Draft: Emergency Economic Stabilization Act of 2008
Submitted by
CalculatedRisk on Sun, 09/28/2008 - 12:01pm (503 comments)
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Recent Recommendations
huh?
????
We've all been "drafted" now...
(a) PRICING.To facilitate market transparency, the
Secretary shall make available to the public, in electronic
form, a description, amounts, and pricing of assets ac
quired under this Act, within 2 business days of purchase,
trade, or other disposition.
Hooray?
Where is Nemo?
Just start Bank of United States. Capiattalize it with $700B of new capital....give all the profits to America.
The beginning of government intervention seems so innocent, so right and good....then it becomes a slippery slope down into socialism, communism and government control....
...within 2 business days of purchase, trade, or other disposition.
AFTER disposition.
what does it mean?
The greatest fraud in world history.
Hi all,
I've updated my CR reader bot. This is a tool that I use to read the comments without having to hit F5 to refresh haloscan. And now you can post comments through the bot to haloscan.
I have spent a few nights programming this and tweaking it, mainly for my own use. I am providing this as a service to CR readers as a way to give something back.
You can try it out by visiting:
Mibbit IRC client widget
It will redirect to mibbit.com, where you can type in a name and then click to join chatroom. Mibbit places a small ad on top, but its better than worrying about Java applet security.
Or connect through irc directly: irc.realize.org:9996 #calculatedrisk
Rob Dawg writes:
...within 2 business days of purchase, trade, or other disposition.
AFTER disposition.
Awww hell!
I'm reading now. The warrants are very vague - basically the Secretary can negotiate "reasonable" warrants (or senior debt).
"to provide for reasonable participa tion by the Secretary, for the benefit of taxpayers, in equity appreciation in the case of a warrant, or a reasonable interest
rate premium, in the case of a debt instrument;"
Best to all.
As Newt said on ABC today (OMG, I'm quoting Newt): We're creating a 20 year government agency to fix a 2 week problem.
Inflation can get out of control, but mainly it kills creditors. When the lenders have too big a piece of the pie, time to print. Greenbacks, Jenning Bryan, it's all coming back. Republicans are afraid Obama will short circuit the Fed and hit reset.
Andrew Jackson stuck it to the creditors, but didn't know to manage inflation and let private banks print money. Then he stuck it to the new banks and went to gold and silver, which swung the pendulum too far into deflation. Proper balance includes the occasional reset, even the Republicans are saying that now. All a question of top down, bottom up, or some middle ground.
Call their bluff. Effective nationalization or no bailout. Pick your poison: swallow the toxic junk or admit yourself into rehab.
"The beginning of government intervention seems so innocent, so right and good....then it becomes a slippery slope down into socialism, communism and government control...."
Somebody used to say that both heaven and hell are absolute dictatorships. All that's different is... who's in charge.
An activist federal government made good sense is cleaning up the mess of the '20s and '30s, ensuring equal rights, and so on. But put the gov't in the hands of the same type of people who caused many of the early economic problems and... see what happens.
Can we nationalize pro sports? Then we can redistribute the profits and make every team almost exact. The competition would be awsome and the games would be great.
How would we be able to determine if Paulson overpaid for CDO's whose current market value is "Unobservable"?
NO BAILOUT !
CR,
Do you think this is an out to have more warrants than executives want, or less warrants than he public wants?
I can predict what happens.
After much reading and all, people will reject it anyway because it is not specific enough to their liking.
However it will pass anyway.
I cannot open the PDF.
Anyone else?
Using Mac Preview, version: latest.
Trying to avoid that memory hog from Adobe.
"what does it mean?
oriellysloofah | 09.28.08 - 4:14 pm |" #
We're f**ked. First the market for homes was nationalized. FNMA, Freddie, FHA have a 90%+ market share, and the average financing for homes is 90%. Now the entire system of asset purchases in the USA has been nationalized, by making sure the prices are determined by govt, and any shortfalls when assets are bought on borrowed money are covered by the govt.
Teach your kids Chinese. China, the best hope for free markets.
Rob Dawg - I don't read the section like you read it. I read it to require reporting within 2 days of purchase by the government - or any subsequent trades. I'll admit that the language is ambiguous - and could have been made a lot clearer. Roby
They should have as well adopted Paulson's original plan.
why didn't house repubs bring up the pfd share idea... i still don't get it...
"(e) PREVENTINGUNJUSTENRICHMENT.In making
1
purchases under the authority of this Act, the Secretary
2
shall take such steps as may be necessary to prevent un-
3
just enrichment of financial institutions participating in
4
a program established under this section, including by pre-
5
venting the resale of a troubled asset to the Secretary at
6
a higher price than what the seller paid to purchase the
7
asset. This subsection does not apply to troubled assets
8
acquired in a merger or acquisition, or a purchase of as-
9
sets from a financial institution in conservatorship or re-
10
ceivership, or that has initiated bankruptcy proceedings
11
under title 11, United States Code.
12
"
This means GS can't dump off any toxic waste it inherited from WaMu, I hope they weren't counting on that.
(c) FAST TRACK CONSIDERATION.—
(1) IN GENERAL.—Notwithstanding any other provision of this section, the Secretary may not exercise any authority to make purchases under this Act with regard to any amount in excess of $350,000,000,000 previously obligated, as described in this section if, within 10 calendar days after the date on which Congress receives a report of the Sec
retary described in subsection (a)(3), Congress enacts a joint resolution disapproving the plan of the Secretary with respect to such additional amount.
bobbyflav, same issue here w/ MacBook Pro/Preview.
probert, I think it's hard to establish a mechanism in a bill, so they are leaving the negotiations upto the Treasury Secretary. Hopefully warrant agreements will also be made public.
It's all pretty open...
Best to all.
It's 106 pages now. I feel so much better.
"Can we nationalize pro sports? Then we can redistribute the profits and make every team almost exact. The competition would be awsome and the games would be great."
Don't you know about salary caps? The owners forced these on the players when the monopolies were busted and the players could get market wages. The players eventually realized some balance was in everyone's interest but they struck for profit sharing. It worked.
Secretary of the Treasury Diana Moon Glampers.
Paulson can still do what the heck he wants to do, is still dictator.
I bought my house honestly thinking is was worth $500,000. Now, nobody will pay more than $400,000. So if this applied to my house he couldn't pay more than $500,000? Do I understand that right? Geez.
Does that PDF work for others? I am just getting errors on my Mac.
WOW,,,from the startup 3 pages to the well 'used' 106 pages...
I actually like the transparency paragraph... looks like we'll get a record when they buy, then another when they sell, so we'll get a near-real-time view of any "profits" (ha ha). (And depending on what is sold, vs. "held to maturity", we might get a lot of nice marks for the banks to use; that is, unless the gov't decides to hold most of all of it for a while.)
Speaking of that, I'll put a lot of power in the hands of the Secretary: any particular bank could be "taken down" by a snowstorm of new marks through carefully-selected sales of formerly "held-to-maturity" securities. (Assuming the sales are likely to lower the marks, of course.)
Someone tell the President that the crops are dying because they need water, not Brawndo.
If this passes, the most effective way to protest this bill is to take your business away from those banks that are the recipients of g'vt largesse and move to local credit unions. Take your money out of the money center banks and put it in credit unions. Don't support bad management by doing business with those banks. They have enough support from the Fed.
Paulson decides what is adequate discolsure. Mr. "committed to Agency discretion".
HAHAHA
ok... well i would guess from Paulson's previous behavior and from what I am guessing is his good-faith effort to make this work, I would predict that he will massively dilute anyone except maybe GS and other close friends. So I predict it'll be ok... but maybe it's my wishful thinking speaking.
Bystander: But Brawndo gots what plants crave
CR--
Check out section 128 and 132.
Elimination of FASB 157 and 0% reserves!
Liv, I am on XP using foxit reader. This is the first time ever that I get a file that is only compatible with Adobe...wow...this government....I tell you...!!
So just a overpaying bail out with more pages?
Many carve outs to warrants and exec pay. This isnt much different than the orginal 3 page plan. Bottom line, Hank Paulson will become the most powerful person in the world. He's proven he's incapable of handling the duties of Treasury Sec so this should be wonderful....
Buy as much Goldman stock as you can.
This plan was designed by GS execs and Buffett for GS execs and Buffett. Dont fight city hall unless you have a lot of money then you can buy city hall.
I would have liked more detail under the pricing section: 113(b)(1).
We're supposed to give them $700 B and they can't even make a proper PDF file!
The one that I still have a very hard time with is Sec 112 Coordination with Foreign Authorities and Central Banks. Is this the clause that allows China to be bailed out so that they keep buying our debt?
Jeez, this bill is the original 3 pages, plus 103 pages that are all "at the discretion of the Secretary".
What a pile of garbage, there are enough loopholes that Paulsen can pretty much do whatever he wants.
From 2 pages to 106 pages, now that's progress....
Oops, didn't mean: "I'll put a lot of power in the hands of the Secretary"; wanted to say: "It'd put a lot of power in the hands of the Secretary".
Hate publishing corrections, but this one completely changes the meaning of the paragraph.
Foreign banks with any operation in the US, as I read it, are included in this bill and the US will have to bail out the whole world - Barclays, UBS, Deutsche Bank, SocGen, Credite Suisse, etc.
They want to the US taxpayers to become the debt slaves of the world!!! NO WAY!
ø(5) FINANCIAL INSTITUTION.The term fi16
nancial institution means any institution, including,
17 but not limited to, any bank, savings association,
18 credit union, security broker or dealer, or insurance
19 company, organized and regulated under the laws of
20 the United States or any State, territory, or posses21
sion of the United States, the District of Columbia,
22 Commonwealth of Puerto Rico, Commonwealth of
23 Northern Mariana Islands, Guam, American Samoa,
24 or the United States Virgin Islands, and having sig25
nificant operations in the United States, but excluding any central bank of, or institution owned by, a
2 foreign government.¿
It's all pretty open...
Best to all.
Calculated Risk
~~~~~~~~~
Once the transactions are shown analysts will know exactly which banks are bust and those stocks will plummet.
Section 132 suspends FASB 157 - no more mark to market.
Daddy, where are you?
2 whole days? In the internet age?
Look at 103(8). Does this mean Hank can buy toxic waste from his deferred comp plan, or is his plan a section 409A plan which is excluded?
x-man writes:
CR--
Check out section 128 and 132.
Elimination of FASB 157 and 0% reserves!
x-man | 09.28.08 - 4:25 pm | #
This proves they are absolutely desperate. Those changes, under these circumstances, will permanently evaporate confidence in our financial system. China's will be trusted more, maybe Venezuela's will be trusted more.
JUST SAY NO!
Anonymous writes:
I can predict what happens.
After much reading and all, people will reject it anyway because it is not specific enough to their liking.
However it will pass anyway.
Am i right or am i right?
Waiting for the last sentence to happen.
girlbear writes:
The beginning of government intervention seems so innocent, so right and good....then it becomes a slippery slope down into socialism, communism and government control....
Yes, like social security, medicare, medicaid, welfare programs...just socialism, communism and government control.
Elimination of FASB 157 and 0% reserves!
No cash-flow accounting method replacement?
Sec 104:
(b) MEMBERSHIP.The Financial Stability Over5
sight Board shall be comprised of
6 (1) the Chairman of the Board of Governors of
7 the Federal Reserve System;
8 (2) the Secretary;
9 (3) the Director of the Federal Home Finance
10 Agency;
11 (4) the chairman of the Securities and Ex12
change Commission; amd
13 (5) the Secretary of Housing and Urban Devel14
opment.
1
Same old bunch of crooks - fox guarding the hen coop ? Bastards.. back to the email round to the reps and speakers
-K
Tell the Dems to put teeth in or they are out.
Well, the accounting was probably a big lie anyhow.
ALL HAIL KING HENRY!!!
Just FYI - New Year (Rosh Hashanah) is a 2 day holiday for Orthodox Jews. Are there any Orthodox Jews in the Senate other than Lieberman? Thursday is EID - the end of Ramadan. I am not familiar with how this holiday is observed. Are there any observant Muslims in the Senate? Roby
I think there is one Muslim.
Do 20% of profits on each and every single transaction still have to be paid to ACORN?
CR--
Please use your well earned bully pulpit to galvanize opposition to this bill. It's contrary to almost every principle in the Constitution.
You are so respected for your even handedness, please speak now if you are so inclined!
This is MADNESS
x-man, yeah, just read 128 and 132 ... SEC. 132. SUSPENSION OF MARK-TO-MARKET ACCOUNTING.
Best to all.
The dems are wossies.
lawyerliz writes:
Well, the accounting was probably a big lie anyhow.
Spot on. Basically the banks are all insolvent, those big global banks anyway. 20-40:1 leverage will do it if they mark anything to market.
So mark to fantasy for as long as possible, this is a stop gap measure to last a few months.
o doubt about it ...
this bill does nothing to avert the financial system freezing and may even contribute to it !
Late to table writes:
WOW,,,from the startup 3 pages to the well 'used' 106 pages...
Late to table | 09.28.08 - 4:24 pm | #
Wait until its translated into federal registry speak - two, three volumes?
Robyn isn't Obama a Muslim?
"CR--
Check out section 128 and 132.
Elimination of FASB 157 and 0% reserves!
x-man | 09.28.08 - 4:25 pm | #"
OK. Everyone who is surprised please put on this hat, shaped like a cone, and stand over there in the corner.
Section 124 looks like it allows modifications of mortgages (in bankruptcy court?), does anyone know for sure what that language replaces?
This thing HAS to pass. Stop your whining about unfairness. Yes it is unfair. Suck it up. If we can muddle through we can have a "greater society" in the end because people will remember this and laisse faire will become discredited along with a predominantly consumer economy.
On the other hand, if we get a serious depression all bets are off. We could go back to a type of 19th century capitalism or fascism or worse.
If anyone thinks you get good government out of a depression and societal chaos you are mad. You get dictators, oligarchs and suffering. If your lower and middle classes are out of work, hungry, and looking for jobs they will submit to damn near any kind of bad government.
Not funny Ministry; there are people who actually believe that. Even if it was meant snarkishly.
REBear writes:
The dems are wossies.
REBear | 09.28.08 - 4:34 pm | #
duh?
Did you hear Kucinich earlier speaking about this bill?
Keith Ellison is the only Muslim in the Senate.
Elimination of FASB 157 and 0% reserves!
Would someone translate that into a fiery aphorism?
Hey, Hank? Get back on your knees!
CR and everyone:
Have y'all seen Section 128?
16 SEC. 128. ACCELERATION OF EFFECTIVE DATE.
17 Section 203 of the Financial Services Regulatory Re
18 lief Act of 2006 (12 U.S.C. 461 note) is amended by strik
19 ing October 1, 2011 and inserting October 1, 2008.
Financial Services Regulatory Relief Act of 2006 - Section 203.
"Interest on Reserves and Reserve Ratios
"Federal Reserve Banks are authorized to pay banks interest on reserves under Section 201 of the Act. In addition, Section 202 permits the FRB to change the ratio of reserves a bank must maintain relative to its transaction accounts, allowing a zero reserve ratio if appropriate. Due to federal budgetary requirements, Section 203 provides that these legislative changes will not take effect until October 1, 2011."
--
A 0% reserve requirement for banks as of this Wednesday?
They're ripping this over on MarketTicker.
Has this been discussed here?
"CR--
Check out section 128 and 132.
Elimination of FASB 157 and 0% reserves!
x-man | 09.28.08 - 4:25 pm | #"
~~~~~~~~~~~
This means when we finally have to nationalize the banks the cupboards will be bare ... all the money "disappeared" ...
Sen Specter is Jewish.
Don't know how observant he is.
There is one Muslim in the House, none in the Senate, unless you count that wascally covert Muslim, Obama. <--kidding
M-F you drank the Kool-Aid. Please listen. If a depression this will not help Main Street avert it. It will allow Wall Street to be more comfortable and shovel all the burden onto Main Street.
LOL.
And to think I did a search of comments for "128" before posting.
Great minds!
Probert grumbled: "Liv, I am on XP using foxit reader. This is the first time ever that I get a file that is only compatible with Adobe."
Foxit Reader opened it on my XP machine. Quickly, too.
Here's my suspicion: the 0% reserve requirement is meant to bankrupt the FDIC and/or to force deposits into the stock market. Banks will be unsafe.
BobbyFlav, you are correct I forgot Ellison was in the House not the Senate...
4 (b) MEMBERSHIP.The Financial Stability Over5
sight Board shall be comprised of
6 (1) the Chairman of the Board of Governors of
7 the Federal Reserve System;
8 (2) the Secretary;
9 (3) the Director of the Federal Home Finance
10 Agency;
11 (4) the chairman of the Securities and Ex12
change Commission; amd
13 (5) the Secretary of Housing and Urban Devel14
opment.
15 (c) CHAIRPERSON.The chairperson of the Financial
16 Stability Oversight Board shall be elected by the members
17 of the Board from among the members.
OMG, the same asshats who got into this mess are on the oversight board!
We are doomed!
Do you remember how David Copperfield made the elephant disappear?
"The beginning of government intervention seems so innocent, so right and good....then it becomes a slippery slope down into socialism, communism and government control....
girlbear"
So you're still clinging to that lie of capitalism, eh?
Some people will never get it. America is doomed.
This thing HAS to pass. Stop your whining about unfairness. Yes it is unfair. Suck it up. If we can muddle through we can have a "greater society" in the end because people will remember this and laisse faire will become discredited along with a predominantly consumer economy.
So what part of this plan will explicitly force banks to lend? What makes you think this plan will work?
Nobody here is in favor of a depression. But we would like to avoid "solutions" that only makes things worse.
Anonymous
it is called fascism ...
This is in no way socialism or communism as that would entail complete nationalization. This is best described as corporate fascism. Bush and Paulson's final present to the greedy Wall Street pigs.
Not one thing will help the middle class or taxpayers. The federal reserve has spent all it's available money, about 600 billion buying this crap and now it is another 700 billion to buy more crap.
How about 113(d)(3) - Anyone who sells less than $100 million of toxic waste to the govt is "de minimis" and exempt from the equity participation requirement.
Hank, could you make a de minimis contribution to my bank account?
Elimination of FASB 157 and 0% reserves.
You can't trust our Balance Sheet.
We make our own money and don't need depositors. Or any real accumulation of true value.
Peter Bernstein has it right:
ECONOMIC VIEW; What's Free About Free Enterprise? - NY Times
Pass this bagatelle damn against the tide.
So what?
The basic problem remains an incompetent regulatory regime along with maximum gaming of the corporate system resulting in tremendous fake profits on nonessential economic activities.
Shake them down. Wall Street is no longer necessary for funding mortgages. They never were.
Rebuild Glass Steagal.
Mainstreet America never wanted their savings put into a casino. They have always wanted stability, and Wall Street lied to them, and promised all of these derivatives meant security, since the risks were now covered.
The have financially engineered themselves into unemployment.
Kill most of Wall Street!!!
Someday this war's gonna end...
On the other hand the 0% reserve rate is inflationary, and inflation is really the only longterm fix here.
House votes tomorrow! Here is a link for fax/phone for ALL house members:
Complete E-Mail Addresses for Congress/House, Senate, Governors & State
Legislators
Also,use free e-fax service at: triple-dub-dot-faxzero-dot-com
Here is my letter (feel free to use/modify):
Dear obligated representative of your constituents,
I am a US citizen residing in the state of XXXYYYZZZ and I have the following request to make of you: Please become a part of the solution and stand behind the correct and courageous views of the Honorable Representative from Michigan, Mr. Thaddeus McCotter.
The revised bailout proposal before you is hardly different than the initial plan proposed by Paulson, Bernanke, and the Wall St. cartel, and must not come to pass. This plan -- the greatest wealth transfer EVER from the middle-class engine of America to the wealthiest wretched few -- has the potential to seal the demise in the core principles that this nation once stood for.
There is a reason why most Americans are overwhelmingly against this plan: we have reached the breaking point where we are collectively willing to exchange a few years (or more) of hard times in order to FIX what is so wrong with our financial system. For far too long, far too many members of the Wall Street community have lived lives of reckless extravagance secured at the expense of the middle-class American taxpayer.
We have simply grown weary. Now is the time to let this deeply-flawed financial system adjust under the weight of its own greed, fraud, and short-sightedness; and to patiently foster a more fair and honest system under the watchful eyes of the harsh lessons learned.
Thank you for your time and your service; and thank you for doing your best to ensure that this great economic crisis does not develop into a great constitutional crisis.
But we would like to avoid "solutions" that only makes things worse.
That's avoid only in spirit. In reality if that were the case, the budget would be balanced and the debt would not have gotten to 9.7T.
The reality is we will kick it down the road as we always do.
So what part of this plan will explicitly force banks to lend? What makes you think this plan will work?
Max
~~~~~~~~~~~
AND aren't we throwing good money into insolvent banks ?
exactly why we need the Scandinavian Plan. Nationalize, Audit, Cleanse and Re-capitalize
It says DISCUSSION DRAFT in huge bold letters right at the top. This ain't the final bill. Why get worked up about things that might not be in the final version?
"Falcor writes:
CR and everyone:
Have y'all seen Section 128?
"Interest on Reserves and Reserve Ratios
"Federal Reserve Banks are authorized to pay banks interest on reserves under Section 201 of the Act. In addition, Section 202 permits the FRB to change the ratio of reserves a bank must maintain relative to its transaction accounts, allowing a zero reserve ratio if appropriate. Due to federal budgetary requirements, Section 203 provides that these legislative changes will not take effect until October 1, 2011."
A 0% reserve requirement for banks as of this Wednesday?
They're ripping this over on MarketTicker."
The reserves requirement is largely an archaism, even though they fill Econ 101 textbooks. The binding constraint on bank balance sheets in the modern era are the capital constraints (proportion of bank equity and quasi-equity on the balance sheet versus risk-weighted assets).
As for paying interest on reserves, it means that the Fed can now act as a true banking intermediary - they can lend to/from banks (via there reserve holdings). The change was presumably made as it has become clear that the interbank market has frozen up completely, an outcome that was viewed as being very unlikely before this.
Falcor, thanks for the text - I was just looking for it.
BEst to all.
"It says DISCUSSION DRAFT in huge bold letters right at the top. This ain't the final bill. Why get worked up about things that might not be in the final version?
BusinessTime | 09.28.08 - 4:44 pm | #"
Don't worry, this won't hurt....
"Kill most of Wall Street!!!"
Damn, AllenM, it took you way too long to finally arrive. But congrats, anyway.
This plan is a glaring No Deal! Suspending mark to market, 0% reserves, dictatorial powers to Paulson, an oversight board of Bernanke and Cox.
This is atrocious. It must not pass.
Thanks, x-man, for pointing out the 157 language.
Terrible. Horrifying.
If this passes, I will only pay taxes on my salary, and will send my substantial capital overseas.
Buck Fush and his criminal gang.
Paying interest on reserves? No f'ing way! This is worse than the original proposal!!!!
cannot open the file on any reader on linux including Adobe
can someone convert into a postscript file please ? or spme other open format ?
Mark to Market suspended. Maybe if they dig deep enough they'll strike gold?
MOGADISHU (AFP) Somali pirates who hijacked a Ukrainian freighter carrying supposed Kenyan military weapons defiantly demanded 20 million dollars in ransom despite being surrounded by three foreign warships on Sunday.
The spokesman for the pirates, contacted by AFP via satellite telephone, confirmed that they were surrounded by three foreign war vessels off Somalia's central coast and said the ship's crew was "safe and not harmed."
"What we are awaiting eagerly is the 20 million dollars (13.7 million euros), nothing less, nothing more," Sugule Ali said. On Saturday, figures ranging between five and 35 million dollars had been put forward.
Another opportunity to discuss who has the upper hand.
I think I'll go to dinner, and come back to see whether the Asian markets have crashed.
Calculated Risk writes:
x-man, yeah, just read 128 and 132 ... SEC. 132. SUSPENSION OF MARK-TO-MARKET ACCOUNTING.
Best to all.
Calculated Risk | Homepage | 09.28.08 - 4:34 pm | #
________________________-
That was one of the elements that the house republicans wanted in the bill, suspension of mark to market. Looks like they got it.
Only the top three employees get their compensation and golden parachutes limited. 111(d), p. 36 line 13.
I used to work for Senator Specter when he was the DA in Philadelphia - and he wasn't very religious then.
I am not sure how I feel about the bailout in terms of whether it will do any good. I do believe that Paulson and Bernanke were irresponsible in terms of telling everyone that it would be the end of the world if it didn't pass. At that point - psychology became more important than reality. I also fault them for their timing (in terms of Congress going into recess - the Jewish holidays - the elections - etc.). This is at least the third credit seizure I've seen since last year - and - if what they want is so important - I don't know why it took them so long to ask for a plan.
Anyway - I will be in France for about 10 days starting this week - and it will be interesting to see what the reaction is there. Roby
an oversight board of Bernanke and Cox.
coup d'etat.
Purchase price and mechanism undefined:
SEC. 101. PURCHASES OF TROUBLED ASSETS.
6 (a) OFFICES; AUTHORITY.
7 ø(1) AUTHORITY.The Secretary is authorized
8 to establish a troubled asset relief program (or
9 TARP) to purchase, and to make and fund com10
mitments to purchase, troubled assets from any fi11
nancial institution, on such terms and conditions as
12 are determined by the Secretary, and in accordance
13 with this Act and the policies and procedures devel14
oped and published by the Secretary.¿
15 (2) ESTABLISHMENT OF TREASURY OFFICE
SHitttt... He can use any freakin' mechanism .
More back to emails to Reps and the Speaker
-skk
wtf does this mean? we only get mark to 'make-believe'?
"to suspend, by rule, regulation, or oder, the application of Statement Number 157 of the Financial Accounting Standards Board"
Wow! You'd think they could at least spell odor correctly.
How much can the Fed pay from their reserve holdings????
ot really ot... i am on local town gov't in a certain capacity... this is what out committee chair just sent us re: the bailout:
Today I participated on a conference call with Congressman John Larson who explained the Congressional Plan to rescue the credit crisis. He is optimistic that the plan which now has the Democratic imprint for accountability, oversight, staggered distribution of funds, warrants/collateral, executive compensation limitations (no golden parachutes), etc., will pass. Congressman Larson is unhappy about the need to rescue the greed and negligence of Wall Street, but feels we must do something to prevent a worse disaster. A Commission will be established to oversee the rescue plan and hold administrators accountable. The staggered release of funds will overlap the new Presidential Administration to allow time for reassessment or redirection. This will not be a bailout, but rather loans, so taxpayer could benefit when the profits are realized later. Insurance will also be available to help insure the loans. The staggered distribution will allow for prudent review and monitoring to insure the plan is working.
Many of the participants on the call all expressed concern for the need to analyze why this happened and prevent it again; that enough aid be available to rescue the monetary system; that there be more accountability; that we help the people on Main St. not just Wall St. Others were very angry about bailing out Wall Street and felt we should do nothing and let the market adjust itself.
The Congressman after consultation with many economists and experts, felt we need to do something to prevent a worse catastrophe. However he assured us that there will be a full investigation and analysis. Congressional subpoenas will issue and the FBI is also involved. He said people calling him are afraid of losing their investments, losing homes, retirement loses, businesses unable to get credit.
The $700 Billion Dollar price tag is from Bernake and Paulson, which is why Congress is giving a lesser amount to track its effectiveness, together with a criminal investigation and oversight. Nobody really knows what the real number should be which is why the Democrats will not give the Bush Administration's "blank check".
I hope this sheds some light on what is going on in Washington. There seems to me a lot of skepticism, anger, and concern among Democrats. They, with Congressman Larson's assistance are trying to do the best they can.
Republicans are TRAITORS wrote:
Can we nationalize pro sports? Then we can redistribute the profits and make every team almost exact. The competition would be awsome and the games would be great.
Yeah, but lets be PC about it, nobody can win because the losers might suffer self esteem problems. Everybody wins with no losers...uh oh...no losers means no winners
Kucinich on FOX. Call him crazy but this guy knows what he is talking about.
Horrible. Suspending mark to market and 0% reserve requirements. Time to get this bubble started again!
Shakespeare said, "first, kill all the lawyers." But maybe we can add into this boondoggle bankers as well.
How is this bill any better? It went from 3 pages of crap to 106 pages of crap except we get to view things online maybe with a nice Google interface.
sidd, I thought it was just me.
I'm working on getting this file working in Linux, if I do, I'll let everyone know.
DaddieMac writes:
How much can the Fed pay from their reserve holdings????
Start the bidding...
Do I hear 20%?
Dennis Kucinich he says he is voting "Hell NO"
Remember this is only a draft, not the actual bill
Per CNN -- "The legislation is still being negotiated, and elements of the bill could still change"
It does provide an opportunity to know what frauds and tricks to look for in the final bill, so let's keep at it, but remember this is not the bill.
Of course, I wonder if we will ever see the final bill language, prior to the vote.
Smart move, Robyn....France is nice this time of year.
And yea.... Paulson made immediate action necessary.
on or before March 14, 2008 ?
(A) residential or commercial mortgages
and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008, the purchase of which the Secretary determines promotes financial market stability
Sec 113(d) seems to suggest that anybody participating MUST give up warrants on shares, preferred shares or senior debt.
That sounds good ? Am I missing something ?
Am I right ?
OT or not? my sister spent friday and saturday trying to buy physical gold and silver.She lives in Auburn CA,heart of the gold country.No Bullion was available,period.No dealer would take an order for Bullion,no dealer would say when they expected any Bullion.She called every dealer from marysville to lodi,sacramento to Tahoe.No market exists,there are NO sellers.
This will not work. Tax payer will lose money.
Maybe Kucinich should say "HELL NO" Paulson must go!!
As far as transparency goes it will like being mugged in broad daylight.
sk -
see that there are huge carve outs under the "de minimus" exceptions. There wont be any warrants unless its a big bank with big problems. Its a joke....
Romanov those pigs. All of 'em.
I said earlier to wait until the text of the legislation was made public. Now, I say no deal.
The exercise price "for any warrant issued pursuant to this subsection shall be set by the Secretary, in the interest of the taxpayers."
Here's a potential bombshell, if other posters haven't already pointed it out:
"AGGREGATION OF PURCHASE PRICES - The amount of troubled assets purchased by the Secretary outstanding at any one time shall be determined for purposes of the [$700 billion] limitation . . . by aggregating the purchase prices of all troubled assets held."
So, we have no guarantees that the taxpayers will secure adequate ownership and it looks like Paulson, contrary to his express testimony, will be able to keep racking up new asset purchases, just as long as he is making some sales. Everyone else read these provisions as I have?
No deal!
One sweet note, in the Senate if the vote is alphabetical by Senator, McCain will have to vote before Obama
sidd, others with pdf problems:
Let me know if this works:
http://praetor.org/files/firstdraft.pdf
0% reserves and interest on reserves... can someone please clarify this a bit?
Will banks be charged interest by the Fed for not lending money out?
Will all banks be allowed to reduce their reserves to 0%?
What are some of the ramifications of this? Could interest rates plummet? Will I be getting credit card offers for .5% rates?
Do you think this is an out to have more warrants than executives want, or less warrants than he public wants?
More warrants for company's Paulson doesn't like and less for those (like GS) that he does like.
Talk about ripe for rip offs
Hank Paulson,
We want our $500mln back !!!
Sec 111
(2) CRITERIA.The standards required under subsection shall include
O:AYOAYO08B94.xml [Discussion Draft]
(A) limits on compensation that exclude incentives for executive officers of a financial institution to take unnecessary and excessive risks that threaten the value of the financial institution during the period that the Secretary holds an equity position in the financial institution;
(B) a provision for the recovery by the financial institution of any bonus or incentive compensation paid to a "senior executive officer" based on statements of earnings, gains, or other criteria that are later proven to be materially inaccurate; and
(C) a prohibition on the financial institution making any golden parachute payment to its "senior executive officers" during the period that the Secretary holds an equity position in the financial institution.
So glad I'm letting my house go to foreclosure....why even bother?
I'm gonna call Pelosi and see if they can bail me out of my neg-am bomb in SoCal.
"Are there any Orthodox Jews in the Senate other than Lieberman?"
In a crisis, Jews are encouraged to postpone observance. He will not miss this vote.
Requiem, thanx, it works
She called every dealer from marysville to lodi,sacramento to Tahoe.No market exists,there are NO sellers.
Tom Stone | 09.28.08 - 4:56 pm | #
Go to Apmex.com or the usmint.gov. The mint suspended sales of the 1 oz gold buffalo. They still have eagles. Apmex has maple leafs..from Canada.
Another link for the Discussion Draft (not the actual bill)
http://www.politico.com/pdf/PPM110_rescuepackage_bill.pdf
I'm gonna call Pelosi and see if they can bail me out of my neg-am bomb in SoCal.
Thanks Paulson/Bush/Cheney Scu | 09.28.08 - 4:59 pm | #
_________________________-
Bush blames you for this mess.
CNBC just changed its headline from "Lawmakers WillVote Monday on Bailout Bill" to "Lawmakers to Vote Monday on Bailout Bill"
WSJ: Fortis is likely to become a multi-government bailout, according to sources.
In a crisis, Jews are encouraged to postpone observance. He will not miss this vote.
When human life is at risk, or maybe something else extraordinary. I don't know if in this case the exemption applies. You would have to argue, for example, that not passing the bill would result in scores of bankers or money managers jumping from windows
Max writes:
Nobody here is in favor of a depression.
Speak for yourself. I am in favor of a Depression. Maybe it will wring the entitlement mentality from a generation or two of my fellow Americans.
Comrade Clueless Dufus writes:
One sweet note, in the Senate if the vote is alphabetical by Senator, McCain will have to vote before Obama
Why? They will both be for it.
"sb writes:
0% reserves and interest on reserves... can someone please clarify this a bit?
Will banks be charged interest by the Fed for not lending money out?"
No, they will be paid for keeping reserves (cash) on their books.
"Will all banks be allowed to reduce their reserves to 0%?"
Apparently (I haven't looked at the bill carefully). See comment below.
"What are some of the ramifications of this? Could interest rates plummet? Will I be getting credit card offers for .5% rates?"
I'd see limited ramifications from this. The reserves requirement, despite appearing in all the Econ 101 textbooks, is not a binding constraint on banks in the modern world. The constraint that limits bank balance sheet growth is bank capital (equity).
As for low rates, where you offered credit cards for 1.5% when fed funds was 1%? I assume not. The reason why is that they need to reserve equity capital against lending to you, and the cost of equity is higher than the interbank interest rates.
@ Bond_Guy
If this is an archaism, presumably because of change in sweeps (?), then
Not arguing, just asking.
Since when has the SEC not had the authority to modify FAS 157?
Like the big issue is mark to Markit? Why not look into that firm, while we are at it.
I don't have a problem Paulson negotiating the terms of the warrants and agreeing to purchases and sales so long as they net out to 700B in the appropriate period.
I want to see someone with the capacity to act quickly and with flexibility. If you don't like Paulson, is there someone in Congress who is better qualified?
Max writes:
CNBC just changed its headline from "Lawmakers WillVote Monday on Bailout Bill" to "Lawmakers to Vote Monday on Bailout Bill"
Lol. Same difference.
If McCain has the balls, he'll filibuster this. He probably won't though because he's a POW or something like that.
Forced Bank Consolidation?
Anon 4:21 said:
This means GS can't dump off any toxic waste it inherited from WaMu, I hope they weren't counting on that.
But the section on undue enrichment includes this language...
"This subsection does not apply to troubled assets acquired in a merger or acquisition, or a purchase of assets from a financial institution in conservatorship or receivership..."
So I think we will see JPM and GS continuing to acquire these failing institutions or buying their bad assets from the FDIC after the banks fail. They can then turn around and sell them to the Treasury for MORE than they paid due to this loophole.
It actually makes the troubled institutions with loads of bad assets much more attractive acquisitions.
That's a gaping loophole, and I don't think it was an oversight.
Unless the headlines change from "Wall Street Bailout" to "Credit System Rescue" this is a long way from done.
"It's all pretty open..."
So are a lot of things these days, but that means nothing. people simply steal openly.
This is still the Paulson giveaway plan with a few pretties on it for the home folks. You are going to set arbitrary values but have 'transparency'? (no, you aren't). Your going to put the full discretion in the hands of Paulson but ask for 'no unjust enrichment'? (won't happen).
This is still the basic: banks are insolvent because they borrowed money to buy bad investments. To fix that you have to give them free money. Everything else is decoration.
So here is the question: why make the gift to the banks rather than insert it at some other point in the process? The answer is that they have an advocate who can get 'inside' and other people - just as broke as the banks - do not.
Will 0 reserves come back to haunt us if FDIC has to pay more?
Commercial free two hours now on bloomberg Radio with Tom Keane.
Pay particular attention to Cassidy of RBC Capital Markets
Bloomberg.com Audio Player
Baca writes:
If McCain has the balls, he'll filibuster this. He probably won't though because he's a POW or something like that.
All the more reason to. He was not bailed out then, so why must there be one now.
On the other hand, because there was no bailout then he could not raise his hands above his shoulders and wouldn't want it to happen to the taxpayers.
Politicians are slick.
CR - Do you think we, the great unwashed, will be able to see the actual text of the final bill prior to passage??
"Falcor writes:
@ Bond_Guy
If this is an archaism, presumably because of change in sweeps (?), then
- why include it in 203?
- why the delay of change til Oct/2011 in 203?
- why the need now to hustle the date change to this Wed?
Not arguing, just asking."
Well, 0% reserves presumably does make life easier for bank liquidity management. And once you shift towards the Fed paying interest on reserves, it's unclear to me how a mandated reserve requirement fits in.
The important shift is paying interest on reserves; and they are doing it now because the interbank lending market is broken now.
The ECB is already acting as an intermediary - they are simultaneously lending at a high rate to some banks, and borrowing from others at a low rate. Such a state of affairs was thought to be impossible; the assumption was that the banks would lend to eachother at the market rate.
Politicians are slick.
Anonymous
At least the have the decency to lubricate when they are sodomizing us.
The reserve change has Bernanke's fingerprints all over it. He is on record stating he can make prices go up in any circumstance. This is just the warm up to the full scale printing. They are desperately trying to herd capital into risky assets that are still wildly overvalued - equity included.
What this bill tells you in bold strokes is that this has nothign to do with unclogging credit markets. This is an all out mea culpa that the entire spectrum of asset classes is inlfated beyond recognition. $700 billion will look like a rounding error when this carnage is done.
Thanks for the working pdf links - CNN has problems.
idiocracy has come true!!
Bystander writes:
Someone tell the President that the crops are dying because they need water, not Brawndo
brihome writes:
Bystander: But Brawndo gots what plants crave
another one?? form a economist readers letter..
"we support S.Palin because she is one of us, she is like us and we support McCain in a choice like this" !!
we have to be represented...
Good Night and Good Luck!
Speak for yourself. I am in favor of a Depression
In 1914, similar things were said about a war...
OK. I want to see a picture of Sarah Palin in the "banned" U of I (where she went to college) uniform. Come on, someone here can Photoshop that!
So we're going to throw in $700B and demand transparency but the SEC suspends mark to market, hence making seeing what's in the cesspool impossible.
And on top of that, we're going to pay the banks interest for funds with the FRB and drop them to zero reserve ratios.
Sweet Jesus.
The Masters of teh Universe have effectively effed up in a major way and they are truly going to try to hide the extent.
Just nationalize the damned thing and be done with it.
This is ridiculous.
GLOBEX starts @ 6:00pm EST; USD/YEN hasn't exactly skyrocketed. I suspect moderate gaps up - pop Monday, perhaps Tuesday or Wednesday, then a dive into Friday.
Hmmm. Mark-to-market suspended. There's got to be an arbitrage opportunity here. Buy houses, sell MBSs?
Ha-ha-ha. All sorts of unintended consequences coming.
"Like the big issue is mark to Markit? Why not look into that firm, while we are at it.
Ziggurat | 09.28.08 - 5:06 pm | #"
Yes, let's. Putin's Russian tax investigations set a great example of how a government can use modern legal state power to strangle thriving sources of sometimes inconvenient information sources. We can do it too.
No mark to market. Seems like the fraudsters are back in control. Who is the sucker who will buy the stuff? Oh, I forgot it is Uncle Sam.
another one?? form a economist readers letter..
"we support S.Palin because she is one of us, she is like us and we support McCain in a choice like this" !!
8 years of incest voting sure proved the point.
cannot open the file on any reader on linux including Adobe
Both xpdf 3.02 and evince 2.22.2 opened the pdf file just fine on my (Debian) Linux machine.
And furthermore, if anyone thought this could be fixed through changing accounting conventions...it would be done already.
FAS 157 is the least of any of this...although it is interesting to see that a lot of comments have been made about this proposed change on this blog.
Chainsaw-- that's how I read it also, it's the loophole, not a ban---
I've written a small essay on why, regardless of its merits, no bailout can be passed against such overwhelming public opposition. It's too long to post here, but in summary our government needs legitimacy to make tough decisions. In the coming years, we are probably going to have to make a LOT of tough decisions and to ram this through against the will of the public will destroy the legitimacy we need to carry those decisions out. I hope people find it interesting and useful in this fight.
The new American sacrifice and heroism Wall Street style.
But as Paulson and Sen. Chuck Schumer (D-N.Y.) later walked to the microphones to address the media, they were locked arm in arm. Treasury confirmed moments ago that Schumer was steadying Paulson, helping him walk.
The new American sacrifice and heroism, Wall Street style.
Ziggurat writes:
And furthermore, if anyone thought this could be fixed through changing accounting conventions...it would be done already.
~~~~~~~
exactly ... we need to toss the insolvent banks ... anything less is pointless ...
So is no mark to market #1 a way for the gov't to overpay for the trash or #2 is it's purpose to keep bank reserve ratios from forcing insolvency of banks or both? I think #2 although #1 will be a logical result.
Das ist das Ende.
Robyn writes:
Just FYI - New Year (Rosh Hashanah) is a 2 day holiday for Orthodox Jews.
Rosh Hashanah is a 2 day holiday for ALL Jews. Some less observant Jews only take the 1st day off, but it is by no means a Orthodox only holiday, and your post insinuates that.
"...In addition, Section 202 permits the FRB to change the ratio of reserves a bank must maintain relative to its transaction accounts, allowing a zero reserve ratio if appropriate...."
An interesting historical note: In 1974 (and if memory serves it was September or October), lowering bank reserves was one of the actions taken. It's like bringing a nuclear weapon to a gunfight, with a massive impact far larger than simply lowering Fed funds rates or providing short-term liquidity.
Sebastia
Business has been conducted more or less forever without FAS 157....so get real.
Non issue.
We are all communists now! Except for the CEO's who got their golden parachutes. They are the aristocrats!
Take a chance Barack. They are going to hit you with an October surprise. Republicans will abstain and they will blame your party for the crash.
"...allowing a zero reserve ratio if appropriate..."
Hey, if zero is good, negative is even better, right? What, some banks are already there????
How much will 0% reserve requirements change things since we already have sweeps?
suspending mark to market means stop fair value accounting
If anyone thinks you get good government out of a depression and societal chaos you are mad. You get dictators, oligarchs and suffering. If your lower and middle classes are out of work, hungry, and looking for jobs they will submit to damn near any kind of bad government.
M-F | Homepage
Roosevelt was a dictator/oligarch?
Hahaha...Abstain, the GOP's favorite mantra...
Maybe they get trip A on all the mark to model stuff.
"Business has been conducted more or less forever without FAS 157....so get real.
Non issue.
Ziggurat | 09.28.08 - 5:21 pm | #"
If it's really a non-issue, why is it in the most important bill to come before Congress in several decades?
The likely suspension of market to market accounting will yield a disaster.
Right now banks are reluctant to lend to one another. The reason is each banks suspects that the others' marks on assets are too optimistic.
In the case of Wamu and Lehman, we discovered after bankruptcy that the value of their assets was way below the mark-to-market value. They were inflating their marks.
So now ALL financial institutions will be able to inflate their marks. They get to "mark to model", and they'll of course use optimistic assumptions in those models.
So will this increase confidence in the credit markets or decrease it?
You don't have to hard about the answer to that one.
Linux friendly (Ubuntu 8 evince tested) version of firstdraft.pdf
RapidShare: 1-CLICK Web hosting - Easy Filehosting.
I had to use Acrobat on a Windoze box to open it, then save a copy.
Enjoy!
Get the Treasury Secretary out of the room. He's there to execute, not legislate. I'm mad again.
Comrade Scared Shitless writes:
If anyone thinks you get good government out of a depression and societal chaos you are mad. You get dictators, oligarchs and suffering. If your lower and middle classes are out of work, hungry, and looking for jobs they will submit to damn near any kind of bad government.
M-F | Homepage
Roosevelt was a dictator/oligarch?
Hell yeah, he took mah gold and i still ain't seen any of it.
o consistent balance sheet needed
from the shadow to the air
Substitute "prop up our friends," for "stabilization," and you will better understand the bill's intent.
Come on, it's buried by the still, we've done the math.
Oma would say:
Gibt's weider scheiss.
Now, we print.
Nothing but more T-bonds, Tbills, and frns as needed.
The physical shortages of precious metal say more about the current level of panic than anything else.
If food starts up next we will have rationing by next summer.
Someday this war's gonna end...
Banks still won't lend to each other. They can see through this game.
Fair Economist: link doesn't work for me
"Speak for yourself. I am in favor of a Depression
In 1914, similar things were said about a war..."
True - all parties sent their armies off with great pomp and celebration.
BreakOut
Where's TANTA?
"So now ALL financial institutions will be able to inflate their marks. They get to "mark to model", and they'll of course use optimistic assumptions in those models."
I think it is inaccurate to to say they will use optimistic assumptions in those models. They will use blatantly unlikely and false assumptions.
So, no mark-to-market, no price discovery. More smoke and mirrors. Throw in zero reserves to boost lending.
They'll burn through $700 billion in no time, then Mr. Market will want more, then more after that. We still won't know who's solvent and who isn't.
GAME OVER.
lawyerliz writes:
So just a overpaying bail out with more pages?
Yep. 106 pages explicitly specifying exactly what Hank can dictate at will via administrative fiat.
At taxpayers expense LLC
Elvis,
Sorry. I was drinking the Kool-Aid there for minute.
Just where does over optimistic turn into fraud?
Fair Economist writes:
I've written a small essay on why, regardless
i'm.... speechless
Emergency Economic Stabilization Act of 2008
House Financial Services Committee
Print a little, but end run around the Fed. We'll take it in cheese, they can't hoard that so well.
Different filename but don't know if any changes AYO08C04.xml vs AYO08b04.xml
Ezra Pound writes: How would we be able to determine if Paulson overpaid for CDO's whose current market value is "Unobservable"?
Simple. If Paulson buys them he overpaid. Otherwise, you are assuming he is the smartest man in the room and all other potential investors are chopped liver.
Sorry Ben...
Re: the Secretary shall determine whether the public disclosure required for such financial institutions with respect to off-balance sheet transactions, derivatives instruments, contingent liabilities, and similar sources of potential exposure is adequate to provide to the public sufficient information as to the true financial position of the institutions.
I need sun, more vodka!
They'll burn through $700 billion in no time, then Mr. Market will want more, then more after that. We still won't know who's solvent and who isn't.
Judging by their leverage ratio and exposure to the CDS market in relation to its size, I'd say they are ALL insolvent now.
I'm a bit tired of hearing about this "protecting of the taxpayer". If "protecting the taxpayer" means spending 700 billion dollars (or even 350 billion dollars) then please, no more protecting the taxpayer!
Market transparency is now completely gone. I'm glad I'm out.
Won't be back in the US markets until the smoke clears.
Five, maybe ten years.
mp, I wish the game were over.
Unfortunately, the "new game" is just beginning. Some of us still have young kids, so disappearing just isn't going to work. We're going to have to endure.
I see a lot of frustration in the future for a lot of people who don't deserve this.
New Zealand NZ250 up .58%, ANZ Bank up 5.58%.
Bernanke is dead set on printing his way out of this. He will do everyhting possible to obfuscate. He will be the other pimple on US economic history aside Greenspan.
Bernanke is challneging the market to fight him and his presses. He is so arrogant that he thinks he is going to chase people into stocks and other risky assets by devlauing the dollar. First rate fool.
You think this is bad, wait until the Economic Stabilization Act of '09!
mp writes: Das ist das Ende.
Yes, and it's about time.
If Asia goes down tonight they'll say we must act fast. If Asia goes up they'll say see how this restores confidence.
" Section 203 of the Financial Services Regulatory Relief Act of 2006 (12 U.S.C. 461 note) is amended by striking October 1, 2011 and inserting October 1, 2008."
Wow! Just, wow. So, assuming that the bill's name reflects its intent -- not always true -- we are reducing regulation this year instead of in 2011. Wow! Just, wow: numskulls don't realize that deregulation helped get us into this mess.
Apologies if you've already posted this.
From Wapo:
Treasury Confirms Paulson Woozy Spell
At the final, critical meeting in negotiations on the $700 billion Wall Street bailout -- the last round of talks began at 10:40 p.m. Saturday and ended around 12:25 a.m. this morning - Treasury Secretary Hank Paulson was so short of breath that lawmakers called the Capitol physician because they were so concerned.
Paulson, 62, a former Dartmouth offensive tackle, told lawmakers he was fine and waved off the doctor, despite working around the clock for several days.
But as Paulson and Sen. Chuck Schumer (D-N.Y.) later walked to the microphones to address the media, they were locked arm in arm. Treasury confirmed moments ago that Schumer was steadying Paulson, helping him walk.
the next few days should be used to sell dollars into practicly anything...
These dumb clucks got us where we are today; they need to shut down FASB along with SIFMA!!
FASB: Financial Accounting Standards Board
Fair Value Measurements
Summary
This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice.
Many here don't seem to believe there is real risk out there. So, look here's the plan:
Wishing for the whole system to come crashing down, and writing your congressman to encourage it is madness. Most of your congressmen are not that smart, and they are unlikely to do the right thing here. Don't encourage them to throw caution to the wind.
Let's get through the next month or two with the 350 Billion, but the minute it passes start advocating for something that WILL work.
Stop all this opposition, it will not be good for you just because yopu happen to be a renter or have gold hidden somewhere. It wil be seriously bad for everyone.
And those stupid neighbors of yours, the ones who bught a huse they couldn't afford, and a big SUV on a HELOC. Forget about them, what is done is done. Get over it. Do the pragmatic thing and trust Paulson, Bernamke and Buffet, at least for now, then come up with something better later. Now is not the time to stall for 3 months.
"reserves requirement is largely an archaism" & "the Fed can now act as a true banking intermediary"
bond guy | 09.28.08 - 4:44 pm
"reserves requirement, despite appearing in all the Econ 101 textbooks, is not a binding constraint on banks in the modern world"
bond guy | 09.28.08 - 5:05 pm
If I understand you correctly:
1) 4.875% of our banking system's monetary base "is largely an archaism" and "required" does not mean "required".
2) The strong unwillingness to lend to other banks that drove the Fed Funds Market Hi to 15% on 10/25/07 and to 7% on a recent Monday will suddenly dissolve when the member banks let the Fed lend their (member bank) reserves for them, rather than doing it themselves.
Please help.
"Business has been conducted more or less forever without FAS 157....so get real.
Non issue.
Ziggurat | 09.28.08 - 5:21 pm | #"
If it's really a non-issue, why is it in the most important bill to come before Congress in several decades?
patientrenter
~~~~~~~~~
Lawsuits ...
Not that it matters, but there is nothing in the plan about sourcing, reclaiming and redistributing all the money that was sucked soaked up 'til (and including) now.
SEC. 132. SUSPENSION OF MARK-TO-MARKET ACCOUNTING.
I can think of nothing but the recent GSE broohaha over implicit v. explicit government guarantees. F&F went to great pains to make clear that they were not government guaranteed yet the market acted as if they were. When it became an issue the market changed the reality to suit its assumptions.
Now we have accumulated years of mark-to-model despite reams of regulations that imposed mark to market accounting. Now when it becomes and issue the market changes the rules to reflect their reality.
Used to be those with the gold make the rules. Now those who make the rules get the gold.
Pelosi just said that the actual text is up at the house.gov site
Crash first, print later. Then assets are worth buying, not before.
FRED,
Kindly mail your dollars to me and I'll send back my thoughts.
Thanks
David:
Vanilla banks don't value their loan portfolios using mark to market or FAS 157.
I haven't looked at WaMu, but their loan portfolios were over valued the old fashioned way.....by estimating a provision for loan losses.
The bank stuff that is marked using FAS 157 is stuff for sale, asset backed securities, etc.
I am all in favor of people really looking into "mark to market" and "fair value" .....
Especially those provisions in "fair value" that allow LIABILITIES to be marked down.
A lot of the so called accounting modernization is experimental, not a reform, and may not be work under stress. IMO, a major reason that "reform" is being proposed is to reduce capital requirements of regulated financial companies to allow them to compete with the more capital efficient, less regulated entities.
That's my POV..... You should check out London Banker's blog as he has expressed similar views, with his unique flair and spin, of course.
"At least transactions will be made public online."
Well, yeah, if the Secretary of the Treasury wants it to be public.
"the Secretary shall determine whether the public disclosure required for such financial institutions with respect to off-balance sheet transactions, derivatives instruments, contingent liabilities, and similar sources of potential exposure is adequate..."
Uncle B,
Hope your feeling better, I gotta go!
Pelosi is so spooked having to announce this 'plan'. After the de riguer attack on Bush she then has to say she has endorsed a 'bi-partisan' plan that will protect the taxpayer by putting at risk $700 billion buying loans made to deadbeats!
The Democratic party's addiction to 'talking points' is simply disgraceful. How it must pain them to have to have to actually govern and not campaign.
zoppie writes:
Apologies if you've already posted this.
From Wapo:
Treasury Confirms Paulson Woozy Spell
At the final, critical meeting in negotiations on the $700 billion Wall Street bailout -- the last round of talks began at 10:40 p.m. Saturday and ended around 12:25 a.m. this morning - Treasury Secretary Hank Paulson was so short of breath that lawmakers called the Capitol physician because they were so concerned.
Paulson, 62, a former Dartmouth offensive tackle, told lawmakers he was fine and waved off the doctor, despite working around the clock for several days.
But as Paulson and Sen. Chuck Schumer (D-N.Y.) later walked to the microphones to address the media, they were locked arm in arm. Treasury confirmed moments ago that Schumer was steadying Paulson, helping him walk.
zoppie | 09.28.08 - 5:36 pm | #
Paulson earns a purple heart...
Grand Theft WallStreet. Teach your children financial standards and techniques.
Dang, correct link
to my essay on why passing this will cost us in things worth more more than money.
of course, the financialservices.house.gov site is so overloaded I can't get i
@ bond_guy
I hear you and the requirement on interest makes sense. So why not say "interest." Instead they're doing this stealth thing on page 80-something and talking about "reserve requirements."
I'm just trying to get up to speed here (in this constantly accelerating acceleration), but doesn't this get the FDIC way off the hook if reserves can be 0%?
And can it still be called Fractional Reserve Banking if there's a zero in the numerator?
My circuits fry.
Hi Kona Cookie. Thanks, I do feel better, want to wretch for other reasons now.
We really, truly, are all subprime now.
Sigh.
How can they suspend MARK-TO-MARKET? That's the REAL value of the assets.
FRED writes:
the next few days should be used to sell dollars into practicly anything...
What, and lose out of the dollar rally?
Does anybody else think "Emergency Economic Stabilization Act of 2008" sounds like the title of coup legislation?
Funny how institutions (ie regional banks) that were affected by the Fannie and Freddie bailout are included.
financialservices.house.gov is down.
I hope the server that is supposed to document wall street give aways performs better.
Who broke the government's internet?
Fair Economist: Nicely written and profound sentiment. My one humbe suggestions "The United States government [had] tremendous legitimacy..."
Paulson earns a purple heart...
He is trying his best i agree.
zoppie writes: Treasury Secretary Hank Paulson was so short of breath that lawmakers called the Capitol physician because they were so concerned.
In all seriousness, that man is talented... after fluffing the initial draft (in fairness, that draft had David Addington's editing written all over it), he's getting his game trying for the rebound. Now, I'm not saying he's faking it, I'm saying he's so intense he can push his body to this extreme, which naturally brings people closer together towards his proposal.
He's a potent nemesis!
M-F-
Evil only wins when good stands by and watches instead of intervening...
Are you a paid shill...
This is a transfer of my daughters future for pigmen..
I'm prepared for tough times I suggest you prepare and become a citizen not a shill....
Palosi, Frank, Reid, and Dodd all look rode hard and put up wet. Ha!
Paulson earns a purple heart...
barney gave him a date rape pill ...
didn't work
Mirrored documents from the House Finacial Services
Emergency Economic Stabilization Act of 2008
File Savr - Free File Hosting
Summary of Emergency Economic Stabilization Act of 2008
File Savr - Free File Hosting
SECTION-BY-SECTION ANALYSIS OF THE LEGISLATIONhttp://www.filesavr.com/finalbillsection-by-sectio
Thanks, Uncle Billy. I'm not giving up on our legitimacy until this thing passes. The Founding Fathers knew things like this would be tried and they put in checks and balances to stop it. We shall see this week whether they are adequate.
"humbe suggestions"
Ok... back to bed.
Wake me when I need to report to the Public Works Crew.
Do Not Go Gentle Into That Good Night
\t
\tDo not go gentle into that good night,
Old age should burn and rave at close of day;
Rage, rage against the dying of the light.
Though wise men at their end know dark is right,
Because their words had forked no lightning they
Do not go gentle into that good night.
Good men, the last wave by, crying how bright
Their frail deeds might have danced in a green bay,
Rage, rage against the dying of the light.
Wild men who caught and sang the sun in flight,
And learn, too late, they grieved it on its way,
Do not go gentle into that good night.
Grave men, near death, who see with blinding sight
Blind eyes could blaze like meteors and be gay,
Rage, rage against the dying of the light.
And you, my father, there on that sad height,
Curse, bless, me now with your fierce tears, I pray.
Do not go gentle into that good night.
Rage, rage against the dying of the light.
Dylan Thomas
The struggle to keep people in houses they can't affort will continue until it bankrupts the country.
Paulson, 62, a former Dartmouth offensive tackle,
Now he's just offensive.
Reid took time out to get a haircut. Dodd is speaking in subdued tones. The Democrats really hate this but are going to vote for it. That speaks volumes to me at least about who bankrolls them.
Hope the GOP House hangs tough and walks away from it.
why are people so adiment about the exeucitve compensation it seems so childish to even be debating a few million dollars.
Having a mandatory 3 year jail term for every participating CEO would actually be worth debating. But a few million? Please.
CR et al:
Full text here:
Read The Bill: S. 2856 [109th] - GovTrack.us
Financial Services Regulatory Relief Act of 2006
Oops on the last one
SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION
File Savr - Free File Hosting
"Secretary Hank Paulson was so short of breath..."
If I has as much 'splaining to do as he does, I'd have attacks, too. His monumental failure to recognize, understand and plan ahead has played a big role.
Pelosi: The Bill went on the internets now
They have done the same thing during the 80' (suspend fair value accounting to prevent insolvency)
It's ok if you want to delay the problem and wait for better days.
firt there will no be better days
then the taxpayer will pay not the banks
at last those MBS are not classic junk bonds, they are black holes with very liquid short term paper and linked to a
still moving market.
all-
i have been reading CR for about a year, and though i am not as knowledgeable as some of you, i have now learned enough to understand the key concepts of the current problem.
serious question here: to solve the problem, we have just changed the rules of accounting. financial statements are now a sham.
wont the rest of the world see and recognize this for what it is?
Some thoughts:
If you read this from another perspective it makes perfect sense!
From a Socialist POV - they determine values, set the reward and keep the asset.
Putin would be proud - This is very similiar to how Gazprom "negotiated" ownership.
How odd.
More juice from 2856:
SEC. 202. INCREASED FLEXIBILITY FOR THE FEDERAL RESERVE BOARD TO ESTABLISH RESERVE REQUIREMENTS.
Section 19(b)(2)(A) of the Federal Reserve Act (12 U.S.C. 461(b)(2)(A)) is amended--
(1) in clause (i), by striking `the ratio of 3 per centum' and inserting `a ratio of not greater than 3 percent (and which may be zero)'; and
(2) in clause (ii), by striking `and not less than 8 per centum,' and inserting `(and which may be zero),'.
why are people so adiment about the exeucitve compensation it seems so childish to even be debating a few million dollars.
Great, then if it's so childish and unworthy, it will be easy for the banks to give it up.
See the point yet?
ZERO Reserve Ratio?
WTF does that mean?
Banks can write loans til blue in the face without having to actually have, you know, MONEY?
That and SUSPENSION of Mark-to-Market?
Why not just dictate that 2+2=700,000,000,000 while they're at it?
Since we're rewriting the rules of mathematics, why not caloric conversion, so we can all eat as much (human breast milk) Ice Cream as we want and not get fat!
M-F I agree, the possibility of a financial crash (that many of us predicted many many months ago) is far to risky a thing not to address with something, anything. Hopefully, the next $350B will be used for a Swedish type solution if this buys us some time.
Lux, NV, Belgium to bail out Fortis, appoint their own CEO, Duth gov 49% stake
wont the rest of the world see and recognize this for what it is?
No. Not in their interest to ...yet.
Nancy, it's easy: 1) let it crash
2)print some but pay it straight to depositors as interest.
haircuts all around, but junk writers left holding their junk.
BobbyFlav
2+2=700,000,000,000 for large enough values of 2.
wont the rest of the world see and recognize this for what it is?
Oh yes. You're not going to want to try to float an American bond abroad if this goes through. Good luck on finding the savings to float it here. China won't have to issue a directive to stop overnight lending to US banks either. 0% reserves? I think China requires 15% right now. No Chinese bank would be that dumb.
BobbyFlav writes:
ZERO Reserve Ratio?
Nice - if we all make withdrawls - nobody gets any!
wont the rest of the world see and recognize this for what it is?
You have it exactly. Confidence is not going to be restored until at least a modicum of honesty is restored.
And the truth is that the financials are incompetently managed and insolvent. This bill will make them $700B less insolvent, but won't solve the incompetent management part.
These things are walking dead, and the very reason why bankruptcy was invented.
Here are some examples of how this works for the average tax payer
Roasting a Turkey - Turkey Cooking Times: Easy How-To Cooking Tips & Advice: RecipeTips.com
If we are going to put this to music I'd suggest Bob Dylan's The Ballad of Hollis Brown, probably the most depressing song ever written. Must have been what Harry Reid's mom sang to him at bedtime.
Your grass is turning black an
there's no water in your well,
You've spent your last lone dollar
on seven shotgun shells.
Your baby's eyes look crazy
an its a pounding on your brain
Your wife's screams are a stabbin you
like the dirty driven rain.