The bankers will get their share first, as usual. the average taxpayer will get nothing as usual. Life goes on, the rich get richer, the middle class gets wiped out and the poor remain there.
I don't think the Dems will cave. They will demand a plan along the lines Krugman proposes, which is just what Frank, Pelosi, and Obama have been saying. They have the votes to push it through and they have the political cards to call Paulson/Bush's bluff. If it is a real crisis, then the system needs the money, then you must accept the conditions.
where are the dollars to come from? Foreigners earn about 700b from our trade deficit, perfect to fund the existing 700b US deficit. But, where would another 1000b come from?
CR wrote: A better plan would be transparent (all deals would be publicized).... And he mentioned a website with the price and description / info on each asset that trades.
I for one think that is not only a good idea but a f'in must.
Somehow I dont see it happening....
And now I have baby Jas sitting on my shoulder talking about bourne and bread....
Anyone every use LiveMocha.com I might start working on my french or something. This place is falling apart at the wheels....
Back in 1998, after Asia experienced a systemic banking crisis, the United States led a series of international working groups to develop best practices for handling future crises. One of the working group the second working group developed principles for managing a systemic banking crisis. The groups recommendations included:
Bank owners (holders of bank equity) should not be bailed out. They should lose their investments when banks are given public support, or their investment should be diluted through sales of equity (or some convertible instrument) to a government agency, which is then in a position to benefit and recover cots if the institutions conditions improves.
See p. 43-44 of the pdf of the Report on Strengthening Financial Systems.
The extension of guarantees should be strictly limited, possibly by class of institution, instrument and agent;
Guarantees should always be given in ways to reduce moral hazard risk. i.e. providing an upside risk to the guarantor.
CR, why do you stand by questionable analysis from Krugman?
For MSB with 5% starting equity 20% default at 50% severity is needed to bring just 5% loss of the principal.
Most of AAA paper is marked to .75 already and lower quality is as low as at $.20. These are low prices as is, and assuming Feds get another 20% discount, they will make a fortune just holding the paper.
Care to run us some numbers that prove it ain't so?
back on topic, sometimes this guys are just stupid:
"And by the way, that rescue (FRE/FNM) has done what it was supposed to. Mortgage interest rates have come down sharply since the federal takeover"
uh, yeah, the flight to safety to treasuries as the financials crashed had nothing to do with it - it was just one big vote of confidence in the safety of debt instruments across the board.
i had posted an imaginary conversation about how these assets would never get marked to market a few times and no takers.
there is no way the L3 will get marked to market and the Treasury will go along with the mark to model.
this is blackmail by the (former) ibanks, banks, and shadow finance pure and simple. the "market, economy, and main street" are being held hostage and Czar Paulson has given in to the demands and he is asking the US taxpayer to come up with the cash or the kids get shot one by one in the head starting with the little ones first.
you know like secretaries at LEH so the tough guys can get their payoff (what is 2.5 Billion between friends anyway...right J6P?).
A better idea would be to let the banks that have failed us fail. If and when that results in real companies (i.e., not banks) laying off real people (i.e., not bankers), then maybe spend the $1 trillion on those people.
Deliberately misallocating $1 trillion in capital is not the answer. "Unintended consequences"? Boy howdy!
Could GS & MS becoming banks have something to do with the feds removing the limits (was 10% i believe) on the amount of capital that can be used by the brokerage when BAC "bought" MER?
Deleveraging is no paradox. It is simply the tape being played backward.
Bogus assets build on top of bogus assets to make a wall; the bricks are solid on the way up, but start getting mushy as time goes by.
If you are smart you unbuild the wall brick by brick, just like you built it. You just hope that you do not have a whole bunch of mushy bricks toward the bottom of your wall.
2kt, you're setting up the same strawman that Krugman effectively knocked down. Very simply, IF the government were to pay current market prices for this stuff it wouldn't help the banks. The only way it works is if the government pays more than current market value. And that's what Paulson wants to do.
I'm not selling my kids into servitude to pay for some stupid banker's yacht and pool service.
2kt, there is no transparency, so how can you be sure of your numbers? Also there is wide disparity between credit quality even in the same asset class. AMBAC earlier this year talked about one MBS they insured with 81% default rate and 100% severity. How does that fit into your analysis?
The answer is we don't know how bad this will be - and we need to make it transparent and the taxpayers should share in the ownership if they are required to recapitalize the banks. This plan doesn't do either - plus a little oversight would be nice.
nades writes:
I'm rapidly becoming a fan of the progressive tax structure...
I'd love to see a flat tax. Severly restricting deductions. But that won't happen.
All bailed out banks should have diluted equity. Maybe not zero (let's not send the DJIA back below 1,000)... But severely hit.
I predicted real estate emotions would hit panic in the Fall. This could be a tough month to call! (Are we there yet?)
It would be nice if the Dems in Congress actually showed some backbone and said no. But it's more likely that Wall str execs will voluntarily return their bonuses of the last few years.
3 years of 10%+ defaults with 50% loss severity on original AAA paper bought at $.60 on $1 face value would leave the Feds with about $.30 profit, not counting all the interest.
Obviously one needs to adjust for their cost of capital, but I don't know ink and paper prices, sorry.
Paulson asked for a "Clean Bill" and got Dem OK BUT now he is dirtying up the bill all by his loansome.
And in doing so squeezing McCain in his shorts.
If I really could believe that it would trash McCain/Palin I might just back spending 700 bil on bail out.
The MBS indexes have a big problem in that they rate the lowest-rated AAA tranche. So yes, they do overestimate losses. But, the markdowns aren't ANYTHING like 30%. Very little is marked-to-market so far. Mortgage assets are about 10 trillion, total markdowns to date around 500 billion, so we've only seen about 5% markdown so far. Lots more to come...
Going forward, we as a society really need to draw a line.
If an institution is "too big to fail" then we need to nationalize it, pronto.
This habit of praising capitalism while institutions are profitable, and then bailing out/socializing them when they fail is an ABOMINATION. If the institution is to be bailed out, it should have been nationalized to begin with so that the profits could be put against future failures. In addition the OUTRAGEOUS bonuses handed out by Wall St firms would be curbed.
Me, I'm in the camp that we should bail out nothing. But if we're going to be in the bailout business, then let's socialize anything that is deemed "too big to fail".
Manipulations on this scale should not work much lest attempted.
Taxpayer and savers have nowhere to hide their ever dwindling wealth it seems, unless you want to take a risk in the equity markets.
You can probably find more than that made by New Century, Franklin and other "good fellas". They are not majority of the market.
To give you a bone, you can have 50% default and 80% loss severity. Fair enough? Just don't say NO, I will get pissed. How much does that hit the principal? Still $.05 in profit to the Feds is they pay $.60 on $1.
Gross is loading up on this paper and he is not known in the bond business for being a sucker.
Hank Paulson wants to take toxic debt out of the system, repackage it and then put it back in.
There are huge problems with his plan, however, that have to do with conflicts of interests, assessing imperfect information, and so on and so forth. Such problems are best dealt with in markets. In fact, to deal with such problems is why we put up with markets in the first place. They are necessary --- however flawed --- because they are the ONLY way to gather and evaluate vast amount of dispersed data, then use it to achieve complex levels of coordination.
Markets were beginning to do their job of getting toxic stuff accurately assessed. As the process got underway Paulson didnt like what he was seeing, and came up with a plan: suspend markets, then do the job that markets do.
What has to be understood about Paulsons plan is that it is no plan at all. AT THE LEVEL HE INTENDS IT, it is incoherent. He wants to achieve what markets achieve but by a process that is not market driven.
Actually, let me modify this
statement just a bit. Paulson has not suspended markets in relation to toxic debt. He lacks the power to do this. Markets are going to exist in relation to the debt. The problem is that these markets -- after Paulson gets through with them -- are not going to function in disaggregated form (where anybody can play via decisions to purchase or sell assets based on their own assessment). Rather, the newly structured markets will be restricted to players who are part of the Washington/Wall Street Nexus. That is, the new markets are going to be political.
This means: if you like what the current crop of political players is doing for you now, wait until another trillion dollars gets thrown down onto the table. Youre going to love it then.
The rest of us might not find matters to be so cool, however. Ever more goodies on the table means ever greater rewards to players who make it inside the Nexus, and find ways to skim off cream. Given the nature of the political world -- highly asymmetric information, barriers to entry, control of the organs of propaganda, control of the means of violence players in the Nexus operate in a world of low transparency (to put it mildly). This gives them latitude of action, an inevitable consequence of which is that those among them with least integrity enjoy greatest advantage. Their lack of scruples gives them an advantage over players whose range of action is impeded by moral considerations.
I personally think the political world at the moment is too strong to be beaten or even resisted by means of political activity taking place within the framework of the Constitution of 1789. The restraints of that document have long since been subverted. An appeal to arms will not work either, at least for the time being. This leaves one alternative. As in late Roman times, it is going to be necessary to create alternative moral structures. Or to say the same thing with different words: the only road ahead is internal secession.
My counsel is to stop thinking about the Washington/Wall Street Nexus, or about general solutions, and start setting up your own networks. Of course, Im a Southerner with a soft spot in my heart for certain tendencies.
that's exactly the strategy they have.
Make it so fast it makes your head spin.
krugman is totally right...it's all about paying huge premiums that make the banks whole again at our expense. Now you know the dems should not support it however they know if they do then they can kiss off the election.
Is this not a wonderful situation for all of us?
We lose with each and every potential outcome that has been laid out here.
And all of it designed to happen so quickly that any opposition will be seen as anti-american.
Fuck You Hank Paulson...I hope someone puts a fucking bullet in your skull....
While I'm not a fan of Krugman - he's right in this case - must be transparency, accountability, ownership, etc.
Paulson's comment that this would prevent banks from participating is a red herring - they have to disclose how, what, why, who, how much, etc. regardless of whether they agree to participate or not.
If they don't want to play - then there is not crisis.,
It may take a huge spreadsheet, per CR, but we can do that - further, saw that the banks want to suspend mark-to-market accounting - what? Regulators can choose to offer forbearance in computing capital if they choose, but for anyone's confidence to be increased, we have to know the truth!
Finally, we need to protect ourselves from being at the mercy of giant companies that are "too big to fail," that is, companies who are so large that their failure would cause systemic harm to the economy. We need to assess which companies fall into this category and insist they are broken up. Otherwise, the American taxpayer will continue to be on the financial hook for the risky behavior, the mismanagement, and even the illegal conduct of these companies' executives.
Anybody notice the revised SEC order on short sales? First part seems to be supportive of ETFs, but the second part seems to specifically crack down on SKF's counterparties. Waiting for official proshares position...
http://sec.gov/rules/other/2008/34-58611.pdf
In addition, we are clarifying that the exception applies to all market makers, including over-the-counter market makers, and that it applies to bona fide market making and hedging activity related directly to bona fide market making in exchange traded funds and exchange traded notes of which Covered Securities are a component. The purpose of this accommodation is to permit market makers to continue to provide liquidity to the markets.
To help ensure that this hedging exception does not result in increased short exposure in Covered Securities, we are limiting the exception so that if a customer or counterparty position in a derivative security based on a Covered Security is established after 12:01 a.m. E.D.T on September 22, 2008, a market maker may not effect a short sale in the Covered Security if the market maker knows that the customer's or counterparty's transaction will result in the customer or counterparty establishing or increasing an economic net short position (i.e., through actual positions, derivatives, or otherwise) in the issued share capital of a firm covered by this Order.
actually, it's in the same range it has been in since wednesday afternoon. right in the middle of it.
futures are so sedate as to be downright boring - split between nat gas and crude, bonds perfectly flat, spx exactly where it sat before the mini-rally at the close... yawn
To give you a bone, you can have 50% default and 80% loss severity. Fair enough? Just don't say NO, I will get pissed. How much does that hit the principal? Still $.05 in profit to the Feds is they pay $.60 on $1.
Then YOU buy it if its such a good deal - go to Greenwich press some flesh & hug some old widows and buy some of that fat under-priced action... make the big money.
Seriously - banks are pretty desperate to unload - run the numbers past some hedgies... you can get 2 and 20 of that shit til the cows come home if you can prove those numbers to them. make the case to them, not us.
Fuck You Hank Paulson...I hope someone puts a fucking bullet in your skull....
Steady on, MS.
I agree, this all the feel of a good three card monte game. I can't imagine what Madison would be screaming right now. Leaving aside Jefferson and Jackson.
"The underground economy becomes wider and deeper everyday, in J6P's eyes and wallet.
This is an unintended consequence going forward that Paulson and cronies have not even seen on the horizon, yet. IMHO"
think this through a little . Dont you think micro economies have been accounted for by Paulson and his cronies?
Regardless..
this is definitely an area for enterprising investors to fill.
I'm all for that however that is not going to do a thing. I'm actually quite surprised (and will be shocked) that someone has not done something violent.
They either have great security or we are truly a pacifist nation.
I see more of the later...unfortunately for us being constructive is going to allow this whole rip-off to occur while we are busy discussing it.
I watched Paulson on ABC this morning. He didn't really explain what the crisis was. I don't know why everyone is so scared. Let the financial system seize up for a few days, maybe a few months. So what. We'll have a sharp recession, people will start saving again, home prices will drop to affordable levels and we will have a much healthier economy in a few years.
Even a depression doesn't scare me. So we won't be able to afford chinese junk, hummers, mcmansions, sushi, and manicures.
Good. Americans will have to walk to places, grow vegetables, read a book for entertainment, swap tales, hunt, fish, chop wood, schuck (sp?) corn and pick apples, tomatoes, and arugulla.
How can I opt out of this bailout? I rent a cheap place, parked my savings in CDs and MMs two years ago, and drive a 15-yr old vehicle. I refused to jump into the housing nonsense that started here in San Diego.
Americans will have to walk to places, grow vegetables, read a book for entertainment, swap tales, hunt, fish, chop wood, shuck corn and pick apples, tomatoes, and arugulla.
I asked this question in a previous thread and I understand that CR is perhaps a little busy.... but I'm hoping to get an answer in this one from anyone!
CR,
When you say the plan will achieve the primary objective, I think this will need to be clarified more.
Perhaps the banks will start to lend again, BUT, to whom will they lend and more importnantly, to whom will they NOT lend?
I cannot see the banks be willing to take but the smallest risks in their lending. Hence, they will lend to only those large well capitalized firms - financial and non-financial and the rest will have to go without.
Won't this mean that the small and medium sized businesses will be severly hampered in their cashflow financing needs?
What about the retail level? Will we see mortgages being offered again? To who? More credit cards? Personal and Auto loans? I seriously doubt that. I think we will get a two-tier credit system - liquidity and credit for the very safest and a drought for the rest.
I would really appreciate your thoughts on this as I feel it will be the measure by which the economy is affected (the two-tiered lending that is, not just your opinion...!!)
Is anybody supposed to keep track of what percentage of the bail-out ever gets loaned out?
I'm betting that a whole lotta the bail-out money never will be loaned out. It will be skimmed off as salaries, bonuses, administrative and other "expenses," dividends, etc., etc.
C'mon! Streeters see the writing on the Wall. They're going to use every available means to line their own pockets before the Wall comes crashing down.
Our plan is so good, so perfect for protecting taxpayer interest that the judiciary should be bypassed. Indeed, it should be written out of any oversight, and barred from any means of judging worthiness. Yes, on our own, we will ensure that the taxpayers interest is protect. Of course, they have not even the rights of a public company. No right to sack directorship, no right to vote, no right to bring pressure to bear for management steering. Instead believe we will do what is best for you. History has shown you the validity of the assertion.
A few years ago, I couldn't get anyone to read Jefferson at all, let alone listen to me quoting him.
He talked a lot about his fears that the 'monied incorporations' would become permanent, and would make real democracy impossible.
Along with the 1888 court decision to turn corporations into 'legal persons', we have gone beyond Jefferson's worst nightmares.
Remember this, when your children ask how we got here.
missing in hanky-poo's talk at 'merica is that him and his greedy ass friends are leveraged to beyond the sun withe securities tied to nothing but "up"...
That's why you won't hear a friggin' thing about the reality of why they stopped a market that was just at the cusp of staring to perform as it should.
Now it will be much worse and we get to pay for it.
Calculated Risk writes:
"The answer is we don't know how bad this will be - and we need to make it transparent and the taxpayers should share in the ownership if they are required to recapitalize the banks."
Okay say it is transparent but still marked to model. Then what. I would love to have my assets marked to model and have you buy them with the assumption that the model is correct and you will gain in the end.
But correct me if I am wrong here. Is this not just a form of gambling and basically the problem with when capitalism is based on asset inflation speculation rather than actual production?
So we no have exactly the wrong equation still in place and excess debt which is worth less by the day and worthless once we lost trust in the value of the assets that back them up.
So how on it is possible to prop up the value or even return it to its peak given the trajectory of deflation we are on and it remains unclear whose trust this bailout is supposed to repair.
You earn trust not buy it. Once the trust is lost it takes years to get it back or a whole lot of forgiveness.
Being forced to forgive free-market capitalists of their debt on the backs of taxpayers but to not do so will kill everyone (or so we are told but not yet fully argued) sounds like blackmail.
Being asked to trust the Bush Administration and a former GS exec boggles the mind. You know the same lackadaisical bunch from Iraq to Katrina to sub-Prime even though concerns have been raised over and over and over. And we are supposed to trust...them?
Anyway, the 2.5 Billion bonuses for LEH is criminal if I were the DEMS I would be having a field day with that and anything else, even minor, before any sign off on any bail out.
Earn some trust Czar Paulson! Forgiveness begins at home, on Main Street.
Seriously, did you just read Walden Pond, while on acid?
The issue isn't whether or not we're going to have a severe recession. It isn't whether or not we get to buy toys, or know our neighbors. The issue is, who is going to own our future.
Or if you like, whether or not we get to grow vegetables at all, on our collective work camps.
Yossarian, that was unneccesarily harsh. Some of us have to figure out a way to think of the situation that lets us sleep. We kinda sorta know that it's a fairy tale, but you've got to sleep. And then we wake up and read and learn some more.
"Or if you like, whether or not we get to grow vegetables at all, on our collective work camps."
well, seeing how russia is a model of fiscal stability and seems to have no problem digesting the gyrations of a relatively free equities market, and how china owns a good chunk of the world, perhaps a collectivist phase isn't a bad thing for creating a nation which knows the value of a buck.
Short the dollar
Short US treasuries
Long commodities
Sell US stocks and bonds
Cut up credit card
Join underground economy
Start underground bank
Screw these bastards
Well - capital can be used asymmetrically. Via - broad lending in micro amounts across geographic regions.
This can be done with minimal effort. IMO- There is the possibility of decent returns as long as there are tight controls with collateral and decent incentives for the borrowers.
And it only takes small investments. The proof of this has been demonstrated to some degree in Iraq and India via micro loans.
I have conceived a method that is unique in this realm and it is something I will implement soon. When the time is right.
Even as policy makers worked on details of a $700 billion bailout of the financial industry, Wall Street began looking for ways to profit from it.
Financial firms were lobbying to have all manner of troubled investments covered, not just those related to mortgages.
At the same time, investment firms were jockeying to oversee all the assets that Treasury plans to take off the books of financial institutions, a role that could earn them hundreds of millions of dollars a year in fees.
Nobody wants to be left out of Treasurys proposal to buy up bad assets of financial institutions.
The definition of Financial Institution should be as broad as possible, the Financial Services Roundtable, which represents big financial services companies, wrote in an e-mail message to members on Sunday.
The group said a wide variety of institutions as varied as mortgage lenders and insurance companies should be able to take advantage of the bailout, and that these companies should be able to sell off any investments linked to mortgages.
W's plan sounds something like loan-sharking or paycheck cashing. Probably a growth area, plus the book-keeping is probably better than it was in Countrywide.
This price discovery in the effecient market of the USA is killing everyone. How to establish price when a few words from gov't agents who were previously active traders moves the market 1000 points in a week. Real markets? No. No advocate for the common man. But for big business? Yes, Treasury or Federal Reserve will issue fiat proclamations which alter landscape profoundly. Every investor should leave the public market, FOREVER. Transparency is only in the large players revealing themselves as operating adverse to common interests and contrary to real price discovery. If you are not lining their pockets, the croupier will toss the roulette wheel and walk away with ALL chips.
The WSJ editorial points out the public policy errors that helped to contribute to the problem - I'm all for holding those in the legislative/executive branch accountable as well.
We can have a 9/08 commission headed by CR do investigate. Now, that would be some rider to the current bill that would demonstate some courage. What to bet on the chances of that rider?
I've been thinking about the Moral Hazard associated with the bailout.
To me, this plan is nothing less than a failure of Reganomics. It's not just the deregulation that failed... it's also the tax cuts that have fueled our decifit spending.
Rather than trying to limit CEO pay, we should be looking at new tax sources to pay for this $700 billion... paygo style.
The logical solution is to go back to the pre-regan tax structure... with 70% maxium marginal rates. Tax the rich, and you'll limit the culture of greed.
The banks won't sell at a big discount as the losses will bankrupt them." The banks "will sell the assets they already marked down, but getting rid of those doesn't help their equity base at all, and preserving this is why they aren't doing anything."
Short selling bans only scare shareholders more as they can longer buy protection...
This is scary. Paulson and Co LLC must know that this plan will not work. Buying time so the market makes a more orderly sell off.
I know that there's many like me right now.I kid not. I don't know whether I should start drinking heavy or stay stone sober.I don't know if I want to know every little detail or glide thru in a haze.Thus far I've been reading every post and comment here and on several other sites and it sure is cutting into my Porn viewing time........Best of Luck to everybody during these trying times.
Nobody wants to be left out of Treasurys proposal to buy up bad assets of financial institutions.
This is too much. So these jokers are going to use their horrible balance sheets as a resume for managing ... the government's purchase of their horrible balance sheets.
The People's Republic of Wall St. and it's glorious leader's recent speech.
How much more destruction can we take after FNM, FRE, LEH and BS. The situation is dire as the enemy has initiated an offensive on our home bases in GS, MER and JPM.
These institutions CANNOT be allowed to fail, our lives depend on it.
The recent attacks by financial WMDs have shaken us to the core, we must not give up and take the fight to those terrorist group known as the 'free markets'. The 'free markets' cannot be allowed to succeed in their plan.
The Fed and Treasury has decided to act in the interests of the people. We must move fast and take action immediately, time is of the essence, this window of opportunity will not last forever. The alternative will be unthinkable.
Thus, we have mobilized our printing presses and are going to war.
It is now DECREED that our equity markets should not and must not fall. This is against our national interests.
This drastic step is deemed necessary as recent attacks launched against our enemies' elite troops of 'short sellers' by initiating the mother of all short squeezes has proved unsuccessful.
Traders and investors rejoice at this new edict. Please come back to our markets in droves, it is your patriotic and national duty. We will provide the impetus for your continued success by continuing to monitor the markets and changing the rules as we deem fit, there is no way we can lose.
We leave you with high hopes and our rallying cry "DOW 36,000! DOW 36,000!"
As a spittle-flecked reactionary right wing conservative bastard, this crisis has served only to frighten and confuse me. However, I will note that The Corner @ NRO is running pretty much entirely against the proposal:
The FED knows what big banks are in real trouble. It should simply pony up enough capital to put them on their feet and take ownership for that and not pay much to do so since it is saving them from collapse. The small banks can simply be allowed to fail. Small bank stockholders get wiped out. Big bank stockholders get an extreme haircut. And of course the government should take over running the big banks, kick out the overpaid executives and put in functionaries paid normal government salaries. Cutting the overhead would be a big help in lots of cases.
2kt - you'll have to stop making sense and talking real numbers .... grin
First - while CR is correct tehre ARE a some pools with very high loss ratios - the vast majority are nowhere even remotely close
The vast amjority of the appx $10 trillion in loans is prime fixed product with little likelihood of dramatic increases in losses
Even for the fraction of the $10 trillion in overall loans that are subprime and ALT-a the majority are not ever likely to see the kind of loss ratiosn CR notes
The math seems simple ... a $100 million pool with 50% lifetime foreclosure (never mind prepayments and refis will reduce the nunmber) and a 50% loss severity equals a 25% loss on face value ... the remaining loans still worth $75 million face
The ONLY market today is the vultures - who do not repesent any type real market value of the assets. And they only want to pay 25 cents on the dollar or so.
Rightly the investors refuse to sell an asset worth more than 75 cents on the dollar in even a severe model for 25 cents
If the Fed buys these assets for 60 cents on the dollar even at a 50% lifetime overall FC rate and a 50% loss severity on each the Fed still has 15 cents on the dollar to the good
In doing so the Fed pays far less than the real value based on cash flow and loan performance - so the investors DO take a big haircut
And with the inetntion to hold tehse assets and sell when market improves and as mkty conditions warrant there is a very good chance there could be a profit as you note
The fed borrowing and hold costs are extremely low which makes a profit even more likely
And unlike the other various bailout scenarios - where funds are lent on assets not owned - here the Fed owns the collateral directly and owns 100% of any potential gains as well
Such is the power of truth. Such is the power of truth in the minds of many men. That N. Roubini makes powerful argument that the investment banks must change their business model, merge, or cease to exist. With emboldened short sellers delivering a message not to be ignored, Wham! suddenly a transformation. Over another "working weekend" comes a chrysalis emerged double bank. When the redoubtable business of creation & production and the allocation of capital becomes but a game of pretend wizardry--You know you are in OZ. Ozmandyias. What a devastation to the true patriots whose blood was pledged to a true cause. Patriots who spent their hard muscled blood, sweat, tears to support the most comely ideas socialized men have ever known. LIBERTY. Ability to make, be, do according to the capacity infused by the great Creator and the vision of individual man. Patriots who were willing to forgoe their futures in order to insure for unborn generations a tremendous inheritance at birth. These tiny wonders of 13 colonies have become a nation of 300 millions. But if only a handful of this legion will rise up and reclaim their birthright, this small setback of material prosperity can be easily overcome, and another wave of innovation, invention, and common wealth be renewed. Giving in to a moment's weakness and looking for a "saviour" in a strong man of mortal flesh is a remake of the Third Reich. Enduring an economic recession, enduring hunger for work-money-possession is a small concession to a Republic that can long endure. Think of the great persons whose actions resisted great evil and who gave the greatest and final sacrifice of their entire life to preserve your LIBERTY. Do not allow its destruction for the pittance of minor possessions. Better to possess nothing and one's true knowledge of freedom than to barely exist as a surfeited slave of pretend prosperity!
Trash for cash? No, cash is now trash. Keep your fundamental ideals through a mean time and stay a freeman, otherwise slavery, bread, circuses, and dimunition.
Correct me if I'm wrong, but wouldn't it be better and cheaper to let the failed banks fail than to try to bail them out until they fail anyways? There's some big assumptions here that these failed banks wouldn't fail if they had just a little bit more money.
In other words, isn't this bailout essentially doubling your bet after a loss, hoping to either break even or lose twice as much? If the banks fail their excess debt gets dismissed - if they fail after a bailout infusion then that infusion evaporates with it.
Credit Suisse chart was interesting especially if you apply the actual asset value as a delta. Accounting for another 20% pullback, those people would (or should) accelerate their jingle mail faster given the evaporation of equity at a faster pace than in subprime. This would recognize many more foreclosures on a rapid logarithmic delta as apposed to a linear one.
People will not buy this paper on open market due to "mark to market" rules.
Say you are big bank and have similar paper. If you buy like-kind paper at $.60, you need to mark your inventory down to that level. If market keeps in panic mode longer, and it will, and some one else makes sales at $.50, you would need to take another writedown, etc., etc.
Long-term profit potential notwithstanding, you can bring your own bank down even if you bought a bargain. Nobody will do it. Mark to market accounting intended to prevent fraud ala-Enron, but in this case it kills decent bonds and forces banks to their knees. Feds understood this and this is why they are doing what they are doing.
Pimco funds can buy those bonds since they are mutual funds and they can take a short-term hit and would not have to raise any capital.
In addition to junk mortgage related assets, Treasury wants to buy "car loans, credit-card debt and other devalued assets."
Also, "the Treasury said in a statement late yesterday it would limit its $50 billion plan for insuring money-market funds to those held by investors as of Sept. 19, excluding any subsequent contributions."
Hmmm...just had an interesting thought for a long equity play...given all that's going on...didn't Black Rock get some gigs recently "managing" distressed debt? Sounds like they could be in line for another plate.
"I should start drinking heavy or stay stone sober."
They tax alcohol so if your going to do it you had better start looking into home brew (screw'em), with the double digit inflation that is coming if this goes threw you ain't gonna be able to afford the store bought anyway.
"W's plan sounds something like loan-sharking or paycheck cashing. Probably a growth area, plus the book-keeping is probably better than it was in Countrywide."
Lol :: bookkeeping on this would be easy and in my vision does not involve usury in the beginning stages at all.
So any way-- my hope is that
lending can be done with more good will in mind than profit or gain.
Lending could be an activity
wheere incentives are more important than the consequences.
However the consequences would be enough of a deterrent that most individuals would find it distasteful to renege on their commitments.
It looks like two somebodies with numbers in their handles are trying too hard to make this all sound like a pretty gosh darn good deal for the U.S. Treasury.
I smell a rat. If it's a good deal, why exactly do we have to do it RIGHT NOW with no transparency and no oversight?
the banks get a big haircut, a fraction of the real value based on cash flows/present value ... but they also do not ahve to sell for "vulture" fire sale prices
This allows the banks to get their balance sheet back in shape
And contrary to CR's comment - taxpayers DO have an "ownership" interest - they own 100% of the assets - and 100% of any possible profit in the future
Additionally, and perhaps more important - the US govt buys these hundreds of billions in assets ...
if instead they are sold to the vultures - the vast amjority fo these assets would be transferred to foreign entities, foreign gobt's, foreign companies and soverign wealth funds ... we would be selling the heart of the Country - our key finacial assets and essentially the entoire financial system - to foreigners - for fire sale prices - pennies on the dollar
"The FED knows what big banks are in real trouble. It should simply pony up enough capital to put them on their feet and take ownership for that and not pay much to do so since it is saving them from collapse."
Please do NOT use the word "pony', 'cause I'm NOT seeing one in my future.
really? a pile of misguided, mysterious derivatives of derivatives which theoretically could have already traded hands across multiple continents dozens of times is "the heart of the Country"?
have you considered writing lyrics for John Mellencamp?
hank said on the talking heads shows this sunday that we have to save the banks or all lending will come to a halt
nobody will buy houses, pay checks will stop, business wont have the cash to restock inventory, or maintain production and generally meet cash flow needs.
i have a proposal
keep the 700 billion, start a new bank, the last federal bank of the united states
lend money from the treasury directly to home buyers, businesses, consumers and students for tuition etc. charge interest and restock the treasury.
really? a pile of misguided, mysterious derivatives of derivatives which theoretically could have already traded hands across multiple continents dozens of times is "the heart of the Country"?
have you considered writing lyrics for John Mellencamp?
Good one, bgates. When the visitor count drops below 15 trillion there's time to be funny.
2kt - the Fed doesn't have a clue IMO about the mark to market - FASB 157 - issues ... Paulson refuses to consider any change to this terrible rule
We could solve the whole problem - elimiante the death spiral mark to market "fair value" is causing - by simply resending the rule - allowing assets bought for as investments - not for sale - to be valued according to its capitalized cash flow
If the loans are performing as expected and originally planned - as the vast majority (well over 90% of ALL loans) are - then they are not impaired and should not be forced to be repeatedly marked down to the current fire sale panic selling prices
This would immeduately fix the balance sheet of many/most of these companies ... and at zero costs to the taxpayers
And as far as I can see at no negative to anyone - it would simply be valuing the assets as they should be - based on cash flow
Right now mark to market is simply ridiculous - with an orderly market its an ok rule - witha huge dislocation as now - where tehre are no buyers other than vultures - it is a self fueling death spiral
the revised option short rules would most definitely not permit creation of new short etf shares whose underlying consist of prohibited financial stocks.
it says that if the market maker knows that the party taking on the position is increasing negative delta or gamma then he may not short to hedge his counterposition.
in this case, "know" means "know or should know"
no way would they not know what a short etf counterparty was doing.
WhyTF do we have so many shill IB types on here now? Do you guys really think you are going to sway any of us here? I know you've got a lot of time now that you've lost your job, but hey, piss off, ya know? We dont need any more of the problem telling us how the selfserving solution is so great. Wankers.
"taxpayers DO have an "ownership" interest - they own 100% of the assets - and 100% of any possible profit in the future"
or 100% of the loss as we have no frickin' idea what the assets are worth...none...but hey let's buy them for what we are told they worth by gamblers...otherwise the chinese or the saudis or ? (i hear the Iraqis are sitting on 80 Billion plus)...or
some legs busted and heads broken...again this is blackmail
You can't use current cash flow value if you have a high expectation that the future cash flows will never materialize. Hence, MtM, since it incorporates the perception of future risk.
"bgates - 'vultures', eh? the sheer contempt for the free market is really remarkable."
Contempt for the "free market"?
Hardly ...
What we have is in no way a "free" market - which is buyers and sellers on generally equal terms
The only buyers in the market today are vultures looking for distressed assets - and only willing to pay fire sale prices ... we do not have any semblance of a free or orderly market today
Fair market value is supposed to exclude distressed sales - unfortunately that model fail when ALL you have are distressed sales ....
If you are so convinced the FED will make money on the deal, what is the argument against some transparency then? If there's nothing to hide, banks should happy to let know what was sold for how much, no?
"Fair market value is supposed to exclude distressed sales "
now THAT is better comedy writing than i've been forced to endure on tonight's emmys bar none, excepting Don Rickles, of course.
would you have been happier if that saudi prince had just given away all of his C shares in '95 - "sorry, guys, that really wasn't fair"...
and how about those folks selling those mcmansions in riverside county at under 300K which were 650 just a year ago - is it UNGENTLEMANLY to maybe give 'em an offer at their new listing price?
"Fair market value is supposed to exclude distressed sales -"
Ummm....seriously? Tell that to a lender when you try to purchase for "fair" market next to recent distressed sale or better yet try to sell your asset for "fair" market value next to the distressed sale...or even one say a mile a way or depending on the assets....a continent away....
"220mph writes:
2kt - the Fed doesn't have a clue IMO about the mark to market - FASB 157 - issues ... Paulson refuses to consider any change to this terrible rule
We could solve the whole problem - elimiante the death spiral mark to market "fair value" is causing - by simply resending the rule - allowing assets bought for as investments - not for sale - to be valued according to its capitalized cash flow "
220.......
Are you sure that regular banks HAVE to value their held mortgage portfolio to "market" ?
As long as they are not in the trading portfolio and are regular mortgages, they are valued at amortized cost less expected credit losses. No?
sure hope lehman stock holders find a way to bring suit against their top management for taking a 2.5 billion bri i mean incentive payment from barclays for selling the company.
Most of the smart guys who caused this mess have already moved all of their assets offshore. Only the stupid rich people who didn't plan for this will have to pay in increased taxes.
"Most of the smart guys who caused this mess have already moved all of their assets offshore. Only the stupid rich people who didn't plan for this will have to pay in increased taxes."
There's more to it than that. Think it through. You're going in the right direction.
Anybody talking about a 5% loss in MBS hasn't seen the exurban bubble neighborhoods. I've seen neighborhoods in the CA Inland Empire which look like a neutron bomb has hit. Nobody's there and the landscaping is dead. Nobody really wants a 4000 sq ft. home 40 miles from employment. Vast tracts are totally useless and losses there will approach 100%. I understand it's the same story in all the other bubble markets. High-rise urban condos have similar problems although they will not be totally abandoned and so they won't be total losses if they get completed. Still, a 70% loss is going to be perfectly ordinary there.
A better plan would be transparent (all deals would be publicized), involve a share in ownership for the taxpayers, and have substantial oversight. We can do better.
CR, that's what my letters today said, and my phone calls tomorrow will say. If it must be passed so quickly the American people, at the very least, deserve transparency and oversight.
Thanks for all you've kept us up with these last few weeks.
as it turns out paulson was quoted as saying actually the banking industry really didnt need the bailout that badly
really
heres the quote
tomorrows NYT
But Mr. Paulson said that he was concerned that imposing limits on the compensation of executives could discourage companies from participating in the program.
If we design it so its punitive and so institutions arent going to participate, this wont work the way we need it to work, Mr. Paulson said on Fox News Sunday. Lets talk about executive salaries. There have been excesses there. I agree with the American people. Pay should be for performance, not for failure.
But he quickly added: But we need this system to work, and so we the reforms need to come afterwards.
The fact that we have an economy that depends so inordinately on debt creation ought to open a few people's eyes.
The logic of the crisis seems to call for an intervention ...
Actually, the "logic of the crisis" demands the use of the bankruptcy laws. They are designed to allow reorganization while being protected from creditors. Of course this usually wipes out shareholders, which I'm sure is the problem here. Scum like Paulson, Bernanke et al prefer to wipe out taxpayers instead. The fact that they appear to be joined by the US Congress in this just adds to the disgrace.
From bloomberg:
"Goldman Sachs Group Inc. and Morgan Stanley concluded there is no future in remaining investment banks now that investors have determined the model is broken."
The model is broken. Investment bankers are on the scrap heap. What we are watching is these people twisting the government to try to find them a safe place to anchor from the storm where they can continue to accrete wealth at a similar rate to their last 5 years of bonuses. They have private schools, jet shares and hamptons holiday houses to maintain to say nothing of their professional shopper wives and girlfriends and tax accountants who help them with their family trusts in the caymans.
Ask them how much of their money they would willingly put into mortgage backed securities, or even their own stocks right now.
I have no problem with some level of transparency at all - to the extent rational and practical
And as to knowing the values of these assets - the claism we have no clue is simply silly ...
Again the vast majority - 80% according to recent MBA reports - of the appx $10.7 trillion in loans in the US are prime loans
We know there is little overall likelihood of any dramatic change in this group of loans
Subprime loans were 12% (6% arm and 6% fixed) of the total loan pool but represented 50% of the foreclosures in the June 2008 MBA report - but we also know that subprime defaults have largely peaked
And even our host acknowleges ALT-A rates will not come anywhere close to subprime rates - quote from CR from a few months ago:
"I don't think anyone was suggesting that Alt-A delinquency rates would be as high as subprime. So Mr. Perry is creating a strawman here. The suggestion is that Alt-A would see a substantial increase in delinquency rates, and, as a result, the sector specific credit crunch would also impact Alt-A. "
So we DO know - or can relatively accurately predict - the performance of the loans out there - and with the perfomance prohjections it is relatively easy to come up with values
This whole idea that tehre is sonme great unknown out there just isn't supported it seems by facts
Yes - it IS true the whole country could go in the dumper - witha catastrophic collapse - but that is not something a rational amalysis of value would attempt to address
may be... not now but later... the final solution after a more extensive nacionalization will be... the COMUNISM!!!!
so next century the comunism in the USA and a wild capitalism in Russia, that's very funny.
Sorry, but for the most part, all I see going on here are deck chairs being re-arranged.
At the most basic level, why isn't anyone talking about the likely scenarios going forward--there are two obvious ones--and the personal responses they require?
whole idea that tehre is sonme great unknown out there just isn't supported it seems by facts
It's not an "unknown".
The odds are very high that we've entered a long-term period of rising mortgage rates. Even with the crash and panic, the 30-year rates still haven't fallen to the previous low of late 2003.
These assets will lose value for decades as interest rates rise.
ziggurat - I don't know the full answer - at least not case by case basis - on who does and doesn't marlk to market ... I do know Fannie for exampole had billions in "fair value" write downs (although to be fair I did not look up what they were for) in each of 1st 2 qtrs of 2008
I know Thornburg has said Mark to Market is the root of their problems - despite that thebought the laons to hold
And I saw a quote yesterday re: AIG where they said the majority of their assets are inetnded to be held to maturity, but they had to take billions of mark to marlet write downs ... their comment was the ACTUAL losses were something like 10% of what they ahd to take as write downs if they hold to maturity
I also spoke Thurs with Managing Director and Chief Credit Officer of a multi-billion REIT, a buyter of MBS, CDO's etc who said al of tehir assets are bought for long term hold, but they;ve had to mark to market a majority ...
His comment was unequivicol - if FASB 157 was lifted - he said if its only lifted for AAA assets - the markets would be fixed lietrally overnite ... hsi comment was this would "stop the death spiral in its tracks"
I'm starting to think this was a sham proposal meant to placate the markets and CB's in order to buy enough time to get the GS/MS bank deal worked out, backstop the MMF's, and co-ordinate a new world-wide ban on short-selling. Classic mis-direction.
There is just no way any Republican would think he was going to get that kind of bill past a Democratic Congress in an election year.
On a side note the comments about Paulson not pushing for restrictions on executive compensation were also in large part addressed withe the Morgan and Goldman becoming banks scenario - as Bloomberg notes in their story
"They're going to have to protect their deposit bases by law, and the days of high leverage are gone,'' said Charles Geisst, a finance professor at Manhattan College in Riverdale, New York, who wrote Wall Street: A History.''The days of the big bonuses are gone."
Take into consideration the risk of over-reacting, as well as the risk of making the wrong decision. Also evalute the risk of being given wrong information, such as was the case in Weimar Germany re inflation and money supply, and delineate indicators that would suggest that development.
Sorry, but you folks are way behind the power curve. With all due respect, you need to get on top of it or all of you are going to end up roadkill.
This whole idea that tehre is sonme great unknown out there just isn't supported it seems by facts
Policy needs to be written in a bullet-proof defensive manner. They have already opened it up for any type of financial instrument. Should we rely on the inner moral compasses of Wall Street to ensure that the taxpayers don't get stuck with the most toxic of the waste? I don't see why you are bothering to argue the quality of the mortgage portfolio when the plan is being widened to cover all instruments.
Mr. Paulson said that he was concerned that imposing limits on the compensation of executives could discourage companies from participating in the program.
Companies discouraged from participating in the program obviously didn't need the program.
Companies apparently discouraged, but needing the program also need the courage to find new executives.
"But Mr. Paulson said that he was concerned that imposing limits on the compensation of executives could discourage companies from participating in the program."
This ticked me off when he said that. If this is such a great deal for these banks and they are so desperate to shed themselves of their "toxic waste" why wouldn't their execs take a haircut on compensation. J6P has had to take a haircut to keep his job in alot of cases.
deflation is the path trying to be managed by Treasury and FED.
hyperinflaton means we be fucked
the US can live with deflation and a prolonged recession....question is can the Chinese and Saudis? they may be fucked by option 1 or 2..
and Karl....define "finance punk."
a lot of us know our history hence we
are none to keen on the bail out plan
being devised by Goldman Sachs, I mean Sec. Paulson, and would prefer that investors and (former) investment bankers learn to live with
their gambling debts and not ask taxpayers to both save their sorry assess from the sharks AND go on some 12 step program with them for who knows how long on recovery road
CR: A better plan would be transparent (all deals would be publicized), involve a share in ownership for the taxpayers, and have substantial oversight. We can do better.
Undoubtedly. When, though, is the last time we did any such thing?
You will have to pick through the ruins of mid-20th century liberalism for the answer.
Everyone remembers that ideology. And how it oppressed us. And so we ditched it and became fat, stupid and broke, instead.
With all due respect, you need to get on top of it or all of you are going to end up roadkill.
mp
Not in my neck of the woods, literally. We had a community meeting this evening (another topic, regarding the winter plans for possible river cresting)and the other 8 people who live on my 2.5 dirt road surrounded by National Forest have decided if the stuff hits the fan, if we cut down a few old growth trees at the beginning of our private (we maintain) road, anybody would play hell getting through. We are prepared.
Now, regarding Prof. Roubini's recent essays: Is there anyone here that can analyze the style of his writing, and possibly compare it with other contributors on his rgemonitor? I'm particularly curious if Brad Setser is penning some of the content published under the Roubini marque.
And do we know why Setser moved his blog to the Council on Foreign Relations blog a while back? Setser is affiliated with the both the CoFR, and RGEmonitor. Besides Setser, does Roubini or other RGE people (i.e. Summers?) have any other relations with the CoFR?
zigg - structured investment of these types all have a mortgage (or pool of them) of some sort at the bottom of the pile ... and each tranche or portion of the pool split into a structured investment is entitled to a well defined share
The AAA stuff generally represents as I understand it the majority - the largest part - the biggest "slice" - and also has probably the least complicated "return" or "share" of the revenue
(since the AAA tranches get the first dollars - and the majority of $ - it generally, again as I understand it - wouldd take a huge foreclosure rate and loss severity before a AAA tranche loses on a cash flow basis)
If we know the value of the underlying mortgages and we know what "share" each "slice" is entitled to - it seems not that hard to figure values of any of them
It is complex but certainly not impossible
Not at all unlike the complexity of doing title work - where every property was once a big huge piece when the givt stole from the Indians - and where we have to tarck many, many splits etc over the years
In the 1980's we went through a period of significant inflation but not hyperinflation.
Wouldn't 20% inflation fix a lot of borrowers?
20% over a couple of years is a real ass kicking, but not hyperinflation.
In fact, we have already gotten nailed for that amount over the last couple of years if you use honest inflation numbers and also consider the trashing of the dollar.
Ziggurat- "what's it going to be? Deflation or hyperinflation?
unfortunately, there is no where to hide from systemic risk"
Deflation would be the natural course, but public policy could lead to hyperflation. One must be prepared for both. It's necessary to maintain a running estimate of the situation in order to know which way it's going to go.
There may be no "hiding" from systemic risk, but why stand in front of the steamroller? Risks are to be MITIGATED, and that's why you plan. If you don't plan, you lose.
Certain actions may be required by both scenarios. Determine what they are and implement them without fear.
Evaluate the quality of incoming information. For example, you can look for indicators that would suggest a decision to inflate: changes in inflation methodology (a Weimar trick); late reporting of money supply or inflation data; dropping certain statistics from reporting (M3).
In short, start think like survivors instead of victims.
I'm not trying to cop-out, but it's late here. I buried a friend today, so it has been a long day.
My view of electoral politics and elected officials is jaundiced at best, and I have not written any elected officials since my time as an activist twenty years ago and more. Well, when ya gotta, ya gotta. I include here the full text of the missal I sent to my senators and to my representative. Any one who wants to use some portion of this as boilerplate in their own letters, in concept, in part, or entire, is more than welcome:
Madame Senator:
I implore you NOT to pass the measure before you proposing sweeping financial emergency powers and unlimited funding authority for Treasury Secretary Henry Paulson. This proposal in every aspect flies in the face of the fiduciary responsibilities of our public authorities and government, and will fail in its stated purposes.
The complete lack of oversight and blanket legal immunity solicited in this proposal abandons any governance over how this vast authority and funding is expended. In our political tradition this is odious, and much harm will result, human frailty being what it is.
This program is clearly intended to purchase securities from financial institutions, many of them active speculators, at present nominal prices which are above the underlying values of those instruments, and it appears far over what those participants will actually pay for them themselves. With prices of underlying assets, principally home mortgages in the United States, still dropping, this guarantees massive financial losses for the public acquiring authorities. It is a direct gift of money to failed speculators without any legal check.
These purchases will not serve to halt the decline in mortgage prices. Those prices are inflated, and their price declines will not flatten until they approach the levels which the income of buyers can support, and which private investment capital, of which be it said there are hundreds of billions of dollars aloof from the markets, deems profitable.
This action will not in many cases recapitalize banking institutions presently holding such declining securities, as the numerous losses of these firms on other speculative investments such as complex derivatives, securitized junk bond debt, and considerable sector overcapacity in a declining economic cycle, ensure that many will yet cease business or fail outright.
I well understand that the banking system in the United States is severely damaged. Its rescue will involve substantial public investment into tens of billions of dollars, and more; this is unavoidable, and I do not call on you to prohibit all public funding. Such intervention must be authorized in a form which has the best chance of success, the best recovery for the public, and the least room for misappropriation, malinvestment, or outright graft. Time is of the essence, but more functional programs will better serve.
The Congress must promptly enact a public authority vested with emergency powers to wholly seize banks or bank-like financial institutions when near failure but not formally insolvent when these are of a size as to pose systemic risks to the banking system or the country. These can be supported with combinations of public guarantees and funding in return for equity or temporary public ownership, with failed management replaced, and other necessary actions taken.
The Congress must authorize such a public conservator to strip out mortgage securities from failed institutions in public control---but only those---into a public trust with powers to renegotiate the terms of the underlying contracts, and the mandate to hold such securities for a period of years until property markets settle on appropriate price levels, so as to avoid further price depressing sales.
The Congress must promptly authorize such an agency to lend to solvent banks or bank-like agencies under market pressure in return for equity warrants in those institutions at prices and terms determined by the public authority. When this crisis is passed, these public investments can be resold to private investors with recovery for the public. As you are aware, the Federal Reserve has no such authority, nor should it be given such.
The Congress must consider authorizing public investment authorities capitalized in the $100 billion range to lend directly to the public and to institutions in instances, such as the present, of unwillingness by participants in the banking system to lend to each other or conduct normal business. This might involve direct loans to sound small businesses to maintain operations where they are presently damaged by market credit rationing. This might involve directly underwriting and guaranteeing municipal and other public authority bond offerings since those markets remain essential but impaired. When and as the present financial crisis eases, these unimpaired bridge banking services can be sold to private investors, or better retained as public credit authorities as Congress deems wise.
The Congress must mandate that the administrators of these various emergency and service funding authorities be separate from both the Treasury and the Federal Reserve, that they personally have experience as senior public regulators or otherwise have served in public financial system administrative capacities, that they have stringent accounting and reporting requirements back to the Congress, and optimally that they have a record of skepticism toward the innovations/shenanigans of the investment banking industry which have caused our banking system so much harm at present.
The Congress must authorize further funding for the Federal Deposit Insurance Corporation, both for public and market confidence in present conditions and because probable losses for the FDIC can be expected to exceed their present reserves and funding authorizations.
The Congress must strongly consider enacting a Federal statute for a streamlined mortgage resolution process whereby distressed mortgage buyers and their note holders can, by mutual declaration before a judge with appropriate jurisdiction, resolve a pre-packaged renegotiation of their contract terms. This would preserve the underlying compact under contract law while speeding up the otherwise tortuous and fragmentary settlements. This would serve the best interests of all parties.
We have needed these latter measures for a year and more. It would be unconscionable for Congress to adjourn into the Election season leaving these undone. But far, far worse would it be to give sweeping authorities to a compromised Treasury Secretary in the final hours of a failed Administration to pay above market prices, and that with neither penalties nor firmer regulation in return, to legions of failed speculators in the guise of easing a manifest public financial emergency. Such reckless actions and any who might enact them will surely be repudiated subsequently, but the damage to Federal finance, our currency, and the American public will already have been done with no commensurate gains to the stability of the banking or the financial system.
Please recall your oath of office in this, and act for the public wisely and with determination.
But Mr. Paulson said that he was concerned that imposing limits on the compensation of executives could discourage companies from participating in the program.
Sorry, no haircuts for executive economy-wreckers. They hold insurance policies, after all.
$1 face value would leave the Feds with about $.30 profit,
See, now you got me all worried about the government making 21 billion on this deal. It wasn't so long ago that we were worried about the reduction of the national debt. Whose to say that the government won't make even more on this? Why don't we stop and think about the long term consequences of allowing the US government to profiteer at the expense of the Wall Street executives?
Now I have an idea. Why don't they sell this undervalued stuff back to the people who sold it to them? Those people who sold it should know how valuable it is. They can also buy back the stuff that others are holding that they know is undervalued. It's amazing that everyone is sitting on potential gold mines and suffering for it.
Nope, American tourism here ,(Vancouver B.C.), is dying. Every year less and less as our dollar becomes worth more and more versus yours. Been picking up from Asia and Europe though.
zigg - the REIT Managing Director and CCO I talked with ealrier this week said there were plenty of buyers for all the lower tier tranches - primarily because of the higher return - even with the higher risks
He said it is the AAA stuff, with its lower returns, that despite being VERY safe generally, has the problem with no buyers ... he pointed out that something like 80% if I recall of AIG's assets were AAA
His specific comment was - even at top tiers in industry - that it is a psychological not a financial thing with the AAA stuff ... he said there is very little AAA rated stuff out tehre - even subprime AAA tranches - that have any drmatic risk of losses ... but with the lower returns that safety dictates coupled with the psychological issues - even seasoned investors are shying away ...
crude is remarkably perky this morning, really the only interesting action overnight.
and speaking of misdirection - hank panky's dr. evil routine has every one not noticing that crude has rocketed in the past few trading days.
and in terms of the narrow hegelian mindset that sees inflation and deflation as an either/or - who says you can't have chocolate AND peanut butter, anyways? falling wages, higher commodities, demand destruction, etc? sounds like my local economy.
The more the government buys, the more prices will drop forcing the government to buy even more assets, which keeps the cycle going. At some point the whole bail-out concept will come to an ignominious end.
that's because there's no reason to take any real risks for only 200 bp over treasuries, when treasuries are so absurdly low. crank that ten year note up to 6% and the AAA stuff at 9% or so might seem attractive. maybe.
Money is at the basis of our society, its circulation has been delegated to banks. The price asked (700 bn.) should be directed in separating two functions of the banks: basic functions (deposits, mortgages, etc.) that should be governed by a public instituition. All the others, sophisticated, functions of modern banks should stay private. This is what should be asked for the 700 bn. Basic money functions shouldn't be (es. deposits) in the same hand of people who manage complex financial initiatives.
sdtfs ... you must have missed part of my comments ... these AAA tranches are unlikely to not give you your money back - they are entitled to majority of cash flow - enough that it would take very large foreclosures/losses to risk not getting your money back
I agree with MP, the policy sewing circle should come to an end. We can speak to the merits of deflation/hyperinflation indicators as they arise, but I feel we would benefit more from discussing planning for both probable outcomes until the direction is clear. It does not appear the center will hold.
My concerns and questions in order:
(1) I've liquidated cash in case of deflationary systemic collapse. Will US currency hold value in these circumstances or should I diversify with hard gold/silver?
(2) Have a Glock 9 but contemplating purchase of Mossberg 500-A1 shotgun.
(3) How much food supplies on hand would be prudent?
(4) How to hedge in case of hyper-inflation scenario? Today I considered taking a sum out against credit to invest in markets as a hedge. What would be the most appropriate strategy? I figure if the system does collapse and I lose these funds...at least it won't be my hard cash reserves.
(5) What risks and mitagates should suburban dwellars w/out ability to leave consider?
I realize this isn't the forum for these discussions, but these are some of the issues I am contemplating and planning for currently.
Again the vast majority - 80% according to recent MBA reports - of the appx $10.7 trillion in loans in the US are prime loans.
We know there is little overall likelihood of any dramatic change in this group of loans... --220mph
Not even in the coming Depression?
You're a Republican, right? I can tell by the way you analyze a situation. It's characteristic. Republicans fixate on the tiniest sliver of reality, due to their inability to cognitively embrace more than one sliver at a time.
MBS's are just one aspect of the problem, which is DEBT.
Thank LBJ, RMN, RR, GHB, WJC and GWB, and all the deluded voters who put them in office and supported their policies.
DEBT is the leviathan that looms over us all.
I shouldn't have to point this out, but if we had stuck to hard money the DEBT monster would still be a miniature poodle.
Now, that's something I would expect to hear from a commander. Go with that. You should be able to make a completely logical case for it. So, to follow on, what does that leave once you've put it aside?
Folks, with that, I'm out of here. It's another long day tomorrow.
sdtfs ... you must have missed part of my comments .
No, my point is you can't convince people of this,...that's why no one is buying.
I bought into the idea of American capitalism being alive to the opportunities to make a profit, anywhere, any time, any way. Now you are trying to tell me the the brightest minds on Wall Street need to be bailed out because they can't see the profits to be made?? Or because their capital is tied up in some safe investments that don't pay anything?
1] canada can exist as a first-world country without the US buying stuff from canada? think rationally..
2] Do you think your banks have a different asset composition? Many eurotards also have that delusion..
3] Do you think your real estate bubble is smaller than the US?
4]How is your government going to pay all the stuff promised to the retiring baby boomers?
5] Have you looked at your demographic profile lately?
6] Your tax base is shrinking (more retirees + poorly paid immigrants)
7] For all the dishonesty inherent in US governmental statistics, they are quite honest when compared to canucks.
8] And there is the issue that, unlike the US, a very large percentage of the immigrant population feels discriminated against and hates canucks. Coincidently they + their kids are soon going to be a significant % of your working age population. wanna bet how that will turn out.. Of course, europe has the same problems..
The sad reality is that your future is much bleaker than anything successive republican administrations could ever inflict on the US.
You know the big difference between between canucks and americans- lots of americans are self-critical, you however believe everything you say..
Hubris usually starts with excessive uncritical belief in yourself and magical thinking- a feature much more common in canucks than americans
"Again the vast majority - 80% according to recent MBA reports - of the appx $10.7 trillion in loans in the US are prime loans. We know there is little overall likelihood of any dramatic change in this group of loans. Subprime loans were 12% (6% arm and 6% fixed) of the total loan pool but represented 50% of the foreclosures in the June 2008 MBA report - but we also know that subprime defaults have largely peaked"
So.... what you are saying is that the risk is contained? Phew.
bgates writes:
hmmm... demonizing canadians... this is somewhat new. any way we can invade alberta and get their heavy tar/oil out of this approach?
Elect Palin. I said it before, Alaska sits next to Russia and Canada- that's two foreign countries- and she's not afraid to go to war with either of them, if that's God's will.
sd: CCRC gives anyone who has spoken with a Reit in the last month a Triple-Rat-Minus. It's really weird to see people talking about the value of tranching these days and especially weird to see people talk about the value of mortgages, mbs, and cdo's as if wages are not going to be impacted so severly that we will be seeing only modest drops in the ability of borrowers to pay. Open your freaking eyes.
Credit has seized up, jobs are drying up, businesses are going under -- and there are bozos hanging out on blogs trying to convince others that the the cash will still be flowing from mortgages? Yes, people will be paying down their 3o year fixed rate loans with a constant stream of furniture stuffing, excess pets, and toenail shavings. Clot-brained f*ckwits.
Elect Palin. I said it before, Alaska sits next to Russia and Canada- that's two foreign countries- and she's not afraid to go to war with either of them, if that's God's will.
And it would be such a polite war with the Canucks as well. The only thing they get excited about is pole dancers and their money. They finally got the Loonie within a nucuelar detonation of parity so they're content.
220, something is worth something only if someone is willing to pay something for it. Otherwise, it is worthless. Spin anyway you wish, if no one will buy it is WORTHLESS.
The changes in the option market making rules may sound like they make sense, but in some respects really don't. Most options traders have multiple positions involving multiple strike prices. A simple example. If you have a negative gamma position and the market moves in the direction of your short options (and away from your long options), your position gets shorter and shorter. You may be long at one price and very short at a higher or lower price Frequently traders have to go to the computer to check their positions since they aren't sure of their delta and gamma positions if volatility or the skew changes.
If traders can't be sure of their positions as the market moves, how could the person on the other side of the trade know whether they are facilitating a short position? They can't.
Hazard writes:
220, something is worth something only if someone is willing to pay something for it. Otherwise, it is worthless. Spin anyway you wish, if no one will buy it is WORTHLESS.
Does'nt the US Legal System have something like a Public Interest Litigation? So that interested stake holders can actually try to achieve a stay order ?
Viki writes:
Does'nt the US Legal System have something like a Public Interest Litigation? So that interested stake holders can actually try to achieve a stay order ?
HAHAHAHAHAHAHAHAHAHAHA!
Since when? And for who(m)?
It's like the Inspector General for the green machine. You complain, they investigate, you get crushed by your chain of command.
Get this: we are in a new state of central planning and authority, emphasis authority. Keep your mouth shut, your head down and don't bother wearing your chicken plate, it just makes you sweat.
"Crude is up to 105 again, let's see how this one develops :-
http://www.nhc.noaa.gov/"
The track forecast
The models agree on a slow north-northwesterly motion for 93L over the next 3-4 days, which would bring the storm to a point between Bermuda and South Carolina. A major complicating factor in the long-range track forecast is the expected development of an extratropical Nor'easter storm off the coast of South Carolina on Wednesday or Thursday. The Nor'easter could bring hostile wind shear over 93L, weakening it, and potentially converting it into a subtropical storm. The two storms may rotate cyclonically around a common center (the Fujiwhara effect), sending the Nor'easter west-southwestward into the Southeast U.S., and 93L northwestwards towards North Carolina. This is the solution of the 18Z (2 pm EDT) GFDL and HWRF model. The NOGAPS model predicts that the Nor'easter will not develop at all, and instead 93L will absorb the energy that would have gone into creating the Nor'easter.
BB writes:
Betting on prices in the markets to fall is decidedly risky, for even if they do rules may be changed again to ensure that they don't.
The markets are rigged.
To those of you just now getting this, you might want to cancel your several subscriptions to various magazines, newsletters, periodicals of all types as well as the Thrift Report Weekly (if there is such a thing).
Keep your local paper though, the little league and high school sports news is good stuff, along with a reasonably doable crossword or word jumble.
CHRISTOPHER LOW, CHIEF ECONOMIST AT FTN FINANCIAL IN NEW YORK said, What this program does indirectly is that it will support home prices. And, Taxpayers can make money off this program, albeit it would be a long time.
Price solves many problems, and no doubt there will be some fortunes made from this crisis, but dryfly put it well - let private money make the investment. I don't gamble with my money and I don't want the government to gamble either.
Put together some cash and get to work. I hope you do well. Otherwise, leave me alone.
Its easy being among the 99% of readers here saying its all going to shit. All hell has officially broken loose, Paulson is an evil monarch, and the this whole plan will implode.
Odds are, you guys are right.
But what if it works? Will you guys keep pointing out how the secondary, tertiary, and nth goals haven't been met and how you were right all along? Even if this works, it will leave a stink (even in the most optimistic outcome).
No matter HOW well this works, if it does (and the odds are slim), you can ALWAYS argue the tax payers paid too much, a few people (pauly's friends?) STILL got rich blah blah blah... it will never end.
Just a thought. And yes, i agree, that in (almost) all probability, this plan will fail at the expense of the tax payer, the dollar, and treasuries.
Its easy to prove WRONG those who said this will work. Its impossible for those of you (99% of the posters here) to admit they were wrong if it DOES work... because it'll bever be perfect... the "I TOLD YOU SO's" will be abundant.
Its not very complicated. Force them into chapter 11. Give $700 billion to Berkshire to setup a bank of the U.S, I trust him more than I trust Paulson and his cronies.
suecris writes: I'm not selling my kids into servitude to pay for some stupid banker's yacht and pool service.
What makes you so special? Do you think you have a choice?
Blue collar wages have not kept up with inflation for 20 years. That's a whole generation. Middle class white collars are now not doing any better. Therefore, I conclude that our parents and grandparents set us up to pay for some stupid banker's yacht and pool service.
CDS's are a ponzi scheme and now they want the tax payer to be the last one standing. They continue to call them mortgages to make Joesixpack think he is getting something. The fact is they want us to buy a mortgage that has been repackaged to 3000% of the underlying value.
Hey Paulson, you told me the dollar would strengthen well into next year.. BUT the USD index is now 76.98.. can we take the plan to bailout all the banks off the shelf now?
Lemme re-read my thesis on the great depression.. this isn't going according to plan..
You need to help me out or i'll have to cut rates again too, the analysts are saying it's going to cost more than 1T now, man they're sharp...
The last couple of years have been enlightening. 25 years ago my brother, who was one of the architects of what we now call Globalization, described to me what he and the other economic strategists at his organization were designing for the large international corporations who were their clients. How they were going to use foreign labor, cheap transportation costs, etc (you all know the drill) to dramatically lower production costs. How they were going to encourage the "service" economy to grow here in the US and Europe, traiin consumers to use vast amounts of debt to leverage thenselves. All of it. All of the mess that has happened. 25 years ago. I thought he was full of shit. He told me then that this system would crush the working class and eventually the middle class of America, but that it would not matter to those who held the reins of power. They would become rich beyond belief and that the world would eventually drift towards a feudal structure of a small number of aristocratic wealthy and vast numbers of whatever you would like to call the rest. He seems to have called it pretty close.
I have thought about what he said all these years and I do not believe that there is a way to gracefully back this system down to something that is based upon morals and ethics and fairness.
I give up there's no way to keep up
We MUST do better!
first? this is not logic. this is blackmail.
by i guess even blackmail has an internal logic that makes sense to someone.
It's not just paying cash for something that has no value, it's paying cash for something that has negative value!
The bankers will get their share first, as usual. the average taxpayer will get nothing as usual. Life goes on, the rich get richer, the middle class gets wiped out and the poor remain there.
So, how do we put a stop to this shit?
I can't fathom that Paulson, who with GS created this mess, is being allowed to dictate how it gets fixed?
Serious question: how do we get them to at least view this from a taxpayer's point of view?
eed cliff notes
jim...we don't. vote against all incumbents
OMFG I get through reading the comments on ONE thread and there are TWO more up!
how do we get them to at least view this from a taxpayer's point of view?
to be fair, the rich are going to pay the bulk of the delta of the tax increases going forward.
"FUCKIN A"
"to be fair, the rich are going to pay the bulk of the delta of the tax increases going forward."
only the poor proles who get by on active income...
girlbear, we won't be paying cash. If we're lucky, the Chinese will be paying cash and we'll be their indentured servants.
If you oppose the TARP, you must want the stock market to crash. In fact, you're probably one-a-them evil short-sellers.
I don't think the Dems will cave. They will demand a plan along the lines Krugman proposes, which is just what Frank, Pelosi, and Obama have been saying. They have the votes to push it through and they have the political cards to call Paulson/Bush's bluff. If it is a real crisis, then the system needs the money, then you must accept the conditions.
I'm rapidly becoming a fan of the progressive tax structure...
If Ayn could hear me now... Dios mio...
......
another group of "evil doers"?
where are the dollars to come from? Foreigners earn about 700b from our trade deficit, perfect to fund the existing 700b US deficit. But, where would another 1000b come from?
CR wrote: A better plan would be transparent (all deals would be publicized).... And he mentioned a website with the price and description / info on each asset that trades.
I for one think that is not only a good idea but a f'in must.
Somehow I dont see it happening....
And now I have baby Jas sitting on my shoulder talking about bourne and bread....
Anyone every use LiveMocha.com I might start working on my french or something. This place is falling apart at the wheels....
........
fun stuff from from Brad Setser. funny how the rules don't apply to us
Brad Setser: Follow the Money » Blog Archive » Not necessarily practicing what you used to preach …
Back in 1998, after Asia experienced a systemic banking crisis, the United States led a series of international working groups to develop best practices for handling future crises. One of the working group the second working group developed principles for managing a systemic banking crisis. The groups recommendations included:
Bank owners (holders of bank equity) should not be bailed out. They should lose their investments when banks are given public support, or their investment should be diluted through sales of equity (or some convertible instrument) to a government agency, which is then in a position to benefit and recover cots if the institutions conditions improves.
See p. 43-44 of the pdf of the Report on Strengthening Financial Systems.
The extension of guarantees should be strictly limited, possibly by class of institution, instrument and agent;
Guarantees should always be given in ways to reduce moral hazard risk. i.e. providing an upside risk to the guarantor.
CR, why do you stand by questionable analysis from Krugman?
For MSB with 5% starting equity 20% default at 50% severity is needed to bring just 5% loss of the principal.
Most of AAA paper is marked to .75 already and lower quality is as low as at $.20. These are low prices as is, and assuming Feds get another 20% discount, they will make a fortune just holding the paper.
Care to run us some numbers that prove it ain't so?
printing press...or just a simple key stroke
all this distraction ....
the second wave of defaults are about to hit ....
and the banks know it ...
AltAs,, Opt Arms, CRE etc etc ... are the next wave
back on topic, sometimes this guys are just stupid:
"And by the way, that rescue (FRE/FNM) has done what it was supposed to. Mortgage interest rates have come down sharply since the federal takeover"
uh, yeah, the flight to safety to treasuries as the financials crashed had nothing to do with it - it was just one big vote of confidence in the safety of debt instruments across the board.
i had posted an imaginary conversation about how these assets would never get marked to market a few times and no takers.
there is no way the L3 will get marked to market and the Treasury will go along with the mark to model.
this is blackmail by the (former) ibanks, banks, and shadow finance pure and simple. the "market, economy, and main street" are being held hostage and Czar Paulson has given in to the demands and he is asking the US taxpayer to come up with the cash or the kids get shot one by one in the head starting with the little ones first.
you know like secretaries at LEH so the tough guys can get their payoff (what is 2.5 Billion between friends anyway...right J6P?).
A better idea would be to let the banks that have failed us fail. If and when that results in real companies (i.e., not banks) laying off real people (i.e., not bankers), then maybe spend the $1 trillion on those people.
Deliberately misallocating $1 trillion in capital is not the answer. "Unintended consequences"? Boy howdy!
Could GS & MS becoming banks have something to do with the feds removing the limits (was 10% i believe) on the amount of capital that can be used by the brokerage when BAC "bought" MER?
For MSB with 5% starting equity 20% default at 50% severity is needed to bring just 5% loss of the principal.
But what happens with three years of 10%+ defaults.
Add a little leverage and its a slipperly slope....
.......
Deleveraging is no paradox. It is simply the tape being played backward.
Bogus assets build on top of bogus assets to make a wall; the bricks are solid on the way up, but start getting mushy as time goes by.
If you are smart you unbuild the wall brick by brick, just like you built it. You just hope that you do not have a whole bunch of mushy bricks toward the bottom of your wall.
2kt
If severity is 50% default wont be 20%, more like 80%. Then add cost of rehab the property, cost of holding, taxes, vandalism, sales, etc.
By the way, has anybody else noticed that the SEC has revised their short-selling ban to exempt options market makers, kinda sorta?
heres a link to the Lehman sale agreement...
im still reading it
allegedly it contains th language where barclays by-passed the creditors and stockholders
and paid the lehman top brass 2.7 billion in bonuses to induce the sale !!!!!!!!!!!
http://graphics8.nytimes.com/images/blogs/dealbook/lehmanSALE.pdf
see the second to last para of this times article to reference the 2.5 billion payout bonus from carclays to lehman top brass
Barclays and Nomura to decide Lehman's fate - Times Online
I'm rapidly becoming a fan of the progressive tax structure...
If Ayn could hear me now... Dios mio...
Welcome to the light gray side. Bush flipped me from small-o objectivist to liberal Democrat in 2003. It's not so bad, really. Resistance is futile...
fallonpdx | 09.22.08 - 12:58 am |
good take ...
this is bare knuckle ... make no mistake friends ...
1st Dude Todd Palin writes:
"FUCKIN A"
no first dude
its Fuckin AAA
2kt, you're setting up the same strawman that Krugman effectively knocked down. Very simply, IF the government were to pay current market prices for this stuff it wouldn't help the banks. The only way it works is if the government pays more than current market value. And that's what Paulson wants to do.
I'm not selling my kids into servitude to pay for some stupid banker's yacht and pool service.
But it is a panic! We don't have time to make it fair!
2kt, there is no transparency, so how can you be sure of your numbers? Also there is wide disparity between credit quality even in the same asset class. AMBAC earlier this year talked about one MBS they insured with 81% default rate and 100% severity. How does that fit into your analysis?
The answer is we don't know how bad this will be - and we need to make it transparent and the taxpayers should share in the ownership if they are required to recapitalize the banks. This plan doesn't do either - plus a little oversight would be nice.
Best to all.
"Most of AAA paper is marked to .75"
You are talking about non agency right? Please be specific.
nades writes:
I'm rapidly becoming a fan of the progressive tax structure...
I'd love to see a flat tax. Severly restricting deductions. But that won't happen.
All bailed out banks should have diluted equity. Maybe not zero (let's not send the DJIA back below 1,000)... But severely hit.
I predicted real estate emotions would hit panic in the Fall. This could be a tough month to call! (Are we there yet?)
Got Popcorn?
Neil
Do you think Comrade Paulson will have Comrade Krugman declared a left deviationist and send him to Siberia?
Or do you think Dick Cheney will expose Krugman's wife as an undercover CIA officer?
Got to be one or the other.
It would be nice if the Dems in Congress actually showed some backbone and said no. But it's more likely that Wall str execs will voluntarily return their bonuses of the last few years.
3 years of 10%+ defaults with 50% loss severity on original AAA paper bought at $.60 on $1 face value would leave the Feds with about $.30 profit, not counting all the interest.
Obviously one needs to adjust for their cost of capital, but I don't know ink and paper prices, sorry.
Krugman seems to miss perhaps the most important point!
Let's not forget that we're rewarding failed businesses and failed managements. This goes against the core of American capitalism.
How can we ever take anyone to task for their failures?
THERE IS A BETTER WAY TO PROP UP THE FINANCIAL SYSTEM WITHOUT SOCIALIZING GREED DRIVEN FAILURE.
Paulson asked for a "Clean Bill" and got Dem OK BUT now he is dirtying up the bill all by his loansome.
And in doing so squeezing McCain in his shorts.
If I really could believe that it would trash McCain/Palin I might just back spending 700 bil on bail out.
there is a petition drive a-foot at the following link
i signed it.
looks legit but you may get spam , i dont know
but im desperate to act so i did.
only your name and email address is required and the author claims your address will be held private...who knows
Tax Payers Against a Wall Street and Mortgage Bailout - Signatures
The MBS indexes have a big problem in that they rate the lowest-rated AAA tranche. So yes, they do overestimate losses. But, the markdowns aren't ANYTHING like 30%. Very little is marked-to-market so far. Mortgage assets are about 10 trillion, total markdowns to date around 500 billion, so we've only seen about 5% markdown so far. Lots more to come...
Obviously one needs to adjust for their cost of capital, but I don't know ink and paper prices, sorry.
Oh, well shit! If it's that easy, we should just nationalize banking!
Problem solved!
Ponies,
prat
Going forward, we as a society really need to draw a line.
If an institution is "too big to fail" then we need to nationalize it, pronto.
This habit of praising capitalism while institutions are profitable, and then bailing out/socializing them when they fail is an ABOMINATION. If the institution is to be bailed out, it should have been nationalized to begin with so that the profits could be put against future failures. In addition the OUTRAGEOUS bonuses handed out by Wall St firms would be curbed.
Me, I'm in the camp that we should bail out nothing. But if we're going to be in the bailout business, then let's socialize anything that is deemed "too big to fail".
Wow.. worldwide domination.
Gold is taking a hit now too.
Manipulations on this scale should not work much lest attempted.
Taxpayer and savers have nowhere to hide their ever dwindling wealth it seems, unless you want to take a risk in the equity markets.
ortgage assets are about 10 trillion, total markdowns to date around 500 billion, so we've only seen about 5% markdown so far. Lots more to come...
Fair Economist
and now they are throwing in auto, CC, student etc etc ... as collateral ...
Amazing to sit on a blog on a Sunday night and watch the future of our country, and the global economic order, be discussed.
The thought crossed my mind earlier this evening to begin a serious study of Mandarin.
CR,
You are talking about one MSB.
You can probably find more than that made by New Century, Franklin and other "good fellas". They are not majority of the market.
To give you a bone, you can have 50% default and 80% loss severity. Fair enough? Just don't say NO, I will get pissed. How much does that hit the principal? Still $.05 in profit to the Feds is they pay $.60 on $1.
Gross is loading up on this paper and he is not known in the bond business for being a sucker.
Or you take Krugman over Gross? Want a bet?
I live next door to Hank. He's blasting his freakin' stereo right now:
YouTube - Geto Boys - Damn It Feels Good To Be A Gangsta
All these changes.. i'm
Shocked and Awe'd
Hank Paulson wants to take toxic debt out of the system, repackage it and then put it back in.
There are huge problems with his plan, however, that have to do with conflicts of interests, assessing imperfect information, and so on and so forth. Such problems are best dealt with in markets. In fact, to deal with such problems is why we put up with markets in the first place. They are necessary --- however flawed --- because they are the ONLY way to gather and evaluate vast amount of dispersed data, then use it to achieve complex levels of coordination.
Markets were beginning to do their job of getting toxic stuff accurately assessed. As the process got underway Paulson didnt like what he was seeing, and came up with a plan: suspend markets, then do the job that markets do.
What has to be understood about Paulsons plan is that it is no plan at all. AT THE LEVEL HE INTENDS IT, it is incoherent. He wants to achieve what markets achieve but by a process that is not market driven.
Actually, let me modify this
statement just a bit. Paulson has not suspended markets in relation to toxic debt. He lacks the power to do this. Markets are going to exist in relation to the debt. The problem is that these markets -- after Paulson gets through with them -- are not going to function in disaggregated form (where anybody can play via decisions to purchase or sell assets based on their own assessment). Rather, the newly structured markets will be restricted to players who are part of the Washington/Wall Street Nexus. That is, the new markets are going to be political.
This means: if you like what the current crop of political players is doing for you now, wait until another trillion dollars gets thrown down onto the table. Youre going to love it then.
The rest of us might not find matters to be so cool, however. Ever more goodies on the table means ever greater rewards to players who make it inside the Nexus, and find ways to skim off cream. Given the nature of the political world -- highly asymmetric information, barriers to entry, control of the organs of propaganda, control of the means of violence players in the Nexus operate in a world of low transparency (to put it mildly). This gives them latitude of action, an inevitable consequence of which is that those among them with least integrity enjoy greatest advantage. Their lack of scruples gives them an advantage over players whose range of action is impeded by moral considerations.
I personally think the political world at the moment is too strong to be beaten or even resisted by means of political activity taking place within the framework of the Constitution of 1789. The restraints of that document have long since been subverted. An appeal to arms will not work either, at least for the time being. This leaves one alternative. As in late Roman times, it is going to be necessary to create alternative moral structures. Or to say the same thing with different words: the only road ahead is internal secession.
My counsel is to stop thinking about the Washington/Wall Street Nexus, or about general solutions, and start setting up your own networks. Of course, Im a Southerner with a soft spot in my heart for certain tendencies.
If at first you dont secede, try, try again.
Badfed,
The underground economy becomes wider and deeper everyday, in J6P's eyes and wallet.
This is an unintended consequence going forward that Paulson and cronies have not even seen on the horizon, yet. IMHO
2kt
Gross is loading up on backed paper ...
Care to run us some numbers that prove it ain't so?
2kt | 09.22.08 - 12:57 am | #
2kt - if the paper's so good SELL IT ON THE OPEN MARKET.
If it can't be sold & need taxpayer bailout then do it by OUR rules not theirs. Beggers aren't choosers, eh?
that's exactly the strategy they have.
Make it so fast it makes your head spin.
krugman is totally right...it's all about paying huge premiums that make the banks whole again at our expense. Now you know the dems should not support it however they know if they do then they can kiss off the election.
Is this not a wonderful situation for all of us?
We lose with each and every potential outcome that has been laid out here.
And all of it designed to happen so quickly that any opposition will be seen as anti-american.
Fuck You Hank Paulson...I hope someone puts a fucking bullet in your skull....
Ciao
MS
Are folks here aware that barter is growing in popularity?
anonymous
i empathize with your frustration
the reference to violence is not a good idea and will not help us.
many of us here are angry and frustrated.
we must act constructively
While I'm not a fan of Krugman - he's right in this case - must be transparency, accountability, ownership, etc.
Paulson's comment that this would prevent banks from participating is a red herring - they have to disclose how, what, why, who, how much, etc. regardless of whether they agree to participate or not.
If they don't want to play - then there is not crisis.,
It may take a huge spreadsheet, per CR, but we can do that - further, saw that the banks want to suspend mark-to-market accounting - what? Regulators can choose to offer forbearance in computing capital if they choose, but for anyone's confidence to be increased, we have to know the truth!
Welcome back CR. Glad to see you put the evil twin back in the closet.
Bernie Sanders (Commie-Vermont):
Finally, we need to protect ourselves from being at the mercy of giant companies that are "too big to fail," that is, companies who are so large that their failure would cause systemic harm to the economy. We need to assess which companies fall into this category and insist they are broken up. Otherwise, the American taxpayer will continue to be on the financial hook for the risky behavior, the mismanagement, and even the illegal conduct of these companies' executives.
OpEdNews - Article: The Middle Class Must Not Be Forced to Bail Out Wall Street Greed
Anybody notice the revised SEC order on short sales? First part seems to be supportive of ETFs, but the second part seems to specifically crack down on SKF's counterparties. Waiting for official proshares position...
http://sec.gov/rules/other/2008/34-58611.pdf
In addition, we are clarifying that the exception applies to all market makers, including over-the-counter market makers, and that it applies to bona fide market making and hedging activity related directly to bona fide market making in exchange traded funds and exchange traded notes of which Covered Securities are a component. The purpose of this accommodation is to permit market makers to continue to provide liquidity to the markets.
To help ensure that this hedging exception does not result in increased short exposure in Covered Securities, we are limiting the exception so that if a customer or counterparty position in a derivative security based on a Covered Security is established after 12:01 a.m. E.D.T on September 22, 2008, a market maker may not effect a short sale in the Covered Security if the market maker knows that the customer's or counterparty's transaction will result in the customer or counterparty establishing or increasing an economic net short position (i.e., through actual positions, derivatives, or otherwise) in the issued share capital of a firm covered by this Order.
"Gold is taking a hit now too."
actually, it's in the same range it has been in since wednesday afternoon. right in the middle of it.
futures are so sedate as to be downright boring - split between nat gas and crude, bonds perfectly flat, spx exactly where it sat before the mini-rally at the close... yawn
To give you a bone, you can have 50% default and 80% loss severity. Fair enough? Just don't say NO, I will get pissed. How much does that hit the principal? Still $.05 in profit to the Feds is they pay $.60 on $1.
Then YOU buy it if its such a good deal - go to Greenwich press some flesh & hug some old widows and buy some of that fat under-priced action... make the big money.
Seriously - banks are pretty desperate to unload - run the numbers past some hedgies... you can get 2 and 20 of that shit til the cows come home if you can prove those numbers to them. make the case to them, not us.
Wonder why nobody's doing it?
""Fuck You Hank Paulson...I hope someone puts a fucking bullet in your skull....""
Now, now, Anonymous.... we need a public show trial, first.
If they're going to play Socialist for the wealthy, then we should play Communist Revolutionary.
Everyone knows their roles, right?
If they don't want to play - then there is not crisis.
Amen.
Fuck You Hank Paulson...I hope someone puts a fucking bullet in your skull....
Steady on, MS.
I agree, this all the feel of a good three card monte game. I can't imagine what Madison would be screaming right now. Leaving aside Jefferson and Jackson.
Cheers,
prat
C Mack writes:
"The underground economy becomes wider and deeper everyday, in J6P's eyes and wallet.
This is an unintended consequence going forward that Paulson and cronies have not even seen on the horizon, yet. IMHO"
think this through a little . Dont you think micro economies have been accounted for by Paulson and his cronies?
Regardless..
this is definitely an area for enterprising investors to fill.
alternate currencies,localized banks etc...
perhaps utilizing capital asymmetrically?
I'm all for that however that is not going to do a thing. I'm actually quite surprised (and will be shocked) that someone has not done something violent.
They either have great security or we are truly a pacifist nation.
I see more of the later...unfortunately for us being constructive is going to allow this whole rip-off to occur while we are busy discussing it.
Fuck us all 'cause we are all fucked.
Ciao
MS
I made my calls and sent my faxes to Senators and a Representative. Hopefully, they will get a glimmer of attention.
I watched Paulson on ABC this morning. He didn't really explain what the crisis was. I don't know why everyone is so scared. Let the financial system seize up for a few days, maybe a few months. So what. We'll have a sharp recession, people will start saving again, home prices will drop to affordable levels and we will have a much healthier economy in a few years.
Even a depression doesn't scare me. So we won't be able to afford chinese junk, hummers, mcmansions, sushi, and manicures.
Good. Americans will have to walk to places, grow vegetables, read a book for entertainment, swap tales, hunt, fish, chop wood, schuck (sp?) corn and pick apples, tomatoes, and arugulla.
How can I opt out of this bailout? I rent a cheap place, parked my savings in CDs and MMs two years ago, and drive a 15-yr old vehicle. I refused to jump into the housing nonsense that started here in San Diego.
Who speaks for me? Is this country mine anymore?
"perhaps utilizing capital asymmetrically?"
You've got my attention. Go ahead.
Americans will have to walk to places, grow vegetables, read a book for entertainment, swap tales, hunt, fish, chop wood, shuck corn and pick apples, tomatoes, and arugulla.
SDMisfit | 09.22.08 - 1:35 am | #
Stop looking in my windows !!!
ice catch peatey. interesting to see if SDS, URPIX, etc are going to still exist as of a week from now.
I asked this question in a previous thread and I understand that CR is perhaps a little busy.... but I'm hoping to get an answer in this one from anyone!
CR,
When you say the plan will achieve the primary objective, I think this will need to be clarified more.
Perhaps the banks will start to lend again, BUT, to whom will they lend and more importnantly, to whom will they NOT lend?
I cannot see the banks be willing to take but the smallest risks in their lending. Hence, they will lend to only those large well capitalized firms - financial and non-financial and the rest will have to go without.
Won't this mean that the small and medium sized businesses will be severly hampered in their cashflow financing needs?
What about the retail level? Will we see mortgages being offered again? To who? More credit cards? Personal and Auto loans? I seriously doubt that. I think we will get a two-tier credit system - liquidity and credit for the very safest and a drought for the rest.
I would really appreciate your thoughts on this as I feel it will be the measure by which the economy is affected (the two-tiered lending that is, not just your opinion...!!)
Is anybody supposed to keep track of what percentage of the bail-out ever gets loaned out?
I'm betting that a whole lotta the bail-out money never will be loaned out. It will be skimmed off as salaries, bonuses, administrative and other "expenses," dividends, etc., etc.
C'mon! Streeters see the writing on the Wall. They're going to use every available means to line their own pockets before the Wall comes crashing down.
Our plan is so good, so perfect for protecting taxpayer interest that the judiciary should be bypassed. Indeed, it should be written out of any oversight, and barred from any means of judging worthiness. Yes, on our own, we will ensure that the taxpayers interest is protect. Of course, they have not even the rights of a public company. No right to sack directorship, no right to vote, no right to bring pressure to bear for management steering. Instead believe we will do what is best for you. History has shown you the validity of the assertion.
A few years ago, I couldn't get anyone to read Jefferson at all, let alone listen to me quoting him.
He talked a lot about his fears that the 'monied incorporations' would become permanent, and would make real democracy impossible.
Along with the 1888 court decision to turn corporations into 'legal persons', we have gone beyond Jefferson's worst nightmares.
Remember this, when your children ask how we got here.
missing in hanky-poo's talk at 'merica is that him and his greedy ass friends are leveraged to beyond the sun withe securities tied to nothing but "up"...
That's why you won't hear a friggin' thing about the reality of why they stopped a market that was just at the cusp of staring to perform as it should.
Now it will be much worse and we get to pay for it.
Ciao
MS
Maybe we should inundate the information stream with such volume that no reader may keep up. Thereby we dilute and ultimately defeat the resistance.
Maybe we should inundate the information stream with such volume that no reader may keep up. Thereby we dilute and ultimately defeat the resistance.
I'm sure the CIA/NSA dossier compilers will have no trouble keeping up with us...
Dear Hank,
Thanks buddy. We always knew you wouldn't let us down.
Best,
Your Pals at GS
Calculated Risk writes:
"The answer is we don't know how bad this will be - and we need to make it transparent and the taxpayers should share in the ownership if they are required to recapitalize the banks."
Okay say it is transparent but still marked to model. Then what. I would love to have my assets marked to model and have you buy them with the assumption that the model is correct and you will gain in the end.
But correct me if I am wrong here. Is this not just a form of gambling and basically the problem with when capitalism is based on asset inflation speculation rather than actual production?
So we no have exactly the wrong equation still in place and excess debt which is worth less by the day and worthless once we lost trust in the value of the assets that back them up.
So how on it is possible to prop up the value or even return it to its peak given the trajectory of deflation we are on and it remains unclear whose trust this bailout is supposed to repair.
You earn trust not buy it. Once the trust is lost it takes years to get it back or a whole lot of forgiveness.
Being forced to forgive free-market capitalists of their debt on the backs of taxpayers but to not do so will kill everyone (or so we are told but not yet fully argued) sounds like blackmail.
Being asked to trust the Bush Administration and a former GS exec boggles the mind. You know the same lackadaisical bunch from Iraq to Katrina to sub-Prime even though concerns have been raised over and over and over. And we are supposed to trust...them?
Anyway, the 2.5 Billion bonuses for LEH is criminal if I were the DEMS I would be having a field day with that and anything else, even minor, before any sign off on any bail out.
Earn some trust Czar Paulson! Forgiveness begins at home, on Main Street.
SDMisfit
Seriously, did you just read Walden Pond, while on acid?
The issue isn't whether or not we're going to have a severe recession. It isn't whether or not we get to buy toys, or know our neighbors. The issue is, who is going to own our future.
Or if you like, whether or not we get to grow vegetables at all, on our collective work camps.
Econbrowser: Distressing Picture of the Day
here's a little graph of the coming second wave of mortgage default ...
and thanks to our civil servants you can add consumer and student loans to the avalanche tax payers will be on the hook for ...
Yossarian, that was unneccesarily harsh. Some of us have to figure out a way to think of the situation that lets us sleep. We kinda sorta know that it's a fairy tale, but you've got to sleep. And then we wake up and read and learn some more.
You notice there are 247 of us not sleeping.
"Or if you like, whether or not we get to grow vegetables at all, on our collective work camps."
well, seeing how russia is a model of fiscal stability and seems to have no problem digesting the gyrations of a relatively free equities market, and how china owns a good chunk of the world, perhaps a collectivist phase isn't a bad thing for creating a nation which knows the value of a buck.
Short the dollar
Short US treasuries
Long commodities
Sell US stocks and bonds
Cut up credit card
Join underground economy
Start underground bank
Screw these bastards
Will MS & GS have SIPC Insurance anymore? Are they still going to hold Investment Accounts?
"You've got my attention. Go ahead."
You will have to pay me for it
j/k
Well - capital can be used asymmetrically. Via - broad lending in micro amounts across geographic regions.
This can be done with minimal effort. IMO- There is the possibility of decent returns as long as there are tight controls with collateral and decent incentives for the borrowers.
And it only takes small investments. The proof of this has been demonstrated to some degree in Iraq and India via micro loans.
I have conceived a method that is unique in this realm and it is something I will implement soon. When the time is right.
Just think how much better off we would be if we had spent a trillion dollars on energy efficiency instead of saving a bunch of greedy bankers.
" broad lending in micro amounts across geographic regions."
let a million roach coaches roll... and may their tacos be tasty...
NYT: Big Financiers Start Lobbying for Wider Aid
Even as policy makers worked on details of a $700 billion bailout of the financial industry, Wall Street began looking for ways to profit from it.
Financial firms were lobbying to have all manner of troubled investments covered, not just those related to mortgages.
At the same time, investment firms were jockeying to oversee all the assets that Treasury plans to take off the books of financial institutions, a role that could earn them hundreds of millions of dollars a year in fees.
Nobody wants to be left out of Treasurys proposal to buy up bad assets of financial institutions.
The definition of Financial Institution should be as broad as possible, the Financial Services Roundtable, which represents big financial services companies, wrote in an e-mail message to members on Sunday.
The group said a wide variety of institutions as varied as mortgage lenders and insurance companies should be able to take advantage of the bailout, and that these companies should be able to sell off any investments linked to mortgages.
There is more.
Big Financiers Start to Lobby For Wider Aid - NY Times
Have a strong stomach. This is just ill. This is criminal. These are sociopaths whom want our money and our children's future.
The Google Finance site isn't working for me. Yahoo seems okay. Anybody else have difficult with the Google site?
W's plan sounds something like loan-sharking or paycheck cashing. Probably a growth area, plus the book-keeping is probably better than it was in Countrywide.
This price discovery in the effecient market of the USA is killing everyone. How to establish price when a few words from gov't agents who were previously active traders moves the market 1000 points in a week. Real markets? No. No advocate for the common man. But for big business? Yes, Treasury or Federal Reserve will issue fiat proclamations which alter landscape profoundly. Every investor should leave the public market, FOREVER. Transparency is only in the large players revealing themselves as operating adverse to common interests and contrary to real price discovery. If you are not lining their pockets, the croupier will toss the roulette wheel and walk away with ALL chips.
The WSJ editorial points out the public policy errors that helped to contribute to the problem - I'm all for holding those in the legislative/executive branch accountable as well.
We can have a 9/08 commission headed by CR do investigate. Now, that would be some rider to the current bill that would demonstate some courage. What to bet on the chances of that rider?
I've been thinking about the Moral Hazard associated with the bailout.
To me, this plan is nothing less than a failure of Reganomics. It's not just the deregulation that failed... it's also the tax cuts that have fueled our decifit spending.
Rather than trying to limit CEO pay, we should be looking at new tax sources to pay for this $700 billion... paygo style.
The logical solution is to go back to the pre-regan tax structure... with 70% maxium marginal rates. Tax the rich, and you'll limit the culture of greed.
The banks won't sell at a big discount as the losses will bankrupt them." The banks "will sell the assets they already marked down, but getting rid of those doesn't help their equity base at all, and preserving this is why they aren't doing anything."
Short selling bans only scare shareholders more as they can longer buy protection...
This is scary. Paulson and Co LLC must know that this plan will not work. Buying time so the market makes a more orderly sell off.
I know that there's many like me right now.I kid not. I don't know whether I should start drinking heavy or stay stone sober.I don't know if I want to know every little detail or glide thru in a haze.Thus far I've been reading every post and comment here and on several other sites and it sure is cutting into my Porn viewing time........Best of Luck to everybody during these trying times.
Nobody wants to be left out of Treasurys proposal to buy up bad assets of financial institutions.
This is too much. So these jokers are going to use their horrible balance sheets as a resume for managing ... the government's purchase of their horrible balance sheets.
Creative little weasels, aren't they?
The People's Republic of Wall St. and it's glorious leader's recent speech.
How much more destruction can we take after FNM, FRE, LEH and BS. The situation is dire as the enemy has initiated an offensive on our home bases in GS, MER and JPM.
These institutions CANNOT be allowed to fail, our lives depend on it.
The recent attacks by financial WMDs have shaken us to the core, we must not give up and take the fight to those terrorist group known as the 'free markets'. The 'free markets' cannot be allowed to succeed in their plan.
The Fed and Treasury has decided to act in the interests of the people. We must move fast and take action immediately, time is of the essence, this window of opportunity will not last forever. The alternative will be unthinkable.
Thus, we have mobilized our printing presses and are going to war.
It is now DECREED that our equity markets should not and must not fall. This is against our national interests.
This drastic step is deemed necessary as recent attacks launched against our enemies' elite troops of 'short sellers' by initiating the mother of all short squeezes has proved unsuccessful.
Traders and investors rejoice at this new edict. Please come back to our markets in droves, it is your patriotic and national duty. We will provide the impetus for your continued success by continuing to monitor the markets and changing the rules as we deem fit, there is no way we can lose.
We leave you with high hopes and our rallying cry "DOW 36,000! DOW 36,000!"
Have a nice day.
As a spittle-flecked reactionary right wing conservative bastard, this crisis has served only to frighten and confuse me. However, I will note that The Corner @ NRO is running pretty much entirely against the proposal:
The Corner on National Review Online
Hank's got a tough sell ahead of him if he doesn't rail-road it through pronto and, praise Madison!, he probably can't.
I still prefer small government, assholes.
Cheers,
prat
"A true capitalist loves inflation."
-Charlie Munger
Buying time so the market makes a more orderly sell off.
~ DaddieMac
they are buying time to off load more debt on the tax payer ... Hank is coming to the rescue, unless the Dems get some spine ...
The FED knows what big banks are in real trouble. It should simply pony up enough capital to put them on their feet and take ownership for that and not pay much to do so since it is saving them from collapse. The small banks can simply be allowed to fail. Small bank stockholders get wiped out. Big bank stockholders get an extreme haircut. And of course the government should take over running the big banks, kick out the overpaid executives and put in functionaries paid normal government salaries. Cutting the overhead would be a big help in lots of cases.
2kt - you'll have to stop making sense and talking real numbers .... grin
First - while CR is correct tehre ARE a some pools with very high loss ratios - the vast majority are nowhere even remotely close
The vast amjority of the appx $10 trillion in loans is prime fixed product with little likelihood of dramatic increases in losses
Even for the fraction of the $10 trillion in overall loans that are subprime and ALT-a the majority are not ever likely to see the kind of loss ratiosn CR notes
The math seems simple ... a $100 million pool with 50% lifetime foreclosure (never mind prepayments and refis will reduce the nunmber) and a 50% loss severity equals a 25% loss on face value ... the remaining loans still worth $75 million face
The ONLY market today is the vultures - who do not repesent any type real market value of the assets. And they only want to pay 25 cents on the dollar or so.
Rightly the investors refuse to sell an asset worth more than 75 cents on the dollar in even a severe model for 25 cents
If the Fed buys these assets for 60 cents on the dollar even at a 50% lifetime overall FC rate and a 50% loss severity on each the Fed still has 15 cents on the dollar to the good
In doing so the Fed pays far less than the real value based on cash flow and loan performance - so the investors DO take a big haircut
And with the inetntion to hold tehse assets and sell when market improves and as mkty conditions warrant there is a very good chance there could be a profit as you note
The fed borrowing and hold costs are extremely low which makes a profit even more likely
And unlike the other various bailout scenarios - where funds are lent on assets not owned - here the Fed owns the collateral directly and owns 100% of any potential gains as well
239 Visitors Online
Welcome
good turnout for a Sunday night
Such is the power of truth. Such is the power of truth in the minds of many men. That N. Roubini makes powerful argument that the investment banks must change their business model, merge, or cease to exist. With emboldened short sellers delivering a message not to be ignored, Wham! suddenly a transformation. Over another "working weekend" comes a chrysalis emerged double bank. When the redoubtable business of creation & production and the allocation of capital becomes but a game of pretend wizardry--You know you are in OZ. Ozmandyias. What a devastation to the true patriots whose blood was pledged to a true cause. Patriots who spent their hard muscled blood, sweat, tears to support the most comely ideas socialized men have ever known. LIBERTY. Ability to make, be, do according to the capacity infused by the great Creator and the vision of individual man. Patriots who were willing to forgoe their futures in order to insure for unborn generations a tremendous inheritance at birth. These tiny wonders of 13 colonies have become a nation of 300 millions. But if only a handful of this legion will rise up and reclaim their birthright, this small setback of material prosperity can be easily overcome, and another wave of innovation, invention, and common wealth be renewed. Giving in to a moment's weakness and looking for a "saviour" in a strong man of mortal flesh is a remake of the Third Reich. Enduring an economic recession, enduring hunger for work-money-possession is a small concession to a Republic that can long endure. Think of the great persons whose actions resisted great evil and who gave the greatest and final sacrifice of their entire life to preserve your LIBERTY. Do not allow its destruction for the pittance of minor possessions. Better to possess nothing and one's true knowledge of freedom than to barely exist as a surfeited slave of pretend prosperity!
Trash for cash? No, cash is now trash. Keep your fundamental ideals through a mean time and stay a freeman, otherwise slavery, bread, circuses, and dimunition.
Correct me if I'm wrong, but wouldn't it be better and cheaper to let the failed banks fail than to try to bail them out until they fail anyways? There's some big assumptions here that these failed banks wouldn't fail if they had just a little bit more money.
In other words, isn't this bailout essentially doubling your bet after a loss, hoping to either break even or lose twice as much? If the banks fail their excess debt gets dismissed - if they fail after a bailout infusion then that infusion evaporates with it.
Credit Suisse chart was interesting especially if you apply the actual asset value as a delta. Accounting for another 20% pullback, those people would (or should) accelerate their jingle mail faster given the evaporation of equity at a faster pace than in subprime. This would recognize many more foreclosures on a rapid logarithmic delta as apposed to a linear one.
CHURCH, biatches
Dryfly,
People will not buy this paper on open market due to "mark to market" rules.
Say you are big bank and have similar paper. If you buy like-kind paper at $.60, you need to mark your inventory down to that level. If market keeps in panic mode longer, and it will, and some one else makes sales at $.50, you would need to take another writedown, etc., etc.
Long-term profit potential notwithstanding, you can bring your own bank down even if you bought a bargain. Nobody will do it. Mark to market accounting intended to prevent fraud ala-Enron, but in this case it kills decent bonds and forces banks to their knees. Feds understood this and this is why they are doing what they are doing.
Pimco funds can buy those bonds since they are mutual funds and they can take a short-term hit and would not have to raise any capital.
I'll settle for translucent.
In addition to junk mortgage related assets, Treasury wants to buy "car loans, credit-card debt and other devalued assets."
Also, "the Treasury said in a statement late yesterday it would limit its $50 billion plan for insuring money-market funds to those held by investors as of Sept. 19, excluding any subsequent contributions."
Bush Urges Quick Action on Financial Rescue Package (Update1) - Bloomberg.com
220mph, in lieu of actual transparency, speculation about .60 par, etc, is a discussion of angels on pins.
'vultures', eh? the sheer contempt for the free market is really remarkable.
Hmmm...just had an interesting thought for a long equity play...given all that's going on...didn't Black Rock get some gigs recently "managing" distressed debt? Sounds like they could be in line for another plate.
"I should start drinking heavy or stay stone sober."
They tax alcohol so if your going to do it you had better start looking into home brew (screw'em), with the double digit inflation that is coming if this goes threw you ain't gonna be able to afford the store bought anyway.
UMM, I think we have way too many houses. They aren't worth very much right now.
joe shmoe
"W's plan sounds something like loan-sharking or paycheck cashing. Probably a growth area, plus the book-keeping is probably better than it was in Countrywide."
Lol :: bookkeeping on this would be easy and in my vision does not involve usury in the beginning stages at all.
So any way-- my hope is that
lending can be done with more good will in mind than profit or gain.
Lending could be an activity
wheere incentives are more important than the consequences.
However the consequences would be enough of a deterrent that most individuals would find it distasteful to renege on their commitments.
It looks like two somebodies with numbers in their handles are trying too hard to make this all sound like a pretty gosh darn good deal for the U.S. Treasury.
I smell a rat. If it's a good deal, why exactly do we have to do it RIGHT NOW with no transparency and no oversight?
suecris, why do you hate america?
Comrade Maven | 09.22.08 - 2:00 am |
yep, more debt while the economy is only getting worse ...
as far as valuations you're shooting at a sinking target ...
Vito, is that you posting as 'w'? Where's Vinny?
the banks get a big haircut, a fraction of the real value based on cash flows/present value ... but they also do not ahve to sell for "vulture" fire sale prices
This allows the banks to get their balance sheet back in shape
And contrary to CR's comment - taxpayers DO have an "ownership" interest - they own 100% of the assets - and 100% of any possible profit in the future
Additionally, and perhaps more important - the US govt buys these hundreds of billions in assets ...
if instead they are sold to the vultures - the vast amjority fo these assets would be transferred to foreign entities, foreign gobt's, foreign companies and soverign wealth funds ... we would be selling the heart of the Country - our key finacial assets and essentially the entoire financial system - to foreigners - for fire sale prices - pennies on the dollar
Now THERE is MORAL HAZARD for you ...
ALL your precious metals are ours.
Hear, hear SueCris. Atlas among flying monkeys.
W
Do you mean . . . a kinder, gentler loan-sharking? Kind of like Tony Soprano after he discovered he liked animals?
I'm almost ready to invest.
Will you have a prospectus?
@ Jim
"The FED knows what big banks are in real trouble. It should simply pony up enough capital to put them on their feet and take ownership for that and not pay much to do so since it is saving them from collapse."
Please do NOT use the word "pony', 'cause I'm NOT seeing one in my future.
"we would be selling the heart of the Country"
really? a pile of misguided, mysterious derivatives of derivatives which theoretically could have already traded hands across multiple continents dozens of times is "the heart of the Country"?
have you considered writing lyrics for John Mellencamp?
It's 2 a.m. Do you know where your bail-out is?
suecris writes:
"Vito, is that you posting as 'w'? Where's Vinny? "
he is eating spaghetti
People are obsessed with ROI now.
Return OF Investment.
220mph,
Re: moral hazard: I do not think that word means what you think that word means.
220mph and 2k, dudes, sounds like y'all need to start a bond fund. Me? I'd just like to not invest in it if you don't mind.
Warmest,
prat
I'll even pass on ROI for ROC. Return of Constitution. Otherwise fit us all for grey suits and manacles for state-directed tasking.
With all this shit going down, someone better be getting us all ponies.
And we need a LOT more popcorn this week!!
hank said on the talking heads shows this sunday that we have to save the banks or all lending will come to a halt
nobody will buy houses, pay checks will stop, business wont have the cash to restock inventory, or maintain production and generally meet cash flow needs.
i have a proposal
keep the 700 billion, start a new bank, the last federal bank of the united states
lend money from the treasury directly to home buyers, businesses, consumers and students for tuition etc. charge interest and restock the treasury.
bypass the failed IBs, let them rot in hell.
really? a pile of misguided, mysterious derivatives of derivatives which theoretically could have already traded hands across multiple continents dozens of times is "the heart of the Country"?
have you considered writing lyrics for John Mellencamp?
Good one, bgates. When the visitor count drops below 15 trillion there's time to be funny.
2kt - the Fed doesn't have a clue IMO about the mark to market - FASB 157 - issues ... Paulson refuses to consider any change to this terrible rule
We could solve the whole problem - elimiante the death spiral mark to market "fair value" is causing - by simply resending the rule - allowing assets bought for as investments - not for sale - to be valued according to its capitalized cash flow
If the loans are performing as expected and originally planned - as the vast majority (well over 90% of ALL loans) are - then they are not impaired and should not be forced to be repeatedly marked down to the current fire sale panic selling prices
This would immeduately fix the balance sheet of many/most of these companies ... and at zero costs to the taxpayers
And as far as I can see at no negative to anyone - it would simply be valuing the assets as they should be - based on cash flow
Right now mark to market is simply ridiculous - with an orderly market its an ok rule - witha huge dislocation as now - where tehre are no buyers other than vultures - it is a self fueling death spiral
"lend money from the treasury directly to home buyers, businesses, consumers and students for tuition etc. charge interest and restock the treasury.
bypass the failed IBs, let them rot in hell."
too much risk.holding companies where designed for this type of situation.
however short selling must return or the market will lose faith.
The markets are rigged, there is no way to lose, bet on it going up in the short term.
the revised option short rules would most definitely not permit creation of new short etf shares whose underlying consist of prohibited financial stocks.
it says that if the market maker knows that the party taking on the position is increasing negative delta or gamma then he may not short to hedge his counterposition.
in this case, "know" means "know or should know"
no way would they not know what a short etf counterparty was doing.
WhyTF do we have so many shill IB types on here now? Do you guys really think you are going to sway any of us here? I know you've got a lot of time now that you've lost your job, but hey, piss off, ya know? We dont need any more of the problem telling us how the selfserving solution is so great. Wankers.
220 MPH writes:
"taxpayers DO have an "ownership" interest - they own 100% of the assets - and 100% of any possible profit in the future"
or 100% of the loss as we have no frickin' idea what the assets are worth...none...but hey let's buy them for what we are told they worth by gamblers...otherwise the chinese or the saudis or ? (i hear the Iraqis are sitting on 80 Billion plus)...or
some legs busted and heads broken...again this is blackmail
"ownership" as in "ownership society"?
and that got us where....oh yeah...here...
You guys got your deltas, you got some vegas, throw in some betas, maybe a sprinkle of gamma.
Somewhere along the line you forgot any profit. Maybe ya headed along the wrong vector.
Hell, the problem is we need more models. Obviously.
Glorious lender writes:
The markets are rigged, there is no way to lose, bet on it going up in the short term.
Unless people realize they have absolutely no downside protection... short term of course =)
are designed for this situation i meant .
the stock market is not THE economy...seriously....
good night and good luck
You can't use current cash flow value if you have a high expectation that the future cash flows will never materialize. Hence, MtM, since it incorporates the perception of future risk.
"bgates - 'vultures', eh? the sheer contempt for the free market is really remarkable."
Contempt for the "free market"?
Hardly ...
What we have is in no way a "free" market - which is buyers and sellers on generally equal terms
The only buyers in the market today are vultures looking for distressed assets - and only willing to pay fire sale prices ... we do not have any semblance of a free or orderly market today
Fair market value is supposed to exclude distressed sales - unfortunately that model fail when ALL you have are distressed sales ....
Do you mean . . . a kinder, gentler loan-sharking? Kind of like Tony Soprano after he discovered he liked animals?
I'm almost ready to invest.
Will you have a prospectus?
sure lol. it's in the hand shake
DaddieMac writes:
Unless people realize they have absolutely no downside protection... short term of course =)
If the markets move down it will show a rejection of the paulson doctrine. This WILL NOT be allowed to happen.
Short term of course.
So go make a killing, may be the last sure thing for a long time.
2kt and 220mph,
If you are so convinced the FED will make money on the deal, what is the argument against some transparency then? If there's nothing to hide, banks should happy to let know what was sold for how much, no?
"Fair market value is supposed to exclude distressed sales "
now THAT is better comedy writing than i've been forced to endure on tonight's emmys bar none, excepting Don Rickles, of course.
would you have been happier if that saudi prince had just given away all of his C shares in '95 - "sorry, guys, that really wasn't fair"...
and how about those folks selling those mcmansions in riverside county at under 300K which were 650 just a year ago - is it UNGENTLEMANLY to maybe give 'em an offer at their new listing price?
exactly what planet do you live on, 220?
which is buyers and sellers on generally equal terms
Heh. Funny, I noticed a lack of a free market in housing a year back or so. I don't remember you IB types worrying so much about panicked buying...
Or do free markets only "not" "work" in a down market?
Just curious.
Cheers,
prat
220 MPH writes:
"Fair market value is supposed to exclude distressed sales -"
Ummm....seriously? Tell that to a lender when you try to purchase for "fair" market next to recent distressed sale or better yet try to sell your asset for "fair" market value next to the distressed sale...or even one say a mile a way or depending on the assets....a continent away....
DEFLATION....look it up! as is ASSET DEFLATION.
w said, too much risk for treasury to bypass banks and loan directly to business and consumers...HAHAHAHAH
you are kidding right??
we are about to be put on the hook for all the risk and get no equity stake in return
WTF is that???
"220mph writes:
2kt - the Fed doesn't have a clue IMO about the mark to market - FASB 157 - issues ... Paulson refuses to consider any change to this terrible rule
We could solve the whole problem - elimiante the death spiral mark to market "fair value" is causing - by simply resending the rule - allowing assets bought for as investments - not for sale - to be valued according to its capitalized cash flow "
220.......
Are you sure that regular banks HAVE to value their held mortgage portfolio to "market" ?
As long as they are not in the trading portfolio and are regular mortgages, they are valued at amortized cost less expected credit losses. No?
the consequences would be enough of a deterrent that most individuals would find it distasteful to renege
Yup, this sounds like a loan-sharking operation, all right!
My uncle Freddie and my aunt Fannie told me that there is no such thing as a sure thing...
Ziggurat writes:
Are you sure that regular banks HAVE to value their held mortgage portfolio to "market" ?
As long as they are not in the trading portfolio and are regular mortgages, they are valued at amortized cost less expected credit losses. No?
I think you are correct on this. And for the regulars the loan loss provision is non-performing loans versus under performing assets?
Anyway. That would be my take and perhaps one reason MS and GS want to go straight, as it were...
"Comrade Yossarian writes:
SDMisfit
Seriously, did you just read Walden Pond, while on acid?"
Lol that's almost as funny as Herr Yossarian thinking we ever get to determine who owns our futures.
sure hope lehman stock holders find a way to bring suit against their top management for taking a 2.5 billion bri i mean incentive payment from barclays for selling the company.
ok
enuf punishment for one night
OK serious question.
Will this bullshit bailout actually help me get a loan for a home 7 months from now?
/Fist time home buyer
BB says: People are obsessed with ROI now. Return OF Investment.
Thanks. I needed a good laugh.
rationaljeff writes:
OK serious question.
Will this bullshit bailout actually help me get a loan for a home 7 months from now?
No idea, but this bailout is going to make house prices stay as high as possible for as long as possible.
Wait, these are Level 3 assets right? You're holding them to maturity, right? What do you care if there's only fire sale prices?
I've got an idea: Treasury can't buy anything that has been classified as Level 3 prior to September 19th, 2008.
Most of the smart guys who caused this mess have already moved all of their assets offshore. Only the stupid rich people who didn't plan for this will have to pay in increased taxes.
When all else fails:
liquor and whores
"Most of the smart guys who caused this mess have already moved all of their assets offshore. Only the stupid rich people who didn't plan for this will have to pay in increased taxes."
There's more to it than that. Think it through. You're going in the right direction.
Anybody talking about a 5% loss in MBS hasn't seen the exurban bubble neighborhoods. I've seen neighborhoods in the CA Inland Empire which look like a neutron bomb has hit. Nobody's there and the landscaping is dead. Nobody really wants a 4000 sq ft. home 40 miles from employment. Vast tracts are totally useless and losses there will approach 100%. I understand it's the same story in all the other bubble markets. High-rise urban condos have similar problems although they will not be totally abandoned and so they won't be total losses if they get completed. Still, a 70% loss is going to be perfectly ordinary there.
For what it's worth, I took a look at Wells Fargo.
They have about $400 billion in loans and they don't mark them to fair value.
Except they have stuff for sale or in trading portfolios or derivatives, etc of $150 billion which they are valuing at "fair value" using fas 157.
The stuff they call "Loans" probably actually look like loans and not CDO's or other impossible to value assets.
e10vq
Here are the coming consequences of Paulson's plan, in order:
My guess is that we go from 1 to 3 by winter of 2009.
A better plan would be transparent (all deals would be publicized), involve a share in ownership for the taxpayers, and have substantial oversight. We can do better.
CR, that's what my letters today said, and my phone calls tomorrow will say. If it must be passed so quickly the American people, at the very least, deserve transparency and oversight.
Thanks for all you've kept us up with these last few weeks.
Why do US taxpayers let this happen over and over and over and over and over....????
ok one more shot
as it turns out paulson was quoted as saying actually the banking industry really didnt need the bailout that badly
really
heres the quote
tomorrows NYT
But Mr. Paulson said that he was concerned that imposing limits on the compensation of executives could discourage companies from participating in the program.
If we design it so its punitive and so institutions arent going to participate, this wont work the way we need it to work, Mr. Paulson said on Fox News Sunday. Lets talk about executive salaries. There have been excesses there. I agree with the American people. Pay should be for performance, not for failure.
But he quickly added: But we need this system to work, and so we the reforms need to come afterwards.
The fact that we have an economy that depends so inordinately on debt creation ought to open a few people's eyes.
The logic of the crisis seems to call for an intervention ...
Actually, the "logic of the crisis" demands the use of the bankruptcy laws. They are designed to allow reorganization while being protected from creditors. Of course this usually wipes out shareholders, which I'm sure is the problem here. Scum like Paulson, Bernanke et al prefer to wipe out taxpayers instead. The fact that they appear to be joined by the US Congress in this just adds to the disgrace.
ttp://www.nytimes.com/2008/09/22/business/22paulson.html?_r=1&hp=&pagewanted=print&oref=slogin
the link from above paulson quote
bye (i mean sell)
From bloomberg:
"Goldman Sachs Group Inc. and Morgan Stanley concluded there is no future in remaining investment banks now that investors have determined the model is broken."
The model is broken. Investment bankers are on the scrap heap. What we are watching is these people twisting the government to try to find them a safe place to anchor from the storm where they can continue to accrete wealth at a similar rate to their last 5 years of bonuses. They have private schools, jet shares and hamptons holiday houses to maintain to say nothing of their professional shopper wives and girlfriends and tax accountants who help them with their family trusts in the caymans.
Ask them how much of their money they would willingly put into mortgage backed securities, or even their own stocks right now.
Here are the coming consequences of Paulson's plan, in order:
My guess is that we go from 1 to 3 by winter of 2009.
Succinct and inarguable.
Oh, wait, it was me that wrote that.
I have no problem with some level of transparency at all - to the extent rational and practical
And as to knowing the values of these assets - the claism we have no clue is simply silly ...
Again the vast majority - 80% according to recent MBA reports - of the appx $10.7 trillion in loans in the US are prime loans
We know there is little overall likelihood of any dramatic change in this group of loans
Subprime loans were 12% (6% arm and 6% fixed) of the total loan pool but represented 50% of the foreclosures in the June 2008 MBA report - but we also know that subprime defaults have largely peaked
And even our host acknowleges ALT-A rates will not come anywhere close to subprime rates - quote from CR from a few months ago:
"I don't think anyone was suggesting that Alt-A delinquency rates would be as high as subprime. So Mr. Perry is creating a strawman here. The suggestion is that Alt-A would see a substantial increase in delinquency rates, and, as a result, the sector specific credit crunch would also impact Alt-A. "
So we DO know - or can relatively accurately predict - the performance of the loans out there - and with the perfomance prohjections it is relatively easy to come up with values
This whole idea that tehre is sonme great unknown out there just isn't supported it seems by facts
Yes - it IS true the whole country could go in the dumper - witha catastrophic collapse - but that is not something a rational amalysis of value would attempt to address
w said, too much risk for treasury to bypass banks and loan directly to business and consumers"...HAHAHAHAH
you are kidding right??
we are about to be put on the hook for all the risk and get no equity stake in return
WTF is that???"
that is what the holding companies are for.
Any company that sells distressed debt should also be forced to adopt a company-wide uniform policy. I'm thinking something like this:
http://aci.az.gov/images/needle_trades/orange_jump_suit.jpg
may be... not now but later... the final solution after a more extensive nacionalization will be... the COMUNISM!!!!
so next century the comunism in the USA and a wild capitalism in Russia, that's very funny.
Sorry, but for the most part, all I see going on here are deck chairs being re-arranged.
At the most basic level, why isn't anyone talking about the likely scenarios going forward--there are two obvious ones--and the personal responses they require?
All I see here is hysteria.
whole idea that tehre is sonme great unknown out there just isn't supported it seems by facts
It's not an "unknown".
The odds are very high that we've entered a long-term period of rising mortgage rates. Even with the crash and panic, the 30-year rates still haven't fallen to the previous low of late 2003.
These assets will lose value for decades as interest rates rise.
220....
I'm calling you on the statement about FAS 157 being applied to vanilla bank loan portfolios.
Once again, look at the WFC 10Q. Only a relatively small fraction of WFC assets are being valued using FAS 157.
A lot of the assets that are being valued using FAS 157 are actually in the process of being traded/sold, so it isn't that hard to get a market price.
So...aren't you really talking about structured finance and not vanilla banks here?
ALL you have are distressed sales
How could that have happened?
ziggurat - I don't know the full answer - at least not case by case basis - on who does and doesn't marlk to market ... I do know Fannie for exampole had billions in "fair value" write downs (although to be fair I did not look up what they were for) in each of 1st 2 qtrs of 2008
I know Thornburg has said Mark to Market is the root of their problems - despite that thebought the laons to hold
And I saw a quote yesterday re: AIG where they said the majority of their assets are inetnded to be held to maturity, but they had to take billions of mark to marlet write downs ... their comment was the ACTUAL losses were something like 10% of what they ahd to take as write downs if they hold to maturity
I also spoke Thurs with Managing Director and Chief Credit Officer of a multi-billion REIT, a buyter of MBS, CDO's etc who said al of tehir assets are bought for long term hold, but they;ve had to mark to market a majority ...
His comment was unequivicol - if FASB 157 was lifted - he said if its only lifted for AAA assets - the markets would be fixed lietrally overnite ... hsi comment was this would "stop the death spiral in its tracks"
mp,
True. Start it up by laying out the 2.
220....
You are getting at the REAL problem. The stuff that is causing the biggest problems is the structured finance crap that is too complicated to value.
And they are using credit default swaps to price the stuff that is impossible to price.
By the way, regular mortgages aren't rated AAA, no?
the markets would be fixed lietrally overnite
And Paulson told me that the crash was contained.
Really.
I'm starting to think this was a sham proposal meant to placate the markets and CB's in order to buy enough time to get the GS/MS bank deal worked out, backstop the MMF's, and co-ordinate a new world-wide ban on short-selling. Classic mis-direction.
There is just no way any Republican would think he was going to get that kind of bill past a Democratic Congress in an election year.
"Here are the coming consequences of Paulson's plan, in order:
My guess is that we go from 1 to 3 by winter of 2009."
I couldn't agree more. The only one to add, and it's linked to #3 is huge tax increases.
And ziggurat - I think you are correct - I used the term "banks" when it should have said "investment banks"
Which inetrestingly as of 9pm means the same thing now that Goldman Sachs and Morgan Stanley are real banks and not investment banks
I wonder if that lets them unwind the mark to market write downs they had to take - in Morgans case $15 billion and GS appx $5 billion??
On a side note the comments about Paulson not pushing for restrictions on executive compensation were also in large part addressed withe the Morgan and Goldman becoming banks scenario - as Bloomberg notes in their story
"They're going to have to protect their deposit bases by law, and the days of high leverage are gone,'' said Charles Geisst, a finance professor at Manhattan College in Riverdale, New York, who wrote Wall Street: A History.''The days of the big bonuses are gone."
It would be nice if you young "finance punks" would read some history.
You're so focused on the technical terminology that you've missed the forest. You don't get to build infinite debt.
period.
Simple.
All this crap "mark to market", "mark to model", "distressed market", "FASB"...
A meaningless decorative pattern on a ticking a-bomb.
South Seas Bubble
John Law.
Tulip.
350% Debt to GDP ratio.
Is is really that hard to grasp?
Gumbo- "True. Start it up by laying out the 2."
Son of mp is, at this hour, updating two cases I prepared sixteen years ago:
Case "Delta"- Deflation
Case "India"- Hyperinflation
Each of you need to decide what you and your family's mission is, then prepare an estimate of the situation.
Here is a format from the military that you can adapt to your own needs:
Appendix F - Commander's Estimate of the Situation
Take into consideration the risk of over-reacting, as well as the risk of making the wrong decision. Also evalute the risk of being given wrong information, such as was the case in Weimar Germany re inflation and money supply, and delineate indicators that would suggest that development.
Sorry, but you folks are way behind the power curve. With all due respect, you need to get on top of it or all of you are going to end up roadkill.
So, 220 --
I still contend that there is no good way to value absurdly complex sturctured finance crap.
If they could really do it by changing accounting rules, they would have.
In the 80's, they changed the definition of capital in order to let Citi write off a bunch of LDC loans.
A panic is a crisis of confidence and changing accounting rules won't do much to improve it.
By the way, I don't like mark to market and do like the fact that vanilla banks keep their held portfolio in real loans, not structured finance crap.
mp,
Now there's some meat, thanks.
This whole idea that tehre is sonme great unknown out there just isn't supported it seems by facts
Policy needs to be written in a bullet-proof defensive manner. They have already opened it up for any type of financial instrument. Should we rely on the inner moral compasses of Wall Street to ensure that the taxpayers don't get stuck with the most toxic of the waste? I don't see why you are bothering to argue the quality of the mortgage portfolio when the plan is being widened to cover all instruments.
mp.....
what's it going to be? Deflation or hyperinflation?
unfortunately, there is no where to hide from systemic risk.
Unfortunately my hopes for manned interstellar flight by 2010 will probably not materialize.
Mr. Paulson said that he was concerned that imposing limits on the compensation of executives could discourage companies from participating in the program.
Companies discouraged from participating in the program obviously didn't need the program.
Companies apparently discouraged, but needing the program also need the courage to find new executives.
"But Mr. Paulson said that he was concerned that imposing limits on the compensation of executives could discourage companies from participating in the program."
This ticked me off when he said that. If this is such a great deal for these banks and they are so desperate to shed themselves of their "toxic waste" why wouldn't their execs take a haircut on compensation. J6P has had to take a haircut to keep his job in alot of cases.
and zigg ... BTW - thanks for the reasoned discussion and debate - for helping fill in the blanks
deflation is the path trying to be managed by Treasury and FED.
hyperinflaton means we be fucked
the US can live with deflation and a prolonged recession....question is can the Chinese and Saudis? they may be fucked by option 1 or 2..
and Karl....define "finance punk."
a lot of us know our history hence we
are none to keen on the bail out plan
being devised by Goldman Sachs, I mean Sec. Paulson, and would prefer that investors and (former) investment bankers learn to live with
their gambling debts and not ask taxpayers to both save their sorry assess from the sharks AND go on some 12 step program with them for who knows how long on recovery road
CR: A better plan would be transparent (all deals would be publicized), involve a share in ownership for the taxpayers, and have substantial oversight. We can do better.
Undoubtedly. When, though, is the last time we did any such thing?
You will have to pick through the ruins of mid-20th century liberalism for the answer.
Everyone remembers that ideology. And how it oppressed us. And so we ditched it and became fat, stupid and broke, instead.
With all due respect, you need to get on top of it or all of you are going to end up roadkill.
mp
Not in my neck of the woods, literally. We had a community meeting this evening (another topic, regarding the winter plans for possible river cresting)and the other 8 people who live on my 2.5 dirt road surrounded by National Forest have decided if the stuff hits the fan, if we cut down a few old growth trees at the beginning of our private (we maintain) road, anybody would play hell getting through. We are prepared.
In case we missed it here in the comments -- a very interesting post at the Roubini website:
RGE - America appoints a Magister Populi to deal with the financial crisis
Now, regarding Prof. Roubini's recent essays: Is there anyone here that can analyze the style of his writing, and possibly compare it with other contributors on his rgemonitor? I'm particularly curious if Brad Setser is penning some of the content published under the Roubini marque.
And do we know why Setser moved his blog to the Council on Foreign Relations blog a while back? Setser is affiliated with the both the CoFR, and RGEmonitor. Besides Setser, does Roubini or other RGE people (i.e. Summers?) have any other relations with the CoFR?
zigg - structured investment of these types all have a mortgage (or pool of them) of some sort at the bottom of the pile ... and each tranche or portion of the pool split into a structured investment is entitled to a well defined share
The AAA stuff generally represents as I understand it the majority - the largest part - the biggest "slice" - and also has probably the least complicated "return" or "share" of the revenue
(since the AAA tranches get the first dollars - and the majority of $ - it generally, again as I understand it - wouldd take a huge foreclosure rate and loss severity before a AAA tranche loses on a cash flow basis)
If we know the value of the underlying mortgages and we know what "share" each "slice" is entitled to - it seems not that hard to figure values of any of them
It is complex but certainly not impossible
Not at all unlike the complexity of doing title work - where every property was once a big huge piece when the givt stole from the Indians - and where we have to tarck many, many splits etc over the years
deflationary joe.....
In the 1980's we went through a period of significant inflation but not hyperinflation.
Wouldn't 20% inflation fix a lot of borrowers?
20% over a couple of years is a real ass kicking, but not hyperinflation.
In fact, we have already gotten nailed for that amount over the last couple of years if you use honest inflation numbers and also consider the trashing of the dollar.
How can bucky stay strong through this chaos. Methinks inflation is in the cards.
Ziggurat- "what's it going to be? Deflation or hyperinflation?
unfortunately, there is no where to hide from systemic risk"
Deflation would be the natural course, but public policy could lead to hyperflation. One must be prepared for both. It's necessary to maintain a running estimate of the situation in order to know which way it's going to go.
There may be no "hiding" from systemic risk, but why stand in front of the steamroller? Risks are to be MITIGATED, and that's why you plan. If you don't plan, you lose.
Certain actions may be required by both scenarios. Determine what they are and implement them without fear.
Evaluate the quality of incoming information. For example, you can look for indicators that would suggest a decision to inflate: changes in inflation methodology (a Weimar trick); late reporting of money supply or inflation data; dropping certain statistics from reporting (M3).
In short, start think like survivors instead of victims.
I'm not trying to cop-out, but it's late here. I buried a friend today, so it has been a long day.
condolences mp.
I'm not trying to cop-out, but it's late here. I buried a friend today, so it has been a long day.
mp
Sorry to hear that, mp. Always tough.
My view of electoral politics and elected officials is jaundiced at best, and I have not written any elected officials since my time as an activist twenty years ago and more. Well, when ya gotta, ya gotta. I include here the full text of the missal I sent to my senators and to my representative. Any one who wants to use some portion of this as boilerplate in their own letters, in concept, in part, or entire, is more than welcome:
Madame Senator:
I implore you NOT to pass the measure before you proposing sweeping financial emergency powers and unlimited funding authority for Treasury Secretary Henry Paulson. This proposal in every aspect flies in the face of the fiduciary responsibilities of our public authorities and government, and will fail in its stated purposes.
The complete lack of oversight and blanket legal immunity solicited in this proposal abandons any governance over how this vast authority and funding is expended. In our political tradition this is odious, and much harm will result, human frailty being what it is.
This program is clearly intended to purchase securities from financial institutions, many of them active speculators, at present nominal prices which are above the underlying values of those instruments, and it appears far over what those participants will actually pay for them themselves. With prices of underlying assets, principally home mortgages in the United States, still dropping, this guarantees massive financial losses for the public acquiring authorities. It is a direct gift of money to failed speculators without any legal check.
These purchases will not serve to halt the decline in mortgage prices. Those prices are inflated, and their price declines will not flatten until they approach the levels which the income of buyers can support, and which private investment capital, of which be it said there are hundreds of billions of dollars aloof from the markets, deems profitable.
This action will not in many cases recapitalize banking institutions presently holding such declining securities, as the numerous losses of these firms on other speculative investments such as complex derivatives, securitized junk bond debt, and considerable sector overcapacity in a declining economic cycle, ensure that many will yet cease business or fail outright.
I well understand that the banking system in the United States is severely damaged. Its rescue will involve substantial public investment into tens of billions of dollars, and more; this is unavoidable, and I do not call on you to prohibit all public funding. Such intervention must be authorized in a form which has the best chance of success, the best recovery for the public, and the least room for misappropriation, malinvestment, or outright graft. Time is of the essence, but more functional programs will better serve.
The Congress must promptly enact a public authority vested with emergency powers to wholly seize banks or bank-like financial institutions when near failure but not formally insolvent when these are of a size as to pose systemic risks to the banking system or the country. These can be supported with combinations of public guarantees and funding in return for equity or temporary public ownership, with failed management replaced, and other necessary actions taken.
The Congress must authorize such a public conservator to strip out mortgage securities from failed institutions in public control---but only those---into a public trust with powers to renegotiate the terms of the underlying contracts, and the mandate to hold such securities for a period of years until property markets settle on appropriate price levels, so as to avoid further price depressing sales.
The Congress must promptly authorize such an agency to lend to solvent banks or bank-like agencies under market pressure in return for equity warrants in those institutions at prices and terms determined by the public authority. When this crisis is passed, these public investments can be resold to private investors with recovery for the public. As you are aware, the Federal Reserve has no such authority, nor should it be given such.
The Congress must consider authorizing public investment authorities capitalized in the $100 billion range to lend directly to the public and to institutions in instances, such as the present, of unwillingness by participants in the banking system to lend to each other or conduct normal business. This might involve direct loans to sound small businesses to maintain operations where they are presently damaged by market credit rationing. This might involve directly underwriting and guaranteeing municipal and other public authority bond offerings since those markets remain essential but impaired. When and as the present financial crisis eases, these unimpaired bridge banking services can be sold to private investors, or better retained as public credit authorities as Congress deems wise.
The Congress must mandate that the administrators of these various emergency and service funding authorities be separate from both the Treasury and the Federal Reserve, that they personally have experience as senior public regulators or otherwise have served in public financial system administrative capacities, that they have stringent accounting and reporting requirements back to the Congress, and optimally that they have a record of skepticism toward the innovations/shenanigans of the investment banking industry which have caused our banking system so much harm at present.
The Congress must authorize further funding for the Federal Deposit Insurance Corporation, both for public and market confidence in present conditions and because probable losses for the FDIC can be expected to exceed their present reserves and funding authorizations.
The Congress must strongly consider enacting a Federal statute for a streamlined mortgage resolution process whereby distressed mortgage buyers and their note holders can, by mutual declaration before a judge with appropriate jurisdiction, resolve a pre-packaged renegotiation of their contract terms. This would preserve the underlying compact under contract law while speeding up the otherwise tortuous and fragmentary settlements. This would serve the best interests of all parties.
We have needed these latter measures for a year and more. It would be unconscionable for Congress to adjourn into the Election season leaving these undone. But far, far worse would it be to give sweeping authorities to a compromised Treasury Secretary in the final hours of a failed Administration to pay above market prices, and that with neither penalties nor firmer regulation in return, to legions of failed speculators in the guise of easing a manifest public financial emergency. Such reckless actions and any who might enact them will surely be repudiated subsequently, but the damage to Federal finance, our currency, and the American public will already have been done with no commensurate gains to the stability of the banking or the financial system.
Please recall your oath of office in this, and act for the public wisely and with determination.
Sincerely,
But Mr. Paulson said that he was concerned that imposing limits on the compensation of executives could discourage companies from participating in the program.
Sorry, no haircuts for executive economy-wreckers. They hold insurance policies, after all.
AIG? Prudential?
Better. Campaign contributions to both parties.
$1 face value would leave the Feds with about $.30 profit,
See, now you got me all worried about the government making 21 billion on this deal. It wasn't so long ago that we were worried about the reduction of the national debt. Whose to say that the government won't make even more on this? Why don't we stop and think about the long term consequences of allowing the US government to profiteer at the expense of the Wall Street executives?
Now I have an idea. Why don't they sell this undervalued stuff back to the people who sold it to them? Those people who sold it should know how valuable it is. They can also buy back the stuff that others are holding that they know is undervalued. It's amazing that everyone is sitting on potential gold mines and suffering for it.
Good letter, Mr. Kline!
Hey Richard, if you ask Tanta for some pointers she'll show you how to shorten that up a bit.
How can bucky stay strong through this chaos. Methinks inflation is in the cards.
Comrade Canadien avec popcorn
Yes, but short term more Americans will be vacationing there spending those buckies while they still have some value left.
Condolences, mp. Thanks, as always, for your pithy comments.
C
220 ---
The AAA tranches were, like 80% of the pool. Maybe even more if you add in AAA CDO^2.
220 ---- it is VERY hard to figure out what these things are worth.
So then you have your 'super senior' tranches, but no one is buying them either, right?
Sorry to read of your loss, mp.
mp, sleep repairs the body and the soul.
Listen, all of you. I'm not trying to bash, but you folks really need to get on top of this.
Wonking policy isn't going to help you.
sportsfan | 09.22.08 - 3:28 am |
Nope, American tourism here ,(Vancouver B.C.), is dying. Every year less and less as our dollar becomes worth more and more versus yours. Been picking up from Asia and Europe though.
mp,
For me the rough sketch is: if nature takes its course then deflation, if Paulson etal. botch it enough then hyperinflation.
Difficult race to handicap because I think Paulson believes he is trying to do the right thing and is willing to try hard.
zigg - the REIT Managing Director and CCO I talked with ealrier this week said there were plenty of buyers for all the lower tier tranches - primarily because of the higher return - even with the higher risks
He said it is the AAA stuff, with its lower returns, that despite being VERY safe generally, has the problem with no buyers ... he pointed out that something like 80% if I recall of AIG's assets were AAA
His specific comment was - even at top tiers in industry - that it is a psychological not a financial thing with the AAA stuff ... he said there is very little AAA rated stuff out tehre - even subprime AAA tranches - that have any drmatic risk of losses ... but with the lower returns that safety dictates coupled with the psychological issues - even seasoned investors are shying away ...
"Difficult race to handicap because I think Paulson believes he is trying to do the right thing and is willing to try hard."
OK. Start formulating YOUR policy responses.
speaking of inflation/deflation...
crude is remarkably perky this morning, really the only interesting action overnight.
and speaking of misdirection - hank panky's dr. evil routine has every one not noticing that crude has rocketed in the past few trading days.
and in terms of the narrow hegelian mindset that sees inflation and deflation as an either/or - who says you can't have chocolate AND peanut butter, anyways? falling wages, higher commodities, demand destruction, etc? sounds like my local economy.
The more the government buys, the more prices will drop forcing the government to buy even more assets, which keeps the cycle going. At some point the whole bail-out concept will come to an ignominious end.
Pomp & Surkanstance: The Hunger That Never Ends
You can "staff" your policy responses here amongst yourselves to see if they will stand on their own merits.
"even seasoned investors are shying away ..."
that's because there's no reason to take any real risks for only 200 bp over treasuries, when treasuries are so absurdly low. crank that ten year note up to 6% and the AAA stuff at 9% or so might seem attractive. maybe.
What stores value in both a deflationary or inflationary enviroment?
but with the lower returns that safety dictates coupled with the psychological issues - even seasoned investors are shying away ...
Yep, it is a damn shame people are worried about getting their money back,...even Wall Streeters playing with OPM.
Money is at the basis of our society, its circulation has been delegated to banks. The price asked (700 bn.) should be directed in separating two functions of the banks: basic functions (deposits, mortgages, etc.) that should be governed by a public instituition. All the others, sophisticated, functions of modern banks should stay private. This is what should be asked for the 700 bn. Basic money functions shouldn't be (es. deposits) in the same hand of people who manage complex financial initiatives.
"What stores value in both a deflationary or inflationary enviroment?"
gonna have to go with "crack cocaine" on that one
sdtfs ... you must have missed part of my comments ... these AAA tranches are unlikely to not give you your money back - they are entitled to majority of cash flow - enough that it would take very large foreclosures/losses to risk not getting your money back
It is the return above "your money" that is low
I agree with MP, the policy sewing circle should come to an end. We can speak to the merits of deflation/hyperinflation indicators as they arise, but I feel we would benefit more from discussing planning for both probable outcomes until the direction is clear. It does not appear the center will hold.
My concerns and questions in order:
(1) I've liquidated cash in case of deflationary systemic collapse. Will US currency hold value in these circumstances or should I diversify with hard gold/silver?
(2) Have a Glock 9 but contemplating purchase of Mossberg 500-A1 shotgun.
(3) How much food supplies on hand would be prudent?
(4) How to hedge in case of hyper-inflation scenario? Today I considered taking a sum out against credit to invest in markets as a hedge. What would be the most appropriate strategy? I figure if the system does collapse and I lose these funds...at least it won't be my hard cash reserves.
(5) What risks and mitagates should suburban dwellars w/out ability to leave consider?
I realize this isn't the forum for these discussions, but these are some of the issues I am contemplating and planning for currently.
You can "staff" your policy responses here amongst yourselves to see if they will stand on their own merits.
Extend antitrust legislation to limit the size of corporations.
damondidit | 09.22.08 - 3:46 am |
I would be interested in some of those answers.
Instead of limiting size, repeal the decision that gave corporations standing as a person.
Again the vast majority - 80% according to recent MBA reports - of the appx $10.7 trillion in loans in the US are prime loans.
We know there is little overall likelihood of any dramatic change in this group of loans... --220mph
Not even in the coming Depression?
You're a Republican, right? I can tell by the way you analyze a situation. It's characteristic. Republicans fixate on the tiniest sliver of reality, due to their inability to cognitively embrace more than one sliver at a time.
MBS's are just one aspect of the problem, which is DEBT.
Thank LBJ, RMN, RR, GHB, WJC and GWB, and all the deluded voters who put them in office and supported their policies.
DEBT is the leviathan that looms over us all.
I shouldn't have to point this out, but if we had stuck to hard money the DEBT monster would still be a miniature poodle.
"It does not appear the center will hold."
Now, that's something I would expect to hear from a commander. Go with that. You should be able to make a completely logical case for it. So, to follow on, what does that leave once you've put it aside?
Folks, with that, I'm out of here. It's another long day tomorrow.
OT: Has anybody noticed that USDYen seems to be dropping quite quickly tonight.
Bloomberg
USD-JPY 106.2950 -1.1550 -1.07
(3) How much food supplies on hand would be prudent?
damondidit | 09.22.08 - 3:46 am |
Food Storage Calculator
sdtfs ... you must have missed part of my comments .
No, my point is you can't convince people of this,...that's why no one is buying.
I bought into the idea of American capitalism being alive to the opportunities to make a profit, anywhere, any time, any way. Now you are trying to tell me the the brightest minds on Wall Street need to be bailed out because they can't see the profits to be made?? Or because their capital is tied up in some safe investments that don't pay anything?
Hey c**t aka "Comrade Canadien avec popcorn"
Do you really believe that-
1] canada can exist as a first-world country without the US buying stuff from canada? think rationally..
2] Do you think your banks have a different asset composition? Many eurotards also have that delusion..
3] Do you think your real estate bubble is smaller than the US?
4]How is your government going to pay all the stuff promised to the retiring baby boomers?
5] Have you looked at your demographic profile lately?
6] Your tax base is shrinking (more retirees + poorly paid immigrants)
7] For all the dishonesty inherent in US governmental statistics, they are quite honest when compared to canucks.
8] And there is the issue that, unlike the US, a very large percentage of the immigrant population feels discriminated against and hates canucks. Coincidently they + their kids are soon going to be a significant % of your working age population. wanna bet how that will turn out.. Of course, europe has the same problems..
The sad reality is that your future is much bleaker than anything successive republican administrations could ever inflict on the US.
You know the big difference between between canucks and americans- lots of americans are self-critical, you however believe everything you say..
Hubris usually starts with excessive uncritical belief in yourself and magical thinking- a feature much more common in canucks than americans
Hey Richard, if you ask Tanta for some pointers she'll show you how to shorten that up a bit.
Sly remark, kudos!
hmmm... demonizing canadians... this is somewhat new. any way we can invade alberta and get their heavy tar/oil out of this approach?
220mph@2:45 writes:
"Again the vast majority - 80% according to recent MBA reports - of the appx $10.7 trillion in loans in the US are prime loans. We know there is little overall likelihood of any dramatic change in this group of loans. Subprime loans were 12% (6% arm and 6% fixed) of the total loan pool but represented 50% of the foreclosures in the June 2008 MBA report - but we also know that subprime defaults have largely peaked"
So.... what you are saying is that the risk is contained? Phew.
Oops--gold, silver and oil rising while the dollar falls.
Don't tell me investors have already figured out where this new turn of events is headed.
I thought it would take two or three days.
Uncle Billy- he probably didn't know about your rating company when he mentioned AIG's AAA stuff.
bgates writes:
hmmm... demonizing canadians... this is somewhat new. any way we can invade alberta and get their heavy tar/oil out of this approach?
Elect Palin. I said it before, Alaska sits next to Russia and Canada- that's two foreign countries- and she's not afraid to go to war with either of them, if that's God's will.
McCain, last nite: "Deregulation was probably helpful to the growth of our economy."
YouTube - McCain: No Regrets on Deregulation, "Helpful" to Economy
(3) How much food supplies on hand would be prudent?
300 lbs. microwave popcorn
500 pizzas
2000 Slim Jims
250 gal. Brawndo, The Thirst Mutilator
Maybe more Brawndo, come to think of it. Depends on whether the meltdown gets out of control and accidentally jumpstarts the Rapture, too.
we are the new japa
we are the new japan writes:
we are the new japan
You wish.
fun facts:
"The Mint estimates it will cost 1.23 cents per penny and 5.73 cents per nickel this fiscal year" 2006
USATODAY.com - Coins cost more to make than face value
We are not Japan. They have a health care system that works...
"we are the new japan"
YouTube -
sd: CCRC gives anyone who has spoken with a Reit in the last month a Triple-Rat-Minus. It's really weird to see people talking about the value of tranching these days and especially weird to see people talk about the value of mortgages, mbs, and cdo's as if wages are not going to be impacted so severly that we will be seeing only modest drops in the ability of borrowers to pay. Open your freaking eyes.
Credit has seized up, jobs are drying up, businesses are going under -- and there are bozos hanging out on blogs trying to convince others that the the cash will still be flowing from mortgages? Yes, people will be paying down their 3o year fixed rate loans with a constant stream of furniture stuffing, excess pets, and toenail shavings. Clot-brained f*ckwits.
Glad to see you guys weren't buying it.
cd: spewage was not meant for you of course. "Open freaking eyes" was for the clot-brains.
sdtfs writes:
Elect Palin. I said it before, Alaska sits next to Russia and Canada- that's two foreign countries- and she's not afraid to go to war with either of them, if that's God's will.
And it would be such a polite war with the Canucks as well. The only thing they get excited about is pole dancers and their money. They finally got the Loonie within a nucuelar detonation of parity so they're content.
220, something is worth something only if someone is willing to pay something for it. Otherwise, it is worthless. Spin anyway you wish, if no one will buy it is WORTHLESS.
The changes in the option market making rules may sound like they make sense, but in some respects really don't. Most options traders have multiple positions involving multiple strike prices. A simple example. If you have a negative gamma position and the market moves in the direction of your short options (and away from your long options), your position gets shorter and shorter. You may be long at one price and very short at a higher or lower price Frequently traders have to go to the computer to check their positions since they aren't sure of their delta and gamma positions if volatility or the skew changes.
If traders can't be sure of their positions as the market moves, how could the person on the other side of the trade know whether they are facilitating a short position? They can't.
lotsa nattering about AAA ratings and how they won't fail
I guess these same people were in a drug induced coma when the truth about the rating agencies came out.
Anybody else want to defend/defame them?
Whores, each and every one of them. But they did talk dirty real good, all about how this one was the biggest and hardest sure bet they ever seen.
trader walt, next time you get the urge to trade, don't
Hazard writes:
220, something is worth something only if someone is willing to pay something for it. Otherwise, it is worthless. Spin anyway you wish, if no one will buy it is WORTHLESS.
see CDS and AIG, see also FNM and FRE
UR b-ing studied:
Reuters.com
Good one Volker.
I meant someone other than Paulson&crew of course (crew = others + 220), etc, etc.
Ya know, someone like me, you, humans, etc, etc. Not these blood sucking leaches.
Does'nt the US Legal System have something like a Public Interest Litigation? So that interested stake holders can actually try to achieve a stay order ?
Crude is up to 105 again, let's see how this one develops :-
National Hurricane Center
Viki writes:
Does'nt the US Legal System have something like a Public Interest Litigation? So that interested stake holders can actually try to achieve a stay order ?
HAHAHAHAHAHAHAHAHAHAHA!
Since when? And for who(m)?
It's like the Inspector General for the green machine. You complain, they investigate, you get crushed by your chain of command.
Get this: we are in a new state of central planning and authority, emphasis authority. Keep your mouth shut, your head down and don't bother wearing your chicken plate, it just makes you sweat.
"Crude is up to 105 again, let's see how this one develops :-
http://www.nhc.noaa.gov/"
The track forecast
The models agree on a slow north-northwesterly motion for 93L over the next 3-4 days, which would bring the storm to a point between Bermuda and South Carolina. A major complicating factor in the long-range track forecast is the expected development of an extratropical Nor'easter storm off the coast of South Carolina on Wednesday or Thursday. The Nor'easter could bring hostile wind shear over 93L, weakening it, and potentially converting it into a subtropical storm. The two storms may rotate cyclonically around a common center (the Fujiwhara effect), sending the Nor'easter west-southwestward into the Southeast U.S., and 93L northwestwards towards North Carolina. This is the solution of the 18Z (2 pm EDT) GFDL and HWRF model. The NOGAPS model predicts that the Nor'easter will not develop at all, and instead 93L will absorb the energy that would have gone into creating the Nor'easter.
source:
Wunder Blog : Weather Underground
Betting on prices in the markets to fall is decidedly risky, for even if they do rules may be changed again to ensure that they don't.
The markets are rigged.
Crude up 106.5 now.
BB writes:
Betting on prices in the markets to fall is decidedly risky, for even if they do rules may be changed again to ensure that they don't.
The markets are rigged.
To those of you just now getting this, you might want to cancel your several subscriptions to various magazines, newsletters, periodicals of all types as well as the Thrift Report Weekly (if there is such a thing).
Keep your local paper though, the little league and high school sports news is good stuff, along with a reasonably doable crossword or word jumble.
CHRISTOPHER LOW, CHIEF ECONOMIST AT FTN FINANCIAL IN NEW YORK said, What this program does indirectly is that it will support home prices. And, Taxpayers can make money off this program, albeit it would be a long time.
Comedy gold.
220mph,
Price solves many problems, and no doubt there will be some fortunes made from this crisis, but dryfly put it well - let private money make the investment. I don't gamble with my money and I don't want the government to gamble either.
Put together some cash and get to work. I hope you do well. Otherwise, leave me alone.
I agree
trust me, the government isn't gambling,
central state planning when wielded alongside central state authority never fails
what we don't know for sure is--what are they trying to accomplish
The American Empire: Too Big to Fail? by Justin Raimondo -- Antiwar.com
Greed trumps reason absent limiting authority.
In Fed We Trust? I don't...BUT....
Its easy being among the 99% of readers here saying its all going to shit. All hell has officially broken loose, Paulson is an evil monarch, and the this whole plan will implode.
Odds are, you guys are right.
But what if it works? Will you guys keep pointing out how the secondary, tertiary, and nth goals haven't been met and how you were right all along? Even if this works, it will leave a stink (even in the most optimistic outcome).
No matter HOW well this works, if it does (and the odds are slim), you can ALWAYS argue the tax payers paid too much, a few people (pauly's friends?) STILL got rich blah blah blah... it will never end.
Just a thought. And yes, i agree, that in (almost) all probability, this plan will fail at the expense of the tax payer, the dollar, and treasuries.
Its easy to prove WRONG those who said this will work. Its impossible for those of you (99% of the posters here) to admit they were wrong if it DOES work... because it'll bever be perfect... the "I TOLD YOU SO's" will be abundant.
Its not very complicated. Force them into chapter 11. Give $700 billion to Berkshire to setup a bank of the U.S, I trust him more than I trust Paulson and his cronies.
suecris writes: I'm not selling my kids into servitude to pay for some stupid banker's yacht and pool service.
What makes you so special? Do you think you have a choice?
Blue collar wages have not kept up with inflation for 20 years. That's a whole generation. Middle class white collars are now not doing any better. Therefore, I conclude that our parents and grandparents set us up to pay for some stupid banker's yacht and pool service.
It's already a family tradition.
Sorry Ben, we couldn't keep it.
CDS's are a ponzi scheme and now they want the tax payer to be the last one standing. They continue to call them mortgages to make Joesixpack think he is getting something. The fact is they want us to buy a mortgage that has been repackaged to 3000% of the underlying value.
Please write your senators to stop this.
U.S. Widens Scope of Bad-Debt Plan Beyond Home Loans
Bush Urges Quick Action on Financial Rescue Package (Update1) - Bloomberg.com
Stop worrying guys!
I got this under control.
Taxpayers just waste their money anyway, it's better if I spends it for them.
"US generals planning for resource wars"
The Irish Times - Mon, Sep 22, 2008 - US generals planning for resource wars
Hey Paulson, you told me the dollar would strengthen well into next year.. BUT the USD index is now 76.98.. can we take the plan to bailout all the banks off the shelf now?
Lemme re-read my thesis on the great depression.. this isn't going according to plan..
You need to help me out or i'll have to cut rates again too, the analysts are saying it's going to cost more than 1T now, man they're sharp...
Hank.. you still there? Hank??? HANK???
The last couple of years have been enlightening. 25 years ago my brother, who was one of the architects of what we now call Globalization, described to me what he and the other economic strategists at his organization were designing for the large international corporations who were their clients. How they were going to use foreign labor, cheap transportation costs, etc (you all know the drill) to dramatically lower production costs. How they were going to encourage the "service" economy to grow here in the US and Europe, traiin consumers to use vast amounts of debt to leverage thenselves. All of it. All of the mess that has happened. 25 years ago. I thought he was full of shit. He told me then that this system would crush the working class and eventually the middle class of America, but that it would not matter to those who held the reins of power. They would become rich beyond belief and that the world would eventually drift towards a feudal structure of a small number of aristocratic wealthy and vast numbers of whatever you would like to call the rest. He seems to have called it pretty close.
I have thought about what he said all these years and I do not believe that there is a way to gracefully back this system down to something that is based upon morals and ethics and fairness.