well, I suppose "you give me a bushel of money and don't tell me what to do with it" is a negotiating ploy, but in my experience negotiating ploys don't tend to insult the other parties... especially when the other party is Congress...
Krugman already called out the lie:
"Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency." Good ideas and lies - Paul Krugman Blog - NYTimes.com
"Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."
I took CR's lead and just sent this to my congresswoman who just happens to be Nancy P.
Perhaps everyone else on this blog should do the same.
Let's get oversight, let's get open and transparent pricing, and let's get a pound of flesh from the wall street execs who put us here in the first place.
I am writing to let Nancy Pelosi know about my views on the pending legislation regarding the bail out (I just moved to SF and will be voting in her district from now on). Simply put I have three items that I urge the congresswoman to consider.
First, giving 700 bllion without any oversight is simply, a non starter. It is against the spirit that created this country and in fact I would argue flies directly in the face of John McCain's view that we should adhere to the constitution. If the republican's leading candidate believes in the constitution, then let's force the current republican administration to put country first and do the same. The house and congress control spending, not the executive.
Second, Ben Bernake is arguing for the need for this bail out to determine what he calls "hold to maturity pricing." While I merely hold an MBA from UCLA and not a PHD in economics from Princeton, I can't for the life of me remember how a market ever has two prices at the same time. Perhaps I missed something, perhaps California education is simply not as good as an East Coast eduction. But that aside (and if the congresswoman wants to learn more about this check out the site calculated risk) let's give Ben what he wants. Let's insist that every single group of asset sales be published on the Web -- that way we will get what he and the administration feels we need -- pricing -- transparent, open and readily discoverable.
Finally, if a company gets a bail out there has to be a cost. I will definitely not vote for any representative, presidential candidate or other elected official who feels that companies should be able to get a government bail out without a) giving the government equity and b) limiting executive compensation. I am already reading articles about King Henry on the web and blogs and with the Internet I don't think the public will sit by and let a bail out take place without a cost. Just my view.
I do respect the congresswoman but I also hope that she works to protect the country, protect the constitution and impose a cost on those in wall street who, let's not forget, are the reason we are discussing this at all.
IIRC, one of the reasons that his bailout was "necessary" was that commercial paper was vanishing or something like that. If that's the case, why doesn't the Fed/Treas. just start lending money as CP?
Well, glad you weren't focused on Section 8 over the weekend-- it worried the stuffing out of me. The transparency website with all the transactions posted daily-- with a blogger's comment section-- would be the beginning of a distributed-knowledge-gathered wired system of market governance. Great idea.
To be fair, sometimes people put an offensive clause in a proposed agreement as a negotiating ploy. That is why I never focused on Section 8 over the weekend - this was obviously going to be changed.
Let's go easy on poor Hank. He's as clueless and irrelevant as the rest of us. Sure - it's difficult to fathom that his plan could work. But at least he isn't piling on a lot of fluff which would make it even more expensive and counterproductive.
I suspect there is a large political agenda in play. Not so much the November elections but many elections to come and historical blame for this mess and the bigger mess to come.
If the Paulson plan is excepted, Wall Street gets a parting gift of $1-2 Trillion from Bush. If the Dems restructure the plan in any meaningfull way, the Conservative media will call them the party that destroyed America for generations (assuming a serious recession is just beginning).
"Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."
I'm Canadian, and I'm still pissed off. If Americans are any less pissed off than I am right now, you deserve what you get. Good luck tomorrow. It's all in the hands of your elected reps. Paulson & company should be forced to stick around Pro Bono until the very last piece of toxic paper is disposed of at face value.
If I were trying to quickly do "the people's business", there would be no such clause as Section 8 that would detract from rapid passage of reasonable terms.
Clearly the "Titans of Finance" (the large IBs) failed for many reasons. They are not the only adults on the block, and it seems pretty stupid to bail them out (give them more dollars to try again). SInce mergers clearly can be made/forced, why not just take the critical functions from the failed entities (clearing, etc) and give them to the un-failed banks, rather than allow the government to give the morons who made the toxic mess money to take over the banks which to some better degree stayed solvent?
The Paulson-Bernanke plan to rescue troubled financial institutions by buying up mortgage assets has been underway for several weeks, according to a person familiar with the plans. Although the plan was announced suddenlyand perhaps earlier than plannedit had been under development for quite some time, with its seeds sown inside the Treasury Department offices at 1500 Pennsylvania Avenue shortly after Bear Stearns collapsed.
In recent weeks, as the plan began to be regarded as a pre-emptive version of the Resolution Trust Corporation, the Treasury began approaching former officials from the RTC to see if they would take a role in the bailout plan. The RTC was created in 1989 to sell off assets of thrifts that had gone bust. One former senior RTC official approached in late August declined to join the Paulson-Bernanke plan, a person close to the former official said.
Theres at least some hint that the Treasury might have sought to use the former RTC officials as window dressing. The Hanky Panke Plan (short for Hank Paulson and Ben Bernanke plan) is being presented as an updated version of the RTC, which obscures crucial differences between the plans. Most importantly, the RTC sold off assets of thrifts that had already failed while the Treasurys bailout plan wants to buy assets from financial institutions that arent convinced they are in danger of failing. Having former RTC officials running the show might have helped distract from the unprecedented aspects of the Hanky Panke Plan.
[end quote]
but on friday, the story was that a state of emergency necessitated immediate action on the 3-page plan...
section 8 is paulsons immunity from prosecution ploy. its the only way he's hanging around. he's smart enough not to be the fall guy when the FBI comes knocking.
Buying crap at sometimg close to par without dollar for dollar warrants at a September 11 2008 strike price is stupid, especially since this all could have been done a year ago much cheaper when CP froze the first time.
Found this while googling 'pitchforks' and 'torches'. Yes, I did price them on amazon for capitol delivery. Thanks to who thought of that earlier.
Rep. Kaptur:
To Wall Street: "You think you can away with it because you are extraordinarily wealthy....but you are about to be brought under firm control. First, America doesn't need to bail you out. It needs to secure our real assets and properties, not your paper."
"Those who created and profited from this game of games must be brought to justice. The assets they stole must be returned to the American taxpayers right down to the tires on their Mercedes."
Anyone as confused as I am for the about-face: that the hold to maturity argument was NOT accepted by Bernanke and Paulson for Fannie, but now all of a sudden it's good for Wall Street banks?
some for the $500B for defense is necessary and wise, but much of the $700B will come back from sale of assets (certainly not all, but one hopes considerably more than half) plus maybe it will keep the economy from crashing . . . if the crisis is real
Anyone but me frightened by the thought that for the majority of the time frame of whatever plan is adopted it could be administered by Treasury Secretary Phil Gramm ?
Anyone but me frightened by the thought that for the majority of the time frame of whatever plan is adopted it could be administered by Treasury Secretary Phil Gramm ?
I don't think they want transparency. If they did, more people would be on the same page with them. As it stands, people are scratching their heads saying, "Huh?" It doesn't make sense because there's more to this than meets the eye.
Forget about asking for transparency. Let's scratch every single bailout plan and get back to the drawing board. Find a solution that is not totally one-sided. Bring in the economists. If a plan causes panic and general angst, it's probably not the right one. A good plan would be acceptable, if not to all, then at least to more than him-himself-and-him. A good plan would make sense.
Bring in the advisors. Not just political. No strong arming. After better proposals are offered, narrow them down, then make a choice by one person if you have to.
But bailing out banks on the backs of the citizens is not going to sit well with anyone. Forget it.
I've been trying to do that for six years, but execution is always tougher than concept.
But, seriously, it explains all of the mysterious elements of the past few weeks. One day very soon, we're going to wake up in a world where the Fed just doesn't exist as a viable entity.
but here's the tricky part - who is to say that there won't be a rush to safety to bonds and to (ironically) "cash" FRNs as a result, not to mention the kind of deflationary drag that drags down gold and oil as we face a particularly severe form of 'demand destruction'?
On "Fresh Air", Morgenson also responded to TG's question about "why does this matter to the rest of us" with a mushy comment that Money Market funds might be damaged.
I turned it off in disgust at that point. GM seems to not understand that freezing of credit markets imperils the operation of companies that employ workers. She's worried about 3% losses in MM funds when a death spiral into Great Depression II may be in view.
Paulson will have zero choice about oversight and most other provisions.
He is going to get what Congress allows him to have.
Reports tonight are that Dick Cheney was laughed out of the repub caucus he visited to push them into line, and the Dem pushback against Paulson is solid.
In the Senate hearing today there was lots of broad agreemnt between Dems and Repubs. I don't recall one who spoke up for Paulson. All whom I heard demanded accountability, protection for tx payers (equity or a clear pricing formula which is impossible) etc.
Dick Cheney has been sitting on this bailout plan for weeks. It appears that the game plan was Shock Doctrine all along. Create a false time sensitive crisis,induce fear and rush a corporate bailout without debate. Just like the Iraq War and Patriot Act bills. I wouldn't put it past these domestic and war criminals to cancel the November election and declare martial law.
If someone told me that I'd suffer dire consequences if I didn't give them a lot of money, I'd call the cops.
Yes, Yes, Yes!
Why aren't people calling this plan what it is? It's the Paulsen Heist! He didn't spell out the consequences... methink Hank would have a hard time fending to his own devices if he had to...
Hank Robbing an Old Lady at the ATM
Hank: Miss! Give me all of your money! Or else I'm going to allow you to suffer the dire consequences!
Hey buddy, if you don't show the gun than you are going to get beaten up by Grandma 6 Pack!
Wow - I think the Plan died today. Cable news are getting snarky... US World and News Report, Time, Politico, Newsweek piling on... WP and NYT pushing hostile commentary.
The media turned a corner today.
Perhaps because Paulson came across as a poison toad with a forked tongue.
I think the White Hoouse claim that they've had the Paulson Plan in the drawer for 6 months is total BS. Hank made it up as he went along over the weekend, and did such a piss poor job that we are all lucky.
karelian-san writes:
Wow - I think the Plan died today. Cable news are getting snarky... US World and News Report, Time, Politico, Newsweek piling on... WP and NYT pushing hostile commentary.
The media turned a corner today.
I'm with you by golly...the media are the definitely the ones to trust with the answers to problems like this.
Being that the FED is a group of private banks I think we may be better off if the government just outsourced this job to India or somewhere. They certainly couldn't have screwed it up any worse.
they get on me wanna know Hank
why do you loot
(Hank) why do you talk shit?
Why must you pillage and rape all our kids?
over and over
everything fell my direction
so if you get boned
I'm just carryin'
on an old banking traditio
Did anyone hear the entirety of the Gross/Morgenson interview? Did Morgenson at any point note the concern that tight credit could result in a self-reinforcing contraction of the real economy?
Yeah, they want us to believe the 3 page plan was in the works for months? It was written up on toilet paper in 3 hours... or perhaps restaurant napkins?
The point is that the media thought this was a done deal on Sunday nite... now the wind is changing.
Maybe it's the polling showing majority opposition to the plan. Congressmen and newspapers have started defecting - this pig is gonna bleed out by Friday.
My understanding is that the Fed hands over its earnings, net of expenses, to the Treasury. I don't think that the governors are excessively compensated. I think there are shareholders, but do they receive dividends? Anyone have data on that?
Didn't Hillary Clinton say she saw this coming for the last two years? Is that why the Clintons sold all their real property last year? And the Hilton family sold their real property? (I read that on CR last year, that's my source).
On the whole "post every transaction on the internet idea" --
Isn't that exactly what Bernanke doesn't want to do? If everyone can see what these assets are selling for, doesn't that force all these companies to mark their assets down? I thought that was what BB was trying to avoid at all costs.
Paulson opens his mouth - and lies again. If he welcomes oversight and did not want to presumptuous, he would have put in a bracketed section "[Oversight Provisions]", or left it out entirely, not put in this "no review by anyone" language.
No wonder Americans hate Washington - liars, crooks, thieves and war-mongers. Join the Revolution!
Get beyond whether this sh*t passes! It won't make a damn difference to the consumer's rapidly deflating balance sheet. It won't make house prices stop falling, no matter what these idjits say. People should focus money on stimulating aggregate demand, preferably by forgiving all student debt and making secondary education universal, then pushing to eliminate all dead-end non-supervisory McJobs and build a sustainable urban landscape. Manual labor + intellectual ingenuity in one job description. Stop illegally blocking labor unions from forming and bargaining for workers. Tax the top 1% at marginal rate of 80% and spend pay for the above college tuition (major reform of their bureaucracies - no million dollar college Presidents, etc.). Cut the Pentagon by 9/10ths and use the revenue for building that non-auto dependent urban form. Forget the banks - nothing structurally will change in the economy from it.
Anyone else suspicious about the timing of the release of information on the FBI investigation of AIG, Lehman et al? Seems almost designed to generate more public disgust at Wall Street. Evidence of a power struggle or mere conincidence?
I may be irrelevant, but I hope I'm not so clueless.
AndrewBW | 09.23.08 - 10:29 pm | #
Paulson's on the verge of controlling a $700B line of credit for distribution to Wall Street, including the company of which he was once CEO, and you guys are calling him clueless???
I'm irrelevant too, and probably pretty clueless, but it was obvious today that the reason he wasn't answering questions wasn't because he didn't know the answers.
The ONLY excuse for that abomination of what they call a piece of legislation for an act of congress of this magnitude and scope was that it WAS drawn up in some Georgetown bar at 1130PM on Saturday...MONTHS?
you really, truly, can't make this up.
This country, this great nation, is in the hands of utter knaves.
i listened to gretchen morgensons interview times two
did you?
she said in no uncertain terms that recent history indicates we can not trust the banksters and their shills in the administration to rescue the system with 700 billion or necessarily any other amount
because, she went on to say
the problem is not just subprime but rather the credit default swaps are likely to overrun the band aid approach we are getting from ben chris and hanky
WH Spokesman said plan was in the works for months. Claim is total BULLSHIT, equivalent of Bush saying his dog ate the CIA warning on Bin Laden in August 2001:
White House: Bailout plan was months in the drafting
(7 mins ago)
Defending its embattled rescue package for troubled banks, the White House said Tuesday that the US$700 billion (HK$5.46 trillion) plan was months in the making but that lawmakers must pass it this week.
"This was not a program that was conceived of, or put together, hastily. There was an enormous amount of analysis and debate and discussion before we came forward with this program,'' said spokesman Tony Fratto.
"Some of the policy staff have had months to think about what a program like this would be like and how it would work. Others have had at least weeks to think about it,'' he told reporters.
After watching the Senate banking committee hearings on the"Big Bailout", the following points were clear to me:
1. Messrs. Paulson and Bernanke do not know how to price the troubled assets
2. In logical contradiction with 1 above, they are convinced that they are priced too low ("fire sale" prices), and therefore are willing to overpay ("hold-to-maturity" prices)
3. They are resisting the generally accepted risk mitigation mechanism of taxpayer sharing in the upside.
I have no choice but to conclude that this smacks of fraud.
but here's the tricky part - who is to say that there won't be a rush to safety to bonds and to (ironically) "cash" FRNs as a result, not to mention the kind of deflationary drag that drags down gold and oil as we face a particularly severe form of 'demand destruction'?
Yeah, this should be watched closely. But the current crisis is global, so if there's dollar deflation, there'll almost certainly be deflation in less debased currencies (e.g. euros, swiss francs); you might even come out ahead. On the other hand, if things go inflationary, and you're in dollars, there'll be nothing but suffering.
I have a friend that has $100,000 in student loans and, upon finally graduating, has "learned" that he/she is not that smart. He/she is upside-down on his/her loan.
He/she feels obligated to repay the obligation that he/she committed to, but upon reading the excellent commentary on this site, the obvious solution is to walk away. Of course, if an abundance of the similarly-situated stupid people do this, it creates a systemic problem. But I told her/him to not mind that and to not let silly things like ethical and moral values stand in his/her way from doing what is best for him/her. God Bless America.
I gave up on the Morgenson interview after she flubbed the question about the implications for the real economy. How a journalist can not understand that given what is happening in Congress this past week, I don't get. Tanta thinks GM is an idiot, and I am inclined to agree. That she thinks we have been lied to doesn't cover for the fact that she doesn't understand how close we are to a major recession or a depression.
Yeah - inflation is occurring so fast my eyes are bleeding. Everyone I know has so many dollars they're picking up dog crap with them. Get real! Nothing has transpired that will put actual cash or new credit lines directly into the hands of U.S. consumers, hence the ongoing decline in nominal, and real, aggregate demand.
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, lets 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?
some for the $500B for defense is necessary and wise, but much of the $700B will come back from sale of assets (certainly not all, but one hopes considerably more than half) plus maybe it will keep the economy from crashing . . . if the crisis is real
joe shmoe | 09.23.08 - 10:24 pm | #
Joe, I believe that the crisis is real.
Yes, the financial wizards are talking it up and AIG is an example of how arrogant they've become. Their institution is collapsing and they still play chicken for all the marbles.
What's at stake ultimately is whether "the full faith and credit of the United States" has meaning. For better or worse, we have a fiat currency and there are billions who've bought into that.
Disappoint them and everything collapses.
After this, we can have a serious discussion about whether the Fed should be abolished or heavily reworked. But the question is, replaced with what?
And do we continue with a fiat currency?
And do we finally learn that we have to control our collective - governmental, corporate and private - spending?
A drink is always a good idea. Think I will join you.
But don't sweat this WH flack Fratto's statement. It is just another lie to make it look like they were prepared.
Ironic twist is that if they really were prepared, then that would mean that all the times they said things were fine they were lying to us.
But they weren't prepared. And though they lie all the time, they are also incompetent and live in fantasy worlds, so they probably thought the economy was fine.
YLSP writes:
If someone told me that I'd suffer dire consequences if I didn't give them a lot of money, I'd call the cops.
I can't find a transcript of the testimony yet--did anyone catch the bit early on about how he shared the feelings of those who were pained by the enormous profits made in the creation of these securities? Of course he used the third person instead of the more honest and accurate first:
"I understand the pain you feel when you contemplate the vast fortune I made packaging and selling this crap, but it's nothing compared to the pain you'll feel if you don't fork over the $900B."
I expect very little of my Senators, but I was surprised he wasn't called on this.
For starters no one can tell us exactly what the problem is. It's too, too, SCAREY, and so, because we are not given any relevant information about the causes, it is completely understandable that we are confused and doubtful about the proposed solutions.
It is an impossible situation and the idea, the very notion, that these pinheads in the west wing would have A0 known about the risk that long ago and B) taken the all of the summer interns from Liberty U and put that brain trust on the issues at hand, prayed over it, and received the direct transmission from The Source that this was the Solution and then C) written it all up nicely and put it IN A DRAWER??!?!!!
WTF?
No. I cannot for the life of me BEGIN to logically (logic??!?) explain what the hell is going on.
Yeah - there's no walking away from a student loan since there's no collateral which they can sieze. It's not like they can foreclose on your education. Or can they...
You cannot "walk away" from student loans as far as I'm aware. They'll garnish part of your wages/income over your entire life if they have to.
Just the response I anticipated, although much quicker than I thought.
Precisely. Now apply this to the deadbeats in California, Florida, Nevada.....the list goes on. And, magically, as we have no student loan crisis, we would have no mortgage crises, and, well, how 'bout them apples?
Obama said taxpayers should be treated like investors if they are being asked to underwrite the bailout.
"Now that the American people are being called upon to finance this solution, the American people have the right to certain protections and assurances from Washington," he said.
This sounds like an excellent idea. Mr. Obama how are my social security investments doing?
What are my risk exposures? How much are you siphoning and never returning to me?
All these democrats should have to prove their social programs will return money just like these republicans should for the bailout.
All these spotlight pandering politicians are ridiculous - the situation is too complicated for any of them to truly understand yet they throw in opinions as if they have a grasp on the situation.
Ask them where a SuperSenior NAS 2006 Alt-A with 18% 60d+ and 13% credit support is trading market value and what the fair value is and they will have no idea what you are talking about.
So how can they design a solution when they vaguely understand the problem. The world has become too complicated for men who essentially spend 100% of their time pandering for media attention rather than understanding and solving problems. This is a systemic problem beyond this issue. It's why social security will end up a disaster and it will be too late to fix.
Anyone who even makes this a political issue which many posters here do is sadly mistaken. Because they are all tainted. There's plenty of dems and rep. on wall street that made craploads and stand to make more with this program. There's plenty of crappy homeowners who knew what they were doing by gambling on homes and they come in both elephant and donkey form.
Could there be any motivation to choose the inefficient path?
geee | 09.23.08 - 10:52 pm | #
What? Paulson's entire career has been built on profiting from the inefficient path. It's mighty hard to rip the other guy's face off in an efficient market.
Nationalizing the Fed would politicize it. That's why it was made an independent entity when it was founded (I don't buy the theory that this was a gift to nefarious persons, but I could be wrong. And maybe if I bought my land with gold specie, I would have tax-free allodial land tenure, too).
Whoever first leaked the plan over the weekend is close to a hero. Those days were crucial in terms of getting people pissed off about it.
If Section 8 was a bargaining ploy, it really blew up in the Administration's face, because it galvanized the hell out of a whole hell of a lot of people who now want NO bailout at ANY cost.
Anyone who even makes this a political issue which many posters here do is sadly mistaken.
Discussions of power and of public finance are by definition political. They may not be partisan, but anyone who thinks this can be discussed without politics is seriously deluded.
1) paulson needs to be made to stand naked in public - i.e., open the books to the people to show that the crisis is real
2) all currency is fiat currency, even when backed by gold. no choice there (unless it is barter, but then that means no currency) but you are right that full faith and credit is at stake due to foreign T holdings, etc
3) This problem is mainly private sector, not public.
4) We'll probably disagree on public spending, but I don't think public spending is the problem in the US. The problem is unfair and insufficient taxation and, consequently, constant deficits, no saving for rainy days, and an infrastructure that has gone for shit.
Fear mongering and bullshit is all this is. There are 100's of $billions of private capital sitting on the sidelines waiting for the holders of these assets to blink. But too many fortunes of politically connected elites will be wiped out in the process.
Section 8? Isn't that what Klinger wanted to get out of the Army?
Perhaps a more clearer statement is when one argues one specific party is to blame. They both are. The seeds were planted for this before Bush came around (which his admin deserves blame) and the Bush admin did really nothing. It's really a broken government system.
The crooked mtg brokers, lying homeowners, and wall street execs come from both sides of the fence.
Its not clear to me that the present disaster is the Fed's doing. A better explanation may be the orgy of financial de-regulation since the heroic Reagan era. The easy credit of the Greenspan Fed certainly helped to inflate (not one, but) two asset price bubbles, but the bank balance sheet disaster might have been much smaller had the credit default swaps, which made many MBS products look safe enough to risk depositor monies on, been regulated like the insurance products they are.
I'll say it a different way--what could be more political than to make this a technocratic decision that transcends politics--so that giving one man near dictatorial control over pricing in the most critical sector of the economy and giving him access to a budget bigger than the Pentagon's would be OK, as long as it "worked"?
The blatant attempt at blackmail is a big part of what chaps my @ss with this whole thing - the actions of these financial wizards has baked one hell of a recession/depression into the cake - no way we miss out on that fun due to the excessive credit created then rapidly destroyed as it shrivels in the sunlight like so much fairy gold...due to the actions of the Fed and the securitizing IB's that is a foregone conclusion at this point (love ya Seb but you are smoking the kind from the Comissar). And yet they stand up and say "Oh, if you don't let us plunder the public purse you will cause a recession!" Gah!
uh, the fed is already supremely political - why the hell else did greenie cut rates to nothing if not to shore up the political fortunes of his party?
and as for gold-backed currency being the same as fiat??? WTF? uh, redeemable gold-backed currency is, er, gold.
this really is like when folks started to realize that the earth wasn't the center of the universe, human biology consisted of more than 4 humors etc, in the 1600s. we've been blinded by voodoo for so long, reality is totally unfamiliar to us.
You hit it right on the head about the timing of the plan. If they had the bailout plan in the drawer for months, then they were lying that everything was okay freezing Congress out as they did with Patriot Act and Iraq (Shock Doctrine).
If they only just put it together, then it is a half-assed, slapdash effort resulting from the fact that they were caught flat-footed.
Allan Meltzer of Carnegie Mellon was marvelous. And blunt: "every time things go wrong they rush to bail out their friends"; "let them borrow the money and then repay it"; "not one person has said this is going to solve the problem."
1) paulson needs to be made to stand naked in public - i.e., open the books to the people to show that the crisis is real
What if he does this and he is truly correct? You don't think there would be a mad rush where every person in this county dumps their bank accounts and money markets?
At some level there has to be some discretion or else it just creates the panic.
The Fed is only nominally independent now. In practice, at least for the past 20 years, it's served as an enabler of its contemporary executive branch.
yes, there's responsibility across parties, but . . .
Deregulation has been the Repub mantra since Reagan and the explosives were packed and the fuse lit under Bush's 8 year reign, with a Repub Congress for 6 of those 8 years.
Phil Gramm led repeal of Glass Steagel, which opened the door for expanding Bush's neglect.
Clinton did sign Gramm's bill and Clinton deserves some blame. I think Clinton's blame is not so much that he supported the law but that he pissed away ( or shall we say ejaculated away) his political power and made himself vulnerable to repub demands . . . but i am open to blaming Clinton more directly than that.
Still, this is the product of an economic philosohpy that is nearly synonomous with the Repub party....
Some or many here will disagree with me in different ways. That's cool. I think it is a significant issue, though maybe not the main thing we should focus on here on this thread.
From another blogger ... "If we don't buy into the scam we can raise unholy hell with their plans. THIS IS A FEW WEEKS BEFORE A FEDERAL ELECTION WITH ALL OF THE HOUSE UP FOR ELECTION AND A THIRD OF THE SENATE UP FOR ELECTION. If everyone would just telephone their Congressman's office, and the offices of their state's two US Senators, and say NO BAILOUT, NONE AT ALL AND IF YOUR BOSS VOTES FOR ANY BAILOUT HE/SHE WILL NEVER GET MY VOTE AGAIN"
Zeus,
Maybe that used to work but I doubt it. Everyone just pulls R or D now... and I know a lot of House seats (read CA) are in gerry-mandered districts... so ... yeah right... when's the last time we voted out like 15-20% of incumbents?
OT and probably redundant, but I'm still fuming over McCain's campaign manager taking $15K a month from Freddie Mac until it got bailed. And he has the temerity to run ads accusing Obama of being in bed with lobbyists!
NO BAILOUT, NONE AT ALL AND IF YOUR BOSS VOTES FOR ANY BAILOUT HE/SHE WILL NEVER GET MY VOTE AGAIN"
Zeus | 09.23.08 - 11:13 pm | #
Well, Ok, but I live in a one-party district. My Congresswoman actually has an opponent for a change this year, but the guy (or his staff, if he even has one) can't even spell "Bussiness Man" on the front page of his website.
I know what I'll do: I'll redeem all my shares of Money Market funds and deposit them in a sound bank instead. Except that that won't increase the amount of credit available to the real economy.
The real economy is overleveraged. That's the modern paradigm. Why tie up shareholder cash in company working capital when it could be dividended out to the shareholders to spend or invest as they please, or else reinvested internally in the interest of more rapid growth?
The cash/credit that the real economy needs to function is going to have to come from somewhere, or the real economy will contract.
Don't ask me Hank
why do you loot?
(Hank) why do you talk shit?
Why must you pillage and rape all our kids?
If I'm sick of the Senate's shit
Some ol' dick's tryin to give me directions
I'll say gimme my cash
Or the market will crash
it's a banking tradition
Lordy, I have loved blackmail
and I have loved high stakes
and they both helped to guide me
in late two thousand and eight
when old Chris Dodd asked me
Son how did we get in this condition?
I said hey albino I'm just carryin on
an old banking tradition
So don't ask me Hank
why do you loot?
(Hank) why do you talk shit?
Why must you pillage and rape all our kids?
Stop and bend on over
Grab your ankles and assume the position
Cause if I get you and fuck your grandkids too
It's a banking tradition!
1994? I don't recall the exact % swing from Dem. to Repub. but they took over control handily. I don't give a damn about choosing one of two puppets from the same master, though. Damn - Stalin never dreamed of having such control over the population without force as our rulers do by inciting furious debates within a razon thin political spectrum and take the people's attention away from whole controls the levers of power in society $$$
yes, that woudl be especially true if there were not a plan on the table.
But there is a plan on the table - the Frank/Dodd bill, which is pretty good if the crisis is real and present (which I think it is).
If the crisis is real and scarier than we think, then I think Frank/Dodd would grow, or include a provision for upping the ante, or maybe go a step farther and employ the swedish model.
If things really are that bad, then Paulson better tell us so we can act. But I doubt the crisis is that bad.
Really whats at the bottom of this current political moment is the total distrust of the Bush Admn, and distrust of Paulson and Bernake. Sorry hank and ben, but you've squandered our trust. So now, if there is a big problem, you need to fucking show it.
No more stories about mushroom clouds and Cheney telling Dick Armey that saddam had suitcase nukes he was going to give to his cousin in Al Qaeda. (see the new book by barton Gellman of the Wash Post)
I think that the average person realizes now that the situation is real and that opening books is going to simply take too long. And the opacity of the accounting regs is mindbending. These are folks that can't tell assets from liabilities, as Tanta likes to remind us.
FFDIC:
Thanks for the China link.
At least they get to punish their screw-ups.
Who was it who said "wait 'til after the Olympics?" Dryfly?
bsmarteurr - that blog you linked to is just awful! We should spend more on defense, and Obama should really tell us if he's a Muslim? And the post below that was titled something like "the bailout is good for the economy!" Don't give us that crap.
By "opening the books" in this instance I meant simply a public presentation with some evidence that lays out what Paulson and Bernake told Congressional leader backon Thursday (?) last week. That's what I meant by making paulson stand naked. Such a distrurbing thought.
later there will be time to literally open the books - in the accounting sense, not the Sopranos sense.
Greenspan's easy money policy inflated two asset price bubbles --- the first internet/technology bubble and the housing-price bubble.
The collapse of the internet bubble destroyed enormous amounts of shareholder value, but it didn't endanger the banking sector, did it? The banks didn't invest heavily in these risky assets.
The deflation of the housing price bubble has badly damaged the banks because they thought the structured vehicles, insured with credit default swaps, were safer than they actually were and consequently invested imprudently. This looks to me like a regulatory failure. Had CDS been regulated like an insurance product, the fees would have been higher (making MBS nominal returns less attractive) to build a sound reserve against claims. The MBS would still have lost value, but there would be more counterparty reserves to cover the losses and probably fewer bank investments in them due to the lower nominal returns.
J6P needs to throw Bush's mangled words back in his face: "you fooled me once, you fooled me twice....and er....well you aren't going to fool me again...." Bush&Co have simply called "wolf" too often. Credibility, the most valuable asset a President and administration has, is gone. None left.
At the New York Federal Reserve bank, 40 people protested with banners reading "Bail out Main Street, not just Wall Street" and "$700 billion for banks, $0 for homeowners."
"There will come a day when institutional asset managers will have seamless access to a global equities marketplace...
...when the factors that comprise best execution can be achieved through a single trading venue...
...when buy-side traders are able to maintain complete control of their orders, executing anonymously, securely and efficiently within the largest liquidity pools in the industry.
Wrong ... Greenspan could have regulated mortgage brokers, but did not, left interest rates too low for too long and actually touted the very loans that are blowing up in our face ...
This is an interesting report about McCain on the bailout.
Remember that he endorsed Paulson's plan on 60 Minutes, then added reservations about compensation and overisght that match bipartisan concerns voiced today in the hearings, and match Obama's comments.
BTW, if China gets into deep trouble then just about all emerging countries get into deep trouble. There will be a lot of new/recycled treasuries/agencies in the market. A so-called dollar flood.
"Currently Smoking Cannabis writes:
Don't ask me Hank
why do you loot?
(Hank) why do you talk shit?
Why must you pillage and rape all our kids?
If I'm sick of the Senate's shit
Some ol' dick's tryin to give me directions
I'll say gimme my cash
Or the market will crash
it's a banking tradition
Lordy, I have loved blackmail
and I have loved high stakes
and they both helped to guide me
in late two thousand and eight
when old Chris Dodd asked me
Son how did we get in this condition?
I said hey albino I'm just carryin on
an old banking tradition
So don't ask me Hank
why do you loot?
(Hank) why do you talk shit?
Why must you pillage and rape all our kids?
Stop and bend on over
Grab your ankles and assume the position
Cause if I get you and fuck your grandkids too
It's a banking tradition!"
Greenspan's fingerprints are all over this crisis - low interest rates, pro ARM, no bubble, no regulation, antifreeze with crack and PCP into the punch bowl.
Bottom line though, it is what Pogo said long ago: We have met the enemy and he is us.
Very good points. I'm glad there others who may have different viewpoints but eloquently discuss the issues
This is getting outside the scope of the bailout plan discussion but in general i find government nowadays increasingly fails in their "solutions". whether it's unproven social programs that cost tons of money with no real way to accurate measure effectiveness or poorly designed deregulation programs.
Example the ridiculous money thrown toward education with no real improvements in many districts. Or with deregulation like the power markets back in California. The problem isn't the underlying program objective its that we have politicians who are over their heads when it comes to the issues nowadays. Their ideas and programs suck because nowadays the problems are too complex. The solutions that would work require real problems solvers - like the best minds in American corporations (Andy Grove had a great idea for solving social security but was ignored)
Getting back to the bailout, I'll throw this out there. There is merit to what Paulson and Bernanke are saying (I can say this because I trade this stuff and see the buyers squeezing the crap out of sellers). The government can help avoid a crisis by getting involved. Whether it works depends on the pricing mechanism which Bernanke said is supposed to be between mktval and fairval.
After seeing the bill and all the bullshit they added I can say there is no way to EXECUTE all the extra shit they threw on (as a taxpayer I do like the oversight board). It's like congress issuing a bill that says they we are going to count all the grains of sand in the US. Not going to happen. Why did the HOPE program fail? Because it sucked and was a bad solution. The add-ons tell me these guys have no clue and should be kicked out of office and incompetent boobs. You tack on all this crap and it's impossible to execute. Guess we'll just roll the dice...
Glad all my money is out of the US market and USD.
McCain ... then added reservations about compensation and overisght that match bipartisan concerns voiced today in the hearings, and match Obama's comments.
Let's review Paulson's proposal from Thursday:
Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
Not only is this unconstitutional, it's a dictatorship. But today as you can see on youtube, Paulson flips and claims almost a dozen times that his actions should now be overseen by Congress and that we need oversight. He in fact lies when he said he was never asking for immunity from oversight:
"So if any of you felt that I didnt believe that we needed oversight: I believe we need oversight. We need oversight."
Section 8 in his plan clearly says otherwise - not even the Surpreme Court could rule on let alone review his actions. This is Paulson asking to be given greater powers than the President himself - to put Paulson above the law and the Constitution. If Section 8 was an honest mistake by Paulson, he needs to be more careful with his words like Greenspan. Frankly I don't see how we can trust this failed salesman.
At 42 seconds into the video, Paulson says:
"And, so what we're asking for is, is some, some broad powers, with some, with some good strong oversight."
I love his stutter as he tells the United States of America with a straight face to trust him with broad powers backed by some good oversight. I know when I asked my parents for money for my own spending discretions, it wasn't $700 Billion. But at least Paulson has conceded that he needs to actually let us know where and why the money will be thrown at now.
Tonight Jon Stewart plays a clip of Paulson talking to Fox News just a few months ago about how strong the banks are. And then asks incredulously why we should give a man with a lack of foresight $700 billion with no strings attached.
Goldman and Morgan, however, have a more daunting challenge ahead than simply finding cheap deposits to shore up liquidity: Trust.
The events of the past 15 months, specifically the dramatic government intervention into the free markets, has created a systemic shift in the way the public views Wall Street.
Main Street instinctively knows it shouldnt trust the alchemists of lower Manhattan; we should have learned our lesson after the dot-com crash. But Wall Street simply dreamed up a better disguise, hiding their structured mortgage bets behind the government-constructed façade of affordable housing for all.
Now, the very firms largely responsible for the crisis must go to the public, hat in hand, and ask that they turn their checking and savings accounts over to them.
My point is that banks don't like to invest in risky assets. They invested in MBS because the reward/risk relation for them was artificially juiced by the illusion of counterparty insurance through CDS. Given that this insurance was being sold and that banks were relying on it for their deployment of depositor monies, it should have been regulated as the insurance product that it was. Had it been so regulated (I believe that it was exempted by an act of Congress), MBS returns would have been lower and counterparty reserves would have been higher. Both of these consequences would have mitigated the impact of the rupture of the housing price bubble on bank balance sheets --- the first by reducing bank incentive to invest in MBS, and the second by preserving MBS value for a longer time in a declining housing market.
There is a major regulatory failure in this disaster, and it's surely one of the things that Congress will fix in the next year.
Wrong ... Greenspan could have regulated mortgage brokers, but did not, left interest rates too low for too long and actually touted the very loans that are blowing up in our face ...
In fact, the Fed has enormous power to reign in financial bubbles. First, it has regulatory authority. For example, it could have written regulations that prohibited the banks under its control from writing predatory mortgages, as it has actually done this year. The Fed also can raise interest rates, a policy that would hurt growth, but is likely preferable to the dangers of a housing bubble, if not a stock bubble.
Most importantly, the Fed and its chairman can provide information. If Greenspan had carefully documented the evidence there was a housing bubble when he was Fed chairman, rather than dismissing those of us who made this argument, it is likely the bubble never would have grown to such dangerous levels. Clear warnings from the Fed chair might have made potential homebuyers more careful and made investors less anxious to throw away money making bad mortgage loans. "
i agree there's a hierarchy of blame, but there was also popular participation, in both elections and ponzi schemes.
There's nearly always some choice, even among the least powerful. But the most powerful should always get most of the blame.
I always like the way Tanta handles this sort of issue about responsibility - putting it mainly at the top, but not wiping it away entirely for the general populace.
any claim that the dodd plan is 'good' simply exposes you as a shill. what's good about it? that it will solve the problem? most don't even understand the problem. that it limits exec comp? seriously. that there.s an equity stake? this will by definition cause it to be ineffective. everyone needs to realize that there is no solution. the only thing we can do now is try and control the velocity of the fall.
Would tighter monetary policy have prevented the present problem? Perhaps, but I'm not sure. MBS would still exist, and the phony CDS "insurance" would still have made reward/risk look better than it actually was. The large global pool of capital looking for returns might still have found outlet in the US housing market, inflating a bubble even with sounder monetary policy.
I think that this matters, because it suggests that the failure was in principle preventable. Easy money + financial deregulation is a recipe for disaster. Perhaps we will have wiser governance in the future.
I said the Frank/Dodd plan is "pretty good" if the crisis is real.... I've also said swedish nationalization would be better but its not likely here. And that the Paulson plan is dead and BS and a lie and so forth.
I always like the way Tanta handles this sort of issue about responsibility - putting it mainly at the top, but not wiping it away entirely for the general populace.
joe shmoe
It is what is called leadership ...
They were supposed to be the adults ...
Remember when if you didn't have 20% down they told you ... N O
Sorry but all of this could have been prevented but instead was used to line the pockets of the already filthy rich.
We need to get the name of every Congressman who votes for this bail-out and post it so when we go to the polls November 4th we know whom not to vote for.
I think in the end of the day, it is all about how much the government will overpay for those assets, above the market values.
That's why we need some accountability, or even better the percent level that will limit the price to certain percentage rate above the fair market.
So I'm sitting here trying to keep up with everything flying across the screen, thinking that this deal will probably go down as one of the biggest albatrosses in history...
And then suddenly I went all Bloom County for some reason... YouTube - Albatross
Investing in foreign treasuries is difficult; at least, I found it to be, as the minimum purchases are large compared to my investable amounts. I could only get a few countries' treasuries in 100-bond minimums. Four or five countries, and I was already up to half my pool.
Watch out for mandatory withholding in Australia and a few other countries. Queensland does not do the withholding.
Illiquid market, too; large bid/ask spreads unless you are at $millions.
My point is that CDS is an insurance product. Banks thought that MBS protected with CDS were safer than they actually were.
The decision not to regulate CDS as an insurance product was not the Fed's to make, not within its authority. I believe that Congress
exempted this kind of product from the regulations that normally apply to insurance products. Issuers of CDS charged too little for protection they were pledging, and couldn't pay --- counterparty risk.
The fact that banks invested in MBS when they shouldn't have is not Greenspan's fault. His sins are many, but this is not one of them.
"Comrade' DrChaos writes:
I think in the end of the day"
mentioning the above, i still believe there must be a better way.
Also according to people that work for AIG & MER, there were bank runs today, pretty much some of the derivatives the firms exchange had a cash provision clause (if market value falls beyond certain level), so the firms started calling each other with "margin" calls, - fun times!
Its not clear to me that the present disaster is the Fed's doing.
SRC...you need to do your homework
by his own admissions below one can see greenspan and the fed played a key role in this crisi by holding interest rates too low too long..
Then, after the accounting scandals of 2002, the Fed dropped the federal funds rate from then current 1.25% to 1.00%.[33] Greenspan acknowledged that this drop in rates would have the effect of leading to a surge in home sales and refinancing. (wikipedia)
"Besides sustaining the demand for new construction, mortgage markets have also been a powerful stabilizing force over the past two years of economic distress by facilitating the extraction of some of the equity that homeowners have built up over the years."
[http://www.house.gov/jec/hearings/11-13-02.pdf
Hearing before the Joint Economic Committee Congress of the United States], November 13, 2002. Accessed July 15, 2008.
bgates - FXA is short term money. If/when things come unglued here, you want to be in foreign denominated long bonds. Can't tell you how to do it, but longer will be better if the SHTF.
So when I own an MBS and one the loans in the MBS is not being paid, say there is a foreclosure, what does that do to the MBS? Does its market value drop? What is 10% of the mortgages in the MBS are not being paid? Assuming that the MBS is reduced in value, then I can see how it would be hard to know exactly what the MBS is worth-with falling house prices, ARM resets etc.
Add in CDSs "insuring" these things, what a mess.
I heard on NPR this am how the bailout plan could maybe require that workouts be done on all the loans that Treasury buys from the financial institutions. Sounds like an immediate employment plan for some involved in the housing business.
Empty houses, how likely a mortgage payment is being made on that.
Second homes, will they start being put up for sale, further flooding the market in unsold homes?
If adults aren't adults, then how are the leaders supposed to be adults?
The American populace bears some responsibility for this. For the most part we elect our leaders. Like our children, they rise or fall to our level of expectation.
Comrade' DrChaos writes:
I think in the end of the day, it is all about how much the government will overpay for those assets, above the market values.
f that ... we haven't even started down that road. If the pols roll there will be hell to pay ...
Sorry for the reposting...keep putting it on the wrong thread. Cant keep up anymore! But this is important to read, because it gets at the con being perpetrated by Paulson and his monkey buddy Bernanke.
Only problem is that by the end of the argument, the Professor is unable to see these people as evil and selfserving, and chocks the errors up to incompetence, which I absolutely dont agree with.
dryfly writes:
A good question to ask tomorrow at hearings:
"If you want and welcome oversight & transparency then who in the administration inserted Section 8?"
That I'd like to know. That and was it always intended as a 'throw away' or a 'poison pill'?
dryfly | 09.23.08 - 10:59 pm | #
Yes, that section is baffling. Surely they weren't so arrogant as to think they could get that thru Congress? Which raises the question you put forth. What was the purpose of putting a poison pill in there if there was such a rush to get it approved? Is someone else pulling the strings, other than Bush or Paulsen? The three stooges appeared to be extremely stressed out.
bgates, absolutely, those Rydex ETFs are fine, especially if you have less than about a million to invest in that one asset class. I wanted to get around the 0.4% that the ETF managers were charging. In exchange I lost a hell of a lot of liquidity; I am basically constrained to hold the bonds until maturity. I elected for 1yr to 2yr maturities. Their YTMs range from 4% (Germany) to about 9% (Brazil IMF). I also hold FXY, FXC, and one other, escapes me at the moment.
It is also hard to find retail bond salespeople who know what they are doing. Not to knock Schwab - they are further along in retail bond investing than most, I think - but the salespeople are not the best informed people.
I am not sure if Krugman (big respect please note) is exactly right on this one. Legalese need to be read with a cold towel on the head. Just because it gives Paulson the right to irreversible decisions, it does not seem to rule out review. In other words, they do some deals and then the oversight reviews progress and may steer the managers for the next set of deals: for after all the 700bn cannot be invested all at once and Paulson is an employee of government and subject to all the usual influences and chain of command.
What you cannot have is oversight affecting deliberations on each transaction and that is why 8 is in there. So they are not being arrogant. It is needed
Another example of why the entire BushCo Group should be incarcerated.
Cheney has dumped another (estimated) $10 to $25 million in a european bond fund which tells us that he is counting on a steadily weakening dollar. so, while working class americans are loosing ground to inflation and rising energy costs, darth cheney will be enhancing his wealth in "old europe". as blackburn sagely notes, "not all bad news' is bad for everybody."
this should put to rest once and for all the foolish notion that the "bush economic plan" is anything more than a scam aimed at looting the public till. the whole deal is intended to shift the nation's wealth from one class to another. it's also clear that bush-cheney couldn't have carried this off without the tacit approval of the thieves at the federal reserve who engineered the low-interest rate boondoggle to put the american people to sleep while they picked their pockets.- counterpunch (2006)
The insertion of Section 8 ironically draws attention to the issue. Being silent on the issue would have increased the chances of being free of significant oversight, as they might have failed to add it if it were not explicitly excluded in the very short document.
Greenspan inflated the house-price bubble with too-easy monetary policy.
But he didn't induce the banks to risk depositor money on MBS. That inducement was the illusory low-risk that was implied by the the protection of these securities with credit default swaps issued by companies with too little capital to honor the swap contracts. That capital insufficiency is the responsibility of the regulators of these insurance-like instruments. But that regulation (which did not take place, due to Congressional exemption -- the deregulation mania) was not the Fed's responsibility.
Had these instruments been properly regulated, they would still have been issued, and someone would still have lost a ton of money. But it would have been the properly capitalized counterparties rather than the banks. And we would not have the credit freeze we now have.
The decisive cause of the fact that we have a bank disaster rather than, say, a reinsurer disaster, all other aspects of the history being the same, is not Greenspan's doing, I think, but Congress'.
Multiple things had to go wrong to produce the disaster that we have. Greenspan is a contributor, but he is not alone.
well, I suppose "you give me a bushel of money and don't tell me what to do with it" is a negotiating ploy, but in my experience negotiating ploys don't tend to insult the other parties... especially when the other party is Congress...
rnat☮ | 09.23.08 - 10:06 pm | #
Well said.
The cardinal rule of negotiation is you do not tread on the other's non-negotiable positions.
This crew believes the entire purpose of negotiation is to shit on the others' non-negotiable positions. Like having a Constitution left when it is all done.
What you cannot have is oversight affecting deliberations on each transaction and that is why 8 is in there. So they are not being arrogant. It is needed
Graham |
"The next emergency measure will be that Americans are not allowed to buy foreign currency and transfer money overseas, and the next measure will be not permitting Americans to buy gold and so on and so forth . It creates even more uncertainty in the market place when you continually change the rules," Faber said.
I'm thinking of faxing this to my Senator tomorrow.
I am a Proud Supporter of Senator Boxer. I admire her for standing up as the lone voice of dissent during what I consider to be, the 2004 stolen election.
I live in the "wasteland" that is South Orange County. I'm a CPA & Certified Financial Planner. I deal with financial information every day, and I saw this disaster coming years ago. I pay attention to people I consider to be knowlegable, like Nouriel Roubini & Peter Schiff.
I am firmly of the belief that the economy is going to fail. Regardless of which course of action is taken. I see it as unavoidable. My opinion is that the long term consequences of any considerable bailout plan, will be far more disasterous for the U.S. economy. The reserve status of the Dollar is on the line. The impact of any major bailout, will in all certainty, crash the value of the dollar.
I would be willing to bet a considerable amount of my net worth, that this is only the early innings, and much worse is yet to come, especially if any significant amount of this proposal is adopted. I fear that any compromise, will prove to be fateful for the Democrats, and even though they pose very little responsibility for this, they will nonetheless be blamed if this joke of a plan gets adopted, without major changes, and elimination of certain terrifying items, such as Section 8.
Unfortunately I do not see a solution, which will save this country from perhaps the most difficult economic period in it's history. Certainly it will prove to be worse than anything in at least the last 70 years. You are trusting the people Directly responsible for this mess, to fix it. You are also rewarding the people who have profited the most along the way, with a parting bonus, before they ride off into the sunset. Meanwhile, the future of this country could be damaged for 2 or 3 generations.
I see no way to avoid collapse. This plan, and many of the proposals contained within it, will merely delay the inevitible. It will in no way eliminate it, nor will the requests for funding end at $700 Billion. Were I to put a guess, I would say at least 5 times that amount, perhaps more.
I know that Senator Boxer will do the right thing. I can not say this about many Senators, even on my side of the aisle, but I believe she is one of the few who have the best interests of this country at heart. I will support her, even if she has to stand opposed, with the few as voices of reason, were significant alterations to this "plan" not to be made.
I called my representatives; two senators and a house member. Spoke with two staffers and left a voice message with the other. The staff of the house member was busy writing everything down I had to say. At the end, I said one more thing:Paulson and Bernanke should resign immediately. He said that he completely understands and will pass that on to the rep. Hope it's true!
You probably have a little window to catch some high yield on the aussie.
Advantages:
At 80 something cents, down considerably from 99 cents just a short while ago.
Just a few bank, well capitalized.
High term deposit rates.
Disadvantage:
Housing recession has arrived no doubt, so interest rates are coming down and might drop faster than people expect..
If asian emerging markets tank, aussie dollar will tank too, as economy is resources based. But floor is probably 70 cents barring natural disasters.
bgates writes:
FXA looks good. any thoughts on india, china or russia exposure? RSX at 25 seems like it was a nice buy, same with FXI at those lows last week.
Nothing really concrete when it comes to those countries, just my own speculation (I'm actually most knowledgeable in the crap blowing up, rather than currencies).
I'd think you'd want diversification exposure to countries with different drivers to their economy - eg. natural resource/commodity driven, tech/industrial growth, etc.
eric, don't know if you missed the post but OIBAX, PAIIX are ways to directly access for. govt bonds keeping the currency exposure intact.
There are Everbank currency CDs but they are a questionable because they skim alot off the interest/dividend you should be collecting.
FR and TR want the plan to pass quickly because from where they stand they may not see Russia but they can see trouble, they can see a democratic president from where they are.
The American populace bears some responsibility for this. For the most part we elect our leaders. Like our children, they rise or fall to our level of expectation.
joe shmoe
The US Government is not much of a reflection of any kind of organic, natural public opinion. Since the late 20s, the USG has spent a ton of money shaping public opinion so that we can be steered into demanding, or at worst accepting, the direction they choose to take us.
Edward Bernays wrote a pretty influential book about this called "Propaganda." Bernays was the nephew of Freud and used his research to develop techniques to manipulate the public mind.
Walter Lippmann, one of fathers of modern journalism, also believed this. Lippmann referred to the public as a "bewildered herd" and said that our function was to trample periodically in support of our leaders.
Journalism doesn't report the news, it shapes the mind. Ditto for TV. They are not the products of our 'demand,' rather our demands are the products of their labor.
Someone interviewee on CNN (I think from the WSJ) just said that several members of congress were also being investigated by the FBI for their roles in this....
I can't get over this blaming Clinton for a bill created and passed by Republicans. Fox News can blame the fact that Democrats have been in control of congress for the last two years (even though they never had enough votes to override a veto) for everything that has gone wrong.
suecris writes:
I can't get over this blaming Clinton for a bill created and passed by Republicans. Fox News can blame the fact that Democrats have been in control of congress for the last two years (even though they never had enough votes to override a veto) for everything that has gone wrong.
IOKIYAR, I guess.
suecris
Faux news could say the Democrats have been in control of Congress for the last 12 years, and the Morons that watch, would believe it.
Say, how long have you been in the planning business? I got my CFA in 2000 and have worked for a small but profitable planning firm for 6 years. I read the same stuff you mentioned, and I too saw this building in 2005; we even have the June 2005 Time Magazine cover matted and framed, the one about 'are you in love with your house, or something like that. Perfect contrary indicator. But we stayed out of all US banks and bonds from the wall street banks. Our clients are happy so far...now thet we're looking at relative performance.
Bgates,
before you go into any aussie bonds, check out the link upthread from FFDIC...re Chinese banks and real estate...you may want to think again.
FFDIC...great link, thank you.
"Advantages:
At 80 something cents, down considerably from 99 cents just a short while ago."
But the market value is not 80 something anymore!!!
The market demand for some of those securities is at 70+% discount. Also AIG was burned so badly because it was under the regulators close watch and couldn't keep those on the books at hold maturity valuations. Many other firms still keep those as level 3, ... which might spell trouble to the taxpayers, if the premium will be high enough, 750 might not be enough of the cash to cover every firm that tries to unload those. How will they figure out the preferential treatment for some and not the others?
Do you really think members of Congress are gonna stick around Washington for another 2-3 weeks of the Hank & Ben clown act?
These are people with schedules, commitments, campaigns, money and livelihoods on the line. Whether they are in tight races or unopposed, this is prime time for getting out in the district, getting visibility in the local press, and hearing what constituents are thinking and saying. It comes around just once every 2 years for Reps and once every 6 for Senators.
So, I guess I answered my own question.
Most will go home this weekend, listen to what people back home are thinking and saying about the bailout, and tell Hank and Ben to take a hike. They are better off going home because that way they can hear it straight from the people who elect them.
You think that's what they'll tell Hank and Ben, in a nice sorta way?
We are a bunch of damn fools if we do not hold out entire political establishment accountable for what is starting to unfold. Vote against every incumbent Congress Person. Lets start over!
Raphael, thanks, I will look into those securities. Still have a modest amount of money market funds (15%) and wondering whether and where to move it.
Since I've got you on the line, what do you think, will Morgan Stanley default on its debt? I bought a little bit of Jan '09 bonds, and the yields have continued to go up Now at absurd levels, like 33%.
Zephyr writes:
Democrats and republicans contributed to this mess - mostly by passive inattention. This crisis has been brewing for more than a decade.
Zephyr
All of you who want to blame the Democrats, can you please tell me who has been in the White House for the last 8 years? Can you tell me who had Full Control Of Both Houses Of Congress For 6 Full Years, and a Tie for control the last 1.5?
Now, please explain to me how the Democrats had ANY say in the agenda, or how this country has been run since 1/20/08, when MORON and his Evil Sidekick took over?
I realize you'll come back with how there are bad Democrats, so fine....THERE ARE SOME BAD DEMOCRATS. But it was the republicans who have been in control of things. And they're all a bunch of HYPOCRITES, as usual, trying to transfer 50% of the blame, to a party who had maybe 10% of the control or responsibility for the collapse of this country's economy and world standing.
So shut your fucking mouths already. This country would not be in this condition had Al Gore rightfully been elected. He would not have let this happen under his watch, unlike this Evil SOB who has stolen and destroyed everything in his miserable excuse for a life.
The 9/11 terrorists had a significant part in triggering this in that their raid prompted Greenspan to excessively loosen credit out of a fear of market collapse from the terrorist attacks. The much too low interest rates made speculation and carry trade arbitrage highly profitable. Add a bunch of leverage to the play and fortunes would be made...
The problem isn't the underlying program objective its that we have politicians who are over their heads when it comes to the issues nowadays. Their ideas and programs suck because nowadays the problems are too complex.
The "stupid politician" plays the same role as the guy who bumps into you in the subway while his partner picks your pocket. "Clumsy idiot," you say, and don't even realize your wallet is gone until you get home.
"The last shall be first, and the first last" (Matthew 20:16)
Except when I'm first, of course.
well, I suppose "you give me a bushel of money and don't tell me what to do with it" is a negotiating ploy, but in my experience negotiating ploys don't tend to insult the other parties... especially when the other party is Congress...
Krugman already called out the lie:
"Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."
Good ideas and lies - Paul Krugman Blog - NYTimes.com
Karl Denninger on Brian Williams NBC tonight. Anyone see it?
how do we effectively short the fed itself?
what a christmas gift for the american people - finally gone after 95 years... maybe this means the cubs will go all the way.
"Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."
I took CR's lead and just sent this to my congresswoman who just happens to be Nancy P.
Perhaps everyone else on this blog should do the same.
Let's get oversight, let's get open and transparent pricing, and let's get a pound of flesh from the wall street execs who put us here in the first place.
I am writing to let Nancy Pelosi know about my views on the pending legislation regarding the bail out (I just moved to SF and will be voting in her district from now on). Simply put I have three items that I urge the congresswoman to consider.
First, giving 700 bllion without any oversight is simply, a non starter. It is against the spirit that created this country and in fact I would argue flies directly in the face of John McCain's view that we should adhere to the constitution. If the republican's leading candidate believes in the constitution, then let's force the current republican administration to put country first and do the same. The house and congress control spending, not the executive.
Second, Ben Bernake is arguing for the need for this bail out to determine what he calls "hold to maturity pricing." While I merely hold an MBA from UCLA and not a PHD in economics from Princeton, I can't for the life of me remember how a market ever has two prices at the same time. Perhaps I missed something, perhaps California education is simply not as good as an East Coast eduction. But that aside (and if the congresswoman wants to learn more about this check out the site calculated risk) let's give Ben what he wants. Let's insist that every single group of asset sales be published on the Web -- that way we will get what he and the administration feels we need -- pricing -- transparent, open and readily discoverable.
Finally, if a company gets a bail out there has to be a cost. I will definitely not vote for any representative, presidential candidate or other elected official who feels that companies should be able to get a government bail out without a) giving the government equity and b) limiting executive compensation. I am already reading articles about King Henry on the web and blogs and with the Internet I don't think the public will sit by and let a bail out take place without a cost. Just my view.
I do respect the congresswoman but I also hope that she works to protect the country, protect the constitution and impose a cost on those in wall street who, let's not forget, are the reason we are discussing this at all.
IIRC, one of the reasons that his bailout was "necessary" was that commercial paper was vanishing or something like that. If that's the case, why doesn't the Fed/Treas. just start lending money as CP?
Toxic
Asset
Mega
Purchase
Of
Natio
Marcy Kapture (Ohio-D) Strikes Again [General] - MarketTicker Forums
This is what he will see tommorow...should be fun!!!
Well, glad you weren't focused on Section 8 over the weekend-- it worried the stuffing out of me. The transparency website with all the transactions posted daily-- with a blogger's comment section-- would be the beginning of a distributed-knowledge-gathered wired system of market governance. Great idea.
Krugman was on the Nightly News - good showing by the Dr.
Thanks for calling out Paulson and Bernake for trying to pass us horse turds.
This isn't over until a city burns,
DJ
To be fair, sometimes people put an offensive clause in a proposed agreement as a negotiating ploy. That is why I never focused on Section 8 over the weekend - this was obviously going to be changed.
They threw me a bone and I bit.
Let's go easy on poor Hank. He's as clueless and irrelevant as the rest of us. Sure - it's difficult to fathom that his plan could work. But at least he isn't piling on a lot of fluff which would make it even more expensive and counterproductive.
Der Fuhrer hat gesprochen.
To be fair, this is what gretchen morgenson wanted, too....
I suspect there is a large political agenda in play. Not so much the November elections but many elections to come and historical blame for this mess and the bigger mess to come.
If the Paulson plan is excepted, Wall Street gets a parting gift of $1-2 Trillion from Bush. If the Dems restructure the plan in any meaningfull way, the Conservative media will call them the party that destroyed America for generations (assuming a serious recession is just beginning).
The first draft of revisionist economic history.
Jim
Was Gretchen in line to get some of the $700B ?
Here's oversight:
"Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."
I'm Canadian, and I'm still pissed off. If Americans are any less pissed off than I am right now, you deserve what you get. Good luck tomorrow. It's all in the hands of your elected reps. Paulson & company should be forced to stick around Pro Bono until the very last piece of toxic paper is disposed of at face value.
What are they smoking? Must be good... BTW, where is Nemo?
and Gretchen is relevant how?
Anyone else find it hard to believe this babbling baffoon was the CEO of Goldman? What does that say about Goldman?
700 billion wont bailout the system
its just a last big pay day for the bankster criminals
"just say no"
ps gretchen morgenson,,,yes i know she has been criticized and rightly so from time to time on these pages but
she gave an excellent interview to terry gross on npr program 'fresh air"
i find the link
I like Terry Gross. Good interviewer. Gretchen . . . well......
She wanted a list of what those mortgages were too... in the name of transparency....
proposed Pentagon 2009 budget $515.4 Billion
proposed Paulson budget $700 billio
What does this say about Goldman?
We might find out when Barney Frank pries open their books for FDIC, SEC, Treasury, Fed, and, who knows, maybe the FBI..... We'll know eventually.
we call dis crawfishin'
was it planned?
not that I can tell
From Whoops...
The Paulson-Bernanke plan to rescue troubled financial institutions by buying up mortgage assets has been underway for several weeks, according to a person familiar with the plans. Although the plan was announced suddenlyand perhaps earlier than plannedit had been under development for quite some time, with its seeds sown inside the Treasury Department offices at 1500 Pennsylvania Avenue shortly after Bear Stearns collapsed.
In recent weeks, as the plan began to be regarded as a pre-emptive version of the Resolution Trust Corporation, the Treasury began approaching former officials from the RTC to see if they would take a role in the bailout plan. The RTC was created in 1989 to sell off assets of thrifts that had gone bust. One former senior RTC official approached in late August declined to join the Paulson-Bernanke plan, a person close to the former official said.
Theres at least some hint that the Treasury might have sought to use the former RTC officials as window dressing. The Hanky Panke Plan (short for Hank Paulson and Ben Bernanke plan) is being presented as an updated version of the RTC, which obscures crucial differences between the plans. Most importantly, the RTC sold off assets of thrifts that had already failed while the Treasurys bailout plan wants to buy assets from financial institutions that arent convinced they are in danger of failing. Having former RTC officials running the show might have helped distract from the unprecedented aspects of the Hanky Panke Plan.
[end quote]
but on friday, the story was that a state of emergency necessitated immediate action on the 3-page plan...
If someone told me that I'd suffer dire consequences if I didn't give them a lot of money, I'd call the cops.
section 8 is paulsons immunity from prosecution ploy. its the only way he's hanging around. he's smart enough not to be the fall guy when the FBI comes knocking.
The primary source of the problem is California, as always. Then Florida.
Buying crap at sometimg close to par without dollar for dollar warrants at a September 11 2008 strike price is stupid, especially since this all could have been done a year ago much cheaper when CP froze the first time.
Found this while googling 'pitchforks' and 'torches'. Yes, I did price them on amazon for capitol delivery. Thanks to who thought of that earlier.
Rep. Kaptur:
To Wall Street: "You think you can away with it because you are extraordinarily wealthy....but you are about to be brought under firm control. First, America doesn't need to bail you out. It needs to secure our real assets and properties, not your paper."
"Those who created and profited from this game of games must be brought to justice. The assets they stole must be returned to the American taxpayers right down to the tires on their Mercedes."
Anyone as confused as I am for the about-face: that the hold to maturity argument was NOT accepted by Bernanke and Paulson for Fannie, but now all of a sudden it's good for Wall Street banks?
Wally
good point.
some for the $500B for defense is necessary and wise, but much of the $700B will come back from sale of assets (certainly not all, but one hopes considerably more than half) plus maybe it will keep the economy from crashing . . . if the crisis is real
Anyone but me frightened by the thought that for the majority of the time frame of whatever plan is adopted it could be administered by Treasury Secretary Phil Gramm ?
Jim
So "I want oversight" means "let's talk about something other than the amount?"
bgates writes:
how do we effectively short the fed itself?
Move out of dollar denominated assets.
terry gross at npr "fresh air"
interviews gretchen morgenson
money quote..."we were lied to so many times before why should we believe them now"
The Wall Street Bailout: A Conflict Of Interest? : NPR
Anyone but me frightened by the thought that for the majority of the time frame of whatever plan is adopted it could be administered by Treasury Secretary Phil Gramm ?
Apparently Paul Krugman is, too.
Planned? No.
Avoidable? probably, but unlikely.
Our good friend Taleb will have a choice comment about our hubris and blindness to risk.
Unseen consequences, complacency and a pinch of self interested rationalization how 'nothing will go wrong that we can't handle
that is a respectable comment from gretchen.
Paulson should welcome oversight; otherwise it's all on his head. Let Congress take the blame!
Frank/Dodd bill or Paulson plan or nothing, the idea of McPalin with Gramm at Treasury scares me enough to have plans to depart for a safer country.
Why is everyone giving these guys the benefit of the doubt? I am a little shocked by that really.
Also again someone needs to tell me why doing nothing is not an option.
SR
Nobody writes: "Let's go easy on poor Hank. He's as clueless and irrelevant as the rest of us."
I may be irrelevant, but I hope I'm not so clueless.
I want my pony!
Amen SR,
Gridlock would be the best outcome.
C&C
That is a great vid. Go viral
I don't think they want transparency. If they did, more people would be on the same page with them. As it stands, people are scratching their heads saying, "Huh?" It doesn't make sense because there's more to this than meets the eye.
Forget about asking for transparency. Let's scratch every single bailout plan and get back to the drawing board. Find a solution that is not totally one-sided. Bring in the economists. If a plan causes panic and general angst, it's probably not the right one. A good plan would be acceptable, if not to all, then at least to more than him-himself-and-him. A good plan would make sense.
Bring in the advisors. Not just political. No strong arming. After better proposals are offered, narrow them down, then make a choice by one person if you have to.
But bailing out banks on the backs of the citizens is not going to sit well with anyone. Forget it.
"Move out of dollar denominated assets."
I've been trying to do that for six years, but execution is always tougher than concept.
But, seriously, it explains all of the mysterious elements of the past few weeks. One day very soon, we're going to wake up in a world where the Fed just doesn't exist as a viable entity.
but here's the tricky part - who is to say that there won't be a rush to safety to bonds and to (ironically) "cash" FRNs as a result, not to mention the kind of deflationary drag that drags down gold and oil as we face a particularly severe form of 'demand destruction'?
It's a good thing we don't get the government we pay for...or is it?
On "Fresh Air", Morgenson also responded to TG's question about "why does this matter to the rest of us" with a mushy comment that Money Market funds might be damaged.
I turned it off in disgust at that point. GM seems to not understand that freezing of credit markets imperils the operation of companies that employ workers. She's worried about 3% losses in MM funds when a death spiral into Great Depression II may be in view.
Tanta has been too charitable.
orma writes:
I want my pony!
norma | 09.23.08 - 10:30 pm | #
I'm afraid the Secretary has made it quite clear my dear, hand him the money, or the pony dies.
Paulson will have zero choice about oversight and most other provisions.
He is going to get what Congress allows him to have.
Reports tonight are that Dick Cheney was laughed out of the repub caucus he visited to push them into line, and the Dem pushback against Paulson is solid.
In the Senate hearing today there was lots of broad agreemnt between Dems and Repubs. I don't recall one who spoke up for Paulson. All whom I heard demanded accountability, protection for tx payers (equity or a clear pricing formula which is impossible) etc.
King Hank is Dead.
Barney Frank rules by committee.
And Bush is lamer than ever.
Dick Cheney has been sitting on this bailout plan for weeks. It appears that the game plan was Shock Doctrine all along. Create a false time sensitive crisis,induce fear and rush a corporate bailout without debate. Just like the Iraq War and Patriot Act bills. I wouldn't put it past these domestic and war criminals to cancel the November election and declare martial law.
Interesting interview with Gretchen
She was clearly channeling Tanta but with less rock blogging and not nearly enough cursing >; )
Anyoner else listen to it and wonder where she is hiding her evil twin?
The Wall Street Bailout: A Conflict Of Interest? : NPR
If someone told me that I'd suffer dire consequences if I didn't give them a lot of money, I'd call the cops.
Yes, Yes, Yes!
Why aren't people calling this plan what it is? It's the Paulsen Heist! He didn't spell out the consequences... methink Hank would have a hard time fending to his own devices if he had to...
Hank Robbing an Old Lady at the ATM
Hank: Miss! Give me all of your money! Or else I'm going to allow you to suffer the dire consequences!
Hey buddy, if you don't show the gun than you are going to get beaten up by Grandma 6 Pack!
What's with the freakish left pinky finger? Could he get creepier?
Which tell is it when the person looks up and to the right when they say something...?
"We need to protect the American taxpayer" - tell
Steel,
That has been my fear for the last 3+ yrs.
Wow - I think the Plan died today. Cable news are getting snarky... US World and News Report, Time, Politico, Newsweek piling on... WP and NYT pushing hostile commentary.
The media turned a corner today.
Perhaps because Paulson came across as a poison toad with a forked tongue.
SRC
That's the gretchen I know. the world is right side up . . . or upside down but that's what I'm used to
I think the White Hoouse claim that they've had the Paulson Plan in the drawer for 6 months is total BS. Hank made it up as he went along over the weekend, and did such a piss poor job that we are all lucky.
karelian-san writes:
Wow - I think the Plan died today. Cable news are getting snarky... US World and News Report, Time, Politico, Newsweek piling on... WP and NYT pushing hostile commentary.
The media turned a corner today.
I'm with you by golly...the media are the definitely the ones to trust with the answers to problems like this.
Being that the FED is a group of private banks I think we may be better off if the government just outsourced this job to India or somewhere. They certainly couldn't have screwed it up any worse.
I think the White Hoouse claim that they've had the Paulson Plan in the drawer for 6 months is total BS.
wait wait wait WAIT!!!! Wait one goddam minute!
They WHAT????? They say what????
they get on me wanna know Hank
why do you loot
(Hank) why do you talk shit?
Why must you pillage and rape all our kids?
over and over
everything fell my direction
so if you get boned
I'm just carryin'
on an old banking traditio
Goldman had the oversight to become a bank practically overnight ...
coincidence ?
crispy&cole writes:
404 Not Found? post=62551
This is what he will see tommorow...should be fun!!!
This deserves a post!
escariot
yes, a WH source said so today. I will look up a link and post.
If Paulson really wants transparency, give us a website, updated daily, with the details of all transactions!
Econ Porn - I'll look but I'll feel dirty afterward.
Did anyone hear the entirety of the Gross/Morgenson interview? Did Morgenson at any point note the concern that tight credit could result in a self-reinforcing contraction of the real economy?
Sad repost from previous thread, OT...Tanta...whwre are you?
Would really like a riff from you right now!
Am I the only one who's missing her these days?
Frank/Dodd bill or Paulson plan or nothing, the idea of McPalin with Gramm at Treasury scares me enough to have plans to depart for a safer country.
I'm more concerned that they'll re-animate Milton Friedman's zombified monetarist remains and appoint him Fed Chairman.
"Being that the FED is a group of private banks..."
WAS a group.. hard to believe they got away with it for so long. why can't I have an exclusive franchise on the currency and a 6% return by law?
Yeah, they want us to believe the 3 page plan was in the works for months? It was written up on toilet paper in 3 hours... or perhaps restaurant napkins?
The point is that the media thought this was a done deal on Sunday nite... now the wind is changing.
Maybe it's the polling showing majority opposition to the plan. Congressmen and newspapers have started defecting - this pig is gonna bleed out by Friday.
Fat chance please try and remember what you were told 7yrs ago and is any of it Right?
jo6pac
Just say NO
crispy&cole 10:14 pm
your link re congresswoman mary Kaptur is nothing short of awesome
thank you
must-see 5 minute speech in the well of congress should be viewed by every american
Marcy Kapture (Ohio-D) Strikes Again [General] - MarketTicker Forums
SRC
This bailout will only delay the deflation ...
There will still be tons of toxic paper out there.
The credit crunch will continue until the banks are purged of crap ...
Enjoy this or cry ? Truth hurts.
YouTube
- Broadcast Yourself.
My understanding is that the Fed hands over its earnings, net of expenses, to the Treasury. I don't think that the governors are excessively compensated. I think there are shareholders, but do they receive dividends? Anyone have data on that?
Didn't Hillary Clinton say she saw this coming for the last two years? Is that why the Clintons sold all their real property last year? And the Hilton family sold their real property? (I read that on CR last year, that's my source).
On the whole "post every transaction on the internet idea" --
Isn't that exactly what Bernanke doesn't want to do? If everyone can see what these assets are selling for, doesn't that force all these companies to mark their assets down? I thought that was what BB was trying to avoid at all costs.
"Am I the only one who's missing her these days?"
Not at all.
Paulson opens his mouth - and lies again. If he welcomes oversight and did not want to presumptuous, he would have put in a bracketed section "[Oversight Provisions]", or left it out entirely, not put in this "no review by anyone" language.
No wonder Americans hate Washington - liars, crooks, thieves and war-mongers. Join the Revolution!
Just a quickie for the lawyer types out there. Can congress pass a ill that cuts out judicial review except at Gitmo.....
Hmmm Fuld sent to Gitmo poetic justice
Get beyond whether this sh*t passes! It won't make a damn difference to the consumer's rapidly deflating balance sheet. It won't make house prices stop falling, no matter what these idjits say. People should focus money on stimulating aggregate demand, preferably by forgiving all student debt and making secondary education universal, then pushing to eliminate all dead-end non-supervisory McJobs and build a sustainable urban landscape. Manual labor + intellectual ingenuity in one job description. Stop illegally blocking labor unions from forming and bargaining for workers. Tax the top 1% at marginal rate of 80% and spend pay for the above college tuition (major reform of their bureaucracies - no million dollar college Presidents, etc.). Cut the Pentagon by 9/10ths and use the revenue for building that non-auto dependent urban form. Forget the banks - nothing structurally will change in the economy from it.
Anyone else suspicious about the timing of the release of information on the FBI investigation of AIG, Lehman et al? Seems almost designed to generate more public disgust at Wall Street. Evidence of a power struggle or mere conincidence?
Do they want to keep property values where they are is so that property taxes don't go down? Someone here allued to that a while ago.
Can someone explain how GS is gonna make greater than 10% with the T-bill market at 1%?
I may be irrelevant, but I hope I'm not so clueless.
AndrewBW | 09.23.08 - 10:29 pm | #
Paulson's on the verge of controlling a $700B line of credit for distribution to Wall Street, including the company of which he was once CEO, and you guys are calling him clueless???
I'm irrelevant too, and probably pretty clueless, but it was obvious today that the reason he wasn't answering questions wasn't because he didn't know the answers.
The ONLY excuse for that abomination of what they call a piece of legislation for an act of congress of this magnitude and scope was that it WAS drawn up in some Georgetown bar at 1130PM on Saturday...MONTHS?
you really, truly, can't make this up.
This country, this great nation, is in the hands of utter knaves.
response to SRC
i listened to gretchen morgensons interview times two
did you?
she said in no uncertain terms that recent history indicates we can not trust the banksters and their shills in the administration to rescue the system with 700 billion or necessarily any other amount
because, she went on to say
the problem is not just subprime but rather the credit default swaps are likely to overrun the band aid approach we are getting from ben chris and hanky
WH Spokesman said plan was in the works for months. Claim is total BULLSHIT, equivalent of Bush saying his dog ate the CIA warning on Bin Laden in August 2001:
first link I found (heard/read it elsewhere earlier:
White House: Bailout plan was months in the drafting - The Standard
White House: Bailout plan was months in the drafting
(7 mins ago)
Defending its embattled rescue package for troubled banks, the White House said Tuesday that the US$700 billion (HK$5.46 trillion) plan was months in the making but that lawmakers must pass it this week.
"This was not a program that was conceived of, or put together, hastily. There was an enormous amount of analysis and debate and discussion before we came forward with this program,'' said spokesman Tony Fratto.
"Some of the policy staff have had months to think about what a program like this would be like and how it would work. Others have had at least weeks to think about it,'' he told reporters.
AGENCE FRANCE-PRESSE
seriously writes:
Can someone explain how GS is gonna make greater than 10% with the T-bill market at 1%?
seriously | 09.23.08 - 10:44 pm |
They are scheduled to get a $1T inflow later this week.
SR
I'm afraid the Secretary has made it quite clear my dear, hand him the money, or the pony dies.
You know how those stories always end. He gets the money and the pony dies.
After watching the Senate banking committee hearings on the"Big Bailout", the following points were clear to me:
1. Messrs. Paulson and Bernanke do not know how to price the troubled assets
2. In logical contradiction with 1 above, they are convinced that they are priced too low ("fire sale" prices), and therefore are willing to overpay ("hold-to-maturity" prices)
3. They are resisting the generally accepted risk mitigation mechanism of taxpayer sharing in the upside.
I have no choice but to conclude that this smacks of fraud.
bgates writes:
but here's the tricky part - who is to say that there won't be a rush to safety to bonds and to (ironically) "cash" FRNs as a result, not to mention the kind of deflationary drag that drags down gold and oil as we face a particularly severe form of 'demand destruction'?
Yeah, this should be watched closely. But the current crisis is global, so if there's dollar deflation, there'll almost certainly be deflation in less debased currencies (e.g. euros, swiss francs); you might even come out ahead. On the other hand, if things go inflationary, and you're in dollars, there'll be nothing but suffering.
But who is he negotiating for? His multi-millioaire peers or as Secretary of the Treasury for all the citizens?
Nothing coming out of the Bush White House escapes the editing pen of David Addington.
We don't need no stinkin' laws.
OT, again...Tanta, where are you???
Thanks Joe
I think I need a drink
I have a friend that has $100,000 in student loans and, upon finally graduating, has "learned" that he/she is not that smart. He/she is upside-down on his/her loan.
He/she feels obligated to repay the obligation that he/she committed to, but upon reading the excellent commentary on this site, the obvious solution is to walk away. Of course, if an abundance of the similarly-situated stupid people do this, it creates a systemic problem. But I told her/him to not mind that and to not let silly things like ethical and moral values stand in his/her way from doing what is best for him/her. God Bless America.
Mama's gonna keep baby healthy and warm.
-GSD
turtle,
I gave up on the Morgenson interview after she flubbed the question about the implications for the real economy. How a journalist can not understand that given what is happening in Congress this past week, I don't get. Tanta thinks GM is an idiot, and I am inclined to agree. That she thinks we have been lied to doesn't cover for the fact that she doesn't understand how close we are to a major recession or a depression.
Is there anyone in this country who can stand up to the plate and present a halfway logical approach to this problem?
Anyone?
We have to do better than this.
Yeah - inflation is occurring so fast my eyes are bleeding. Everyone I know has so many dollars they're picking up dog crap with them. Get real! Nothing has transpired that will put actual cash or new credit lines directly into the hands of U.S. consumers, hence the ongoing decline in nominal, and real, aggregate demand.
Absolutely...The public will provide far more feedback as to how bad we're getting screwed.
"a halfway logical approach to this problem?"
Pitchforks.
The full solution requires torches too.
My Friend,
You cannot "walk away" from student loans as far as I'm aware. They'll garnish part of your wages/income over your entire life if they have to.
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, lets 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?
some for the $500B for defense is necessary and wise, but much of the $700B will come back from sale of assets (certainly not all, but one hopes considerably more than half) plus maybe it will keep the economy from crashing . . . if the crisis is real
joe shmoe | 09.23.08 - 10:24 pm | #
Joe, I believe that the crisis is real.
Yes, the financial wizards are talking it up and AIG is an example of how arrogant they've become. Their institution is collapsing and they still play chicken for all the marbles.
What's at stake ultimately is whether "the full faith and credit of the United States" has meaning. For better or worse, we have a fiat currency and there are billions who've bought into that.
Disappoint them and everything collapses.
After this, we can have a serious discussion about whether the Fed should be abolished or heavily reworked. But the question is, replaced with what?
And do we continue with a fiat currency?
And do we finally learn that we have to control our collective - governmental, corporate and private - spending?
Escariot
A drink is always a good idea. Think I will join you.
But don't sweat this WH flack Fratto's statement. It is just another lie to make it look like they were prepared.
Ironic twist is that if they really were prepared, then that would mean that all the times they said things were fine they were lying to us.
But they weren't prepared. And though they lie all the time, they are also incompetent and live in fantasy worlds, so they probably thought the economy was fine.
Does that make you feel better?
Me neither.
Where's Conjure?
SRC
The Fed needs to be nationalized immediately ...
then maybe we could get some answers as to what exactly the banks have on their books ...
The banksters have screwed the pooch. They have taken their money making monopoly and bankrupted the country with it ...
It is time for a Public Central Bank that prints our money without debt.
CSC does Hank Jr. nice job
now how bout a little Hank III, cunt in country, perhaps?
i agree with On the Clock:
"Nothing coming out of the Bush White House escapes the editing pen of David Addington."
Sec. 8 was straight from Addington.
ey My Friend I got news for you (or your friend).
you can't walk away from a student loan. Not even declaring bankruptcy eliminates a student loa
Dr. Strangelove, only less loved.
I want Imprisonment!
We'll start with Paulson, Bernanke and Greenspan.
YLSP writes:
If someone told me that I'd suffer dire consequences if I didn't give them a lot of money, I'd call the cops.
I can't find a transcript of the testimony yet--did anyone catch the bit early on about how he shared the feelings of those who were pained by the enormous profits made in the creation of these securities? Of course he used the third person instead of the more honest and accurate first:
"I understand the pain you feel when you contemplate the vast fortune I made packaging and selling this crap, but it's nothing compared to the pain you'll feel if you don't fork over the $900B."
I expect very little of my Senators, but I was surprised he wasn't called on this.
Outsider
A Bank Holiday whereby every bank opens their books ....
the bad are sold off the good re-capitalized.
I don't know if this Marcy Kapture has made the blog yet, but I want to vote for her...
YouTube -
Best video I've seen on this mess yet.
For starters no one can tell us exactly what the problem is. It's too, too, SCAREY, and so, because we are not given any relevant information about the causes, it is completely understandable that we are confused and doubtful about the proposed solutions.
It is an impossible situation and the idea, the very notion, that these pinheads in the west wing would have A0 known about the risk that long ago and B) taken the all of the summer interns from Liberty U and put that brain trust on the issues at hand, prayed over it, and received the direct transmission from The Source that this was the Solution and then C) written it all up nicely and put it IN A DRAWER??!?!!!
WTF?
No. I cannot for the life of me BEGIN to logically (logic??!?) explain what the hell is going on.
pass the bourbo
Sp futures up 16, probably on the Buffett-buys-in news
Yeah - there's no walking away from a student loan since there's no collateral which they can sieze. It's not like they can foreclose on your education. Or can they...
Persecuted Comrade Anonymouse writes:
My Friend,
You cannot "walk away" from student loans as far as I'm aware. They'll garnish part of your wages/income over your entire life if they have to.
Just the response I anticipated, although much quicker than I thought.
Precisely. Now apply this to the deadbeats in California, Florida, Nevada.....the list goes on. And, magically, as we have no student loan crisis, we would have no mortgage crises, and, well, how 'bout them apples?
Obama said taxpayers should be treated like investors if they are being asked to underwrite the bailout.
"Now that the American people are being called upon to finance this solution, the American people have the right to certain protections and assurances from Washington," he said.
This sounds like an excellent idea. Mr. Obama how are my social security investments doing?
What are my risk exposures? How much are you siphoning and never returning to me?
All these democrats should have to prove their social programs will return money just like these republicans should for the bailout.
All these spotlight pandering politicians are ridiculous - the situation is too complicated for any of them to truly understand yet they throw in opinions as if they have a grasp on the situation.
Ask them where a SuperSenior NAS 2006 Alt-A with 18% 60d+ and 13% credit support is trading market value and what the fair value is and they will have no idea what you are talking about.
So how can they design a solution when they vaguely understand the problem. The world has become too complicated for men who essentially spend 100% of their time pandering for media attention rather than understanding and solving problems. This is a systemic problem beyond this issue. It's why social security will end up a disaster and it will be too late to fix.
Anyone who even makes this a political issue which many posters here do is sadly mistaken. Because they are all tainted. There's plenty of dems and rep. on wall street that made craploads and stand to make more with this program. There's plenty of crappy homeowners who knew what they were doing by gambling on homes and they come in both elephant and donkey form.
rant over.
Could there be any motivation to choose the inefficient path?
geee | 09.23.08 - 10:52 pm | #
What? Paulson's entire career has been built on profiting from the inefficient path. It's mighty hard to rip the other guy's face off in an efficient market.
Nationalizing the Fed would politicize it. That's why it was made an independent entity when it was founded (I don't buy the theory that this was a gift to nefarious persons, but I could be wrong. And maybe if I bought my land with gold specie, I would have tax-free allodial land tenure, too).
Two things I think about this whole affair:
Anyone who even makes this a political issue which many posters here do is sadly mistaken.
Discussions of power and of public finance are by definition political. They may not be partisan, but anyone who thinks this can be discussed without politics is seriously deluded.
Homedad
I generally agree. Though:
1) paulson needs to be made to stand naked in public - i.e., open the books to the people to show that the crisis is real
2) all currency is fiat currency, even when backed by gold. no choice there (unless it is barter, but then that means no currency) but you are right that full faith and credit is at stake due to foreign T holdings, etc
3) This problem is mainly private sector, not public.
4) We'll probably disagree on public spending, but I don't think public spending is the problem in the US. The problem is unfair and insufficient taxation and, consequently, constant deficits, no saving for rainy days, and an infrastructure that has gone for shit.
A good question to ask tomorrow at hearings:
"If you want and welcome oversight & transparency then who in the administration inserted Section 8?"
That I'd like to know. That and was it always intended as a 'throw away' or a 'poison pill'?
Yeah, but I didn't quite get whether he wants oversight or not.
Bald headed liar. Stupid slimeball.
Mom, I need $100.
WHAT? I just gave you $20. What do you need $100 for?
I want to go to the movies.
$100 to go to the movies? Isn't that a little excessive?
No.
Forget it.
Calls friend: Sorry, can't supply the booze this time. Try your mother now.
SRC writes:
Nationalizing the Fed would politicize it.
~~
And that's worse than what we have now ?
If tax payers are responsible for the Fed's errors it should reap the rewards also ...
Fear mongering and bullshit is all this is. There are 100's of $billions of private capital sitting on the sidelines waiting for the holders of these assets to blink. But too many fortunes of politically connected elites will be wiped out in the process.
Section 8? Isn't that what Klinger wanted to get out of the Army?
Great clip further up the comments.
Is Mary Kaptur gonna have to choke a bitch??
Regarding the $100 movie ticket:
Yes! A question for HP/BB - how long will it take to value $700B in SIVs?
Then offer them a fraction of the $700B and have them go to work doing that, while Congress builds a "better" plan.
I wouldn't give them even a fraction of $700B. Forget it, it's off the table. Come up with an idea that works.
Paulson is essentially kaput now ... Bernanke is hanging by a thread ...
got rope ?
dryfly wrote:
"who in the administration inserted Section 8?""
Addingto
Lawrence talks to his weapon.
So?
So I think Lawrence is a Secton 8.
Wouldn't surprise me.
...
I wanna slip my tube-stick into your sister. What'll you take in trade?
Wadda ya got?
Yalt - granted.
Perhaps a more clearer statement is when one argues one specific party is to blame. They both are. The seeds were planted for this before Bush came around (which his admin deserves blame) and the Bush admin did really nothing. It's really a broken government system.
The crooked mtg brokers, lying homeowners, and wall street execs come from both sides of the fence.
Section 8? Isn't that what Klinger wanted to get out of the Army?
It's also the taxpayer funded low income housing program. Kinda ironic.
Regarding a Political Fed,
Its not clear to me that the present disaster is the Fed's doing. A better explanation may be the orgy of financial de-regulation since the heroic Reagan era. The easy credit of the Greenspan Fed certainly helped to inflate (not one, but) two asset price bubbles, but the bank balance sheet disaster might have been much smaller had the credit default swaps, which made many MBS products look safe enough to risk depositor monies on, been regulated like the insurance products they are.
I'll say it a different way--what could be more political than to make this a technocratic decision that transcends politics--so that giving one man near dictatorial control over pricing in the most critical sector of the economy and giving him access to a budget bigger than the Pentagon's would be OK, as long as it "worked"?
/rant
The blatant attempt at blackmail is a big part of what chaps my @ss with this whole thing - the actions of these financial wizards has baked one hell of a recession/depression into the cake - no way we miss out on that fun due to the excessive credit created then rapidly destroyed as it shrivels in the sunlight like so much fairy gold...due to the actions of the Fed and the securitizing IB's that is a foregone conclusion at this point (love ya Seb but you are smoking the kind from the Comissar). And yet they stand up and say "Oh, if you don't let us plunder the public purse you will cause a recession!" Gah!
/rant
uh, the fed is already supremely political - why the hell else did greenie cut rates to nothing if not to shore up the political fortunes of his party?
and as for gold-backed currency being the same as fiat??? WTF? uh, redeemable gold-backed currency is, er, gold.
this really is like when folks started to realize that the earth wasn't the center of the universe, human biology consisted of more than 4 humors etc, in the 1600s. we've been blinded by voodoo for so long, reality is totally unfamiliar to us.
Joe Schmoe,
You hit it right on the head about the timing of the plan. If they had the bailout plan in the drawer for months, then they were lying that everything was okay freezing Congress out as they did with Patriot Act and Iraq (Shock Doctrine).
If they only just put it together, then it is a half-assed, slapdash effort resulting from the fact that they were caught flat-footed.
Either way, it doesn't help.
hmmmm
produces this. Obama set to debate McCain...and lose
...
Obama does seem like he will lose..agree
Allan Meltzer of Carnegie Mellon was marvelous. And blunt: "every time things go wrong they rush to bail out their friends"; "let them borrow the money and then repay it"; "not one person has said this is going to solve the problem."
SocGen issues China alert as fears mount on banks - Telegraph
SocGen issues China alert as fears mount on banks
Société Générale has advised clients to dump shares of banks exposed to the Far East.
The crooked mtg brokers, lying homeowners, and wall street execs come from both sides of the fence.
raphael
and GREENSPAN ? 18 years of Wall Street money pumping and deregulation ?
joe shmoe writes:
Homedad
I generally agree. Though:
1) paulson needs to be made to stand naked in public - i.e., open the books to the people to show that the crisis is real
What if he does this and he is truly correct? You don't think there would be a mad rush where every person in this county dumps their bank accounts and money markets?
At some level there has to be some discretion or else it just creates the panic.
The Fed is only nominally independent now. In practice, at least for the past 20 years, it's served as an enabler of its contemporary executive branch.
SRC writes:
Regarding a Political Fed,
Its not clear to me that the present disaster is the Fed's doing.
~~~~~~~~~~
Are you kidding ME !
Greenspans fingerprints are all over this mess !
Yeah, as Hank is arranging the life boats for the first class passengers by all means don't breathe a word to the folks in steerage...
raphael
yes, there's responsibility across parties, but . . .
Deregulation has been the Repub mantra since Reagan and the explosives were packed and the fuse lit under Bush's 8 year reign, with a Repub Congress for 6 of those 8 years.
Phil Gramm led repeal of Glass Steagel, which opened the door for expanding Bush's neglect.
Clinton did sign Gramm's bill and Clinton deserves some blame. I think Clinton's blame is not so much that he supported the law but that he pissed away ( or shall we say ejaculated away) his political power and made himself vulnerable to repub demands . . . but i am open to blaming Clinton more directly than that.
Still, this is the product of an economic philosohpy that is nearly synonomous with the Repub party....
Some or many here will disagree with me in different ways. That's cool. I think it is a significant issue, though maybe not the main thing we should focus on here on this thread.
From another blogger ... "If we don't buy into the scam we can raise unholy hell with their plans. THIS IS A FEW WEEKS BEFORE A FEDERAL ELECTION WITH ALL OF THE HOUSE UP FOR ELECTION AND A THIRD OF THE SENATE UP FOR ELECTION. If everyone would just telephone their Congressman's office, and the offices of their state's two US Senators, and say NO BAILOUT, NONE AT ALL AND IF YOUR BOSS VOTES FOR ANY BAILOUT HE/SHE WILL NEVER GET MY VOTE AGAIN"
That is why I never focused on Section 8 over the weekend - this was obviously going to be changed.
Paulson lost the battle but won the war.
Zeus,
Maybe that used to work but I doubt it. Everyone just pulls R or D now... and I know a lot of House seats (read CA) are in gerry-mandered districts... so ... yeah right... when's the last time we voted out like 15-20% of incumbents?
OT and probably redundant, but I'm still fuming over McCain's campaign manager taking $15K a month from Freddie Mac until it got bailed. And he has the temerity to run ads accusing Obama of being in bed with lobbyists!
McCain Aide's Firm Was Paid by Freddie Mac - NY Times
NO BAILOUT, NONE AT ALL AND IF YOUR BOSS VOTES FOR ANY BAILOUT HE/SHE WILL NEVER GET MY VOTE AGAIN"
Zeus | 09.23.08 - 11:13 pm | #
Well, Ok, but I live in a one-party district. My Congresswoman actually has an opponent for a change this year, but the guy (or his staff, if he even has one) can't even spell "Bussiness Man" on the front page of his website.
"Still, this is the product of an economic philosohpy that is nearly synonomous with the Repub party...."
Ironic, ain't it, that the last reality-based comment on it from a viable high-profile candidate came from George HW in the '80 debates?
I know what I'll do: I'll redeem all my shares of Money Market funds and deposit them in a sound bank instead. Except that that won't increase the amount of credit available to the real economy.
The real economy is overleveraged. That's the modern paradigm. Why tie up shareholder cash in company working capital when it could be dividended out to the shareholders to spend or invest as they please, or else reinvested internally in the interest of more rapid growth?
The cash/credit that the real economy needs to function is going to have to come from somewhere, or the real economy will contract.
Ideas, anyone?
99.9 % of this toxic crap is in just 25 or so companies ...
The problem is they are the biggest banking houses ... JP, BAC, Wells, Goldman ...
We nationalize 'em, audit them and if they are insolvent liquidate and sell the pieces ...
Does this remind anyone else of the Contra investigations with Ollie North?
Congress: Were you lying to us in your testimony?
OL Yes
Congress: How do we know you are not lying now?
OL Because I am not
Congress: 4 weeks ago this was all contained. Now you tell us it is aramagdon.
HP/BB Yes
How do we know it will work
HP/BB We know what we are doing.
Scary....
Don't ask me Hank
why do you loot?
(Hank) why do you talk shit?
Why must you pillage and rape all our kids?
If I'm sick of the Senate's shit
Some ol' dick's tryin to give me directions
I'll say gimme my cash
Or the market will crash
it's a banking tradition
Lordy, I have loved blackmail
and I have loved high stakes
and they both helped to guide me
in late two thousand and eight
when old Chris Dodd asked me
Son how did we get in this condition?
I said hey albino I'm just carryin on
an old banking tradition
So don't ask me Hank
why do you loot?
(Hank) why do you talk shit?
Why must you pillage and rape all our kids?
Stop and bend on over
Grab your ankles and assume the position
Cause if I get you and fuck your grandkids too
It's a banking tradition!
FFDIC | 09.23.08 - 11:10 pm | #
hmmm....
methinks another shoe is about to drop
YSLP,
1994? I don't recall the exact % swing from Dem. to Repub. but they took over control handily. I don't give a damn about choosing one of two puppets from the same master, though. Damn - Stalin never dreamed of having such control over the population without force as our rulers do by inciting furious debates within a razon thin political spectrum and take the people's attention away from whole controls the levers of power in society $$$
raphael
yes, that woudl be especially true if there were not a plan on the table.
But there is a plan on the table - the Frank/Dodd bill, which is pretty good if the crisis is real and present (which I think it is).
If the crisis is real and scarier than we think, then I think Frank/Dodd would grow, or include a provision for upping the ante, or maybe go a step farther and employ the swedish model.
If things really are that bad, then Paulson better tell us so we can act. But I doubt the crisis is that bad.
Really whats at the bottom of this current political moment is the total distrust of the Bush Admn, and distrust of Paulson and Bernake. Sorry hank and ben, but you've squandered our trust. So now, if there is a big problem, you need to fucking show it.
No more stories about mushroom clouds and Cheney telling Dick Armey that saddam had suitcase nukes he was going to give to his cousin in Al Qaeda. (see the new book by barton Gellman of the Wash Post)
Joe:
I think that the average person realizes now that the situation is real and that opening books is going to simply take too long. And the opacity of the accounting regs is mindbending. These are folks that can't tell assets from liabilities, as Tanta likes to remind us.
FFDIC:
Thanks for the China link.
At least they get to punish their screw-ups.
Who was it who said "wait 'til after the Olympics?" Dryfly?
Is Hank a ventriloquist, as it on tv his lips are perfectly synched when he is talking out his kister..
What a show!
99.9 % of this toxic crap is in just 25 or so companies ...
We nationalize 'em, audit them and if they are insolvent liquidate and sell the pieces
I second that.
You want a website with a list of transactions? Here ya go
Federal Reserve Bank of New York - Permanent Open Market Operations
$2B of garbage paper bought by the Fed for its permanent portfolio today.
The great monetization is underway. TARP is but a sideshow.
Those Bank of Scotland and SocGen predictions from a few months ago weren't so bad, were they?
Yes, let's post all of the toxic assets on a website as suggested. And let's trace them all to the States of origin and tally that as well.
That will be interesting, but not surprising.
The cash/credit that the real economy needs to function is going to have to come from somewhere, or the real economy will contract.
Ideas, anyone?
SRC | 09.23.08 - 11:16 pm | #
Prosper.com?
Can we bring Iacocca out of retirement? He worked wonders with Chrysler.
Ross Perot? Ron Paul? Is there anyone with a better idea?
bsmarteurr - that blog you linked to is just awful! We should spend more on defense, and Obama should really tell us if he's a Muslim? And the post below that was titled something like "the bailout is good for the economy!" Don't give us that crap.
Homedad
By "opening the books" in this instance I meant simply a public presentation with some evidence that lays out what Paulson and Bernake told Congressional leader backon Thursday (?) last week. That's what I meant by making paulson stand naked. Such a distrurbing thought.
later there will be time to literally open the books - in the accounting sense, not the Sopranos sense.
Greenspan's easy money policy inflated two asset price bubbles --- the first internet/technology bubble and the housing-price bubble.
The collapse of the internet bubble destroyed enormous amounts of shareholder value, but it didn't endanger the banking sector, did it? The banks didn't invest heavily in these risky assets.
The deflation of the housing price bubble has badly damaged the banks because they thought the structured vehicles, insured with credit default swaps, were safer than they actually were and consequently invested imprudently. This looks to me like a regulatory failure. Had CDS been regulated like an insurance product, the fees would have been higher (making MBS nominal returns less attractive) to build a sound reserve against claims. The MBS would still have lost value, but there would be more counterparty reserves to cover the losses and probably fewer bank investments in them due to the lower nominal returns.
Can we bring Iacocca out of retirement? He worked wonders with Chrysler.
Ross Perot? Ron Paul? Is there anyone with a better idea?
Outsider | 09.23.08 - 11:22 pm | #
Auntie Anne is now retired.
She even gave one of the speeches at the Repub Convention.
Great pretzels, though...
J6P needs to throw Bush's mangled words back in his face: "you fooled me once, you fooled me twice....and er....well you aren't going to fool me again...." Bush&Co have simply called "wolf" too often. Credibility, the most valuable asset a President and administration has, is gone. None left.
Joe:
See what you mean now.
Thanks
Hey is that the FedUpUSA folks?
At the New York Federal Reserve bank, 40 people protested with banners reading "Bail out Main Street, not just Wall Street" and "$700 billion for banks, $0 for homeowners."
Yahoo! 404 - Page Not Found
homedad43
There will be enough money because credit will be much tougher to get ...
The problem going forward isn't credit but lack of disposable income for purchases.
Consumer spending will be in the showers for a good long while ...
"There will come a day when institutional asset managers will have seamless access to a global equities marketplace...
...when the factors that comprise best execution can be achieved through a single trading venue...
...when buy-side traders are able to maintain complete control of their orders, executing anonymously, securely and efficiently within the largest liquidity pools in the industry.
That day is now."
Liquidnet
Dark pools of liquidity - Wikipedia, the free encyclopedia
All hail the new transparency!
IHT
Bailout is financial equivalent of the Patriot Act
DealBook: Bailout is financial equivalent of the Patriot Act - The New York Times
Bush assures UN of 'bold steps' for financial crisis
Bush assures UN of 'bold steps' for financial crisis - The New York Times
SRC
Wrong ... Greenspan could have regulated mortgage brokers, but did not, left interest rates too low for too long and actually touted the very loans that are blowing up in our face ...
Dean Baker | Alan Greenspan and His Bubbles
t r u t h o u t | Dean Baker | Alan Greenspan and His Bubbles
This is an interesting report about McCain on the bailout.
Remember that he endorsed Paulson's plan on 60 Minutes, then added reservations about compensation and overisght that match bipartisan concerns voiced today in the hearings, and match Obama's comments.
Stephanopoulos: McCain Holds Key to Administration's Bailout Passage on Capitol Hill - Political Radar
BTW, if China gets into deep trouble then just about all emerging countries get into deep trouble. There will be a lot of new/recycled treasuries/agencies in the market. A so-called dollar flood.
a little thread music courtesy of the late, great Warren Zevon
YouTube
- Warren Zevon on Nightmusic
CSC,
"Currently Smoking Cannabis writes:
Don't ask me Hank
why do you loot?
(Hank) why do you talk shit?
Why must you pillage and rape all our kids?
If I'm sick of the Senate's shit
Some ol' dick's tryin to give me directions
I'll say gimme my cash
Or the market will crash
it's a banking tradition
Lordy, I have loved blackmail
and I have loved high stakes
and they both helped to guide me
in late two thousand and eight
when old Chris Dodd asked me
Son how did we get in this condition?
I said hey albino I'm just carryin on
an old banking tradition
So don't ask me Hank
why do you loot?
(Hank) why do you talk shit?
Why must you pillage and rape all our kids?
Stop and bend on over
Grab your ankles and assume the position
Cause if I get you and fuck your grandkids too
It's a banking tradition!"
A good chunk works.
Nostrovia,
Middle America has noticed.
YouTube -
liquidnet.com
scary website ("are you supernatural?")
Greenspan's fingerprints are all over this crisis - low interest rates, pro ARM, no bubble, no regulation, antifreeze with crack and PCP into the punch bowl.
Bottom line though, it is what Pogo said long ago: We have met the enemy and he is us.
joe schmoe -
Very good points. I'm glad there others who may have different viewpoints but eloquently discuss the issues
This is getting outside the scope of the bailout plan discussion but in general i find government nowadays increasingly fails in their "solutions". whether it's unproven social programs that cost tons of money with no real way to accurate measure effectiveness or poorly designed deregulation programs.
Example the ridiculous money thrown toward education with no real improvements in many districts. Or with deregulation like the power markets back in California. The problem isn't the underlying program objective its that we have politicians who are over their heads when it comes to the issues nowadays. Their ideas and programs suck because nowadays the problems are too complex. The solutions that would work require real problems solvers - like the best minds in American corporations (Andy Grove had a great idea for solving social security but was ignored)
Getting back to the bailout, I'll throw this out there. There is merit to what Paulson and Bernanke are saying (I can say this because I trade this stuff and see the buyers squeezing the crap out of sellers). The government can help avoid a crisis by getting involved. Whether it works depends on the pricing mechanism which Bernanke said is supposed to be between mktval and fairval.
After seeing the bill and all the bullshit they added I can say there is no way to EXECUTE all the extra shit they threw on (as a taxpayer I do like the oversight board). It's like congress issuing a bill that says they we are going to count all the grains of sand in the US. Not going to happen. Why did the HOPE program fail? Because it sucked and was a bad solution. The add-ons tell me these guys have no clue and should be kicked out of office and incompetent boobs. You tack on all this crap and it's impossible to execute. Guess we'll just roll the dice...
Glad all my money is out of the US market and USD.
McCain ... then added reservations about compensation and overisght that match bipartisan concerns voiced today in the hearings, and match Obama's comments.
probably read his constituents mail
Comrade Misean: Any suggestions for revision would be appreciated. Maybe "I-Bank Tradition?"
Paulson is a liar and thinks himself above the law and Constitution. Now he finally back flips on immunity from review and oversight.
Good ideas and lies - Paul Krugman Blog - NYTimes.com
Let's review Paulson's proposal from Thursday:
Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
Not only is this unconstitutional, it's a dictatorship. But today as you can see on youtube, Paulson flips and claims almost a dozen times that his actions should now be overseen by Congress and that we need oversight. He in fact lies when he said he was never asking for immunity from oversight:
"So if any of you felt that I didnt believe that we needed oversight: I believe we need oversight. We need oversight."
Section 8 in his plan clearly says otherwise - not even the Surpreme Court could rule on let alone review his actions. This is Paulson asking to be given greater powers than the President himself - to put Paulson above the law and the Constitution. If Section 8 was an honest mistake by Paulson, he needs to be more careful with his words like Greenspan. Frankly I don't see how we can trust this failed salesman.
At 42 seconds into the video, Paulson says:
"And, so what we're asking for is, is some, some broad powers, with some, with some good strong oversight."
I love his stutter as he tells the United States of America with a straight face to trust him with broad powers backed by some good oversight. I know when I asked my parents for money for my own spending discretions, it wasn't $700 Billion. But at least Paulson has conceded that he needs to actually let us know where and why the money will be thrown at now.
CSC,
Whenever I write a parody I keep some of the rhyming scheeme the same...but it's looking good.
Nostroia,
Tonight Jon Stewart plays a clip of Paulson talking to Fox News just a few months ago about how strong the banks are. And then asks incredulously why we should give a man with a lack of foresight $700 billion with no strings attached.
McCain saw an opportunity and a need to distance himself from Bush. I think that was the key factor in his shift.
CSC,
The only demerit is the rhyming scheme is off. But Ef that it works.
Nice job.
Nostrovia,
Bottom line though, it is what Pogo said long ago: We have met the enemy and he is us.
joe shmoe |
~~~
Not buying it , that's bankster propaganda. The banks have bought everything ... media , colleges , washington dc ...
The average person just trying to make it doesn't have the time, knowledge or money to compete with the people who own the money monopoly.
.
If all we are worried about is credit drying up, why don't we help investors set up banks which can replace IBs?
The king is dead long live the new king
Goldman and Morgan, however, have a more daunting challenge ahead than simply finding cheap deposits to shore up liquidity: Trust.
The events of the past 15 months, specifically the dramatic government intervention into the free markets, has created a systemic shift in the way the public views Wall Street.
Main Street instinctively knows it shouldnt trust the alchemists of lower Manhattan; we should have learned our lesson after the dot-com crash. But Wall Street simply dreamed up a better disguise, hiding their structured mortgage bets behind the government-constructed façade of affordable housing for all.
Now, the very firms largely responsible for the crisis must go to the public, hat in hand, and ask that they turn their checking and savings accounts over to them.
That may be a tough sell.
Goldman, Morgan Want Your Money-Minyanville
Screw these clowns and Buffett.
For conservatives, an interesting commentary by George Will from todays Wash Post:
George F. Will - McCain Loses His Head - washingtonpost.com
Sweet! when you mentioned Zevon I was hoping it was "Lawyers, Guns, and Money" - a classic along with Roland the Headless Thompson Gunner
Comrade Misean: My financial vocabulary is fairly limited. I was afraid of misusing a word and sounding like a Republican.
mmckinl,
I agree that Greenspan screwed up.
My point is that banks don't like to invest in risky assets. They invested in MBS because the reward/risk relation for them was artificially juiced by the illusion of counterparty insurance through CDS. Given that this insurance was being sold and that banks were relying on it for their deployment of depositor monies, it should have been regulated as the insurance product that it was. Had it been so regulated (I believe that it was exempted by an act of Congress), MBS returns would have been lower and counterparty reserves would have been higher. Both of these consequences would have mitigated the impact of the rupture of the housing price bubble on bank balance sheets --- the first by reducing bank incentive to invest in MBS, and the second by preserving MBS value for a longer time in a declining housing market.
There is a major regulatory failure in this disaster, and it's surely one of the things that Congress will fix in the next year.
mmckinl writes:
SRC
Wrong ... Greenspan could have regulated mortgage brokers, but did not, left interest rates too low for too long and actually touted the very loans that are blowing up in our face ...
raph,
where is the $ if not USD? i was just reviewing the options for foreign paper, the aussie yield caught my eye.
The Fed does not regulate the insurance industry.
CSC,
I get accused of sounding like a rebooblipuke all the time...ask Gary...He's convinced I'm one.
But I like it. Have to go over it again with music in my ear. But well done sir.
Nostrovia,
Regulation of the insurance industry is not part of the Fed's mandate.
SRC
meet Dean Baker on Alan Greenspan ...
In fact, the Fed has enormous power to reign in financial bubbles. First, it has regulatory authority. For example, it could have written regulations that prohibited the banks under its control from writing predatory mortgages, as it has actually done this year. The Fed also can raise interest rates, a policy that would hurt growth, but is likely preferable to the dangers of a housing bubble, if not a stock bubble.
Most importantly, the Fed and its chairman can provide information. If Greenspan had carefully documented the evidence there was a housing bubble when he was Fed chairman, rather than dismissing those of us who made this argument, it is likely the bubble never would have grown to such dangerous levels. Clear warnings from the Fed chair might have made potential homebuyers more careful and made investors less anxious to throw away money making bad mortgage loans. "
mmckinl
i agree there's a hierarchy of blame, but there was also popular participation, in both elections and ponzi schemes.
There's nearly always some choice, even among the least powerful. But the most powerful should always get most of the blame.
I always like the way Tanta handles this sort of issue about responsibility - putting it mainly at the top, but not wiping it away entirely for the general populace.
Debunking the full on credit crunch fear tactics (from an interview with Glenn Greenwald.)
Salon News - Salon.com index1.html
We're getting conned folks. Plain and simple. And guess what, we will make compromises, and STILL get conned.
Hank Paulson, Conman Extraordinaire, has you by the balls and you dont even know it.
any claim that the dodd plan is 'good' simply exposes you as a shill. what's good about it? that it will solve the problem? most don't even understand the problem. that it limits exec comp? seriously. that there.s an equity stake? this will by definition cause it to be ineffective. everyone needs to realize that there is no solution. the only thing we can do now is try and control the velocity of the fall.
bgates - currency etfs, aussie dollar FXA, euro FXE,
Regulation of the insurance industry is not part of the Fed's mandate.
SRC
so it was insurance agents that made all these bad loans ?
LOL
Comrade Misean: Thanks, dude. If something better pops in your head, please post.
"To be fair, sometimes people put an offensive clause in a proposed agreement as a negotiating ploy."
This is what passes for stewardship and leadership at the highest levels of government in the United States today (in the 21st century).
mmckinl,
Yes, Greenspan screwed up.
Would tighter monetary policy have prevented the present problem? Perhaps, but I'm not sure. MBS would still exist, and the phony CDS "insurance" would still have made reward/risk look better than it actually was. The large global pool of capital looking for returns might still have found outlet in the US housing market, inflating a bubble even with sounder monetary policy.
I think that this matters, because it suggests that the failure was in principle preventable. Easy money + financial deregulation is a recipe for disaster. Perhaps we will have wiser governance in the future.
arw
I said the Frank/Dodd plan is "pretty good" if the crisis is real.... I've also said swedish nationalization would be better but its not likely here. And that the Paulson plan is dead and BS and a lie and so forth.
If that makes me a shill, so be it.
I always like the way Tanta handles this sort of issue about responsibility - putting it mainly at the top, but not wiping it away entirely for the general populace.
joe shmoe
It is what is called leadership ...
They were supposed to be the adults ...
Remember when if you didn't have 20% down they told you ... N O
Sorry but all of this could have been prevented but instead was used to line the pockets of the already filthy rich.
can we stop using their term of bailout. No siree, this is a cover-up.
We need to get the name of every Congressman who votes for this bail-out and post it so when we go to the polls November 4th we know whom not to vote for.
I think in the end of the day, it is all about how much the government will overpay for those assets, above the market values.
That's why we need some accountability, or even better the percent level that will limit the price to certain percentage rate above the fair market.
So I'm sitting here trying to keep up with everything flying across the screen, thinking that this deal will probably go down as one of the biggest albatrosses in history...
And then suddenly I went all Bloom County for some reason... YouTube - Albatross
I think I'm officially on info overload...
bgates,
Investing in foreign treasuries is difficult; at least, I found it to be, as the minimum purchases are large compared to my investable amounts. I could only get a few countries' treasuries in 100-bond minimums. Four or five countries, and I was already up to half my pool.
Watch out for mandatory withholding in Australia and a few other countries. Queensland does not do the withholding.
Illiquid market, too; large bid/ask spreads unless you are at $millions.
The sum of $700 billion is more than the entire Federal Budget of 1981, and more than all Federal Budget revenue in 1984.
raph, already own some E and TOT (which has been very painful for the past few months) so I feel like I'm covered in terms of euroland.
FXA looks good. any thoughts on india, china or russia exposure? RSX at 25 seems like it was a nice buy, same with FXI at those lows last week.
canada, mexico, japan and the helvetian confederation all have FX_ tickers too.
eric, i think these products are pretty revolutionary:
Quotes for FXA, FXB, FXC, ... - Yahoo! Finance
i really wish something like GSG existed back in 2002.
mmckinl,
My point is that CDS is an insurance product. Banks thought that MBS protected with CDS were safer than they actually were.
The decision not to regulate CDS as an insurance product was not the Fed's to make, not within its authority. I believe that Congress
exempted this kind of product from the regulations that normally apply to insurance products. Issuers of CDS charged too little for protection they were pledging, and couldn't pay --- counterparty risk.
The fact that banks invested in MBS when they shouldn't have is not Greenspan's fault. His sins are many, but this is not one of them.
eric, bgates
There are unhedged (currency) foreign bond funds, OIBAX, PAIIX, and a Trowe price one I can't recall.
"Comrade' DrChaos writes:
I think in the end of the day"
mentioning the above, i still believe there must be a better way.
Also according to people that work for AIG & MER, there were bank runs today, pretty much some of the derivatives the firms exchange had a cash provision clause (if market value falls beyond certain level), so the firms started calling each other with "margin" calls, - fun times!
Looking better on mobilizing v sec 8, but it's not the end of it by any means.
In the meantime, I've changed my Stooges search n destroy meme to the Pixies:Wave of Mutilation.
ttp://www.youtube.com/watch?v=o4ddpFDC63Y
SRC writes:
Regarding a Political Fed,
Its not clear to me that the present disaster is the Fed's doing.
SRC...you need to do your homework
by his own admissions below one can see greenspan and the fed played a key role in this crisi by holding interest rates too low too long..
Then, after the accounting scandals of 2002, the Fed dropped the federal funds rate from then current 1.25% to 1.00%.[33] Greenspan acknowledged that this drop in rates would have the effect of leading to a surge in home sales and refinancing. (wikipedia)
"Besides sustaining the demand for new construction, mortgage markets have also been a powerful stabilizing force over the past two years of economic distress by facilitating the extraction of some of the equity that homeowners have built up over the years."
[http://www.house.gov/jec/hearings/11-13-02.pdf
Hearing before the Joint Economic Committee Congress of the United States], November 13, 2002. Accessed July 15, 2008.
sorry, bank runs were not today but last week; did not mean to cause panic....
bgates - FXA is short term money. If/when things come unglued here, you want to be in foreign denominated long bonds. Can't tell you how to do it, but longer will be better if the SHTF.
So when I own an MBS and one the loans in the MBS is not being paid, say there is a foreclosure, what does that do to the MBS? Does its market value drop? What is 10% of the mortgages in the MBS are not being paid? Assuming that the MBS is reduced in value, then I can see how it would be hard to know exactly what the MBS is worth-with falling house prices, ARM resets etc.
Add in CDSs "insuring" these things, what a mess.
I heard on NPR this am how the bailout plan could maybe require that workouts be done on all the loans that Treasury buys from the financial institutions. Sounds like an immediate employment plan for some involved in the housing business.
Empty houses, how likely a mortgage payment is being made on that.
Second homes, will they start being put up for sale, further flooding the market in unsold homes?
Leaders bear responsibility as leaders.
Adults responsibility as adults.
If adults aren't adults, then how are the leaders supposed to be adults?
The American populace bears some responsibility for this. For the most part we elect our leaders. Like our children, they rise or fall to our level of expectation.
I am sending my reps and senators the Kapture video and asking them why are you not saying this?
Marcy Kapture (Ohio-D) Strikes Again [General] - MarketTicker Forums
Comrade' DrChaos writes:
I think in the end of the day, it is all about how much the government will overpay for those assets, above the market values.
f that ... we haven't even started down that road. If the pols roll there will be hell to pay ...
Paulson is hot for "oversight".
But he never wanted legal review,
which can be a real grind.
And why wouldn't he answer Dole's
question on credit default swaps ?
.
Sorry for the reposting...keep putting it on the wrong thread. Cant keep up anymore! But this is important to read, because it gets at the con being perpetrated by Paulson and his monkey buddy Bernanke.
(from an interview with Glenn Greenwald.)
Salon News - Salon.com index1.html
Only problem is that by the end of the argument, the Professor is unable to see these people as evil and selfserving, and chocks the errors up to incompetence, which I absolutely dont agree with.
dryfly writes:
A good question to ask tomorrow at hearings:
"If you want and welcome oversight & transparency then who in the administration inserted Section 8?"
That I'd like to know. That and was it always intended as a 'throw away' or a 'poison pill'?
dryfly | 09.23.08 - 10:59 pm | #
Yes, that section is baffling. Surely they weren't so arrogant as to think they could get that thru Congress? Which raises the question you put forth. What was the purpose of putting a poison pill in there if there was such a rush to get it approved? Is someone else pulling the strings, other than Bush or Paulsen? The three stooges appeared to be extremely stressed out.
Wasn't greenspan the one who said it was the feds job to take the punch bowl away? Or am I just making up delicious ironies in my head?
bgates, absolutely, those Rydex ETFs are fine, especially if you have less than about a million to invest in that one asset class. I wanted to get around the 0.4% that the ETF managers were charging. In exchange I lost a hell of a lot of liquidity; I am basically constrained to hold the bonds until maturity. I elected for 1yr to 2yr maturities. Their YTMs range from 4% (Germany) to about 9% (Brazil IMF). I also hold FXY, FXC, and one other, escapes me at the moment.
It is also hard to find retail bond salespeople who know what they are doing. Not to knock Schwab - they are further along in retail bond investing than most, I think - but the salespeople are not the best informed people.
LOLFed — Emo Bernanke, LOLTraders and Schadenfreude, Oh My
SRC writes:
mmckinl,
My point is that CDS is an insurance product.
~~~~~
Doesn't matter, it affects the banks which were Greenspan's charge ... He should have regulated CDS and all other derivatives that affected banks ...
joe - That would have been William McChesney Martin.
I think Greenspan said that with enough punch no one ever needs to have a hangover. Welcome to the results.
I am not sure if Krugman (big respect please note) is exactly right on this one. Legalese need to be read with a cold towel on the head. Just because it gives Paulson the right to irreversible decisions, it does not seem to rule out review. In other words, they do some deals and then the oversight reviews progress and may steer the managers for the next set of deals: for after all the 700bn cannot be invested all at once and Paulson is an employee of government and subject to all the usual influences and chain of command.
What you cannot have is oversight affecting deliberations on each transaction and that is why 8 is in there. So they are not being arrogant. It is needed
Another example of why the entire BushCo Group should be incarcerated.
Cheney has dumped another (estimated) $10 to $25 million in a european bond fund which tells us that he is counting on a steadily weakening dollar. so, while working class americans are loosing ground to inflation and rising energy costs, darth cheney will be enhancing his wealth in "old europe". as blackburn sagely notes, "not all bad news' is bad for everybody."
this should put to rest once and for all the foolish notion that the "bush economic plan" is anything more than a scam aimed at looting the public till. the whole deal is intended to shift the nation's wealth from one class to another. it's also clear that bush-cheney couldn't have carried this off without the tacit approval of the thieves at the federal reserve who engineered the low-interest rate boondoggle to put the american people to sleep while they picked their pockets.- counterpunch (2006)
thanks, guys.
The insertion of Section 8 ironically draws attention to the issue. Being silent on the issue would have increased the chances of being free of significant oversight, as they might have failed to add it if it were not explicitly excluded in the very short document.
turtle,
Greenspan inflated the house-price bubble with too-easy monetary policy.
But he didn't induce the banks to risk depositor money on MBS. That inducement was the illusory low-risk that was implied by the the protection of these securities with credit default swaps issued by companies with too little capital to honor the swap contracts. That capital insufficiency is the responsibility of the regulators of these insurance-like instruments. But that regulation (which did not take place, due to Congressional exemption -- the deregulation mania) was not the Fed's responsibility.
Had these instruments been properly regulated, they would still have been issued, and someone would still have lost a ton of money. But it would have been the properly capitalized counterparties rather than the banks. And we would not have the credit freeze we now have.
The decisive cause of the fact that we have a bank disaster rather than, say, a reinsurer disaster, all other aspects of the history being the same, is not Greenspan's doing, I think, but Congress'.
Multiple things had to go wrong to produce the disaster that we have. Greenspan is a contributor, but he is not alone.
well, I suppose "you give me a bushel of money and don't tell me what to do with it" is a negotiating ploy, but in my experience negotiating ploys don't tend to insult the other parties... especially when the other party is Congress...
rnat☮ | 09.23.08 - 10:06 pm | #
Well said.
The cardinal rule of negotiation is you do not tread on the other's non-negotiable positions.
This crew believes the entire purpose of negotiation is to shit on the others' non-negotiable positions. Like having a Constitution left when it is all done.
Cheers.
What you cannot have is oversight affecting deliberations on each transaction and that is why 8 is in there. So they are not being arrogant. It is needed
Graham |
~~~~~~~~
With no judicial review even if their is fraud ?
Sell it someplace else ...
From Faber:
Fed Acted Like a Liquidity Drug Dealer: Economist - CNBC
"The next emergency measure will be that Americans are not allowed to buy foreign currency and transfer money overseas, and the next measure will be not permitting Americans to buy gold and so on and so forth . It creates even more uncertainty in the market place when you continually change the rules," Faber said.
I'm thinking of faxing this to my Senator tomorrow.
I am a Proud Supporter of Senator Boxer. I admire her for standing up as the lone voice of dissent during what I consider to be, the 2004 stolen election.
I live in the "wasteland" that is South Orange County. I'm a CPA & Certified Financial Planner. I deal with financial information every day, and I saw this disaster coming years ago. I pay attention to people I consider to be knowlegable, like Nouriel Roubini & Peter Schiff.
I am firmly of the belief that the economy is going to fail. Regardless of which course of action is taken. I see it as unavoidable. My opinion is that the long term consequences of any considerable bailout plan, will be far more disasterous for the U.S. economy. The reserve status of the Dollar is on the line. The impact of any major bailout, will in all certainty, crash the value of the dollar.
I would be willing to bet a considerable amount of my net worth, that this is only the early innings, and much worse is yet to come, especially if any significant amount of this proposal is adopted. I fear that any compromise, will prove to be fateful for the Democrats, and even though they pose very little responsibility for this, they will nonetheless be blamed if this joke of a plan gets adopted, without major changes, and elimination of certain terrifying items, such as Section 8.
Unfortunately I do not see a solution, which will save this country from perhaps the most difficult economic period in it's history. Certainly it will prove to be worse than anything in at least the last 70 years. You are trusting the people Directly responsible for this mess, to fix it. You are also rewarding the people who have profited the most along the way, with a parting bonus, before they ride off into the sunset. Meanwhile, the future of this country could be damaged for 2 or 3 generations.
I see no way to avoid collapse. This plan, and many of the proposals contained within it, will merely delay the inevitible. It will in no way eliminate it, nor will the requests for funding end at $700 Billion. Were I to put a guess, I would say at least 5 times that amount, perhaps more.
I know that Senator Boxer will do the right thing. I can not say this about many Senators, even on my side of the aisle, but I believe she is one of the few who have the best interests of this country at heart. I will support her, even if she has to stand opposed, with the few as voices of reason, were significant alterations to this "plan" not to be made.
I called my representatives; two senators and a house member. Spoke with two staffers and left a voice message with the other. The staff of the house member was busy writing everything down I had to say. At the end, I said one more thing:Paulson and Bernanke should resign immediately. He said that he completely understands and will pass that on to the rep. Hope it's true!
You probably have a little window to catch some high yield on the aussie.
Advantages:
At 80 something cents, down considerably from 99 cents just a short while ago.
Just a few bank, well capitalized.
High term deposit rates.
Disadvantage:
Housing recession has arrived no doubt, so interest rates are coming down and might drop faster than people expect..
If asian emerging markets tank, aussie dollar will tank too, as economy is resources based. But floor is probably 70 cents barring natural disasters.
bgates writes:
FXA looks good. any thoughts on india, china or russia exposure? RSX at 25 seems like it was a nice buy, same with FXI at those lows last week.
Nothing really concrete when it comes to those countries, just my own speculation (I'm actually most knowledgeable in the crap blowing up, rather than currencies).
I'd think you'd want diversification exposure to countries with different drivers to their economy - eg. natural resource/commodity driven, tech/industrial growth, etc.
eric, don't know if you missed the post but OIBAX, PAIIX are ways to directly access for. govt bonds keeping the currency exposure intact.
There are Everbank currency CDs but they are a questionable because they skim alot off the interest/dividend you should be collecting.
FR and TR want the plan to pass quickly because from where they stand they may not see Russia but they can see trouble, they can see a democratic president from where they are.
The American populace bears some responsibility for this. For the most part we elect our leaders. Like our children, they rise or fall to our level of expectation.
joe shmoe
The US Government is not much of a reflection of any kind of organic, natural public opinion. Since the late 20s, the USG has spent a ton of money shaping public opinion so that we can be steered into demanding, or at worst accepting, the direction they choose to take us.
Edward Bernays wrote a pretty influential book about this called "Propaganda." Bernays was the nephew of Freud and used his research to develop techniques to manipulate the public mind.
Walter Lippmann, one of fathers of modern journalism, also believed this. Lippmann referred to the public as a "bewildered herd" and said that our function was to trample periodically in support of our leaders.
Journalism doesn't report the news, it shapes the mind. Ditto for TV. They are not the products of our 'demand,' rather our demands are the products of their labor.
Someone interviewee on CNN (I think from the WSJ) just said that several members of congress were also being investigated by the FBI for their roles in this....
How Sweden Handled a Financial Crisis Without Burdening Taxpayers - NY Times
CR
care to comment on this approach by swedes? It hass worked unlike the japanese way we are trying right now, well paulson trying
CSS,
That is the core of the matter, it won't solve the problem (before considering the issue of equity - in the sense of fairness).
I can't get over this blaming Clinton for a bill created and passed by Republicans. Fox News can blame the fact that Democrats have been in control of congress for the last two years (even though they never had enough votes to override a veto) for everything that has gone wrong.
IOKIYAR, I guess.
suecris writes:
I can't get over this blaming Clinton for a bill created and passed by Republicans. Fox News can blame the fact that Democrats have been in control of congress for the last two years (even though they never had enough votes to override a veto) for everything that has gone wrong.
IOKIYAR, I guess.
suecris
Faux news could say the Democrats have been in control of Congress for the last 12 years, and the Morons that watch, would believe it.
Anyone wanna comment when SKF is going to trade normally? Will there be a massive correction when the short-sale ban expires?
Full disclosure: I own 2 or 3 shares. Yes, I know it is probably pointless but I wanted to see what all the fuss was about.
Democrats and republicans contributed to this mess - mostly by passive inattention. This crisis has been brewing for more than a decade.
YLSP writes:
Anyone wanna comment when SKF is going to trade normally? Will there be a massive correction when the short-sale ban expires?
Who knows. They're making everything up as they go along, so it's an unknown I think.
But the real cause of our current troubles are greed and excessive leverage. And there is little that our politicians could have done about that.
I just got a very weird call from a friend of mine in New York - an exec with huge connections to everyone.
He said get in cash.. it starts tomorrow.
I'm kinda freaked out.
To Comrade Scared Shitless
Say, how long have you been in the planning business? I got my CFA in 2000 and have worked for a small but profitable planning firm for 6 years. I read the same stuff you mentioned, and I too saw this building in 2005; we even have the June 2005 Time Magazine cover matted and framed, the one about 'are you in love with your house, or something like that. Perfect contrary indicator. But we stayed out of all US banks and bonds from the wall street banks. Our clients are happy so far...now thet we're looking at relative performance.
desi dude
We need a Swedish solution to this mess ... only by purging the system of this toxic paper will we emerge ...
Stopping a Financial Crisis, the Swedish Way
How Sweden Handled a Financial Crisis Without Burdening Taxpayers - NY Times
Good luck .... the heads of BAC, JP, Goldman and their boards would be toast ... and they have some high profile board members ...
.
Bgates,
before you go into any aussie bonds, check out the link upthread from FFDIC...re Chinese banks and real estate...you may want to think again.
FFDIC...great link, thank you.
He said get in cash.. it starts tomorrow.
I'm kinda freaked out.
Lover of Ham
How connected? Dammit there are stoners out here waiting for armageddon, please say if you are bullpooping.
"Advantages:
At 80 something cents, down considerably from 99 cents just a short while ago."
But the market value is not 80 something anymore!!!
The market demand for some of those securities is at 70+% discount. Also AIG was burned so badly because it was under the regulators close watch and couldn't keep those on the books at hold maturity valuations. Many other firms still keep those as level 3, ... which might spell trouble to the taxpayers, if the premium will be high enough, 750 might not be enough of the cash to cover every firm that tries to unload those. How will they figure out the preferential treatment for some and not the others?
Do you really think members of Congress are gonna stick around Washington for another 2-3 weeks of the Hank & Ben clown act?
These are people with schedules, commitments, campaigns, money and livelihoods on the line. Whether they are in tight races or unopposed, this is prime time for getting out in the district, getting visibility in the local press, and hearing what constituents are thinking and saying. It comes around just once every 2 years for Reps and once every 6 for Senators.
So, I guess I answered my own question.
Most will go home this weekend, listen to what people back home are thinking and saying about the bailout, and tell Hank and Ben to take a hike. They are better off going home because that way they can hear it straight from the people who elect them.
You think that's what they'll tell Hank and Ben, in a nice sorta way?
We are a bunch of damn fools if we do not hold out entire political establishment accountable for what is starting to unfold. Vote against every incumbent Congress Person. Lets start over!
Raphael, thanks, I will look into those securities. Still have a modest amount of money market funds (15%) and wondering whether and where to move it.
Since I've got you on the line, what do you think, will Morgan Stanley default on its debt? I bought a little bit of Jan '09 bonds, and the yields have continued to go up
Now at absurd levels, like 33%.
Zephyr writes:
Democrats and republicans contributed to this mess - mostly by passive inattention. This crisis has been brewing for more than a decade.
Zephyr
All of you who want to blame the Democrats, can you please tell me who has been in the White House for the last 8 years? Can you tell me who had Full Control Of Both Houses Of Congress For 6 Full Years, and a Tie for control the last 1.5?
Now, please explain to me how the Democrats had ANY say in the agenda, or how this country has been run since 1/20/08, when MORON and his Evil Sidekick took over?
I realize you'll come back with how there are bad Democrats, so fine....THERE ARE SOME BAD DEMOCRATS. But it was the republicans who have been in control of things. And they're all a bunch of HYPOCRITES, as usual, trying to transfer 50% of the blame, to a party who had maybe 10% of the control or responsibility for the collapse of this country's economy and world standing.
So shut your fucking mouths already. This country would not be in this condition had Al Gore rightfully been elected. He would not have let this happen under his watch, unlike this Evil SOB who has stolen and destroyed everything in his miserable excuse for a life.
The 9/11 terrorists had a significant part in triggering this in that their raid prompted Greenspan to excessively loosen credit out of a fear of market collapse from the terrorist attacks. The much too low interest rates made speculation and carry trade arbitrage highly profitable. Add a bunch of leverage to the play and fortunes would be made...
...until the music stopped.
I think the White Hoouse claim that they've had the Paulson Plan in the drawer for 6 months is total BS.
2 pps/mo.... sounds about right!
The problem isn't the underlying program objective its that we have politicians who are over their heads when it comes to the issues nowadays. Their ideas and programs suck because nowadays the problems are too complex.
The "stupid politician" plays the same role as the guy who bumps into you in the subway while his partner picks your pocket. "Clumsy idiot," you say, and don't even realize your wallet is gone until you get home.
Hank I want heads on a plater. Yours would do nicely.
What is this FRB graph telling us?
It's flat for years then suddenly dives straight down recently.
http://research.stlouisfed.org/fred2/fredgraphfile/?height=480&width=800&bgcolor=%23B3CDE7&txtcolor=%23000000&recession_bars=On&s[1][id]=NFORBRES&s[1][transformation]=lin&s[1][scale]=Left&s[1][line_color]=%230000FF&s[1][range]=Max&s[1][cosd]=1959-01-01&s[1][coed]=2008-08-01&s[1][revision_date]=&s[1][vintage_date]=2008-09-23
TC writes:
I think the White Hoouse claim that they've had the Paulson Plan in the drawer for 6 months is total BS.
2 pps/mo.... sounds about right!
TC | 09.24.08 - 12:24 am | #
What is the purpose in this? Just to spring it on Congress before recess to see if it will fly?