Counting "consumption" as a measure of "production" is the height of self-delusion. The concept of a "consumer-driven economy" will be studied in future courses in abnormal mass psychology.
I think September will be quite week. I go to BB and Fry's frequently. BB is very low in traffic, and Fry's salesmen (commissioned) mob you now. And the grocery store only seems crowded around pay day.
Anecdotal yes, but restaurants seem rather empty as well.
anecdotal--here a sunday dinner would be eaten at various restaurants-you wouldn't want to be seen at the Mcdonalds at sunday lunch--now both inside and drive thru are mob scenes
Re Grocery - A quick reference if consumers are waiting to payday to shop for groceries is
1. You see pantry loaders (usually working off some budget).
2. Grocery chains starting to heavily discount (put sales on product or encourage multiple purchase) the 13th to the 17 (mid month) and 26th to the 30th/31st.
Since 1987/1988 Grocery has done this in tight times; and good chains know this all to well.
this pretty much equals the beginning of a strong deflationary period IMHO. Belt-tightening at the consumer level and cash hoarding at the wholesale level means that all the kings liquidity and all the kings bailout will not help the economy again...
In October 2001, in the wake of the September 11, 2001 attacks on the United States, NATO invaded Afghanistan to remove al-Qaeda forces and oust the Taliban regime which had control of the country.
On October 7, 2001 the official invasion began with British and American forces conducting aerial bombing campaigns.
It took a full month for The US government to respond to a war, yet this $700 Billion Bailout has to happen in a week!
So, will we finally get a negative GDP quarter in Q3/08, after it has been forecasted by Roubini to hit at least 7 quarters earlier? Very similar to many posters here, BTW.
I purchased a battery for my car yesterday at Sears. A salesperson cheerily noted that they had passed $2000 in sales for the day, unusually high. I quipped that people were rushing to spend their $ before they became worthless.
"Too late," responded another worker.
I think that regular people are feeling pretty gloomy.
What's with congress taking off two days when even the postal workers don't have a holiday? If this sucker is indeed going down, I would expect them to be working on X-mas Eve and X-mas as well.
Sorry about your impending death, sir, we can't do your angioplasty because it's a holiday.
...though consumers painted a relatively sunny picture about the outlook, they dont seem inclined to pull the trigger on big ticket items any time soon. Home buying intentions collapsed to just 2.1% of those surveyed, the largest one-month decline since August 1990. Given the tightening in credit conditions in this space it is little wonder to us that pool of prospective buyers is getting thin, not to mention that home prices have sagged by 20% according to the latest Case Shiller numbers out earlier today. Moreover, folks are still not seeing real estate as a great place to sock their investments. According to the University of Michigan survey, only 2% of respondents think home prices are going higher.
Even more disturbing was that new car purchase intentions dropped to just 1.5% of all respondents an all-time low. This is an ominous sign for those auto sales numbers due out tomorrow consensus is expecting an almost unchanged print to 13.5 million units while we see sales coming in about 1 million below that mark and we would not be surprised to see sales dip below 12 million in the months ahead.
Those are low numbers, but make sense when very few have down payments ready to put down on these kinds of big purchases.
[Barley writes:
One leg down does not make a trend.
Where are the rebate checks?]
Same thing accurred to me... Say $100b in stimulus Q2 and some insignficant multiplier since consumer spending on imports doesn't rattle around much which makes for tough comps. I don't know if there's seasonal adjustment.
I'm waiting for time to pass versus a panic. Paulson blew this deal out of proportion, just as Bush did with Iraq! Maybe we should have invaded Iraq faster, is that what you mean?
Optimistic Joe - your adherence to the status of things as declared or otherwise in official statements is a touching display of faith and loyalty to our Government.
I suppose you celebrate the "MISSION ACCOMPLISHED" status of the Iraq War also...
It's for sure that staffers are at work, and that the elected persons themselves are in contact with them, and probably with each other.
The "High Holy Days" adjournment strikes me as odd too, but I don't think that business is shut down. And there's need for a decent interval in any event, since the bill will have to be adjusted to give cover to people who switch at the next vote.
The consumption component of GDP will be screwed up from June through November most likely. The June July and August numbers will get a boost from the stimulus checks, and then the 3 months following will all look weak compared to the artificially jacked up number. That is assuming the stimulus was spent, of course, and it does look like, from the rise in the personal saving rate, that much of it was not. Was it spent later? Who knows. But looking at the trend here has to be caveated heavily.
That said, it doesnt look good, and from the looks of the jobless numbers, etc, you can bet that less income is being generated to support spending, and that in and of itself is going to start pushing consumer spending down, since we cant compensate by lowering the saving rate or by sucking more money out of housing.
Ciena Capital LLC filed for bankruptcy protection as the credit crisis led to a significant decline in the value of its assets, sending Allied Capital's shares tumbling 49 percent to an all-time low.
Re: Jewish holiday adjournment. Deflation means vacation days become less costly. Great time to create more national holidays. Maybe the Supreme Court can declare all religious holidays secular events, like it did for Christmas. But Congress really ought to respect the Chinese New Year.
I am still appalled that the aide for my congressman said we should have passed the bill because "so many people lost money in 401k's yessterday and they wouldnt have if the bill passed"
Yeah, lets borrow money from China to save our 401 F**king K's now and put our children in debt forever as US citizens.
It looks like there are enough quarters of history that one could put a quantitative "error bar" on the 2-month method.
e.g. currently we have a "2-month" reading of -2.4% for Q3, and historically the estimate is accurate (at a 1-sigma level) to within +/- 0.4% (or whatever, this is the number that wants to be calculated).
What's missing is the standard deviation of the deltas between the 2-month "preliminary" result and the "official" result.
Not only does it "look" negative, but based on the prior data it's "pretty darned sure" that it will be negative.
In fact, this alone could have accounted for the selloff yesterday.
Between the negative print, the hedge-fund redemption window closing up, end-of-quarter shenanigans, and then the political bailout business, it's no surprise we had so much up and down movement.
Anyone catch the bit about a wild selloff in Google just before the close? (BigPicture)...
Kung Fu-Autos-might are heading lower than your 12m figure...
tomorrows numbers will be ugly....even imports...demand is down big time...Dealers are crying because subprime lenders are gone or tightening but so are captives...
Debt to income and payment to income plus carrying back balance still owed on trade-in is killing most deals or approvals...
Good...we need a recession...Old Joe-the problem I have with you is you want to push this to our children...
Chapter 11 bankruptcy is designed for companies that hope to reorganize and remain in business.
Last Wednesday Bill Heard closed all 14 dealerships, putting 2,700 people out of work.
Burr & Furman, a Birmingham law firm, handled the filing, which shows Bill Heard owes between 1,000 and 5,000 creditors between $500 million and $1 billion. The filing lists assets of $500 million to $1 billion.
Can someone in the know tell me if the money I am not giving to my bank for my mortage payment for the past 9 months is counted towards GDP? I am still spending it just not giving it to the banksters.
declining spending by households should be greeted as a good thing since it will allow them to rebuild their balance sheets. The key is to ensure that there is a stimulus package targeted towards state and local government and infrastructure that will maintain demand while the system is de-leveraging. The fact the Paulson and Co, would suggest a single action rather than comprehensive plan that tackles 3-4 things simultaneously shows the don't understand. It also underscores the need for some health care reform to take some of the stress of households while we go through this readjustment process.
yogi writes: Counting "consumption" as a measure of "production" is the height of self-delusion. The concept of a "consumer-driven economy" will be studied in future courses in abnormal mass psychology.
It might be the height of self-delusion, but it's entirely consistent with classifying bizarre derivates of debts as a new class of "assets."
Citizen AllenM said: "Well now, we finally have data showing that the mighty consumer is done.
I can hardly wait for Seb to make some breezy statements about this too shall pass..."
Actually, I think CR may be right about real PCE being weak. It would "fit", since falling employment and falling income go together.
Whether that's enough to create a negative real GDP or summon a recession is a separate issue, though. Whether the weakness is part of a persistent slide and not just a one-quarter thing is also another issue.
Maybe tomorrow's ISM number will shed a little more light on this.
Re: Of course you need to take this to the fourth power (for the annual rate) and subtract one (for a percentage increase). This ** gives the real annualized rate of change for the quarter as reported in the GDP report.
I would add another change above, where I put in **
"The fact the Paulson and Co, would suggest a single action rather than comprehensive plan that tackles 3-4 things simultaneously shows the don't understand."
You are way too generous. Billionaire Paulson has no interest in repairing the potholes on Main Street.
This is interesting commentary about how one might price mortgage backed securities. The author suggests using the Black-Scholes model for options pricing, taking into account the implicit put in a non-recourse loan.
It has some shortcomings, I think, seeing as how purchase price is not the only thing dictating when people mail in the keys (employment, divorce, etc.) - but still an interesting argument.
Are we really going to call Roubini out for front running the recession by a few quarters? What kept it at bay, after all, was the very chicanery he has been the most astute at identifying; and he has been proven right on so much else of consequence --several orders of magnitude more consequential than the parlor game of recession calling.
O-Joe: In Ireland, it took less than a day for a comprehensive response to banking problems.
More likely it took a day to enact the comprehensive response previously formulated for just such a crisis. Apparently, scenario planning is not dead everywhere.
Burr & Furman, a Birmingham law firm, handled the filing, which shows Bill Heard owes between 1,000 and 5,000 creditors between $500 million and $1 billion. The filing lists assets of $500 million to $1 billion.
Barley
Too bad this world is geared towards pieces of shit like this. I'm sure he won't ever pay back his debts. Fucking Deadbeat.
I'm not sure I would use the Black-Scholes model to look for future value for things like credit default swaps in our new taxpayer bailout; nonetheless, this is the method which Paulson will use for that purpose, or so he says:
§ 502(5)(E)(E) In estimating net present values, the discount rate shall be the average interest rate on marketable Treasury securities of similar maturity to the cash flows of the direct loan or loan guarantee for which the estimate is being made.
I'm guessing that Friday will be the day to pick up some Puts on the more precarious financial stocks.
One thing which I learned from that "conference call" on Sunday night, is that they intend to save the Big Boys, and let the others either get bought out, or disappear.
My thinking is that "Too Big To Fail" list would include Goldman Sachs, B of A, JP Morgan, Citibank, and perhaps Wells Fargo.
I'm also guessing that picking up some retail stock puts might not be a bad idea either. Some of these companies are going to be belly up by 1st Qtr. '09, after they post a dismal holiday season.
I wish I could be a fly on archie and ediths wall "The church calling tree called me and said we should call our congresswoman about her no vote since 777 is a sign fom god and they'll cut off our SS". "Stifle Edith, Rush said this is socialism and besides the markets just went up 500 point!"
Please note that you may be overestimating the size of the contraction in PCE during Q3. This is because you overestimated growth in Q2 and there is pattern that whenever you overestimate in a given quarter with the 2-month method, you tend to understimate growth in the next quarter (see graph).
In any event, contraction in PCE could very well be at 2% annual rate, which could imply a negative GDP growth in Q3 as well.
Responding to Barley: "Burr & Furman, a Birmingham law firm, handled the filing, which shows Bill Heard owes between 1,000 and 5,000 creditors between $500 million and $1 billion. The filing lists assets of $500 million to $1 billion."
Comrade Scared Shitless replied: "Too bad this world is geared towards pieces of shit like this. I'm sure he won't ever pay back his debts. Fucking Deadbeat."
I wish I could get people this riled-up over California home buyers, of whom there are millions and whose debts are large enough to nearly crash the system.
One thing which I learned from that "conference call" on Sunday night, is that they intend to save the Big Boys, and let the others either get bought out, or disappear.
Damn...I lent my brother in law $4k which was secured by his 78 Dodge. Needless to say, he hasn't paid. I was able to convince my wife he was by telling her I was working it out with him. She got more and more pissed with me.
I was hoping I could unload this on the Treasury so I could continue making loans to my other family members and keep my wife happy.
I wish I could get people this riled-up over California home buyers, of whom there are millions and whose debts are large enough to nearly crash the system.
Sebastian
There are lots of deadbeats to go around. After living within my means my whole life, I'm disgusted that it will fall to me and my children, to pay for those who took out loans they never should have gotten.
Well - you wanted a life on the street view in yesterday's thread. How's this? We were downgraded to negative and our stock fell like a rock. We are at 35-40% of what we were a year ago. The only question I have is how massive will our layoffs be? Will they slice and dice and sell parts of the co. off? Or will we claw back and be ok a year from now?
The mood at work totally sucks and some people's behaviors are really unacceptable. People are scared. I hate this.
I'm just thinking that Friday will be the day they pass the garbage Bailout bill, and the market will go nuts.
Ok.... your idea is plausible. It would not be the first time the market rolled over serious fundamental economic issues on an emotional high. And it is reasonable to believe that the PPT will be out in force when it's passed.
Still, I'd consider buying those puts on Thurs. Buy the rumor still favors my take on it - although I'll concede your argument has merit.
"One thing which I learned from that "conference call" on Sunday night, is that they intend to save the Big Boys, and let the others either get bought out, or disappear"
"One thing which I learned from that "conference call" on Sunday night, is that they intend to save the Big Boys, and let the others either get bought out, or disappear"
WHO said this?
You didn't hear? The treasury held an industry only conference call for the big boys on wall street.
If GPD goes negative on first cut, I would expect the GDP price deflator to be lowered to the point that inflation can be disguised as growth and GDP can be published as (barely) positive ahead of the election.
Now it's not about financial institutions. The focus has switched to everyday Americans. And it's not an expenditure of taxpayer money, it's an "investment."
This was clearly evident in Bush's grim warnings on Tuesday of "economic hardship for millions" if the plan can't be revived. He declared, "For the financial security of every American, Congress must act."
This emphasis was echoed on the presidential campaign trail.
"Let's not call it a bailout. Let's call it a rescue," said Republican John McCain.
As Kona pointed out the treasury is just going to discount the cash flow to it's present value.
By all indications it seems the recapitalization will be fudged in 2 ways. It will be assumed that the Treasury will maintain today's low cost of borrowing without any room for Volcker type rates. Recent writedowns from mergers will be implicitly accepted as a good measure -- this will bake in the 'maximum' decline from peak at 21% nationally.
From that you end up with an aggregate of 70-75¢/$ range. Gross at first advocated 60¢/$ but bumped that up to 65¢/$ later on (I think after he had helped treasury with consultation) The language of the bill keeps all options open for the manager(s) they hire. No word on administrative fees, or the market they plan to create for reselling assets. But Paulson will be setting important priorities, especially which pension funds get the handout and which get the tough love.
Thanks for the voxeu article, but Black-Scholes is misunderstood at a low level. It assumes equivalent chance of distribution. The mentioned model does not factor in to account that socially and economically things surrounding housing are not the same as earlier in the Case-Shiller index.
The important vectors are: original mortgage structure, location, amenities, any of the few details on the original mortgage application (common fudged job descriptions), the agents who appraised and closed the deal, the day of the month the mortgage was signed (monthly sales bonus), LTV, vintage year, and don't forget the structures these mortgages were placed into (is it bureaucratically possible to negotiate a workout, or are there multiple levels of conflicting interest)
If it were me, I would collect as much data on as many reliable vectors as possible and find the correlations. From there I would compose a model to give a single index score and then sell portions according to index score.
If you start by reselling by region, underwriter, etc you just end up with way too many variables to have any kind of liquid market
I like this analogy.
A well run bank is a blessing.
A looting operation disguised as
a bank is a curse.
Main Street (where original wealth is created) can suvive without Wall Street, particularly when
its looting more than banking.
Its ironic that Main Street is shrugging at Wall Street right now, yet you invoke the metaphore in reverse, as if thats a credible threat. Small regional banks would spring up in the sunshine left after the removal of diseased growth .life will go on, people will adjust.
First, sort out the good from the bad.
Then, throw capital at the good.
Re: I think BondGirl was referring to the VoxEU link. Paulson still wants to be able to spend the money on anything for whatever aim he so choose
Ok, I'm trying to relax, yah know, that was a hyper reaction, but don't get between the truth and the shit in that proposal, i.e, I now refer to that shit as a proposal and not The bailout Plan.
Right now the Fed is massively selling Treasury bonds and then using the cash raised to buy short term commercial paper. Once the Fed and Treasury depletes its stock of bonds then it has no more cash to do anything. The only people that can provide the Fed with more Treasury Bonds is Congress which is where is where to get back to Paulsons proposal.
Once the Fed runs out of Treasury Bonds and if Congress doesnt authorize the issuance of new bonds, then GAME OVER. The Fed at that point has no ability to prevent a general economic collapse.
What I heard them say is that they plan to have two tracks, one where they overpay for the assets and take over a failing firm (a la Fannie/Freddie/AIG), and another where they use "market pricing" (reverse auctions etc.) but encourage non-failing firms to participate. They did say they would "rather make strong banks stronger", which almost makes sense if you believe you are trying to restore faith in the banking system as a whole.
Q: Will the Treasury still get equity stake in companies that chose insurance? Can the Treasury decide whether or not to let companies participate?
A. The Treasury will consider "long-term viability" of the firm. For the most part, we want to help the healthy banks get healthier as opposed to healing the failing banks.
Oh, yogi, Obama's come out in favor of the bailout, and his advisors Paul Volker and Warren Buffet are telling him what to do. If he wanted to, instead of sitting on the sidelines demanding that congressional leaders do something, he could actually BE a congressional leader and do something.
"If accurate, this will be the first decline in PCE since Q4 1991. This is strong evidence that the indefatigable U.S. consumer is finally throwing in the towel."
How much of this is due to retirement of profligate Baby Boomers? The 1946 cohort reached early retirement (62 yrs) this year and are eligible for Social Security. Hordes will follow.
HAve not done extensive research on either of those, however they are not loaded with the same crap that HIG has (pretty sure) and deal with more of the annuity side of things. Saying that they are just as leveraged in the markets they participate in.
My guess is that they will survive in the same vein that C, MS-to a lesser extent, GS, JPM and BAC are sucking up the others. I still cannot comprehend why C still has a share price that is not 10 or lower....but that's another discussion.
This guy is always fun to watch, because he leaves himself plenty of room to make mistakes:
Today's bounce could be a "dead cat" bounce that eventually sparks another round of selling pressure ahead. If the Dow cannot rise confidently above 11,200, the index should continue to be considered bearish. Otherwise, a break through 11,200 could finally spark some medium term buying pressure. SignalWatch LIVE!
krish writes:
"Right now the Fed is massively selling Treasury bonds and then using the cash raised to buy short term commercial paper. Once the Fed and Treasury depletes its stock of bonds then it has no more cash to do anything."
The Fed can lend at the discount window or do repos (lend against collateral) to create cash in the banking system. The only constraint is that they have to hit their rate target; and if they drop rates, they can create lots of reserves (like BoJ).
IMO the only real reason that produced today's 'rally' in the end of the qtr print. Check out breadth......it SUCKED.
Bouncing cat or not....softening the 3rd qtr statements that go out in a few day's time is what today was all about. Just think if they got there bailout......
Barley,
Take a second look at the insurance language. Given that I may be mistaken, my read was that a premium had to be fixed at the same time Paulson announced the price.
Reading The Irish Times online helped disabuse me of the notion that they all think their bailout's a terrific idea. Labour opposition said ""The Government has effectively written the biggest blank cheque in history, exposing the Irish taxpayer to enormous liabilities [...] This move will also have very serious consequences for the Irish debt level and the cost of borrowing for this country." No kidding.
BondGirl,
Just finished actually reading the VoxEU article. Neat idea, but only practical for mortgage origination at this point in my opinion. Might be useful to value the TARP mortgages 5 years from now when wave of foreclosures has past and things have settled down.
Assumes a blind 5% volatility (you think there is a 50-50 chance of being up YoY any time soon)
Assumes that foreclosure has negligible cost (a foreclosure typically sells for 10-15% below current market price w/o including associated costs)
Again, assumes the greater economy hasn't changed
Would require that all homes be reappraised regularly (or at least an estimate to trigger red flags)
Basically all that it does do is, given a volatility, compute the risk premium necessary to break even (that is foreclose when LTV = 100%)
I wish I could get people this riled-up over California home buyers, of whom there are millions and whose debts are large enough to nearly crash the system.
"One death is a tragedy. A million deaths is a statistic."
Any good blog post or something where I can read a one, or few-page synopsis of Japan in the 1990's, what Japan did in response and the result?
Anonymous
Unfortunalty there is no Coles Notes on Economic Meltdown. I suggest:
Last post on VoxEU article
In his final table he uses the black-scholes around an overall -3% p.a. and +5%p.a. housing market, which is fair. Some of the previous nitpicks still hold. At the very least all the put option prices should be multiplied by (1/.85=)18% to reflect that the bank on average collects 85¢/$ for that sale
It only deals with the embedded put option value of a mortgage.
Kona,
"The House is limiting e-mails from the public to prevent its websites from crashing due to the enormous amount of mail being submitted on the financial bailout bill. As a result, some constituents may get a 'try back at a later time' response if they use the House website to e-mail their lawmakers about the bill defeated in the House on Monday in a 205-228 vote." Slashdot | US House Limits Constituent Emails
Assume that the governemnt gets $350 billion for the first round of this bailout (which will pass so we can get our SS checks and the integrity of the church phone pyramid can be maintained).
Wont there be about $2 trillion in securities being waved, saying "buy me, buy me"?
Client 1: prez of a 12 unit condo. 4 units in foreclosure or otherwise not paying. necessity to pay water, garbage, electricity etc. Letters to send out: pay or we file liens.
Client 2: Holder of 2 mtges, same property. Borrower paying 2nd but not 1st. (Weied) On date of sale, borrower files b'ruptcy.
Client 3: Owns houses, is behind, wants to cut deal with Countryfried.
Why not just buy one of everything at double the market value, and then let the banks change the valuations on their books. Problem solved a lot cheaper.
Client 1: prez of a 12 unit condo. 4 units in foreclosure or otherwise not paying. necessity to pay water, garbage, electricity etc. Letters to send out: pay or we file liens.
Client 2: Holder of 2 mtges, same property. Borrower paying 2nd but not 1st. (Weied) On date of sale, borrower files b'ruptcy.
It is interesting that all the bad guys are aligning together, like Bush, Paulson, Bernanke, SIFMA, IBs, NAR and a long list of Congress Boobs... follow the lobby money and then connect the dots -- this is the reason this can't pass, because these are the crooks that got us to this point!
Require the Securities and Exchange Commission (SEC) to require an economic value standard to measure the capital of financial institutions.
This bill will require SEC to implement a rule to suspend the application of fair value accounting standards to financial institutions, which marks assets to the market value, no matter the conditions of the market. When no meaningful market exists, as is the current market for mortgage backed securities, this standard requires institutions to value assets at fire-sale prices. This creates a capital shortfall on paper. Using the economic value standard as bank examines have traditionally done will immediately correct the capital shortfalls experienced by many institutions.
No more naked short selling.
Require the Securities and Exchange Commission to restore the up-tick rule permanently.
"Net Worth Certificate Program"
This bill will require FDIC to implement a net worth certificate program. The FDIC would determine banks with short-term capital needs and the ability to financially recover in the foreseeable future. For those entities that qualify, the FDIC should purchase net worth certificates in these institutions. In exchange, these institutions issue promissory notes to repay the FDIC, counting the amount "borrowed" as capital on their balance sheets. This exchange provides short term capital, with not cash outlay.
Increase the FDIC Insurance limit from $100,000 to $250,000.
Vehicle has an accident; hits a firehydrant.
Drivers leaves the scene.
Local Restoration Company arrives - proceeds to determine flood damages in the affected house.
Owner of the restoration company was immediate family to the driver.
Owner of the Restoration company was (life long) friends of the claims person employeed by the Insurer.
Anonymous writes:
"bond guy, or other.
Any good blog post or something where I can read a one, or few-page synopsis of Japan in the 1990's, what Japan did in response and the result?"
It takes a few pages just to list all the things the Japanese threw at their economy to try and get it working. The NBER, FED, and BIS all did after-the-fact analysese; typically 100 pages or so.
The quick summary is that the Japanese banking system liked lending against real estate collateral. So even an industrial company would not borrow against cash flow; they borrowed against the land the factory was sitting on.
The Japanese economy boomed in the 1980s, and there was a stock market bubble. At the same time, in order to borrow against land, land prices went through the roof. But they then reached unsustainable levels, and then the real estate bubble popped, burying the banking system in bad debts.
"FDIC seeking upgrade from $100k to $250,000 per account insured"
Yeah that'll help. I mean after WaMu FDIC has a negative balance sheet. Where TF are they going to get the money to handle that increase, given that they probably won't be able to increase insurance premiums. (Glances at mirror)...Oh yeah...(grumble)...
Someone ought to invent an implant that correlates a person's endorphins to the movement in the DOW JONES, as thirty arbitrarily chosen equities allegedly determine the future of our economy and hence everyone's well being.
I'm astonished finally reading/listening to "mainstream" reaction to yesterday's bailout rejection. "OH NO DOW JONES OH DOW JO-- OH DO-- NO NO NO""
Bond Girl Don't get me wrong, I liked the link -- I just like to challenge ideas so that I understand them. The $2tn estimate is with 3% declines for a decade, is $1.1tn default + $900bn of mortgages worth more than the house price once you factor add in the put which banks ignore. RE Thanks LawyerLiz Thanks for anecdotal data. Can you explain filing for bankruptcy day after sale? Were proceeds of sale used to repay a 'preferred' creditor safe from bankruptcy's reach? Loafer That's a theme I've noticed in the world as well. We're poised to have a decade or two of capital inflow restrictions (eg India) and the pause of globalization by countries with less developed financial systems
And to continue the happy story, every celebrity economist around visited Japan and they said:
Restore transparency.
Force mark-to-market.
And lo, the Japanese ignored them.
And the celebrity American economists laughed. They said, "Look at those foolish Japanese! They can't bring themselves to do what they know is necessary."
Then they said, "We're smarter than that, and that would NEVER happen in the United States."
And lo, it came to pass. And lo, the Americans are just as stupid as the Japanese were, maybe even more. After all, Japanese saved, Americans didn't.
And lo, because Americans didn't save, they went to China and Japan for THEIR savings.
And, verily, if you don't know what time it is by now,
The Government rejected Chrysler's plea that it receive aid in the form of either federal tax refunds or immediate relief from having to meet the costly safety, environment and mileage standards on new cars. Miller said the former idea would amount to an "interest-free, unsecured cash advance from taxpayers' funds." Instead, he recommended Government loan guarantees that will have to be approved by Congress and will "total considerably less than $1 billion."
Treasury aides were understood to be thinking of $500 million to $750 million over a limited period. With those guarantees, the company would be able to borrow from private bankers who would otherwise turn down Chrysler as an unacceptably high risk. In case of default, taxpayers would be left holding the bag, and the Government would probably have to take over Chrysler and hope to sell off its vital parts.
Wary of Congress's reluctance to bail out Lockheed in 1971 and New York City in 1975the legislators finally voted for both programs by small marginsthe Carter Administration laid down basic conditions that Chrysler will have to meet.
What were the terms and conditions of this "loan", what happened and how can we relate this history to things like credit default swap valuations, i.e, this current bailout has worthless paper, whereas Chrysler had shitty cars...
"Someone ought to invent an implant that correlates a person's endorphins to the movement in the DOW JONES, as thirty arbitrarily chosen equities allegedly determine the future of our economy and hence everyone's well being.
I'm astonished finally reading/listening to "mainstream" reaction to yesterday's bailout rejection. "OH NO DOW JONES OH DOW JO-- OH DO-- NO NO NO"""
Yes, media like CNBS were established to create Pavlovian responses. I remember CNBS in the early to mid '90's was very good. Lots of statistical and reasoned analysis.
But as the dot bomb bubble grew, it turned into pure cheerleading. I stopped watching years ago...Bloom is tolerable...barely.
So it's no suprise that people react as we see. That's what the programming is designed to do.
Wouldn't be suprised to find as data becomes available that GS had a big hand in crashing things yesterday, just like the refined gas futres thing in summer 2006.
mp writes:
"And to continue the happy story, every celebrity economist around visited Japan and they said:
Restore transparency.
Force mark-to-market.
And lo, the Japanese ignored them."
Ha ha.
I didn't mention that because I thought people would think I made that up since it's so ridiculous.
Comrade Misean, I'm not so sure about the credit unions. My own CU was pushing the toxic mortgages bigtime during the boom (the posters etc. are gone now) and has been showing signs of distress.
I've been telling my wife to not be too surprised if our CU goes TU.
It kills me all the hysteria about the credit crisis. Have people not considered that transactions might be delayed because of the bailout and not in lieu of a bailout?
Lawyerliz writes:
No conflicts; clients have nothing whatsoever to do with each other.
Current claims may be unrelated, but they share the same lawyer. You know the drill. Just exercise care when they come back and expect you to be their lawyer again.
Oh I'm sure some did. And honestly haven't done enough research to have posted that line. I'm responding more to noise level now, as so much is in flux.
I'll try to take a look and have a more intelligent post later on.
Well, it was a nice day or so after the bill was (accidently is now the story) voted down. Senate rubber stamps tomorrow, and the house will follow suit on friday. It must be that new provision for "mental health" or something that makes the bill now so much more awesome. Great try everyone!
I realize the BEA has their way of computing PCE, and I'm wondering if this is a mechanism for "fudging the numbers" just as the NAR uses median prices instead of averages.
Anybody know if there is any good reason for reporting PCE this way? I thought one argument was to smooth things out, but as CR points out if you have a significant event it warps the months around it.
A Dodge Aries. The "K-cars" are generally credited with saving Chrysler from bankruptcy.
The Chrysler Corporation on September 7 1979 petitioned the United States government for US$1.5 billion in loan guarantees to avoid bankruptcy. At the same time former Ford executive Lee Iacocca was brought in as CEO. He proved to be a capable public spokesman, appearing in advertisements to advise customers that "If you find a better car, buy it." He would also provide a rallying point for Japan-bashing and instilling pride in American products. His book Talking Straight was a response to Akio Morita's Made in Japan.
The United States Congress reluctantly passed the "Chrysler Corporation Loan Guarantee Act of 1979" (Public Law 96-185) on December 20 1979 (signed into law by President Jimmy Carter on January 7 1980), prodded by Chrysler workers and dealers in every congressional district who feared the loss of their livelihoods. The military then bought thousands of Dodge pickup trucks which entered military service as the Commercial Utility Cargo Vehicle M-880 Series. With such help and a few innovative cars (such as the K-car platform), especially the invention of the minivan concept, Chrysler avoided bankruptcy and slowly recovered.
Okay. So tell me again, because my mind is not believing this is really the process.
The House voted down the bill. The Senate is voting on the same bill, and it passes. Are you telling me it again goes in same format back to the House? For a re-vote?
That baby was voted d-o-w-n. How can it resurrect?
People may get complacent now, but boy will they be pissed when they are coming back for more money. Because $700 billion is a drop in the bucket in this situation.
Too bad people don't understand that their money might be going to pay for notional costs. The mortgage and other asset backed securities are one thing, but the CDS contracts are another. Wall Streeters could get together and figure out how to un-engineer that bullshit.
THE PRESIDENT. As we go to the bankers now for their portion, I'm glad we have something to loan in addition to compassion. [Laughter]
I might say that this legislation is in the best interest of our country, not just because of the jobs saved but because of the potential adverse effect on the Federal budget itself if Chrysler should cease its operations, not only with the rapidly increasing unemployment rate but also with the substantial payments that would have been required by the Federal Government in the guarantees of pension funds, in unemployment compensation and welfare payments that might have resulted.
I like the framing of this situation as "bailing out big institutions' bad trades." That's exactly what's being proposed. When I make I bad trade, I eat my losses. When Wall Street makes one, they (w/ help from powerful media) terrorize the populace with fear of economic catastrophe if they don't get their losses covered. They deserve a crowbar to the face, to put it politely.
By Peter Thal Larsen, Banking Editor
Tuesday Sep 30 2008 18:10
Luqman Arnold's investment company, Olivant, has been hit by the collapse of Lehman Brothers (NYSE:LEH) as it emerged that its entire shareholding in UBS (NYSE:UBS) was held in accounts managed by the failed Wall Street bank.
The investment company has been trying to recover its 2.78 per cent stake in UBS - worth about SFr1.4bn (£700m) at Tuesday's prices - since Lehman filed for bankruptcy last month.
However, in spite of intensive discussions with Lehman and PwC, the administrators for Lehman Brothers International (Europe), it has been unable to locate the shares.
DeFazio is sponsoring a counter bill in the house, with no funds appropriated. It will be interesting to see where it goes. The powers definitely want their billions worth of bailout.
Kind of a "duh" that you can't use markets when they're highly illiquid. A good idea, but subject to much potential for abuse. If it's to FDIC standards (pre-existing, they used to do it that way), I'm OK with it and it will help somewhat. Otherwise, no. This is essential for 4) to be doable though.
2 No Naked Short-selling
OK, good.
3 Uptick rule
No big deal. I consider this a bone for those frothing about short sellers
4 Net Worth Certificate Program
This is the real meat of the plan. The FDIC will evaluate all banks for solvency. Solvent banks can buy "FDIC certificates", (presumably) AAA securities from the FDIC in return for promissory notes. Effectively the promissory notes are secured against unmarketable assets based on the value the FDIC determines for them, although this isn't official.
5 Increase the FDIC limit to 250,000
Good, we're effectively insuring everything right now. We might as well collect premium.
Rough analysis: A good plan, with the caveat that it all depends on the quality of the folks at the FDIC. FDIC auditors will certify strong banks and close weak ones. This works in theory to fix the insolvency problem. The auditors must be good, though, and will they have the nerve to close Citi if its Level 3 assets fall short?
Likewise it fixes much of the illiquidity problem since illiquid securities are effectively converted into FDIC notes. In this way it's very similar to a hypothetical honest Paulson plan except that there are few opportunities for insider trading with the DeFazio plan.
One nice thing about this plan is that if the auditors are honest and good there's no pump effect. Assets are valued and liquified, but no additional assets are added to the system. Thus we're less like to see a bubble with resultant damage down the line.
@ MP
I remember Bill Seidman was on retainer by, it think, the BOJ in the mid-late nineties. When asked about the progress Japan was making, he would just shake his head. He gave up...
re: Auto sales, I think higher gas prices are a net benefit to sales now since $60 oil is out of the picture.
re: uptick rule
No, markets must be fair and symmetric. You want uptick rule, I want a downtick rule. The deduction of mortgage payments on income tax is one such market distortion that multiplied the current problem. You ban short-selling, well say goodbye to options markets shortly before you just hand the entire financial markets to a more competent country.
What part of OVERSTRETCHED American consumer do Wall Strett, Congress, and The White House don't get?
You don't need to be a financial guru, or an academic economist, least even a banker, to know that the American consumer can not simply take on more debt. That's it. It is that simple.
The whole deck of cards of this bailout is based on the "assumption" that the party will go on, the American consumer will keep buying, and getting deeper into debt? Who are we kidding? Anecdotal evidence shows that exactly the opposite will happen, and is happening.
Savings, by definition, means spending less. The market can not simply extend credit forever....it does not work like that. Everybody on this blog, techies or not, know that.
Rep Peter DeFazio, dem Oregon, voted against the bailout and has proposed this counterplan. See link in my post upthread. The senate is still going ahead with the original.
Haven't been following it closely, but if what was planned happened: The Senate took an old bill, one about tax credits for those in the military, that had passed the house and then just amended it until it was unrecognizable. The Senate can then vote and pass that bill without sending it back to the house provided it fits within the original intent or the bill (which is ambiguous and probably need the President to rule on, and of course he'll side with passing the bill)
It happens, but not often. They essentially took a zombie bill (not dead, not alive) and dressed it up, and are now voting on that.
Our state legislature has appropriations bills that are filed each year that are just vehicles, in case they need them at the end of the session, after filing deadlines.
EvilHenryPaulson: re: uptick rule
No, markets must be fair and symmetric. You want uptick rule, I want a downtick rule.
Welcome to politics. With the current "short sellers are evil terrorists" froth TPTB have whipped up, we'll be lucky to get any kind of short selling at all. Given the choice between a mild market asymmetry and a $700 billion dollar institutionalized corruption program, I find the choice easy.
My daughter just told me that her History teacher casually mentioned to the class that her husband lost his retirement money when Wachovia went under. She is in her 60's.
In 1929 it was your bank account. In 2009 it will be your retirement.
So, will we finally get a negative GDP quarter in Q3/08, after it has been forecasted by Roubini to hit at least 7 quarters earlier? Very similar to many posters here, BTW.
Talk about a rotten record.
O-Joe
Optimistic-Joe | 09.30.08 - 5:52 pm
Heh...I'm still waiting for the 2nd half rebound and for the 'containment' to hold.
You can always hope for that year end budget flush and upgrade cycle! I'm sure there are more myths still floating around.
Bond Girl writes:
Our state legislature has appropriations bills that are filed each year that are just vehicles, in case they need them at the end of the session, after filing deadlines.
So that's where backdated options come from. I used to think Back to the Future gave them the idea
Fair Economist
They're meddling with international politics whether they understand it or not. In the short term people will go wherever they can complete their trade, in the longer term this stains the reputation of the United States. They vote with a substantial chunk of change. The final pivot will be funding the American military overseas, once concessions for American companies are lost there is no ultimate advantage. It's also unlikely that the US will get to extract such concessions through the IMF either.
Ever since Portugal was superseded by the Netherlands (which were superseded by the British), leadership in finance/military/trade has gone hand in hand. In fact the turning point for the pound was when they were boycotted over the Aswan dam
Sec. 3. // 15 USC 1862. // There is established a Chrysler
Corporation Loan Guarantee Board which shall consist of the Secretary of
the Treasury who shall be the Chairperson of the Board, the Chairman of
the Board of Governors of the Federal Reserve System, and the
Comptroller General of the United States. The Secretary of Labor and
the Secretary of Transportation shall be ex officio nonvoting members of
the Board.
AUTHORITY FOR COMMITMENTS FOR LOAN GUARANTEES
Sec. 4. // 15 USC 1863. // (a) Subject to the provisions of this
Act, the Board, on such terms and conditions as it deems appropriate,
may make commitments to guarantee the payment of principal and interest
on loans to a borrower only if at the time the commitment is issued, the
Board determines that--,
(B) from capital to be obtained through merger, sale of securities or
otherwise after October 17, 1979;
(C) from cash to be obtained from the disposition of assets of the Corporation after October 17, 1979; and
(D) from the issuance of $100,000,000 of common stock of the Corporation which shall be made available by the Corporation to its employees and labor organizations which are parties to collective bargaining agreements with the Corporation;
(5) the Board has received adequate assurances regarding the
availability of all financing contemplated by the financing plan
and that such financing is adequate (taking into account the
amount of guarantees to be made available and the amount of wages
and benefits not to be paid as a result of section 6) to meet all
the Corporation's projected financing needs during the period
covered by the financing plan;
I'm sorry I have go, but I'd like to go over this later tonight..
EvilHenryPaulson, I'm not defending the short selling restrictions. But we are going to get some kind of bailout in this atmosphere. Would you prefer $700BB for Paulson's buddies out of your pocket, probably accompanied by a blanket short ban? That's the alternative at present. I don't think there's time for another plan to get publicity.
Obviously, the bottom line with the chrysler bailout, was that the people borrowing the cash had to agree to terms and negotiate a deal..
LIMITATIONS ON GUARANTEE AUTHORITY
Sec. 8. // 15 USC 1867. // (a) The authority of the Board to extend
loan guarantees under this Act shall not at any time exceed
$1,500,000,000 in the aggregate principal amount outstanding.
(b) Subject to subsection (a), the total principal amount of loans
which are guaranteed under this Act and which are outstanding at any
time shall not exceed the amount of nonfederally guaranteed assistance
under section 4(a) and the amount of concessions and contributions under
section 6 which have accrued to the Corporation.
TERMS AND CONDITIONS OF LOAN GUARANTEES
Sec. 9. // 15 USC 1868. // (a) Loans guaranteed under this Act shall
be payable in full not later than December 31, 1990, and the terms and
conditions of such loans shall provide that they cannot be amended, or
any provision waived, without the Board's consent.
(b)(1) Any commitment to issue guarantees entered into pursuant to
this Act shall contain all the affirmative and negative covenants and
other protective provisions that the Board determines are appropriate.
The Board shall require security for the loans to be guaranteed under
this Act at the time the commitment is made.
There was a fucking clock ticking on that deal, just as any deal, as with any mortgage, any CD^2, any cash flow related deal:
Sec. 9. // 15 USC 1868. // (a) Loans guaranteed under this Act shall
be payable in full not later than December 31, 1990, and the terms and
conditions of such loans shall provide that they cannot be amended, or
any provision waived, without the Board's consent.
The Proposal Paulson is pushing has no fucking Clock!
CR probably goes to the same Fry's I go to. Of the 91 fwy, just west of the 55. Off of Tustin Blvd off ramp I believe. They've just opened a new Best Buy on Tustin Ave in Orange just off the Nohl Ranch/Lincoln exit off the 55. I believe CR is from this general area
We just emailed both our senators and our rep, who voted against the bailout (to thank him for voting against it and remind him that the new provisions will not change things). For whatever it is worth....
my credit is crunchy writes:
Why would we want to turn 4 trillion in insured deposits to 10.5 trillion...exactly?
Oh yeah. I forgot all those little J6P's out there have way more than 250k in their bank accounts.
my credit is crunchy | 09.30.08 - 8:21 pm | #
My thoughts exactly. This is why the S&L bailout was expensive, as they raised the limit from $25k to $100k and then encouraged them to make more risky loans. And don't forget, J6P has multiple accounts of $100k or more at several institutions. I have a feeling the upper 5% will come out pretty good in this deal. They sure take care of their own. Next they can insure 401(k)s and IRAs so nobody will get hurt by the risks they took.
EvilHenryPaulson writes:
Kona,
I think BondGirl was referring to the VoxEU link. Paulson still wants to be able to spend the money on anything for whatever aim he so chooses
EvilHenryPaulson | 09.30.08 - 6:52 pm | #
Yeah, I was referring to the paper I posted not the Paulson plan. Paulson can buy whatever the fuck he wants under the proposed legislation. This was just a rough model for gauging the value of mortgage backed securities. Sorry, I should have been more specific.
CR, you should have made a plot showing just the Q3 correlation with your method, since september can be a slower month than july and august. by my rough eyeballing the dense data, it looks as if your two month estimate usually over-estimates the 3 month.
anyway nice work, and fantastic blog. like many have already said, this is a very addictive blog
"FDIC seeking upgrade from $100k to $250,000 per account insured"
Yeah that'll help. I mean after WaMu FDIC has a negative balance sheet. Where TF are they going to get the money to handle that increase, given that they probably won't be able to increase insurance premiums. (Glances at mirror)...Oh yeah...(grumble)...
Nostrovia,
Comrade Misean
What about reducing deposit insurance from the current $100K to $10K and have diminishing pro-rated pay-outs up to $250K (extend the limit+ add haircuts)? Then add interest rate subsidies (determined by Texas Ratio) from the Fed to the banks for deposits? This way you reduce moral hazard of yield-chasing (parking money in higher-yielding CD's with banks that are more likely to fail), the stronger banks get stronger, and the weaker banks hurry up and fail quicker, making it easier for everybody to figure out where the dead bodies lie?
Buy Financials...not!
Finding Nemo
so happy bush's leaving his office with this mess.
You really need to put more work into those charts of yours, CR.
he should rephrase to [GOVERNMENT] ownership society
bastard....
P.S. Once again, "Nemo" is not a reference to the fish, nor to the Captain.
damn TV generation
Counting "consumption" as a measure of "production" is the height of self-delusion. The concept of a "consumer-driven economy" will be studied in future courses in abnormal mass psychology.
Short ban seen exacerbating sharp market drop
Short ban seen exacerbating sharp market drop
| Reuters
Ya think?
Same info as main post, but from my favorite economist - right after CR of course.
http://web-xp2a-pws.ntrs.com:80/content//media/attachment/data/econ_research/0809/document/dd092908.pdf
Are we measuring inflation as well ?
Oh for goodness sake! We need to stop spending for a while pay off household debt! Yes - it will cause more pain for many. Sorry.
One leg down does not make a trend.
Where are the rebate checks?
Comrades,
I think September will be quite week. I go to BB and Fry's frequently. BB is very low in traffic, and Fry's salesmen (commissioned) mob you now. And the grocery store only seems crowded around pay day.
Anecdotal yes, but restaurants seem rather empty as well.
Nostrovia,
Comrades,
"P.S. Once again, "Nemo" is not a reference to the fish, nor to the Captain."
Nemo is no man to me.
Nostrovia,
Good question Barley, where are the rebate checks?
Nemo is nobody just ignore him
All this math.... you mean I have to work to make money ??? Can I haz a pony please ?
anecdotal--here a sunday dinner would be eaten at various restaurants-you wouldn't want to be seen at the Mcdonalds at sunday lunch--now both inside and drive thru are mob scenes
Comrade Misean
Re Grocery - A quick reference if consumers are waiting to payday to shop for groceries is
1. You see pantry loaders (usually working off some budget).
2. Grocery chains starting to heavily discount (put sales on product or encourage multiple purchase) the 13th to the 17 (mid month) and 26th to the 30th/31st.
Since 1987/1988 Grocery has done this in tight times; and good chains know this all to well.
Thank you CR.
this pretty much equals the beginning of a strong deflationary period IMHO. Belt-tightening at the consumer level and cash hoarding at the wholesale level means that all the kings liquidity and all the kings bailout will not help the economy again...
All the best.
CR,
This is high quality work. I'm glad some economic "fundamentals" found their way into all this financial crisis "noise."
The markets are based on fantsy
Misean --
I go to BB and Fry's frequently.
Now that is interesting. Approximately where do you live? If you do not mind my asking.
I think it would be cool if CR sponsored a real-life get-together sometime...
Nemo is nobody just ignore him
Ministry of Truth
Who is Nemo?
OT?
In October 2001, in the wake of the September 11, 2001 attacks on the United States, NATO invaded Afghanistan to remove al-Qaeda forces and oust the Taliban regime which had control of the country.
On October 7, 2001 the official invasion began with British and American forces conducting aerial bombing campaigns.
It took a full month for The US government to respond to a war, yet this $700 Billion Bailout has to happen in a week!
CR - you need to think like the government.
Just turn the graph upside down and this minor PCE problem is fixed.
And it's better than spending $700B.
So, will we finally get a negative GDP quarter in Q3/08, after it has been forecasted by Roubini to hit at least 7 quarters earlier? Very similar to many posters here, BTW.
Talk about a rotten record.
O-Joe
CR writes:
This depends on exports and changes in inventories (investment will be weak).
.... take a careful look at the strength of our traditional export buyers.... it ain't pretty.
Does your chart use revised data for the 2 months? it would be curious to know how it holds up when using preliminary results.
anecdote:
I purchased a battery for my car yesterday at Sears. A salesperson cheerily noted that they had passed $2000 in sales for the day, unusually high. I quipped that people were rushing to spend their $ before they became worthless.
"Too late," responded another worker.
I think that regular people are feeling pretty gloomy.
So if the indefatigable consumer throws in the towel, does that make him/her defatigable?
Or just all wet?
It took a full month for The US government to respond to a war, yet this $700 Billion Bailout has to happen in a week!
Kona
In Ireland, it took less than a day for a comprehensive response to banking problems. What are you waiting for?
O-Joe
Anonymous writes:
Does your chart use revised data for the 2 months? it would be curious to know how it holds up when using preliminary results.
Look here:
http://web-xp2a-pws.ntrs.com:80/content//media/attachment/data/econ_research/0809/document/dd092908.pdf
Excellent point, Kona. I think Paulson has exceeded Rumsfeld as the epitome of brazen and arrogant recklessness in the minds of many Americans.
O-Joe --
I have always enjoyed your performance art, but you are getting snippy. Optimists are not supposed to be snippy.
What's with congress taking off two days when even the postal workers don't have a holiday? If this sucker is indeed going down, I would expect them to be working on X-mas Eve and X-mas as well.
Sorry about your impending death, sir, we can't do your angioplasty because it's a holiday.
Interesting tidbit from Across the Curve:
"No interest in homes
...though consumers painted a relatively sunny picture about the outlook, they dont seem inclined to pull the trigger on big ticket items any time soon. Home buying intentions collapsed to just 2.1% of those surveyed, the largest one-month decline since August 1990. Given the tightening in credit conditions in this space it is little wonder to us that pool of prospective buyers is getting thin, not to mention that home prices have sagged by 20% according to the latest Case Shiller numbers out earlier today. Moreover, folks are still not seeing real estate as a great place to sock their investments. According to the University of Michigan survey, only 2% of respondents think home prices are going higher.
Even more disturbing was that new car purchase intentions dropped to just 1.5% of all respondents an all-time low. This is an ominous sign for those auto sales numbers due out tomorrow consensus is expecting an almost unchanged print to 13.5 million units while we see sales coming in about 1 million below that mark and we would not be surprised to see sales dip below 12 million in the months ahead.
Those are low numbers, but make sense when very few have down payments ready to put down on these kinds of big purchases.
I have always enjoyed your performance art, but you are getting snippy. Optimists are not supposed to be snippy.
Nemo
Well, I've been wrong before, too. Probably not 7 quarters in a row, though.
O-Joe
[Barley writes:
One leg down does not make a trend.
Where are the rebate checks?]
Same thing accurred to me... Say $100b in stimulus Q2 and some insignficant multiplier since consumer spending on imports doesn't rattle around much which makes for tough comps. I don't know if there's seasonal adjustment.
Anyhow, down she goes from here...
Comrade Barley,
Good point about Grocery Stores...I'm going to keep my eyes open.
Comrade Nemo,
San Fernando valley...Encino specifically.
Nostrovia,
Re: What are you waiting for?
I'm waiting for time to pass versus a panic. Paulson blew this deal out of proportion, just as Bush did with Iraq! Maybe we should have invaded Iraq faster, is that what you mean?
bearly writes:
[Barley writes:
One leg down does not make a trend.
Where are the rebate checks?]
Christmas is coming - and all retailers know it.
Optimistic Joe - your adherence to the status of things as declared or otherwise in official statements is a touching display of faith and loyalty to our Government.
I suppose you celebrate the "MISSION ACCOMPLISHED" status of the Iraq War also...
All the best.
Well now, we finally have data showing that the mighty consumer is done.
I can hardly wait for Seb to make some breezy statements about this too shall pass.
It will pass, how long it takes and how much goes under is the question.
Someday this war's gonna end...
Re: negative GDP. GDP is a useless number. Let's talk net home equity extraction, and Roubini looks a little more prescient.
munch,
It's for sure that staffers are at work, and that the elected persons themselves are in contact with them, and probably with each other.
The "High Holy Days" adjournment strikes me as odd too, but I don't think that business is shut down. And there's need for a decent interval in any event, since the bill will have to be adjusted to give cover to people who switch at the next vote.
First financials-next up retailers will be on the "do not short list".
Christmas is coming - and all retailers know it.
I fear a dismal xmas season for retailers. I told everyone they're getting socks and a bag of homemade cookies this year.
Despite the downturn, fears for employment, economic uncertainty I'm saving a few bucks for my favorite restaurant. I want them to survive.
merciless writes:
Christmas is coming - and all retailers know it.
I fear a dismal xmas season for retailers. I told everyone they're getting socks and a bag of homemade cookies this year.
Worry not... consumer's will have a stimulus check in hand.... bet on it. Not yet, of course.
Comrade Misean --
San Fernando valley...Encino specifically.
Not all that far from CR himself, I believe...
Comrades,
Congang is taking time off, because normally they are in recess at this time.
Nostrovia,
The consumption component of GDP will be screwed up from June through November most likely. The June July and August numbers will get a boost from the stimulus checks, and then the 3 months following will all look weak compared to the artificially jacked up number. That is assuming the stimulus was spent, of course, and it does look like, from the rise in the personal saving rate, that much of it was not. Was it spent later? Who knows. But looking at the trend here has to be caveated heavily.
That said, it doesnt look good, and from the looks of the jobless numbers, etc, you can bet that less income is being generated to support spending, and that in and of itself is going to start pushing consumer spending down, since we cant compensate by lowering the saving rate or by sucking more money out of housing.
ggeezz missed this one:
Ciena Capital LLC filed for bankruptcy protection as the credit crisis led to a significant decline in the value of its assets, sending Allied Capital's shares tumbling 49 percent to an all-time low.
CORRECTED - CORRECTED-UPDATE 2-Allied tumbles after portfolio co files for b
| Reuters
CR you rock!
BECAUSE, you see, you took the trouble to explain the correct mathematical operation for an annualized quarterly rate...nerds of the world rejoice!
Comrade Nemo,
CR's in The OC, South part I believe. About an hour and a half in moderate traffic. Rush hour, well, let's just leave that thought for Halloween.
Nostrovia,
Re: Jewish holiday adjournment. Deflation means vacation days become less costly. Great time to create more national holidays. Maybe the Supreme Court can declare all religious holidays secular events, like it did for Christmas. But Congress really ought to respect the Chinese New Year.
I am still appalled that the aide for my congressman said we should have passed the bill because "so many people lost money in 401k's yessterday and they wouldnt have if the bill passed"
Yeah, lets borrow money from China to save our 401 F**king K's now and put our children in debt forever as US citizens.
You suck Congressman Jim Moran.
It looks like there are enough quarters of history that one could put a quantitative "error bar" on the 2-month method.
e.g. currently we have a "2-month" reading of -2.4% for Q3, and historically the estimate is accurate (at a 1-sigma level) to within +/- 0.4% (or whatever, this is the number that wants to be calculated).
What's missing is the standard deviation of the deltas between the 2-month "preliminary" result and the "official" result.
Not only does it "look" negative, but based on the prior data it's "pretty darned sure" that it will be negative.
In fact, this alone could have accounted for the selloff yesterday.
Between the negative print, the hedge-fund redemption window closing up, end-of-quarter shenanigans, and then the political bailout business, it's no surprise we had so much up and down movement.
Anyone catch the bit about a wild selloff in Google just before the close? (BigPicture)...
Kung Fu-Autos-might are heading lower than your 12m figure...
tomorrows numbers will be ugly....even imports...demand is down big time...Dealers are crying because subprime lenders are gone or tightening but so are captives...
Debt to income and payment to income plus carrying back balance still owed on trade-in is killing most deals or approvals...
Good...we need a recession...Old Joe-the problem I have with you is you want to push this to our children...
your pollyanna outlook is funny though...
more on the Bill Heard BK:
Chapter 11 bankruptcy is designed for companies that hope to reorganize and remain in business.
Last Wednesday Bill Heard closed all 14 dealerships, putting 2,700 people out of work.
Burr & Furman, a Birmingham law firm, handled the filing, which shows Bill Heard owes between 1,000 and 5,000 creditors between $500 million and $1 billion. The filing lists assets of $500 million to $1 billion.
U.S. consumer is finally throwing in the towel.
That because it's around our Neck slowly choking the life out of us.
jo6pac
Can someone in the know tell me if the money I am not giving to my bank for my mortage payment for the past 9 months is counted towards GDP? I am still spending it just not giving it to the banksters.
If this is true, all the more reason to pass this bailout and nip this black swan in the beak!
-Hank 'The Hammer' Paulso
declining spending by households should be greeted as a good thing since it will allow them to rebuild their balance sheets. The key is to ensure that there is a stimulus package targeted towards state and local government and infrastructure that will maintain demand while the system is de-leveraging. The fact the Paulson and Co, would suggest a single action rather than comprehensive plan that tackles 3-4 things simultaneously shows the don't understand. It also underscores the need for some health care reform to take some of the stress of households while we go through this readjustment process.
yogi writes:
Counting "consumption" as a measure of "production" is the height of self-delusion. The concept of a "consumer-driven economy" will be studied in future courses in abnormal mass psychology.
It might be the height of self-delusion, but it's entirely consistent with classifying bizarre derivates of debts as a new class of "assets."
Citizen AllenM said: "Well now, we finally have data showing that the mighty consumer is done.
I can hardly wait for Seb to make some breezy statements about this too shall pass..."
Actually, I think CR may be right about real PCE being weak. It would "fit", since falling employment and falling income go together.
Whether that's enough to create a negative real GDP or summon a recession is a separate issue, though. Whether the weakness is part of a persistent slide and not just a one-quarter thing is also another issue.
Maybe tomorrow's ISM number will shed a little more light on this.
Sebastia
The word "change" was used in that post 11 times>
Re: Of course you need to take this to the fourth power (for the annual rate) and subtract one (for a percentage increase). This ** gives the real annualized rate of change for the quarter as reported in the GDP report.
I would add another change above, where I put in **
And they've all been swimming naked.
"The fact the Paulson and Co, would suggest a single action rather than comprehensive plan that tackles 3-4 things simultaneously shows the don't understand."
You are way too generous. Billionaire Paulson has no interest in repairing the potholes on Main Street.
This is interesting commentary about how one might price mortgage backed securities. The author suggests using the Black-Scholes model for options pricing, taking into account the implicit put in a non-recourse loan.
Valuing US mortgages assets: Help from logic and Black-Scholes | vox - Research-based policy analysis and commentary from leading economists
It has some shortcomings, I think, seeing as how purchase price is not the only thing dictating when people mail in the keys (employment, divorce, etc.) - but still an interesting argument.
I can't find my 3D glasses.
"Billionaire Paulson has no interest in repairing the potholes on Main Street.
yogi"
No but his driver does.
This forecasting method appears to be right on direction but wrong on magnitude at turning points, based on a quick inspection. But still impressive.
Is it October yet?
Are we really going to call Roubini out for front running the recession by a few quarters? What kept it at bay, after all, was the very chicanery he has been the most astute at identifying; and he has been proven right on so much else of consequence --several orders of magnitude more consequential than the parlor game of recession calling.
CR's in The OC, South part I believe. About an hour and a half in moderate traffic. Rush hour, well, let's just leave that thought for Halloween.
Nostrovia,
Comrade Misean
I'm also in South O.C.
O-Joe: In Ireland, it took less than a day for a comprehensive response to banking problems.
More likely it took a day to enact the comprehensive response previously formulated for just such a crisis. Apparently, scenario planning is not dead everywhere.
"The author suggests using the Black-Scholes model"
Isn't that what LTCM used?
Except without the Black Swans?
I do not own the market
I don't tell it what to do
Im a simple passenger
But Im not here for the view
I am not the engineer
I dont keep the train on course
and I dont stoke the boiler
thats for those who have real force
Im just here to take this ride
To listen and wait and sit
Until the market beckons
Me to take my small profit
Burr & Furman, a Birmingham law firm, handled the filing, which shows Bill Heard owes between 1,000 and 5,000 creditors between $500 million and $1 billion. The filing lists assets of $500 million to $1 billion.
Barley
Too bad this world is geared towards pieces of shit like this. I'm sure he won't ever pay back his debts. Fucking Deadbeat.
Bond Girl,
I'm not sure I would use the Black-Scholes model to look for future value for things like credit default swaps in our new taxpayer bailout; nonetheless, this is the method which Paulson will use for that purpose, or so he says:
§ 502(5)(E)(E) In estimating net present values, the discount rate shall be the average interest rate on marketable Treasury securities of similar maturity to the cash flows of the direct loan or loan guarantee for which the estimate is being made.
Comrades,
If a bailout is passed, credit availability is going to dry up hard.
Then this idiotic "consumption" economy can go off the rails.
It won't work, and it will be much worse.
It's like a farmer saying after a poor harvest, well we'll just eat the seed corn as well.
Nostrovia,
Comrade Misean writes:
Comrades,
If a bailout is passed, credit availability is going to dry up hard.
But.....But.....But.....they say it will help credit availability, and they would never lie to us.
Too bad this world is geared towards pieces of shit like this. I'm sure he won't ever pay back his debts. Fucking Deadbeat.
Comrade Scared Shitless
I would laugh if it wasn't so sickening
Well, well. AP has noticed the modified spin:
The new bailout pitch: It's NOT a bailout
sm_landlord writes:
Well, well. AP has noticed the modified spin:
The new bailout pitch: It's NOT a bailout
Mark Haynes, one of the few sensible folk on CrapNBC, said last week, to watch for this to happen.
He said, don't let them fool you. IT'S STILL A BAILOUT, regardless of what they call it.
I recall reading that physicists have calculated that black holes have enormous energy in spin.
Comrade CSS,
"and they would never lie to us."
Of course not. Note all the WMD's we found in Iraq. What a cake walk that was. At least Iraq's oil revenues covered the cost.
Nostrovia,
He is limiting it to asset backed securities.
The facts are that September was not a good month as FNMA, Freddie Mac, Lehman, AIG, WaMu, Merrill Lynch and Wachovia all failed.
I suspect October could be worse!
"He is limiting it to asset backed securities."
And as we all have seen, asset-backed securities are not subject to Black Swans.
consumers were never spirited fighters. they were just pumped with substances. now that the substance has ran out, the hero becomes zero.
8th Grader: "Consumption, therefore, is production!"
Advisor: "Well, Johnny, you may flunk English and Logic, but you have a future in advanced Economics. Or Government."
The facts are that September was not a good month as FNMA, Freddie Mac, Lehman, AIG, WaMu, Merrill Lynch and Wachovia all failed.
Man, when you list them like that, it was a really f*ing bad month!
yogi
LOL!
And Greenspan was in school how long?
I'm guessing that Friday will be the day to pick up some Puts on the more precarious financial stocks.
One thing which I learned from that "conference call" on Sunday night, is that they intend to save the Big Boys, and let the others either get bought out, or disappear.
My thinking is that "Too Big To Fail" list would include Goldman Sachs, B of A, JP Morgan, Citibank, and perhaps Wells Fargo.
I'm also guessing that picking up some retail stock puts might not be a bad idea either. Some of these companies are going to be belly up by 1st Qtr. '09, after they post a dismal holiday season.
I wish I could be a fly on archie and ediths wall "The church calling tree called me and said we should call our congresswoman about her no vote since 777 is a sign fom god and they'll cut off our SS". "Stifle Edith, Rush said this is socialism and besides the markets just went up 500 point!"
They need a new name. It's not a bailout, it's a taxpayer foot rub. The Jesus Loves You bill.
Comrade Scared Shitless writes:
I'm guessing that Friday will be the day to pick up some Puts on the more precarious financial stocks.
..... Uhhhh, I kinda doubt it.... Friday is unemployment number day.
CR,
Please note that you may be overestimating the size of the contraction in PCE during Q3. This is because you overestimated growth in Q2 and there is pattern that whenever you overestimate in a given quarter with the 2-month method, you tend to understimate growth in the next quarter (see graph).
In any event, contraction in PCE could very well be at 2% annual rate, which could imply a negative GDP growth in Q3 as well.
... Uhhhh, I kinda doubt it.... Friday is unemployment number day.
Popeye
I'm just thinking that Friday will be the day they pass the garbage Bailout bill, and the market will go nuts.
Responding to Barley: "Burr & Furman, a Birmingham law firm, handled the filing, which shows Bill Heard owes between 1,000 and 5,000 creditors between $500 million and $1 billion. The filing lists assets of $500 million to $1 billion."
Comrade Scared Shitless replied: "Too bad this world is geared towards pieces of shit like this. I'm sure he won't ever pay back his debts. Fucking Deadbeat."
I wish I could get people this riled-up over California home buyers, of whom there are millions and whose debts are large enough to nearly crash the system.
Sebastia
One thing which I learned from that "conference call" on Sunday night, is that they intend to save the Big Boys, and let the others either get bought out, or disappear.
Damn...I lent my brother in law $4k which was secured by his 78 Dodge. Needless to say, he hasn't paid. I was able to convince my wife he was by telling her I was working it out with him. She got more and more pissed with me.
I was hoping I could unload this on the Treasury so I could continue making loans to my other family members and keep my wife happy.
Looks like that plan's shot.
I wish I could get people this riled-up over California home buyers, of whom there are millions and whose debts are large enough to nearly crash the system.
Sebastian
There are lots of deadbeats to go around. After living within my means my whole life, I'm disgusted that it will fall to me and my children, to pay for those who took out loans they never should have gotten.
Well - you wanted a life on the street view in yesterday's thread. How's this? We were downgraded to negative and our stock fell like a rock. We are at 35-40% of what we were a year ago. The only question I have is how massive will our layoffs be? Will they slice and dice and sell parts of the co. off? Or will we claw back and be ok a year from now?
The mood at work totally sucks and some people's behaviors are really unacceptable. People are scared. I hate this.
Comrade Scared Shitless writes:
I'm just thinking that Friday will be the day they pass the garbage Bailout bill, and the market will go nuts.
Ok.... your idea is plausible. It would not be the first time the market rolled over serious fundamental economic issues on an emotional high. And it is reasonable to believe that the PPT will be out in force when it's passed.
Still, I'd consider buying those puts on Thurs. Buy the rumor still favors my take on it - although I'll concede your argument has merit.
"One thing which I learned from that "conference call" on Sunday night, is that they intend to save the Big Boys, and let the others either get bought out, or disappear"
WHO said this?
"One thing which I learned from that "conference call" on Sunday night, is that they intend to save the Big Boys, and let the others either get bought out, or disappear"
WHO said this?
You didn't hear? The treasury held an industry only conference call for the big boys on wall street.
Live-Blogging The Treasury Call - Dealbreaker - A Wall Street Tabloid - Business News Headlines and Financial Gossip
If GPD goes negative on first cut, I would expect the GDP price deflator to be lowered to the point that inflation can be disguised as growth and GDP can be published as (barely) positive ahead of the election.
Jim
I heard about the call - just interested in who said this.
Now it's not about financial institutions. The focus has switched to everyday Americans. And it's not an expenditure of taxpayer money, it's an "investment."
This was clearly evident in Bush's grim warnings on Tuesday of "economic hardship for millions" if the plan can't be revived. He declared, "For the financial security of every American, Congress must act."
This emphasis was echoed on the presidential campaign trail.
"Let's not call it a bailout. Let's call it a rescue," said Republican John McCain.
OK, where do I sign up, you fucking retard?
Barley writes:
WHO said this?
Mussolini-Style Corporatism in Action: Treasury Conference Call on Bailout Bill to Analysts (Updated) « naked capitalism
Bond Girl,
As Kona pointed out the treasury is just going to discount the cash flow to it's present value.
By all indications it seems the recapitalization will be fudged in 2 ways. It will be assumed that the Treasury will maintain today's low cost of borrowing without any room for Volcker type rates. Recent writedowns from mergers will be implicitly accepted as a good measure -- this will bake in the 'maximum' decline from peak at 21% nationally.
From that you end up with an aggregate of 70-75¢/$ range. Gross at first advocated 60¢/$ but bumped that up to 65¢/$ later on (I think after he had helped treasury with consultation) The language of the bill keeps all options open for the manager(s) they hire. No word on administrative fees, or the market they plan to create for reselling assets. But Paulson will be setting important priorities, especially which pension funds get the handout and which get the tough love.
Thanks for the voxeu article, but Black-Scholes is misunderstood at a low level. It assumes equivalent chance of distribution. The mentioned model does not factor in to account that socially and economically things surrounding housing are not the same as earlier in the Case-Shiller index.
The important vectors are: original mortgage structure, location, amenities, any of the few details on the original mortgage application (common fudged job descriptions), the agents who appraised and closed the deal, the day of the month the mortgage was signed (monthly sales bonus), LTV, vintage year, and don't forget the structures these mortgages were placed into (is it bureaucratically possible to negotiate a workout, or are there multiple levels of conflicting interest)
If it were me, I would collect as much data on as many reliable vectors as possible and find the correlations. From there I would compose a model to give a single index score and then sell portions according to index score.
If you start by reselling by region, underwriter, etc you just end up with way too many variables to have any kind of liquid market
"Let's not call it a bailout. Let's call it a rescue," said Republican John McCain.
Someone needs to rescue your brain, Moron.
.
Bring on the recession...
.
I fear a dismal xmas season for retailers. I told everyone they're getting socks and a bag of homemade cookies this year.
Worry not... consumer's will have a stimulus check in hand.... bet on it. Not yet, of course.
Popeye, it's a sweet thought, but my job got outsourced to India a few months ago. Socks.
Re: ""He is limiting it to asset backed securities.""
Bullshit,
Where did you read that, give me a link and prove it; I read the plan, I know what it says, and what you say is a lie!
wow Bond girl - no wonder I'm an equities guy.
I like this analogy.
A well run bank is a blessing.
A looting operation disguised as
a bank is a curse.
Main Street (where original wealth is created) can suvive without Wall Street, particularly when
its looting more than banking.
Its ironic that Main Street is shrugging at Wall Street right now, yet you invoke the metaphore in reverse, as if thats a credible threat. Small regional banks would spring up in the sunshine left after the removal of diseased growth .life will go on, people will adjust.
First, sort out the good from the bad.
Then, throw capital at the good.
Ready, Aim, Fire .not Ready, Fire, Aim.
Kona,
I think BondGirl was referring to the VoxEU link. Paulson still wants to be able to spend the money on anything for whatever aim he so chooses
Bond girl, or whoever, what about asset backed securities?
Yankee,
I take it you work for HIG? Sorry about your situation. Do you think the company will pull through?
Press Release: SEC Office of the Chief Accountant and FASB Staff Clarifications on Fair Value Accounting; 2008-234; Sept. 30, 2008
This makes it game over for everyone.
We are now zimbabwe.....
Ciao
MS
Ahhhh, a normal number of visitors and and normal number of postings.
Ohhhh, for the heady days of, umm, 2 days ago.
Now to read the thread. . .
[ It also underscores the need for some health care reform to take some of the stress of households]
I think you meant "health care refrain"
Re: I think BondGirl was referring to the VoxEU link. Paulson still wants to be able to spend the money on anything for whatever aim he so choose
Ok, I'm trying to relax, yah know, that was a hyper reaction, but don't get between the truth and the shit in that proposal, i.e, I now refer to that shit as a proposal and not The bailout Plan.
merciless,
It's a hard row, and there aren't two ways of saying that. I sincerely wish you well.
Hedge funds the next shoe to drop!
Hedge Funds The Next Shoe To Drop - Market Movers - Portfolio.com
Right now the Fed is massively selling Treasury bonds and then using the cash raised to buy short term commercial paper. Once the Fed and Treasury depletes its stock of bonds then it has no more cash to do anything. The only people that can provide the Fed with more Treasury Bonds is Congress which is where is where to get back to Paulsons proposal.
Once the Fed runs out of Treasury Bonds and if Congress doesnt authorize the issuance of new bonds, then GAME OVER. The Fed at that point has no ability to prevent a general economic collapse.
Barley --
I recommend listening to the call and forming your own opinion.
File Savr - Free File Hosting
What I heard them say is that they plan to have two tracks, one where they overpay for the assets and take over a failing firm (a la Fannie/Freddie/AIG), and another where they use "market pricing" (reverse auctions etc.) but encourage non-failing firms to participate. They did say they would "rather make strong banks stronger", which almost makes sense if you believe you are trying to restore faith in the banking system as a whole.
Dean - I assume this is what you are saying:
Q: Will the Treasury still get equity stake in companies that chose insurance? Can the Treasury decide whether or not to let companies participate?
A. The Treasury will consider "long-term viability" of the firm. For the most part, we want to help the healthy banks get healthier as opposed to healing the failing banks.
Democracy in action. This just dont sit well.
Yankee-
Understand your feelings...sorry for the situation you are facing.
This was completely forseeable.
Especially with HIG.
Zero percent auto loans have an end game too. You are about to become a casualty of greed by your company's lack of any risk profiles.
I do feel for you and I hope you make it however HIG will not.
Get out while you still can.
Ciao
MS
It's a hard row, and there aren't two ways of saying that. I sincerely wish you well.
Thanks, Popeye.
Everyone tell Obama: No bailout. We will capitalize a new bank with new rules, closey watched. You have the mandate. Take control.
Everyone tell Obama: No bailout.
Oh, yogi, Obama's come out in favor of the bailout, and his advisors Paul Volker and Warren Buffet are telling him what to do. If he wanted to, instead of sitting on the sidelines demanding that congressional leaders do something, he could actually BE a congressional leader and do something.
MS, how confident are you in your assessment of HIG? And how do you feel about some of the other insurers like PRU and MET?
Barley writes:
Q: Will the Treasury still get equity stake in companies that chose insurance?
Honest and naive question: I read the language on insurance - and thought... gee, that's mandatory. Doesn't the insurance quote state a price ??
Now that's an honest question - and I don't know the bond world... so be gentle, if you're kind enough to answer.
"If accurate, this will be the first decline in PCE since Q4 1991. This is strong evidence that the indefatigable U.S. consumer is finally throwing in the towel."
How much of this is due to retirement of profligate Baby Boomers? The 1946 cohort reached early retirement (62 yrs) this year and are eligible for Social Security. Hordes will follow.
I haven't filed for SS yet, and I wasn't particularly profligate.
quit the boomer bashing.
HAve not done extensive research on either of those, however they are not loaded with the same crap that HIG has (pretty sure) and deal with more of the annuity side of things. Saying that they are just as leveraged in the markets they participate in.
My guess is that they will survive in the same vein that C, MS-to a lesser extent, GS, JPM and BAC are sucking up the others. I still cannot comprehend why C still has a share price that is not 10 or lower....but that's another discussion.
Ciao
MS
This guy is always fun to watch, because he leaves himself plenty of room to make mistakes:
Today's bounce could be a "dead cat" bounce that eventually sparks another round of selling pressure ahead. If the Dow cannot rise confidently above 11,200, the index should continue to be considered bearish. Otherwise, a break through 11,200 could finally spark some medium term buying pressure.
SignalWatch LIVE!
Popeye - It all air. Who knows. My take if you choose to play, you pay; but, that losses may come from all.
Obama must go populist, and lead the revolution. The elites know he doesn't really mean it, and will compromise.
krish writes:
"Right now the Fed is massively selling Treasury bonds and then using the cash raised to buy short term commercial paper. Once the Fed and Treasury depletes its stock of bonds then it has no more cash to do anything."
The Fed can lend at the discount window or do repos (lend against collateral) to create cash in the banking system. The only constraint is that they have to hit their rate target; and if they drop rates, they can create lots of reserves (like BoJ).
Official inflation rate in Zimbabwae: 11 million percent.....have they blazed the trail for us?
Otherwise McCain will trap him, like they nailed Pelosi.
IMO the only real reason that produced today's 'rally' in the end of the qtr print. Check out breadth......it SUCKED.
Bouncing cat or not....softening the 3rd qtr statements that go out in a few day's time is what today was all about. Just think if they got there bailout......
CIao
MS
Barley,
Take a second look at the insurance language. Given that I may be mistaken, my read was that a premium had to be fixed at the same time Paulson announced the price.
At least Obama is talking to Volker
McCain talks to Phill Gramm (ugh)
And I'm a republican, but even I have to admit Obama is the better of the two.
bond guy, or other.
Any good blog post or something where I can read a one, or few-page synopsis of Japan in the 1990's, what Japan did in response and the result?
Reading The Irish Times online helped disabuse me of the notion that they all think their bailout's a terrific idea. Labour opposition said ""The Government has effectively written the biggest blank cheque in history, exposing the Irish taxpayer to enormous liabilities [...] This move will also have very serious consequences for the Irish debt level and the cost of borrowing for this country." No kidding.
BondGirl,
Just finished actually reading the VoxEU article. Neat idea, but only practical for mortgage origination at this point in my opinion. Might be useful to value the TARP mortgages 5 years from now when wave of foreclosures has past and things have settled down.
Basically all that it does do is, given a volatility, compute the risk premium necessary to break even (that is foreclose when LTV = 100%)
Has anyone ever heard of the DTCC? They seem to actually own all paper securities under the auspices of convenience for transactions...
What the hell is going on here?
WHO REALLY OWNS YOUR MONEY? Part One: The Depository Trust & Clearing Corporation « Your Mortgage or Your Life…
Is it...
Ah nemo money?
sea anemone?
anemometer?
What then?
I wish I could get people this riled-up over California home buyers, of whom there are millions and whose debts are large enough to nearly crash the system.
"One death is a tragedy. A million deaths is a statistic."
What do people think of the DeFazio plan?
"P.S. Once again, "Nemo" is not a reference to the fish, nor to the Captain."
Latin translation of Odyssey?
Any good blog post or something where I can read a one, or few-page synopsis of Japan in the 1990's, what Japan did in response and the result?
Anonymous
Unfortunalty there is no Coles Notes on Economic Meltdown. I suggest:
Deflation - Cambridge University Press
This is not bad.
ScienceDirect - The North American Journal of Economics and Finance :
Looking back at the international deflation record
Last post on VoxEU article
In his final table he uses the black-scholes around an overall -3% p.a. and +5%p.a. housing market, which is fair. Some of the previous nitpicks still hold. At the very least all the put option prices should be multiplied by (1/.85=)18% to reflect that the bank on average collects 85¢/$ for that sale
It only deals with the embedded put option value of a mortgage.
Anyone see letter NAR sent to Congress today? Yun must have gotten a fresh supply of meth and a new pipe!
I am really getting creeped out by how massively managed the "free" markets are.
"Cox to extend short ban"
"THIS CAN NOT STAND. WE WILL GET A BAILOUT"
"Anyone see letter NAR sent to Congress today?"
I saw the this morning. I had to re-seat my jaw after prying it off the desk.
Absolutely stunning - those shills never give up.
Kona,
"The House is limiting e-mails from the public to prevent its websites from crashing due to the enormous amount of mail being submitted on the financial bailout bill. As a result, some constituents may get a 'try back at a later time' response if they use the House website to e-mail their lawmakers about the bill defeated in the House on Monday in a 205-228 vote."
Slashdot | US House Limits Constituent Emails
EvilHenryPaulson,
Great posts, thanks!
Nemo = First
Assume that the governemnt gets $350 billion for the first round of this bailout (which will pass so we can get our SS checks and the integrity of the church phone pyramid can be maintained).
Wont there be about $2 trillion in securities being waved, saying "buy me, buy me"?
Notes from South Florida:
Client 1: prez of a 12 unit condo. 4 units in foreclosure or otherwise not paying. necessity to pay water, garbage, electricity etc. Letters to send out: pay or we file liens.
Client 2: Holder of 2 mtges, same property. Borrower paying 2nd but not 1st. (Weied) On date of sale, borrower files b'ruptcy.
Client 3: Owns houses, is behind, wants to cut deal with Countryfried.
Weird.
Tell us, pray tell us what NAR is saying?
What is TED spread at?
Why not just buy one of everything at double the market value, and then let the banks change the valuations on their books. Problem solved a lot cheaper.
Lawyerliz writes:
Notes from South Florida:
Client 1: prez of a 12 unit condo. 4 units in foreclosure or otherwise not paying. necessity to pay water, garbage, electricity etc. Letters to send out: pay or we file liens.
Client 2: Holder of 2 mtges, same property. Borrower paying 2nd but not 1st. (Weied) On date of sale, borrower files b'ruptcy.
Conflict of interest ???
The natives are getting restless
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It is interesting that all the bad guys are aligning together, like Bush, Paulson, Bernanke, SIFMA, IBs, NAR and a long list of Congress Boobs... follow the lobby money and then connect the dots -- this is the reason this can't pass, because these are the crooks that got us to this point!
I agree there are limitations. I thought it was interesting given that model that he estimated losses on all mortgages at $2 trillion.
Which, ironically, we are pushing the hell out of with our "investments" to prop up the credit market.
Comrade Pavel Chichikov,
Nemo is no man to me.
Nostrovia,
Client 2: Holder of 2 mtges, same property. Borrower paying 2nd but not 1st. (Weied) On date of sale, borrower files b'ruptcy.
Why BK once he sells? Other massive debt?
Reason for the rally today?
Specialists' Moves Monday May Have Staved Off Bigger Market Fall
"Specialists' Moves Monday May Have Staved Off Bigger Market Fall"
Here is the heart of the proposed DeFazio bill. So experts, would it work?
House Progressives Propose Bailout Alternative
This bill will require SEC to implement a rule to suspend the application of fair value accounting standards to financial institutions, which marks assets to the market value, no matter the conditions of the market. When no meaningful market exists, as is the current market for mortgage backed securities, this standard requires institutions to value assets at fire-sale prices. This creates a capital shortfall on paper. Using the economic value standard as bank examines have traditionally done will immediately correct the capital shortfalls experienced by many institutions.
This bill will require FDIC to implement a net worth certificate program. The FDIC would determine banks with short-term capital needs and the ability to financially recover in the foreseeable future. For those entities that qualify, the FDIC should purchase net worth certificates in these institutions. In exchange, these institutions issue promissory notes to repay the FDIC, counting the amount "borrowed" as capital on their balance sheets. This exchange provides short term capital, with not cash outlay.
Legal ethics, conflicts of interest. When in doubt, yes. (Keep the client who might pay)
Not a lot making news, but a lot going on
FDIC seeking upgrade from $100k to $250,000 per account insured
Yahoo! 404 - Page Not Found
Pennsylvania's $12bn turnpike lease had funding fall through (Citi & Albertis). Also looks like another plan to toll a different interstate will fall through next year creating a $500mn shortfall
FT.com / Transport - Consortium pulls out of $12.8bn turnpike deal
Vancouver Airport Services does proceed to lease Chiacgo's midway airport for $2.5bn with funding from Manulife & Citi
Not sure what to take away from those headlines in aggregate
Conflict of interest ???
Popeye
Here is a conflict of interest:
Vehicle has an accident; hits a firehydrant.
Drivers leaves the scene.
Local Restoration Company arrives - proceeds to determine flood damages in the affected house.
Owner of the restoration company was immediate family to the driver.
Owner of the Restoration company was (life long) friends of the claims person employeed by the Insurer.
FDIC seeking upgrade from $100k to $250,000 per account insured
Notice how they keep stealing Obama's ideas ??
Anonymous writes:
"bond guy, or other.
Any good blog post or something where I can read a one, or few-page synopsis of Japan in the 1990's, what Japan did in response and the result?"
It takes a few pages just to list all the things the Japanese threw at their economy to try and get it working. The NBER, FED, and BIS all did after-the-fact analysese; typically 100 pages or so.
The quick summary is that the Japanese banking system liked lending against real estate collateral. So even an industrial company would not borrow against cash flow; they borrowed against the land the factory was sitting on.
The Japanese economy boomed in the 1980s, and there was a stock market bubble. At the same time, in order to borrow against land, land prices went through the roof. But they then reached unsustainable levels, and then the real estate bubble popped, burying the banking system in bad debts.
Sound familiar?
Sebastian writes:
"Actually, I think CR may be right about real PCE being weak."
We have passed through a wormhole.
That which we thought we knew, has now become undone.
Good luck to all.
Is it too early to ask whether the increased FDIC limits would also apply to credit unions via NCUA?
Does this mean we are no longe the buyer of last resort? What does China and Japan do with excess manufacturing capacity?
Old link
http://www.ccwe.org.cn/ccweold/en/journal/2/6ChinaNeedsaFirmerStanceagainstJapaneseMilitarism.pdf
Comrade Popeye and others,
"FDIC seeking upgrade from $100k to $250,000 per account insured"
Yeah that'll help. I mean after WaMu FDIC has a negative balance sheet. Where TF are they going to get the money to handle that increase, given that they probably won't be able to increase insurance premiums. (Glances at mirror)...Oh yeah...(grumble)...
Nostrovia,
Someone ought to invent an implant that correlates a person's endorphins to the movement in the DOW JONES, as thirty arbitrarily chosen equities allegedly determine the future of our economy and hence everyone's well being.
I'm astonished finally reading/listening to "mainstream" reaction to yesterday's bailout rejection. "OH NO DOW JONES OH DOW JO-- OH DO-- NO NO NO""
Comrade Der Kommandant Weather Helm,
"Is it too early to ask whether the increased FDIC limits would also apply to credit unions via NCUA?"
Yes, but they do seem to be ok.
Nostrovia,
Bond Girl Don't get me wrong, I liked the link -- I just like to challenge ideas so that I understand them. The $2tn estimate is with 3% declines for a decade, is $1.1tn default + $900bn of mortgages worth more than the house price once you factor add in the put which banks ignore.
RE Thanks
LawyerLiz Thanks for anecdotal data. Can you explain filing for bankruptcy day after sale? Were proceeds of sale used to repay a 'preferred' creditor safe from bankruptcy's reach?
Loafer That's a theme I've noticed in the world as well. We're poised to have a decade or two of capital inflow restrictions (eg India) and the pause of globalization by countries with less developed financial systems
"Sound familiar?"
And to continue the happy story, every celebrity economist around visited Japan and they said:
Restore transparency.
Force mark-to-market.
And lo, the Japanese ignored them.
And the celebrity American economists laughed. They said, "Look at those foolish Japanese! They can't bring themselves to do what they know is necessary."
Then they said, "We're smarter than that, and that would NEVER happen in the United States."
And lo, it came to pass. And lo, the Americans are just as stupid as the Japanese were, maybe even more. After all, Japanese saved, Americans didn't.
And lo, because Americans didn't save, they went to China and Japan for THEIR savings.
And, verily, if you don't know what time it is by now,
May God Help You.
The good thing about understanding deflation: we have a pretty good grasp on general direction.
The bad thing about understanding deflation: we are going to have to listen to this bond crap for a while..... and pay attention.
Sorry to be OT, but...
Time to go back to basics and look under the hood here:
Business: Chrysler's Crisis Bailout - TIME
The Government rejected Chrysler's plea that it receive aid in the form of either federal tax refunds or immediate relief from having to meet the costly safety, environment and mileage standards on new cars. Miller said the former idea would amount to an "interest-free, unsecured cash advance from taxpayers' funds." Instead, he recommended Government loan guarantees that will have to be approved by Congress and will "total considerably less than $1 billion."
Treasury aides were understood to be thinking of $500 million to $750 million over a limited period. With those guarantees, the company would be able to borrow from private bankers who would otherwise turn down Chrysler as an unacceptably high risk. In case of default, taxpayers would be left holding the bag, and the Government would probably have to take over Chrysler and hope to sell off its vital parts.
Wary of Congress's reluctance to bail out Lockheed in 1971 and New York City in 1975the legislators finally voted for both programs by small marginsthe Carter Administration laid down basic conditions that Chrysler will have to meet.
There is no market for MBS because of PRICE.
There is no market for interbank lending because of PRICE(rate).
There is no market for housing because of PRICE.
======================================
Anyone starting to see a pattern here?
Jeez, this is a hard problem to diagnose. I guess the solution is too, right?
Persecuted Comrade Anonymouse,
"Someone ought to invent an implant that correlates a person's endorphins to the movement in the DOW JONES, as thirty arbitrarily chosen equities allegedly determine the future of our economy and hence everyone's well being.
I'm astonished finally reading/listening to "mainstream" reaction to yesterday's bailout rejection. "OH NO DOW JONES OH DOW JO-- OH DO-- NO NO NO"""
Yes, media like CNBS were established to create Pavlovian responses. I remember CNBS in the early to mid '90's was very good. Lots of statistical and reasoned analysis.
But as the dot bomb bubble grew, it turned into pure cheerleading. I stopped watching years ago...Bloom is tolerable...barely.
So it's no suprise that people react as we see. That's what the programming is designed to do.
Wouldn't be suprised to find as data becomes available that GS had a big hand in crashing things yesterday, just like the refined gas futres thing in summer 2006.
Nostrovia,
No conflicts; clients have nothing whatsoever to do with each other.
Just sad state of practicing law. I like to do closings. No more closings til the housing mkt goes down another 20%.
mp writes:
"And to continue the happy story, every celebrity economist around visited Japan and they said:
Restore transparency.
Force mark-to-market.
And lo, the Japanese ignored them."
Ha ha.
I didn't mention that because I thought people would think I made that up since it's so ridiculous.
"...follow the lobby money and then connect the dots -- this is the reason this can't pass, because these are the crooks that got us to this point!"
Now, Kona, have you been skipping your "dope" kool-aid treatments?
Comrade Misean, I'm not so sure about the credit unions. My own CU was pushing the toxic mortgages bigtime during the boom (the posters etc. are gone now) and has been showing signs of distress.
I've been telling my wife to not be too surprised if our CU goes TU.
It kills me all the hysteria about the credit crisis. Have people not considered that transactions might be delayed because of the bailout and not in lieu of a bailout?
One of the talking heads on Squawk Box this morning used the word 'Bailout'
His controllers must have been yelling in his ear, because he immediately tripped all over his self saying "oh I'm sorry, I meant 'rescue"
Are we so stupid to be fooled by the same junk in a different package?
God I hope not. I fear the Bill will pass tomorrow though. Sad
"God I hope not. I fear the Bill will pass tomorrow though. Sad"
Don't fear, fax!
Lawyerliz writes:
No conflicts; clients have nothing whatsoever to do with each other.
Current claims may be unrelated, but they share the same lawyer. You know the drill. Just exercise care when they come back and expect you to be their lawyer again.
Der Kommandant Weather Helm,
Oh I'm sure some did. And honestly haven't done enough research to have posted that line. I'm responding more to noise level now, as so much is in flux.
I'll try to take a look and have a more intelligent post later on.
Nostrovia,
outta here for now - trade well - think - and trade well.
Comrades,
Gosh it's nice to be able to read the comments and respond to people again. The last few days have been INSANE.
At one point one evening last week I tried to keep up a gave myself carpal tunnel.
Nostrovia,
You need to quiet down a bit. "Lassie Come Home" is on TCM.
Furry puppies=Good.
Well, it was a nice day or so after the bill was (accidently is now the story) voted down. Senate rubber stamps tomorrow, and the house will follow suit on friday. It must be that new provision for "mental health" or something that makes the bill now so much more awesome. Great try everyone!
I realize the BEA has their way of computing PCE, and I'm wondering if this is a mechanism for "fudging the numbers" just as the NAR uses median prices instead of averages.
Anybody know if there is any good reason for reporting PCE this way? I thought one argument was to smooth things out, but as CR points out if you have a significant event it warps the months around it.
"Let's not call it a bailout. Let's call it a rescue," said Republican John McCain.
"Calling a tail a leg doesn't make it a leg."
--Abraham Lincol
scant info on that:
Government loan guarantees
A Dodge Aries. The "K-cars" are generally credited with saving Chrysler from bankruptcy.
The Chrysler Corporation on September 7 1979 petitioned the United States government for US$1.5 billion in loan guarantees to avoid bankruptcy. At the same time former Ford executive Lee Iacocca was brought in as CEO. He proved to be a capable public spokesman, appearing in advertisements to advise customers that "If you find a better car, buy it." He would also provide a rallying point for Japan-bashing and instilling pride in American products. His book Talking Straight was a response to Akio Morita's Made in Japan.
The United States Congress reluctantly passed the "Chrysler Corporation Loan Guarantee Act of 1979" (Public Law 96-185) on December 20 1979 (signed into law by President Jimmy Carter on January 7 1980), prodded by Chrysler workers and dealers in every congressional district who feared the loss of their livelihoods. The military then bought thousands of Dodge pickup trucks which entered military service as the Commercial Utility Cargo Vehicle M-880 Series. With such help and a few innovative cars (such as the K-car platform), especially the invention of the minivan concept, Chrysler avoided bankruptcy and slowly recovered.
Conjure says, "Furry puppies=snack."
Ok, I'll be back in about 4 days...
Public Law 96-185
I fear the Bill will pass tomorrow though. Sad"
Okay. So tell me again, because my mind is not believing this is really the process.
The House voted down the bill. The Senate is voting on the same bill, and it passes. Are you telling me it again goes in same format back to the House? For a re-vote?
That baby was voted d-o-w-n. How can it resurrect?
@bond guy
If I was a Japanese central banker, I'd be laughing my ass off at the Americans right now.
The American celebrity economists who went over there treated the Japanese like childish fools.
Little did they know.
Krugman, you out there?
People may get complacent now, but boy will they be pissed when they are coming back for more money. Because $700 billion is a drop in the bucket in this situation.
Too bad people don't understand that their money might be going to pay for notional costs. The mortgage and other asset backed securities are one thing, but the CDS contracts are another. Wall Streeters could get together and figure out how to un-engineer that bullshit.
Nice shot of JimBob here:
Jimmy Carter: Remarks on Signing Into Law H.R. 5860, the Chrysler Corporation Loan Guarantee Act of 1979
THE PRESIDENT. As we go to the bankers now for their portion, I'm glad we have something to loan in addition to compassion. [Laughter]
I might say that this legislation is in the best interest of our country, not just because of the jobs saved but because of the potential adverse effect on the Federal budget itself if Chrysler should cease its operations, not only with the rapidly increasing unemployment rate but also with the substantial payments that would have been required by the Federal Government in the guarantees of pension funds, in unemployment compensation and welfare payments that might have resulted.
I like the framing of this situation as "bailing out big institutions' bad trades." That's exactly what's being proposed. When I make I bad trade, I eat my losses. When Wall Street makes one, they (w/ help from powerful media) terrorize the populace with fear of economic catastrophe if they don't get their losses covered. They deserve a crowbar to the face, to put it politely.
Big day tomorrow.
-Motor Vehicle Sales
-MBA Purchase Apps
-ADP Employment Report
-Construction Spending
-ISM
-Petro Status
Can't wait to see if Chrysler can attain even more suckage.
Ofcourse ADP is going to be nasty.
Don't stay up too late kiddies.
Olivant suffers Lehman blow
InfoViewer: Olivant suffers Lehman blow
By Peter Thal Larsen, Banking Editor
Tuesday Sep 30 2008 18:10
Luqman Arnold's investment company, Olivant, has been hit by the collapse of Lehman Brothers (NYSE:LEH) as it emerged that its entire shareholding in UBS (NYSE:UBS) was held in accounts managed by the failed Wall Street bank.
The investment company has been trying to recover its 2.78 per cent stake in UBS - worth about SFr1.4bn (£700m) at Tuesday's prices - since Lehman filed for bankruptcy last month.
However, in spite of intensive discussions with Lehman and PwC, the administrators for Lehman Brothers International (Europe), it has been unable to locate the shares.
DeFazio is sponsoring a counter bill in the house, with no funds appropriated. It will be interesting to see where it goes. The powers definitely want their billions worth of bailout.
DeFazio plan is certainly better than Paulson.
1 Mark-to-model for assets without markets
Kind of a "duh" that you can't use markets when they're highly illiquid. A good idea, but subject to much potential for abuse. If it's to FDIC standards (pre-existing, they used to do it that way), I'm OK with it and it will help somewhat. Otherwise, no. This is essential for 4) to be doable though.
2 No Naked Short-selling
OK, good.
3 Uptick rule
No big deal. I consider this a bone for those frothing about short sellers
4 Net Worth Certificate Program
This is the real meat of the plan. The FDIC will evaluate all banks for solvency. Solvent banks can buy "FDIC certificates", (presumably) AAA securities from the FDIC in return for promissory notes. Effectively the promissory notes are secured against unmarketable assets based on the value the FDIC determines for them, although this isn't official.
5 Increase the FDIC limit to 250,000
Good, we're effectively insuring everything right now. We might as well collect premium.
Rough analysis: A good plan, with the caveat that it all depends on the quality of the folks at the FDIC. FDIC auditors will certify strong banks and close weak ones. This works in theory to fix the insolvency problem. The auditors must be good, though, and will they have the nerve to close Citi if its Level 3 assets fall short?
Likewise it fixes much of the illiquidity problem since illiquid securities are effectively converted into FDIC notes. In this way it's very similar to a hypothetical honest Paulson plan except that there are few opportunities for insider trading with the DeFazio plan.
One nice thing about this plan is that if the auditors are honest and good there's no pump effect. Assets are valued and liquified, but no additional assets are added to the system. Thus we're less like to see a bubble with resultant damage down the line.
Why would we want to turn 4 trillion in insured deposits to 10.5 trillion...exactly?
Oh yeah. I forgot all those little J6P's out there have way more than 250k in their bank accounts.
Lawyerliz writes:
No conflicts; clients have nothing whatsoever to do with each other
A story for you - A guilded law firm filed a writ in our name, without us knowing and began to negotiate an insurance matter, for the Insurer!
I have not yet filed a complaint w/ the Law Society but intend to...they we supposed to obtain permission b/w/o a joint retainer letter.
If anything this higher limit would encourage 401k withdrawls and tank the markets even faster.
@ MP
I remember Bill Seidman was on retainer by, it think, the BOJ in the mid-late nineties. When asked about the progress Japan was making, he would just shake his head. He gave up...
They are looking for anything that they can slap on the bill that might give them an excuse to vote for it.
Whatever euphoria this induces will be short-lived. But it might get them past the election.
re: Auto sales, I think higher gas prices are a net benefit to sales now since $60 oil is out of the picture.
re: uptick rule
No, markets must be fair and symmetric. You want uptick rule, I want a downtick rule. The deduction of mortgage payments on income tax is one such market distortion that multiplied the current problem. You ban short-selling, well say goodbye to options markets shortly before you just hand the entire financial markets to a more competent country.
DAY OF RECKONING.
What part of OVERSTRETCHED American consumer do Wall Strett, Congress, and The White House don't get?
You don't need to be a financial guru, or an academic economist, least even a banker, to know that the American consumer can not simply take on more debt. That's it. It is that simple.
The whole deck of cards of this bailout is based on the "assumption" that the party will go on, the American consumer will keep buying, and getting deeper into debt? Who are we kidding? Anecdotal evidence shows that exactly the opposite will happen, and is happening.
Savings, by definition, means spending less. The market can not simply extend credit forever....it does not work like that. Everybody on this blog, techies or not, know that.
Time to catch up with reality, bailout or not.
Best wishes to all.
Persecuted Comrade Anonymouse,
"They deserve a crowbar to the face, to put it politely."
They deserve to be a part of The Joker's magic trick: making a pencil disappear.
YouTube - The Joker magic trick
Nostrovia,
How can this be taken up in the Senate? I thought appropriations bills had to start in the HOR.
stealthwi
Rep Peter DeFazio, dem Oregon, voted against the bailout and has proposed this counterplan. See link in my post upthread. The senate is still going ahead with the original.
Bond Girl,
Haven't been following it closely, but if what was planned happened: The Senate took an old bill, one about tax credits for those in the military, that had passed the house and then just amended it until it was unrecognizable. The Senate can then vote and pass that bill without sending it back to the house provided it fits within the original intent or the bill (which is ambiguous and probably need the President to rule on, and of course he'll side with passing the bill)
It happens, but not often. They essentially took a zombie bill (not dead, not alive) and dressed it up, and are now voting on that.
/rant on
These people at the Fed and Treasury don't have any balls.
Volcker and Conjure could take care of this interbank lending problem in about two weeks.
/rant off
They found a vehicle, I get it. Thanks -
Our state legislature has appropriations bills that are filed each year that are just vehicles, in case they need them at the end of the session, after filing deadlines.
EvilHenryPaulson:
re: uptick rule
No, markets must be fair and symmetric. You want uptick rule, I want a downtick rule.
Welcome to politics. With the current "short sellers are evil terrorists" froth TPTB have whipped up, we'll be lucky to get any kind of short selling at all. Given the choice between a mild market asymmetry and a $700 billion dollar institutionalized corruption program, I find the choice easy.
Comrade ANSFA,
"What part of OVERSTRETCHED American consumer do Wall Strett, Congress, and The White House don't get?"
Erm....my guess is overstretched. That's one of them compound words.
Nostrovia,
96th CONGRESS, S. 2269
MARCH 30, 1980
An Act
To extend the Emergency Agricultural Credit
PUBLIC LAW 96-185, 93 STAT. 1324, CHRYSLER CORPORATION LOAN GUARANTEE
ACT OF 1979.
96th CONGRESS, H.R. 5860
JANUARY 7, 1980
An Act
To authorize loan guarantees to the CHRYSLER Corporation.
...ok wait a sec here
My daughter just told me that her History teacher casually mentioned to the class that her husband lost his retirement money when Wachovia went under. She is in her 60's.
In 1929 it was your bank account. In 2009 it will be your retirement.
So, will we finally get a negative GDP quarter in Q3/08, after it has been forecasted by Roubini to hit at least 7 quarters earlier? Very similar to many posters here, BTW.
Talk about a rotten record.
O-Joe
Optimistic-Joe | 09.30.08 - 5:52 pm
Heh...I'm still waiting for the 2nd half rebound and for the 'containment' to hold.
You can always hope for that year end budget flush and upgrade cycle! I'm sure there are more myths still floating around.
Bond Girl writes:
Our state legislature has appropriations bills that are filed each year that are just vehicles, in case they need them at the end of the session, after filing deadlines.
So that's where backdated options come from. I used to think Back to the Future gave them the idea
Fair Economist
They're meddling with international politics whether they understand it or not. In the short term people will go wherever they can complete their trade, in the longer term this stains the reputation of the United States. They vote with a substantial chunk of change. The final pivot will be funding the American military overseas, once concessions for American companies are lost there is no ultimate advantage. It's also unlikely that the US will get to extract such concessions through the IMF either.
Ever since Portugal was superseded by the Netherlands (which were superseded by the British), leadership in finance/military/trade has gone hand in hand. In fact the turning point for the pound was when they were boycotted over the Aswan dam
CHRYSLER CORPORATION LOAN GUARANTEE BOARD
Sec. 3. // 15 USC 1862. // There is established a Chrysler
Corporation Loan Guarantee Board which shall consist of the Secretary of
the Treasury who shall be the Chairperson of the Board, the Chairman of
the Board of Governors of the Federal Reserve System, and the
Comptroller General of the United States. The Secretary of Labor and
the Secretary of Transportation shall be ex officio nonvoting members of
the Board.
AUTHORITY FOR COMMITMENTS FOR LOAN GUARANTEES
Sec. 4. // 15 USC 1863. // (a) Subject to the provisions of this
Act, the Board, on such terms and conditions as it deems appropriate,
may make commitments to guarantee the payment of principal and interest
on loans to a borrower only if at the time the commitment is issued, the
Board determines that--,
as of October 17, 1979, or from other persons;
(B) from capital to be obtained through merger, sale of securities or
otherwise after October 17, 1979;
(C) from cash to be obtained from the disposition of assets of the Corporation after October 17, 1979; and
(D) from the issuance of $100,000,000 of common stock of the Corporation which shall be made available by the Corporation to its employees and labor organizations which are parties to collective bargaining agreements with the Corporation;
(5) the Board has received adequate assurances regarding the
availability of all financing contemplated by the financing plan
and that such financing is adequate (taking into account the
amount of guarantees to be made available and the amount of wages
and benefits not to be paid as a result of section 6) to meet all
the Corporation's projected financing needs during the period
covered by the financing plan;
If anyone is interested the details of this bailout are here: http://bulk.resource.org/courts.gov/juris/j0105_06.sgml
EvilHenryPaulson, I'm not defending the short selling restrictions. But we are going to get some kind of bailout in this atmosphere. Would you prefer $700BB for Paulson's buddies out of your pocket, probably accompanied by a blanket short ban? That's the alternative at present. I don't think there's time for another plan to get publicity.
Real fast,
Obviously, the bottom line with the chrysler bailout, was that the people borrowing the cash had to agree to terms and negotiate a deal..
LIMITATIONS ON GUARANTEE AUTHORITY
Sec. 8. // 15 USC 1867. // (a) The authority of the Board to extend
loan guarantees under this Act shall not at any time exceed
$1,500,000,000 in the aggregate principal amount outstanding.
(b) Subject to subsection (a), the total principal amount of loans
which are guaranteed under this Act and which are outstanding at any
time shall not exceed the amount of nonfederally guaranteed assistance
under section 4(a) and the amount of concessions and contributions under
section 6 which have accrued to the Corporation.
TERMS AND CONDITIONS OF LOAN GUARANTEES
Sec. 9. // 15 USC 1868. // (a) Loans guaranteed under this Act shall
be payable in full not later than December 31, 1990, and the terms and
conditions of such loans shall provide that they cannot be amended, or
any provision waived, without the Board's consent.
(b)(1) Any commitment to issue guarantees entered into pursuant to
this Act shall contain all the affirmative and negative covenants and
other protective provisions that the Board determines are appropriate.
The Board shall require security for the loans to be guaranteed under
this Act at the time the commitment is made.
Ok, as I go outthe door...
There was a fucking clock ticking on that deal, just as any deal, as with any mortgage, any CD^2, any cash flow related deal:
Sec. 9. // 15 USC 1868. // (a) Loans guaranteed under this Act shall
be payable in full not later than December 31, 1990, and the terms and
conditions of such loans shall provide that they cannot be amended, or
any provision waived, without the Board's consent.
The Proposal Paulson is pushing has no fucking Clock!
CR probably goes to the same Fry's I go to. Of the 91 fwy, just west of the 55. Off of Tustin Blvd off ramp I believe. They've just opened a new Best Buy on Tustin Ave in Orange just off the Nohl Ranch/Lincoln exit off the 55. I believe CR is from this general area
We just emailed both our senators and our rep, who voted against the bailout (to thank him for voting against it and remind him that the new provisions will not change things). For whatever it is worth....
my credit is crunchy writes:
Why would we want to turn 4 trillion in insured deposits to 10.5 trillion...exactly?
Oh yeah. I forgot all those little J6P's out there have way more than 250k in their bank accounts.
my credit is crunchy | 09.30.08 - 8:21 pm | #
My thoughts exactly. This is why the S&L bailout was expensive, as they raised the limit from $25k to $100k and then encouraged them to make more risky loans. And don't forget, J6P has multiple accounts of $100k or more at several institutions. I have a feeling the upper 5% will come out pretty good in this deal. They sure take care of their own. Next they can insure 401(k)s and IRAs so nobody will get hurt by the risks they took.
EvilHenryPaulson writes:
Kona,
I think BondGirl was referring to the VoxEU link. Paulson still wants to be able to spend the money on anything for whatever aim he so chooses
EvilHenryPaulson | 09.30.08 - 6:52 pm | #
Yeah, I was referring to the paper I posted not the Paulson plan. Paulson can buy whatever the fuck he wants under the proposed legislation. This was just a rough model for gauging the value of mortgage backed securities. Sorry, I should have been more specific.
"Nemo" = "Omen" spelled backwards?
Next they can insure 401(k)s and IRAs so nobody will get hurt by the risks they took.
We thought about it and decided we do not like this whole market thingy.
Nemo,
You should just end the suspense and tell everyone why you chose that name. Put them out of their misery.
CR, you should have made a plot showing just the Q3 correlation with your method, since september can be a slower month than july and august. by my rough eyeballing the dense data, it looks as if your two month estimate usually over-estimates the 3 month.
anyway nice work, and fantastic blog. like many have already said, this is a very addictive blog
"FDIC seeking upgrade from $100k to $250,000 per account insured"
Yeah that'll help. I mean after WaMu FDIC has a negative balance sheet. Where TF are they going to get the money to handle that increase, given that they probably won't be able to increase insurance premiums. (Glances at mirror)...Oh yeah...(grumble)...
Nostrovia,
Comrade Misean
What about reducing deposit insurance from the current $100K to $10K and have diminishing pro-rated pay-outs up to $250K (extend the limit+ add haircuts)? Then add interest rate subsidies (determined by Texas Ratio) from the Fed to the banks for deposits? This way you reduce moral hazard of yield-chasing (parking money in higher-yielding CD's with banks that are more likely to fail), the stronger banks get stronger, and the weaker banks hurry up and fail quicker, making it easier for everybody to figure out where the dead bodies lie?
Bond Girl writes:
Nemo,
You should just end the suspense and tell everyone why you chose that name. Put them out of their misery.
Bond Girl | 09.30.08 - 9:29 pm | #
Already been done.
HaloScan.com - Comments
"Of course you need to take this to the fourth power (for the annual rate) and subtract one (for a percentage increase)."
Huh? Dont you mean multiply by 4 and divide by 100?