Gee, how about that, a government guarantee, that sounds like insurance, isn't that what the House Republicans suggested?
Maybe that would be an easier sell to the American people than a distressed debt fund that bails out Goldman by overpaying for the ABS on their portfolios.
"The money that the Fed has pushed through its emergency lending window, now well into the hundreds of billion of dollars, has done nothing beyond strengthen bank reserves. Not a trace of it has shown up in the lending markets."
Folks, if the hundreds of billions already being pushed through the emergency lending window will NOT cause banks to lend, why on earth does Paulson and company think more of the same, in the form of 700B of asset purchases would do the trick???
I don't get it!...If I'm a banker with bad assets, I just want to get rid of those bad assets...Getting rid of them will NOT make me want to go make the same mistakes (i.e. I am going to keep my standards tight as hell until this storm blows over!).
the whole problem started with banks insuring black boxes with imaginary funds backing it up. Ah--Ireland is trying to be the new Goldman--it won't work--a Hail Mary!!
May the congress rise up to meet you,
may the 'aye's be always at your back
May the M2 shine warm upon your face
and the bailout fall soft on your account
and until we meet again,
May Paulson hold you in the palm of His hand
Ironically it is claimed that NK after becoming government owned now has to turn away depositors because it has already reached the max depositor base allowed by the EU. If a whole country does that to its entire banking system in the EU i am not sure what the effect of that would be on sucking money out of the other bank in the EU? presumably if the banks begin recovering due to deposits being moved from other EU areas they will have to scare them away or something?
Only born-and-bred dopes led by Crooks do not understand the EVIL of Pushing Debt. Debt Pushers should be hunted down and not helped as the demonic democratic govts, fully controlled by Debt Pushers, are doing.
People must pay attention to the evil deeds of democratic govts against the people and for the Debt Pushers.
A bad debt is a debt that can't and won't be repaid. Guaranteeing bad debts, or buying them from the banks doesn't make a bad debt go away.
Some day the difference between what is owed on a debt and what remaining value is associated with the asset behind the debt must be recognized.
So, how do you like your debt writedown: quick or deferred as long as possible. Banks/gov. want as long as possible. But they also want to trust their counterparties in bank/bank loans.
Hence, banks want the government to eat the shit. It is that easy to see why Bush/Paulson want their $700B.
I'm for establishing seven new banks with $100 billion each in government money, and tell them they must lend to keep CP and money funds flowing. No ABS purchases. No ABS securitizations of their debt (keep loans on their books). NO credit swaps (CDS). New banks owned by the government via preferred stock/senior debt, and guaranteed interest.
Make existing banks compete with the new banks with no government support until they fail after disclosing all of their bad debts.
Ireland are desperate to stop an all-out bank run. That's the worst thing that can happen to any economy.
Never happen in the US.
Ireland are much worse off that the US. Iceland too. UK, France, Italy and Spain also have tremendous problems, probably worse than the US problems. And Russia's fundamentals can be summed up in five letters: V-O-D-K-A.
In sum: Europe are f*cked as well. It seems Germany could be OK, though.
Good for Ireland... until they have to start making good on the guarantees. Then it could BK the country... and, surprise, surprise, there ARE worse things than bank runs.
In response to landshark's post...I have a serious question:
What IS the theory behind the bailout? Is it that, right now banks won't lend to each other because they fear that any one of them could go under now, since their balance sheets are a complete lie...and so the idea is if the gov't buys the bad assets, the banks are solvent again & therefore they are creditworthy? And is that why the other capital injections don't work?
I'm not advocating for it, I'm just trying to understand the rationale, since as far as I have heard, Paulson and Bernanke have not given a clear answer on this.
I've been thinking about Jas Jain's debt pushers and the dopes born and bred.Many are born and bred through the prosperity gospel A)to look spiritual one must appear prosperous, B)buy that Mcmansion and God will reward your faith C)if you save for a rainy day it shows you have more faith in money than God. All those scriptures against usury are ignored.
Can you please comment on your opinion of the viability of a plan like this? Seems like it is great as far as restoring confidence, but if they actually had to make good on 450B Euro it would quickly BK the country.
Anyone who could actually post an educated opinion would be much appreciated.
Now is the time to be heard. Please call or fax your representative with your inputs. Mish has a list of phone and fax numbers at his blog. Best of luck to all.
30 DAY US Libor at 3.92...was at 2.40 two weeks ago or so...
With all due respect, what's the big deal. Banks don't trust each other for good reason. Seriously. Lehman defaulted on near $800 million in unsecured short term crap.
Why lend to other banks at or near a 2% funds rate. All risk and very nearly NO return.
Another possible quick setup solution-
Let the financial system collapse. If the issue is credit to main st. then the US has in place a multiple location banking system currently in place--its called the US Post Offices. They handle money. They are located in every community in US. They can with staffing increase perform banking services in an emergency. Great start-up. Will show the private banks that there is an alternative to bankrupt banks. The US should loan the 700 Bil directly through the post offices and small local/community banks.
he pretty much has........I read a tinfoil hat story (can't remember where) that he's already in paraguay and the TV shot of him during the Repub. convention was shot from there. This was before all of this went down starting a week or so ago.
Instead of the Capitalists going to their mountain paradise, it's the everday people leaving the greedy Capitalists to burn and ask for bailouts from the people.
How is any bailout going to re-instill "confidence" in a market that within the last two weeks obliterated billions in equity and bondholder net worth of WAMU and WB? There was no shareholder vote, and the government came in during the middle of the night and destroyed billions in value.
How does throwing another 700 billion stop this from happening again?
Jas, I'm totally with you in your comments about evil Debt Pushers. But why do you insist on mixing in irrelevant parameters like christianity or democracy? Would we get a better result with Dear Leader running things or a Shiite mullah? C'mon, this is about economics, not religion. And while politics is clearly involved, it's still more economics than politics.
Angry saver - my point was the US Libor rates charged to bank customers is up, but not by as much as the horrible headlines. 3.92 is still very cheap money (plus the credit spread)...all of this White House fear mongering is horrible. Things have been bad for a while on "main street", its not until WS gets smacked around is it a problem for the country.
The Irish guarantee made me laugh. They dont have that much money by any reckoning. Not only that, they apparently receive nothing for guaranteeing all that debt. Theyve essentially just announced a huge devaluation for when they have to make good on their promise. The only wonder is that the Irish arent burning down Parliament today.
As the weaker banks go under their assets will presumably be bought up by the big boys with taxpayer dollars thus giving the lucky few access to deposits to refloat themselves.
If you are Goldman, JPM, C and BAC this is wonderful plan.
While CNBC has pushed the Washington leadership's position on the bailout, Fox Business Network has consistently covered the objection to it; in fact there's of a populist strain in the FBN covereage.
serious question: why is yen still anti-correlated with the DOW?
Shouldn't the carry trade have died by now? What is keeping it alive, and what would it take to kill it?
Bubba2Friday writes: Yo! I'd much rather see Rebecca Gomez of Fox Business Network's "Happy Hour" show go braless than Erin.... you guys should really pay for more channels!
Are you people misogynistically objectifying again?
Count yourself lucky to have eye-candy evil tools. As a card-carrying homosexual, I get to try to objectify Gasparino and Cramer, and believe me, that's hard work.
DCRogers writes:
Bubba2Friday writes: Yo! I'd much rather see Rebecca Gomez of Fox Business Network's "Happy Hour" show go braless than Erin.... you guys should really pay for more channels!
Are you people misogynistically objectifying again?
Count yourself lucky to have eye-candy evil tools. As a card-carrying homosexual, I get to try to objectify Gasparino and Cramer, and believe me, that's hard work.
DCRogers | 09.30.08 - 11:19 am |
DC, FBN offers you Cody Willard and Eric Bolling as arm candy accents to Rebecca Gomez on "Happy Hour".
It also ranks Ireland as 3rd in investor protection behind only the US and Canada. That's before the upgrade to 100,000 insurance for the next 2 years.
Also, minor point Ireland's ttm GDP is 187bn which I mention because their ttm GNP is 158bn. Their institutions will weather the storm, but going from EU grants + housing boom + inflow of foreign companies to no grants, no housing boom, and a net outflow of foreign companies there will be some whiplash.
Still waiting to see what's next with UniCredit in Italy. The French banks have taken their lumps but the public line is their deposits will keep them safe, Natixis should need new capital at some point.
How is it possible that nothing extraordinary has been coming out of Spain? The biggest housing bubble, 95% floating rate mortgages, high turnover stock market, etc
dryfly | 09.30.08 - 10:56 am | # thought 'we' all agreed last night - no more 'misogynistic objectivization' - or didn't you get the memo?
Is below 'misogynistic objectivization'.
A drunk at the end of the bar calls for a beer. The bartender fills the mug and slides it down the bar. It
hits the lady's breasts and spills all over them. The bartender goes over, retrieves the mug and licks the
beer off of her breasts.
This happens a couple more times.
The next time, the drunk jumps up and starts to lick her breasts. She decks him! He's laying on the floor
moaning and groaning.'Why do you let the bartender do it?'
'Because he has.............(your gonna love this)......
McAngry O'Saver writes:
Things have been bad for a while on "main street", its not until WS gets smacked around is it a problem for the country.
Well said. Point taken.
The arrogance on CNBC yesterday after the bailout was voted down really highlights the huge divide between WS & Main Street.
Maria Bartiromo: "WE WILL HAVE A BAILOUT!" "Main street doesn't understand"
What Crap. Those CNBC shills can't see past their pocket books.
McAngry O'Saver | 09.30.08 - 11:21 am | #
Which is why you should watch FBN. Seriously: compare and contrast the coverage of the two! They don't let the right -wing bomb throwers like Ann Coulter on FBN, if that's what turns you off.
Not housing crunch, bot sovereign credit crisis -- Pakistan still hasn't found an angel donor for $6bn to get the government past year's end. Their problem was a combination of inflation boosting subsidies and later credit markets raising the bar
Count yourself lucky to have eye-candy evil tools. As a card-carrying homosexual, I get to try to objectify Gasparino and Cramer, and believe me, that's hard work.
DCRogers
This has to be one of the top 10 OT comments to appear on CR.
--
Jas, I'm totally with you in your comments about evil Debt Pushers. But why do you insist on mixing in irrelevant parameters like christianity or democracy?
flaminia,
There is a connection. Debt Pushers, former moneybags, rule under democracy! Democracy = Domination of Money. Spengler.
Debt Pushers ARE Anti-Christian and anti-Christianity.
Would we get a better result with Dear Leader
I am NOT here to get results (I am not selling anything to anyone and dont need to). I am hear to tell the truth in the most accurate and descriptive language.
Wish I'd read Anonymous Wag's comment before posting mine. I think he's got it dialed.
Nah, you have a valid point too. I'm not sure what's got Jas in a bunch about Christianity. I mean, the entire british empire pretty much puts paid to the idea that "Christian" anything will make you moral.
I bow down to brass idols, but I can still tell a crook when I see him.
Oh cone on, The Irish Mafia has been pumping a tsunami of liquidity into that economy with Covered Bonds which are linked to a tsunami of accounting fraud linked to government backed entities. This type of government bailout and socialism is what America is doing today!
I guess yesterday the government showed their hand, it is all about stock prices now.
Ministry of Truth | Homepage | 09.30.08 - 10:59 am | #
Because that's what the public understands given the emphasis on the "ownership society". If that melts, then all hell breaks loose for the Bush Admin, as if that's possible.
The tattered remains of their reputation are gone.
J6P really doesn't follow the credit markets and wouldn't know LIBOR from peanut butter and in that regards, probably doesn't understand the underpinning that that provides.
At gut level though, they understand that there are very significant problems.
I just posted this on RGE this AM. Ties into your idea. Sorry for the long post, guys.
I have an idea I want to float about keeping the credit flowing to the real economy while the fin sector does it's demolition work.
I'm assuming that there are thousands of banks in the U.S. that are solvent and well-managed. Somewhere, maybe in the OTS or FDIC, there's a stratified list of banks, ordered by leverage ratio, loan portfolio composition, delinquency ratios, etc. We can easily ID an official, indisputable ranked-by-health list of banks.
If members of the public that currently have sizable deposits in the banking system were to look at this list, and transfer their money to a few of the top banks in their geographic area, we will almost instantly fix our commercial credit flow problem for all the but the very largest of corporations.
This action would:
a. protect the deposits of the population
b. put more resources into the hands of demonstrably capable bankers
c. induce investors to buy the stock of these well-run banks, as they would be the "naturally selected winners"
d. put the credit-flow decisions into the hands of "more local" banks, ones that actually have a relationship with the people they're lending money to
e. dispatch to an early and graceful demise the poorly run banks that have caused the problems we now face. "Controlled demolition" would be achieved.
f. transition what remains of our society's capital from the under-performing financial sector into the real economy, where tomorrow's growth will occur
As the commercial credit instruments in place mature, they can be rolled over at one these well-run banks. The real-economy businesses, one by one, would be freed from dependence upon stricken banks.
The effect of this action would be to effectively de-couple the real economy from the cancerous financial sector.
The would eliminate one of the principal extortion levers that the fin sector is currently using against the real economy, e.g. "if we go down, we're takin' you with us".
The other benefit of this plan is that the decision-makers are the public: no one can stop them from moving their deposits. Wall Street has no lobbying leverage with Main Street.
Best of all, it can be done right away, and can proceed at the pace dictated by events.
Can anyone with a handle on creative bank accounting comment on the following:
Is it possible for a bank that has borrowed from the Fed to show the borrowed assets as tier 1 on their balance sheet rather than the real illiquid asset that they have borrowed against?
I'm wondering if any of the tightness in the CP market is due to banks trying to dress up their balance sheets a bit before they have to release their Q and file with the FDIC.
Jas quoting Spengler? Good boy. I've always thought of myself as a Spenglerian Pirate. "Intervene amongst the interveners and gamble with money as a ware!"
McAngry O'Saver writes:
Which is why you should watch FBN.
I'm an equal opportunity heckler. Neil McCavuto has been the target of my IRE many times.
Neil is a total polyanna imo.
McAngry O'Saver | 09.30.08 - 11:28 am | #
Okay, what about David Asman of "America's Nightly Scoreboard"? Certainly better than Larry Kudlow, on in the same time slot. Asman doesn't cut off his guests or yell his opinion at everybody....
This is where the whole euro project comes apart at the seams. Because Ireland can't, as a practical matter make good on this pledge, because they don't have the ability to write the check - only a sovereign issuer of surrency can do that, and they have given up that to Brussels. It's like the State of California trying to bail out Bank of America - it can't because it has to go out to the same credit markets the banks do to raise cash. Only a sovereign can spend first, borrow later. Some of us have been warning about this for year, looks like it's happening, quicker than anyone could have imagined...
Can anyone direct me toward ANY mainstream coverage of whether or not its constitutional for the Senate to change the "rescue plan" and then pass it themselves first?
This is where the whole euro project comes apart at the seams. Because Ireland can't, as a practical matter make good on this pledge, because they don't have the ability to write the check - only a sovereign issuer of surrency can do that, and they have given up that to Brussels. It's like the State of California trying to bail out Bank of America - it can't because it has to go out to the same credit markets the banks do to raise cash. Only a sovereign can spend first, borrow later. Some of us have been warning about this for year, looks like it's happening, quicker than anyone could have imagined...
Short the Euro!
They can borrow in the markets against taxes to some extent. They could sell off land, buildings, etc...as well. It probably wouldn't be enough but they could give it a try.
Essentially these wankers just have pools of mortgages, like fannie and then the lads at the pub get Moody's to bless these debts with holt water from Father John and then your fucking debt is not a problem any longer, and yah have heaven on earth!
See also: Anglo's cover pool is made up of mortgage loans in respect of properties in England and Scotland as well as cash collateral. As at 25 June 2008, the pool consisted of 312 loans granted to 133 borrowers, secured on 1,715 commercial properties, with a total outstanding balance of GBP4.5bn. Whilst the portfolio is significantly less granular than a typical UK residential or German commercial or mixed mortgage cover pool, some of its larger loans are only partially funded by covered bond issuance, hence reducing the total loan concentration. In addition it exhibits a strong weighted average seasoning of 28.4 months combined with good geographic diversification.
Raising FDIC insurance is a smart thing to do. Right now Aunt Em is shuffling her accounts around to 'protect' her assets. FDIC insurance is a salve but it works for J6P.
It seems that (almost) everybody is into Treasuries right now, they flew from commodities, (some) commercial paper, and (some) stocks to "quality" bonds. Even the FED holds less bonds and the Treasury is looking to issue more. The FED exchanged some of the banks' risky assets for Treasury bonds, let's call this "FED bonderized debt" (you know, like lipstick on a pig).
So right now these "investors" get a return of 3-4%. What would happen if the (expected) inflation goes to 6-7%?
My guess is that bond prices go down, they are being sold. Who buys them? Again, my guess is the FED, and this time it "monetizes the debt", making the inflation problem even worse (additionally stock might go up too). If nobody buys them, the interest rates go up and we have a deep recession with certainty.
Do I have things right? Is there is a shock (sudden change) to inflation, could this sock be persistent for the next few years?
How sensitive is the system right now to changes in other variables? Do you see other possible future paths?
jimbarino writes:
This is where the whole euro project comes apart at the seams
Agreed all around. It was an interesting experiment that is still ongoing, but the Euro as a potential reserve currency to the faltering USD seems more and more of a stretch each day. Getting the Germans to bail out the Irish seems implausible.
And while I have been entirely pessimistic about the USD for the last few years, I think it may be one of the better performing currencies under the assumption that the US is unable to both inflate M3 and increase velocity sufficiently.
One possible currency play that I have thought about for some time is the HKD, as it is a proxy for the USD, and in the event of a USD crash, the monetary authorities in HK/mainland might want to kill the peg to prevent high inflation.
What happens if the Irish govt needs to print euros? I guess they get stuck with real debt, unlike the US central bank, which runs its own printing press.
Spain's central bank imposed a 8% capital charge on SIVs, so they stayed out of that and just resold mortgages as bonds.
Spain is familiar with financial tumult and their leading banks are seasoned champions, witness the reselling of ABN Amro assets by Santander asap right before the August credit shock
Spanish banks are dominated by old-money families from the General Franco days, and they are in it for the long-haul so maybe their bonus schedules are logical
Furthermore, these wankers were big on the push for pooling toxic loans and mortgages into tanks of holy water:
Washington's interest in pushing covered bonds stems from the success of Europe's $2.75 trillion covered-bond market. Such bonds are the primary source of mortgage-loan funding for European banks. Some analysts have predicted that a covered-bond market in the U.S. could grow to $1 trillion over the next few years. There are currently $11 trillion in home mortgages outstanding in the U.S.
Covered bonds are backed by mortgages but they are considered safer investments than the products that fueled the housing boom and landed many Wall Street banks in trouble. That's because the bonds stay on a bank's balance sheet and are backed by a "cover pool" of high-quality mortgages that must meet certain criteria, such as being up to date in their payments. Investors are also protected because if the mortgages go bad, the bank must step in to ensure that bond holders get their interest.
U.S. banks can issue covered bonds but only two have done so: Bank of America and Washington Mutual Inc. The market in the U.S. has been hampered in part because of regulatory uncertainty surrounding the products. Investors have worried about where they stand in the event of a bank's demise and issuers have wanted clarity about the types of assets they must hold, among other things.
McAngry O'Saver writes:
Asman doesn't cut off his guests or yell his opinion at everybody....
Exactly. But that makes maintaining my disbelief, anger and heckling much too difficult.
CNBC, especially Cramer and Kudlow are much easier targets.
McAngry O'Saver | 09.30.08 - 11:35 am | #
On that I agree.
Amazing how Kudlow's show has been turned on it's head the last two weeks. The "Kudlow Creed" has been vaporized, as have the bears who used to be invited on to give the opposing point of view.
Roubini hasn't been on in ages.... now Gary "housing is doomed" Shilling has been left off in addition to the hard assets (gold) guy Michael Pinto. To think Kudlow was sticking it to Pinto everytime recently as gold fell from $1,000 back to $800... Now it's reversed and Kudlow won't have Pinto on anymore.......
treasury rates have not really come down from the Jan. 23rd low
If there was a real sense of panic -as portrayed in this blog -, you would expect these markets to show it. Doesn't seem to happen.
That's not to say we're over the crisis and everything will be fine instantly. But the panic and triumph as conveyed by posters here is not justified and may come to haunt them.
O-Joe
OuterBeltway: i like your plan (use existing sound banks) better than mine, but I'd fence them in with some restrictions and equity to the gov't. if they need/take Fed/Treas. support.
Thats Ballgame Comrades writes:
Can anyone direct me toward ANY mainstream coverage of whether or not its constitutional for the Senate to change the "rescue plan" and then pass it themselves first?
-================
you can't because it's not.
each chamber of the legislature can consider any legislation it damn well likes, if it passes it then has to deal with the other chamber.
so bills can start in either chamber.
"As the assumptions that had blown air into the bubble began to dissipate, many mainstream reports became increasingly skeptical in their reporting and blogs like Calculated Risk offered increasingly alarming insights."
"Its as if the global pool of money thought it was putting trillions of dollars in a savings account, but really, half of it was going into a furnace. The money is gone, burned up, never to come back. That was five months ago, and now that same furnace is about to burn public money."
Ross writes:
Raising FDIC insurance is a smart thing to do. Right now Aunt Em is shuffling her accounts around to 'protect' her assets. FDIC insurance is a salve but it works for J6P.
For some reason, I have doubt that J6P (or the 'average American') has over 100k in his checking account. Are we now a nation of savers?
--
Jas quoting Spengler? Good boy. I've always thought of myself as a Spenglerian Pirate. "Intervene amongst the interveners and gamble with money as a ware!"
Ross,
I have read everything that Spengler wrote that I could find in English. The same goes for Schumpeter, Hayek, Durant, Mencken, Tocqueville, etc., etc., etc.
a little off topic, but last week I got a letter from Wells Fargo (my mortgage holder) practically begging me to apply for a HELOC. I also took a day off last week (went to the zoo) and was approached by a street solicitor trying to get me to sign up for a credit card (I didn't bother to even find out who was offering it - I wish I had now).
Is credit freezing up for everybody, or maybe just for people who are at risk of default?
Commentary: Bankruptcy, not bailout, is the right answer
The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.
Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.
In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources.
Thoughtful advocates of the bailout might concede this perspective, but they argue that a bailout is necessary to prevent economic collapse. According to this view, lenders are not making loans, even for worthy projects, because they cannot get capital. This view has a grain of truth; if the bailout does not occur, more bankruptcies are possible and credit conditions may worsen for a time.
Talk of Armageddon, however, is ridiculous scare-mongering. If financial institutions cannot make productive loans, a profit opportunity exists for someone else. This might not happen instantly, but it will happen.
Further, the current credit freeze is likely due to Wall Street's hope of a bailout; bankers will not sell their lousy assets for 20 cents on the dollar if the government might pay 30, 50, or 80 cents.
The costs of the bailout, moreover, are almost certainly being understated. The administration's claim is that many mortgage assets are merely illiquid, not truly worthless, implying taxpayers will recoup much of their $700 billion.
If these assets are worth something, however, private parties should want to buy them, and they would do so if the owners would accept fair market value. Far more likely is that current owners have brushed under the rug how little their assets are worth
[an argument for lower interest rates]
"The money that the Fed has pushed through its emergency lending window, now well into the hundreds of billion of dollars, has done nothing beyond strengthen bank reserves. Not a trace of it has shown up in the lending markets."
As I've mention before, the problem is (has been) duration mismatch. The Fed is lending overnight; it's needed at 1-3 month durations. Now that the Fed is going to widen its 84 day window that should improve.
Lower interest rates is not a good idea. If anything, rates are too low. It's not like a 3% interest rate is the end of the world. Right now we have too much demand and too little supply. Lowering rates makes that worse.
Thats Ballgame Comrades writes:
Can anyone direct me toward ANY mainstream coverage of whether or not its constitutional for the Senate to change the "rescue plan" and then pass it themselves first?
+++++
It's my understanding that the bailout, because it appropriates funds, must constitutionally be a House, not a Senate, bill
There will be no reduction in stamp duty for housebuyers in next months budget, because the government has decided not to prevent the downward correction in house prices.
Income tax rates are also likely to remain unchanged despite pressure on Brian Lenihan, the finance minister, to compensate for falling tax revenues from the housing and retail sectors by finding new sources of finance.
Lenihan and Brian Cowen have been stressing that a downward correction is under way in the Irish housing market and that no intervention on their part should impede that process. The message from government is that builders who want to shift stock should drop their prices, said one senior political figure. Nothing that will interfere with house prices will be done in this budget.
There are three pillars to prosperity -- economics, politics and, most important, ETHICS.
Commenting on economics without ethics, or morality, is sterile and boring. Free markets devoid of morality turn into fraud markets. That is what we got in America -- a Scam Market. Only born-and-bred American dopes failed to see this in late 1990s.
Buiter was right about the dimensions of the crisis. But now it's clear he cares only for banks, not "populist" stuff. That was obvious from a post of his a few days ago.
Buiter was right about the dimensions of the crisis. But now it's clear he cares only for banks, not "populist" stuff. That was obvious from a post of his a few days ago.
I believe the technical term is "Prat." Of course, I might prefer to use "wanker" myself.
In an FT article at the end of June, John Murray Brown described Irish covered bonds thusly:
The Irish covered bond - branded as an "asset covered security" or ACS - is a bond underpinned by Irish legislation and backed by a ring-fenced pool of assets on the issuer's balance sheet.
It is essentially a secured debt instrument that enjoys special status under the European Union's rules - specifically the directive for undertakings for collective investments in transferable securities, known as Ucits, introduced in 1988...
Maybe the problem is that these things are basically German, and no one can translate German into English:
deb writes:
Can you please comment on your opinion of the viability of a plan like this? Seems like it is great as far as restoring confidence, but if they actually had to make good on 450B Euro it would quickly BK the country.
Anyone who could actually post an educated opinion would be much appreciated.
In addition, both the UK and Ireland allow AAA rated CMBS to be included in the cover pool subject to the same LTV requirements that apply to commercial mortgage loans in each jurisdiction. However, in the UK, CMBS may be included in the cover pool only if the underlying mortgage loans were originated or acquired by the covered bond issuer or an affiliate 13 . At present no such restriction applies to Irish covered bonds (the Irish Covered Bond Act requires that the CMBS must be issued by an EEA-incorporated issuer) although the Irish Financial Services Regulatory Authority (IFSRA) is given powers to impose a variety of limitations on the inclusion of CMBS in the cover pool.
Both regimes allow commercial mortgage loans (or CMBS) secured on property located in the European Economic Area, Switzerland, the United States of America, Japan, Canada, Australia and New Zealand to be included in the cover pool. Additionally, Ireland allows 10 per cent of the pool to be secured on property in other OECD countries.As can be seen, a number of subtle differences exist between the UK Covered Bond Regulations and the Irish Covered Bond Act. However, the choice of jurisdiction for a potential issuer of covered bonds will also depend to a significant extent on where it is authorised as a credit institution or (if it does not already have suitable authorisations) where it wishes to be authorised
Why do people keep talking about voting out the incumbents? Ousting the bailout supporters only works if the other candidate has another position. This issue didn't exist when the current slate announced themselves.
We all know the 'chosen ones' in the US: JP Morgan, Bank of America, Citigroup (too big to fail now, like that's a good thing), Wells Fargo
What about international: Banco Santander, HSBC, Nomura, Royal Bank of Canada, Mitsubishi, Toronto-Dominion, Deutsche Bank, Bank of Nova Scotia, US Bancorp
Who's got the power dry and the ambition for acquisitions?
I think Deutsche Bank is beholden to bailing out German banks, Mitsubishi is already committed, Santander will digest what is has until the real deals come out. The Canadian banks have been quiet other than acqusitions of Etrade Canada by Bank of Nova Scotia, and TD with Commerce Bank
BBVA from Argentina could make a run for things. The British banks are dead in the water, unlike Spanish banks they truly believed house prices never go dow
It's a parliamentary procedure - the bailout bill is not a newly introduced piece of legislation - it is the House amendment to the Senate amendment to the House bill that the House passed in form, the Senate in another - clear so far? So some earlier bill that had diddly squat to do with the bailout is hollowed and used as the vehicle to pass the bailout legislation.
What it means is that technically, it did already start in the House and move to the Senate - observing the letter of the law.
All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.
I think if the Senate starts with the House Bill (even if not passed), they may amend it and pass it.
If they must have passed House bill to amend, then I think they can pass their own bill and then the conference committee could amend the house bill to include the Senate language.
This is sort of a minor matter, and I think they have an established procedure to conform with the language of the Constitution.
Has this Ever happened before? Where they used a prior appropriations bill, and caused it to be passed in the Senate before it was passed in the House?
deb writes:
Can you please comment on your opinion of the viability of a plan like this? Seems like it is great as far as restoring confidence, but if they actually had to make good on 450B Euro it would quickly BK the country.
They are not making a 450bn bet. They are betting that their regulatory bodies can shut them down quickly. Ireland is in the top 5 for bank diversity, they can easily arrange mergers
Who van forget that wonderful day, when father John dumped his tsunami of holy water on the banks that needed liquidity in the form of pooled derivatives -- which were blessed by heaven-sent guarantees? It was as if underwriters were sent a tsunami of financial angeles! That was God's will there and of course, no risk in the details provided by Mephistopheles...
Irish covered bonds
Legislation has now been passed bringing in the Irish Covered Bond Act. This will enable the Central Bank of Ireland to issue bonds against pools of assets, which are either public sector debt or property debt. The general conditions under which this market would develop in Ireland has been well described in many other sources. Needless to add that DePfa, a long established and well known player in Germany, in both the public sector mortgage bond and property mortgage bond, will make extensive use of the Irish legislation to issue from Ireland.
Legislation recently passed is conservative and allows for very high quality securities to be issued by Irish entities.
Some small details and preparations will still remain in early 2002 before the first Irish issue is made. The capital markets in late 2001 were not generally favourable for medium to long-term issuers but this may well change in 2002.
The legislation recently passed is conservative and allows for very high quality securities to be issued by Irish entities. These will get the highest of credit ratings from the rating agencies and should ensure that the investor gets the quality of paper required. Liquidity will be a key factor and as Ireland, a small country, lacks the investor base for large volumes of covered bonds, the advantage will rest initially, at least, with existing players who have already well-established investor bases in Europe, the Far East and North America. It is important that the Irish market commences operations relatively soon as other countries are in the wings with their own Pfandbrief (mortgage bond) legislation. Further liberalisation of the German legislation is also expected in 2002.
OT #1.I miss the old regular posters.
OT #2. Jas and Godhatesfangs, the problem with the bilical proscriptions on usury is that they damn the lender, not the borrower. So it's fine to borrow for a McMansion, but not to make that loan.
I don't think you guys realised just how close the Irish banking system came to complete collapse yesterday. If the Irish Central Bank didn't take action, one of the Irish banks would have failed this morning. FACT!
Yesterday it suffered its greatest every one day loss. Every single Irish bank was down by huge amounts because of fears it lent too much money to property developers.
Irish banks share prices are now so low, it's going to be very hard for them to recapitalise.
You wankers are off topic, this is friggn Irish Covered Bond day and the bailout of the irish mortgage mafia -- take this shit about the yanks to a new blog!
fresno dan said: "a little off topic, but last week I got a letter from Wells Fargo (my mortgage holder) practically begging me to apply for a HELOC. I also took a day off last week (went to the zoo) and was approached by a street solicitor trying to get me to sign up for a credit card (I didn't bother to even find out who was offering it - I wish I had now).
Is credit freezing up for everybody, or maybe just for people who are at risk of default?"
Similar story with me. My bank recently solicited me with an offer to dramatically raise my HELOC, at a below-prime rate of interest.
The Town Improvement Ireland Act of 1854 forbade men to expose themselves - apparently this was mainly aimed at urination in public, obviously just a male problem.
The Public Order Act of 1935 criminalizes nudity - if the nudist intends to offend. Irish Nudism - The Naked Truth About Baring it all in Ireland
Ross writes:
Raising FDIC insurance is a smart thing to do. Right now Aunt Em is shuffling her accounts around to 'protect' her assets. FDIC insurance is a salve but it works for J6P.
Ross | 09.30.08 - 11:38 am | #
The total bank run from a dollar measure is the same but the lines are shorter... all those Aunt Em's staying home and all...
Can anyone give a link to European credit card balances?
For the USA, Credit Card Debt Stats
Average card is using 59% of its limit -- I think Ireland's gov't is doing some textbook work right now, but how many waves of the credit crisis can any one government take?
--How can Irish gov't guarantee 400Billion? Where are the assets?
--What does the Irish taxpayer receive?
Apparently banks will have to pay an increase in their insurance costs, but the details are not yet worked out. . . Hmmmmmm. . . (Any devils lurking in those details perhaps?)
The guarantee only applies to 6 Irish banks, not to foreign-owned banks.
One commentator says the Irish gov't was particularly eager to stop multinationals from withdrawing their funds due to the uncertainty. (Irish bank shares have lost something like 75% of their value compared to 18 months ago. Not necessarily a reflection on their balance sheet, but doesn't inspire confidence.)
A raise in the FDIC insured amount would take care of businesses who have to meet payroll, expenses, etc. The ones who are financially sound. My son owns a business in Santa Monica and he his partners are considering having to spread their money between banks. They started their business by soliciting private investors. They don't depend on borrowing from banks. They are doing well and paying back their investors.
As I watch the debates in the House yesterday on thing that kept being mentioned was losses of main streets pensions plans, 401K's and IRA's accounts. What no one did mention however is it was the same clowns on Wall Street that sold them this bill of goods. Somehow putting that in the equation wasn't brought up.
I believe the Art. 1, Sec. 7 issue can be addressed by tacking Senate language onto a House-originated bill that has already passed. That bill will then need to go back to the House, but there are numerous bills before the Senate that have passed the House which could provide such a vehicle. It may not be established whether there is any functional difference between appropriating revenue and "raising revenue" per Sec. 7, however. I believe constitutional scholars are not in agreement on this issue. Any lawyers in the house want to weigh in? Is Lawyerliz around?
OT -- DCRogers, if you succeed in objectifying Cramer, let us know. I want someone with that much creativity to be nominated for Secretary of the Treasury.
"riverrun, past Eve and Adams, from swerve of shore to bend of bay, brings us by a commodius vicus of recirculation back to Howth Castle and Environs." Finnegans Wake - Wikipedia, the free encyclopedia
In case you thought that only our gov't was good for tongue-in-cheek humor, check out this from the Irish Times:
"Taoiseach Brian Cowen said today that taxpayers will not be liable for any deficits that might occur as a result of the Governments decision to place an unlimited guarantee on all deposits and certain debt in six Irish banks. [...]"
jes writes:"... the problem with the bilical proscriptions on usury is that they damn the lender, not the borrower..."
I'm not against usury nor do I believe in the Bible as the inerrant word of God--dawkins atheist that I am.
I was speculating where jas jain was coming from. Possibly pre -twentieth century financial calvinist
who knows the quote "who goes a borrowing goes a sorrowing" versus the twentieth century post rapture doctrine prosperity christian.
The thing nobody mentions is that commodities fell 6% yesterday.
I really think de-leveraging will help main street as it will rein in commodity speculation and inflation.
McAngry O'Saver | 09.30.08 - 12:21 pm | #
Have any American politicians been making the connection between no bailout and deflating gasoline prices? If they get that into the press it would be an animal unto itself
Some of the old-timers are still lurking; and many of the newer folk will "stick," so it's all good. Just a lot of activity to digest over the last few days/weeks/dollars.
Senators so far are acting like a bunch of news-stand operators when Vito and teh Boys come lookin' for this months "insurance" payment.
It's a stone-cold shake-down, and the Senators will wet themselves in their hurry to appropriate funds for teh Boys.
Which will predictably and assuredly cause the next leg down, as the dollar falls, driving oil back up & slowing the "real" economy.
Hang on to your hats, folks, it gets interesting from here.
McAngry O'Saver writes:
I don't see a credit crunch. Everyday I get junk mail offering loans, credit cards, and mortgages.
I think their is a credit crunch for insolvent banks and borrowers, but so what.
McAngry O'Saver | 09.30.08 - 12:16 pm | #
The fact you are getting solicitations is not a good measure of quantity of available credit or ease of getting a loan.
It is common in business to 'sell harder' when business is worse... not cut back on selling. So if they can only lend to the highest quality borrowers and there are far fewer of them then they have to send out even MORE solicitations to find & capture their slice of a shrinking market.
In my biz we measure both the number of RFQs we chase AND the hit rate (number turned into business)... in tough times the number of solicitations & RFQs we pursue skyrockets, the 'quality' of those solicitations declines (we get less fussy) and the hit rate collapses.
That is exactly where a lot of lenders are now - they don't need more dodgy borrowers - they need more high quality borrowers. Those are tough to find so they look hard as hell.
I really think de-leveraging will help main street as it will rein in commodity speculation and inflation.
McAngry O'Saver | 09.30.08 - 12:21 pm | #
Have any American politicians been making the connection between no bailout and deflating gasoline prices? If they get that into the press it would be an animal unto itself
That's a good idea. Somebody should float that biscuit over to MISH. He'll run with it too as it supports his deflation theory.
mp writes:
If they must mess with the economy's control levers, use the $700 billion to actually help the people who need help.
mp | 09.30.08 - 12:24 pm | #
interesting or ironic that Jas The Jain seems to have a better handle on Christianity and its relation ( or woeful lack thereof) with our current society and economic system.
2 quick points:
Money or the equivalent is the number one topic by a bullet of the both testaments.
reconciling modern western business with its emphasis on debt to Christianity is more than a huge stretch.
There's actually a good course on the biblical perspective on personal finances called "Crown Financial Ministries" and no it's not a bunch of Bible thumpin heeby-jeebies. (speaking as a left winger)
One of the biggest questions that might be raised by all this current brouhaha is are the western democracies even vaguely Christian?
That is exactly where a lot of lenders are now - they don't need more dodgy borrowers - they need more high quality borrowers. Those are tough to find so they look hard as hell.
That's the whole point right? Banks now are returning to the arcaic practice of lending money to people that can pay it back.
Banks will not stop lending, someone will take their place...the desire for a profit will always be there. Aramgeddon didn't happen the way BushCo said it would, my ATM worked this morning, the lights turned on, this is all about saving failed IB's that should go out of business, the whole country will be better off for it.
--
"One of the biggest questions that might be raised by all this current brouhaha is are the western democracies even vaguely Christian?"
Anonymous,
Modern democracy (quite different than ancient) is very Christian in Origin. Of course, some Jews wrote a book on Hebraic Roots of American Democracy. Christianity, like Islam, is a universal religion while Judaism is not.
What the hell, I'll flog my proposal one more time:
Works Progress Administration II
- mass transit
- clean renewable energy (solar, wind, geothermal, tidal, even nuke - NOT ethanol
- last mile fiber optic
- sewers
- basic research
- education
$700 billion spent that way would have constructive use and build a base for the future. $700 billion given to insolvent banks would be a ripoff of the poor and middle class to pay for wealthy bankers mistakes and misdeeds.
Right. Almost two weeks on death watch and still on Armageddon. I love the logic that 777 proves we need the bailout. Sooo, Wall Street was expecting a bail out and got it postponed. The market goes down. Nice logic if you can sell it.
I haven't seen much if any coverage on the FED's pumping in 630 BILLION yesterday.
They're trying to soft pedal that, as the Fed was already 150 billion in the hole last Thursday. Gonna kinda lead people to asking, "gee, how do they keep getting all this collateral?"
Can't really play up the fact that the only think keeping the Fed afloat is White House paper, no doubt way beyond the authorized spending limits and issued under some sort of emergency authority.
"One of the biggest questions that might be raised by all this current brouhaha is are the western democracies even vaguely Christian?"
Depends on how one defines Christian. Wall Street area nyc churches had a new revelation in the late 1870s to explain how little work could make some people rich while impoverishing the hard working farmer. They certainly couldn't keep the big donations flowing if they railed against their superrich parishioners.
Thats Ballgame Comrades
The Irish banks are not being bailed out that much. Upping the deposit insurance in exchange for raised premiums. The Irish government will lose a marginal amount of money which is insignificant compared to repeated bank runs
That's the whole point right? Banks now are returning to the arcaic practice of lending money to people that can pay it back.
Now we call it a "credit crunch"
McAngry O'Saver | 09.30.08 - 12:31 pm | #
because no one lends to the bank also (see LIBOR)... no reserves means less to go out.
A credit crunch is when banks only lend to those who don't need it. We are there. Granted we got there by overshooting from a place where banks were lending to fogged mirrors... regardless they are overshooting...
Example: a company we buy services from refuses to buy a piece of equipment worth about $100K unless we give him a rock solid multiyear contract IN WRITING... we don't have a firm contract from our customer only a 'forecast'... the forecasts they give us have been good but it isn't a contract... the business to us and to this service provider is WAY more than $100K - he should easily pay off in a couple years. But he can't get a loan and doesn't feel safe putting his own money in - not now.
In the past you plop down the money or take out a loan & take a chance the program pays out - if it doesn't you try to use the machine for other customers... most of the time it works out but there might be a year or so when it sits idle. The loan payments are small enough you can do that... if it was a lump sum you couldn't.
So until he gets a loan it isn't getting done - my customer will import the parts from Asia for now.
I run into crap like this everyday - way more recently than at any other time in my working career. Worse than the 80's were the credit hurdle was interest rates (strangled business badly but at least you could get a loan if the projects IRR was high enough)...
Modern democracy (quite different than ancient) is very Christian in Origin. Of course, some Jews wrote a book on Hebraic Roots of American Democracy. Christianity, like Islam, is a universal religion while Judaism is not.
As long as we're spouting mumbo jumbo, isn't American democracy based on the Iroquois Confederacy?
Bush may be ready to turn blue and hold his breath, but it is more likely that he issues the Mother of All Executive Orders that gives Paulson exactly what was in the original treasury bill.
Conspiracy Theory: Bush/Cheney sent a stink bomb to Congress knowing that it might fail and thereby give them the excuse (Save the Country!) to not just ignore the laws and Congress but to take their powers.
"the way to think of this credit collapse is that it is secular in nature, not merely cyclical and also deflationary. Those who believe that weve managed, in one day, to switch from a deflationary to an inflationary backdrop because of additional government debt creation are not taking into account the offsetting credit contraction in the private sector, which comes from three sources: asset liquidation, debt repayment and increased savings. The Fed and Treasury are merely cushioning the massive deflationary forces in the financial system."
I am in the deflation camp...Japan pumped massively with fiscal and monetary policies in the 90's and didn't avoid deflation due to the credit destruction.
Anyone remember JP Morgan or Chase's run on something (was it also banks) during the Great Depression. Didn't they short the hell out of a bank and that enabled them to take it over. Now I know banks are in trouble, all this financial garbage/products have RELATIVELY no value, but why did JP write WaMu's loans down sooooo sooooo sooooo much? So they could take it over? Citi was definitely the unexpected winner in this because of the "close correlation" between WaMu's and Wachovia's garbage product portfolio. I think where there is a smell, there is something fishy going on?
The short end is leading lower despite such juiced expectations with the 2-10-yr yield spread modestly flatter at 187.8. The really short stuff remains well bid keeping the 3-mo-10-yr steeper at 345 and just shy of Fri's 373. Overnight Libor spiked to 6.87% (a record high according to Bloomberg) while 3-month went up to 4.05% suggesting fear remains and interbank lending is still paralyzed. Bond prices in the EuroZone are soft as the ECB is likely to resist the urge to cut rates when they meet Thurs while in Japan, bonds were bid on crumbling stocks. Treasuries will have some data to glance at today but nothing big enough to get prices out of their comfort zone. The 10-yr yield looks lodged between 3.55% and 3.90% until trade gets a better sense of where the economy is headed, or confirmation on where it thinks the economy is headed.
Too bad that their whole country isn't even worth $500 billion. What a bunch of idiots. Isn't Ireland the headquarters for Microsoft and thousands of US companies that seek corporate tax shelters? Let 'em burn.
Interesting anecdote on the supplier...my question is if the guy doesn't feel safe putting his own money into the equipment, why should a lender lend him the money? If he has retained earnings in the form of cash and wants the business, perhaps he needs to step up to the plate.
JPMorgan and Citi may have done some dirty tricks, but with JPM valuing Wamu's home equity book at 75% of face, they're going to lose a lot of money. Citi may come out OK in this, but even there the FDIC spent a lot than it would otherwise have had to. So I'm pretty content with how that worked out.
"This is where the whole euro project comes apart at the seams"
And how is the economy of Alabama and Lousiana doing? Are those welfare states planning to issue Lousiana and Alabama dollars, instead of using US ones? Yeah, that would really solve their problems...NOT!
Message to D.C.
Rather than recount the failures of the bailout policy in either the Henry Paulson or Chris Dodd/Barney Frank incarnation (on both moral and effectiveness grounds), the message the public must send to Washington, D.C., is this: I am now a single-issue voter. My lifelong partisan affiliation is on hold; I will vote against every incumbent who supports this bailout.
Okay,
How about this for a bailout-
mark to market suspended for 1 year
New program for homeowners,buyers
For current homeowners
1) They come up with 5% cash of there current home loan, no matter how far under the government would grant them 10% assistance(gift) and 5% zero interest loan for 15 year payoff. Now they would need to qualify for fixed interest rate loan. This allows some to remain in the home. It means now if they default first 5% of there money is taken, next 10% of gift, and if any left over goes to 5% loan. They also don't have to pay PMI for at least 2 years
2) New buyer deal- each region has its' median home price, Take 10% of that as gift, 5% zero interest 5% there own money-They also have no PMI for 2 years- If foreclosed or short sale-they loose first then 10% gift then 5% loan then bank.
New buyers can buy several houses with first house 15% deal, second house 5%gift 5% loan 10% their own money, third house, etc.
This puts in a floor of up to 20% more down fall without banks getting hit. 700B divided by the number of distressed homes out there times 15% of there median is a hell of alot of homes.
Wall street gets no direct bailout
Local communities and tax bases stabilize
So little guy gets bailed out savers get a chance for a home and we see if trickle up works for once.
No more time to write
What do ya think?
The 2008 U.S. House of Representatives elections will be held on November 4, 2008, to elect members to the United States House of Representatives to serve in the 111th United States Congress from January 3, 2009 until January 3, 2011. All 435 seats are up for election. Democrats, who regained a majority in the 2006 elections hope to retain or expand their control of Congress.
"The thing nobody mentions is that commodities fell 6% yesterday."
And the stock market fell about 6%.
So in other words: the value of the dollar went up 6% in one day! For me, this is great news. Turns out that yesterday was a pretty good day. I don't see any newspapers printing that headline, though. Mark Twain said something like, "The job of a newspaper is to agitate the public, and only blood will do."
(Not an exact quote, but along those lines).
Interesting anecdote on the supplier...my question is if the guy doesn't feel safe putting his own money into the equipment, why should a lender lend him the money? If he has retained earnings in the form of cash and wants the business, perhaps he needs to step up to the plate.
Kung Fu Panda | Homepage | 09.30.08 - 12:56 pm | #
Because that's what lenders do - lend - its like insurance - they KNOW some loans won't be good but in aggregate most all should be okay so they make money IN AGGREGATE.
But the little biz guy can't directly invest a BIG chunk of the liquidity he has into a project like this unless he can borrow against the 'collateral' later if he has to... IN A PINCH. Right now he can't borrow so its dead either way...
So he doesn't buy it himself & can't get a loan to buy it so it doesn't get done. It is a perfectly reasonable thing to do in this environment (walk away from business - even if it means lay offs).
The only people who don't get it are those who have never been there. For them it doesn't seem 'reasonable'.
This situation will all correct in time - question is will it be slow & painful (with a lot more overshoot yet to go through) or can gov't goose the banks a bit to speed up recovery... I think gov't can goose it a little bit but not a lot. Paulson-Bush are overselling the opportunity for recovery vi a goosing while underreporting the cost.
CR's model of how to goose via an RFC-like recapitalization is the best route IMO but would still be slow & somewhat painful... The Paulson Plan from what I can see would be 'faster' more expensive and the lessons of moral hazard would be missed so we'd probably be back to overly loose lending pretty fast. Paulson Plan isn't good...
Borrowers and lenders use contracts.(Banks, Commercial Paper, Ford, homebuyers, Insurance, all)
First respect the remedies within the contracts. Is the remedy injurious to the General Welfare and a barrier to the pursuit of life, liberty and happiness?
Only then move toward special measures for special circumstances and avoid doing it in the dark.
Anecdote: I made a bank (BoA) run today (just to do some business, not to clean out my accounts) and asked the teller if she'd had anyone emptying their accounts. She thought for a second, and said,"Well, some people are yes, but the way things are, they need all the money they can get."
So people at her bank are emptying their accounts, not out of fear of losing their money, but because they're squeezed so hard that they need every last dime they have to buy groceries and pay rent.
First
Bunch of belligerent drunkards.
Maybe the Irish could help us out with our "Potato Famine".....
Wall of Shame: Wachovia CEO Bob Steel
Mad Money: Wall of Shame: Wachovia CEO Bob Steel - CNBC
Devastating, Damning
Bubba2Friday writes:
Maybe the Irish could help us out with our "Potato Famine".....
It's "potatoe". Duh!
Gee, how about that, a government guarantee, that sounds like insurance, isn't that what the House Republicans suggested?
Maybe that would be an easier sell to the American people than a distressed debt fund that bails out Goldman by overpaying for the ABS on their portfolios.
Erin go bailout!
This will be the same in Canada soon, too.
Does this mean the Irish have covered covered bonds?
Erin go bailout?
Prefer Erin go bra-less.
So I guess Ireland as a model for low tax and growth was just as, or more so, unstable as ours.
McCain is just full of good information these days.
--
Irish Guarantee is NO GOOD! Ireland may be the first Western European, or EU, country to default.
Sins of Pushing Debt will come back to haunt the former Christian countries (now they are only in name).
Jas
That would be the equivalent of $60T here. Damn. I hope they know what they're doing....
OT
Here is why the bailout would fail:
A quote, ironically, from an article by Douglas A. McIntyre (Kansas City Fed)on why the Fed should cut interest rates to zero!
The Fed Needs To Cut Interest Rates To Zero – 24/7 Wall St.
"The money that the Fed has pushed through its emergency lending window, now well into the hundreds of billion of dollars, has done nothing beyond strengthen bank reserves. Not a trace of it has shown up in the lending markets."
Folks, if the hundreds of billions already being pushed through the emergency lending window will NOT cause banks to lend, why on earth does Paulson and company think more of the same, in the form of 700B of asset purchases would do the trick???
I don't get it!...If I'm a banker with bad assets, I just want to get rid of those bad assets...Getting rid of them will NOT make me want to go make the same mistakes (i.e. I am going to keep my standards tight as hell until this storm blows over!).
Yo!
I'd much rather see Rebecca Gomez of Fox Business Network's "Happy Hour" show go braless than Erin.... you guys should really pay for more channels!
Already, being set in a bar (Waldorf Astoria?) Gomez wears plunging neckline satin nighties.... doesn't get more non-intellectual than that!
Any system founded on UNPAYABLE debts is doomed to failure.
You'll never here THAT on CNBC or at a CONgressional hearing, but it is the root of the problem.
Crooks & fraudsters.
Cramer---Lie, apologize rinse repeat
Erin---How could anyone as cute and sweet as me be an evil tool
the whole problem started with banks insuring black boxes with imaginary funds backing it up. Ah--Ireland is trying to be the new Goldman--it won't work--a Hail Mary!!
May the congress rise up to meet you,
may the 'aye's be always at your back
May the M2 shine warm upon your face
and the bailout fall soft on your account
and until we meet again,
May Paulson hold you in the palm of His hand
Nice rally in the dollar. People are panicking.
Irish dime girls?
I like where this is going.
Ironically it is claimed that NK after becoming government owned now has to turn away depositors because it has already reached the max depositor base allowed by the EU. If a whole country does that to its entire banking system in the EU i am not sure what the effect of that would be on sucking money out of the other bank in the EU? presumably if the banks begin recovering due to deposits being moved from other EU areas they will have to scare them away or something?
I don't remember who said it....
"With assets like these, who needs liabilities?"
Ah--Ireland is trying to be the new Goldman--it won't work--a Hail Mary!!
Going forward it will be known as a "Bail Mary"
Ireland are desperate to stop an all-out bank run. That's the worst thing that can happen to any economy.
--
Let me repeat...
Only born-and-bred dopes led by Crooks do not understand the EVIL of Pushing Debt. Debt Pushers should be hunted down and not helped as the demonic democratic govts, fully controlled by Debt Pushers, are doing.
People must pay attention to the evil deeds of democratic govts against the people and for the Debt Pushers.
Jas
Hewney O'Coodanode?
jurop writes:
Ireland are desperate to stop an all-out bank run. That's the worst thing that can happen to any economy.
Never happen in the US.
Debt Pushers should be hunted down and not helped as the demonic democratic govts, fully controlled by Debt Pushers, are doing.
Sometimes you sound like Burroughs going on about the Mark Inside, Jas. Is that intentional?
A national debt of 45 billion Euros? Aw, that's so cute!
Banks win Irish Sweepstakes!
Hey, now that we can't export our inflation we might as well try to export our banking practices.
I thought 'we' all agreed last night - no more 'misogynistic objectivization' - or didn't you get the memo?
"With assets like these, who needs liabilities?"
Especially when the assets are based on LIE-abilities.
That's not an Irish bazooka. It's an Irish Potato Cannon. {{rimshot}}
Thanks, I'll be here all week.
Isn't this all like the reverse of an Ayn Rand novel?
I forgot the "Ba-DUMB-ching" for my inane jokes.
Feel free to heckle. I've decided to make heckling my new career. It's the only way I can keep from going postal.
OT and fat chance on my part of help...but anyone seen a list of firms that stand to benefit the most from a TARP plan-- The Paulson structure?
Its to help with a political construct ( not GOP)
the reverse of an Ayn Rand novel is a sitcom.
Popsie Nomansky writes:
Isn't this all like the reverse of an Ayn Rand novel?
"Atlas Bends Over"? [ducks]
So are they making a play to have Citi, JPM, GS... run across the Atlantic? If so take Hank too, pretty please?
Dawg - LOL
Irish Spring?
I guess yesterday the government showed their hand, it is all about stock prices now.
A bad debt is a debt that can't and won't be repaid. Guaranteeing bad debts, or buying them from the banks doesn't make a bad debt go away.
Some day the difference between what is owed on a debt and what remaining value is associated with the asset behind the debt must be recognized.
So, how do you like your debt writedown: quick or deferred as long as possible. Banks/gov. want as long as possible. But they also want to trust their counterparties in bank/bank loans.
Hence, banks want the government to eat the shit. It is that easy to see why Bush/Paulson want their $700B.
I'm for establishing seven new banks with $100 billion each in government money, and tell them they must lend to keep CP and money funds flowing. No ABS purchases. No ABS securitizations of their debt (keep loans on their books). NO credit swaps (CDS). New banks owned by the government via preferred stock/senior debt, and guaranteed interest.
Make existing banks compete with the new banks with no government support until they fail after disclosing all of their bad debts.
hit the bid-
my guess is we won't see it at all until well after it's 'applied'.
You know wouldn't want to cause a drop in confidence...
Ciao
MS
Ireland are desperate to stop an all-out bank run. That's the worst thing that can happen to any economy.
Never happen in the US.
Ireland are much worse off that the US. Iceland too. UK, France, Italy and Spain also have tremendous problems, probably worse than the US problems. And Russia's fundamentals can be summed up in five letters: V-O-D-K-A.
In sum: Europe are f*cked as well. It seems Germany could be OK, though.
divide amount guaranteed by # taxpayers and you come to more than the average irish taxpayer is worth, by far..
"the reverse of an Ayn Rand novel is a sitcom".
No, the reverse of an Ayn Rand novel is any novel where you care about the fate of more than one character.
So there IS a pot o' gold at the end of the rainbow.
I was thinking the reverse of an Ayn Rand novel is Mao's Little Red Book.
Nationalize the banks by 9 A.M.
Hit the pub by 10 A.M.
God bless the Irish
Hysterical. Now we have talking heads on CNBC quoting Cramer as gospel.
Look at the A/D line and up/down volume today. Sucker's rally.
OT-
A stock (or PUT) I gave a shout out on a few weeks ago is getting flushed today..
Check out HIG
Ciao
MS
I was thinking the reverse of an Ayn Rand novel is Mao's Little Red Book.
It certainly isn't Mein Kampf.
Nemo writes:
Nationalize the banks by 9 A.M.
Hit the pub by 10 A.M.
God bless the Irish
Nemo | Homepage | 09.30.08 - 11:01 am | #
That is a plan that could pass congress...
TED spread holding steady at 3.34.
Davy Research analyst Scott Rankin said: "The Irish government has taken out its bazooka."
And set the sights on it's own foot.
Bravo.
Good for Ireland... until they have to start making good on the guarantees. Then it could BK the country... and, surprise, surprise, there ARE worse things than bank runs.
The Irish plan: THE McTARP!
No doubt it will soon be followed up by the: O'BAILOUT
Thread music
30 DAY US Libor at 3.92...was at 2.40 two weeks ago or so...
This is what most banks use for short term borrowing for business customers.
In response to landshark's post...I have a serious question:
What IS the theory behind the bailout? Is it that, right now banks won't lend to each other because they fear that any one of them could go under now, since their balance sheets are a complete lie...and so the idea is if the gov't buys the bad assets, the banks are solvent again & therefore they are creditworthy? And is that why the other capital injections don't work?
I'm not advocating for it, I'm just trying to understand the rationale, since as far as I have heard, Paulson and Bernanke have not given a clear answer on this.
What's Cramer yelling about now?
The Leprechans had it right all along.
Gold standard > Fiat.
We guarantee all debts.
That is, We guarantee you all your debts.
That is, We guarantee all your debts will stay with you, forever.
I'll give you a winter prediction: It's gonna be cold, it's gonna be grey, and it's gonna last you for the rest of your life.
Joke
If, suddenly, all the Irish bank execs leave with golden parachute deals, don't you think the Irish people might feel a bit, um, swindled?
Maybe it won't happen there, but it sure could here and everybody in the country knows it.
What IS the theory behind the bailout?
Take your money, buy trash, profit.
I've been thinking about Jas Jain's debt pushers and the dopes born and bred.Many are born and bred through the prosperity gospel A)to look spiritual one must appear prosperous, B)buy that Mcmansion and God will reward your faith C)if you save for a rainy day it shows you have more faith in money than God. All those scriptures against usury are ignored.
Bush should resign for the good of the nation!
CR-
Can you please comment on your opinion of the viability of a plan like this? Seems like it is great as far as restoring confidence, but if they actually had to make good on 450B Euro it would quickly BK the country.
Anyone who could actually post an educated opinion would be much appreciated.
Those who make fun of the irish, make fun too soon.
At the end of it, we shall have our Guinness.
Now is the time to be heard. Please call or fax your representative with your inputs. Mish has a list of phone and fax numbers at his blog. Best of luck to all.
Mish's Global etc.
30 DAY US Libor at 3.92...was at 2.40 two weeks ago or so...
With all due respect, what's the big deal. Banks don't trust each other for good reason. Seriously. Lehman defaulted on near $800 million in unsecured short term crap.
Why lend to other banks at or near a 2% funds rate. All risk and very nearly NO return.
mmmm....Guinness.
Jim PortlandOR-
Another possible quick setup solution-
Let the financial system collapse. If the issue is credit to main st. then the US has in place a multiple location banking system currently in place--its called the US Post Offices. They handle money. They are located in every community in US. They can with staffing increase perform banking services in an emergency. Great start-up. Will show the private banks that there is an alternative to bankrupt banks. The US should loan the 700 Bil directly through the post offices and small local/community banks.
jmho
he pretty much has........I read a tinfoil hat story (can't remember where) that he's already in paraguay and the TV shot of him during the Repub. convention was shot from there. This was before all of this went down starting a week or so ago.
Makes you wonder though
Ciao
MS
For the Irish, here's A Modest Proposal. ops, better not go there!!!
Instead of the Capitalists going to their mountain paradise, it's the everday people leaving the greedy Capitalists to burn and ask for bailouts from the people.
Blah...at the right rate...banks will lend to each other.
Problem is that their earning assets are crippled with respect to rate, credit quality, and volume.
It's not worth it to borrow at such a high rate if you can't get positive spread and volume on the asset side.
Your good dollar is getting a push from our business.
Though good dollar is a misnomer for sure, but it is better than the english bitter.
How is any bailout going to re-instill "confidence" in a market that within the last two weeks obliterated billions in equity and bondholder net worth of WAMU and WB? There was no shareholder vote, and the government came in during the middle of the night and destroyed billions in value.
How does throwing another 700 billion stop this from happening again?
Jas, I'm totally with you in your comments about evil Debt Pushers. But why do you insist on mixing in irrelevant parameters like christianity or democracy? Would we get a better result with Dear Leader running things or a Shiite mullah? C'mon, this is about economics, not religion. And while politics is clearly involved, it's still more economics than politics.
A young German day-trader yesterday:
YouTube - angry german kid
Angry saver - my point was the US Libor rates charged to bank customers is up, but not by as much as the horrible headlines. 3.92 is still very cheap money (plus the credit spread)...all of this White House fear mongering is horrible. Things have been bad for a while on "main street", its not until WS gets smacked around is it a problem for the country.
Lower highs,
lower lows,
Watch the DOW,
down she goes.
The Irish guarantee made me laugh. They dont have that much money by any reckoning. Not only that, they apparently receive nothing for guaranteeing all that debt. Theyve essentially just announced a huge devaluation for when they have to make good on their promise. The only wonder is that the Irish arent burning down Parliament today.
Jurop:
You might already know this, but that video (allegedly of a crazed video game player) was completely staged.
Speaking of blockheaded Irishman.
Last night I watched in disbelief as Mr. "No Spin" Bill O'Reily defended the bailout while trashing democrats as selfserving left wing socialists.
O'dear!
In Soviet Amerika, banking system safeguard government.
Speed Racer writes:
Bush should resign for the good of the nation!
Speed Racer | 09.30.08 - 11:07 am | #
Yes, we need a couple of months of President Cheney.
It is interesting that the goal of the Paulson plan was to push $700B at the healthy banks, per Treasury conference call with Wall Street pigmen:
Mussolini-Style Corporatism in Action: Treasury Conference Call on Bailout Bill to Analysts (Updated) « naked capitalism
As the weaker banks go under their assets will presumably be bought up by the big boys with taxpayer dollars thus giving the lucky few access to deposits to refloat themselves.
If you are Goldman, JPM, C and BAC this is wonderful plan.
Fyi:
While CNBC has pushed the Washington leadership's position on the bailout, Fox Business Network has consistently covered the objection to it; in fact there's of a populist strain in the FBN covereage.
serious question: why is yen still anti-correlated with the DOW?
Shouldn't the carry trade have died by now? What is keeping it alive, and what would it take to kill it?
Bill O'Reily obviously can't do math.
Me leprechauns can smell a bailout from across the seas, we eagerly await the payout!
What's worse than bank runs?
Bill O'Reilly had 3,000 shares of MER he was pissed off at seeing crash and burn....
runs to the toilet?
Bubba2Friday writes: Yo! I'd much rather see Rebecca Gomez of Fox Business Network's "Happy Hour" show go braless than Erin.... you guys should really pay for more channels!
Are you people misogynistically objectifying again?
Count yourself lucky to have eye-candy evil tools. As a card-carrying homosexual, I get to try to objectify Gasparino and Cramer, and believe me, that's hard work.
jurop writes:
What's worse than bank runs?
jurop | 09.30.08 - 11:18 am | #
Diarrhea
What's worse than bank runs?
Printing Presses.
What's worse than bank runs?
A constipated banking system!
flaminia, religion informs the masses viewpoint of spending versus saving. If Christ is soon to return why plan and save?
What's worse than bank runs?
a bank that runs away with me money of course!
Things have been bad for a while on "main street", its not until WS gets smacked around is it a problem for the country.
Well said. Point taken.
The arrogance on CNBC yesterday after the bailout was voted down really highlights the huge divide between WS & Main Street.
Maria Bartiromo: "WE WILL HAVE A BAILOUT!" "Main street doesn't understand"
What Crap. Those CNBC shills can't see past their pocket books.
Wish I'd read Anonymous Wag's comment before posting mine. I think he's got it dialed.
dcrogers LOL where's our eyecandy!
DCRogers writes:
Bubba2Friday writes: Yo! I'd much rather see Rebecca Gomez of Fox Business Network's "Happy Hour" show go braless than Erin.... you guys should really pay for more channels!
Are you people misogynistically objectifying again?
Count yourself lucky to have eye-candy evil tools. As a card-carrying homosexual, I get to try to objectify Gasparino and Cramer, and believe me, that's hard work.
DCRogers | 09.30.08 - 11:19 am |
DC, FBN offers you Cody Willard and Eric Bolling as arm candy accents to Rebecca Gomez on "Happy Hour".
re: Ireland
IMF Report 2007, http://www.imf.org/external/pubs/ft/scr/2007/cr07326.pdf, looks at Ireland's exposure to dependence on external finance.
It also ranks Ireland as 3rd in investor protection behind only the US and Canada. That's before the upgrade to 100,000 insurance for the next 2 years.
Also, minor point Ireland's ttm GDP is 187bn which I mention because their ttm GNP is 158bn. Their institutions will weather the storm, but going from EU grants + housing boom + inflow of foreign companies to no grants, no housing boom, and a net outflow of foreign companies there will be some whiplash.
Still waiting to see what's next with UniCredit in Italy. The French banks have taken their lumps but the public line is their deposits will keep them safe, Natixis should need new capital at some point.
How is it possible that nothing extraordinary has been coming out of Spain? The biggest housing bubble, 95% floating rate mortgages, high turnover stock market, etc
I get to try to objectify Gasparino and Cramer
What about Bush and Paulson?
dryfly | 09.30.08 - 10:56 am | # thought 'we' all agreed last night - no more 'misogynistic objectivization' - or didn't you get the memo?
Is below 'misogynistic objectivization'.
A drunk at the end of the bar calls for a beer. The bartender fills the mug and slides it down the bar. It
hits the lady's breasts and spills all over them. The bartender goes over, retrieves the mug and licks the
beer off of her breasts.
This happens a couple more times.
The next time, the drunk jumps up and starts to lick her breasts. She decks him! He's laying on the floor
moaning and groaning.'Why do you let the bartender do it?'
'Because he has.............(your gonna love this)......
A LICKER LICENSE!
Anonymous | 09.30.08 - 11:22 am | #
A LICKER LICENSE!
That me. s
McAngry O'Saver writes:
Things have been bad for a while on "main street", its not until WS gets smacked around is it a problem for the country.
Well said. Point taken.
The arrogance on CNBC yesterday after the bailout was voted down really highlights the huge divide between WS & Main Street.
Maria Bartiromo: "WE WILL HAVE A BAILOUT!" "Main street doesn't understand"
What Crap. Those CNBC shills can't see past their pocket books.
McAngry O'Saver | 09.30.08 - 11:21 am | #
Which is why you should watch FBN. Seriously: compare and contrast the coverage of the two! They don't let the right -wing bomb throwers like Ann Coulter on FBN, if that's what turns you off.
Then Jesus better be on the next bus.
sbarrkum..
thanks for laugh...
How is it possible that nothing extraordinary has been coming out of Spain?
It's not possible. Spain is terminal in my opinion.
Not housing crunch, bot sovereign credit crisis -- Pakistan still hasn't found an angel donor for $6bn to get the government past year's end. Their problem was a combination of inflation boosting subsidies and later credit markets raising the bar
Count yourself lucky to have eye-candy evil tools. As a card-carrying homosexual, I get to try to objectify Gasparino and Cramer, and believe me, that's hard work.
DCRogers
This has to be one of the top 10 OT comments to appear on CR.
LOL and LOL agai
--
Jas, I'm totally with you in your comments about evil Debt Pushers. But why do you insist on mixing in irrelevant parameters like christianity or democracy?
flaminia,
There is a connection. Debt Pushers, former moneybags, rule under democracy! Democracy = Domination of Money. Spengler.
Debt Pushers ARE Anti-Christian and anti-Christianity.
Would we get a better result with Dear Leader
I am NOT here to get results (I am not selling anything to anyone and dont need to). I am hear to tell the truth in the most accurate and descriptive language.
Sincerely,
Jas
It's not possible. Spain is terminal in my opinion.
McAngry O'Saver | 09.30.08 - 11:26 am |
You think the Iberians are sleeping on it?
flaminia writes:
Then Jesus better be on the next bus.
In their wishful thinking world, he always is.
On NPR this a.m., I heard Bush state
"meeting with my president" !!!!!
I viewed the edited version of this conference at The Washington Post and this phrase was deleted. .
Anyone have any pointers to the unedited transcript?
Flaminia:
Wish I'd read Anonymous Wag's comment before posting mine. I think he's got it dialed.
Nah, you have a valid point too. I'm not sure what's got Jas in a bunch about Christianity. I mean, the entire british empire pretty much puts paid to the idea that "Christian" anything will make you moral.
I bow down to brass idols, but I can still tell a crook when I see him.
Which is why you should watch FBN.
I'm an equal opportunity heckler. Neil McCavuto has been the target of my IRE many times.
Neil is a total polyanna imo.
Is below 'misogynistic objectivization'.
Not only yes, but also a really stupid joke.
Oh cone on, The Irish Mafia has been pumping a tsunami of liquidity into that economy with Covered Bonds which are linked to a tsunami of accounting fraud linked to government backed entities. This type of government bailout and socialism is what America is doing today!
I guess yesterday the government showed their hand, it is all about stock prices now.
Ministry of Truth | Homepage | 09.30.08 - 10:59 am | #
Because that's what the public understands given the emphasis on the "ownership society". If that melts, then all hell breaks loose for the Bush Admin, as if that's possible.
The tattered remains of their reputation are gone.
J6P really doesn't follow the credit markets and wouldn't know LIBOR from peanut butter and in that regards, probably doesn't understand the underpinning that that provides.
At gut level though, they understand that there are very significant problems.
You think the Iberians are sleeping on it?
The Iberians sleep during the day and "socialize" (pun intended) during the night.
JimInPortland:
I just posted this on RGE this AM. Ties into your idea. Sorry for the long post, guys.
I have an idea I want to float about keeping the credit flowing to the real economy while the fin sector does it's demolition work.
I'm assuming that there are thousands of banks in the U.S. that are solvent and well-managed. Somewhere, maybe in the OTS or FDIC, there's a stratified list of banks, ordered by leverage ratio, loan portfolio composition, delinquency ratios, etc. We can easily ID an official, indisputable ranked-by-health list of banks.
If members of the public that currently have sizable deposits in the banking system were to look at this list, and transfer their money to a few of the top banks in their geographic area, we will almost instantly fix our commercial credit flow problem for all the but the very largest of corporations.
This action would:
a. protect the deposits of the population
b. put more resources into the hands of demonstrably capable bankers
c. induce investors to buy the stock of these well-run banks, as they would be the "naturally selected winners"
d. put the credit-flow decisions into the hands of "more local" banks, ones that actually have a relationship with the people they're lending money to
e. dispatch to an early and graceful demise the poorly run banks that have caused the problems we now face. "Controlled demolition" would be achieved.
f. transition what remains of our society's capital from the under-performing financial sector into the real economy, where tomorrow's growth will occur
As the commercial credit instruments in place mature, they can be rolled over at one these well-run banks. The real-economy businesses, one by one, would be freed from dependence upon stricken banks.
The effect of this action would be to effectively de-couple the real economy from the cancerous financial sector.
The would eliminate one of the principal extortion levers that the fin sector is currently using against the real economy, e.g. "if we go down, we're takin' you with us".
The other benefit of this plan is that the decision-makers are the public: no one can stop them from moving their deposits. Wall Street has no lobbying leverage with Main Street.
Best of all, it can be done right away, and can proceed at the pace dictated by events.
merciless, stupid is good in a world full of geniuses..look where they got us...
It's a darn good thing for the McCain camp that "flip-flopping" was the buzzword in 04 but not 08.
McCain is now demanding the bailout, sorry, RESCUE be passed without delay.
It appears as though the Smoking Man has gotten to everyone. McCain, Krugman, et al.
Turncoat whores.
Can anyone with a handle on creative bank accounting comment on the following:
Is it possible for a bank that has borrowed from the Fed to show the borrowed assets as tier 1 on their balance sheet rather than the real illiquid asset that they have borrowed against?
I'm wondering if any of the tightness in the CP market is due to banks trying to dress up their balance sheets a bit before they have to release their Q and file with the FDIC.
Anyone?
Jas quoting Spengler? Good boy. I've always thought of myself as a Spenglerian Pirate. "Intervene amongst the interveners and gamble with money as a ware!"
McAngry O'Saver writes:
Which is why you should watch FBN.
I'm an equal opportunity heckler. Neil McCavuto has been the target of my IRE many times.
Neil is a total polyanna imo.
McAngry O'Saver | 09.30.08 - 11:28 am | #
Okay, what about David Asman of "America's Nightly Scoreboard"? Certainly better than Larry Kudlow, on in the same time slot. Asman doesn't cut off his guests or yell his opinion at everybody....
This is where the whole euro project comes apart at the seams. Because Ireland can't, as a practical matter make good on this pledge, because they don't have the ability to write the check - only a sovereign issuer of surrency can do that, and they have given up that to Brussels. It's like the State of California trying to bail out Bank of America - it can't because it has to go out to the same credit markets the banks do to raise cash. Only a sovereign can spend first, borrow later. Some of us have been warning about this for year, looks like it's happening, quicker than anyone could have imagined...
Short the Euro!
How the hell does increasing FDIC insurance to 250k make the banking system safer? Isn't the risk that it is underfunded as is?
Maybe I should increase my life insurance. Would that keep me safer?
OuterBeltway writes:
JimInPortland:
I just posted this on RGE this AM. Ties into your idea. Sorry for the long post, guys.
I have an idea I want to float about keeping the credit flowing to the real economy while the fin sector does it's demolition work.
Peter Principle problem.
Well, other countries act while Congress discusses. They will come out of this so much faster then.
No problem here, just keep discussing.
O-Joe
Can anyone direct me toward ANY mainstream coverage of whether or not its constitutional for the Senate to change the "rescue plan" and then pass it themselves first?
Maybe I should increase my life insurance. Would that keep me safer?
Patrick Bateman
I'm insured for 1 mil, so I am bullet-proof right?
Asman doesn't cut off his guests or yell his opinion at everybody....
Exactly. But that makes maintaining my disbelief, anger and heckling much too difficult.
CNBC, especially Cramer and Kudlow are much easier targets.
With the state of Irish housing, they're gonna need a lot of ammo for that bazooka.
When do we expect the ratings companies to downgrade Ireland. I think I'll be offended since I am partly of Irish descent.
This is where the whole euro project comes apart at the seams. Because Ireland can't, as a practical matter make good on this pledge, because they don't have the ability to write the check - only a sovereign issuer of surrency can do that, and they have given up that to Brussels. It's like the State of California trying to bail out Bank of America - it can't because it has to go out to the same credit markets the banks do to raise cash. Only a sovereign can spend first, borrow later. Some of us have been warning about this for year, looks like it's happening, quicker than anyone could have imagined...
Short the Euro!
They can borrow in the markets against taxes to some extent. They could sell off land, buildings, etc...as well. It probably wouldn't be enough but they could give it a try.
Essentially these wankers just have pools of mortgages, like fannie and then the lads at the pub get Moody's to bless these debts with holt water from Father John and then your fucking debt is not a problem any longer, and yah have heaven on earth!
See also: Anglo's cover pool is made up of mortgage loans in respect of properties in England and Scotland as well as cash collateral. As at 25 June 2008, the pool consisted of 312 loans granted to 133 borrowers, secured on 1,715 commercial properties, with a total outstanding balance of GBP4.5bn. Whilst the portfolio is significantly less granular than a typical UK residential or German commercial or mixed mortgage cover pool, some of its larger loans are only partially funded by covered bond issuance, hence reducing the total loan concentration. In addition it exhibits a strong weighted average seasoning of 28.4 months combined with good geographic diversification.
Jas,
I still see a disconnect between 5 year TIPs & 5 year treasuries.
Maybe I should increase my life insurance. Would that keep me safer?
Patrick Bateman
Not from the beneficiaries!
Raising FDIC insurance is a smart thing to do. Right now Aunt Em is shuffling her accounts around to 'protect' her assets. FDIC insurance is a salve but it works for J6P.
Off topic questions
It seems that (almost) everybody is into Treasuries right now, they flew from commodities, (some) commercial paper, and (some) stocks to "quality" bonds. Even the FED holds less bonds and the Treasury is looking to issue more. The FED exchanged some of the banks' risky assets for Treasury bonds, let's call this "FED bonderized debt" (you know, like lipstick on a pig).
So right now these "investors" get a return of 3-4%. What would happen if the (expected) inflation goes to 6-7%?
My guess is that bond prices go down, they are being sold. Who buys them? Again, my guess is the FED, and this time it "monetizes the debt", making the inflation problem even worse (additionally stock might go up too). If nobody buys them, the interest rates go up and we have a deep recession with certainty.
Do I have things right? Is there is a shock (sudden change) to inflation, could this sock be persistent for the next few years?
How sensitive is the system right now to changes in other variables? Do you see other possible future paths?
jimbarino writes:
This is where the whole euro project comes apart at the seams
Agreed all around. It was an interesting experiment that is still ongoing, but the Euro as a potential reserve currency to the faltering USD seems more and more of a stretch each day. Getting the Germans to bail out the Irish seems implausible.
And while I have been entirely pessimistic about the USD for the last few years, I think it may be one of the better performing currencies under the assumption that the US is unable to both inflate M3 and increase velocity sufficiently.
One possible currency play that I have thought about for some time is the HKD, as it is a proxy for the USD, and in the event of a USD crash, the monetary authorities in HK/mainland might want to kill the peg to prevent high inflation.
Interesting twist.
What happens if the Irish govt needs to print euros? I guess they get stuck with real debt, unlike the US central bank, which runs its own printing press.
If Ireland can guarantee 2x GDP, I'm sure the US can guarantee 2x its GDP. $25 trillion of bank assets guaranteed, everything solved!
/sarcasm.
Willem Buiter has his unique take on political fallout arising from yesterday's rejection of the Paulson plan.
For those requesting (earlier this morning) what were the potential consequences of doing nothing, WB provides his opinion:
FT.com | Willem Buiter's Maverecon |
Incidentally, he considers a first step to be necessary immediately, even if it's TARP.
Possible answer to Spanish immunity?
Only a sovereign can spend first, borrow later.
I think that is why the Euro is a more stable currency than the dollar. It's harder to get that many countries to agree to inflate.
Don't get me wrong though, I think Europe has tough times ahead just like the U.S.
Furthermore, these wankers were big on the push for pooling toxic loans and mortgages into tanks of holy water:
Washington's interest in pushing covered bonds stems from the success of Europe's $2.75 trillion covered-bond market. Such bonds are the primary source of mortgage-loan funding for European banks. Some analysts have predicted that a covered-bond market in the U.S. could grow to $1 trillion over the next few years. There are currently $11 trillion in home mortgages outstanding in the U.S.
Covered bonds are backed by mortgages but they are considered safer investments than the products that fueled the housing boom and landed many Wall Street banks in trouble. That's because the bonds stay on a bank's balance sheet and are backed by a "cover pool" of high-quality mortgages that must meet certain criteria, such as being up to date in their payments. Investors are also protected because if the mortgages go bad, the bank must step in to ensure that bond holders get their interest.
U.S. banks can issue covered bonds but only two have done so: Bank of America and Washington Mutual Inc. The market in the U.S. has been hampered in part because of regulatory uncertainty surrounding the products. Investors have worried about where they stand in the event of a bank's demise and issuers have wanted clarity about the types of assets they must hold, among other things.
McAngry O'Saver writes:
Asman doesn't cut off his guests or yell his opinion at everybody....
Exactly. But that makes maintaining my disbelief, anger and heckling much too difficult.
CNBC, especially Cramer and Kudlow are much easier targets.
McAngry O'Saver | 09.30.08 - 11:35 am | #
On that I agree.
Amazing how Kudlow's show has been turned on it's head the last two weeks. The "Kudlow Creed" has been vaporized, as have the bears who used to be invited on to give the opposing point of view.
Roubini hasn't been on in ages.... now Gary "housing is doomed" Shilling has been left off in addition to the hard assets (gold) guy Michael Pinto. To think Kudlow was sticking it to Pinto everytime recently as gold fell from $1,000 back to $800... Now it's reversed and Kudlow won't have Pinto on anymore.......
BTW~ for all the panic here and elsewhere:
If there was a real sense of panic -as portrayed in this blog -, you would expect these markets to show it. Doesn't seem to happen.
That's not to say we're over the crisis and everything will be fine instantly. But the panic and triumph as conveyed by posters here is not justified and may come to haunt them.
O-Joe
Re: U.S. banks can issue covered bonds but only two have done so: Bank of America and Washington Mutual Inc.
Ok, what are the odds of Covered Bonds working for the Irish mafia?
Booner Pickins Boogers is on CNBC now praising Paulson and his bailout plan.
Also predicting $150 oil by next year.
TOOL.
OuterBeltway: i like your plan (use existing sound banks) better than mine, but I'd fence them in with some restrictions and equity to the gov't. if they need/take Fed/Treas. support.
Willem Buiter has his unique take on political fallout arising from yesterday's rejection of the Paulson plan.
I am deeply disappointed in his work of late. He seems to be an apologist for the banks rather than a visionary thinker.
Trotsky,
All good points. No answers here though. Although I think the fed will err on the side of inflation.
That's why I like short term tips.
Thats Ballgame Comrades writes:
Can anyone direct me toward ANY mainstream coverage of whether or not its constitutional for the Senate to change the "rescue plan" and then pass it themselves first?
-================
you can't because it's not.
each chamber of the legislature can consider any legislation it damn well likes, if it passes it then has to deal with the other chamber.
so bills can start in either chamber.
"As the assumptions that had blown air into the bubble began to dissipate, many mainstream reports became increasingly skeptical in their reporting and blogs like Calculated Risk offered increasingly alarming insights."
NYTIMES: Daring to Say Loans Made No Sense
"Its as if the global pool of money thought it was putting trillions of dollars in a savings account, but really, half of it was going into a furnace. The money is gone, burned up, never to come back. That was five months ago, and now that same furnace is about to burn public money."
Also predicting $150 oil by next year.
If you're not in depression by then it could come true.
But the panic and triumph as conveyed by posters here is not justified...
Right, so why do we need this bailout again?
Ross writes:
Raising FDIC insurance is a smart thing to do. Right now Aunt Em is shuffling her accounts around to 'protect' her assets. FDIC insurance is a salve but it works for J6P.
For some reason, I have doubt that J6P (or the 'average American') has over 100k in his checking account. Are we now a nation of savers?
--
Jas quoting Spengler? Good boy. I've always thought of myself as a Spenglerian Pirate. "Intervene amongst the interveners and gamble with money as a ware!"
Ross,
I have read everything that Spengler wrote that I could find in English. The same goes for Schumpeter, Hayek, Durant, Mencken, Tocqueville, etc., etc., etc.
Jas
HIG=AIG
HIG - 15.90 -32%
hehe
Ciao
MS
a little off topic, but last week I got a letter from Wells Fargo (my mortgage holder) practically begging me to apply for a HELOC. I also took a day off last week (went to the zoo) and was approached by a street solicitor trying to get me to sign up for a credit card (I didn't bother to even find out who was offering it - I wish I had now).
Is credit freezing up for everybody, or maybe just for people who are at risk of default?
Some good commentary on the bailout!
From CNN.com:
Commentary: Bankruptcy, not bailout, is the right answer
The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.
Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.
In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources.
Thoughtful advocates of the bailout might concede this perspective, but they argue that a bailout is necessary to prevent economic collapse. According to this view, lenders are not making loans, even for worthy projects, because they cannot get capital. This view has a grain of truth; if the bailout does not occur, more bankruptcies are possible and credit conditions may worsen for a time.
Talk of Armageddon, however, is ridiculous scare-mongering. If financial institutions cannot make productive loans, a profit opportunity exists for someone else. This might not happen instantly, but it will happen.
Further, the current credit freeze is likely due to Wall Street's hope of a bailout; bankers will not sell their lousy assets for 20 cents on the dollar if the government might pay 30, 50, or 80 cents.
The costs of the bailout, moreover, are almost certainly being understated. The administration's claim is that many mortgage assets are merely illiquid, not truly worthless, implying taxpayers will recoup much of their $700 billion.
If these assets are worth something, however, private parties should want to buy them, and they would do so if the owners would accept fair market value. Far more likely is that current owners have brushed under the rug how little their assets are worth
Only a sovereign can spend first, borrow later.
I think that is why the Euro is a more stable currency than the dollar. It's harder to get that many countries to agree to inflate.
exactly - this is an argument FOR euro, not against it. Countries should not be allowed to print on a whim to get rid of their debts.
Just try to remember that people here often talk their books, not some honest impartial analysis.
Commentary: Bankruptcy, not bailout, is the right answer - CNN.com
[an argument for lower interest rates]
"The money that the Fed has pushed through its emergency lending window, now well into the hundreds of billion of dollars, has done nothing beyond strengthen bank reserves. Not a trace of it has shown up in the lending markets."
As I've mention before, the problem is (has been) duration mismatch. The Fed is lending overnight; it's needed at 1-3 month durations. Now that the Fed is going to widen its 84 day window that should improve.
Lower interest rates is not a good idea. If anything, rates are too low. It's not like a 3% interest rate is the end of the world. Right now we have too much demand and too little supply. Lowering rates makes that worse.
Thank you, pharniel
I had heard (incorrectly) that spending bills had to originate in the House and pass there first.
Thats Ballgame Comrades writes:
Can anyone direct me toward ANY mainstream coverage of whether or not its constitutional for the Senate to change the "rescue plan" and then pass it themselves first?
+++++
It's my understanding that the bailout, because it appropriates funds, must constitutionally be a House, not a Senate, bill
Lenihan to let house prices fa
Lenihan to let house prices fall - Times Online
There will be no reduction in stamp duty for housebuyers in next months budget, because the government has decided not to prevent the downward correction in house prices.
Income tax rates are also likely to remain unchanged despite pressure on Brian Lenihan, the finance minister, to compensate for falling tax revenues from the housing and retail sectors by finding new sources of finance.
Lenihan and Brian Cowen have been stressing that a downward correction is under way in the Irish housing market and that no intervention on their part should impede that process. The message from government is that builders who want to shift stock should drop their prices, said one senior political figure. Nothing that will interfere with house prices will be done in this budget.
Bono needs more cash, send Covered Bond help!
There are three pillars to prosperity -- economics, politics and, most important, ETHICS.
Commenting on economics without ethics, or morality, is sterile and boring. Free markets devoid of morality turn into fraud markets. That is what we got in America -- a Scam Market. Only born-and-bred American dopes failed to see this in late 1990s.
Jas
Jas
Buiter was right about the dimensions of the crisis. But now it's clear he cares only for banks, not "populist" stuff. That was obvious from a post of his a few days ago.
If there was a real sense of panic -as portrayed in this blog -, you would expect these markets to show it.
you wouldn't be satisfied until we have tanks on Times Square, would ya?
Well, we are working on it.
Buiter was right about the dimensions of the crisis. But now it's clear he cares only for banks, not "populist" stuff. That was obvious from a post of his a few days ago.
I believe the technical term is "Prat." Of course, I might prefer to use "wanker" myself.
you wouldn't be satisfied until we have tanks on Times Square, would ya?
Well, we are working on it.
Missing Bag
Tomorrow, my friend. The tanks will be gassed up and ready tomorrow.
potato cannon (rather than bazooka) more like it, eh CR?
What is a Covered Bond?
Market Pipeline: What is a Covered Bond?
In an FT article at the end of June, John Murray Brown described Irish covered bonds thusly:
The Irish covered bond - branded as an "asset covered security" or ACS - is a bond underpinned by Irish legislation and backed by a ring-fenced pool of assets on the issuer's balance sheet.
It is essentially a secured debt instrument that enjoys special status under the European Union's rules - specifically the directive for undertakings for collective investments in transferable securities, known as Ucits, introduced in 1988...
Maybe the problem is that these things are basically German, and no one can translate German into English:
fresno dan, is that the zoo at Roeding Park? I have pleasant childhood memories of that place.
Somebody's pumped perfusion fluid into the carcass of O-Joe.
The Senate can just take up old reliable HR3997 and stuff whatever filling they want in that sausage. It's still a House bill.
The Constitutional provision is made a mockery by Parliamentary trickery. 3997 started out long ago as a bill for benefits to military families!
deb writes:
Can you please comment on your opinion of the viability of a plan like this? Seems like it is great as far as restoring confidence, but if they actually had to make good on 450B Euro it would quickly BK the country.
Anyone who could actually post an educated opinion would be much appreciated.
I think you just did.
Damn parliamentary tricks!
Well, I happen to know a voting-booth trick. It's called Oust the Bailout Politicians.
Section 7 of the Constitution -- All bills for raising Revenue shall originate in the House of Representatives
So I think I was wrong because the bailout only appropriates money, it doesn't raise revenue. Just my uneducated take.
We're up 300.
If one more politican says that "Down 777" sent a message, I'm going to bop him or her in the nose.
We're basically back to where we were yesterday morning before the "panic" about the bailout not passing set in.
European Statutory Covered Bonds: New Opportunities For Commercial Mortgage Finance
http://www.cadwalader.com/assets/client_friend/061008EuropeanStatCovBondsConor.pdf
June 2008
In addition, both the UK and Ireland allow AAA rated CMBS to be included in the cover pool subject to the same LTV requirements that apply to commercial mortgage loans in each jurisdiction. However, in the UK, CMBS may be included in the cover pool only if the underlying mortgage loans were originated or acquired by the covered bond issuer or an affiliate 13 . At present no such restriction applies to Irish covered bonds (the Irish Covered Bond Act requires that the CMBS must be issued by an EEA-incorporated issuer) although the Irish Financial Services Regulatory Authority (IFSRA) is given powers to impose a variety of limitations on the inclusion of CMBS in the cover pool.
Both regimes allow commercial mortgage loans (or CMBS) secured on property located in the European Economic Area, Switzerland, the United States of America, Japan, Canada, Australia and New Zealand to be included in the cover pool. Additionally, Ireland allows 10 per cent of the pool to be secured on property in other OECD countries.As can be seen, a number of subtle differences exist between the UK Covered Bond Regulations and the Irish Covered Bond Act. However, the choice of jurisdiction for a potential issuer of covered bonds will also depend to a significant extent on where it is authorised as a credit institution or (if it does not already have suitable authorisations) where it wishes to be authorised
Why do people keep talking about voting out the incumbents? Ousting the bailout supporters only works if the other candidate has another position. This issue didn't exist when the current slate announced themselves.
We all know the 'chosen ones' in the US: JP Morgan, Bank of America, Citigroup (too big to fail now, like that's a good thing), Wells Fargo
What about international: Banco Santander, HSBC, Nomura, Royal Bank of Canada, Mitsubishi, Toronto-Dominion, Deutsche Bank, Bank of Nova Scotia, US Bancorp
Who's got the power dry and the ambition for acquisitions?
I think Deutsche Bank is beholden to bailing out German banks, Mitsubishi is already committed, Santander will digest what is has until the real deals come out. The Canadian banks have been quiet other than acqusitions of Etrade Canada by Bank of Nova Scotia, and TD with Commerce Bank
BBVA from Argentina could make a run for things. The British banks are dead in the water, unlike Spanish banks they truly believed house prices never go dow
Why the Senate can move this bill:
It's a parliamentary procedure - the bailout bill is not a newly introduced piece of legislation - it is the House amendment to the Senate amendment to the House bill that the House passed in form, the Senate in another - clear so far?
So some earlier bill that had diddly squat to do with the bailout is hollowed and used as the vehicle to pass the bailout legislation.
What it means is that technically, it did already start in the House and move to the Senate - observing the letter of the law.
drudge has link to todays Financial Post "Bailout marks Karl Marx's comeback"
Margin Call of Cthulhu writes:
That's not an Irish bazooka. It's an Irish Potato Cannon. {{rimshot}}
beat me to it
The US Constitution on revenue bills: (which include spending):
Article I
Section 7 - Revenue Bills, Legislative Process, Presidential Veto
All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.
I think if the Senate starts with the House Bill (even if not passed), they may amend it and pass it.
If they must have passed House bill to amend, then I think they can pass their own bill and then the conference committee could amend the house bill to include the Senate language.
This is sort of a minor matter, and I think they have an established procedure to conform with the language of the Constitution.
Bail Out alternative.
The View From The Peak: Bail-Out: What's the alternative?
Has this Ever happened before? Where they used a prior appropriations bill, and caused it to be passed in the Senate before it was passed in the House?
deb writes:
Can you please comment on your opinion of the viability of a plan like this? Seems like it is great as far as restoring confidence, but if they actually had to make good on 450B Euro it would quickly BK the country.
They are not making a 450bn bet. They are betting that their regulatory bodies can shut them down quickly. Ireland is in the top 5 for bank diversity, they can easily arrange mergers
Why do people keep bringing up the Constitution? I thought I made my decision clear:
The Constitution is a God damned piece of paper!
Comrade Scared Shitless: yes, it's been done before many times over many decades.
OC mortgage broker says I can still get the same loan I qualified for last month. No crisis here.
roubini on bloomberg tv at 12:20pm easter
Who van forget that wonderful day, when father John dumped his tsunami of holy water on the banks that needed liquidity in the form of pooled derivatives -- which were blessed by heaven-sent guarantees? It was as if underwriters were sent a tsunami of financial angeles! That was God's will there and of course, no risk in the details provided by Mephistopheles...
Irish covered bonds
Legislation has now been passed bringing in the Irish Covered Bond Act. This will enable the Central Bank of Ireland to issue bonds against pools of assets, which are either public sector debt or property debt. The general conditions under which this market would develop in Ireland has been well described in many other sources. Needless to add that DePfa, a long established and well known player in Germany, in both the public sector mortgage bond and property mortgage bond, will make extensive use of the Irish legislation to issue from Ireland.
Legislation recently passed is conservative and allows for very high quality securities to be issued by Irish entities.
Some small details and preparations will still remain in early 2002 before the first Irish issue is made. The capital markets in late 2001 were not generally favourable for medium to long-term issuers but this may well change in 2002.
The legislation recently passed is conservative and allows for very high quality securities to be issued by Irish entities. These will get the highest of credit ratings from the rating agencies and should ensure that the investor gets the quality of paper required. Liquidity will be a key factor and as Ireland, a small country, lacks the investor base for large volumes of covered bonds, the advantage will rest initially, at least, with existing players who have already well-established investor bases in Europe, the Far East and North America. It is important that the Irish market commences operations relatively soon as other countries are in the wings with their own Pfandbrief (mortgage bond) legislation. Further liberalisation of the German legislation is also expected in 2002.
Why was King george's speech this morning, a nothingburger?
Amazing that he still thinks that just by going out and talking for a couple of minutes, he makes us feel better.
OT #1.I miss the old regular posters.
OT #2. Jas and Godhatesfangs, the problem with the bilical proscriptions on usury is that they damn the lender, not the borrower. So it's fine to borrow for a McMansion, but not to make that loan.
The Irish may have finally discovered how to spin straw in to gold. That is the only answer to why they would do this.
It's Official Folks:
The old guy is calling bottom on CNBC.
I don't think you guys realised just how close the Irish banking system came to complete collapse yesterday. If the Irish Central Bank didn't take action, one of the Irish banks would have failed this morning. FACT!
Yesterday it suffered its greatest every one day loss. Every single Irish bank was down by huge amounts because of fears it lent too much money to property developers.
Irish banks share prices are now so low, it's going to be very hard for them to recapitalise.
Old Guy: "I See Signs That Housing Is Bottoming."
Exact Quote.
You wankers are off topic, this is friggn Irish Covered Bond day and the bailout of the irish mortgage mafia -- take this shit about the yanks to a new blog!
If we're able to take these politicians down, can we go after the Bubble Heads on the Corporate Whore Media next?
I'd much prefer some unatractive intelligent folk.
I don't think you guys realised just how close the Irish banking system came to complete collapse yesterday
Yes we do! Off to the pub!
fresno dan said: "a little off topic, but last week I got a letter from Wells Fargo (my mortgage holder) practically begging me to apply for a HELOC. I also took a day off last week (went to the zoo) and was approached by a street solicitor trying to get me to sign up for a credit card (I didn't bother to even find out who was offering it - I wish I had now).
Is credit freezing up for everybody, or maybe just for people who are at risk of default?"
Similar story with me. My bank recently solicited me with an offer to dramatically raise my HELOC, at a below-prime rate of interest.
Sebastian
can we talk about McPalin?
Off topic: Russian trading halted again.
Jim,
Do we really have to?
The Town Improvement Ireland Act of 1854 forbade men to expose themselves - apparently this was mainly aimed at urination in public, obviously just a male problem.
The Public Order Act of 1935 criminalizes nudity - if the nudist intends to offend.
Irish Nudism - The Naked Truth About Baring it all in Ireland
That was a test
Ross writes:
Raising FDIC insurance is a smart thing to do. Right now Aunt Em is shuffling her accounts around to 'protect' her assets. FDIC insurance is a salve but it works for J6P.
Ross | 09.30.08 - 11:38 am | #
The total bank run from a dollar measure is the same but the lines are shorter... all those Aunt Em's staying home and all...
Can anyone give a link to European credit card balances?
For the USA, Credit Card Debt Stats
Average card is using 59% of its limit -- I think Ireland's gov't is doing some textbook work right now, but how many waves of the credit crisis can any one government take?
Sebastian's been huffing Trioxin fumes.
He'll be coming for our braaiinnss shortly.
Sebastian...is that really you?
Hey MP, latest bloomberg headline reads
Senate Leaders Vow to Pass Bailout Plan This Week After Market's `Message
In Ireland some people are commenting already:
--How can Irish gov't guarantee 400Billion? Where are the assets?
--What does the Irish taxpayer receive?
Apparently banks will have to pay an increase in their insurance costs, but the details are not yet worked out. . . Hmmmmmm. . . (Any devils lurking in those details perhaps?)
The guarantee only applies to 6 Irish banks, not to foreign-owned banks.
One commentator says the Irish gov't was particularly eager to stop multinationals from withdrawing their funds due to the uncertainty. (Irish bank shares have lost something like 75% of their value compared to 18 months ago. Not necessarily a reflection on their balance sheet, but doesn't inspire confidence.)
Comrades,
Irish Gov't should have just gone to Cork, and kissed the Blarney Stone.
Or maybe they did.
Nostrovia,
are you kidding me! said: "Sebastian...is that really you?"
I'm probably hard to recognize through all the smoke being blown here.
S.
Senate Leaders Vow to Pass Bailout Plan This Week After Market's `Message'
The real message they should be watching is up JUST 2.5-3.5% when everyone says the bailout will definitely get done this week.
A raise in the FDIC insured amount would take care of businesses who have to meet payroll, expenses, etc. The ones who are financially sound. My son owns a business in Santa Monica and he his partners are considering having to spread their money between banks. They started their business by soliciting private investors. They don't depend on borrowing from banks. They are doing well and paying back their investors.
As I watch the debates in the House yesterday on thing that kept being mentioned was losses of main streets pensions plans, 401K's and IRA's accounts. What no one did mention however is it was the same clowns on Wall Street that sold them this bill of goods. Somehow putting that in the equation wasn't brought up.
I don't see a credit crunch. Everyday I get junk mail offering loans, credit cards, and mortgages.
I think their is a credit crunch for insolvent banks and borrowers, but so what.
I believe the Art. 1, Sec. 7 issue can be addressed by tacking Senate language onto a House-originated bill that has already passed. That bill will then need to go back to the House, but there are numerous bills before the Senate that have passed the House which could provide such a vehicle. It may not be established whether there is any functional difference between appropriating revenue and "raising revenue" per Sec. 7, however. I believe constitutional scholars are not in agreement on this issue. Any lawyers in the house want to weigh in? Is Lawyerliz around?
OT -- DCRogers, if you succeed in objectifying Cramer, let us know. I want someone with that much creativity to be nominated for Secretary of the Treasury.
"riverrun, past Eve and Adams, from swerve of shore to bend of bay, brings us by a commodius vicus of recirculation back to Howth Castle and Environs."
Finnegans Wake - Wikipedia, the free encyclopedia
Also see: YouTube -
I think their is a credit crunch for insolvent banks and borrowers, but so what.
YES!!! Let them fail, and lets move on, no Japan Redux!
And what Stephen said.
One bank in particular (Anglo Irish Bank) had lots of exposure to potentially bad CRE loans.
Seriously huge property bubble burst is ongoing in Ireland. (Things moving if you drop the price 40% or more.)
COMRADESS writes:
Hey MP, latest bloomberg headline reads
Senate Leaders Vow to Pass Bailout Plan This Week After Market's `Message'
What about TODAY'S market message? Are those bought-out politicians going to willfully ignore THAT?
Anecdotal: Discover just doubled my minimum payment on a 3.99% balance transfer.
In case you thought that only our gov't was good for tongue-in-cheek humor, check out this from the Irish Times:
"Taoiseach Brian Cowen said today that taxpayers will not be liable for any deficits that might occur as a result of the Governments decision to place an unlimited guarantee on all deposits and certain debt in six Irish banks. [...]"
jes writes:"... the problem with the bilical proscriptions on usury is that they damn the lender, not the borrower..."
I'm not against usury nor do I believe in the Bible as the inerrant word of God--dawkins atheist that I am.
I was speculating where jas jain was coming from. Possibly pre -twentieth century financial calvinist
who knows the quote "who goes a borrowing goes a sorrowing" versus the twentieth century post rapture doctrine prosperity christian.
Senate Leaders Vow to Pass Bailout Plan This Week After Market's `Message'
The thing nobody mentions is that commodities fell 6% yesterday.
I really think de-leveraging will help main street as it will rein in commodity speculation and inflation.
If they pass a bailout, they'll be propping up dinosaur IBs and letting the economy go the same route that Japan's economy went.
We've been over all of this before.
Let them fail.
I'm giving myself a little pat on the back for my HIG predictions of the past 3-4 months. Down 25% today.
I wonder how long it will take for Prudential (PRU) to follow? Time to back up the truck on puts?
If they must mess with the economy's control levers, use the $700 billion to actually help the people who need help.
The thing nobody mentions is that commodities fell 6% yesterday.
I really think de-leveraging will help main street as it will rein in commodity speculation and inflation.
McAngry O'Saver | 09.30.08 - 12:21 pm | #
Have any American politicians been making the connection between no bailout and deflating gasoline prices? If they get that into the press it would be an animal unto itself
Some of the old-timers are still lurking; and many of the newer folk will "stick," so it's all good. Just a lot of activity to digest over the last few days/weeks/dollars.
Senators so far are acting like a bunch of news-stand operators when Vito and teh Boys come lookin' for this months "insurance" payment.
It's a stone-cold shake-down, and the Senators will wet themselves in their hurry to appropriate funds for teh Boys.
Which will predictably and assuredly cause the next leg down, as the dollar falls, driving oil back up & slowing the "real" economy.
Hang on to your hats, folks, it gets interesting from here.
McAngry O'Saver writes:
I don't see a credit crunch. Everyday I get junk mail offering loans, credit cards, and mortgages.
I think their is a credit crunch for insolvent banks and borrowers, but so what.
McAngry O'Saver | 09.30.08 - 12:16 pm | #
The fact you are getting solicitations is not a good measure of quantity of available credit or ease of getting a loan.
It is common in business to 'sell harder' when business is worse... not cut back on selling. So if they can only lend to the highest quality borrowers and there are far fewer of them then they have to send out even MORE solicitations to find & capture their slice of a shrinking market.
In my biz we measure both the number of RFQs we chase AND the hit rate (number turned into business)... in tough times the number of solicitations & RFQs we pursue skyrockets, the 'quality' of those solicitations declines (we get less fussy) and the hit rate collapses.
That is exactly where a lot of lenders are now - they don't need more dodgy borrowers - they need more high quality borrowers. Those are tough to find so they look hard as hell.
I really think de-leveraging will help main street as it will rein in commodity speculation and inflation.
McAngry O'Saver | 09.30.08 - 12:21 pm | #
Have any American politicians been making the connection between no bailout and deflating gasoline prices? If they get that into the press it would be an animal unto itself
That's a good idea. Somebody should float that biscuit over to MISH. He'll run with it too as it supports his deflation theory.
mp writes:
If they must mess with the economy's control levers, use the $700 billion to actually help the people who need help.
mp | 09.30.08 - 12:24 pm | #
Is that from CB's Little Red Book?
interesting or ironic that Jas The Jain seems to have a better handle on Christianity and its relation ( or woeful lack thereof) with our current society and economic system.
2 quick points:
There's actually a good course on the biblical perspective on personal finances called "Crown Financial Ministries" and no it's not a bunch of Bible thumpin heeby-jeebies. (speaking as a left winger)
One of the biggest questions that might be raised by all this current brouhaha is are the western democracies even vaguely Christian?
Comrade mp,
"use the $700 billion to actually help the people who need help."
Wouldn't actually help. The gov't would be sucking what little capital is left in the economy to rebuild itself.
And a lot of the people who "need help" were speculating on housing, or living high on the HELOC hog. Thye need to crash and burn too.
Nostraovia,
That is exactly where a lot of lenders are now - they don't need more dodgy borrowers - they need more high quality borrowers. Those are tough to find so they look hard as hell.
That's the whole point right? Banks now are returning to the arcaic practice of lending money to people that can pay it back.
Now we call it a "credit crunch"
****!$*********$$$$$$$$*$ ****
Host of factors contributed to bailouts demise
Ninety-five freshman, Hispanic and liberal Democratic lawmakers voted against the bill.
Host of factors contributed to bailout’s demise - Phoenix Business Journal:
LOOK at this story being spread at Google: Results 1 - 10 of about 77,000 for Host of factors contributed to bailouts demise
http://www.google.com/search?client=safari&rls=en-us&q=Host+of+factors+contributed+to+bailouts+demise&ie=UTF-8&oe=UTF-8
Ninety-five freshman, Hispanic and liberal Democratic lawmakers voted against the bill.
Ninety-five freshman, Hispanic and liberal Democratic lawmakers voted against the bill.
Ninety-five freshman, Hispanic and liberal Democratic lawmakers voted against the bill.
Is this America???
The whole "credit crunch" concept is a misnomer.
We have a systemic bank insolvency problem stemming from too much bad debt.
Anyone with decent finances can get credit.
The perils of easy money.
Paying back loans is for wimps.
better them than us
I had to laugh at Bush this morning; did everything but threaten to hold his breath until he gets his bailoutz
Scolding Congress for inaction. What nerve!
Anyone with decent finances can get credit.
Soon not to be true I'm afraid.
it's great that the hispanic contingent voted it down, there representing the hardest working voter contingent.
I haven't seen much if any coverage on the FED's pumping in 630 BILLION yesterday. What difference is another 700 billion?
Anyone with decent finances can get credit.
Soon not to be true I'm afraid.
Banks will not stop lending, someone will take their place...the desire for a profit will always be there. Aramgeddon didn't happen the way BushCo said it would, my ATM worked this morning, the lights turned on, this is all about saving failed IB's that should go out of business, the whole country will be better off for it.
--
"One of the biggest questions that might be raised by all this current brouhaha is are the western democracies even vaguely Christian?"
Anonymous,
Modern democracy (quite different than ancient) is very Christian in Origin. Of course, some Jews wrote a book on Hebraic Roots of American Democracy. Christianity, like Islam, is a universal religion while Judaism is not.
Jas
So look at these shit-eating grins: CNN.com - Breaking News, U.S., World, Weather, Entertainment & Video News
and tell me why we need a bailout?
What the hell, I'll flog my proposal one more time:
Works Progress Administration II
- mass transit
- clean renewable energy (solar, wind, geothermal, tidal, even nuke - NOT ethanol
- last mile fiber optic
- sewers
- basic research
- education
$700 billion spent that way would have constructive use and build a base for the future. $700 billion given to insolvent banks would be a ripoff of the poor and middle class to pay for wealthy bankers mistakes and misdeeds.
Aramgeddon didn't happen
Right. Almost two weeks on death watch and still on Armageddon. I love the logic that 777 proves we need the bailout. Sooo, Wall Street was expecting a bail out and got it postponed. The market goes down. Nice logic if you can sell it.
I haven't seen much if any coverage on the FED's pumping in 630 BILLION yesterday.
They're trying to soft pedal that, as the Fed was already 150 billion in the hole last Thursday. Gonna kinda lead people to asking, "gee, how do they keep getting all this collateral?"
Can't really play up the fact that the only think keeping the Fed afloat is White House paper, no doubt way beyond the authorized spending limits and issued under some sort of emergency authority.
anonymous writes:
"One of the biggest questions that might be raised by all this current brouhaha is are the western democracies even vaguely Christian?"
Depends on how one defines Christian. Wall Street area nyc churches had a new revelation in the late 1870s to explain how little work could make some people rich while impoverishing the hard working farmer. They certainly couldn't keep the big donations flowing if they railed against their superrich parishioners.
Thats Ballgame Comrades
The Irish banks are not being bailed out that much. Upping the deposit insurance in exchange for raised premiums. The Irish government will lose a marginal amount of money which is insignificant compared to repeated bank runs
That's the whole point right? Banks now are returning to the arcaic practice of lending money to people that can pay it back.
Now we call it a "credit crunch"
McAngry O'Saver | 09.30.08 - 12:31 pm | #
because no one lends to the bank also (see LIBOR)... no reserves means less to go out.
A credit crunch is when banks only lend to those who don't need it. We are there. Granted we got there by overshooting from a place where banks were lending to fogged mirrors... regardless they are overshooting...
Example: a company we buy services from refuses to buy a piece of equipment worth about $100K unless we give him a rock solid multiyear contract IN WRITING... we don't have a firm contract from our customer only a 'forecast'... the forecasts they give us have been good but it isn't a contract... the business to us and to this service provider is WAY more than $100K - he should easily pay off in a couple years. But he can't get a loan and doesn't feel safe putting his own money in - not now.
In the past you plop down the money or take out a loan & take a chance the program pays out - if it doesn't you try to use the machine for other customers... most of the time it works out but there might be a year or so when it sits idle. The loan payments are small enough you can do that... if it was a lump sum you couldn't.
So until he gets a loan it isn't getting done - my customer will import the parts from Asia for now.
I run into crap like this everyday - way more recently than at any other time in my working career. Worse than the 80's were the credit hurdle was interest rates (strangled business badly but at least you could get a loan if the projects IRR was high enough)...
Modern democracy (quite different than ancient) is very Christian in Origin. Of course, some Jews wrote a book on Hebraic Roots of American Democracy. Christianity, like Islam, is a universal religion while Judaism is not.
As long as we're spouting mumbo jumbo, isn't American democracy based on the Iroquois Confederacy?
Comrade mal,
"isn't American democracy based on the Iroquois Confederacy?"
Silly me, I thought the US had a constitutional representative republic.
My bad.
Nostrovia,
OT:
As of this morning, I can get Certificates of Deposit through my Schwab account from "Goldman Sachs Bank" and "Morgan Stanley Bank".
Bush may be ready to turn blue and hold his breath, but it is more likely that he issues the Mother of All Executive Orders that gives Paulson exactly what was in the original treasury bill.
Conspiracy Theory: Bush/Cheney sent a stink bomb to Congress knowing that it might fail and thereby give them the excuse (Save the Country!) to not just ignore the laws and Congress but to take their powers.
Post of interest at NakedCap:
Merrill: Low Treasury Yields to Go Even Lower
"the way to think of this credit collapse is that it is secular in nature, not merely cyclical and also deflationary. Those who believe that weve managed, in one day, to switch from a deflationary to an inflationary backdrop because of additional government debt creation are not taking into account the offsetting credit contraction in the private sector, which comes from three sources: asset liquidation, debt repayment and increased savings. The Fed and Treasury are merely cushioning the massive deflationary forces in the financial system."
I am in the deflation camp...Japan pumped massively with fiscal and monetary policies in the 90's and didn't avoid deflation due to the credit destruction.
Anyone remember JP Morgan or Chase's run on something (was it also banks) during the Great Depression. Didn't they short the hell out of a bank and that enabled them to take it over. Now I know banks are in trouble, all this financial garbage/products have RELATIVELY no value, but why did JP write WaMu's loans down sooooo sooooo sooooo much? So they could take it over? Citi was definitely the unexpected winner in this because of the "close correlation" between WaMu's and Wachovia's garbage product portfolio. I think where there is a smell, there is something fishy going on?
ANYONE???????
The short end is leading lower despite such juiced expectations with the 2-10-yr yield spread modestly flatter at 187.8. The really short stuff remains well bid keeping the 3-mo-10-yr steeper at 345 and just shy of Fri's 373. Overnight Libor spiked to 6.87% (a record high according to Bloomberg) while 3-month went up to 4.05% suggesting fear remains and interbank lending is still paralyzed. Bond prices in the EuroZone are soft as the ECB is likely to resist the urge to cut rates when they meet Thurs while in Japan, bonds were bid on crumbling stocks. Treasuries will have some data to glance at today but nothing big enough to get prices out of their comfort zone. The 10-yr yield looks lodged between 3.55% and 3.90% until trade gets a better sense of where the economy is headed, or confirmation on where it thinks the economy is headed.
Too bad that their whole country isn't even worth $500 billion. What a bunch of idiots. Isn't Ireland the headquarters for Microsoft and thousands of US companies that seek corporate tax shelters? Let 'em burn.
dryfly,
Interesting anecdote on the supplier...my question is if the guy doesn't feel safe putting his own money into the equipment, why should a lender lend him the money? If he has retained earnings in the form of cash and wants the business, perhaps he needs to step up to the plate.
JPMorgan and Citi may have done some dirty tricks, but with JPM valuing Wamu's home equity book at 75% of face, they're going to lose a lot of money. Citi may come out OK in this, but even there the FDIC spent a lot than it would otherwise have had to. So I'm pretty content with how that worked out.
What happens when the J6P's balance transfer offers dry up and there are no more roll overs.
Many Americans borrow short and spend long. Same situation as the banks.
And noone's going to offer them 700B of "recapitalization." What then?
Just to kill forever the theme that Nancy Pelosi's mean words blew up the (damnable and ill-conceived) bailout bill yesterday:
John Shadegg (R) basically calls out Boehner and Cantor as embarrassed liars:
Talking Points Memo | Shadegg: Pelosi's Speech Had Nothing to Do With Bailout Defeat
We can't possibly live without bailouts. Life would be much too difficult to bear.
I can't get through to my Congressman, anyone else having trouble?
Congressman Norm Dicks
"Davy Research analyst Scott Rankin said: "The Irish government has taken out its bazooka."
Oh, good, a weapon 60 years out of date. That'll help, against the M-1 Abrams of insolvency.
"This is where the whole euro project comes apart at the seams"
And how is the economy of Alabama and Lousiana doing? Are those welfare states planning to issue Lousiana and Alabama dollars, instead of using US ones? Yeah, that would really solve their problems...NOT!
I just go through to the Dicks web sight, what should I say?
Congressman Norm Dicks
My letter to the editor ran today:
Message to D.C.
Rather than recount the failures of the bailout policy in either the Henry Paulson or Chris Dodd/Barney Frank incarnation (on both moral and effectiveness grounds), the message the public must send to Washington, D.C., is this: I am now a single-issue voter. My lifelong partisan affiliation is on hold; I will vote against every incumbent who supports this bailout.
I'll tell that to Dicks too!
I will vote against every incumbent who supports this bailout.
Okay,
How about this for a bailout-
mark to market suspended for 1 year
New program for homeowners,buyers
For current homeowners
1) They come up with 5% cash of there current home loan, no matter how far under the government would grant them 10% assistance(gift) and 5% zero interest loan for 15 year payoff. Now they would need to qualify for fixed interest rate loan. This allows some to remain in the home. It means now if they default first 5% of there money is taken, next 10% of gift, and if any left over goes to 5% loan. They also don't have to pay PMI for at least 2 years
2) New buyer deal- each region has its' median home price, Take 10% of that as gift, 5% zero interest 5% there own money-They also have no PMI for 2 years- If foreclosed or short sale-they loose first then 10% gift then 5% loan then bank.
New buyers can buy several houses with first house 15% deal, second house 5%gift 5% loan 10% their own money, third house, etc.
This puts in a floor of up to 20% more down fall without banks getting hit. 700B divided by the number of distressed homes out there times 15% of there median is a hell of alot of homes.
Wall street gets no direct bailout
Local communities and tax bases stabilize
So little guy gets bailed out savers get a chance for a home and we see if trickle up works for once.
No more time to write
What do ya think?
Comrade Bob Dobbs,
"Oh, good, a weapon 60 years out of date. That'll help, against the M-1 Abrams of insolvency."
LOL.
They weren't even adequate 60 years ago.
Nostrovia,
The 2008 U.S. House of Representatives elections will be held on November 4, 2008, to elect members to the United States House of Representatives to serve in the 111th United States Congress from January 3, 2009 until January 3, 2011. All 435 seats are up for election. Democrats, who regained a majority in the 2006 elections hope to retain or expand their control of Congress.
United States House of Representatives elections, 2008 - Wikipedia, the free encyclopedia
"The thing nobody mentions is that commodities fell 6% yesterday."
And the stock market fell about 6%.
So in other words: the value of the dollar went up 6% in one day! For me, this is great news. Turns out that yesterday was a pretty good day. I don't see any newspapers printing that headline, though. Mark Twain said something like, "The job of a newspaper is to agitate the public, and only blood will do."
(Not an exact quote, but along those lines).
because no one lends to the bank also (see LIBOR)... no reserves means less to go out.
LIBOR is at 6.8%.
Therefore the banks ARE lending to each other, right?
So I don't understand the talk of banks not lending when by definition LIBOR at 6.8% means they are lending to each other at 6.8%.
What am I missing?
"In their wishful thinking world, he always is."
Not wishfully, but in reality. Always.
gr8f8
How about this? Let's throw all the deadbeats on the street and make sure they and their kids pay the money back.
If you borrow money you have to pay it back.
Today is the end of the Federal Fiscal Year. Hmm.
Interesting anecdote on the supplier...my question is if the guy doesn't feel safe putting his own money into the equipment, why should a lender lend him the money? If he has retained earnings in the form of cash and wants the business, perhaps he needs to step up to the plate.
Kung Fu Panda | Homepage | 09.30.08 - 12:56 pm | #
Because that's what lenders do - lend - its like insurance - they KNOW some loans won't be good but in aggregate most all should be okay so they make money IN AGGREGATE.
But the little biz guy can't directly invest a BIG chunk of the liquidity he has into a project like this unless he can borrow against the 'collateral' later if he has to... IN A PINCH. Right now he can't borrow so its dead either way...
So he doesn't buy it himself & can't get a loan to buy it so it doesn't get done. It is a perfectly reasonable thing to do in this environment (walk away from business - even if it means lay offs).
The only people who don't get it are those who have never been there. For them it doesn't seem 'reasonable'.
This situation will all correct in time - question is will it be slow & painful (with a lot more overshoot yet to go through) or can gov't goose the banks a bit to speed up recovery... I think gov't can goose it a little bit but not a lot. Paulson-Bush are overselling the opportunity for recovery vi a goosing while underreporting the cost.
CR's model of how to goose via an RFC-like recapitalization is the best route IMO but would still be slow & somewhat painful... The Paulson Plan from what I can see would be 'faster' more expensive and the lessons of moral hazard would be missed so we'd probably be back to overly loose lending pretty fast. Paulson Plan isn't good...
Borrowers and lenders use contracts.(Banks, Commercial Paper, Ford, homebuyers, Insurance, all)
First respect the remedies within the contracts. Is the remedy injurious to the General Welfare and a barrier to the pursuit of life, liberty and happiness?
Only then move toward special measures for special circumstances and avoid doing it in the dark.
Anecdote: I made a bank (BoA) run today (just to do some business, not to clean out my accounts) and asked the teller if she'd had anyone emptying their accounts. She thought for a second, and said,"Well, some people are yes, but the way things are, they need all the money they can get."
So people at her bank are emptying their accounts, not out of fear of losing their money, but because they're squeezed so hard that they need every last dime they have to buy groceries and pay rent.