From Angry Bear:
[i]As long as more homeowners default on mortgages, losses to financial institutions will mount. Those losses already exceed $400 billion, and some analysts believe they will top $1 trillion before the housing carnage is over.
By comparison, Congress has authorized $650 billion so far to fight the Iraq war.[/i]
Is it possible they've figured out how squeeze blood from a rock?
Posted in the other thread but more relevant here:
"Congress will try to use the Fannie/Freddie bailout as leverage to get the whole housing bill passed with the issues that Bush said he'd veto still intact.
They will give him a choice between delaying the Fannie/Freddie regulation and backstop or allowing their pet programs to go through."
Minion; Sir, your plan has been leaked to the press.
Hank: Oh my God, we've got to get out in front and anounce it.
Minion: Yes, sir.
Hank: Minion, get me a plan to announce!
Rich
regarding your comment on another thread of Q2 losses...Rich
It seems to me it's worse than -23%... categories with actual losses are ignored, at least they are as far as I can tell. e.g. home construction lost an extra 400M, delivery services an impressive 900M... maybe these guys need shorting.
Wally, yeah, but I wonder who leaked the plan? Of course it sounds like Paulson was calling everyone on Wall Street to ask them what they thought - so it could be almost anyone.
The WSJ article last Thursday referred to "three people familiar with the matter". Was it Larry, Moe and Curly?
A very intriguing idea. However, for it to work wouldn't the President have to learn to speak a recognizable language so that he can be understood on the wiretap?
A mind is a terrible thing to waste, especially when it is in the body of someone we allow to become President
People should not assume that just because the stock price has been going down, that were going to close their bank, Ms. Bair said. In addition to our credit problems, I dont want to have to start worrying about bank runs.
So I should just "chill the hell out" then, Sheila?
My vote for understatement of the year from the absolute worst President and worthless admin in US history ( unless of course you're a member of the < 1% club )
"... such action by Congress would take the form of a dollar limit-- here's how much we're willing to stake, and no more-- with residual losses presumably laid on the GSE creditors."
There is no way that the general creditor for GSE will suffer. If that is the case, GSE will not be able to borrow any debt for a long, long time. And how would Professor Hamilton proposed that GSE continue their mission if they cannot borrow money? If we get to that point, we may as well shut down the economy and get ready for depression. The deferred may not get their divy for a while and common divy will definitely get cut. And common will get dilute to next to nothing. But it is a non-starter to think that Teasury try to resuce FNM/FRE but handicap their future operation. What is the point of rescuing them in the first place?
``Things are out of his control,'' said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina.
Silvia, who used to work as chief economist of the Senate Banking Committee, where Bernanke testifies today, predicted that lawmakers' questions will mostly focus on how the financial crisis that has now engulfed Fannie Mae and Freddie Mac will ``affect the downside for the economy.''
Traders, who last month foresaw an interest-rate increase as soon as August, now anticipate the Fed will hold off until October, with the chance of a move by year-end dropping to 67 percent from 100 percent, futures contracts show.
The hearing is scheduled for 10 a.m. in Washington.
"The amount of money at stake is hard to estimate but could be enormous. One element of the plan could raise Fannie Mae's and Freddie Mac's lines of credit with Treasury from $2.25 billion to an unspecified level to be determined by the government later, according to people who have seen a draft of the plan. The draft language includes no upper limit."
"Once Treasury made it clear there was a plan, the Fed decided it could offer Fannie Mae and Freddie Mac access to its lending facility, known as the discount window, but purely as a backstop. It was a move that could happen right away without congressional approval."
Dear CR:
A minor query: The Fed is making access to the discount window quite the party favor these days. Is this "Monetary Policy" or not? If it is how are we to judge its significance? Is our ability to measure now lacking.
Discontinuance of M3---As announced on November 10, 2005, the Board of Governors will cease publication of the M3 monetary aggregate on March 23, 2006. The Board will also cease publishing the following components: large-denomination time deposits, repurchase agreements (RPs), and Eurodollars.
Which is one thing . But then two paragraphs later it makes a curious statement:
"M3 does not appear to convey any additional information about economic activity that is not already embodied in M2 and has not played a role in the monetary policy process for many years.
Consequently, the Board judged that the costs of collecting the underlying data and publishing M3 outweigh the benefits."
The costs of collecting the underlying data? Is there really data on M3 that is not being collected????????
I wouldn't look at the 2 week thing as a credibility problem. It takes a lot of time and effort to plan a closing (I know, I did for FDIC 20 years ago), and it's always done on a contingency basis. Many times in the past plans were made and shelved. FDIC doesn't have any control over when a bank is closed--that's OCC, OTS, or a state agency. Sometimes the bank is recapitalized or sold, but if you need to organized hundreds of people and extensive EDP support, it takes planning for the worst.
apan stocks fell, sending the benchmark index to the lowest in more than three months, on concern U.S. banks will collapse amid mounting credit market losses and debt held by Japanese lenders may be at risk.
Mizuho Financial Group Inc., the country's third-biggest bank by market value, fell for the first time in five days. Mitsubishi UFJ Financial Group Inc., the biggest, tumbled the most in two months.
U.S. financial shares fell to the lowest level in a decade yesterday, and mortgage lenders Fannie Mae and Freddie Mac sank in spite of a rescue plan from the Treasury Department. The Nikkei newspaper said today Japan's three largest banks hold 4.7 trillion yen ($44.2 billion) in debt from the companies.
The Nikkei 225 Stock Average declined 202.83, or 1.6 percent, to 12,807.33 as of 9:54 a.m. in Tokyo, the lowest since April 1. The broader Topix index slumped 22.96, or 1.8 percent, to 1,257.76. Only two of the 33 industry groups in the gauge rose.
A friggn safety net for $5000 Billion??? Sorry, Hiroyuki, the fabric of reality aint gonna stretch that far!
Re: `They're setting up a safety net'' for the two companies, said Hiroyuki Bando, chief manager for fixed income, equities and currencies in Tokyo at Mitsubishi UFJ Trust & Banking Corp., part of Japan's biggest bank. ``A government-guaranteed bailout is very negative for Treasuries.''
The yield on the benchmark 10-year note rose 2 basis points to 3.87 percent as of 10:47 a.m. in Tokyo, according to bond broker BGCantor Market Data. The price of the 3.875 percent security due in May 2018 fell 4/32, or $1.25 per $1,000 face amount, to 100. A basis point is 0.01 percentage point.
After listening to Jim Rogers on Bloomberg today, who declared "anyone who can read a balance sheet can see that FRE and FNM are insolvent," I think it's a good bet that the GSEs are in far BETTER shape than the market (equity investors in particular) think. Rogers was inane during much of this lengthy interview and he offered no evidence to back up his strong assertion about insolvency.
I think we'll look back on this era 10 or 20 years from now and wonder how arrogant men like Bernanke and Paulson managed to made decision after decision that just made a bad situation so much worse. Their biggest problem seems to be...they think they have the power to fix things. If they would focus instead on good policies and decisions, the outcome might not be so destructive.
Make good decisions and eventually things will fix themselves. There's an element of unnecessary panic in almost everything they do. They've got to fix it tomorrow.
"The amount of money at stake is hard to estimate but could be enormous. One element of the plan could raise Fannie Mae's and Freddie Mac's lines of credit with Treasury from $2.25 billion to an unspecified level to be determined by the government later, according to people who have seen a draft of the plan. The draft language includes no upper limit."
Ignoring all of his other crappy decisions, why all the animosity towards Paulson for this particular plan? What was he supposed to do regarding FRE/FNM when he doesn't have the statutory authority? Treasury doesn't regulate the FSEs; that's the job of Lockhart over at OFHEO...
For all the hate directed at Dodd, he's been a stalwart on the anti-FISA campaign. Counts for a lot in my book.
tranches of lunacy | 07.14.08 - 10:06 pm |
Absolutely correct unlike the spineless bastards and chicken hawks that make up todays GOP !
After listening to Jim Rogers on Bloomberg today, who declared "anyone who can read a balance sheet can see that FRE and FNM are insolvent," I think it's a good bet that the GSEs are in far BETTER shape than the market (equity investors in particular) think. Rogers was inane during much of this lengthy interview and he offered no evidence to back up his strong assertion about insolvency.
If FRE and FNM are in such great shape why do they need urgent government assistance right now?
rich writes:
I think we'll look back on this era 10 or 20 years from now and wonder how arrogant men like Bernanke and Paulson managed to made decision after decision that just made a bad situation so much worse. Their biggest problem seems to be...they think they have the power to fix things. If they would focus instead on good policies and decisions, the outcome might not be so destructive.
Make good decisions and eventually things will fix themselves. There's an element of unnecessary panic in almost everything they do. They've got to fix it tomorrow.
rich | 07.14.08 - 10:08 pm | #
This is the hallmark of this administration, will it so. The arrogance is palpable.
I see nothing changing it. In fact, they believe they are doing it right.
Totally OT: Mortgage fraud - just another weapon in the gangster's arsenal:
"Lock was the purported head of a criminal organization known as the Body Snatchers, which prosecutors said dealt drugs and also kidnapped, tortured, robbed and killed other dealers....Lock still faces state charges that he prostituted his wife and others and federal charges that he ran a mortgage fraud scheme."
Can someone tell me what the dollar, stocks and bonds have done since Paulson and Bernanke have been put into place? As a bonus, stats on Bush would also be nice!
I think we'll look back on this era 10 or 20 years from now and wonder how arrogant men like Bernanke and Paulson managed to made decision after decision that just made a bad situation so much worse. Their biggest problem seems to be...they think they have the power to fix things. If they would focus instead on good policies and decisions, the outcome might not be so destructive.
I was thinking today this whole thing with housing and mortgages amounts to the biggest crime ever committed in terms of wealth stolen.
And the people complict in this crime are now trying to act as saviors or otherwise grab enough power to protect themselves for having to pay for their involvement.
I suspect now that a lot of people in the financial industry and in Washington feel that a bailout has to be found, otherwise they may be seen (more accurately) as criminals and the destroyers of millions of lives as the illusion that they're some kind of financial hero wears off.
"Time for Hank Paulson to Do the Right Thing and Nationalize the GSEs"
For hells sake, just nationalize the damn things! To pay for the loses increase the capital gains tax to 20% and sell the Saudis the White House! We can house the new prez in a portable trailer unit.
For hells sake, just nationalize the damn things! To pay for the loses increase the capital gains tax to 20% and sell the Saudis the White House! We can house the new prez in a portable trailer unit.
As long as they don't nationalize any of their associated debt... oh wait, is that what "nationalize the GSEs" really means?
Socialize all the potential losses from the bad loans they've made before taxpayers catch on?
The economic Dopler from <a href="http://www.bloomberg.com/apps/ne...or28& refer=home>Bloomberg article (via Rich)
The strategy has been tested over the past year as bouts of financial turbulence clouded the economic outlook, forcing officials to alter their messages.
I feel like George in the Sinfield where he does everything opposite of his normal routine. Every time one of the administration talks; I play opposite. Someone talks strong dollar, I put my money into foreign currency. Someone mentions strong economy, I put my money into bonds. Someone mentions that FRE and FNM have strong balance sheets, I move my money into cash. So far, I an up 6% from the start of the year. Thanks Paulson and crew. Let me know what I can play tomorrow.
Rogers knows the score. Don't think just because he is on television that he is a hack like all the other market strategists, newsletter writers, research analysts, Cramer. Most of these people are clowns--since their money is never on the line, since most couldn't trade their way out of a paper bag (or in the case of Cramer, without dubious, line-skirting plays) their only function is to entertain.
The ones who know are not on television. They don't write books. They have nothing to sell. They want to hide and keep their ideas to themselves. Clearly Rogers is talking his book, and I don't understand why he needs the attention, I mean, he has plenty of dough, but he is a sharp guy. I would be very careful owning the common in either FRE or FNM here.
Personally I think all of these actions are being modeled to determine the least effects on the various markets before they are released. What I call a "Controlled Collapse".
Carpal tunnel syndrome is breaking out at the NY Fed's Open Market trading desks...before long there is will be long line forming at the Discount Window too.
OT: Bloggers and Comment writers may want to have a look at this.
At the Uneasy Intersection of Bloggers and the Law A grand jury subpoena sent by prosecutors in the Bronx earlier this year sought information to help identify people blogging anonymously on a Web site about New York politics called Room 8.
The subpoena carried a warning in capital letters that disclosing its very existence could impede the investigation being conducted and thereby interfere with law enforcement implying that if the bloggers blabbed, they could be prosecuted.
"As long as they don't nationalize any of their associated debt... oh wait, is that what "nationalize the GSEs" really means?
Socialize all the potential losses from the bad loans they've made before taxpayers catch on?
Biggest theft crime in history"
What the alternative is?
Read the article:
?When you officially nationalize the GSEs, the chief constituency - namely the bond holders including many global central banks - are reassured. The crisis ends, the systemic threat goes away. Remember, FRE and FNM don't need more capital - at least not immediately. But they do need access to the capital markets at preferential rates. "
For the current future, we need the foreign flows to keep coming. Of course this is all going to end badly.
?When you officially nationalize the GSEs, the chief constituency - namely the bond holders including many global central banks - are reassured. The crisis ends, the systemic threat goes away. Remember, FRE and FNM don't need more capital - at least not immediately. But they do need access to the capital markets at preferential rates. "
For the current future, we need the foreign flows to keep coming. Of course this is all going to end badly.
So why not just explicitly guarantee all new GSE debt going forward?
Wouldn't that solve the problem?
Why are we even talking about the amount of losses that taxpayers may have to be accountable for if all these GSEs need are access to "preferential rates"?
Seems like there's other ways to accomplish this rather than putting taxpayers on the hook for losses from existing bonds.
If you buy the idea that Paulson is the band conductor for the PPT, and the PPT's primary mission for over a year has been to prop up U.S. equity markets, it explains a lot about his policies.
I've wondered when the PPT first started getting deeply involved in its tricks to prop up U.S. stocks. I think the answer was the Feb. 2007 crisis that was triggered by the overnight collapse in Chinese equities. I think what they did then was tiny, compared to what they do almost every day now. But it worked. And it made them more arrogant that they could get away with it. They came back again in August of 2007, and it worked again, although that time it took Fed rate cuts to keep the scam going. It worked again in January of 2008, but this time it took rate cuts and the TAFs and liquidity facility crap. Each time, it takes more and more govt. intervention to keep Paulson's Ponzi scheme afloat. But now, he's running out of tricks and all the traders he lured into his scam are seeing greener pastures on the short side of the fence. Paulson could keep the trader loyal to the PPT only so long. Now, he has no hold over them. Because he can't deliver consistent profits to them anymore by orchestrating signals.
When you are putting out signal to turn the black boxes on and buy indexes 10-20 times a day, it starts to look desperate. And smart traders prey on desperation like lions prey on wounded animals. Paulson is a lame duck anyway. In a way, he's become the wounded animal.
ac:
Thanks. I thought I was going crazy for thinking the same thing. Seems like most see it as an honest mistake.
Yeah... never mind the billions upon billions of dollars in profits there made from this "honest mistake".
Of course we can't find out where those profits have been stashed now, and we can't punish bondholders for buying trash bonds, so the taxpayer -- the party least culpable, the party that should be last in line to take the hit -- gets stuck with the loss of hundreds of billions or trillions of dollars in wealth that was "honestly lost", not stolen in a calculated way.
Besides the fact that I can't keep up with all these (probably) informative comments and blog posts now, I'm having a hard time wrapping around my head the fact that selling into weakness is now an effective strategy for trading the equity markets. I wondered if it would be such a few weeks back and it's held up. I wonder how long it lasts.
I think this sentence by Buiter captures the issue very well. The Fed has become a fiscal agent of the treasury and therefore circumvents the political process. This is NO independent central bank:
"... Since 1997, the Fed has long been the least operationally independent central bank in the industrial world. This latest episode suggests its main current purpose is to be an unaccountable quasi-fiscal agent for the US Treasury. If that is correct, the Feds capacity to deliver price stability in the future may have been fatally impaired."
You know, I'm just not really into this global financial meltdown / structural recession anymore. It's been really fantastic getting to know it and I am going to miss the sleepness nights it has caused, but right now, I'm just in a different place, and I think it's best if we go our separate ways. I'd like to think we can still be friends.
P.S. - If it's alright with you, I'd like to keep the Hummer.
For those watching the markets and wondering why the equity futures just rolled over in the past few minutes. I just saw Bernanke out at a, ahem, club. Jasmine and Alexa now have access to the discount window...
Well, of course Paulson and the others are only putting band-aids on the problems. It wont be their problem in 14 weeks. They have already arranged big jobs at the firms they have bailed-out, or have helped with the looting. What would be their reward for proposing gut-wrenching, long-term solutions that would make them traitors to their future employers?
Their job is to prop everything up until the election, then run like hell.
Saudi Arabia has already boosted its production by 300,000 barrels a day, or about 3 percent, to 9.45 million barrels a day last month. But that has had
little impact on soaring prices. Oil futures in New York have gained more than 40 percent this year. They rose 2 percent to $134.62 a barrel before the
Charlie Poole writes:
After listening to Jim Rogers on Bloomberg today, who declared "anyone who can read a balance sheet can see that FRE and FNM are insolvent," I think it's a good bet that the GSEs are in far BETTER shape than the market (equity investors in particular) think. Rogers was inane during much of this lengthy interview and he offered no evidence to back up his strong assertion about insolvency.
Agreed. What we know from the balance sheet is that they'd have negative equity if they were forced to liquidate their holdings into the market, which is hardly a surprise and isn't the same thing as insolvency.
And what we know from their cashflows is that they're a long way from not being able to meet current obligations.
The real threat here is that they might simply go into run-off mode, instead of throwing themselves on their modernized swords writing "affordable" jumbos and all the other crap that's pushed the private labels into the abyss. Left to their own devices I think there's a good chance they could work their way out of their hole, but if you want them to carry on for the recently departed and "save the housing market," they're going to need a whole lot of capital.
Record fuel costs and a weaker won drove consumer prices up 5.5 percent in June from a year earlier. In response, policy makers stepped up efforts to stem a drop in the South Korean won that has fanned price pressures by increasing the cost of imported goods including oil.
Won's Decline
The won declined 0.2 percent to 1,006.30 per dollar as of 10:47 a.m. in Seoul. The currency last week advanced 4.8 percent as the finance ministry and central bank said they would use the nation's $258 billion of foreign reserves to support the won. For the year it is down 7 percent against the dollar.
OK, some updates/corrections from my FDIC historical data analysis, started last night:
There has been a steady increase in the percentage of uninsured domestic deposits since 1992, from 18.38% then to 37.38% now. Since the 100K limit has not been raised to keep up with inflation (IIRC), it's not surprising that there has been some increase. But the size of the increase is surprising.
The number of institutions reporting has steadily decreased, from 13,853 in '92 to 8,494 today. Assuming reporting requirements are fairly strict, this would seem to reflect the consolidation trend of the last 20+ years.
CR points out (above) that "The WSJ quotes Brian Bethune, Chief U.S. Financial Economist for research firm Global Insight as saying the equity investment could be as high as $20 billion."
"Fannie Mae's market value is now about $10 billion, down from $38.9 billion at the end of 2007. Freddie Mac's market value has shrunk to about $5 billion from $22 billion at the end of last year.
So Hank wants to buy $15 billion worth of stuff for $20 billion.
Japan's three megabanks had roughly 4.7 trillion yen (US$44.3 billion) in debt securities issued by top U.S. mortgage finance agencies as of the end of March, while major insurance firms' exposure totaled more than 4 trillion yen, the Nikkei business daily said on Tuesday.
It also said market participants are still confident the value of those securities will not plummet because of the "implicit guarantee" that the U.S. government will step in to rescue the companies if necessary.
Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism
by Kevin Phillips
"Bad money refers to a new phenomenon in wayward megafinancethe emergence of a U.S. economy that is globally dependent and dominated by hubris-driven financial services.
Bad finance" has failed the American people and pointed U.S. capitalism toward a global crisis.
I strongly encourage everyone here to go read this morning entry at Clusterfuck Nation. It is the most vivid, lucid and frightening summary of the future we may face that I've read.
It's hard to imagine what kind of melodramas were unspooling on the Hamptons lawns this weekend, while everybody else in America was watching Nascar, or plying the aisles of BJs Discount Warehouse for next week's supply of mesquite-and-guacamole flavored Doritos, or having flames and chains tattooed on their necks, or lost in a haze of valium and methedrine.
With the death of the IndyMac Bank last week, and the GSEs Fannie Mae and Freddie Mac laying side-by-side in the EMT van on IV drips, headed for the Federal Reserve's ever more crowded intensive care unit, there was a sense of the American Dream having passed through the event horizon that denotes the opening of a black hole.
dave writes:
"Well, of course Paulson and the others are only putting band-aids on the problems. It wont be their problem in 14 weeks. They have already arranged big jobs at the firms they have bailed-out, or have helped with the looting. What would be their reward for proposing gut-wrenching, long-term solutions that would make them traitors to their future employers?
Their job is to prop everything up until the election, then run like hell."
A perfect description of what we have achieved: a government of men, not of law. Welcome to South America, USA.
Anything Congress does (e.g. Roubini's 5% haircut), it will be with the debt holders in mind. Unless of course, you don't mind several trillion USD in a fire sale.
And then there's this other great part in Kunstler's post, as linked by Mr. Beach:
"Painful as it is, Americans had better get a new "Dream" and fast. It better be a dream based on the way the universe actually works, which is to say an operating procedure run on earnest effort and truthfulness rather than merely trying to get something for nothing and wishing on stars. We might begin symbolically by evacuating Las Vegas and calling in an air strike on the loathsome place . . ."
The Republican Party under George Bush will be known as the party that wrecked America (release 2.. Painful as it is, Americans had better get a new "Dream" and fast.
Yup,
Gonna take the spare flint out of my Zippo and go all in on the next 250 point Dow downer.
In 40 years, I've never seen a more difficult market. But like Pascal, I play the odds about the existance of God. Any card counting heretic would do the same.
If you haven't learned to read a chart, do so.
It may be only a 15% bear market bounce but the massive short positions argue for a melt up.....soon.
Commodities (my loves) are dead for 6 to 9 months at least.
No, I am not polly's aunta and I reserve the right to go massively short again in 09.
Y'know, I told my better half that I've officially signed on to the belief that this is going to be a Grande Depression. She asks, can we make some money on this, and I respond, sure, we short sectors and markets.
Buy anything? Nope.
That said, I put in a limit buy order on a grocery chain that has some great stores in our area. I figured that they'll go down some with the market chaos so I'll not buy market now. It's good for 60 days. And in one day, I'm almost there.
I just cancelled the order and will just wait it out.
Ingrid Bettancourt comes out of the jungle after six years of captivity and torture as a hostage. She speaks in public fluently and flawlessly, with humility, grace, compassion and clarity, in three languages. Why? Because she's intelligent, cultured and her heart is pure.
Henry Paulson has lived the life of a multi-millionaire. Whenever he appears in public to speak, he looks shifty, dishonest and stutters in the only language he half knows, Wall Street English. Why? Because he's narrow-minded, greedy, sleazy and guilty.
Okay, so Kunstler has moments of lucidity. But he remains the guy who supported Bush's disaster in Iraq, contorting himself into a tragicomic pretzel whenever he tries to reconcile this with his dystopic thesis.
Quite a head fake by oil the past couple weeks. I was convinced it was on long slide down. Now... who knows.
CR first made his mild recession call when oil was what, $70/bl? I'm leaning more to the depression camp myself homedad43. Though I prefer "Goldilocks Depression," since ..... I coined it!
I wonder if the Romans were able to understand that the empire was crumbling before their eyes, They did not have blogs to keep them in touch and so probably discounted all of the evidence. We are either cursed or blessed by having all of this at our finger tips. We can't do anything about it but at least can see the event unfold in living color. Long live the Empire!
"From China's perspective, Paulson's ``Three-Part Plan for Immediate Action'' is a perfect outcome if it succeeds in lowering the risk premium on Freddie Mac's 10-year debt over U.S. Treasury notes of similar maturity. The capital gains that this narrowing of spread will produce for China will be quite a bonanza. The process may already be under way: The excess yield fell to 73 basis points yesterday from 94 points on July 10."
But it is a non-starter to think that Teasury try to resuce FNM/FRE but handicap their future operation. What is the point of rescuing them in the first place?
What if they made the existing bondholders take a haircut, while nationalizing the GSEs, making them more conservative and fully insuring future bonds?
"The GSEs cannot survive without the ability to borrow (and borrow cheaply), period."
And why do we want the GSEs to survive? I would really like to see them go away permanently. Put the securities they own in a trust of some sort and just get rid of them.
Fannie and Freddie are two of the most worthless, fraudulent entities to ever have existed on American soil. All they have done is made it so the average American can't afford a house. Get rid of them and we'll all be better off in a few years.
Odd story,but I vouch for it 100%(personaly involved).....Mid level management person at WAMU rushed this morning to be in line at Indymac.Had a LOT o money in there over 100k.I don't know yet how much they got,but they were told they would get 75% of over 100k...........I know. I know.....What is a WAMU person doing keeping their money at Indymac,why didn't they take it out before today(didn't they know?),why so much over 100k,told 75%?I don't know any of these things,but if/when I find out I may post them.I'm very curious about the whole thing myself!
There is no way that the general creditor for GSE will suffer. If that is the case, GSE will not be able to borrow any debt for a long, long time. And how would Professor Hamilton proposed that GSE continue their mission if they cannot borrow money?
I would like to let Fannie/Freddie subside into runoff with whatever haircut that entails for the bondholders. Start over with an honest-to-goodness government housing loan agency with civil service salaries for its executives and an honest-to-goodness government guarantee on its debt.
Totally OT: Mortgage fraud - just another weapon in the gangster's arsenal:
"Lock was the purported head of a criminal organization known as the Body Snatchers, which prosecutors said dealt drugs and also kidnapped, tortured, robbed and killed other dealers....Lock still faces state charges that he prostituted his wife and others and federal charges that he ran a mortgage fraud scheme."
That's always the way it goes. You start out dealing drugs, torturing, robbing, killing, and pimping, and pretty soon you're running a mortgage fraud.
We already have an honest-to-goodness government housing loan agency called GNMA and another called FHA, don't we? Then we have plenty of non-government housing loan agencies, called banks.
The US Dept. of Treasury would like to announce the merging of Fanne Mae and Freddie Mac in order to shift the financial burden onto the American taxpayers.
Fannie was a government agency for a long time. Tanta had a post on this the other day. They were spun off into the private sector back in the 70's I believe. If I recall correctly, they were spun off from the government so that the government wouldn't have to carry their debt on the government's books (most massive off-balance sheet entity ever).
If the government creates a new housing agency, we'll be right back where we started from and this whole mess will likely happen again. The government needs to get completely out of housing -- FHA, Fannie, Freddie, Ginnie Mae, FHLBs, etc. Get rid of them all so that house prices will go back down to market prices that people can afford.
"And why do we want the GSEs to survive? I would really like to see them go away permanently. Put the securities they own in a trust of some sort and just get rid of them. "
Because we want to have a functioning economy, feed our family and may be even has a housing market.. Have you ever thought about what would happen if GSE fail? I mean really sit down and think about the ramification. All the banks carries GSE paper as part of the capital structure. That mean overnight all the banks in US will fail because they don't have enough capitalization. And some of the oversea banks will fail as well... And without banks, where do we get short term credit to get our factory or business going? Without business going, we start to have layoff... It is like a bad movie that one watch and don't want to live in. If all the banks in US fail at the same time, do you think brokerage firm and insurance companies can survived? How do we even access our own money?
ac "Man, last time that happened we got the futures down 500 points and some severe follow up Benankypanky the very next morning"
Ha. I was thinking the same thing. A little early, since expiry is still 4 trading days away.
This is like a primitive movie, in slow motion. The kind where you can anticipate the next scene. The ending isn't shaping up too pretty. I went long gold today, GLD options, for insurance against the rest of the meltdown. Problem is it's futures on derivatives. What's the chance it'll pay?
I doubt that any foreign governments would fail. They would lose some money, sure, but they wouldn't fail. And I really don't give a rat's if some idiot can't afford a house. Let him rent like I'm doing.
There may have been a time when government needed to facilitate home financing. That time is long gone. There are pleny of rentals out there.
Yes, we've thought about it. So, two private corporations go out of business. Big deal. One of those firms had real trouble doing simple accounting the past few years anyway. Why save losers like these? As for banks, it may be that some of them are almost gone, even now.
If all banks fail, people like A.P. Giannini will start new ones.
This really isn't funny anymore. They are going to bankrupt the country. Everyone is presuming that when prices "bottom out" that they will go up in a traditional pattern. We're talking a decade here, and trillions of dollars.
Speaking of attempted stick saves, I just may start day trading in anticipation of the daily 2 PM pump. It's become such a regular occurrence...almost comical when it happens now.
There are innumerable practice accounts, homedad, to get the feel of it. Plus, there are mini-accs available that don't involve trading more than pocket change.
"... A quick initial glance at the short term data definitely suggests that a serious batch of storm clouds may well be gathering above the economy. Not only did Denmark claim the dubious honor of being the first economy in Europe to exhibit a technical recession but it was also recently handed its very own banking crisis à la Bear Stearns and Freddie/Fannie, since only last Friday the 10th largest bank, Roskilde Bank, had to go hat in hand to the central bank for a provisional liquidity guarantee as the writedowns it was about to announce to the market were judged to be too tough to swallow without rsking a bank run. ..."
DOW futures have a 10 handle, again. So, when do we get that 500pt capitulation day ? Or are we just going to get the daily grind lower all summer long.
Everyone is presuming that when prices "bottom out" that they will go up in a traditional pattern
Everyone thinks that the traditional pattern is 20%, 30%, 50% annual appreciation. Unfortunately, everyone needs to be educate that housing only appreciates with inflation (generalized).
Ron Paul in the House Financial Services Committee, September 10, 2003
Mr. Chairman, thank you for holding this hearing on the Treasury Department's views regarding government sponsored enterprises (GSEs). I would also like to thank Secretaries Snow and Martinez for taking time out of their busy schedules to appear before the committee.
I hope this committee spends some time examining the special privileges provided to GSEs by the federal government. According to the Congressional Budget Office, the housing-related GSEs received $13.6 billion worth of indirect federal subsidies in fiscal year 2000 alone. Today, I will introduce the Free Housing Market Enhancement Act, which removes government subsidies from the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the National Home Loan Bank Board.
One of the major government privileges granted to GSEs is a line of credit with the United States Treasury. According to some estimates, the line of credit may be worth over $2 billion. This explicit promise by the Treasury to bail out GSEs in times of economic difficulty helps the GSEs attract investors who are willing to settle for lower yields than they would demand in the absence of the subsidy. Thus, the line of credit distorts the allocation of capital. More importantly, the line of credit is a promise on behalf of the government to engage in a huge unconstitutional and immoral income transfer from working Americans to holders of GSE debt.
The Free Housing Market Enhancement Act also repeals the explicit grant of legal authority given to the Federal Reserve to purchase GSE debt. GSEs are the only institutions besides the United States Treasury granted explicit statutory authority to monetize their debt through the Federal Reserve. This provision gives the GSEs a source of liquidity unavailable to their competitors.
The connection between the GSEs and the government helps isolate the GSE management from market discipline. This isolation from market discipline is the root cause of the recent reports of mismanagement occurring at Fannie and Freddie. After all, if Fannie and Freddie were not underwritten by the federal government, investors would demand Fannie and Freddie provide assurance that they follow accepted management and accounting practices.
Ironically, by transferring the risk of a widespread mortgage default, the government increases the likelihood of a painful crash in the housing market. This is because the special privileges granted to Fannie and Freddie have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions. As a result, capital is diverted from its most productive use into housing. This reduces the efficacy of the entire market and thus reduces the standard of living of all Americans.
Despite the long-term damage to the economy inflicted by the government's interference in the housing market, the government's policy of diverting capital to other uses creates a short-term boom in housing. Like all artificially-created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have otherwise been had government policy not actively encouraged over-investment in housing.
Perhaps the Federal Reserve can stave off the day of reckoning by purchasing GSE debt and pumping liquidity into the housing market, but this cannot hold off the inevitable drop in the housing market forever. In fact, postponing the necessary, but painful market corrections will only deepen the inevitable fall. The more people invested in the market, the greater the effects across the economy when the bubble bursts.
No less an authority than Federal Reserve Chairman Alan Greenspan has expressed concern that government subsidies provided to GSEs make investors underestimate the risk of investing in Fannie Mae and Freddie Mac.
Mr. Chairman, I would like to once again thank the Financial Services Committee for holding this hearing. I would also like to thank Secretaries Snow and Martinez for their presence here today. I hope today's hearing sheds light on how special privileges granted to GSEs distort the housing market and endanger American taxpayers. Congress should act to remove taxpayer support from the housing GSEs before the bubble bursts and taxpayers are once again forced to bail out investors who were misled by foolish government interference in the market. I therefore hope this committee will soon stand up for American taxpayers and investors by acting on my Free Housing Market Enhancement Act.
Dr. Ron Paul is a Republican member of Congress from Texas.
In regards to the Ron Paul comment...well that's just great. So let them fail. Then what? If the backer of 5 Trillion Dollars worth of debt goes bad, what happens to the value of homes then? Rates will skyrocket and home values will plummet. But, on the other hand, now we're paying for it in tax dollars up front, and it still may happen anyway. So, Paulson just figured out a way to double the pain, and it was a half-baked, 2 week reaction that was not well thought out.
The ability to support housing and the economy will ultimately depend on the ability of (Fannie Mae and Freddie Mac) to lever their recapitalizied balance sheets through the purchase of secondary mortgages in the open market as well as to create new mortgages. This, however, is a critical first step.
Fannie Mae and Freddie Mac boost the mortgage market by insuring packages of mortgages and then resell them to investors to get more cash to insurer more mortgages. Sundays news, Gross says, should soothe antsy mortgage investors because it tells the market that the government will not allow them to fail. It also warns (Fannie and Freddie) that substantial changes in regulation lie ahead and that tonights proposals will not come without a cost.
Why should we care? Why can't homes go back to being simply places to live? The less we spend on housing the better, especially since we'll need the money for food & energy.
Brokers and analysts anticipate a mixed CME hog open on spot-July maneuvering ahead of its July 15 expiration, Goldman roll business and participants waiting for market direction.
Fundamentally, bullish traders may key in on Friday's modest pork cutout rebound and steady-to-higher cash hog price expectations, a broker said. Also, he said, calculated pork packer margins for last Friday remain profitable despite slipping from Thursday's level.
By the same token, spot-July and nearby-August are slightly overbought technically which may deter potential buyers, another broker said. He said front-month hogs are also at mildly bearish premiums to CME's hog index, especially after July's posted triple-digit gains last Friday.
Meanwhile, overnight-CBOT corn's retreat and short-term profit taking after some back-month hogs gained last Friday may weigh on some deep hog contracts, an analyst said.
Spot-July's 74.58-cent 40-day moving average is a support level. The contract's 75.20-cent 100-day moving average is a resistance target.
Nearby-August's 73.79-cent 20-day moving average is a support area. The contract's 75.27-cent 40-day moving average is a resistance threshold.
An analyst also called pork bellies mostly weak on six more deliveries posted by CME against spot-July that will expire on July 28 and no cash developments.
fair point that the paul piece is from 2003, predicting that this might happen. But, even if the government was not there supporting Fannie Mae and Freddie Mac, what would they do if this was happening anyway? Wouldn't they still be forced to do something? What's the alternative...worst case sceanrio in mind
People need to see, over and over, the evidence provided by those who knew this whole thing was a scam way back when and said so.
It shines the light on the criminality of people like Frank , Dodd, Greenspan, Bernanke, etc.
Barney Frank was on PBS tonight badgering rep.Garrett (of NJ?) on the GSE mess. Garrett sounds great, a voice of sanity.
Every time Garrett tried to talk about the current GSE situation, Frank would switch the subject and drown him out,screaming about some gov. subsidized low income housing that Garrett voted against in the past.
Barney Frank, and the rest of these a-holes are desperately trying to portray themselves as "trying to provide affordable housing for the American masses."
When will people really get it: They are desperately trying to keep anyone in this country from ever actually owning a home again.
Their intention is to keep Americans either 1) paying off a supersized mortgage loan to the bank FOREVER, with decades of interest.
or
2) living under the thumb of the government forever in low income, government subsidized, housing.
Get the government OUT of housing so that people can once again own property.
(And will the good folks of Massachusetts PLEASE get that a$$hole Frank out of our government??? I know it's a long list, but personally, I'd like it to start with him).
lthough those powers and changes in interest rates are unconnected on a policy level, they could be connected politically,'' says Senator Michael Crapo, an Idaho Republican who sits on the Banking Committee, which will be the first to hear Bernanke's report in a session tomorrow. Raising rates may lead some politicians to tryto stop efforts'' to expand the Fed's authority, he says.
Inflation Mandate
Bernanke's appearances this week on Capitol Hill provide him with the chance to separate the Fed's approach to financial markets from its mandate to keep a lid on inflation, says Dean Maki, chief U.S. economist at Barclays Capital in New York.
``There can be a fuzzy line between them at times,'' says Maki, a former Fed researcher.
Skepticism Among Lawmakers
Some lawmakers are skeptical of granting Bernanke any more authority. Senator Jim Bunning, a Kentucky Republican, says he ``wouldn't give the Fed an inch more of power.'' Individual senators can block bills from coming to a vote.
Democratic Representative Barney Frank of Massachusetts, who chairs the Financial Services Committee, may be more accommodating. ``There's an increasing consensus that there should be new powers given to the Federal Reserve to regulate some of the activities of investment banks and hedge funds,'' he says.
The tradeoff for such authority would be heightened scrutiny by lawmakers. ``If we grant additional powers to the Fed or to other regulatory bodies, I certainly hope that that will provide more reliable information to the Congress,'' says Representative Brad Miller, a North Carolina Democrat.
As a senior member of the Senate Banking Committee, I stand ready to work with President Bush, Secretary Paulson, and my colleagues to take the steps necessary to ensure that Fannie and Freddie are able to meet their homeownership mission. Allard responds to Treasury Dept. housing loan plans : News : KXRM FOX 21
Raise mortgage rates on GSE loans to 9% immediately with a requirement for 20% and the standard 36% DTI.
What would happen?
The already slow market would get slower.
Prices would drop very fast (which ironically would be the first time the GSE's actually did lower the price of housing!)
The GSE's would make money on every new loan.
Private lenders could come back to life offering lower cost 8% loans.
People would be buying houses for low principle and high interest meaning more of their payment is deductable, also meaning that rates would likely lower in the future increasing affordability through refinancing and making the value of their own house go up as it becomes more affordable to the next buyer.
Too bad lower housing prices, so simple to actually get, are the last thing the FED wants to see.
Barely, DOW gets sandpapered. Big crashes make for ugly headlines, that's a no-no. PPT just wants to avoid fireworks. A slow grind down with a bit of volatility lets those in the know bleed over-leveraged shorts.
Me? I'm a chicken. I went mostly PM a few years ago with a few bonds on the side. I'm big on that whole bears, bulls, and pigs theme.
Anyone remember a couple years back, when the stupid SIV thing was first floated by Paulson , Bill Gross wrote a great article comparing them all to whores?
Looks like Bill's been joining in on the trips to cheap shoe stores to load up on the toeless strappy spikes with the rest of 'em for the past 6 months or so.
OCC To Focus on Compliance
Comptroller of the Currency John Dugan warned compliance examiners that they must guard against compliance complacency while they deal with banks credit quality problems. We simply cannot take our eyes off compliance while we address safety and soundness, Dugan said in a speech to a recent OCC compliance conference.
We know how to deal with credit issues, and we will work our way through these very difficult problems, Dugan said. What I dont want, though, is to finish dealing with the industrys safety and soundness issues only to find that weve allowed significant compliance problems to develop in their place.
By the way I got that Ron Paul link from the comment by 4plxowner in the comment section of Prof Pigginton (Rich Toscano) that linked to an historical post where Toscano nailed this long ago too.
"For example, its important that borrowers aren't being foreclosed on more
quickly or denied access to modification programs because of their race. This is in many
ways a new area, because most banks have never had to run foreclosure and workout
programs on so large a scale, and we will need to adjust our practices accordingly. "
Three months ago, with Washington Mutual's shares at $13.15, Forth Worth, Texas-based TPG and a group of investors agreed to buy $7 billion of stock at $8.75, a 33 percent discount. The stock slumped 35 percent yesterday to $3.23, leaving TPG's investment down 63 percent. TPG also has warrants to buy 57.1 million shares at $10.06 a piece.
W, the bell rang last August. The grind down over the last year is what I expect to see again over the next year or two. It's the frog in a pot of water on the stove metaphor in reverse. John Q Public is just now starting to notice things are getting chilly.
So, when do we get that 500pt capitulation day ? Or are we just going to get the daily grind lower all summer long.
If you want a 500 down day, cut the fiber optic cables going out of greenwich, CT
So much black box trading it's almost impossible to have days like that unless there's a fat finger or something dun got blowed up. Even on the 300 pt days you see futures arbing so it all but guarantees a correction the next day(whether it holds is a different matter as this summer has shown.)
Citigroup is exposed to all of this. It has recorded more than $45 billion in credit losses and write-downs since mid-2007 and lost nearly $15 billion in the last two quarters. Its shareholders have paid a steep price: The stock has lost nearly 70 percent of its value in the last year.
Hanging by a thread writes:
I wonder if the Romans were able to understand that the empire was crumbling before their eyes, They did not have blogs to keep them in touch and so probably discounted all of the evidence. We are either cursed or blessed by having all of this at our finger tips. We can't do anything about it but at least can see the event unfold in living color. Long live the Empire!
Blessed. I think it's better to know...
But may Heaven help us, as Earthly help doesn't appear to be forthcoming.
TJ &Bear- thanks for the Martin Hutchinson article. Great read.
Now, back to how this mess was totally predictable, has anybody ever thought it strange that the US chose, deliberately, to follow in the steps of the previous Swedish (mentioned in the article) and Japanese blow-out Real estate debacle?
Why do you think our policy makers would CHOOSE to do this ?
Because, let's face it, they did have a choice, and they did know what the outcome would be, seeing that the whole shabang had just occured in at least 2 other countries in the previous decade.
Maybe one can manage the economics of a household by seat-of-the-pants flying, but the world economy may be as complex as flying to moon, landing, and then returning alive. That requires plans, plans, and more plans, and detailed checklists, and competent managers and technicians.
But the conservatives HATE planning (that's what commies do!). They say, let the market sort it out.
So, we have Paulson, Cheney, Bush et. al. thinking stuff may happen but making no plans. Just like the aftermath of the Iraq invasion - just send some College Republicans there and free markets and democracy will florish. Right!
The only plan BushCo is capable of making is an unlawful, war to be started for hidden motives (and then let the market sort it out).
Now they have declared war on the US and world economy by rewarding the already rich, making obscene insider deals, and denouncing any responsibility or balance of powers in government.
Yup, there goes our favorite rip-off artist, Barney Frank, again. He wants to be "accomodating" when it comes to giving the Fed (who helped get us into this mess!!) more_power.
People really need to start sending messages of support to those few, very few, reps we still have that care about us at all.
Here's my list so far:
Garrett, NJ
Paul, TX
Bunning, KY
Unfortunately, they're all Republicans so far. Anybody know of a Democrat to add to the list?
My money's on a long, slow grind. I'd love to see that big 500 pt. capitulation, but have managed 25% pa hanging on to SDS, covering, and getting back in once in the last year.
The quality of the comments are deteriorating. This is an economics blog, not a forum to spill out your bile on whatever politician you don't like. Name calling or tin foil hat political theories belong somewhere else. You waste our time wading through your pet hatreds. I'm talking about you, "Repulicansaretraitors" and "JimportlandOR."
Please read up on the Clinton administrations' sizeable contribution to getting this particular puke-your-guts-out RE lending debacle going.
yeah yeah and it was Clinton's fault that FEMA sat around with its thumb up its ass after Katrina.
There is, actually, a more balanced view to be had here:
Politicians don't have the luxury to monkey with things that are apparently working, cuz if they break it, or if it breaks AFTER they monkey with it anyway, then they can be demagogued on that by their next challenger.
But lending standards were DEFINITELY thrown out in 2002-2004. I know cuz I was shopping for a loan in late 2001 and CFC itself wasn't that aggressive in getting my biz since I had jack for a dp.
"People should not assume that just because the stock price has been going down, that we're going to close their bank," Bair said in an interview. "In addition to our credit problems, I don't want to have to start worrying about bank runs."
Hey Sheila, I've got news for you. What you are going to have to worry about is not for you to say. You're going to have to worry about what flies into your face. You better get ready...... LOL
What we're experiencing now--and it's global--is cascading cross-defaults.
It began with subprime home-buyers, whose defaults triggered hedge fund defaults, which led to defaults of investment and commercial banks.
Builder and developer defaults are happening now. Also regional banks. Next up, local and state gov't defaults, and of course pension and insurance fund defaults.
And defaults by 90% of individual debtors.
Finally, defaults on US Treasuries.
This is what happens when you build a house of cards.
Is the fed snd treasury setting up fsiluers so that IBs can avoid 'starvation'? Is this the new way to make IBs profitable at taxpayers expense but make it look like they are helping taxpayers?
>
This is Paulson, we have a plan to bailout Fannie and Freddie in 2 weeks for no apparent reason. What do you guys think?
The IBs said that was a wonderful plan and went about shorting the stock to zero. The rest of the crowd followed.
The video is great, see how he takes apart some of the anchors on CNBC.
"If you're blaming all this on short sellers, then you should get another job". LOL.
Yeah, Kunstler sure has some odd views re geopolitics.
Not odd at all. Kunstler is a jew so he can't help but be for America doing Israel's dirty work in the Middle East, even when it is a disaster for the US.
The WSJ reports that about two weeks ago Paulson ordered his staff to draw up contingency plans in case Freddie or Fannie faltered. When that planning was leaked in a WSJ article last Thursday,
The plan leaked. Isn't that essentially a rumor being spread by Paulson's staff? Shouldn't the SEC get involved?
I think we are seeing the beginning of a new phase of this process where the reality starts to hit mainstream.
I read Financial Arm. last summer and have been following the blogs, news and markets since. All around me regular people, co workers, internet forums, the media have been almost, but not quite oblivious to the beginnings of a meltdown. Interesting footnotes here or there, but plausible deniability reigned.
Yesterday, lines at banks, and not just ones in CA, I saw them on my way to work. Co-workers agast at stock prices, literally not believing they could go this low. Layoffs.
This morning, local news LEADING with stock market futures, Fed testimony in the Senate and the GM announcements.
I wonder if the media will make this fashionable, like "green".
According to Bloomberg, the Viet Nahm stock market closed sharply higher last night. A wag I know maintains that the Viet Nam war is the only war America really won. His evidence: how Vietnamese cars to you see on the road?
Not odd at all. Kunstler is a jew so he can't help but be for America doing Israel's dirty work in the Middle East, even when it is a disaster for the US.
yours in Christ,
Isamu
And in that one simple, ignorant, statement the reason for americas slow destruction becomes obvious. A once great nation is now just a country full of ignorant, bigoted idiots who will continue to blame all their problems on 'the others' long after the world stops listening to them.
Yeah, my blood's so mad, feels like coagulatin',
I'm sittin' here, just contemplatin',
I can't twist the truth, it knows no regulation,
handful of Senators don't pass legislation,
What you note is not exactly surprising to me. I recall seeing the same phenomenon during the last bubble. By definition, this site has tended to attract contrarians. It's natural enough that the population would tend towards stronger feelings on econ and more political crackpottery than the general public. The fact that expecting a meltdown is what they had in common has helped it along, since they've generally been right on that score.
Belgian Prime Minister Yves Leterme's four-month-old government collapsed after failing to heal a rift between French- and Dutch-speaking voters that threatens to split the country.
King Albert II is considering the resignation Leterme submitted just before midnight yesterday, the royal palace said in a statement today. Leterme's coalition, which took a record nine months to pull together, fractured after missing a self- imposed July 15 deadline for getting an agreement on regional autonomy and on splitting a disputed voting district.
The resignation plunges the country into the worst political crisis in its 177-year history at a time when the fastest inflation in almost 24 years is eroding Belgians' purchasing power and slower economic growth threatens the budget.
E-MINI is -18.00 (-1.00%) overnight, suggesting the markets will open below yesterday's close.
I note KITCO was unable to keep their charts up through the wee hours. That's something new. Too many hits smoking the servers, or is it PM trading volume?
Oh, now I see it, we're finally going to have that round number day: $150 oil, $1000 gold, $20 silver, and the danse macabre of the currencies can begin.
"Insured deposits are absolutely safe," Sheila Bair, FDIC chair, said in an interview on CBS' "The Early Show." "The banking system as a whole is absolutely safe."
Oops, Ill try again
According to Bloomberg, the Viet Nam stock market closed sharply higher last night. A wag I know maintains that the Viet Nam war is the only war America really won. His evidence: how many Vietnamese cars do you see on the road?
Ten hours away from homeland the Bismarck made its run
The Admiral of the British fleet said turn those bows around
We found that German battleship and we're gonna cut her dow
His plan in a nutshell
1) wipe out all common and preferred equity
2) With the remaining senior debtholders:
-give them 90cents in New Seniour Unsecured Debt on the dollar for all held debt
-the remainint 10cents of the dollar would be converted to "new Fannie" or "new Freddie" common equity.
-the govt will do a 3-year purchase gaurantee of the new common equity.
He feels that the beauty of this plan is
1) the stockholders get wiped out as they should
2) reducing the stock and the debt like this markedly improves F&F's leverage ratios to around 40:1 instead of 140:1, (his numbers)
3) the senior debtholders would NEVER sell their new equity stake because
-arbitragers would definitely buy this equity as it's a "free put" to the government
-over time, the firms would be profitable and thus this "free put" would become out of the money in the future
-thus no cost to government.
This also limits the possible government losses. If the govt chose it could also decide to raise or lower how much senior debt that the govt wants to convert and gaurantee equity.
anyway, I hope CR puts these vids up... I'd like to see discussion of the plan.
(OT) -- YTL - Thank you for the great info on the med career the other week. I've been trying to push daughter into pharmacy, that seems like the best of all worlds, but she's intent. We'll see.
Well, come on Wall Street, don't move slow,
Why man, this is war au-go-go.
There's plenty good money to be made
By supplying the Army with the tools of the trade,
Just hope and pray that if they drop the bomb,
They drop it on the Viet Cong.
And in that one simple, ignorant, statement the reason for americas slow destruction becomes obvious. A once great nation is now just a country full of ignorant, bigoted idiots who will continue to blame all their problems on 'the others' long after the world stops listening to them.
Hanging by a thread writes:
I wonder if the Romans were able to understand that the empire was crumbling before their eyes, They did not have blogs to keep them in touch and so probably discounted all of the evidence. Hanging by a thread |07.14.08 - 11:56 pm
Yes the Romans most certainly did understand the empire was crumbling. See St. Augustine, "City of God," which provides one perspective directly addressing this question. There were others. There were many efforts to understand what was happening and to devise solutions. There were administrative reforms (various types of decentralization). There were currency reforms (to attempt to deal with inflation). There were attempts to defeat foreign forces in battle. There were attempts to buy off foreign forces.
Nothing really worked. Or maybe it did - the empire lasted a good 500 years, or 1500 if you include the Eastern empre.
And the Romans were literate and self-conscious students of history. They wrote about what was going on and attempted to analyze it. Unfortunately, most of their writings have been lost. One would have been particularly fascinating - Asinius Pollio (I think) was an associate of Julius Caesar and witnessed and wrote about the transition from Republic to Empire, addressing the causes, in a book praised by his contemporaries. This has been lost.
Even now the root causes of "decline and fall" are not completely understood. I love Tainter's "Collapse of Complex Societies" explanation, but that's mainly because I can immediately grasp the argument!
Gavshire Hathaway writes:
Yet futures ticked upwards, and PMs worsened. Go figure....
The misguided futures seem to think that the FED will raise rates soon in light of the numbers. Just wait till the market really opens. Ben is no Trichet.
The futures are a complete and utter fraud. Low volumes are easy to manipulate, and I suspect cheaper than waiting for the market to open to intervene.
WIPE OUT EVERYONE, ONLY THEN NATIONALIZE THEM, GIVE EXPLICIT GOVERNMENT BACKING, AND GET THEM ON THEIR FEET OPERATING RESPONSIBLY.
WHATS WRONG WITH THIS???
GROSS WOULD LOSE, AND SO WOULD CHINA.
HERES THE CATCH, THEY ALREADY LOST, THEY JUST DONT KNOW IT YET. SOCIALIZING THE LOSSES THAT WILL COME WILL CAUSE US TREASURY RATES TO SOAR, HIGH INFLATION 15% OR SO. HOLDERS OF BONDS AT 5% WILL BE HOLDING WORTHLESS JUNK. THERE IS NO WAY FOR THEM TO WIN REGARDLESS, SO SPARE THE TAXPAYERS.
ac says:
"I was thinking today this whole thing with housing and mortgages amounts to the biggest crime ever committed in terms of wealth stolen."
ac, I think that when this has passed people will look back on this era - the defense contracts, FEMA, Iraqi contractors, the giveaway of the Fed, tax cuts for the richest, etc. as the greatest period of looting in US history. It certainly compares to the era of Harding, of the Teapot Dome, the time of the robber barons.
The concept of social responsibility simply does not seems to exist in American corporate life or public life today. America now is not the America that older people still think of when they remember the past. Right now it is just another country.
Somebody ought to take those "Get out of Hell free" cards that are floating around and put Bernanke's picture on them in stead of that old monopoly guy.
"He's short those stocks too, so he has vested interest."
of course. but that doesn't negate the validity of the plan.
Paulson is also talking his book, as am I, as is Sheila Bair.
overall I actually like the plan A LOT> the downfall that I see is that he may be incorrect that Fannie/Freddie can earn their way out of this... but it's definitely a good chance.
Hi
From Angry Bear:
[i]As long as more homeowners default on mortgages, losses to financial institutions will mount. Those losses already exceed $400 billion, and some analysts believe they will top $1 trillion before the housing carnage is over.
By comparison, Congress has authorized $650 billion so far to fight the Iraq war.[/i]
Is it possible they've figured out how squeeze blood from a rock?
Posted in the other thread but more relevant here:
"Congress will try to use the Fannie/Freddie bailout as leverage to get the whole housing bill passed with the issues that Bush said he'd veto still intact.
They will give him a choice between delaying the Fannie/Freddie regulation and backstop or allowing their pet programs to go through."
Minion; Sir, your plan has been leaked to the press.
Hank: Oh my God, we've got to get out in front and anounce it.
Minion: Yes, sir.
Hank: Minion, get me a plan to announce!
Awesome. It could almost be argued that Paulson's anticipation of FNM demise precipitated the event.
"EXECUTE HIM!" - The Shadow Government
Inconceivable.
I wonder what else the Government has planned. I suspect it has something to do with printing presses.
Son Of Siv... SOS
I love it!
Paulson is a visionary and obviously is trying to steal the show from Schuman!
Why are the people of the US not monitoring their PUBLIC SERVANTS?
Tap their phones, track by GPS and intercepting internet communications.
We have it the wrong way around.
schumer..whatever
The final phase of The Bush Coup is WW lll I'm afraid! Ohhh, but wait, we should worry about taxes being raided for our super wealthy class
Rich
regarding your comment on another thread of Q2 losses...Rich
It seems to me it's worse than -23%... categories with actual losses are ignored, at least they are as far as I can tell. e.g. home construction lost an extra 400M, delivery services an impressive 900M... maybe these guys need shorting.
Wally, yeah, but I wonder who leaked the plan? Of course it sounds like Paulson was calling everyone on Wall Street to ask them what they thought - so it could be almost anyone.
The WSJ article last Thursday referred to "three people familiar with the matter". Was it Larry, Moe and Curly?
Best Wishes.
M of T
A very intriguing idea. However, for it to work wouldn't the President have to learn to speak a recognizable language so that he can be understood on the wiretap?
A mind is a terrible thing to waste, especially when it is in the body of someone we allow to become President
joe shmoe, the President has done the best job I think any president has ever done. Too bad he is playing for the other team.
"with residual losses presumably laid on the GSE creditors"
Yikes. That puts a brand new spin on GSE rates going forward.
From NYTimes:
People should not assume that just because the stock price has been going down, that were going to close their bank, Ms. Bair said. In addition to our credit problems, I dont want to have to start worrying about bank runs.
So I should just "chill the hell out" then, Sheila?
DON'T PANIC!!!!!!!!!!!!!!!
Man I am jonesing for a post by "We're So Screwed"...just to see the handle.
"with residual losses presumably laid on the GSE creditors"
Probably wishful thinking.
Professor Hamilton sounds like an innocent in the wilds of Washington.
If losses approach whatever dollar limit is set by Congress...they'll raise the limit.
There is no way that losses will fall on the bondholders. You couldn't even trade the dollar if that happened.
MoT
You mean W was, gasp, The KenneBUNKportian Candidate????????
I knew the Texas accent was fake.
I see the NY Times report of Sheila Bair asking us not to panic confirms my despair over the leadership gap.
My vote for understatement of the year from the absolute worst President and worthless admin in US history ( unless of course you're a member of the < 1% club )
Caught napping again??
From the Ministry of Disinformation...
WaMu says well-capitalized after shares sink 34.7 percent on Monday.
Ahem.
They started planning this 2 weeks ago eh?
While spewing B.S. about the health of the economy.
The creditability of these guys now is effectively 0.
You can't make this stuff up.
Cheers,
"... such action by Congress would take the form of a dollar limit-- here's how much we're willing to stake, and no more-- with residual losses presumably laid on the GSE creditors."
There is no way that the general creditor for GSE will suffer. If that is the case, GSE will not be able to borrow any debt for a long, long time. And how would Professor Hamilton proposed that GSE continue their mission if they cannot borrow money? If we get to that point, we may as well shut down the economy and get ready for depression. The deferred may not get their divy for a while and common divy will definitely get cut. And common will get dilute to next to nothing. But it is a non-starter to think that Teasury try to resuce FNM/FRE but handicap their future operation. What is the point of rescuing them in the first place?
t seems the plan is bad for equity holders, but good for debt holders ... and potentially bad for taxpayers (like the Bear Stearns bailout).
The Bear Stearns thing seems almost trivial compared to this.
We're talking about heaping default liability for trillions of dollars worth of bonds onto taxpayers that they didn't sign up for, right?
This is like a bad movie that they want to fix by redoing it with a different set of actors.
Change the script, stupid. Start from scratch.
Ah, son of Super SIV, to be named "Super GIV." Open yer wallets and giv us your money!
Bernanke Foiled as Fannie-Freddie Rescue Thwarts Forecasts
Bernanke Forecasts Foiled by Fannie-Freddie Rescue (Update1) - Bloomberg.com
``Things are out of his control,'' said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina.
Silvia, who used to work as chief economist of the Senate Banking Committee, where Bernanke testifies today, predicted that lawmakers' questions will mostly focus on how the financial crisis that has now engulfed Fannie Mae and Freddie Mac will ``affect the downside for the economy.''
Traders, who last month foresaw an interest-rate increase as soon as August, now anticipate the Fed will hold off until October, with the chance of a move by year-end dropping to 67 percent from 100 percent, futures contracts show.
The hearing is scheduled for 10 a.m. in Washington.
"The amount of money at stake is hard to estimate but could be enormous. One element of the plan could raise Fannie Mae's and Freddie Mac's lines of credit with Treasury from $2.25 billion to an unspecified level to be determined by the government later, according to people who have seen a draft of the plan. The draft language includes no upper limit."
"Once Treasury made it clear there was a plan, the Fed decided it could offer Fannie Mae and Freddie Mac access to its lending facility, known as the discount window, but purely as a backstop. It was a move that could happen right away without congressional approval."
Dear CR:
A minor query: The Fed is making access to the discount window quite the party favor these days. Is this "Monetary Policy" or not? If it is how are we to judge its significance? Is our ability to measure now lacking.
My questions are inspired by the memorable past:
The March 16, 2006 press release (FRB: Federal Reserve Board: Error Page
Discontinuance of M3---As announced on November 10, 2005, the Board of Governors will cease publication of the M3 monetary aggregate on March 23, 2006. The Board will also cease publishing the following components: large-denomination time deposits, repurchase agreements (RPs), and Eurodollars.
Which is one thing . But then two paragraphs later it makes a curious statement:
"M3 does not appear to convey any additional information about economic activity that is not already embodied in M2 and has not played a role in the monetary policy process for many years.
Consequently, the Board judged that the costs of collecting the underlying data and publishing M3 outweigh the benefits."
The costs of collecting the underlying data? Is there really data on M3 that is not being collected????????
Misean you're right, you can't make this stuff up.
Misean,
I wouldn't look at the 2 week thing as a credibility problem. It takes a lot of time and effort to plan a closing (I know, I did for FDIC 20 years ago), and it's always done on a contingency basis. Many times in the past plans were made and shelved. FDIC doesn't have any control over when a bank is closed--that's OCC, OTS, or a state agency. Sometimes the bank is recapitalized or sold, but if you need to organized hundreds of people and extensive EDP support, it takes planning for the worst.
Re: EXECUTE HIM
I second that motion and suggest that we add Bernanke and Dodd to the growing list of those on the way out!
apan stocks fell, sending the benchmark index to the lowest in more than three months, on concern U.S. banks will collapse amid mounting credit market losses and debt held by Japanese lenders may be at risk.
Mizuho Financial Group Inc., the country's third-biggest bank by market value, fell for the first time in five days. Mitsubishi UFJ Financial Group Inc., the biggest, tumbled the most in two months.
U.S. financial shares fell to the lowest level in a decade yesterday, and mortgage lenders Fannie Mae and Freddie Mac sank in spite of a rescue plan from the Treasury Department. The Nikkei newspaper said today Japan's three largest banks hold 4.7 trillion yen ($44.2 billion) in debt from the companies.
The Nikkei 225 Stock Average declined 202.83, or 1.6 percent, to 12,807.33 as of 9:54 a.m. in Tokyo, the lowest since April 1. The broader Topix index slumped 22.96, or 1.8 percent, to 1,257.76. Only two of the 33 industry groups in the gauge rose.
ot a banker
i was wondering if you think the financials are going to rebound tomorrow or burn?
For all the hate directed at Dodd, he's been a stalwart on the anti-FISA campaign. Counts for a lot in my book.
A friggn safety net for $5000 Billion??? Sorry, Hiroyuki, the fabric of reality aint gonna stretch that far!
Re: `They're setting up a safety net'' for the two companies, said Hiroyuki Bando, chief manager for fixed income, equities and currencies in Tokyo at Mitsubishi UFJ Trust & Banking Corp., part of Japan's biggest bank. ``A government-guaranteed bailout is very negative for Treasuries.''
The yield on the benchmark 10-year note rose 2 basis points to 3.87 percent as of 10:47 a.m. in Tokyo, according to bond broker BGCantor Market Data. The price of the 3.875 percent security due in May 2018 fell 4/32, or $1.25 per $1,000 face amount, to 100. A basis point is 0.01 percentage point.
After listening to Jim Rogers on Bloomberg today, who declared "anyone who can read a balance sheet can see that FRE and FNM are insolvent," I think it's a good bet that the GSEs are in far BETTER shape than the market (equity investors in particular) think. Rogers was inane during much of this lengthy interview and he offered no evidence to back up his strong assertion about insolvency.
I think we'll look back on this era 10 or 20 years from now and wonder how arrogant men like Bernanke and Paulson managed to made decision after decision that just made a bad situation so much worse. Their biggest problem seems to be...they think they have the power to fix things. If they would focus instead on good policies and decisions, the outcome might not be so destructive.
Make good decisions and eventually things will fix themselves. There's an element of unnecessary panic in almost everything they do. They've got to fix it tomorrow.
Is Paulson evil, corrupt, or representing someone other than America?
Can't tell.
lost-
If I knew that, I would be a banker. Personally, I stay away from falling knives.
Tora Friggn Tora BONZAI !
Banzai charge - Wikipedia, the free encyclopedia
"The amount of money at stake is hard to estimate but could be enormous. One element of the plan could raise Fannie Mae's and Freddie Mac's lines of credit with Treasury from $2.25 billion to an unspecified level to be determined by the government later, according to people who have seen a draft of the plan. The draft language includes no upper limit."
Short bucky?
Ignoring all of his other crappy decisions, why all the animosity towards Paulson for this particular plan? What was he supposed to do regarding FRE/FNM when he doesn't have the statutory authority? Treasury doesn't regulate the FSEs; that's the job of Lockhart over at OFHEO...
For all the hate directed at Dodd, he's been a stalwart on the anti-FISA campaign. Counts for a lot in my book.
tranches of lunacy | 07.14.08 - 10:06 pm |
Absolutely correct unlike the spineless bastards and chicken hawks that make up todays GOP !
Following Friedman to the bitter end. I guess you really can't turn left in General Pinochet's Cadillac.........
After listening to Jim Rogers on Bloomberg today, who declared "anyone who can read a balance sheet can see that FRE and FNM are insolvent," I think it's a good bet that the GSEs are in far BETTER shape than the market (equity investors in particular) think. Rogers was inane during much of this lengthy interview and he offered no evidence to back up his strong assertion about insolvency.
If FRE and FNM are in such great shape why do they need urgent government assistance right now?
rich writes:
I think we'll look back on this era 10 or 20 years from now and wonder how arrogant men like Bernanke and Paulson managed to made decision after decision that just made a bad situation so much worse. Their biggest problem seems to be...they think they have the power to fix things. If they would focus instead on good policies and decisions, the outcome might not be so destructive.
Make good decisions and eventually things will fix themselves. There's an element of unnecessary panic in almost everything they do. They've got to fix it tomorrow.
rich | 07.14.08 - 10:08 pm | #
This is the hallmark of this administration, will it so. The arrogance is palpable.
I see nothing changing it. In fact, they believe they are doing it right.
Shumer and Paulson with the first two kills.
We're being taken down by our own goobermint.
Totally OT: Mortgage fraud - just another weapon in the gangster's arsenal:
"Lock was the purported head of a criminal organization known as the Body Snatchers, which prosecutors said dealt drugs and also kidnapped, tortured, robbed and killed other dealers....Lock still faces state charges that he prostituted his wife and others and federal charges that he ran a mortgage fraud scheme."
Page Not Found - JSOnline.com
Can someone tell me what the dollar, stocks and bonds have done since Paulson and Bernanke have been put into place? As a bonus, stats on Bush would also be nice!
Heck of a job, Hanky!
I think we'll look back on this era 10 or 20 years from now and wonder how arrogant men like Bernanke and Paulson managed to made decision after decision that just made a bad situation so much worse. Their biggest problem seems to be...they think they have the power to fix things. If they would focus instead on good policies and decisions, the outcome might not be so destructive.
I was thinking today this whole thing with housing and mortgages amounts to the biggest crime ever committed in terms of wealth stolen.
And the people complict in this crime are now trying to act as saviors or otherwise grab enough power to protect themselves for having to pay for their involvement.
I suspect now that a lot of people in the financial industry and in Washington feel that a bailout has to be found, otherwise they may be seen (more accurately) as criminals and the destroyers of millions of lives as the illusion that they're some kind of financial hero wears off.
The Institutional Risk Analyst: Time for Hank Paulson to Do the Right Thing and Nationalize the GSEs
"Time for Hank Paulson to Do the Right Thing and Nationalize the GSEs"
For hells sake, just nationalize the damn things! To pay for the loses increase the capital gains tax to 20% and sell the Saudis the White House! We can house the new prez in a portable trailer unit.
For hells sake, just nationalize the damn things! To pay for the loses increase the capital gains tax to 20% and sell the Saudis the White House! We can house the new prez in a portable trailer unit.
As long as they don't nationalize any of their associated debt... oh wait, is that what "nationalize the GSEs" really means?
Socialize all the potential losses from the bad loans they've made before taxpayers catch on?
Biggest theft crime in history.
Doesn't it feel like we're just descending into a fog?
``Things are out of his control,'' said John Silvia
HEY! Why isn't super-genius John working for Paulson?! It's a match made in... DC.
The economic Dopler from <a href="http://www.bloomberg.com/apps/ne...or28& refer=home>Bloomberg article (via Rich)
The strategy has been tested over the past year as bouts of financial turbulence clouded the economic outlook, forcing officials to alter their messages.
ahh deep value entry points are closer than ever
I feel like George in the Sinfield where he does everything opposite of his normal routine. Every time one of the administration talks; I play opposite. Someone talks strong dollar, I put my money into foreign currency. Someone mentions strong economy, I put my money into bonds. Someone mentions that FRE and FNM have strong balance sheets, I move my money into cash. So far, I an up 6% from the start of the year. Thanks Paulson and crew. Let me know what I can play tomorrow.
Oops, bad link above:
Bloomberg article
Re: "The WSJ article shows how quickly this rescue plan came together"
This is like a bunch of drunks shooting the shit in a bar, before they go home to smoke crack -- our government is on binge, like a meth addict.
ac:
Thanks. I thought I was going crazy for thinking the same thing. Seems like most see it as an honest mistake.
"Why the animosity towards Paulson?"
Animosity? The guy is a stand-up comic genius. I can't even read a SINGLE paragraph from his press office that doesn't contain at least two lies.
It's un-fricking-real.
Paulson...lies? He's merely economical with the truth (M.T.)
Rogers knows the score. Don't think just because he is on television that he is a hack like all the other market strategists, newsletter writers, research analysts, Cramer. Most of these people are clowns--since their money is never on the line, since most couldn't trade their way out of a paper bag (or in the case of Cramer, without dubious, line-skirting plays) their only function is to entertain.
The ones who know are not on television. They don't write books. They have nothing to sell. They want to hide and keep their ideas to themselves. Clearly Rogers is talking his book, and I don't understand why he needs the attention, I mean, he has plenty of dough, but he is a sharp guy. I would be very careful owning the common in either FRE or FNM here.
Personally I think all of these actions are being modeled to determine the least effects on the various markets before they are released. What I call a "Controlled Collapse".
Carpal tunnel syndrome is breaking out at the NY Fed's Open Market trading desks...before long there is will be long line forming at the Discount Window too.
Ever notice Paulson starts stuttering when he tells the truth. He has been trained well.
OT: Bloggers and Comment writers may want to have a look at this.
At the Uneasy Intersection of Bloggers and the Law
A grand jury subpoena sent by prosecutors in the Bronx earlier this year sought information to help identify people blogging anonymously on a Web site about New York politics called Room 8.
The subpoena carried a warning in capital letters that disclosing its very existence could impede the investigation being conducted and thereby interfere with law enforcement implying that if the bloggers blabbed, they could be prosecuted.
"As long as they don't nationalize any of their associated debt... oh wait, is that what "nationalize the GSEs" really means?
Socialize all the potential losses from the bad loans they've made before taxpayers catch on?
Biggest theft crime in history"
What the alternative is?
Read the article:
?When you officially nationalize the GSEs, the chief constituency - namely the bond holders including many global central banks - are reassured. The crisis ends, the systemic threat goes away. Remember, FRE and FNM don't need more capital - at least not immediately. But they do need access to the capital markets at preferential rates. "
For the current future, we need the foreign flows to keep coming. Of course this is all going to end badly.
Rogers is money, and he's been right on the money all along w/ this mortgage fiasco and commodity/inflation boom.
He's made me tons of money and I wouldn't bet against him.
Re his being inane, that's just his style. He's cantankerous and full of piss and vinegar and is calm for about 1 interview per year.
?When you officially nationalize the GSEs, the chief constituency - namely the bond holders including many global central banks - are reassured. The crisis ends, the systemic threat goes away. Remember, FRE and FNM don't need more capital - at least not immediately. But they do need access to the capital markets at preferential rates. "
For the current future, we need the foreign flows to keep coming. Of course this is all going to end badly.
So why not just explicitly guarantee all new GSE debt going forward?
Wouldn't that solve the problem?
Why are we even talking about the amount of losses that taxpayers may have to be accountable for if all these GSEs need are access to "preferential rates"?
Seems like there's other ways to accomplish this rather than putting taxpayers on the hook for losses from existing bonds.
If you buy the idea that Paulson is the band conductor for the PPT, and the PPT's primary mission for over a year has been to prop up U.S. equity markets, it explains a lot about his policies.
I've wondered when the PPT first started getting deeply involved in its tricks to prop up U.S. stocks. I think the answer was the Feb. 2007 crisis that was triggered by the overnight collapse in Chinese equities. I think what they did then was tiny, compared to what they do almost every day now. But it worked. And it made them more arrogant that they could get away with it. They came back again in August of 2007, and it worked again, although that time it took Fed rate cuts to keep the scam going. It worked again in January of 2008, but this time it took rate cuts and the TAFs and liquidity facility crap. Each time, it takes more and more govt. intervention to keep Paulson's Ponzi scheme afloat. But now, he's running out of tricks and all the traders he lured into his scam are seeing greener pastures on the short side of the fence. Paulson could keep the trader loyal to the PPT only so long. Now, he has no hold over them. Because he can't deliver consistent profits to them anymore by orchestrating signals.
When you are putting out signal to turn the black boxes on and buy indexes 10-20 times a day, it starts to look desperate. And smart traders prey on desperation like lions prey on wounded animals. Paulson is a lame duck anyway. In a way, he's become the wounded animal.
ac:
Thanks. I thought I was going crazy for thinking the same thing. Seems like most see it as an honest mistake.
Yeah... never mind the billions upon billions of dollars in profits there made from this "honest mistake".
Of course we can't find out where those profits have been stashed now, and we can't punish bondholders for buying trash bonds, so the taxpayer -- the party least culpable, the party that should be last in line to take the hit -- gets stuck with the loss of hundreds of billions or trillions of dollars in wealth that was "honestly lost", not stolen in a calculated way.
Besides the fact that I can't keep up with all these (probably) informative comments and blog posts now, I'm having a hard time wrapping around my head the fact that selling into weakness is now an effective strategy for trading the equity markets. I wondered if it would be such a few weeks back and it's held up. I wonder how long it lasts.
Sell rallies, sell weakness, just sell. Wild.
I think this sentence by Buiter captures the issue very well. The Fed has become a fiscal agent of the treasury and therefore circumvents the political process. This is NO independent central bank:
FT.com | Willem Buiter's Maverecon | The rescue of Fannie and Freddie by Hankie and Feddie
"... Since 1997, the Fed has long been the least operationally independent central bank in the industrial world. This latest episode suggests its main current purpose is to be an unaccountable quasi-fiscal agent for the US Treasury. If that is correct, the Feds capacity to deliver price stability in the future may have been fatally impaired."
You know, I'm just not really into this global financial meltdown / structural recession anymore. It's been really fantastic getting to know it and I am going to miss the sleepness nights it has caused, but right now, I'm just in a different place, and I think it's best if we go our separate ways. I'd like to think we can still be friends.
P.S. - If it's alright with you, I'd like to keep the Hummer.
For those watching the markets and wondering why the equity futures just rolled over in the past few minutes. I just saw Bernanke out at a, ahem, club. Jasmine and Alexa now have access to the discount window...
We're all exotic dancers now!
Well, of course Paulson and the others are only putting band-aids on the problems. It wont be their problem in 14 weeks. They have already arranged big jobs at the firms they have bailed-out, or have helped with the looting. What would be their reward for proposing gut-wrenching, long-term solutions that would make them traitors to their future employers?
Their job is to prop everything up until the election, then run like hell.
Saudi Arabia has already boosted its production by 300,000 barrels a day, or about 3 percent, to 9.45 million barrels a day last month. But that has had
little impact on soaring prices. Oil futures in New York have gained more than 40 percent this year. They rose 2 percent to $134.62 a barrel before the
meeting on Friday.
very interesting: Will the market implode or rally??
http://www.wallstreetjournal.com/story/market_implode_or_rally?
I'm having a hard time wrapping around my head the fact that selling into weakness is now an effective strategy for trading the equity markets.
Pretty amazing, huh?
Seems like it started around the time the Fed paused with the rate cuts.
For those watching the markets and wondering why the equity futures just rolled over in the past few minutes...
Man, last time that happened we got the futures down 500 points and some severe follow up Benankypanky the very next morning.
Jasmine and Alexa now have access to the discount window...
That's okay as long as us taxpayers have access to Jasmine and Alexa.
Charlie Poole writes:
After listening to Jim Rogers on Bloomberg today, who declared "anyone who can read a balance sheet can see that FRE and FNM are insolvent," I think it's a good bet that the GSEs are in far BETTER shape than the market (equity investors in particular) think. Rogers was inane during much of this lengthy interview and he offered no evidence to back up his strong assertion about insolvency.
Agreed. What we know from the balance sheet is that they'd have negative equity if they were forced to liquidate their holdings into the market, which is hardly a surprise and isn't the same thing as insolvency.
And what we know from their cashflows is that they're a long way from not being able to meet current obligations.
The real threat here is that they might simply go into run-off mode, instead of throwing themselves on their modernized swords writing "affordable" jumbos and all the other crap that's pushed the private labels into the abyss. Left to their own devices I think there's a good chance they could work their way out of their hole, but if you want them to carry on for the recently departed and "save the housing market," they're going to need a whole lot of capital.
Record fuel costs and a weaker won drove consumer prices up 5.5 percent in June from a year earlier. In response, policy makers stepped up efforts to stem a drop in the South Korean won that has fanned price pressures by increasing the cost of imported goods including oil.
Won's Decline
The won declined 0.2 percent to 1,006.30 per dollar as of 10:47 a.m. in Seoul. The currency last week advanced 4.8 percent as the finance ministry and central bank said they would use the nation's $258 billion of foreign reserves to support the won. For the year it is down 7 percent against the dollar.
And in the meantime the dollar is tanking.
Look for 1.6 to the Euro and 2 to the pound, once this goes...
OK, some updates/corrections from my FDIC historical data analysis, started last night:
All data from FDIC Statistics on Depository Institutions
FDIC: Statistics on Depository Institutions
CR points out (above) that "The WSJ quotes Brian Bethune, Chief U.S. Financial Economist for research firm Global Insight as saying the equity investment could be as high as $20 billion."
But in the Bloomberg article where Rogers calls Paulson's plan an unmitigated disaster, we learn that the two entities are worth only $15 billion:
"Fannie Mae's market value is now about $10 billion, down from $38.9 billion at the end of 2007. Freddie Mac's market value has shrunk to about $5 billion from $22 billion at the end of last year.
So Hank wants to buy $15 billion worth of stuff for $20 billion.
That's America to me!
Maybe this has already been addressed upthread, but can anyone explain why debt holders must be bailed out?
Top Japanese Banks Hold $44.3 Billion in GSE Debt
Top Japanese Banks Hold $44.3 Billion in GSE Debt - CNBC
Japan's three megabanks had roughly 4.7 trillion yen (US$44.3 billion) in debt securities issued by top U.S. mortgage finance agencies as of the end of March, while major insurance firms' exposure totaled more than 4 trillion yen, the Nikkei business daily said on Tuesday.
It also said market participants are still confident the value of those securities will not plummet because of the "implicit guarantee" that the U.S. government will step in to rescue the companies if necessary.
Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism
by Kevin Phillips
"Bad money refers to a new phenomenon in wayward megafinancethe emergence of a U.S. economy that is globally dependent and dominated by hubris-driven financial services.
Bad finance" has failed the American people and pointed U.S. capitalism toward a global crisis.
I strongly encourage everyone here to go read this morning entry at Clusterfuck Nation. It is the most vivid, lucid and frightening summary of the future we may face that I've read.
http://jameshowardkunstler.typepad.com/clusterfuck_nation/2008/07/event-horizon.html
It's hard to imagine what kind of melodramas were unspooling on the Hamptons lawns this weekend, while everybody else in America was watching Nascar, or plying the aisles of BJs Discount Warehouse for next week's supply of mesquite-and-guacamole flavored Doritos, or having flames and chains tattooed on their necks, or lost in a haze of valium and methedrine.
With the death of the IndyMac Bank last week, and the GSEs Fannie Mae and Freddie Mac laying side-by-side in the EMT van on IV drips, headed for the Federal Reserve's ever more crowded intensive care unit, there was a sense of the American Dream having passed through the event horizon that denotes the opening of a black hole.
Kunstler is a nut.
dave writes:
"Well, of course Paulson and the others are only putting band-aids on the problems. It wont be their problem in 14 weeks. They have already arranged big jobs at the firms they have bailed-out, or have helped with the looting. What would be their reward for proposing gut-wrenching, long-term solutions that would make them traitors to their future employers?
Their job is to prop everything up until the election, then run like hell."
A perfect description of what we have achieved: a government of men, not of law. Welcome to South America, USA.
Maybe this has already been addressed upthread, but can anyone explain why debt holders must be bailed out?
From Setser: Too Chinese (and Russian) to fail?
Anything Congress does (e.g. Roubini's 5% haircut), it will be with the debt holders in mind. Unless of course, you don't mind several trillion USD in a fire sale.
And then there's this other great part in Kunstler's post, as linked by Mr. Beach:
"Painful as it is, Americans had better get a new "Dream" and fast. It better be a dream based on the way the universe actually works, which is to say an operating procedure run on earnest effort and truthfulness rather than merely trying to get something for nothing and wishing on stars. We might begin symbolically by evacuating Las Vegas and calling in an air strike on the loathsome place . . ."
Kunstler nails it !
The Republican Party under George Bush will be known as the party that wrecked America (release 2.
. Painful as it is, Americans had better get a new "Dream" and fast.
Maybe this has already been addressed upthread, but can anyone explain why debt holders must be bailed out?
The GSEs cannot survive without the ability to borrow (and borrow cheaply), period.
km4,
The outcome was determined long before Bush came into office; he just greatly accelerated the endgame.
Yup,
Gonna take the spare flint out of my Zippo and go all in on the next 250 point Dow downer.
In 40 years, I've never seen a more difficult market. But like Pascal, I play the odds about the existance of God. Any card counting heretic would do the same.
If you haven't learned to read a chart, do so.
It may be only a 15% bear market bounce but the massive short positions argue for a melt up.....soon.
Commodities (my loves) are dead for 6 to 9 months at least.
No, I am not polly's aunta and I reserve the right to go massively short again in 09.
U dacha to all. And to all, spakolnya noche.
"Sell rallies, sell weakness. Just sell. Wild"
Y'know, I told my better half that I've officially signed on to the belief that this is going to be a Grande Depression. She asks, can we make some money on this, and I respond, sure, we short sectors and markets.
Buy anything? Nope.
That said, I put in a limit buy order on a grocery chain that has some great stores in our area. I figured that they'll go down some with the market chaos so I'll not buy market now. It's good for 60 days. And in one day, I'm almost there.
I just cancelled the order and will just wait it out.
Welcome to October 1929.
Wow.
The Bismarck was the fastest ship that ever sailed the sea
On her decks were guns as big as steers and shells as big as trees
tj & the bear agree i.e. Bush admin accelerated the process by about 20 - 25 yrs.
Ingrid Bettancourt comes out of the jungle after six years of captivity and torture as a hostage. She speaks in public fluently and flawlessly, with humility, grace, compassion and clarity, in three languages. Why? Because she's intelligent, cultured and her heart is pure.
Henry Paulson has lived the life of a multi-millionaire. Whenever he appears in public to speak, he looks shifty, dishonest and stutters in the only language he half knows, Wall Street English. Why? Because he's narrow-minded, greedy, sleazy and guilty.
What's wrong with this picture?
Okay, so Kunstler has moments of lucidity. But he remains the guy who supported Bush's disaster in Iraq, contorting himself into a tragicomic pretzel whenever he tries to reconcile this with his dystopic thesis.
Quite a head fake by oil the past couple weeks. I was convinced it was on long slide down. Now... who knows.
CR first made his mild recession call when oil was what, $70/bl? I'm leaning more to the depression camp myself homedad43. Though I prefer "Goldilocks Depression," since ..... I coined it!
Yeah, Kunstler sure has some odd views re geopolitics. Makes me distrust his other views, though some are interesting.
I wonder if the Romans were able to understand that the empire was crumbling before their eyes, They did not have blogs to keep them in touch and so probably discounted all of the evidence. We are either cursed or blessed by having all of this at our finger tips. We can't do anything about it but at least can see the event unfold in living color. Long live the Empire!
From Andy Mukherjee, Bloomberg--
"From China's perspective, Paulson's ``Three-Part Plan for Immediate Action'' is a perfect outcome if it succeeds in lowering the risk premium on Freddie Mac's 10-year debt over U.S. Treasury notes of similar maturity. The capital gains that this narrowing of spread will produce for China will be quite a bonanza. The process may already be under way: The excess yield fell to 73 basis points yesterday from 94 points on July 10."
Your children's tax dollars are at work...
This bald mother F*&^er has been deceiving us since the get go.
But it is a non-starter to think that Teasury try to resuce FNM/FRE but handicap their future operation. What is the point of rescuing them in the first place?
What if they made the existing bondholders take a haircut, while nationalizing the GSEs, making them more conservative and fully insuring future bonds?
right now
Heng Seng down a little over 3%
Nikkei down 2%
taiwan down 3.6%
"The GSEs cannot survive without the ability to borrow (and borrow cheaply), period."
And why do we want the GSEs to survive? I would really like to see them go away permanently. Put the securities they own in a trust of some sort and just get rid of them.
Fannie and Freddie are two of the most worthless, fraudulent entities to ever have existed on American soil. All they have done is made it so the average American can't afford a house. Get rid of them and we'll all be better off in a few years.
durnk,
Who said we wanted them to survive?
Odd story,but I vouch for it 100%(personaly involved).....Mid level management person at WAMU rushed this morning to be in line at Indymac.Had a LOT o money in there over 100k.I don't know yet how much they got,but they were told they would get 75% of over 100k...........I know. I know.....What is a WAMU person doing keeping their money at Indymac,why didn't they take it out before today(didn't they know?),why so much over 100k,told 75%?I don't know any of these things,but if/when I find out I may post them.I'm very curious about the whole thing myself!
will USB set the tone for tomorrow?
There is no way that the general creditor for GSE will suffer. If that is the case, GSE will not be able to borrow any debt for a long, long time. And how would Professor Hamilton proposed that GSE continue their mission if they cannot borrow money?
I would like to let Fannie/Freddie subside into runoff with whatever haircut that entails for the bondholders. Start over with an honest-to-goodness government housing loan agency with civil service salaries for its executives and an honest-to-goodness government guarantee on its debt.
But that's just me.
Totally OT: Mortgage fraud - just another weapon in the gangster's arsenal:
"Lock was the purported head of a criminal organization known as the Body Snatchers, which prosecutors said dealt drugs and also kidnapped, tortured, robbed and killed other dealers....Lock still faces state charges that he prostituted his wife and others and federal charges that he ran a mortgage fraud scheme."
That's always the way it goes. You start out dealing drugs, torturing, robbing, killing, and pimping, and pretty soon you're running a mortgage fraud.
We already have an honest-to-goodness government housing loan agency called GNMA and another called FHA, don't we? Then we have plenty of non-government housing loan agencies, called banks.
The US Dept. of Treasury would like to announce the merging of Fanne Mae and Freddie Mac in order to shift the financial burden onto the American taxpayers.
We will call the new entity:
Fanny Packed.
-Hank Paulso
Billy Hill,
Fannie was a government agency for a long time. Tanta had a post on this the other day. They were spun off into the private sector back in the 70's I believe. If I recall correctly, they were spun off from the government so that the government wouldn't have to carry their debt on the government's books (most massive off-balance sheet entity ever).
If the government creates a new housing agency, we'll be right back where we started from and this whole mess will likely happen again. The government needs to get completely out of housing -- FHA, Fannie, Freddie, Ginnie Mae, FHLBs, etc. Get rid of them all so that house prices will go back down to market prices that people can afford.
Lest we forget .....
Paulson made 3,000,000,000
shorting mortgages before he
became Treasury Secretary.
"And why do we want the GSEs to survive? I would really like to see them go away permanently. Put the securities they own in a trust of some sort and just get rid of them. "
Because we want to have a functioning economy, feed our family and may be even has a housing market.. Have you ever thought about what would happen if GSE fail? I mean really sit down and think about the ramification. All the banks carries GSE paper as part of the capital structure. That mean overnight all the banks in US will fail because they don't have enough capitalization. And some of the oversea banks will fail as well... And without banks, where do we get short term credit to get our factory or business going? Without business going, we start to have layoff... It is like a bad movie that one watch and don't want to live in. If all the banks in US fail at the same time, do you think brokerage firm and insurance companies can survived? How do we even access our own money?
ac "Man, last time that happened we got the futures down 500 points and some severe follow up Benankypanky the very next morning"
Ha. I was thinking the same thing. A little early, since expiry is still 4 trading days away.
This is like a primitive movie, in slow motion. The kind where you can anticipate the next scene. The ending isn't shaping up too pretty. I went long gold today, GLD options, for insurance against the rest of the meltdown. Problem is it's futures on derivatives. What's the chance it'll pay?
Did you notice that GWB is losing hair ?
What stress ?
What guilt ?
xofruitcake,
I doubt that any foreign governments would fail. They would lose some money, sure, but they wouldn't fail. And I really don't give a rat's if some idiot can't afford a house. Let him rent like I'm doing.
There may have been a time when government needed to facilitate home financing. That time is long gone. There are pleny of rentals out there.
Just a hell of a mess here.
OT, if the dollar's tanking, what's the likelihood of an intervention and how to set up for it? Euro almost at $1.60, so they'd want it to drop.
How to short the Euro? Any funds?
Bueller?
Bueller?
Thanks for reminding me. I will never trust a bald person again.
Yes, we've thought about it. So, two private corporations go out of business. Big deal. One of those firms had real trouble doing simple accounting the past few years anyway. Why save losers like these? As for banks, it may be that some of them are almost gone, even now.
If all banks fail, people like A.P. Giannini will start new ones.
This really isn't funny anymore. They are going to bankrupt the country. Everyone is presuming that when prices "bottom out" that they will go up in a traditional pattern. We're talking a decade here, and trillions of dollars.
Hey, I'm bald.
And Obama doesn't have much hair either.
Just did some quick reading re forex and shorting currencies.
Little too dicey for me, not to mention expensive. That's out of my league.
Okay, who again was calling for a multi-week rally based upon this latest (attempted) stick-save? Time sure flies!
"There may have been a time when government needed to facilitate home financing. That time is long gone. There are pleny of rentals out there."
durnk
I'm afraid the American Dream of home ownership will only be for the wealth from here on!!!
Speaking of attempted stick saves, I just may start day trading in anticipation of the daily 2 PM pump. It's become such a regular occurrence...almost comical when it happens now.
There are innumerable practice accounts, homedad, to get the feel of it. Plus, there are mini-accs available that don't involve trading more than pocket change.
Martin Hutchinson:
It is thus necessary that any rescue for Fannie and Freddie be a euthanasia not a lifeline.
Are we entering a financial meltdown?
Great stuff.
Just a teaser. The U.S. is not alone:
Global Economy Matters: The Danish Economy - Sailing into Dire Straits?
"... A quick initial glance at the short term data definitely suggests that a serious batch of storm clouds may well be gathering above the economy. Not only did Denmark claim the dubious honor of being the first economy in Europe to exhibit a technical recession but it was also recently handed its very own banking crisis à la Bear Stearns and Freddie/Fannie, since only last Friday the 10th largest bank, Roskilde Bank, had to go hat in hand to the central bank for a provisional liquidity guarantee as the writedowns it was about to announce to the market were judged to be too tough to swallow without rsking a bank run. ..."
DOW futures have a 10 handle, again. So, when do we get that 500pt capitulation day ? Or are we just going to get the daily grind lower all summer long.
There are grumblings that wtf futures are going to be exploding overnight.
Heng Seng down a little over 3%
Nikkei down 2%
taiwan down 3.6%
I thought we decoupled, then Nikkei called at 3am, drunk, wanting to come over...
Everyone is presuming that when prices "bottom out" that they will go up in a traditional pattern
Everyone thinks that the traditional pattern is 20%, 30%, 50% annual appreciation. Unfortunately, everyone needs to be educate that housing only appreciates with inflation (generalized).
Fannie and Freddie by Rep. Ron Paul
Ron Paul in the House Financial Services Committee, September 10, 2003
Mr. Chairman, thank you for holding this hearing on the Treasury Department's views regarding government sponsored enterprises (GSEs). I would also like to thank Secretaries Snow and Martinez for taking time out of their busy schedules to appear before the committee.
I hope this committee spends some time examining the special privileges provided to GSEs by the federal government. According to the Congressional Budget Office, the housing-related GSEs received $13.6 billion worth of indirect federal subsidies in fiscal year 2000 alone. Today, I will introduce the Free Housing Market Enhancement Act, which removes government subsidies from the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the National Home Loan Bank Board.
One of the major government privileges granted to GSEs is a line of credit with the United States Treasury. According to some estimates, the line of credit may be worth over $2 billion. This explicit promise by the Treasury to bail out GSEs in times of economic difficulty helps the GSEs attract investors who are willing to settle for lower yields than they would demand in the absence of the subsidy. Thus, the line of credit distorts the allocation of capital. More importantly, the line of credit is a promise on behalf of the government to engage in a huge unconstitutional and immoral income transfer from working Americans to holders of GSE debt.
The Free Housing Market Enhancement Act also repeals the explicit grant of legal authority given to the Federal Reserve to purchase GSE debt. GSEs are the only institutions besides the United States Treasury granted explicit statutory authority to monetize their debt through the Federal Reserve. This provision gives the GSEs a source of liquidity unavailable to their competitors.
The connection between the GSEs and the government helps isolate the GSE management from market discipline. This isolation from market discipline is the root cause of the recent reports of mismanagement occurring at Fannie and Freddie. After all, if Fannie and Freddie were not underwritten by the federal government, investors would demand Fannie and Freddie provide assurance that they follow accepted management and accounting practices.
Ironically, by transferring the risk of a widespread mortgage default, the government increases the likelihood of a painful crash in the housing market. This is because the special privileges granted to Fannie and Freddie have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions. As a result, capital is diverted from its most productive use into housing. This reduces the efficacy of the entire market and thus reduces the standard of living of all Americans.
Despite the long-term damage to the economy inflicted by the government's interference in the housing market, the government's policy of diverting capital to other uses creates a short-term boom in housing. Like all artificially-created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have otherwise been had government policy not actively encouraged over-investment in housing.
Perhaps the Federal Reserve can stave off the day of reckoning by purchasing GSE debt and pumping liquidity into the housing market, but this cannot hold off the inevitable drop in the housing market forever. In fact, postponing the necessary, but painful market corrections will only deepen the inevitable fall. The more people invested in the market, the greater the effects across the economy when the bubble bursts.
No less an authority than Federal Reserve Chairman Alan Greenspan has expressed concern that government subsidies provided to GSEs make investors underestimate the risk of investing in Fannie Mae and Freddie Mac.
Mr. Chairman, I would like to once again thank the Financial Services Committee for holding this hearing. I would also like to thank Secretaries Snow and Martinez for their presence here today. I hope today's hearing sheds light on how special privileges granted to GSEs distort the housing market and endanger American taxpayers. Congress should act to remove taxpayer support from the housing GSEs before the bubble bursts and taxpayers are once again forced to bail out investors who were misled by foolish government interference in the market. I therefore hope this committee will soon stand up for American taxpayers and investors by acting on my Free Housing Market Enhancement Act.
Dr. Ron Paul is a Republican member of Congress from Texas.
Did you see the date of that paper by Ron Paul above?
2003!
In regards to the Ron Paul comment...well that's just great. So let them fail. Then what? If the backer of 5 Trillion Dollars worth of debt goes bad, what happens to the value of homes then? Rates will skyrocket and home values will plummet. But, on the other hand, now we're paying for it in tax dollars up front, and it still may happen anyway. So, Paulson just figured out a way to double the pain, and it was a half-baked, 2 week reaction that was not well thought out.
the indian stock market (bombay), which has lost nearly 30% since december is down 310 points today, about 2 and 1/4 %
Pimcos Gross thinks Fannie/Freddie bailout may aid borrowers
Pimco’s Gross thinks Fannie/Freddie ‘bailout’ may aid borrowers - Lansner on Real Estate : The Orange County Register
The ability to support housing and the economy will ultimately depend on the ability of (Fannie Mae and Freddie Mac) to lever their recapitalizied balance sheets through the purchase of secondary mortgages in the open market as well as to create new mortgages. This, however, is a critical first step.
Fannie Mae and Freddie Mac boost the mortgage market by insuring packages of mortgages and then resell them to investors to get more cash to insurer more mortgages. Sundays news, Gross says, should soothe antsy mortgage investors because it tells the market that the government will not allow them to fail. It also warns (Fannie and Freddie) that substantial changes in regulation lie ahead and that tonights proposals will not come without a cost.
...what happens to the value of homes then?
Why should we care? Why can't homes go back to being simply places to live? The less we spend on housing the better, especially since we'll need the money for food & energy.
Got crisco?
Dave said: "In regards to the Ron Paul comment...well that's just great. So let them fail."
If you are referring to the paper by Ron Paul 5 YEARS AGO, then perhaps you misunderstand.
He wanted to take the punch bowl away while other lenders still existed and could pick up the slack.
It's called being PROACTIVE instead or REACTIVE.
Gross definitely talking his book, which is loaded with agencies.
July lean hogs declined 0.17 cents to 74.8 cents a pound; July pork bellies gave up 0.6 cent to 66 cents a pound.
Oh shit!
Edd Browne,
Wrong Paulson.
Not the Sec. of the Treasury.
DD, dude.
Pork Complex
Brokers and analysts anticipate a mixed CME hog open on spot-July maneuvering ahead of its July 15 expiration, Goldman roll business and participants waiting for market direction.
Fundamentally, bullish traders may key in on Friday's modest pork cutout rebound and steady-to-higher cash hog price expectations, a broker said. Also, he said, calculated pork packer margins for last Friday remain profitable despite slipping from Thursday's level.
By the same token, spot-July and nearby-August are slightly overbought technically which may deter potential buyers, another broker said. He said front-month hogs are also at mildly bearish premiums to CME's hog index, especially after July's posted triple-digit gains last Friday.
Meanwhile, overnight-CBOT corn's retreat and short-term profit taking after some back-month hogs gained last Friday may weigh on some deep hog contracts, an analyst said.
Spot-July's 74.58-cent 40-day moving average is a support level. The contract's 75.20-cent 100-day moving average is a resistance target.
Nearby-August's 73.79-cent 20-day moving average is a support area. The contract's 75.27-cent 40-day moving average is a resistance threshold.
An analyst also called pork bellies mostly weak on six more deliveries posted by CME against spot-July that will expire on July 28 and no cash developments.
That should instill a lot of CONfidence in US assets and the dollar. If you haven't sold by now, run like hell.
fair point that the paul piece is from 2003, predicting that this might happen. But, even if the government was not there supporting Fannie Mae and Freddie Mac, what would they do if this was happening anyway? Wouldn't they still be forced to do something? What's the alternative...worst case sceanrio in mind
The point is that this was highly predicatable and preventable.
I should say predictED instead.
Its like a cop who steps infront of a moving car, and then tries to justify the shooting on the grounds he was about to be run over.
The reason it's an emergency now is because they failed to do something about it before.
In anycase, we are where we are, and I frankly can't blame those in charge for putting off the day of reckoning until it's someone else's problem.
But, the longer we wait the more damage it will cause.
Thanks for that Ron Paul post, Average Joe.
People need to see, over and over, the evidence provided by those who knew this whole thing was a scam way back when and said so.
It shines the light on the criminality of people like Frank , Dodd, Greenspan, Bernanke, etc.
Barney Frank was on PBS tonight badgering rep.Garrett (of NJ?) on the GSE mess. Garrett sounds great, a voice of sanity.
Every time Garrett tried to talk about the current GSE situation, Frank would switch the subject and drown him out,screaming about some gov. subsidized low income housing that Garrett voted against in the past.
Barney Frank, and the rest of these a-holes are desperately trying to portray themselves as "trying to provide affordable housing for the American masses."
When will people really get it: They are desperately trying to keep anyone in this country from ever actually owning a home again.
Their intention is to keep Americans either 1) paying off a supersized mortgage loan to the bank FOREVER, with decades of interest.
or
2) living under the thumb of the government forever in low income, government subsidized, housing.
Get the government OUT of housing so that people can once again own property.
(And will the good folks of Massachusetts PLEASE get that a$$hole Frank out of our government??? I know it's a long list, but personally, I'd like it to start with him).
taiwan now down over 4 and 1/4 percent (306 points).
as AC wrote up thread at 11:18... time for some more bernankepanky.
to get outta this shit hole, i think we're gonna need something more
maybe some hankybernankepanky
lthough those powers and changes in interest rates are unconnected on a policy level, they could be connected politically,'' says Senator Michael Crapo, an Idaho Republican who sits on the Banking Committee, which will be the first to hear Bernanke's report in a session tomorrow. Raising rates may lead some politicians to tryto stop efforts'' to expand the Fed's authority, he says.
Inflation Mandate
Bernanke's appearances this week on Capitol Hill provide him with the chance to separate the Fed's approach to financial markets from its mandate to keep a lid on inflation, says Dean Maki, chief U.S. economist at Barclays Capital in New York.
``There can be a fuzzy line between them at times,'' says Maki, a former Fed researcher.
Skepticism Among Lawmakers
Some lawmakers are skeptical of granting Bernanke any more authority. Senator Jim Bunning, a Kentucky Republican, says he ``wouldn't give the Fed an inch more of power.'' Individual senators can block bills from coming to a vote.
Democratic Representative Barney Frank of Massachusetts, who chairs the Financial Services Committee, may be more accommodating. ``There's an increasing consensus that there should be new powers given to the Federal Reserve to regulate some of the activities of investment banks and hedge funds,'' he says.
The tradeoff for such authority would be heightened scrutiny by lawmakers. ``If we grant additional powers to the Fed or to other regulatory bodies, I certainly hope that that will provide more reliable information to the Congress,'' says Representative Brad Miller, a North Carolina Democrat.
As a senior member of the Senate Banking Committee, I stand ready to work with President Bush, Secretary Paulson, and my colleagues to take the steps necessary to ensure that Fannie and Freddie are able to meet their homeownership mission.
Allard responds to Treasury Dept. housing loan plans : News : KXRM FOX 21
What a dick...
Average Joe
you are right-on and Ron Paul is a champion for causes he truly believes in. it appears he can't be bought.
i'm a dem who has great respect for this repub.
My solution:
Raise mortgage rates on GSE loans to 9% immediately with a requirement for 20% and the standard 36% DTI.
What would happen?
The already slow market would get slower.
Prices would drop very fast (which ironically would be the first time the GSE's actually did lower the price of housing!)
The GSE's would make money on every new loan.
Private lenders could come back to life offering lower cost 8% loans.
People would be buying houses for low principle and high interest meaning more of their payment is deductable, also meaning that rates would likely lower in the future increasing affordability through refinancing and making the value of their own house go up as it becomes more affordable to the next buyer.
Too bad lower housing prices, so simple to actually get, are the last thing the FED wants to see.
Barely, DOW gets sandpapered. Big crashes make for ugly headlines, that's a no-no. PPT just wants to avoid fireworks. A slow grind down with a bit of volatility lets those in the know bleed over-leveraged shorts.
Me? I'm a chicken. I went mostly PM a few years ago with a few bonds on the side. I'm big on that whole bears, bulls, and pigs theme.
Anyone remember a couple years back, when the stupid SIV thing was first floated by Paulson , Bill Gross wrote a great article comparing them all to whores?
Looks like Bill's been joining in on the trips to cheap shoe stores to load up on the toeless strappy spikes with the rest of 'em for the past 6 months or so.
What a jerk.
EEngineer, did I just hear you ring a bell?
Hey Fannie, how's that higher conforming limit working out for ya?
I been up, I been down.
Take my word, my way around.
I ain't askin' for much.
I said, Lord, take me downtown,
I'm just lookin' for some tush.
waitinginPNW:
Bill Gross as a pump-clad street whore. Now that's a pretty picture.
OCC To Focus on Compliance
Comptroller of the Currency John Dugan warned compliance examiners that they must guard against compliance complacency while they deal with banks credit quality problems. We simply cannot take our eyes off compliance while we address safety and soundness, Dugan said in a speech to a recent OCC compliance conference.
We know how to deal with credit issues, and we will work our way through these very difficult problems, Dugan said. What I dont want, though, is to finish dealing with the industrys safety and soundness issues only to find that weve allowed significant compliance problems to develop in their place.
Pratt's Letter Online
By the way I got that Ron Paul link from the comment by 4plxowner in the comment section of Prof Pigginton (Rich Toscano) that linked to an historical post where Toscano nailed this long ago too.
http://piggington.com/fed_monetizing_fannie_and_freddie
This seems like a weird comment:
Remarks by
John C. Dugan
Comptroller of the Currency
Before the
OCC Compliance Conference
July 7, 2008
The Need to Stay Focused on Compliance Supervision
http://www.occ.treas.gov/ftp/release/2008-76a.pdf
"For example, its important that borrowers aren't being foreclosed on more
quickly or denied access to modification programs because of their race. This is in many
ways a new area, because most banks have never had to run foreclosure and workout
programs on so large a scale, and we will need to adjust our practices accordingly. "
Dave- Ron Paul wasn't predicting what might happen. He was stating what would happen.
Which was something that any idiot could see.
So Ron Paul's not a genius or a seer or a psychic. He's just honest.
And the bulk of the rest of them are not stupid. They're just lying crooks.
Washington Mutual's Decline Wipes Out Most of TPG's Investment
Washington Mutual Drop Wipes Out Most of TPG Holding (Update5) - Bloomberg.com
Three months ago, with Washington Mutual's shares at $13.15, Forth Worth, Texas-based TPG and a group of investors agreed to buy $7 billion of stock at $8.75, a 33 percent discount. The stock slumped 35 percent yesterday to $3.23, leaving TPG's investment down 63 percent. TPG also has warrants to buy 57.1 million shares at $10.06 a piece.
W, the bell rang last August. The grind down over the last year is what I expect to see again over the next year or two. It's the frog in a pot of water on the stove metaphor in reverse. John Q Public is just now starting to notice things are getting chilly.
Weather Helm-
OMG. I'm a painter and you've just given me an idea for a possible new series- thanks!
Could get some the aggression out that I've been feeling for this band of thieves.
So, when do we get that 500pt capitulation day ? Or are we just going to get the daily grind lower all summer long.
If you want a 500 down day, cut the fiber optic cables going out of greenwich, CT
So much black box trading it's almost impossible to have days like that unless there's a fat finger or something dun got blowed up. Even on the 300 pt days you see futures arbing so it all but guarantees a correction the next day(whether it holds is a different matter as this summer has shown.)
Next bubble: shorts
Citigroup reflects what's ailing the industry
Citigroup reflects what's ailing the industry - The New York Times
Citigroup is exposed to all of this. It has recorded more than $45 billion in credit losses and write-downs since mid-2007 and lost nearly $15 billion in the last two quarters. Its shareholders have paid a steep price: The stock has lost nearly 70 percent of its value in the last year.
Hanging by a thread writes:
I wonder if the Romans were able to understand that the empire was crumbling before their eyes, They did not have blogs to keep them in touch and so probably discounted all of the evidence. We are either cursed or blessed by having all of this at our finger tips. We can't do anything about it but at least can see the event unfold in living color. Long live the Empire!
But may Heaven help us, as Earthly help doesn't appear to be forthcoming.
TJ &Bear- thanks for the Martin Hutchinson article. Great read.
Now, back to how this mess was totally predictable, has anybody ever thought it strange that the US chose, deliberately, to follow in the steps of the previous Swedish (mentioned in the article) and Japanese blow-out Real estate debacle?
Why do you think our policy makers would CHOOSE to do this ?
Because, let's face it, they did have a choice, and they did know what the outcome would be, seeing that the whole shabang had just occured in at least 2 other countries in the previous decade.
Maybe one can manage the economics of a household by seat-of-the-pants flying, but the world economy may be as complex as flying to moon, landing, and then returning alive. That requires plans, plans, and more plans, and detailed checklists, and competent managers and technicians.
But the conservatives HATE planning (that's what commies do!). They say, let the market sort it out.
So, we have Paulson, Cheney, Bush et. al. thinking stuff may happen but making no plans. Just like the aftermath of the Iraq invasion - just send some College Republicans there and free markets and democracy will florish. Right!
The only plan BushCo is capable of making is an unlawful, war to be started for hidden motives (and then let the market sort it out).
Now they have declared war on the US and world economy by rewarding the already rich, making obscene insider deals, and denouncing any responsibility or balance of powers in government.
What ye sow is what ye reap.
hmmm.. at this rate we will have a USD carry trade courtesy of the FED.
Anon 1:42,
Yup, there goes our favorite rip-off artist, Barney Frank, again. He wants to be "accomodating" when it comes to giving the Fed (who helped get us into this mess!!) more_power.
People really need to start sending messages of support to those few, very few, reps we still have that care about us at all.
Here's my list so far:
Garrett, NJ
Paul, TX
Bunning, KY
Unfortunately, they're all Republicans so far. Anybody know of a Democrat to add to the list?
Why do you think our policy makers would CHOOSE to do this ?
They choose the easy path and hoped for the best. It's the nature of people. It's the nature of credit cycles to grow and eventually blow out.
JimPortland-
Unfortunately, if people refuse to acknowledge that this mess was caused by BOTH parties , nothing will change.
A disater of this size is not caused by one president and his party, no matter how big of an asshat said President may be.
Please read up on the Clinton administrations' sizeable contribution to getting this particular puke-your-guts-out RE lending debacle going.
waitinginPNW writes:
that this mess was caused by BOTH parties
I concur and the public was also complicit.
Broward, They're sure fighting the "blowout" phase of this credit cycle tooth and nail, aren't they?
Bernanke asking for 1 million dollar limits, vs. 417K, for the GSE's?
And Congress giving him 625K of that?
Funny, how these crisis identify who the true communists are...republicans. Small elite class benefits while everyone else flips the bill.
daring,
My money's on a long, slow grind. I'd love to see that big 500 pt. capitulation, but have managed 25% pa hanging on to SDS, covering, and getting back in once in the last year.
old trader
Okay.. This just in.
2.0007 USD = 1 Uk Pound
Waiting for 1.60 to the Euro.
The quality of the comments are deteriorating. This is an economics blog, not a forum to spill out your bile on whatever politician you don't like. Name calling or tin foil hat political theories belong somewhere else. You waste our time wading through your pet hatreds. I'm talking about you, "Repulicansaretraitors" and "JimportlandOR."
Please read up on the Clinton administrations' sizeable contribution to getting this particular puke-your-guts-out RE lending debacle going.
yeah yeah and it was Clinton's fault that FEMA sat around with its thumb up its ass after Katrina.
There is, actually, a more balanced view to be had here:
Politicians don't have the luxury to monkey with things that are apparently working, cuz if they break it, or if it breaks AFTER they monkey with it anyway, then they can be demagogued on that by their next challenger.
But lending standards were DEFINITELY thrown out in 2002-2004. I know cuz I was shopping for a loan in late 2001 and CFC itself wasn't that aggressive in getting my biz since I had jack for a dp.
W.O.W. Break
YouTube - The Love Guru - The Guru Pitka's Word of the Week
"People should not assume that just because the stock price has been going down, that we're going to close their bank," Bair said in an interview. "In addition to our credit problems, I don't want to have to start worrying about bank runs."
Hey Sheila, I've got news for you. What you are going to have to worry about is not for you to say. You're going to have to worry about what flies into your face. You better get ready...... LOL
What we're experiencing now--and it's global--is cascading cross-defaults.
It began with subprime home-buyers, whose defaults triggered hedge fund defaults, which led to defaults of investment and commercial banks.
Builder and developer defaults are happening now. Also regional banks. Next up, local and state gov't defaults, and of course pension and insurance fund defaults.
And defaults by 90% of individual debtors.
Finally, defaults on US Treasuries.
This is what happens when you build a house of cards.
You guys should not get too worked up over comments, they're just opinions.
For the most part the contributions have been fantastic, my humble thanks.
====================================
Now i dedicate this to the good old Ben & Paulson show :-
YouTube - Creedence Clearwater Revival - Fortunate Son - Music Video
ALL of Asia is down this morning. Every blessed stock market in Asia. Down 2-3% on average.
And, except for Greece, all of Europe is down, too.
Looks like the Dow will close well under 11,000 today.
umber2son writes:
"Kunstler is a nut."
Should we worry when a nut's vision starts to match our reality?
Is the fed snd treasury setting up fsiluers so that IBs can avoid 'starvation'? Is this the new way to make IBs profitable at taxpayers expense but make it look like they are helping taxpayers?
This is Paulson, we have a plan to bailout Fannie and Freddie in 2 weeks for no apparent reason. What do you guys think?
The IBs said that was a wonderful plan and went about shorting the stock to zero. The rest of the crowd followed.
Well The Pound is more than 2 and the Euro is just above 1.6. Targets achieved.
Now DOW 10725.
Welcome to the Buuuuuusssssssh economy.
does EUR holdz $1.60 beyond today is the question.
If it does you're gonna se a lot of scrambling for new positions and should go to $1.65 tout suite.
Euro retraced just below 1.6 now, with any luck Ben will make sure it stays above 1.6.
seems things were heading up until a few months AFTER the democrats took over congress.
diduforget writes:
seems things were heading up until a few months AFTER the democrats took over congress.
This thing was a few decades in the making and it seems the policies are the same now regardless of who is in charge.
Namely:
Kick the can down the road.
Don't Bail Out Fannie, Freddie: Jim Rogers
Don't Bail Out Fannie, Freddie: Jim Rogers - CNBC
The video is great, see how he takes apart some of the anchors on CNBC.
"If you're blaming all this on short sellers, then you should get another job". LOL.
DAX, FTSE, and CAC hit fresh one year lows.
Oh, great GoogaMooga, can't you hear me talking to you.
Yeah, Kunstler sure has some odd views re geopolitics.
Not odd at all. Kunstler is a jew so he can't help but be for America doing Israel's dirty work in the Middle East, even when it is a disaster for the US.
yours in Christ,
Isamu
The WSJ reports that about two weeks ago Paulson ordered his staff to draw up contingency plans in case Freddie or Fannie faltered. When that planning was leaked in a WSJ article last Thursday,
The plan leaked. Isn't that essentially a rumor being spread by Paulson's staff? Shouldn't the SEC get involved?
Confused
The Sack of Rome occurred on August 24, 410. The city was attacked by the Visigoths, led by Alaric I.
The Visigoths immediately cut the internet viaducts making most of the Romans unaware of the situation.
Unfortunately for the Visigoths, housing prices continued to drop and they lost most of their hard won booty.
History does repeat.
We should have someone ring the closing bell at 8AM until the soft landing happens.
I think we are seeing the beginning of a new phase of this process where the reality starts to hit mainstream.
I read Financial Arm. last summer and have been following the blogs, news and markets since. All around me regular people, co workers, internet forums, the media have been almost, but not quite oblivious to the beginnings of a meltdown. Interesting footnotes here or there, but plausible deniability reigned.
Yesterday, lines at banks, and not just ones in CA, I saw them on my way to work. Co-workers agast at stock prices, literally not believing they could go this low. Layoffs.
This morning, local news LEADING with stock market futures, Fed testimony in the Senate and the GM announcements.
I wonder if the media will make this fashionable, like "green".
According to Bloomberg, the Viet Nahm stock market closed sharply higher last night. A wag I know maintains that the Viet Nam war is the only war America really won. His evidence: how Vietnamese cars to you see on the road?
Not odd at all. Kunstler is a jew so he can't help but be for America doing Israel's dirty work in the Middle East, even when it is a disaster for the US.
yours in Christ,
Isamu
And in that one simple, ignorant, statement the reason for americas slow destruction becomes obvious. A once great nation is now just a country full of ignorant, bigoted idiots who will continue to blame all their problems on 'the others' long after the world stops listening to them.
Yeah, my blood's so mad, feels like coagulatin',
I'm sittin' here, just contemplatin',
I can't twist the truth, it knows no regulation,
handful of Senators don't pass legislation,
picturerock,
What you note is not exactly surprising to me. I recall seeing the same phenomenon during the last bubble. By definition, this site has tended to attract contrarians. It's natural enough that the population would tend towards stronger feelings on econ and more political crackpottery than the general public. The fact that expecting a meltdown is what they had in common has helped it along, since they've generally been right on that score.
Belgian Prime Minister Yves Leterme's four-month-old government collapsed after failing to heal a rift between French- and Dutch-speaking voters that threatens to split the country.
King Albert II is considering the resignation Leterme submitted just before midnight yesterday, the royal palace said in a statement today. Leterme's coalition, which took a record nine months to pull together, fractured after missing a self- imposed July 15 deadline for getting an agreement on regional autonomy and on splitting a disputed voting district.
The resignation plunges the country into the worst political crisis in its 177-year history at a time when the fastest inflation in almost 24 years is eroding Belgians' purchasing power and slower economic growth threatens the budget.
Belgian Government Falls on Rift Over Regions' Powers (Update3) - Bloomberg.com
Oh Yeah!
E-MINI is -18.00 (-1.00%) overnight, suggesting the markets will open below yesterday's close.
I note KITCO was unable to keep their charts up through the wee hours. That's something new. Too many hits smoking the servers, or is it PM trading volume?
@ rich | 07.14.08 - 11:51 pm | re:Ingrid Betancourt Pulecio in Cf: to Paulson
Great post. Thanks.
Oh, now I see it, we're finally going to have that round number day: $150 oil, $1000 gold, $20 silver, and the danse macabre of the currencies can begin.
"Insured deposits are absolutely safe," Sheila Bair, FDIC chair, said in an interview on CBS' "The Early Show." "The banking system as a whole is absolutely safe."
...and the problem is contained.
Oops, Ill try again
According to Bloomberg, the Viet Nam stock market closed sharply higher last night. A wag I know maintains that the Viet Nam war is the only war America really won. His evidence: how many Vietnamese cars do you see on the road?
Gumbo writes:
Paulson...lies? He's merely economical with the truth (M.T.)
Nicely done.
Ten hours away from homeland the Bismarck made its run
The Admiral of the British fleet said turn those bows around
We found that German battleship and we're gonna cut her dow
Paulson shows where the truth lies.
trader walt writes:
His evidence: how many Vietnamese cars do you see on the road?
You should ask him how many bikes instead.
YouTube - Saigon traffic!
YouTube - Vietnam Street
YouTube -
Great.
CR and Tanta are now officially popular, because even antisemites are joining us.
How do I short stupidity?
GM suspending dividend and raising 15B through 2009.
2 interesting videos recently discussed on Squawk Box.
It's William Ackerman's Plan (Pershing Square Capital Management).
first video is the plan
His plan
Explanation of why he thinks this is good
His plan in a nutshell
1) wipe out all common and preferred equity
2) With the remaining senior debtholders:
-give them 90cents in New Seniour Unsecured Debt on the dollar for all held debt
-the remainint 10cents of the dollar would be converted to "new Fannie" or "new Freddie" common equity.
-the govt will do a 3-year purchase gaurantee of the new common equity.
He feels that the beauty of this plan is
1) the stockholders get wiped out as they should
2) reducing the stock and the debt like this markedly improves F&F's leverage ratios to around 40:1 instead of 140:1, (his numbers)
3) the senior debtholders would NEVER sell their new equity stake because
-arbitragers would definitely buy this equity as it's a "free put" to the government
-over time, the firms would be profitable and thus this "free put" would become out of the money in the future
-thus no cost to government.
This also limits the possible government losses. If the govt chose it could also decide to raise or lower how much senior debt that the govt wants to convert and gaurantee equity.
anyway, I hope CR puts these vids up... I'd like to see discussion of the plan.
(OT) -- YTL - Thank you for the great info on the med career the other week. I've been trying to push daughter into pharmacy, that seems like the best of all worlds, but she's intent. We'll see.
Yearning To Learn writes:
anyway, I hope CR puts these vids up... I'd like to see discussion of the plan.
Might be a bit late, paulson knew about it 2 weeks in advance if what i read was correct, hence he would have got a plan out already.
Well, come on Wall Street, don't move slow,
Why man, this is war au-go-go.
There's plenty good money to be made
By supplying the Army with the tools of the trade,
Just hope and pray that if they drop the bomb,
They drop it on the Viet Cong.
And in that one simple, ignorant, statement the reason for americas slow destruction becomes obvious. A once great nation is now just a country full of ignorant, bigoted idiots who will continue to blame all their problems on 'the others' long after the world stops listening to them.
I am sorry I put my country before Israel.
Enjoy your war with Iran.
yours in Christ,
Isamu.
I am sorry I put my country before Israel.
You did no such thing.
Wholesale Inflation Soars, While Retail Sales Slump
Economy Shows More Signs Of Dreaded Stagflation - CNBC
Yet futures ticked upwards, and PMs worsened. Go figure....
Hanging by a thread writes:
I wonder if the Romans were able to understand that the empire was crumbling before their eyes, They did not have blogs to keep them in touch and so probably discounted all of the evidence. Hanging by a thread |07.14.08 - 11:56 pm
Yes the Romans most certainly did understand the empire was crumbling. See St. Augustine, "City of God," which provides one perspective directly addressing this question. There were others. There were many efforts to understand what was happening and to devise solutions. There were administrative reforms (various types of decentralization). There were currency reforms (to attempt to deal with inflation). There were attempts to defeat foreign forces in battle. There were attempts to buy off foreign forces.
Nothing really worked. Or maybe it did - the empire lasted a good 500 years, or 1500 if you include the Eastern empre.
And the Romans were literate and self-conscious students of history. They wrote about what was going on and attempted to analyze it. Unfortunately, most of their writings have been lost. One would have been particularly fascinating - Asinius Pollio (I think) was an associate of Julius Caesar and witnessed and wrote about the transition from Republic to Empire, addressing the causes, in a book praised by his contemporaries. This has been lost.
Even now the root causes of "decline and fall" are not completely understood. I love Tainter's "Collapse of Complex Societies" explanation, but that's mainly because I can immediately grasp the argument!
Yearning To Learn writes:
It's William Ackerman's Plan (Pershing Square Capital Management).
He's short those stocks too, so he has vested interest.
Gavshire Hathaway writes:
Yet futures ticked upwards, and PMs worsened. Go figure....
The misguided futures seem to think that the FED will raise rates soon in light of the numbers. Just wait till the market really opens. Ben is no Trichet.
The futures are a complete and utter fraud. Low volumes are easy to manipulate, and I suspect cheaper than waiting for the market to open to intervene.
Besides, why would equities respond positively to a rate increase?
THEY NEED TO FAIL ...PERIOD.
WIPE OUT EVERYONE, ONLY THEN NATIONALIZE THEM, GIVE EXPLICIT GOVERNMENT BACKING, AND GET THEM ON THEIR FEET OPERATING RESPONSIBLY.
WHATS WRONG WITH THIS???
GROSS WOULD LOSE, AND SO WOULD CHINA.
HERES THE CATCH, THEY ALREADY LOST, THEY JUST DONT KNOW IT YET. SOCIALIZING THE LOSSES THAT WILL COME WILL CAUSE US TREASURY RATES TO SOAR, HIGH INFLATION 15% OR SO. HOLDERS OF BONDS AT 5% WILL BE HOLDING WORTHLESS JUNK. THERE IS NO WAY FOR THEM TO WIN REGARDLESS, SO SPARE THE TAXPAYERS.
Gavshire Hathaway writes:
Besides, why would equities respond positively to a rate increase?
Would imply that we are 'out' of the mess and the focus is on inflation as well as strengthen the Dollar.
ac says:
"I was thinking today this whole thing with housing and mortgages amounts to the biggest crime ever committed in terms of wealth stolen."
ac, I think that when this has passed people will look back on this era - the defense contracts, FEMA, Iraqi contractors, the giveaway of the Fed, tax cuts for the richest, etc. as the greatest period of looting in US history. It certainly compares to the era of Harding, of the Teapot Dome, the time of the robber barons.
The concept of social responsibility simply does not seems to exist in American corporate life or public life today. America now is not the America that older people still think of when they remember the past. Right now it is just another country.
Would imply that we are 'out' of the mess and the focus is on inflation as well as strengthen the Dollar.
Or maybe the market is 'rallying' because sentiment is obviously too negative.
Somebody ought to take those "Get out of Hell free" cards that are floating around and put Bernanke's picture on them in stead of that old monopoly guy.
outsider: you're welcome.
In the end, if your child is committed to going into the MD side of medicine, then it is the right choice.
I tell all prospective docs: if you love two things and one is doctor, do the other.
but if you only have one desire, then who am I to stand in the way!
good luck!
Gavshire Hathaway writes:
Or maybe the market is 'rallying' because sentiment is obviously too negative.
Well you got me there, everything is upside down now, but the dollar is strengthening again! We'll know the market direction once it gets started.
"He's short those stocks too, so he has vested interest."
of course. but that doesn't negate the validity of the plan.
Paulson is also talking his book, as am I, as is Sheila Bair.
overall I actually like the plan A LOT> the downfall that I see is that he may be incorrect that Fannie/Freddie can earn their way out of this... but it's definitely a good chance.