adapt." And she was right. This is another period of dislocation.
The answer, of course, is education because the skillsets needed now are different than 10 years ago. Manufacturing jobs will not come back, and even if manufacturing came back the jobs would be far less because of automation. So it's more complicated than pointing at a bunch of Government policies and some IBs. Or even easy credit that masked the stagnant wages. The demise of unions, global wage arbitrage, automation and technology, all these are putting pressure on the job/wage factor.
People who don't understand the difference between reassuring Bear's customers and bailing out its owners and bondholders are either:
Or
The end.
Killa,
Good points. I'm suspicious of high prices. I never felt wealthier when my house price was soaring. And I certainly don't feel wealthier with 4.1% CPI either.
I feel wealthy based on increasing purchasing power and stability. Valuations and reall yields are the key. Prices are just numbers.
That really needs to be an issue people:
The New York Fed presented a one-page description of the portfolio.
The staff of some lawmakers will be able to review the full list on a confidential basis, the statement said.
Angry Saver said: "...I tend to view the people on this board as early adopters and would not be willing to use them as a counter indicator."
Early adopters? Didn't CR start this blog, along with its primary theme, in 2005?
So given my views, wouldn't I be the early adopter, with most everyone else here having been on this bus for quite a while?
Sebastia
Interesting Times,
Oil at ~$104/bbl is an inflation adjusted tie for the previous all time high, and currently we don't have the costs of $80-$90 dollar oil fully priced through the economy (end of October).
In all the transcripts, a very small amount of information received on a confidential basis from, or about, foreign officials, businesses, and persons that are identified or identifiable was subject to deletion. All deleted passages, indicated by gaps in the text, are exempt from disclosure under applicable provisions of the Freedom of Information Act.
energyecon-
You are right on when you talk about real incomes and J6P balance sheets.
The bottom will be in when much of the debt has been purged, and peoples expectations of the future are bleak.
J6P may be aware that hard times are coming, but not to the extent that will be required to correct the imbalances(CAD, energy imports, savings rate, etc.).
Rally, huh?
Please point out in any of my posts where I used the word "rally" or implied it. Otherwise quote me verbatim and give evidence to the contrary. You know, the way we used to do it around here.
Ipodius,
Regarding glogalization & stagnating wages:
What you say is accurate, but it also makes the contol of CPI inflation all the more critical.
Re: The staff of some lawmakers will be able to review the full list on a confidential basis, the statement said.
Federal Open Market Committee Transcripts
FRB: Invalid URL
In all the transcripts, a very small amount of information received on a confidential basis from, or about, foreign officials, businesses, and persons that are identified or identifiable was subject to deletion. All deleted passages, indicated by gaps in the text, are exempt from disclosure under applicable provisions of the Freedom of Information Act.
energyecon | 04.03.08 - 4:06 pm | #
Yup. Sorry about that. Oil is at an inflated adjusted high. It just didn't blow past it yet...
ipodius,
Now you are being deliberately obtuse - first the debt needs income to service it - and second, even if the income is there (a largish assumption) we're talking a more than one quarter exercise in consumer balance sheet repair.
If the debt isn't serviced than cue secondary effects aka the feedback loop...
Sebastion,
You are indeed an early adopter. Unfortunately, I think you are probably a decade to early. I could be wrong of course.
Risk-Based Capital Standards: Advanced Capital Adequacy Framework Basel
II
AGENCIES: Office of the Comptroller of the Currency, Treasury; Board of Governors
of the Federal Reserve System; Federal Deposit Insurance Corporation; and Office of
Thrift Supervision, Treasury.
ACTION: Final rule.
SUMMARY: The Office of the Comptroller of the Currency (OCC), the Board of
Governors of the Federal Reserve System (Board), the Federal Deposit Insurance
Corporation (FDIC), and the Office of Thrift Supervision (OTS) (collectively, the
agencies) are adopting a new risk-based capital adequacy framework that requires some
and permits other qualifying banks1
One commenter expressed concerns that some of the confidential information
requested in the proposed reporting templates was also contained in the public disclosure
requirements under the proposal. As a result, some information would be classified as
confidential in the reporting templates and public under the disclosure requirements in the
final rule.
You seem to suffer delusions of infallibility - an air of superiority. Good luck wit' dat
LOL Marcus did you actually read your snotty post before you wrote it? First you mis-quote me totally, and then you use STFU as if you were someone who had any authority to order that for someone!
Now, what I said was that I agreed with mp and conjure on another thread where we were discussing this...that financials have been pulled back from the brink. He was suggesting there were buys, I said I agreed, but was being more cautious and not yet buying. So exactly how does this realte to your point?
President Robert Mugabe's government raided the offices of the main opposition movement and rounded up foreign journalists Thursday in an ominous indication that he may use intimidation and violence to keep his grip on power.
America is next at this rate!
Where to next? Lower dollar, higher gas, tight credit, massive increase in bankruptcies, higher unemployment, stagnant wages, increased global competition, feckless leadership, corporate and accounting fraud, debt default privately, corporately, and nationally, middle class squeeze (resulting in NO middle-class), and the list could go on.
In other words, same o'l, same ol'.
I want the bulls to post all of the positive aspects of our economy by which we will be saved from the massive financial fraud perpetrated on the American people over the past 10 years.
These are the same people who believe that Bush is a shining example of what an MBA from Harvard can do for an enterprise.
Shorter ipodius/Sebastian: Because we say so.
Why do you have a problem with people who want to abolish the Fed, discuss different monetary systems, or complain about the government?
Because they want to do it here, which is just plain rude. I'm sure there's blogs dedicated to goldbugs, monetary reform and The End Times. This ain't it. This is a blog with a community of people sharing opinions and experience regarding the housing and mortgage markets, with the occasional diversion into general economic conditions.
Tanta,
Time to get up and write something, Ive carried you to 200 posts, get up!
Another point regarding the oil situation.
energyecon is once again right on about current oil prices not yet having worked their way through the economy. What makes this even worse however, is that as oil prices continue to rise, the percentage of energy costs in a finished product increases, causing further energy price rises to have a larger impact.
Simply put, oil going from 60 to 100(66% rise) actually has a worse impact than oil going from 20 to 40(100% rise).
energycon, the debt will be serviced...out of consumption. Debt that can't be serviced will be written off (ask some banks about that).
That's why we're in a recession.
Marcus Aurelius | 04.03.08 - 4:15 pm | #
Thanks. I'm buying oil energy stocks on the dips.
Ralph Cramdown | 04.03.08 - 4:16 pm
Ralph,
You could just say "Willll you shadddap!?"
Ralph Cramdown - can we say that housing crash is kinda on auto pilot now. The convincing has been done.
We all know that the turn-around in housing will occurr when inventories turn. Now it's just wait and see.
Ipodius. You are correct in that you never said rally. Perhaps it was your few comments about now being the "bottom"...
"My indicator for a bottom is now the threads on here."
"The same thing will happen at the bottom now. As signs point to upturn..."
"there are some values now in financials as we're past the bottom now for the sector."
Read it? I wrote it. If you think it's not accurate, back up and read your own posts.
After you do that, lay out for me and everybody else how the BSC situation reflects stability in the global banking and financial markets. Give us some good news ("the cancer didn't kill you - today", is not good news). Show us how the fundamentals of our economy have benefitted from anything that has occurred in the financial industry over the past say, 5 years. Show me solvency of a major bank (if you can cut through the BS they claim - as in the hearing today). Show me the real price or value of a mortgage and/or its underlying asset originated in that period of time. Show me the creamy-goodness of the banking-governmental complex as we move forward.
I gave you my partial list, above. Now put up, or....
Who still Believes?
I love how people here are saying the "crisis is averted."
Really? So, having the Fed bail out the banks (and probably whoever else comes along with their hand out) is a good thing? Yeah, if the "crisis" was a bunch of executives not getting huge bonuses.
Not of these new-bulls has revealed how any problem is "fixed" in a crumbling, overleveraged, debt-buried economy with run-away inflation and vanishing jobs. I guess the Fed will fix all those problems too - just print a few million $$$ for everyone and we'll all be rich, right? Whatever...
Re: "Because they want to do it here, which is just plain rude. I'm sure there's blogs dedicated to goldbugs, monetary reform and The End Times. This ain't it. This is a blog with a community of people sharing opinions" ... Testimony on Bear Stearns
Dumbass retard!
Ipodius,
Everyone says education is the key. But that statement rings hollow to me. We have way more college graduates today than in 1970, yet real incomes are lower.
All the education in the world is not going to raise wages against a backdrop of billions of people willing and able to work for peanuts.
I'm not against globalization. I just don't think it's wise to purposely inflate people into poverty. I've been to Cleveland, Toledo, Pittsburgh, Trenton, Detroit, etc. Not good. Globalization & zero CPI inflation makes more sense to me.
Okay - everybody in here keep the conversation centered on mortgages, or Ralph Cramdown will get a knot in his undies.
How bout dem ARMs!
This just in on the housing and mortgage fronts:
They still suck and are getting worse. But, not to worry - they exist outside the larger universe of finance, in addition to being contained.
Shorter Ralph: Once it's a mortgage, there's nothing financial about it.
The document is being called the "C & R" document because it reportedly states that if the United States defaults on loans and debt underwriting from China, Japan, and Russia, all of which are propping up the United States government financially, and the United States unilaterally cancels the debts, America can expect a war that will have disastrous results for the United States and the world
how appropriate
Confidential Doc. In Congress Warns of Conflict in America
BULLSHIT, It was not adequately capitalized because it was so overleveraged just like many other banks and the ecobomy as a whole. What a joke.
I agree with Ipodius.
The world will not blow up.
Life will go on.
There will be pain, but so what.
Everyone who predicted the housing bubble blowing up, and feared recession, and were upset at those who ignored warning signs, will find out that our heads will not explode afterall.
Afterall, look at Japan. They still have an economy, they still produce the greatest cars on the planet, their people aren't rioting in the streets.
If we go the way of Japan the no worries.
(Frankly we're all better off if our economy doesn't avoid a major blow-up, the slow bleed is more deadly.)
Throwing this OT news item in this thread rather than risking the wrath o' steel toed bunny slippers above...
Motorola says to cut jobs, take $104 mln charge
NEW YORK (Reuters) - Mobile phone maker Motorola Inc (MOT.N: Quote, Profile, Research) said on Thursday that it was cutting jobs and paying severance payments to around 2,600 workers, resulting in a net pre-tax charge in the first quarter of around $104 million.
[snip]
ipodius,
You are constantly saying that no taxpayer money is involved (yet) so nobody should complain so I have a question. Do you think that if I get a free car insurance then it is not a gift until I have an accident?
Are you aware that in EU the Fed/Paulson action would be investigated as an unfair subsidy and likely fined? And that the Northern Rock nationalization (which in my opinion is less morally hazardous) is already being investigated?
google layoff
Expired
Ipodius,
You see the increased shrillness of bears to be a turning point in sentiment and the evidence of a bottom. I see the increased talk by bulls and MSM and gov't officialdom that the crisis has been averted as evidence that just around the corner there is a cliff. Everybody got very excited over Bear's big weekend and the adrenline is playing out on both sides of this argument. There is no one-sidedness about what who's saying what.
Dividends being cut back like it's 1999-sorry prince 1991
Liquidity crunch continues to eat into corporate dividends - MarketWatch
Ipod,
I think I agree that the immediate risk of the total meltdown scenario has passed. All things considered the shotgun wedding of JPM/BSC was needed, just wish the Gov't could have gotten a better deal out of it. The window being open to the IB's will probably prevent the same happening to LEH or MER. While BAC shareholders were only partially bailed out, the bondholders were completely bailed out. The situation is unfair, but heck, even if the entire $30 B is lost, its probably pennies on the dollar compaired to the cost of the full meltdown. I still have longer term worries about the full meltdown, mostly focused on FNM/FRE and this stupid expansion of the conforming limit and expansion of balance sheets, but looks like we have kicked that can down the road for a few years. The financial sector still desperately needs to raise capital, and the most obvious sources of that capital is cutting/elimination of common dividends. In its role as regulator, the Fed should be demanding it just about across the board (this would be better than on a case by case basis since the Banks could claim that it wasn't a signal of their being singled out as capital deficent).
The second major source would be a drastic cutting back on bonuses. As offensive as the big bonuses were in 05 and 06 when everything was going well they are just Alice in Wonderland stuff for the 2007 year. The 05/06 bonuses just offend on the basis of equity and social stabilty, but the 07 ones help endager the entire finacial system. I know I'm dreaming but would love to see the top comp at any finanial institution be below 7 figures in 08. Put the money saved into reserves and retained earnings. When capital is rebuilt, banks can get back to lending and the economy can grow again. Moves like LEH's recent prefered offering should be repeated over and over again through out the system undil we get the leverage knocked down to reasonable levels.
Ipodius may be correct. Starting today [yesterday?] Cramer has a sell rating.
Mad Money: Stop Trading!: A Deep Dow Decline? - CNBC
Angry Saver sez: Everyone says education is the key. But that statement rings hollow to me. We have way more college graduates today than in 1970, yet real incomes are lower.
Yeah right - The problem is most of todays grads can't do eight grade math, can not tell you when the Civil War occured, think that irony has something to do with the laundry and believe UFO's land with more regularity than fixed wing aircraft. Sorry to show my age, but I fail to understand how most (not all by a long shot) 20 year olds manage to find thier own asses without parential help.
"We make the rules - the news, war, peace, famine, upheaval, the cost of a paper clip... you're not naive enough to think we're living in a democracy are you?
Gordon Gekko
Re the BSC Bailout:
It was probably necessary to avoid some form of limited systemic breakdown.
BUT,
Nobody has been able to give me a good answer yet why the following occurred:
1) BSC shareholders got $10/share. If they got ZERO, the potential taxpayer obligation would have been about $1.25 billion less.
2) BSC bondholders had their situations IMPROVE significantly, as their debt is now JPM debt. They should also have taken a hit, and if somebody wrote CDS protection on those positions, well, those are the breaks. Nobody has been able to give me a credible argument why BSC bondholders getting wiped out would pose such a HUGE systemic meltdown that everybody is suggesting.
3) The Fed and Treasury are essentially appropriating taxpayer funds without Congress' approval. Not allowed.
Other than that, I agree that the Fed should have stepped in, but this deal sucks, and reeks of cronyism and looking out for the big guy.
Bear should have not been bailed out. When every thing was roses they moped up all the profit, then when the dog didn't hunt they went to the Fed for the bailout. If the MBS the fed received were worth 30 or 29 Billion then sell them this month and be done with it. The fed will be lucky to get 20% of the par value on this low grade junk. UBS brought into the investment grade story and every 3 months UBS is marking down this crap. What happened to Adam Smith?.
ipodius --
energycon, I'll go with someone that knows the meaning of "non-sequitor"
Or someone who knows how to spell "non sequitur"?
All Fall Down - those 40 to 50 year old teachers must be doing a heckuva job teaching youngsters all this stuff
"I still want to know why that bastard Paulson slithered out of this and why he doesnt have to explain details about terms??"
Nobody wanted to listened to his irritating stuttering. Let the Chinese have it.
reason to live in kentucky
Kentucky spends more than $18,600 to house one inmate for a year, or roughly $51 a day. In California, each inmate costs an average of $46,104 to incarcerate.
Yahoo! 404 - Page Not Found
reason to live in calif.
http://www.easternshorevisitor.com/RAICA.jpg
we should have several heads in baskets today......but noooooooo
America is next at this rate!
Um, you think the current party in power doesn't already do that? See Joseph Nacchio for evidence otherwise.
cd said: "Kentucky spends more than $18,600 to house one inmate for a year, or roughly $51 a day. In California, each inmate costs an average of $46,104 to incarcerate."
And what have I been saying? That it's the cost of housing, generally, and not the cost of houses, specifically, that's the real problem in California and other "bubble" areas.
Now we've got a whole new metric.
Sebastia
Nemo,
Man I was biting my 'tongue' for hours on that one - thanks!
Hello all,
Imho, a key to getting taxpayers a good payoff for bailing out speculators is showing Big Media how it can profit obscenely by fighting gratuitous moral hazard.
Toward this end, please consider signing the online petition for The Learning and Earning Modernization, Moral Hazard Minimization and Entertainment Programming Talent Full Employment Act of 2008.
The URL: love madison wall and fords at loveatmadisonandwall.com
An excerpt:
We the undersigned call on our elected representatives to see to it that the Federal Reserve opens its new loan program for non-banks the Term Securities Lending Facility to American media conglomerates that own a broadcast TV network. More precisely, to said conglomerates that use the loans to:
a) popularizes these markets
b) showcases high-performing market participants
Best regards,
Frank Ruscica (longishtime reader)
Just because the amount of assets is 30 Bln Usd doesn't mean that is the limit on the gov's possible loss. Apparently these assets include derivatives which pay out, so an asset now worth 10 Usd could eventually have the Fed paying out 100 Usd or more. Maybe not, but we don't know, and nobody in Congress seemed to ask the 64000 dollar question: what is the maximum loss these assets could see? See Interfluidity via Naked Capitalism.
During the Bear Stern's hearing Senator Elizabeth Dole was up there digging in on the old GOP shibboleths of the 'GSE problem" at the same time the GSE's are the only ones making loans to homeowners according to the Wall Street Journal.
Someone should send the YouTube of her to every North Carolinian who's trying to buy, sell, or live in a single family residence and ask for a recall.