When the exchange is unwound, does the Fed make its partner bank whole? In other words, if the dollar's value falls in relation to the Danish krone, does the Fed give back $5 billion worth of Danish krone at the new exchange rate?
Anyone hesitant to go to sleep tonight because their dreams might be infested by Paulson? Those teeth! That breath! The hardman stare he gives himself in the morning mirror as he shaves his head.
Exit: This drug is used here too, called Ibogaine (instead of Iboga). They take people on 3 day trips in Tijuana. I know a girl who works there and it's very intense. They monitor you throughout the trip. Supposedly it cures heroin addiction.
I was trying to figure out what a swap facility/reciprocal currency agreement is. Using Google it took a bit of work; as okay... a bunch of these swap facilities have been set up. Think I found something good here.
So basically "swap facilities" are just high volume currency exchanges? America provides dollars for yen, kronks, euro's, whatever? Its safe to replace "liquidity" with "dollars"? So basically all the countries we are swapping in our shorting the dollar? Or are we shorting the dollar?
So we borrow foreign currency, and give them dollars. Let's assume today's currency exchange rate is $2:1 euro. ECB gives me 10 euro's; and I swap them $20. I hold these 10 euro's until January 30. On January 30, 2009 the exchange rate is $4:1 euro (weaker currency). So I take the 10 euro and get $40 in return.
It's 1 am I have no idea what the implication is, but it seems like this is how we are going to accomplish inflation?
Sept. 23 (Bloomberg) -- Treasury Secretary Henry Paulson's $700 billion plan to buy devalued assets from financial companies is ``a joke'' because it doesn't go far enough to calm markets, said Kenichi Ohmae, president of Business Breakthrough Inc.
This is a benevolent act from the foreign feds. They're trying to defend the dollar's status as medium of interbank exchanges in Scandinavia. If there are further dollar shortages in these countries, such as the dramatic one we saw last week, I would guess that they at some point abandon the dollar as reserve currency, sending the value of the dollar down. Remember, these are very wealthy countries with a cumulative 40 million+ inhabitants.
Can we just say it please? $100 Trillion. That's what it will take to calm down the economies. They've gotten us used to billions. We're on a first name basis with trillions now too. $100 Trillion, that seems like a nuclear howitzer sized number, right?
Here's some feel-good: A number of economists (mostly from chicago) have put together a crisply worded letter to congress:
Everyone homeless and living in the street? If it comes to that, there will be 50 million abandoned houses. I have a hunch that rent prices will decline before this happens.
More welfare for the wealthiest families on earth. More good money after bad. More fear, more fear. Our National Socialist Republican Party will never stop until the achieve their ultimate goal, all money to zee master race.
Hi, My Name is Chip, I went Harvard and Yale, then I was slipped into this cushy $200,000 a year job at an investment bank. I basically make nothing of value to anyone. I move worthless paper around the world in a daisy chain. Anyway, if you don't bail me out I will have to quit buying cocaine by the pound, which would be real bad, and the whole economy will collapse, Molly might leave me for another privileged brat and so on and so forth to infinity!
Eric Hovde systematically just dismantled the TARP on CNBS. It was great. Kernan looked as if he got his lunch money stolen and abruptly cut him off and went to break.
Plus they have this annoying young lad on with spikey hair that looks as if he should be selling chamois on late nite informercials.
Oh wait, Steve LIEsman on trying to sell BB's book.
And we see all this frantic gyration over the mortgage CDO mess. What will they do when all the other flavors of debt go sour for credit cards, auto loans and student loans?
These mess waves probably won't stop rolling much before 2010, if them.
Paul Krugman just nominated himself for Treasury Secretary
Ive been pointing out that the dictatorial powers Paulson has sought would accrue to the next Treasury secretary, who might well be Phil Gramm. Ive been trying to come up with a liberal-leaning name who might seem equally horrifying to Republicans, and the only one Ive come up with is me.
enter zip code, get phone #s -- dial your reps, unzip pie holes!
Then please dial state/local folks and ask them to contact reps too - they have ways of getting through when things are busy - and it's important they register constituent ire up the chain.
Also kids, GREAT stuff today on this site (clearly they know there is a need - so your use of the site is working!!)
Big item on bailout is front and center on the site -includes a form so you can carpet bomb all sens and reps with emails/ letters (but really-CALLS work best)
also found this handy guide to media-call 'em up, demand more coverage!!
Is it too late to bailout Tony Soprano? He might have some friends that can fix the system. They've been in the business longer than Paulson--and seem to be more patriotic and less greedy.
It is time to get government out of the business of bailing out Wall Street. No matter how you structure a $700 billion dollar bailout package for Wall Street, it does not make any sense unless the market would have logically taken the same action using its own initiatives. In fact, I believe one of the reasons we are in this predicament today is that government has been manipulating these markets for years by keeping interest rates too low for too long. Government has artificially supported mortgage backed security prices through support by Fannie, Freddie and FHA, by permitting lenders to use insane models to leverage deposits to free up huge amounts of lending capital and through use of countless facilities offered by Federal Reserve Banks. Senator, America needs free markets without government participation but with limited regulation. The best action you can take is to stop the $700 billion dollar bailout package for Wall Street, support a free market not only in America but Worldwide, and recommend that Fannie, Freddie and FHA gradually be dissolved by spinning them off piece by piece to private investors.
Sveriges Riksbank, Danmarks Nationalbank, and Norges Bank do not have "the" before their names, just like Bank of England and Bank of Canada. Putting a "the" before the names looks really weird to us Scandinavians.
Who gives a damn about bailouts, the real monster is the future liabilities:
"The President of the Dallas Federal Reserve, Richard W. Fisher...points out that this $99.2 trillion will be a bit of a burden to pay off:
"Lets say you and I and Bruce Ericson and every U.S. citizen who is alive today decided to fully address this unfunded liability through lump-sum payments from our own pocketbooks, so that all of us and all future generations could be secure in the knowledge that we and they would receive promised benefits in perpetuity. How much would we have to pay if we split the tab? Again, the math is painful. With a total population of 304 million, from infants to the elderly, the per-person payment to the federal treasury would come to $330,000. This comes to $1.3 million per family of fourover 25 times the average households income."
You do have $1.3 million in your pocket, right? What, are you some kind of deadbeat?
Speaking of deadbeats, the "$99.2 trillion" estimate does not include the subprime bailout. So for those who like large round numbers, by the end of 2008 the real National Debt should be large, round, and about $100 trillion. "
Sept. 24 (Bloomberg) -- Eighteen months ago, U.S. Treasury Secretary Henry Paulson told an audience at the Shanghai Futures Exchange that China risked trillions of dollars in lost economic potential unless it freed up its capital markets.
``An open, competitive, and liberalized financial market can effectively allocate scarce resources in a manner that promotes stability and prosperity far better than governmental intervention,'' Paulson said.
The failure of Lehman was felt all over the world. GS, MS and MER have a similar reach and are NOT out of the woods, yet. Makes sense to have more swap lines available in the event of trouble. This is a global crisis whether we like it or not, and while the Fed seems unable to anticipate the magnitude or timing of these things they have been fairly efficient in cleaning up the mess afterward. Additional swap facilities can't hurt and might help.
Just checking up on TED this morning...up to 2.78...this is the part where Bernanke and Paulson would run around with their hair on fire except...well...
That road may be different from the one Paulson proposed 18 months ago, according to Arthur Kroeber at economic research company Dragonomics Advisory Services Ltd. in Beijing.
China's made it clear it won't listen to these snake-oil salesmen who come from Wall Street, even if they're wearing suits issued by the Treasury Department,'' he said.It's strengthened the hands of all the people who are very skeptical about financial liberalization in China.''
Treasuries Lose Allure for Asia, Europe Investors (Update2)
Sept. 24 (Bloomberg) -- Investors outside the U.S., who own more than half of all Treasuries outstanding, say the government's $700 billion plan to revive the banking system will diminish the appeal of the nation's bonds.
With the TED spread that high can we start calling it the "credit freeze" now? I never liked the term "credit crunch", sounds like some kind of candy bar.
The Fed never sleeps nor, it seems, does the ever vigilant CR.
I can think of more than one instance where I extended some help to friends frm no very strong position of my own. But it does seem to me this reflects simultaneously two perceptions of the US held by Treasury and the Fed which make strange bedfellows - that the economy is fundamentally sound, on the one hand, and that we must move promptly to shore up any unfortunate developments at home or abroad lest the world economy and our own should collapse, on the other.
I've heard it said that entertaining two incompatible views at the same time is a sign of intellect, but think perhaps itl bears pointing out all the same.
So we borrow foreign currency, and give them dollars. Let's assume today's currency exchange rate is $2:1 euro. ECB gives me 10 euro's; and I swap them $20. I hold these 10 euro's until January 30. On January 30, 2009 the exchange rate is $4:1 euro (weaker currency). So I take the 10 euro and get $40 in return.
I do not think so... What you are describing is a straight-up forex trade, followed by the unwind of that trade a few months later.
In a swap, the Fed gets back exactly the same dollars it loaned out (possibly with interest). In fact, I believe this is the entire reason a foreign bank would use one of these swaps instead of simply hitting the forex market... With a swap, they do not bear any risk of the borrowed dollars becoming weaker, because they will get your original euro/yen/kiwi/ZW$ back no matter what the exchange rates do.
But I am definitely no expert on this stuff and would be glad to be corrected.
With the TED spread that high can we start calling it the "credit freeze" now? I never liked the term "credit crunch", sounds like some kind of candy bar.
Actually, you guys should sign the petition FOR the bailout, not against. It would give YOU more time to prepare for the inevitable massive economical collapse of USA.
Mainly Medicare and SS future liabilities are growing by that same 700 billion dollars EVERY FOUR MONTHS! So bailout is not going to solve anything, it will just give a little bit more time.
Soon foreigners are not going to buy those new shiny US treasury bonds or any other type of American bonds anymore. That will be the GAME OVER moment.
In response to a near meltdown of the financial system last week, Treasury
Secretary Paulson unveiled his plan to stabilize world credit markets. By now
absolutely everyone knows that the centerpiece of this plan is a $700 billion
bailout for the banks and Wall Street (the very ones that created this mess in the
first place!). But we wonder if bailout is the right term. Of the many reporters
and analysts covering this event, we saw only a few who told the television
audience that the government is not going to simply spend $700 billion of their
tax money in the same way the government spends their money on social
programs or war. Only a few correctly pointed out that the government was
planning to buy cheap assets, many of which are trading well below fair value,
and that indeed, the program has a good chance to making money for the
government.
I notice a lot of false statements/claims on this board too.
In addition to many of the concerns listed here and elsewhere, I have three concerns that have not received much, if any, attention.
First, if anyone at a securitizing firm, let’s call the fictitious firm Silverman, knew of fraudulent activity anywhere in the pipeline, would the investor that purchased the security have legal recourse against Silverman? Could the hedge funds and other investors that purchased Silverman mortgage backed securities force them to purchase the securities back at par because they had knowledge of fraudulent activities? Would this problem disappear if Treasury purchased these securities at inflated prices from everyone?
Second, did Silverman market these securities to investors while taking opposite positions for the institution? As we saw with auction rate securities, some investment banks were selling the securities to customers while the banks liquidated their own positions. Once that was apparent, the investment banks were forced to buy the securities back due to the misrepresentation. So, did Silverman sell these securities to investors at the same time as they were shorting, liquidating, or purchasing CDSs on these same securities? If so, would the investor have legal recourse?
Third, would banks and other financial institutions be allowed to act as conduits to hedge funds selling these securities? If the bill had an equity position or limits on executive compensation, the conduit scenario would be less likely and would therefore be opposed if the intention was to include hedge funds (or any investor anywhere).
It seems like Paulson could have chosen a much more efficient path to achieve the same result. This inefficient path may produce the same result at the end of the day but cost the taxpayer three times as much. Could there be any motivation to choose the inefficient path?
Hey, can somebody answer this question? I'm just reading where Paulson said yesterday that he is opposed to executive compensation limits in his bailout plan because he thinks it will discourage participation in his plan. Well, if a firm decides that our bailout money is not worth the hassle of govt oversight, then doesn't that suggest that we don't need this bailout at all? I guess that Paulson thinks that many firms really DON'T need our money that badly. OK then - so let's not give it to them.
I don't remember the logic, but I believe Russ Winter and Lee Adler (The Yellow Brick Road › Page not found said some time ago that these swap lines are actually done to help the U.S., since we have basically no foreign currency reserves, rather than help the foreign country, as it seems at first glance.
JP writes:
With the TED spread that high can we start calling it the "credit freeze" now? I never liked the term "credit crunch", sounds like some kind of candy bar.
I love looking at CNBC's buffett headlines. Breaking squib about him saying bailout is necessary, main hed says the bailout makes his very expensive (to goldman) 5B deal possible.
What happened to the "we don't talk about our deals in advance" buffett of yore? Now that he's not a disinterested party, someone needs to ask him some hard questions about the bailout: "holding to maturity" and equity stakes come immediately to mind. He knows he can move markets -- and reporters do to -they need to play some hardball with him.
Only a few correctly pointed out that the government was
planning to buy cheap assets
Assets priced in the future and mark to model, this manure heap that's fast approaching the fan.
Why don't your employers pay your wages 10 years in advance?
What is ultimately comes down to is the protection of the currency for our future generations. This generation's goodtime is over and we will pay horrendously. So be it.
Paulson asks too much in addition to the $700 B. I'm now in the camp of spending money, but for chrissakes, attach some strings. I can live with Frank's approach.
There must be oversight. They've shown that they are flailing and that will only make it worse.
SDS & DXD trading well below NAV in pre-market. They're trading as though the markets were up 3.5-4% already. Just a heads up for those wanting to enter into them this a.m.
Don't take pot shots at Stephen Roach just because he works for Morgan Stanley.
Roach is a very talented global economist, and probably did more yelling than any other economist (even more than Roubini) about the problems that are now unfolding.
The shame was that Roach was early in his call, and his perception among MS clients as being too gloomy in his daily musings on the MS global macro website probably had something to do with MS moving him to Asia (he had previously been the chief economist of MS).
Stephen Roach probably did more than all of us combined (and I'm a big fan of blog hosts) in trying to stop this train. He had the ear of politicians, he was out there pretty much on his own at Davos and Jackson Hole.
Stephen Roach was writing several times a week about the US consumer using their houses as ATM cards years ago...
There are many people responsible for what's gone wrong with the global economy... either through their actions or inactions. Roach is one of the few who really tried to be a hero.
I distinctly heard the editor of the Financial Times on NPR this a.m. state that, if the Bailout doesn't go through, the dollar will fall, with respect to other currencies.
I'd anticipated inflationary concerns if the Bailout goes through.
US bank insolvency cannot be cured with any amount of liquidity.
How exactly does an entity with 10 trillion in debt and a FY operating deficit of ~$1.5 trillion come up with the cash to swap? Not honestly I can tell you that much. At least the Fed is smart enough to get out of the US Dollar. That is unless insider trading rules apply to them.
If the dollar is crushed the terrorists win. Does that make the Fed a terrorist organization or merely a domestic funding arm? Can we freeze their "assets" (suspend their banking privleges) before they do to the entire economy what they did to housing? Is there any moral difference between dropping high explosive bombs and dropping fiscal bombs on the people of the US?
Freddie Mac's treasurer said on Wednesday that overseas investors were taking a wait-and-see stance toward U.S. agency debt due to volatility and uncertainty, but added that this did not signify a loss of confidence
It's probably that they don't want to lend to a country that is going to issue massive amount of debt and pay them back with a devalued currency wiping out any returns.I don't balme them.
there could be self-dealing all over the place. there's already rumors certain firms have been picked to manage this. the question is who and whether they should be allowed to if they were involved in the blowup. at the root of the problem is there are few firms that really understand these securities that didn't actively cause the blowup.
also agree w/ good times are over. we've been living way beyond our means at the dime of foreign countries.
"Notice anything interesting about the effective overnight Federal Funds rate?"
Nemo | Homepage | 09.24.08 - 8:54 am |
yes, its anticipating a surprise 50bps cut in Fed Funds Rate, or tacitly making one until the next FOMC meeting.
One thing about LIBOR that has puzzled me. Those who have lent money at LIBOR-indexed rates would seem to me well motivated to complain about artificially low numbers. As far as I know, they have not done so.
Comrade Baron Von Helmut III: because he said their assets were marked extremely low. secondly I wouldn't be surprised if gs did something like offer 6% CDs to buy distressed assets at 10% or higher. there in fact was an article on BB yesterday where the CFO alluded to something like this.
NEW YORK - President Bush says that despite congressional debate over his proposed $700 billion financial bailout plan, "a robust plan" will be passed.
ADVERTISEMENT
The president spoke Wednesday before a meeting to discuss free trade with leaders of other Western Hemisphere nations. It was one of his final events in his three-day trip to attend the U.N. General Assembly.
He said the leaders can see clearly that the legislative process in the U.S. is "give and take."
Bush added: "I am confident when it's all said and done, that there will be a robust plan."
The Dollar is getting Pounded. Euro all going to see more of this as the Yen for US denominated debt gets Marked to new levels. Just Loonie. We are going to get buried in the Rouble. We need to get Rial and accept that the pigmen have Won.
OK, I'll ask this question again: can those who are firmly in the camp of "needing to spend money" explain to me why that money has to be spent recapitalizing failed banks instead of beefing up the capital positions of sound banks (or creating new, sound bnnks if necessary)?
Allows Treasury to buy these assets and make money where private markets are demanding more return (whereby depressing prices).
(Obviously he's demanding more return from Goldman -from 10% to 17% depending on your analysis)
Look, there's plenty of money out there to buy every security currently (uh, creatively) in Level 3. But, banks won't let them go at current bids.
The funny thing is, to me, the banks act as if there is some cabal of vultures looking to take advantage of them. As if the global pool of dollars has conspired to price their securities at a similar rate. And so, they go to the taxpayer and make a case that our collective cost of capital is so low, how could we say no?
Well, just like Warren has to protect the interests of his shareholders, each of us has to protect the interests of our families.
And, our collective cost of capital will rise considerably if we put any of the taxpayers money into this black hole.
Seems to me if our cost of capital is so low, why aren't we behaving as if we are the ultimate vulture investor?
@Yalt | 09.24.08 - 9:21 am
Can't help ya. I see it like you do. Bailout does nothing for the commercial paper market's problem, beyond distracting scarce resources ($700bln) to a red herring.
Maybe someday we'll be smarter and understand why "Bailout is Best".
Raphael, you are right that assets are "undervalued" or less than their "fair value". However, does this not depend strongly on the recovery assumptions? I am thinking that there is an enormous amount of risk in the price of housing, because of risk in the economy and financial institutions. Bond values hate risk. To repeat an often made point here: It seems to me that there is more than enough private capital - well more than $700Bn - to buy these "undervalued" assets.
I appreciate your comments and agree with you that many commenters here are uselessly ranting the "pitchforks and torches" line.
Eric at 9:05, get your own name. I was here first.
It does, so there isn't a perfect science to determining fair value. Most participants are running anything between 40-70% severities (and worse on subprime high-LTV loans). Based upon the recoveries so far we are seeing ranges slightly less than that. Obviously if house prices depress further severities and defaults get worse. Eventually it can be figured out where house prices have to go in relation to rents and incomes (I do this type of analysis when evaluating these securities)
But nothing in investing is ever a perfect science. What I can say is most people bidding this are assuming draconian events and figuring out the cashflows. Then the are bidding from there to earn pretty good returns (10-20%) even if they are wrong.
It's been more than a year since the experts declared the bond market broken. It's been more than a year since Cramer's meltdown. The market is not broken.
The problem for Wall St. is that the market is open and working quite well, but they don't like the terms.
This government takeover started with the stolen election of 2000. That right there should have been proof to Americans we were headed for disaster.
Then the manufactured or allowed Big Event where 3000 Americans died. That should have been a warning that we were headed for disaster. Then all the post 911 Exec orders. That was a warning.
Now your wallets are up for grabs. The eight-headed government/central banking Monster was ignored and allowed to gain complete power. Too late to wake up.
Y'all had eight years but the Boom distracted you and bought you off. This was a sequence of abuse of power events that was ignored by the public and now the public will pay for their apathy and complicity.
another dynamic is that there are a limited amount of people that actually understand this stuff. they are demanding a premium for their expertise. that's why a lot of money is on the sidelines.
for instance i can figure out RMBS in and out, but throw a CDO at me with all sorts of crap and tranching in it and I have no idea. the people who know how to do this are exploiting their expertise.
Raphael,
No one knows the inputs into the current crop of CDOs. No one knows the value of the underlying asset or the ability of the borrower to pay. So, isn't that the risk currently being priced?
There's a price for expertise. My experience in the accounting world is that there's a higher price for a lack of expertise. In this case, Paulson was hoping Congress' lack of expertise would make them suckers. "Pass the costs over to their constituents." That's not going well so far.
Another point:
The theory of bailout proponents is "the solution of pollution is dillution". If that's true, where are the overseas sovereigns?
"With a swap, they do not bear any risk of the borrowed dollars becoming weaker, because they will get your original euro/yen/kiwi/ZW$ back no matter what the exchange rates do"
Nemo - The FT reported last week that the USDs were a swap for "assets pledged" by other CBs. I wrote the Treasury and asked the question if the CBs were guaranteeing the debt or were the assets pledged now part of the UST - no answer!!
So either thee UST is propping up the dollar - or, it is pledging USDs for US paper held overseas - ie a backend bailout to circumvert Congress.
We can see there's a worldwide shortage of dollars. Who will lend the 2T the treasury will try to borrow in 2009?
a) we print it. We've never actually done that, likely hyperflation, IMO won't do it this time either.
b) we do the usual, we borrow it. Borrowing this much will push up US interest rates very high, economy crashes but dollar strong.
Everything but the kitchen sink it would seem.
I just get this image of Lilliputians tying up Gulliver with threads and threads and threads, hoping to keep him down.
Of course, Swift's other line of thought, his Modest Proposal, might offer some suggestions on how to deal with the issue.
Substituting "bankers" for children, naturally.
When the exchange is unwound, does the Fed make its partner bank whole? In other words, if the dollar's value falls in relation to the Danish krone, does the Fed give back $5 billion worth of Danish krone at the new exchange rate?
60 visitors at 3:09 a.m.!
It's only 12:09 on CR's coast...
Arrrrrgh! There goes my country.
CSC - this one's for you...
YouTube - Hallucinogenic Cocktail
"Two people desperate to change their lives."
with friends like this, who needs enemas
CR, do you sleep?
how is swapping short term with the fed different than being bailed out in the paulson plan?
Ah, more international credit unions.
Anyone hesitant to go to sleep tonight because their dreams might be infested by Paulson? Those teeth! That breath! The hardman stare he gives himself in the morning mirror as he shaves his head.
In the basement of the treasury dpt
Paper... check
Ink... check
Cutter... check
Power... check
Presses... check
Hank yells at Ben - should we start with $20's or $100's tonight?
You up late folks - go fax your congress peeps. Make them honest.
I just finished another round of it - for me and the misses.
Close to 70 faxes sent since Sunday.
More in the morning. Night.
[Yawn]
Ok Paulson, here I come.
Night all. Here's a good beer related link:
Top 20 Beer Drinking Countries - CNBC
beer! we need to increase our debt pyramid. and fast!
I thought I was the only one. Good to know that Ben shares a addiction for coffee just like me.
Exit: That was rad. Bookmarked. Many thanks.
Exit: This drug is used here too, called Ibogaine (instead of Iboga). They take people on 3 day trips in Tijuana. I know a girl who works there and it's very intense. They monitor you throughout the trip. Supposedly it cures heroin addiction.
I was trying to figure out what a swap facility/reciprocal currency agreement is. Using Google it took a bit of work; as okay... a bunch of these swap facilities have been set up. Think I found something good here.
So basically "swap facilities" are just high volume currency exchanges? America provides dollars for yen, kronks, euro's, whatever? Its safe to replace "liquidity" with "dollars"? So basically all the countries we are swapping in our shorting the dollar? Or are we shorting the dollar?
So we borrow foreign currency, and give them dollars. Let's assume today's currency exchange rate is $2:1 euro. ECB gives me 10 euro's; and I swap them $20. I hold these 10 euro's until January 30. On January 30, 2009 the exchange rate is $4:1 euro (weaker currency). So I take the 10 euro and get $40 in return.
It's 1 am I have no idea what the implication is, but it seems like this is how we are going to accomplish inflation?
Maybe the US Fed and Treasury authorities last year were really preaching "GLOBAL" containment?
Very scary times...
The FED is aimed at keeping USD weak and not strong.
This is to help out in exports and in anticipation when they will raise rates.
Wonder if rates are going up soon?
Did the tide just go out?
Short DRR...you know it makes sense
Looks like Sumitomo is also buying a Buffet-like stake in Goldman. Rally in financials, dead ahead, see you all at Dow 13k before the election.
After the election however...things could get dicey again.
$5 Trillion Cash Pool Needed to Stop Rout, Ohmae Says
$5 Trillion Cash Pool Needed to Stop Rout, Ohmae Says (Update1) - Bloomberg.com
Sept. 23 (Bloomberg) -- Treasury Secretary Henry Paulson's $700 billion plan to buy devalued assets from financial companies is ``a joke'' because it doesn't go far enough to calm markets, said Kenichi Ohmae, president of Business Breakthrough Inc.
30 billion..
So the fed went looking under the couch cushions for some spare change...
Sorry been using the word 'trillion' all week....
Some fiddling while Rome burns...
This is a benevolent act from the foreign feds. They're trying to defend the dollar's status as medium of interbank exchanges in Scandinavia. If there are further dollar shortages in these countries, such as the dramatic one we saw last week, I would guess that they at some point abandon the dollar as reserve currency, sending the value of the dollar down. Remember, these are very wealthy countries with a cumulative 40 million+ inhabitants.
Can we just say it please? $100 Trillion. That's what it will take to calm down the economies. They've gotten us used to billions. We're on a first name basis with trillions now too. $100 Trillion, that seems like a nuclear howitzer sized number, right?
Here's some feel-good: A number of economists (mostly from chicago) have put together a crisply worded letter to congress:
http://faculty.chicagogsb.edu/john.cochrane/research/Papers/mortgage_protest.htm
(courtesy Marginal Revolution & Freakonomics)
Paulson "Don't worry guys! We thought of everything..""
Bernanke "I wonder what Greenspan would do?"
Tine to hit the street with protests (before we are all homeless and living on the street ) .
Everyone homeless and living in the street? If it comes to that, there will be 50 million abandoned houses. I have a hunch that rent prices will decline before this happens.
More welfare for the wealthiest families on earth. More good money after bad. More fear, more fear. Our National Socialist Republican Party will never stop until the achieve their ultimate goal, all money to zee master race.
Hi, My Name is Chip, I went Harvard and Yale, then I was slipped into this cushy $200,000 a year job at an investment bank. I basically make nothing of value to anyone. I move worthless paper around the world in a daisy chain. Anyway, if you don't bail me out I will have to quit buying cocaine by the pound, which would be real bad, and the whole economy will collapse, Molly might leave me for another privileged brat and so on and so forth to infinity!
Are we doing swaps with the Reserve Bank of Zimbabwe?
Eric Hovde systematically just dismantled the TARP on CNBS. It was great. Kernan looked as if he got his lunch money stolen and abruptly cut him off and went to break.
Plus they have this annoying young lad on with spikey hair that looks as if he should be selling chamois on late nite informercials.
Oh wait, Steve LIEsman on trying to sell BB's book.
what a joke.
And we see all this frantic gyration over the mortgage CDO mess. What will they do when all the other flavors of debt go sour for credit cards, auto loans and student loans?
These mess waves probably won't stop rolling much before 2010, if them.
Paul Krugman just nominated himself for Treasury Secretary
Ive been pointing out that the dictatorial powers Paulson has sought would accrue to the next Treasury secretary, who might well be Phil Gramm. Ive been trying to come up with a liberal-leaning name who might seem equally horrifying to Republicans, and the only one Ive come up with is me.
Princeton saves the world - Paul Krugman Blog - NYTimes.com
The fed never sleeps and neither does CR - Thank you again for nutritious postings!
OK -NOW EVERYONE CALL YOUR U.S. REPS TODAY!
Congress.org - Get informed, get involved --
enter zip code, get phone #s -- dial your reps, unzip pie holes!
Then please dial state/local folks and ask them to contact reps too - they have ways of getting through when things are busy - and it's important they register constituent ire up the chain.
An it is extremely important to convince others to do it too .
OK -NOW EVERYONE CALL YOUR U.S. REPS TODAY!
Also kids, GREAT stuff today on this site (clearly they know there is a need - so your use of the site is working!!)
Big item on bailout is front and center on the site -includes a form so you can carpet bomb all sens and reps with emails/ letters (but really-CALLS work best)
also found this handy guide to media-call 'em up, demand more coverage!!
Congress.org - : Media Guide
The site where big bailout item form exists again is
Congress.org - Get informed, get involved
And very important point Fred, email everyone you know and ask them to call their reps and state/local folks too!
Is it too late to bailout Tony Soprano? He might have some friends that can fix the system. They've been in the business longer than Paulson--and seem to be more patriotic and less greedy.
Please write your Senator
Dear Senator:
It is time to get government out of the business of bailing out Wall Street. No matter how you structure a $700 billion dollar bailout package for Wall Street, it does not make any sense unless the market would have logically taken the same action using its own initiatives. In fact, I believe one of the reasons we are in this predicament today is that government has been manipulating these markets for years by keeping interest rates too low for too long. Government has artificially supported mortgage backed security prices through support by Fannie, Freddie and FHA, by permitting lenders to use insane models to leverage deposits to free up huge amounts of lending capital and through use of countless facilities offered by Federal Reserve Banks. Senator, America needs free markets without government participation but with limited regulation. The best action you can take is to stop the $700 billion dollar bailout package for Wall Street, support a free market not only in America but Worldwide, and recommend that Fannie, Freddie and FHA gradually be dissolved by spinning them off piece by piece to private investors.
Thank You!
Sveriges Riksbank, Danmarks Nationalbank, and Norges Bank do not have "the" before their names, just like Bank of England and Bank of Canada. Putting a "the" before the names looks really weird to us Scandinavians.
Thanks for an excellent blog, by the way. =)
So we now have a landmap of where the latest set of distress points is.
Wondered when I saw the Danes and Norwegians.
This is, I think, the start of the dollar unravelling as the currency of global exchange.
When we set one up with Zimbabwe, then I'm really going to worry.
Like, sweat worry.
Who gives a damn about bailouts, the real monster is the future liabilities:
"The President of the Dallas Federal Reserve, Richard W. Fisher...points out that this $99.2 trillion will be a bit of a burden to pay off:
"Lets say you and I and Bruce Ericson and every U.S. citizen who is alive today decided to fully address this unfunded liability through lump-sum payments from our own pocketbooks, so that all of us and all future generations could be secure in the knowledge that we and they would receive promised benefits in perpetuity. How much would we have to pay if we split the tab? Again, the math is painful. With a total population of 304 million, from infants to the elderly, the per-person payment to the federal treasury would come to $330,000. This comes to $1.3 million per family of fourover 25 times the average households income."
You do have $1.3 million in your pocket, right? What, are you some kind of deadbeat?
Speaking of deadbeats, the "$99.2 trillion" estimate does not include the subprime bailout. So for those who like large round numbers, by the end of 2008 the real National Debt should be large, round, and about $100 trillion. "
Our $100 Trillion National Debt by Bill Walker
The TED is alive and well....
http://www.bloomberg.com/apps/quote?ticker=.TEDSP%3AIND
China Shuns Paulson's Free Market Push as Meltdown Burns U.S.
China Shuns Paulson's Free Market Push as Meltdown Burns U.S. - Bloomberg.com
Sept. 24 (Bloomberg) -- Eighteen months ago, U.S. Treasury Secretary Henry Paulson told an audience at the Shanghai Futures Exchange that China risked trillions of dollars in lost economic potential unless it freed up its capital markets.
``An open, competitive, and liberalized financial market can effectively allocate scarce resources in a manner that promotes stability and prosperity far better than governmental intervention,'' Paulson said.
Err..
They are preparing for the dollar crisis.
barkingtribe writes:
The TED is alive and well....
2.78.. WHA..?
Bailout now people .. bail out of the US financial markets.
The failure of Lehman was felt all over the world. GS, MS and MER have a similar reach and are NOT out of the woods, yet. Makes sense to have more swap lines available in the event of trouble. This is a global crisis whether we like it or not, and while the Fed seems unable to anticipate the magnitude or timing of these things they have been fairly efficient in cleaning up the mess afterward. Additional swap facilities can't hurt and might help.
Comrade Bagholder Exit,
"Of course, Swift's other line of thought, his Modest Proposal, might offer some suggestions on how to deal with the issue."
A Modest Proposal was dark satire. If one substitutes Banksters for children, it is no longer satire.
Nostrovia,
barking,
Just checking up on TED this morning...up to 2.78...this is the part where Bernanke and Paulson would run around with their hair on fire except...well...
That road may be different from the one Paulson proposed 18 months ago, according to Arthur Kroeber at economic research company Dragonomics Advisory Services Ltd. in Beijing.
China's made it clear it won't listen to these snake-oil salesmen who come from Wall Street, even if they're wearing suits issued by the Treasury Department,'' he said.It's strengthened the hands of all the people who are very skeptical about financial liberalization in China.''
Shoulda listened to jimmy rogers..
From CNBC.com
Cramer: 5 Lies About the Paulson Plan
Has the world turned upside down?
Would Corzine be a good replacement for Paulson?
Treasuries Lose Allure for Asia, Europe Investors (Update2)
Sept. 24 (Bloomberg) -- Investors outside the U.S., who own more than half of all Treasuries outstanding, say the government's $700 billion plan to revive the banking system will diminish the appeal of the nation's bonds.
Treasuries Lose Allure for Asia, Europe Investors (Update2) - Bloomberg.com
Bond market collapses, the things depressions are made of...
Comrade Bagholders,
Yep...that Ted spread is encouraging.
Nostrovia,
Worth a read :
$5 Trillion Cash Pool Needed to Stop Rout, Ohmae Says
$5 Trillion Cash Pool Needed to Stop Rout, Ohmae Says (Update1) - Bloomberg.com
Comrade Bagholders,
We need some honest people at treasury. Unfortunately John Gotti died in 2002. Any other candidates?
Nostrovia,
With the TED spread that high can we start calling it the "credit freeze" now? I never liked the term "credit crunch", sounds like some kind of candy bar.
The Fed never sleeps nor, it seems, does the ever vigilant CR.
I can think of more than one instance where I extended some help to friends frm no very strong position of my own. But it does seem to me this reflects simultaneously two perceptions of the US held by Treasury and the Fed which make strange bedfellows - that the economy is fundamentally sound, on the one hand, and that we must move promptly to shore up any unfortunate developments at home or abroad lest the world economy and our own should collapse, on the other.
I've heard it said that entertaining two incompatible views at the same time is a sign of intellect, but think perhaps itl bears pointing out all the same.
Fiction?
YouTube -
I've been to and drank beer in 13 of those countries.
Comrade Bagholder burnside,
"I've heard it said that entertaining two incompatible views at the same time is a sign of intellect,"
No it's called cognitive dissonance.
It's not a good thing.
Cognitive dissonance - Wikipedia, the free encyclopedia
Nostrovia,
YLSP --
So we borrow foreign currency, and give them dollars. Let's assume today's currency exchange rate is $2:1 euro. ECB gives me 10 euro's; and I swap them $20. I hold these 10 euro's until January 30. On January 30, 2009 the exchange rate is $4:1 euro (weaker currency). So I take the 10 euro and get $40 in return.
I do not think so... What you are describing is a straight-up forex trade, followed by the unwind of that trade a few months later.
In a swap, the Fed gets back exactly the same dollars it loaned out (possibly with interest). In fact, I believe this is the entire reason a foreign bank would use one of these swaps instead of simply hitting the forex market... With a swap, they do not bear any risk of the borrowed dollars becoming weaker, because they will get your original euro/yen/kiwi/ZW$ back no matter what the exchange rates do.
But I am definitely no expert on this stuff and would be glad to be corrected.
Don't know if this is already circulating here or not:
Sign the petition from Senator Sanders (VT)
Technical difficulties.
Comrade Bagholders,
Anyone else having trouble accessing CR right now?
Nostrovia,
Err.. take a look at the TED spread now..
Comrade Misean:
Of course you are right. Unless you're Bertrand Russell, in which case you're contradicting yourself.
;o)
With the TED spread that high can we start calling it the "credit freeze" now? I never liked the term "credit crunch", sounds like some kind of candy bar.
crunch = candy bar
freeze = slushie
You just can't escape the food analogies.
Comrade Bagholder burnside,
ROFL!
Time for the morning run.
BBL.
Nostrovia,
TED at 3.01
TED @ 3.01 Strap in, prepare for some turbulence.
"Sign the petition from Senator Sanders (VT)"
Actually, you guys should sign the petition FOR the bailout, not against. It would give YOU more time to prepare for the inevitable massive economical collapse of USA.
Mainly Medicare and SS future liabilities are growing by that same 700 billion dollars EVERY FOUR MONTHS! So bailout is not going to solve anything, it will just give a little bit more time.
Soon foreigners are not going to buy those new shiny US treasury bonds or any other type of American bonds anymore. That will be the GAME OVER moment.
Morgan's Roach Says Bailout Plan Will Help Stop Panic [and keep his job].
from UBS mtgstrat:
In response to a near meltdown of the financial system last week, Treasury
Secretary Paulson unveiled his plan to stabilize world credit markets. By now
absolutely everyone knows that the centerpiece of this plan is a $700 billion
bailout for the banks and Wall Street (the very ones that created this mess in the
first place!). But we wonder if bailout is the right term. Of the many reporters
and analysts covering this event, we saw only a few who told the television
audience that the government is not going to simply spend $700 billion of their
tax money in the same way the government spends their money on social
programs or war. Only a few correctly pointed out that the government was
planning to buy cheap assets, many of which are trading well below fair value,
and that indeed, the program has a good chance to making money for the
government.
I notice a lot of false statements/claims on this board too.
Roach + from UBS mtgstrat:
Nobody is going to trust any statements from Wall Street on this issue.
What do you take people for, born-and-bred dopes?
Only a few correctly pointed out that the government was
planning to buy cheap assets
Cheap assets at high prices!
Here's something :
YouTube - Full Metal Jacket - Motivational Speech
In addition to many of the concerns listed here and elsewhere, I have three concerns that have not received much, if any, attention.
First, if anyone at a securitizing firm, let’s call the fictitious firm Silverman, knew of fraudulent activity anywhere in the pipeline, would the investor that purchased the security have legal recourse against Silverman? Could the hedge funds and other investors that purchased Silverman mortgage backed securities force them to purchase the securities back at par because they had knowledge of fraudulent activities? Would this problem disappear if Treasury purchased these securities at inflated prices from everyone?
Second, did Silverman market these securities to investors while taking opposite positions for the institution? As we saw with auction rate securities, some investment banks were selling the securities to customers while the banks liquidated their own positions. Once that was apparent, the investment banks were forced to buy the securities back due to the misrepresentation. So, did Silverman sell these securities to investors at the same time as they were shorting, liquidating, or purchasing CDSs on these same securities? If so, would the investor have legal recourse?
Third, would banks and other financial institutions be allowed to act as conduits to hedge funds selling these securities? If the bill had an equity position or limits on executive compensation, the conduit scenario would be less likely and would therefore be opposed if the intention was to include hedge funds (or any investor anywhere).
It seems like Paulson could have chosen a much more efficient path to achieve the same result. This inefficient path may produce the same result at the end of the day but cost the taxpayer three times as much. Could there be any motivation to choose the inefficient path?
Hey, can somebody answer this question? I'm just reading where Paulson said yesterday that he is opposed to executive compensation limits in his bailout plan because he thinks it will discourage participation in his plan. Well, if a firm decides that our bailout money is not worth the hassle of govt oversight, then doesn't that suggest that we don't need this bailout at all? I guess that Paulson thinks that many firms really DON'T need our money that badly. OK then - so let's not give it to them.
I don't remember the logic, but I believe Russ Winter and Lee Adler (The Yellow Brick Road › Page not found said some time ago that these swap lines are actually done to help the U.S., since we have basically no foreign currency reserves, rather than help the foreign country, as it seems at first glance.
JP writes:
With the TED spread that high can we start calling it the "credit freeze" now? I never liked the term "credit crunch", sounds like some kind of candy bar.
crunch = candy bar
freeze = slushie
Constipated Credit
I love looking at CNBC's buffett headlines. Breaking squib about him saying bailout is necessary, main hed says the bailout makes his very expensive (to goldman) 5B deal possible.
What happened to the "we don't talk about our deals in advance" buffett of yore? Now that he's not a disinterested party, someone needs to ask him some hard questions about the bailout: "holding to maturity" and equity stakes come immediately to mind. He knows he can move markets -- and reporters do to -they need to play some hardball with him.
Only a few correctly pointed out that the government was
planning to buy cheap assets
Assets priced in the future and mark to model, this manure heap that's fast approaching the fan.
Why don't your employers pay your wages 10 years in advance?
oh and:
Congress.org - Get informed, get involved -- call your reps!
Notice anything interesting about the effective overnight Federal Funds rate
?
Raphael:
What is ultimately comes down to is the protection of the currency for our future generations. This generation's goodtime is over and we will pay horrendously. So be it.
Paulson asks too much in addition to the $700 B. I'm now in the camp of spending money, but for chrissakes, attach some strings. I can live with Frank's approach.
There must be oversight. They've shown that they are flailing and that will only make it worse.
Like that could be possible? Yup.
SDS & DXD trading well below NAV in pre-market. They're trading as though the markets were up 3.5-4% already. Just a heads up for those wanting to enter into them this a.m.
Don't take pot shots at Stephen Roach just because he works for Morgan Stanley.
Roach is a very talented global economist, and probably did more yelling than any other economist (even more than Roubini) about the problems that are now unfolding.
The shame was that Roach was early in his call, and his perception among MS clients as being too gloomy in his daily musings on the MS global macro website probably had something to do with MS moving him to Asia (he had previously been the chief economist of MS).
Stephen Roach probably did more than all of us combined (and I'm a big fan of blog hosts) in trying to stop this train. He had the ear of politicians, he was out there pretty much on his own at Davos and Jackson Hole.
Stephen Roach was writing several times a week about the US consumer using their houses as ATM cards years ago...
There are many people responsible for what's gone wrong with the global economy... either through their actions or inactions. Roach is one of the few who really tried to be a hero.
Am I the first to say this - I wish Warren Buffett nothing but the worst and by worst I mean WORST.
Totally sold out his Country with double talk about this deal.
Hopefully Congress won't be duped but who has faith in them?
SR
I could really use some help now.
I distinctly heard the editor of the Financial Times on NPR this a.m. state that, if the Bailout doesn't go through, the dollar will fall, with respect to other currencies.
I'd anticipated inflationary concerns if the Bailout goes through.
Please clarify.
I canz haz containment?
US bank insolvency cannot be cured with any amount of liquidity.
How exactly does an entity with 10 trillion in debt and a FY operating deficit of ~$1.5 trillion come up with the cash to swap? Not honestly I can tell you that much. At least the Fed is smart enough to get out of the US Dollar. That is unless insider trading rules apply to them.
If the dollar is crushed the terrorists win. Does that make the Fed a terrorist organization or merely a domestic funding arm? Can we freeze their "assets" (suspend their banking privleges) before they do to the entire economy what they did to housing? Is there any moral difference between dropping high explosive bombs and dropping fiscal bombs on the people of the US?
Freddie Mac's treasurer said on Wednesday that overseas investors were taking a wait-and-see stance toward U.S. agency debt due to volatility and uncertainty, but added that this did not signify a loss of confidence
Foreigners biding their time over debt: Freddie Mac
| Reuters
It's probably that they don't want to lend to a country that is going to issue massive amount of debt and pay them back with a devalued currency wiping out any returns.I don't balme them.
homedad43:
agree with oversight 100%.
there could be self-dealing all over the place. there's already rumors certain firms have been picked to manage this. the question is who and whether they should be allowed to if they were involved in the blowup. at the root of the problem is there are few firms that really understand these securities that didn't actively cause the blowup.
also agree w/ good times are over. we've been living way beyond our means at the dime of foreign countries.
"Notice anything interesting about the effective overnight Federal Funds rate?"
Nemo | Homepage | 09.24.08 - 8:54 am |
yes, its anticipating a surprise 50bps cut in Fed Funds Rate, or tacitly making one until the next FOMC meeting.
I don't know who said it a few weeks ago, but it's seeming more and more appropriate as time goes on...
"With assets like these, who needs liabilities"
Something tells me there's more Shock and Awe to be introduced today...
A few observations. If the markets were on the verge of collapse, why is the "world's smartest investor" throwing 5 billion dollars onto the fire?
and second. TED 2.99 woo hoo
LIBOR was back on the front page of the WSJ.
One thing about LIBOR that has puzzled me. Those who have lent money at LIBOR-indexed rates would seem to me well motivated to complain about artificially low numbers. As far as I know, they have not done so.
TED=2.91783
ruh roh
Comrade Baron Von Helmut III: because he said their assets were marked extremely low. secondly I wouldn't be surprised if gs did something like offer 6% CDs to buy distressed assets at 10% or higher. there in fact was an article on BB yesterday where the CFO alluded to something like this.
NO BAILOUTS PERIOD
Bush: Robust financial bailout expected
47 minutes ago
NEW YORK - President Bush says that despite congressional debate over his proposed $700 billion financial bailout plan, "a robust plan" will be passed.
ADVERTISEMENT
The president spoke Wednesday before a meeting to discuss free trade with leaders of other Western Hemisphere nations. It was one of his final events in his three-day trip to attend the U.N. General Assembly.
He said the leaders can see clearly that the legislative process in the U.S. is "give and take."
Bush added: "I am confident when it's all said and done, that there will be a robust plan."
VIX @ 35. Ted @ 2.9
Woo-hoo.
The Dollar is getting Pounded. Euro all going to see more of this as the Yen for US denominated debt gets Marked to new levels. Just Loonie. We are going to get buried in the Rouble. We need to get Rial and accept that the pigmen have Won.
The FED is propositioning congress for the bailout.
YouTube -
Buffet now backing no-strings bailout. Bloomberg front page. Amazing what having a stake in GS will do to you.
Bush is doing a great job of clinching the election for Barak Obama . The Libertian Party will also receive a record number of votes.
TED spread 3.01 per Bloomberg. What the hell's going on?
OK, I'll ask this question again: can those who are firmly in the camp of "needing to spend money" explain to me why that money has to be spent recapitalizing failed banks instead of beefing up the capital positions of sound banks (or creating new, sound bnnks if necessary)?
The moral outrage about this administration's actions are a little late. Is it time now to investigate 9/11/2001.
Buffet is panicking now too....huh
should be an eventful day.
Now that everyone's wallet is on the line, it's time for grassroots action!
So WB buys 44 millions shares of GS @ 115 Plus a stake in GS and gets interest, and now he wants a bailout.
UNfrikkin real.
New thread on Buffett....
Warren's argument:
Treasury's cost of capital is effectively nil.
Allows Treasury to buy these assets and make money where private markets are demanding more return (whereby depressing prices).
(Obviously he's demanding more return from Goldman -from 10% to 17% depending on your analysis)
Look, there's plenty of money out there to buy every security currently (uh, creatively) in Level 3. But, banks won't let them go at current bids.
The funny thing is, to me, the banks act as if there is some cabal of vultures looking to take advantage of them. As if the global pool of dollars has conspired to price their securities at a similar rate. And so, they go to the taxpayer and make a case that our collective cost of capital is so low, how could we say no?
Well, just like Warren has to protect the interests of his shareholders, each of us has to protect the interests of our families.
And, our collective cost of capital will rise considerably if we put any of the taxpayers money into this black hole.
Seems to me if our cost of capital is so low, why aren't we behaving as if we are the ultimate vulture investor?
@Yalt | 09.24.08 - 9:21 am
Can't help ya. I see it like you do. Bailout does nothing for the commercial paper market's problem, beyond distracting scarce resources ($700bln) to a red herring.
Maybe someday we'll be smarter and understand why "Bailout is Best".
This nation turned its back on its own citizens after 911 and is now paying for ignoring the systemic corruption.
Raphael, you are right that assets are "undervalued" or less than their "fair value". However, does this not depend strongly on the recovery assumptions? I am thinking that there is an enormous amount of risk in the price of housing, because of risk in the economy and financial institutions. Bond values hate risk. To repeat an often made point here: It seems to me that there is more than enough private capital - well more than $700Bn - to buy these "undervalued" assets.
I appreciate your comments and agree with you that many commenters here are uselessly ranting the "pitchforks and torches" line.
Eric at 9:05, get your own name. I was here first.
Buffett investing in Goldman Sachs? I thought he only invested in competent management. Unimpressed Warren.
It does, so there isn't a perfect science to determining fair value. Most participants are running anything between 40-70% severities (and worse on subprime high-LTV loans). Based upon the recoveries so far we are seeing ranges slightly less than that. Obviously if house prices depress further severities and defaults get worse. Eventually it can be figured out where house prices have to go in relation to rents and incomes (I do this type of analysis when evaluating these securities)
But nothing in investing is ever a perfect science. What I can say is most people bidding this are assuming draconian events and figuring out the cashflows. Then the are bidding from there to earn pretty good returns (10-20%) even if they are wrong.
It's been more than a year since the experts declared the bond market broken. It's been more than a year since Cramer's meltdown. The market is not broken.
The problem for Wall St. is that the market is open and working quite well, but they don't like the terms.
This government takeover started with the stolen election of 2000. That right there should have been proof to Americans we were headed for disaster.
Then the manufactured or allowed Big Event where 3000 Americans died. That should have been a warning that we were headed for disaster. Then all the post 911 Exec orders. That was a warning.
Now your wallets are up for grabs. The eight-headed government/central banking Monster was ignored and allowed to gain complete power. Too late to wake up.
Y'all had eight years but the Boom distracted you and bought you off. This was a sequence of abuse of power events that was ignored by the public and now the public will pay for their apathy and complicity.
another dynamic is that there are a limited amount of people that actually understand this stuff. they are demanding a premium for their expertise. that's why a lot of money is on the sidelines.
for instance i can figure out RMBS in and out, but throw a CDO at me with all sorts of crap and tranching in it and I have no idea. the people who know how to do this are exploiting their expertise.
I include Me in the distracted, clueless, and complicit crowd but I did wake up about a year or so ago.
No Bailouts Period - Let the system work and of course prosecute the criminals .
Banking Expert: Bailout Not Necessary, Industry Can Take Losses « naked capitalism
BTW - I've done this today -
Mish's Global Economic Trend Analysis: Senator Sanders' Petition Against Paulson
Raphael,
No one knows the inputs into the current crop of CDOs. No one knows the value of the underlying asset or the ability of the borrower to pay. So, isn't that the risk currently being priced?
There's a price for expertise. My experience in the accounting world is that there's a higher price for a lack of expertise. In this case, Paulson was hoping Congress' lack of expertise would make them suckers. "Pass the costs over to their constituents." That's not going well so far.
Another point:
The theory of bailout proponents is "the solution of pollution is dillution". If that's true, where are the overseas sovereigns?
Liquidity my pewtuty
The USD must be kept up, up, up!
Sorry eric ... didn't mean to steak your nick
"This is, I think, the start of the dollar unravelling as the currency of global exchange"
Could not agree more homedad!
Can you believe that shit?
The morons are bringing the shit overseas forcing me to buy gold?
FUVCK YOU BAD AND NASTY UNCLE BEN!
FUCK YOU!!!!!!!!!
You are inflating the korona and the world..
Wish you the best struggelers,
but you will not win this play..
But I am sure Ben and Hank will end up in HELL!!!
"With a swap, they do not bear any risk of the borrowed dollars becoming weaker, because they will get your original euro/yen/kiwi/ZW$ back no matter what the exchange rates do"
Nemo - The FT reported last week that the USDs were a swap for "assets pledged" by other CBs. I wrote the Treasury and asked the question if the CBs were guaranteeing the debt or were the assets pledged now part of the UST - no answer!!
So either thee UST is propping up the dollar - or, it is pledging USDs for US paper held overseas - ie a backend bailout to circumvert Congress.
Let it blow
We can see there's a worldwide shortage of dollars. Who will lend the 2T the treasury will try to borrow in 2009?
a) we print it. We've never actually done that, likely hyperflation, IMO won't do it this time either.
b) we do the usual, we borrow it. Borrowing this much will push up US interest rates very high, economy crashes but dollar strong.
END THE FED!
The End Begins November 22nd
Every Fed Bank. Every Fed Office.
38 Cities. One Purpose.
END THE FED!
End The Fed Network - Sound Money for America! Support HR 1207, S.604 and HR 833!
End the Fed! National Day of Protest and Education 11:22:08