I want to backstop the government by insuring their investment in mortgages, both commercial and residential, as well as CDO's and RMBS's . Who do I call?
So, how exactly do you get on welfare? What is the minimum you need to make? I can do that, just let me know what the numbers are. Thank you in advance.
I read a Sebastian post on an earlier thread. He said this bailout was better than the alternative.
How does he or anyone else know that? Is there any empirical evidence or logical reasoning that explains exactly what letting some of these institutions fail would entail? How do we know this is better?
I honestly don't get it. Hank and Ben tell a horror story behind closed doors and we are supposed to open our wallets? Don't we get to hear the sales pitch if we are buying the pony?
@yogi, thanks. This is one of the items that blew my mind.
The NYTimes is a part of the propaganda machine. It is up to us to inform our friends and family that this "plan" is lacking in plan and big on transfer of wealth.
"Raghuram Rajan and Luigi Zingales of the University of Chicago suggest ways to force the banks to raise capital without tapping the taxpayers. First, the government should tell banks to cancel all dividend payments. Banks dont do that on their own because it would signal weakness; if everyone knows the dividend has been canceled because of a government rule, the signaling issue would be removed. Second, the government should tell all healthy banks to issue new equity. Again, banks resist doing this because they dont want to signal weakness and they dont want to dilute existing shareholders. A government order could cut through these obstacles."
BCS: you heard the sales pitch already. It is very technical but basically involves a pack of cards and one of those towers you made when you were 6 years old. The dog just knocked a main support card out, or I think that was what Bush said. Sheesh, what more do you need to know?
Oh, one more thing. There is an innate human bias toward action. It is called Action Bias and is what the criminals such as BB are using to their advantage. Personally, I think that knowledge of this bias can help us talk with our friends/family/neighbors/coworkers when discussing this issue.
The GOVT has NO IDEA what is going to happen (other than the part where we give a huge amount of money to certain businesses.) But at least they'll be able to tell the voters that at least they tried.
And with that said, I'm off to drink some beers and forget about this train wreck until tomorrow.
I just want to put myself in most f'd category & need to do a little whiny rant b/c I am:
heavily invested in hedge fund that got everything right: short ABX, long gold, short financials, etc. so our fund got it totally right but now can't take advantage of short for financials & is now being royally screwed
renter in NYC: watched prices spiral out of control & just out of my reach, living in crappy rental in good neighborhood that is probably about to decline; for last 7 years totally unwilling to take out some crazy option ARM mortgage to be able to compete in RE market b/c it just "didn't make sense" & now understand (to my psychological & economic detriment perhaps) exactly why
had a big year last year b/c of big short on ABX, so paying lots & lots of taxes
have literally ZERO debt b/c I like to play it conservatively
have cash, but no safe place to put it & can't leave this country b/c of value of dollar-- so stuck here in a country that may actually vote in a Republican again.
As I see it, we made every call right & we are just f'd, f'd, f'd.
Trying to count blessings though - great marriage, great kids, happy with job. Not a hobo yet. Also not getting a pony, clearly. Trying to be philosophical, but how?
My experience tells me that when any group or industry is advocating for government intervention based on "national security" or some generalized total apocalypse but refuse to elaborate on the specifics, they stand to gain something out of it and there is no real risk if the government doesn't intervene.
See the airline and auto industries for reference.
Silly thought, but instead of pissing away 700 billion, if we're going to go for it, let's take equity stakes in every financial institution in the country. Say 3% from each in the form of warrants. In exchange, Treasury provides liquidity (which won't solve the problem but will buy time).
Order every bank cut their dividends to zero, and let the strong eat the weak. The warrants will be worth zero for the failures, but the they'll be worth something for the survivors.
Is it an illegal taking? Yeah, so what? Give us the 3% equity, or we all go to zero.
As far as I can tell, Paulsen purchase assets for 30 cents on the dollar, sell them for 5 cents dollar and that frees up his limit again? He can keep selling at a loss and keep purchasing assets forever as long as he keeps his balance sheet under $700,000,000.
Can somebody explain why Goldman,Morgan,Citi are considered too big too fail? Shouldn't these companies be liquidated in an orderly fashion like Lehman was since they hold $500 billion Level 3 assets? Why screw the taxpayers?
comrade awgee writes:
As far as I can tell, Paulsen purchase assets for 30 cents on the dollar, sell them for 5 cents dollar and that frees up his limit again? He can keep selling at a loss and keep purchasing assets forever as long as he keeps his balance sheet under $700,000,000.
comrade awgee | 09.20.08 - 9:10 pm | #
You assume a buyer. Who would pay the nickel if the value of the tranche is zero.
"Can somebody explain why Goldman,Morgan,Citi are considered too big too fail? Shouldn't these companies be liquidated in an orderly fashion like Lehman was since they hold $500 billion Level 3 assets? Why screw the taxpayers?"
Ha-ha-ha.
Because, the Federal Reserve is a private bank owned by private banks and it's number one priority is the best interest of those banks.
Yes always counting the blessings. I visited Egypt as a teenager and the Peruvian Amazon recently. Gave me all the perspective I needed. Of course it's hard to decline, but for $200 you can still buy several hundred hours of well-produced musical recording. John D. Rockefeller couldn't.
yogi writes:
Just emailed section 8 to every lawyer I know (about 30). With a comment that if it passes we are in a Constitutional crisis.
Section 8 isn't unprecedented--it applies to decisions regarding consular visas, for example. No doubt it applies to certain intelligence activities, too.
What would be unprecedented is attaching it to a bill that grants essentially unlimited powers (the Secretary can take any action he deems necessary...without limitation). Or one having at least $700B in spending authority.
I can see why Treasury wouldn't want to be subject to judicial challenge of every single transaction, and I'd probably be ok with a clause that limited judicial oversight if the legislation clearly spelled out the extent of Treasury's powers and if there were, at least, congressional oversight.
(I suppose I wouldn't really like that, either, but at least it wouldn't be Grade A constitutional crisis material.)
"You assume a buyer. Who would pay the nickel if the value of the tranche is zero."
Call me a cynic, but I am thinking he will sell them back to the original owner, with the agreement that he will buy more worthless assets for 30 cent on the dollar. At least that is what I would do if I were him.
Really, this non-plan plan works for me if they just add two clauses:
Any financial institution that participates in this plan needs to provide 80% of its preferred stock to the US Treasury (effectively wiping out shareholders).
The current executive management (any "C" level officer) team will be replaced.
Otherwise, we may as well just give the billions directly to the bank and let them keep their mortgage backed securities.
"People view us today as being a source of the solution, instead of part of the problem," Gary Crittenden, Citigroup's chief financial officer, said in an interview.
more funny... Was at Washington Mutual today huge line teller ran out of $20's started giving money out in $5's
Why don't we just skip the preliminaries? Let the banks drive container trucks up to the Treasury, drag the cash out with backhoes and be done with it.
Great question. The government will own well over 50% of the mortgages outstanding between the TARP and Fannie and Freddie. The TARP will put it in the position of owning the mortgages most likely to be foreclosed upon.
Cue the video of people being thrown out of their houses. Some of those people will be newly-unemployed in a declining economy and have few housing options. Some will even end up homeless.
Now, do you think the government wants to be in the business of taking away people's dream of homeownership?
We will have a moratorium on foreclosures of government-owned mortgages. The cost of the TARP and F&F bailouts will explode as a result.
comrade awgee writes:
"You assume a buyer. Who would pay the nickel if the value of the tranche is zero."
Call me a cynic, but I am thinking he will sell them back to the original owner, with the agreement that he will buy more worthless assets for 30 cent on the dollar. At least that is what I would do if I were him.
comrade awgee | 09.20.08 - 9:17 pm | #
I suspect there are enough low grade securities to load up the whole 700B with some left over. I agree with CR's assessment that the initial cost to the taxpayer is 700B.
"The Treasury Department said on Saturday that its financial rescue plan could permit it to buy assets beyond those backed by mortgages and potentially buy them from foreign holders."
WASHINGTON (Reuters) - The Treasury Department said on Saturday that its financial rescue plan could permit it to buy assets beyond those backed by mortgages and potentially buy them from foreign holders...
Anonymous writes:
They can't just go around and sell them at 5 cents. That would destroy the banks because they would then have to mark to market at 5 cents...
Anonymous | 09.20.08 - 9:21 pm | #
--
That probably won't be true:
(c) Sale of Mortgage-Related Assets.--The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.
I read this as a grant to transform any mortgage related asset into another security with a totally different value. They could strip them apart, value only some of it at the lowest amount to not affect banks and sell off some new government (tax payer) backed security for whatever they like.
Wait, isn't this what makes this thing so goddamned awful in the first place??
Nothing is outside the Constitution. If the CIA commits a crime on US soil, it is not beyond "judicial review". Don't know about consular visas but I assume if it ever came up that there is Constitutional authority for giving it solely to the Executive. Agency decisions of course can not be arbitrary or capricious. What if the Secretary commits fraud? We have to wait for Congress to maybe catch him 3 months later?
Even if the banks are somehow made whole (unlikely) how will they be made profitable in the future? The gov't will have to wean the banks back into the home loan business which is likely to be depressed for years to come.
Let me see if I can make this more clear. This new Federal Entity will buy the dregs that the banks desperately need to get off their books. Significant sales out of the facility aren't real likely because they will be buying the worst of the worst. No one will buy this stuff now, what will make them want to buy it from the Feds? Ergo, if the legislation is passed as proposed, 700 Billion is the cost, maybe a little more.
Any chance that Moody's or another rating agency downgrades or announces that they will downgrade US debt if they move forward with this crap? Do they have the cojones?
All these actions by the fed awaken in me the long-in-slumber rothschild connections. Anybody else in this boat?
Yep. The public was so easily fooled and manipulated into buying into the need for a "Federal Reserve" (the words Central Bank were intentionally not used) back in the day in order to prevent crisis' such as bank runs, many of which were provoked by bankers themselves.
"I am a little surprised that their reaction to that panic is to throw $700 billion at Hank Paulson to spend however he likes."
In my opinion, resignation of the current administration ought to be a condition set by Congress for approval. In any other country on earth, hitting your Treasury for a $700 billion partial patch to avert total breakdown would be regarded as evidence of having done a bad job.
Currently even prime mbs is not an attractive assett. But it is if you can wait 10 years or more. If prime is made attractive then better alt-a is. The cancer has to be stopped. That is also clear.
If we're going to hasten the bankruptcy the country, I'd prefer another round of stimulus checks. I could put those $2k to a lot of good uses. Like my rent. Yes I am bitter.
You have persuaded me that this is probably the wrong intervention.
Question: is this structure a "done deal" or does it make sense to object to one's elected representatives? This looks likely to go down quite quickly next week. Is it too late for constituent outcry?
I can tell you honestly that people like me are prepared to buy US real estate because our own real estate overseas is so expensive. But first we need to see that Americans are going to do what is necessary. What is necessary is not to just allow prices to fall back to super cheap while you drag the entire world with you.
Don't even sweat over it. Democrats and Reps are going to sign on the dotted line.
I really want Hank or someone to take the money and move to China. The courts cannot come after him because the new law will say so.
"Who would pay the nickel if the value of the tranche is zero"
This is getting at the heart of the design of many of these MBS, and what they really are going to find down in Level 3. Tranches (literally, in Fr, 'slices') cut apart the inflow from mortgages into more or less assured cash flows.
Say you forecast that under a certain default/prepayment scenario, $100 would come into the pool in a month. The issuers would issue a "A" tranche that would get, say $60, a "B" tranche that would get $30, and a "Z"-tranche that would get $10. That's simplified, but it's the basic idea.
Now, in the light of day, the default/prepayment scenario turns out to be 15% worse than that: only $85 is coming in. The "A" still gets its 60. The "B" now only gets 25. The Z gets nothing.
One of the problems is that the issuers, IB's and F&F, sold the top tranches out, and largely kept, with their fees, disproportional holding of the Z's.
While rates were falling, and the average life of a mortgage was, literally, sometimes weeks, the payout favored the Z's. Today, not so much.
These are what the market has, since the beginning, termed the toxic waste of the securitization. It used to be, in fact, kind of a fond, ironic term. Today, not so much.
It isn't $2k per american, it is $7000 per family. Taking out the families that live below the poverty line it is probably $10k per family.
Thats $10k added to each families invisible "USA" credit card, accumulating interest and no minimum payments forever along with the other $90k that was already there.
The toxic waste represents the mortgages of families in the US. If you abandon your toxic waste you will abandon them. If you can float out of this mess you all allowed to be created then there is no toxic waste.
Wait till Tanta reads the article by Gretchen. That one is rally bad. She seems to think that CDSs are synonymous with real estate. She thinks that AIG's CDS portfolio of $400B is all guarantees on troubled real estate loans. AIG might have been dumb but they weren't that dumb. Their problematic part of the CDS portfolio, the super senior tranche collateralized by the mezzanine tranches of subprime MBSs is more like $28B not $400B and marks so far on that part is about $16B. AIGs estimate of actual cash losses is about $5B. AIGs problem is liquidity and not solvency. Of course to understand that, you need to understand the idea of subordination and that is too complicated for most journalists which is why they should not be writing on it.
Comrade patient renter writes:
All these actions by the fed awaken in me the long-in-slumber rothschild connections. Anybody else in this boat?...
It's like we've come full circle.
...or downward spiral
With this in mind subsection (3) is even scarier...
"(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;"
To ease your troubled minds, a quote from GWB himself:
"In our economy, the Fed is the independent body responsible for setting monetary policy, for overseeing the integrity of our banking system, for containing the risk that can arise in financial markets, and for ensuring a functioning payment system. Across the world, the Fed is the symbol of the integrity and the reliability of our financial system..." --Oct. 24, 2005
Leaks are already coming out of Congress that seem to indicate that Frank's staff is plugging something like the Schumer plan into Paulson's bill, with the selling institutions' common and preferred shareholders in first loss position ahead of the treasury. (Don't ask me exactly how this would work.)
At this point I'm pretty well reassured that this will never pass as proposed. But I'm still disturbed by comments like this:
It sounds like Paulson is asking to be a financial dictator, for a limited period of time,'' said historian John Steele Gordon, author ofHamilton's Blessing,'' a chronicle of the national debt. ``This is a much-needed declaration of power for the Treasury secretary. We can't wait until the next administration in January.''
Here's an economic historian who understands that this is a proposal for a sort of dictatorship and thinks that it's much needed.
If this kind of thinking catches on more generally (and I'm worried that it already has--we've had similar sentiments expressed on this board today), I'm going to give serious consideration to emigration.
real estate prices can continue to fall but if the ABS fall to no value and destroy the banking system i cant see any gain. We are talking about being a lender of last resort here. In time these assetts can perform.
"Across the world, the Fed is the symbol of the integrity and the reliability of our financial system..."
William McChesney Martin, who ran the Fed from '51 to '70, once described the role of that institution as taking away the punch bowl when the party is really getting going.
Clearly, Greenspans Fed did not play that role.
And Bernanke's fate is having to try to fill the punch bowl after the booze and fruit are all gone and the water has been turned off.
my dad was severely disabled. With assistance from his dad and his dads friends in 1955 he bought a house at 10 times earnings and did ok since he was able to get promotion and my mum worked too when she could. We never had any money but at least he was independant.
People who imagine they have some right to cheap owner occupation need to face some realities of life.
2. 50 year government backed mortgages will become common place.
nullpointer | 09.20.08 - 10:04 pm | #
It probably didn't get much notice because interest-only loans already became commonplace, and those are effectively amortized over an infinite period. What's 50 years when you can get infinity?
Trickle Down Tax Cuts.
It has become obvious that this ridiculousness has left the realm of economics and is now a political problem. There is no question but that the Bush tax cut, spending increases and decreased regulations, all financed by borrowing, have allowed the Wall Street oligarchs to game the system in their favor and make an inordinate amount of money (who wouldn't want to pay 15% taxes on 100 million dollar bonus?). But we are well past the point where anybody thinks that this is either right or moral. The question is, what's next? What Mr. Paulson suggests is the largest tax cut for the rich in American history. 1 Trillion dollars of debt relief for the Wall Street oligarchs, financed either by tax increases or inflation, is what is on the table for us. I cannot for the life of me understand why the Democratic candidate for the US president, Mr. Obama, is favor of this solution. The Democratic party has always been the party of the working Joe, so how can Mr. Obama support one trillion dollars of debt relief for the Morgan Stanley's of this world. He is such a big critic of trickle down economics (rightly so), yet he is in favor of trickle down debt relief. Can you just imagine that you had one trillion dollars to play around with. You could give back to Wall Street, who created this mess, or you could spend it as your wish. How many factories, roads, power plants, schools, bridges, solar farms, etc.... could you build? How many jobs could you create with a trillion dollars. How many fiscal stimuli could one inject with a trillion dollars? But Mister Paulson believes the best utilization of our fiat currency is to fortify the Wall Street Oligarchs, "so credit could flow through our system!" This is bull shit!!!!! This is a false choice that is being presented to us!!!! I implore any and all who read my little blog to contact your congressman and senator and tell him/her that you do not want your money to go to Wall Street. Do you believe that is fair that the taxes paid by the brave men and women of our armed services, who put their lives on the line for us day in and day our, be sent to people vacationing on their yachts? If there is any debt relief to be had, let it be had by regular working people who were ensorcelled into taking excessive debt by the oligarchs' sales force. I propose that people have direct debt relief by sending any kind of debt that was incurred from 2003-2006 (or so) to a DRC (Debt Reduction Corporation), and thus 1 trillion dollars of debt relief can be had by the American consumer. Thus, they will have excess capital that can be used for spending, saving or investing. Much of this can be taxed by the government, so they will have a return on investment. I am shocked that Democrats have allowed Wall Street to flim flam them into their nonsense. Please, America, let us unite in this effort to end the Wall Street Debt Reduction plan. They don't deserve it!!!
Housing prices will fall because there is no way to prop them up any more.
The lie of endless RE appreciation has been shattered. The American consumer is maxed out,
Helocs cut off, and food and gas prices are eating into any discretionary cash. The value of the dollar is falling, and the bailout will hasten its fall. That means even more expensive food and energy costs.
Job losses and layoffs will continue. State and local budgets are in crisis, and those taxes will rise.
Even less money for new household formation.
real estate prices can continue to fall but if the ABS fall to no value and destroy the banking system i cant see any gain
The paradox is that if home values rise enough to make the MBS regain their value, then more toxic mortgages will have to be written for those gains to be realized. Wages are not going up in a recessionary, global labor arbitrage era. And if wage inflation does occur, it's unlikely to keep pace with price/asset inflation.
A few comments about the value and future value of the outstanding cdos, cmos, mbss or whatever they are called. I have been reading Irvinehousingblog that goes through individual foreclosures (about 5 a week for the last year in Irvine). The losses in general seem to fall in this pattern.
2nd mortgages value 0
equity tranch 0
mezzanine tranch battered
senior debt mostly intact but sometimes hurt.
This is for mortgages with some downpayment or a 2nd. Those 0 down firsts show some seriously damaged senior debt.
These are the houses that are selling in a market that is about half way back to equilibrium in the Schiller curve. This is not a subprime market either, the properties sold mostly in the 400K to 800K range with some over a million.
These properties will likely decline another 20% to 30%. This means the senior tranches in prime mortgages will be hit. How hard will be determined by how many people that go under water decide to walk as well as those who simply cannot afford their mortgages and resets.
I believe making a good estimate of the value of all mortgage bonds, assuming a Schiller equilibrium, is quite feasible. This could be done by examining a significant sample of these bonds, researching household income of a sample of those mortgages and making a good guess on how many people that are underwater who can afford their mortgage will make the economically sensible choice to default.
you're not an American, are you? 2.5 times median income is the traditional lending metric for housing in this country, until greenspan and his bubble distorted the economy. It will be again.
So,you're getting burned on your investments?
Too freaking bad.
America for Americans..screw the rest of you.
it is not clear what will happen but prices dont have to rise in real terms. Inflation can do the work. Once financial armageddon is averted you still have to become a more productive nation. I dont think you Americans realise that most of the rest of the world does not live as well as you do.
In the military, the catch all clause to get rid of weirdos isn't section 8 anymore. I forget the legal term, but we just call it "failure to adjust" or "going sad" (as in "Chaplain, I just can't take it anymore). The easiest way to get rid of people, at least in the Nuclear Navy, is to rack them out constantly (ie wake them up at all hours), then put them in a position where they fall asleep on watch (instant loss of nuclear rating).
But I digress,
There is no way this doesn't cause a government funding crisis in the near future. This could easily create deficits over 1 trillion dollars. Why isn't anyone talking about what this will do to the government's ability to fund its operations?
The only investments i have are the euro and a house in NZ. But i am expecting to be a father in February and hope Finland, where i am now, is a safe place to live.
The toxic waste represents the mortgages of families in the US. If you abandon your toxic waste you will abandon them.
The houses are an asset in a bubble. The values are largely illusory. People have mortgages that obligate them to pay loans of values the property will never again command without another asset bubble.
If you want to prop up those "values" so you can buy a Miami condo investment on a lark, be prepared to keep subsidizing the US state because at a half-million a crack, those superficial suburbanites in their mcmansions are going to add up fast.
Also, the lack of the HELOC ATM is going to severely depress economic activity, so if you want to keep the bubble propped open, it'll all need to be refinanced regularly at increasingly higher values.
What part of asset bubble are you missing? We aren't going to let houses "slide down to nothing" we're going to let them slide back to their real value. If that fucks with your yield assumptions, that is not "dragging you down", that is you having chained yourself to the anchor of the patently, superficially unreal finding out that water is wet and consequences are real. Say hello to Davey Jones. What are we supposed to do, grab on and go down with you?
I've got it at 50-50 that this bill is never going to pass. Democrats want too much (equity stakes, forclosure prevention, etc.) and Republicans don't want it at all.
If it does pass, it seems more and more likely that the entire this is going to be a logistical and PR nightmare which will lead to the mother of all panics, making the government look more impotent than ever and sending the national debt well through the roof.
Beginning Oct. 1 for 12 months, the 1st BCT will be under the day-to-day control of U.S. Army North, the Army service component of Northern Command, as an on-call federal response force for natural or manmade emergencies and disasters, including terrorist attacks.
But this new mission marks the first time an active unit has been given a dedicated assignment to NorthCom, a joint command established in 2002 to provide command and control for federal homeland defense efforts and coordinate defense support of civil authorities.
whats not to like!
nullpointer | 09.20.08 - 10:18 pm | #
I'm not suggesting it won't happen, I just don't think it makes much difference. We had to resort to widespread neg am loans to keep the game going. Whether we revert to 30-year or 50-year the result will be pretty much the same--the monthly payments on either will be too high.
There is no way this doesn't cause a government funding crisis in the near future. This could easily create deficits over 1 trillion dollars. Why isn't anyone talking about what this will do to the government's ability to fund its operations?
Nuke | 09.20.08 - 10:18 pm |
And Bernanke's fate is having to try to fill the punch bowl after the booze and fruit are all gone and the water has been turned off.
Austin Tex | 09.20.08 - 10:04 pm | #
Question: is this structure a "done deal" or does it make sense to object to one's elected representatives? This looks likely to go down quite quickly next week. Is it too late for constituent outcry?
If house prices fall it only benefits me. But if there is no system left what benefit do i have? I think you are living in an alternate reality if you do not realise how serious the financial crisis became last week. We need an orderly unwind not a fucking collapse back to the stoneage!
50 year mortgages are actually not much cheaper than 30 year.
An interest only loan (at a fixed rate) actually would make some sense... if you just think of it as a low, fixed (inflation-proof) payment and the ability to take advantage of any inflation generated gains in the price of the house.
From Bloomberg:
The Treasury would also have discretion, after discussions with the Fed, to make non-U.S. financial institutions eligible under the program.
What the hell? So we are not only bailing out Wall Street, but the whole damn world?
Who says this is a crisis that has to be solved next week?
Agreed. So what if a few major banks go under. Take the hit and move on.
I get the feeling the Fed, and banking industry in general, has an over-evolved sense of self-importance. What is good for the banks is not necessarily what is good for the people of the US.
worried writes:
Banks need to fail but it has to happen in some kind of orderly manner so that the survivors are separated from the dead.
Spending 700 Billion of our tax dollars to prop up gamblers won't be as orderly as you think.
From the WSJ: "LONDON U.K. Prime Minister Gordon Brown said Saturday that he is working with U.S. authorities to get billions of dollars returned to Lehman Brothers Holdings Inc.'s London operations from the firm's U.S. business."
We want you to come home. Your family misses you. Mr. Obama supports that plan. You get to come home; your family benefits. Please believe. It is going to happen.
Worried,
We are facing a fascist takeover in the guise of "saving" some bankers, and you're whining about your "investments".
Here's a clue...we're concerned about the dollar being even more devalued. We are worried about state and local governments going bankrupt. We are worried about job losses. We are concerned about a 10 trillion dollar plus deficit and the costs of servicing that deficit. We are all worried about our economic futures.
Simple enough for you to understand?
"What the hell? So we are not only bailing out Wall Street, but the whole damn world?"
You guys have been living beyond your means for decades. And now some of you say screw the rest of the world. Meanwhile a major chunk of the rest of the world is dominated by American TV, films, multinational products, microsoft and your military while you pig out on most of the worlds resources.
How about some guilt and a sense of responsibility for what you have all allowed to happen:-)
BR --- You got it right...That's the crux of the biscuit...The tendency to think that when the value is on the upside, a "house" is an investment and when it is on the downside it's a "home", and I need the government to protect me (from having to live under bridges and such)...You can't have it both ways...
Unless, to continue the metaphor, your home just happens to be a boat! Then you're safe!
kis: "Agreed. So what if a few major banks go under. Take the hit and move on.
I get the feeling the Fed, and banking industry in general, has an over-evolved sense of self-importance. What is good for the banks is not necessarily what is good for the people of the US."
The rule I think is to identify the institutions that are too small to not fail. If you're insolvent, but your failure does not pose a systemic risk, then a speedy liquidation is the best option. Let's save the government money for when the really big pieces of crap hit the fan.
The administration has zero credibility at this point. Now they are telling us how much money the taxpayers are going to make on this deal? And they want to give Paulson absolute power with this bill?
You don't give a hopelessly conflicted fraudster anything. You show him the darn door. Thanks for coming out to help us Hank.
The entire mess just shows what an absence of leadership we have in government today. This "made for t.v." method of governance is absolutely destroying the U.S.
"I believe making a good estimate of the value of all mortgage bonds, assuming a Schiller equilibrium, is quite feasible. This could be done by examining a significant sample of these bonds, researching household income of a sample of those mortgages"
Syvanen, a commenter above suggested that it would be easy to establish [snapshot] debt to income ratios by automatically comparing tax return information with the mortgage information.
In many cases they probably wouldn't even need to get permission from the borrowers since there is an executed required form that allows the lender (servicer, guarantor?) to verify the returns.
Tanta would know when this form is required, by whom, and approximately what percentage of borrowers signed them. Tanta?
I always say the Federal Reserve should not make decisions based on the stock market. This should apply to Congress too. That is what they are doing here - they are throwing trillions of dollars in a rush to solve a problem they do not understand (and probably do not have a prayer of understanding) just because of volatility in the stock market. Reviving the uptick rule would have been a hell of a lot cheaper.
worried
dude get off you high horse ok, being in finland with a house in nz you're just as much apart of the global crisis as anyone. If coming here and being a douche makes you feel better then your life must really suck
The rule I think is to identify the institutions that are too small to not fail. If you're insolvent, but your failure does not pose a systemic risk, then a speedy liquidation is the best option. Let's save the government money for when the really big pieces of crap hit the fan.
More and more, it sounds like the tide (as described by Warren Buffett) is about to go out. We will soon learn that the ABA has a previously undisclosed nudist colony down by the beach.
yogi: "Always wondered how the British empire managed to unwind slowly without any major domestic catastrophes. It could be that they will crash with us."
Well they gave up their global empire, for starters. That's a suggestion that needs to be thrown out there for the U.S.
Also, the Bloomberg article that said $700 billion is more than the U.S. spends on the military is bunk. When you add black budget expenditures, the Dept. of Energy's budget for maintaining nukes, the Dept. of Veteran's Affairs, and the pro rata share of the interest on the national debt, you get at least double the official figure.
Sharia law is now legally binding
Monday, September 15, 2008
Its been described by one commentator as an example of Great Britain surrendering itself and the Archbishop of Canterbury Rowan Williams was criticised for saying it will happen, but whatever the reaction, Islamic law now officially operates in the UK.
Whereas before rulings by sharia courts in Britain could only be enforced if all parties in a Muslim civil case agreed to abide by them, now what the courts say will be legally binding, backed by county courts or the High Court.
The five sharia courts are Birmingham, Bradford, London and Manchester with others planned for Glasgow and Edinburgh. They will be run by the Muslim Arbitration Tribunal whose Sheikh Faiz-ul-Aqtab Siddiqi said: "We realised that under the Arbitration Act [1996] we can make rulings which can be enforced by county and high courts. The act allows disputes to be resolved using alternatives like tribunals."
I do not care if banks in other countries mimicked our financial mistakes or bought them either for that matter. Unless they are picking up my tax bill, other countries can deal with their own financial institutions.
Here's another thing I find amusing. They are giving Hank Paulson unprecendented power to spend money. The dude isn't even going to be around in January.
All i am saying is that i honestly dont understand why people are so against the government buying assett backed securities to stablise the market and encourage others to realise that the world will keep on spinning and that in time this mess will be resolved.
they are throwing trillions of dollars in a rush to solve a problem they do not understand (and probably do not have a prayer of understanding) just because of volatility in the stock market.
The stock market is a sideshow here--I think the real crisis, to the extent there is one, is the blowout in spreads on ST commercial paper. I suspect the nightmare scenario presented in Pelosi's room was a world where companies couldn't convert cash equivalents into cash. Tell Congress there's a good chance of hundreds of companies not meeting their payroll next month and you can probably instigate a panic.
One more post; the voice from the other end of the house is demanding we start to watch "A good year." Chick flick for sure, (R. Crowe), but I can't get enough of Marion Cotillard, so it's a push.
A. Blinder (not a real heavyweight) says this is basically about real estate. I'm no heavyweight either, but I believe it's basically about credit disloacations, and has been from LTCM and the explosion in securitization.
At the time of the 29 crash, US credit was 175% of GDP. In '33, with debt rising and GDP falling, it was almost 300%. At the top of the dotcom, it was again something under 300%, but not much. In '06, it was over 300% again, but that time during the Greenspan/Bush "expansion." I have no idea what it is now, and it's rising faster than meaningful tracking anyway. But it cannot stand, and debt destruction, starting in the FIRE sector, inevitably spreads to the real economy.
That's why I must still disagree with the rapidly growing hyperinflation opinion. The credit wasn't real, it was mispriced, it was not based in payback ability, and I believe the infinite amount of money they're going to throw is going to disappear in Fisher's debt deflation like rain on hot pavement.
Why can't this bailout program be limited to companies/firms that give 90+% of their equity to the govt? Why would the markets fail if there was known to be this $700B available to fill the void left by any counterparties that fail as a result of the crap securities? This is a simplistic solution that will forever change the US markets- they are no longer a free market- they are a fixed game where bad decisions are not punished and it pays to take massive risks within organizations that can create a systemic impact of their own failure.
Bond Girl: "I do not care if banks in other countries mimicked our financial mistakes or bought them either for that matter. Unless they are picking up my tax bill, other countries can deal with their own financial institutions."
Other countries have been importing dollars for decades, financing U.S. spending. The U.S. has been living off of the world, not the other way around. In fact, the main reason this fiasco happened was because those dollars that were recycled through Wall St. ran out of decent investments and ended up in CDO's and CDO^2's.
They are giving Hank Paulson unprecendented power to spend money. The dude isn't even going to be around in January.
Bond Girl | 09.20.08 - 10:43 pm | #
January!
This stuff is going to be wiped out of the Treasury by the end of September....
Bush today said he's unconcerned that the price tag on the package may seem high.
I'm sure there are some of my friends out there that are saying, I thought this guy was a market guy, what happened to him,'' the president said.My first instinct was to let the market work, until I realized, while being briefed by the experts, how significant this problem became.''
Worried
yeah you're not worried because it's not your TAXES being used as a transfer of wealth from the have nots (your average american) to the haves the plutocrats and croney capitalists.
Frankly I'd hope that someone who lives outside the US of A would see this for the naked power grab it is.
If house prices fall it only benefits me. But if there is no system left what benefit do i have?
Have you learned something about letting capital structures get too large and interpenetrated? How about learning some lessons about loose lending standards?
I think you are living in an alternate reality if you do not realise how serious the financial crisis became last week.
I would say I understand it 'very' well to 'exceedingly' well. I am not a quant / trader like many of the people here, but I'm a student of strained and failing states. The general arc of things was predetermined when they started slashing interest rates after 9/11.
We need an orderly unwind not a fucking collapse back to the stoneage!
Who's the "we"? I'ma get stoned and watch Babylon fall.
The gov't for the moment is trying to act as the backstop to the shadow banking system. Providing the cover for the lack of meaningful reserve's (leverage) that the shadow banking gearing has allowed. Now the Gov't has enjoyed this massive credit creation since it has allowed the economy to experience a higher level of growth without large liquid capital reserves. Clearly without this high level of credit gearing the economy will slow down and with it goes millions of jobs and various business of all types.
This bailout cannot resolve the issue because the shadow banking system has crashed and AIG being the private insurance vehicle that everyone believed was the final backstop, basically said the system is a fraud. While the shadow banking system or parts of it may be overhauled in the coming months and years it cannot operate without either gov't financial backing or much higher reserve's which is exactly what it was designed to avoid.
Got back for a minute while the microwave popcourn is popping.
There are none. Bills carry no interest, and are paid in the notes of the Federal Reserve. Used to be paid in the notes of the T, but we don't have them anymore. Bills are as riskless as the Federal Reserve note in you pocket.
"Who's the "we"? I'ma get stoned and watch Babylon fall."
Aint that right. Babylon is falling. The only consolation is knowing that some illusions will finally become obvious. I hope the squares handle the realization well.
At this point I wonder how the thermonuclear war will be blamed on people who couldn't pay their mortgages.
Comrade Tech Sargent Chen | 09.20.08 - 10:52 pm | #
Not a chance. It's those short-selling terrorists who are the war criminals.
"For the last time, the"government" ain't buying anything. The bill is being dumped on us, the taxpayers of America. We are displeased."
The taxpayers are the government. You have been living beyond your means and have refused to reign in your spending. Indeed as a people you have begged the government for more spending. And up until last month the rest of the world was paying for that.
totally agree the bond market is the tell. The US Gov needs the bond market as its condiut for funding. It is the oxygen which ensures its survival. Rest assured TPTB would throw away the equity market in a heartbeat to protect thier funding mechanism. THe real tell is when no one shows up for the auction.
Also, on inflation and house prices. Inflation is meaningless unless (1) interest rates compensate you for it, or (2) wages reflect it. Neither are true and neither are likley to be true. So inflation will solve no problem whatsoever. Why is this so hard for people to comprehend?
Want to save the US economy on the cheap? Export investment bankers to China to be processed as a replacement for melamine augmentation in baby formula. $0.50 a pound sound about right?
Makes as much sense as anything being currently discussed. Sorry to be so crass, but this one is going to the streets.
There are multiple reasons for resistance to this bailout:
U.S. can't afford it
The majority of citizens in the U.S. either own their home free and clear or rent. The crisis is a problem brought on by the minority. The whole spin narrative that "main street is culpable in the debacle" is a complete load of malarky. Most of the folks in U.S. behave honorably. Unfortunately, when you are talking about a population of hundreds of millions, a few bad apples.....
The bill looks like a bailout for bankers because it allows their companies to survive. I wonder how many finance execs were unloading their shares Friday morning?
Is it that shocking that the citizens are up in arms? Its almost like the administration wants to provoke the people. Very hamfisted approach to asking the taxpayers for an additional $800B.
yogi writes: Always wondered how the British empire managed to unwind slowly without any major domestic catastrophes.
Well they were bankrupt in 1940 but then a sugar dady stepped in with lend-lease and later the Marshall Plan to tide them over. That plus dismantling their empire seemed to provide a soft landing.
Isn't it just incredible that the banks don't know the value of these various products within any reasonable range of certainty? Doesn't that suggest that the pricing models used to price them were useless? And what good was the insurance value of a CDS when the counterparty could just go away? The cost of this bailout has to work out to tens of thousands of dollars per each household that pays real taxes.
And up until last month the rest of the world was paying for that.
The rest of the world will continue to pay us. If they stop paying the bailout is off and we will all witness armageddon. Call it black mail or whatever you want.
Like all enablers, I see the world Bankers all going to Al Anon after this....we need our fix....and if we don't get it, no one is going to have a good day.
Escariot writes:
Like all enablers, I see the world Bankers all going to Al Anon after this....we need our fix....and if we don't get it, no one is going to have a good day.
Escariot | 09.20.08 - 11:02 pm |
Hell I haven't stopped drinking since November 3, 2004.
Yeah, everybody decided to loan money to the global empire with the nukes and carriers because they liked us so much.
We held a nuclear weapon over your head? I find that unlikely. I think a buyer's strike in the Treasuries market is worth ten carriers. Ya did it 'cause you were dumb and greedy. Be honest.
"The rest of the world will continue to pay us. If they stop paying the bailout is off and we will all witness armageddon. Call it black mail or whatever you want."
Sounds like we are then, after all, on a similar page.
Not that this will make any difference, but Bernie Sanders, the only 'admitted socialist' in Congress OR Senate, has posted four principles that ANY bailout should follow. I'll just list the first.
(1) The people who can best afford to pay and the people who have benefited most from Bushs economic policies are the people who should provide the funds for the bailout.
Ok, we have people like me who are free and clear.
Then we have renters, who don't owe anything but the rent.
Then we have people who can make their payments and aren't underwater.
Then we have people who are a little or a lot underwater, but can and do make their payments, either because it's honorable, or because they haven't a clue what's going on.
So what percent is left: those who are underwater and can't or won't make their payments. It's a lot. It's enough to break the banking system, at least temporarily. But it's not everybody.
It's not worth losing the Republic over.
By the way, the Roman republic had dictators a lot during certain periods. They did their jobs and then went away. Even Sulla in late republican Rome eventually retired.
But their system was set up that way.
Ours isn't and shouldn't be.
The funny thing, as Krugman suggests, is that the banks and other financial institutions may get this aid and still fail. What are we going to do then?
I wonder what is going through the heads of our esteemed leaders right now. I wonder if they are truly afraid or if they even care.
(1) interest rates compensate you for it, or (2) wages reflect it.
I've never understood the inflate-out-of-it argument either. To the extent interest rates move with inflation, the cost to service debt goes up far faster than revenues (inflation goes from 4% to 12% you get 8% more revenue/wage but your cost to service your debt triples). If interest rates don't move with inflation the noteholder gets the shaft.
Any inflationary move either crushes demand or crushes bondholders, and I don't see how either is feasible.
If the debt was all owed to foreign parties, like 30s Germany and postwar Hungary, crushing the bondholders might be politically feasible, but not in our situation.
Hey worried,
got a house New Zealand? Too bad, housing bubble there is imploding.
Guess you're safe in Finland, unless Pultin is feeling peckish again.
Me? I'm still bemused by thought of the government making money. Maybe we need a clause in there to prevent them from making off with their windfall profits. And then we need to worry about other branches of the government profiteering. Why, in a few years, they might not even need the taxpayers. Then what will we do?
There is nothing to do here, which is why there are so many Russian holiday homes here in the best locations. Historically Finland was just a killing/buffer zone managed by rival empires. Finland helps Russia solve its infrastructure inadequacies with its skills in engineering and has shown it understands Russia.
I wonder what is going through the heads of our esteemed leaders right now. I wonder if they are truly afraid or if they even care.
Bond Girl | 09.20.08 - 11:05 pm | #
I have to believe they care, if for no other reason that they like to think their peeps admire them, and this is just such a clusterfuck. I imagine they are also cramming like crazy to get up to speed on what the hell is going on. We have the luxury of having been schooled by the bears already.
Pity they can't come on here and read the archives.
But there isn't time. That must be the worst part. This thing is moving so fast we are almost certainly looking at this thing that is too little, too late.
I bet he's drunk a good part of the time. I can't even blame him for that.
And B and P have got to be so tired they aren't capable of making rational decisions. This is why dictatorship is not a good idea. 2 guys can't control the global economy.
True London got bombed. But I believe law and order was generally maintained. They seem to have respected freedom of expression and though I'm sure there have been incidents of secret police intervention (they produced Orwell) they let the Sex Pistols get away with "God save the Queen, the fascist regime..."
That's a soft enough landing. Better than occupation or reign of terror.
I was so worried about the douchebags on Wall Street who've lost and will lose their jobs, and then I saw this in the proposal:
"Paulson is asking for the power to hire asset managers and award contracts to private companies."
And now I know, this proposal will work. Everything will be OK. The guys who got us into this mess will be highfiving as they go from fleecing each other to fleecing the taxpayers.
NZ and Australia are more or less commodity countries. After ww2 NZ was the seventh richest nation per capita. Food prices are sky high. So NZ has some buffer there as does the US with its massive agricultural produce and agricultural machinery sales. I never heard of John Deere before i went to NZ i just knew of small Massey Fergusons. My car (stolen while i was away) was a ford. And curiously you can buy a well known brand of Finnish steel products (Fiskars) in NZ that are made in the USA.
Comrade NSA writes:
Are we toast, or is this just another bad 'A-Team' TV show?
Comrade NSA | 09.20.08 - 11:16 pm |
Its much worse than that. Its another bad episode of 'Greatest American Hero' and Congress evidently thinks giving Paulson the superhero suit is the way out of this mess.
I personally find myself in something of a quandary. I do not want the financial markets to crash, but the current US policies of corporatism (low taxes, low regulation, privatization) are now (I hope) once and for all proven to be a disastrous mistake.
While much of the spending spree was going on in the US it seems to me that it was really global in nature. Many countries have been partying hard on credit, or have made their economies dependent on the party and the music stopped back in July of 2007.
My biggest concern, as better described by others on the board, is that most of this so called "wealth" that was created is illusory. Attempts to preserve this wealth by propping up artificially high home prices (in this country, anyway) or buying distressed assets will probably be akin to throwing the money into a furnace. We need to set a realistic price on the value of these assets (if that's possible) - right now the value of these assets is zero, since noone will buy them.
Do I think the value is zero? No, but I sure don't know if and when they can be resold for what the US Govt will end up paying for them as part of this proposal. And giving any non-elected official the kind of wide-ranging powers that are being asked for is a refutation of the democratic values that many of us hold near and dear.
If this type of legislation was proposed in Finland, how do you think the people living there would react?
Why cant Obama not back this and just come out and say, "look, we're in a pickle. If I dont support this, and it does not happen, we are looking at the real risk of a seizing up of the finance that businesses need to run, and expand, and if that happens, a lot of the lower, middle and upper classes are going to lose jobs. Frankly, since the last few years gains have all gone to the rich, those people are quite well equipped to handle job losses, if they come. However, most of you are not, and living standards have already gone down in eight years based on no income growth and runaway inflation. So, my proposal is to take the chance, and to be at the ready with a series of taxpayer funded initiatives, stimuli, and jobs programs, including rebuilding our infrastructure. We will also support banks that are soundly run, and help them fill the need for business capital. And once we get to the point where people in there houses are the ones who an actually afford them, and home prices have fallen back in line with income and rental values, and the insolvent banks have disappeared, and banks get back to the business of funding sensible investments, well perhaps then we can get back to moving forward. But it is going to require some pain, for many. And it will require time. But there are lessons to be learned and systems to fix, etc... but rewarding the very people that put us in this mess, is not the way we move forward."
Why can't we at least have the debate about who should foot the bill for this fiasco?
Yes Finns have 100% literacy. Which is kind of weird but seems true. I met a blonde and now seem to be here for the duration! Given the mayhem i would prefer to be back in NZ but sometimes life is very complicated. Actually at the moment nothing much is happening here. But the worry for me is that it becomes a rerun of the 1990's crisis where all finnish banks began recalling loans to save themselves. I know some people who had good buisinesses who could not renew loans who were ruined. Already this week banks have admitted they are changing loan terms to unilaterally protect themselves with higher rates if it all turns to custurd. No crisis here though.
"After years of deregulation, of promotion of greed and assertion of the superiority of the market, and in particular of financial makrets to decide how to run the economy, it appears - nay, make that: it is now blatantly, in your face, obvious - that none of this worked. Worse, the people that have mocked government throughout, as wasteful, inefficient and incompetent are now counting on the very same government to bail them out from the hole they have dug."
-- J Paris
I say we approve these measures for the next administration. Let everyone know we'll do it, so they know all they have to do is survive until January, and then we'll see how much this plan appeals to the current administration. Or, as I suggested before, put a Democrat or Ron Paul in charge. How good would it look then?
So does Goldman survive as an independant? An earlier poster commented on this. Level 3 to the moon. Nice job waiting BB if he can eliminate GS's competition in a week's time and keep em flying solo.
No, Paulson thinks giving Paulson the superhero suit is the way out of the mess. This was Treasury's proposal; it didn't come from anyone in Congress.
Yalt | 09.20.08 - 11:21 pm
Absolutely correct. I bet he is wearing his Underoos underneath his suit these days.
Tell all your friends that the saame mofos who got you into this mess will now help get you out, that it's being rammed down Congress with all speed during election season and you need to make sure someone has the cojones to question the wisdom of every clause instead of kissing babies next week.
No doubt this thing is going to have 'homeowner' or 'housing' or 'mortgage' or some other suggestive word in the name to convince J6P that it is going to save housing prices. It will approved with thunderous applause.
I also hope that CR is going to get some quality sleep time in. We need him and the Tantanator in peak shape, because the financial Olympics have started, and we are all on the team.
My father went through the Depression as an orphan in an orphanage; so he's laughing at us pussies now (from Heaven). He told me it was an opportunity to build character.
"Uncle Billy, Diosa del Caño" Oh no. LOL. She scars the mind, but I must admit that in a foreign country, with no witnesses, after many drinks...I would still rather rip my own dick off.
I just got home from an evening out and read CR's comments. You have this thing nailed. What a wreck. One of our our Senators was to speak at the function we attended tonight and he was summoned to return to Washington just before he went on stage tonight. This is on a fast track. He is on Senate Banking Committee so will be in the action. He is a smart and decent man and I hope he can resist the pressure and tell Paulson to back off.
RE Bear, I am aware of that. I mean to vote on it publicly, as in, make a pronouncement as to your take on it. Did I say vote, I dont think I did. My point is that if you get one of the two presidential candidates saying this isnt right, it will wake a lot of people up.
"If this type of legislation was proposed in Finland, how do you think the people living there would react?"
Finland operates under the Nordic model. Taxes are very high. Medical care is good and free i think. Education is also good. Thats not to say it is a paradise. Life is hard here compared to NZ and not just because of the winters.
In the 1990´s banking crisis the Nordic regions governments recapitalised the many failing banks (there were not many) but ensured i believe that all share holders and bond holders were wiped out and all directors were replaced. Whatever it was it was pretty drastic. No depositors lost any money.
Bush today said he's unconcerned that the price tag on the package may seem high.
Who in their right mind could have voted for this fellow? Do we really want to repeat this calamity and send a really old man with already limited facilities to the plate AGAIN?
Bond Girl writes:
A lot of wisdom came out of the Great Depression. Their kids were America's Greatest Generation. I don't know what our kids will be.
Bond Girl | 09.20.08 - 11:32 pm |
RE writes:
Bush today said he's unconcerned that the price tag on the package may seem high.
Who in their right mind could have voted for this fellow? Do we really want to repeat this calamity and send a really old man with already limited facilities to the plate AGAIN?
for all of you who say let these banks die, you do realize that you are begging for 5 - 10 years of pain. that being said, paulson's proposal is criminal. why isn't there an in between?
If the DEMs had any balls they would kill it right now over this provision.
If they don't, the courts will. This whole deal will be eviscerated. But WHEN?
Several years from now the taxpayer will be stuck with all the bad debt and the courts will be awarding all the decent assets back to those effected...the surviving banks & IBs...at bottom market prices. Their won't be enough to go around but we know who will get first in line and its first come first serve.
maybe we should save/bailout/liquify all the smallest banks and those bigger banks that don't have tons of toxic waste on their balance sheets or hidden off-balance sheets. buy out the toxic stuff (if present) from the little guys, and establish 'market' for valuing the level 3 crap.
depend on them to keep the economy liquid (including mortgages).
then require those with toxic waste to get transparent. No mark to model. just disclose what the level 3 stuff is in detail.
as the level 3 picture (market value) becomes clearer, require that the banks/whatever to either take market value plus a haircut or deal with the consequences themselves - including bankruptcy.
Dave writes:
for all of you who say let these banks die, you do realize that you are begging for 5 - 10 years of pain.
I don't see why this is necessarily so as long as an alternate funding mechanism is made available. I actually think there'd be less pain if we found a less leaky conduit.
Dave...not sure of this, but my sense (after reading on here for months now, daily) is that the die was cast years ago. What's done cannot be undone.
None of the solutions will be popular.
My reading of this board's general feeling (nodding to the loyal opposition here present) is that there is some sense in trying to have us deal with this in a way that limits the damage to the present generation as opposed to sending it upstream to the next.
We have benefited (some more some less it is true) so we should bear the cost.
maybe we should save/bailout/liquify all the smallest banks and those bigger banks that don't have tons of toxic waste on their balance sheets or hidden off-balance sheets. buy out the toxic stuff (if present) from the little guys, and establish 'market' for valuing the level 3 crap.
I agree, but I would have a limit on leverage before you can visit the Treas. candy shop. If you're leveraged beyond let's say the industry mean you're banished to go die a quick painful death.
Remind me what TARP stands for?
"Taxpayer A**-Rape Program", or something?
from bloomberg:
the plan
"spends as much money as the combined annual budgets of the Departments of Defense, Education and Health and Human Services."
Talk About Reaming People?
I want to backstop the government by insuring their investment in mortgages, both commercial and residential, as well as CDO's and RMBS's . Who do I call?
Don't you get it? The auction isn't supposed to work. That way stuff will be bought at ridiculous prices.
TARP - Taxpayer Asset Removal Program
The new Republican job market
YouTube - The Job
McCain: "I did not" see financial crisis coming
So, how exactly do you get on welfare? What is the minimum you need to make? I can do that, just let me know what the numbers are. Thank you in advance.
Just emailed section 8 to every lawyer I know (about 30). With a comment that if it passes we are in a Constitutional crisis.
Failure.
are they going to also buy toxic securities directly from GE, GMAC, K-mart and so on?
or will these and other companies now offload them to banks who know they can on-sell them to the taxpayer, and make a profit on the deal?
I read a Sebastian post on an earlier thread. He said this bailout was better than the alternative.
How does he or anyone else know that? Is there any empirical evidence or logical reasoning that explains exactly what letting some of these institutions fail would entail? How do we know this is better?
I honestly don't get it. Hank and Ben tell a horror story behind closed doors and we are supposed to open our wallets? Don't we get to hear the sales pitch if we are buying the pony?
@yogi, thanks. This is one of the items that blew my mind.
The NYTimes is a part of the propaganda machine. It is up to us to inform our friends and family that this "plan" is lacking in plan and big on transfer of wealth.
CR,
What do you think about these ideas from a Sebastian Mallaby WaPo article:
Sebastian Mallaby - A Bad Bank Rescue - washingtonpost.com
One set of ideas:
"Raghuram Rajan and Luigi Zingales of the University of Chicago suggest ways to force the banks to raise capital without tapping the taxpayers. First, the government should tell banks to cancel all dividend payments. Banks dont do that on their own because it would signal weakness; if everyone knows the dividend has been canceled because of a government rule, the signaling issue would be removed. Second, the government should tell all healthy banks to issue new equity. Again, banks resist doing this because they dont want to signal weakness and they dont want to dilute existing shareholders. A government order could cut through these obstacles."
so, does anybody still think we live in a capitalistic representative democracy? lol.
BCS: you heard the sales pitch already. It is very technical but basically involves a pack of cards and one of those towers you made when you were 6 years old. The dog just knocked a main support card out, or I think that was what Bush said. Sheesh, what more do you need to know?
"Taxpayer A**-Rape Program", or something?
hahaha Nemo at least your not wasting those first posts!!
Here you can keep track
U.S. National Debt Clock
For some reason I still trust Bernanke. But power corrupts.
Oh, one more thing. There is an innate human bias toward action. It is called Action Bias and is what the criminals such as BB are using to their advantage. Personally, I think that knowledge of this bias can help us talk with our friends/family/neighbors/coworkers when discussing this issue.
The GOVT has NO IDEA what is going to happen (other than the part where we give a huge amount of money to certain businesses.) But at least they'll be able to tell the voters that at least they tried.
And with that said, I'm off to drink some beers and forget about this train wreck until tomorrow.
damn, just sent that link to cr!
great site!
I just want to put myself in most f'd category & need to do a little whiny rant b/c I am:
heavily invested in hedge fund that got everything right: short ABX, long gold, short financials, etc. so our fund got it totally right but now can't take advantage of short for financials & is now being royally screwed
renter in NYC: watched prices spiral out of control & just out of my reach, living in crappy rental in good neighborhood that is probably about to decline; for last 7 years totally unwilling to take out some crazy option ARM mortgage to be able to compete in RE market b/c it just "didn't make sense" & now understand (to my psychological & economic detriment perhaps) exactly why
had a big year last year b/c of big short on ABX, so paying lots & lots of taxes
have literally ZERO debt b/c I like to play it conservatively
have cash, but no safe place to put it & can't leave this country b/c of value of dollar-- so stuck here in a country that may actually vote in a Republican again.
As I see it, we made every call right & we are just f'd, f'd, f'd.
Trying to count blessings though - great marriage, great kids, happy with job. Not a hobo yet. Also not getting a pony, clearly. Trying to be philosophical, but how?
My experience tells me that when any group or industry is advocating for government intervention based on "national security" or some generalized total apocalypse but refuse to elaborate on the specifics, they stand to gain something out of it and there is no real risk if the government doesn't intervene.
See the airline and auto industries for reference.
Silly thought, but instead of pissing away 700 billion, if we're going to go for it, let's take equity stakes in every financial institution in the country. Say 3% from each in the form of warrants. In exchange, Treasury provides liquidity (which won't solve the problem but will buy time).
Order every bank cut their dividends to zero, and let the strong eat the weak. The warrants will be worth zero for the failures, but the they'll be worth something for the survivors.
Is it an illegal taking? Yeah, so what? Give us the 3% equity, or we all go to zero.
We hang together or we hang separately.
As far as I can tell, Paulsen purchase assets for 30 cents on the dollar, sell them for 5 cents dollar and that frees up his limit again? He can keep selling at a loss and keep purchasing assets forever as long as he keeps his balance sheet under $700,000,000.
Sorry, I meant $700,000,000,000.
Can somebody explain why Goldman,Morgan,Citi are considered too big too fail? Shouldn't these companies be liquidated in an orderly fashion like Lehman was since they hold $500 billion Level 3 assets? Why screw the taxpayers?
comrade awgee writes:
As far as I can tell, Paulsen purchase assets for 30 cents on the dollar, sell them for 5 cents dollar and that frees up his limit again? He can keep selling at a loss and keep purchasing assets forever as long as he keeps his balance sheet under $700,000,000.
comrade awgee | 09.20.08 - 9:10 pm | #
You assume a buyer. Who would pay the nickel if the value of the tranche is zero.
"Can somebody explain why Goldman,Morgan,Citi are considered too big too fail? Shouldn't these companies be liquidated in an orderly fashion like Lehman was since they hold $500 billion Level 3 assets? Why screw the taxpayers?"
Ha-ha-ha.
Because, the Federal Reserve is a private bank owned by private banks and it's number one priority is the best interest of those banks.
Yes always counting the blessings. I visited Egypt as a teenager and the Peruvian Amazon recently. Gave me all the perspective I needed. Of course it's hard to decline, but for $200 you can still buy several hundred hours of well-produced musical recording. John D. Rockefeller couldn't.
yogi writes:
Just emailed section 8 to every lawyer I know (about 30). With a comment that if it passes we are in a Constitutional crisis.
Section 8 isn't unprecedented--it applies to decisions regarding consular visas, for example. No doubt it applies to certain intelligence activities, too.
What would be unprecedented is attaching it to a bill that grants essentially unlimited powers (the Secretary can take any action he deems necessary...without limitation). Or one having at least $700B in spending authority.
I can see why Treasury wouldn't want to be subject to judicial challenge of every single transaction, and I'd probably be ok with a clause that limited judicial oversight if the legislation clearly spelled out the extent of Treasury's powers and if there were, at least, congressional oversight.
(I suppose I wouldn't really like that, either, but at least it wouldn't be Grade A constitutional crisis material.)
Does this mean the Gov't will be in the foreclosure business??
"You assume a buyer. Who would pay the nickel if the value of the tranche is zero."
Call me a cynic, but I am thinking he will sell them back to the original owner, with the agreement that he will buy more worthless assets for 30 cent on the dollar. At least that is what I would do if I were him.
I am not surprised that Congress has decided to panic.
I am a little surprised that their reaction to that panic is to throw $700 billion at Hank Paulson to spend however he likes.
I wonder what form this will take when it passes.
tbapple writes:
Does this mean the Gov't will be in the foreclosure business??
tbapple | 09.20.08 - 9:16 pm | #
--
no it means the government should be in the foreclosure process.
Really, this non-plan plan works for me if they just add two clauses:
Otherwise, we may as well just give the billions directly to the bank and let them keep their mortgage backed securities.
"People view us today as being a source of the solution, instead of part of the problem," Gary Crittenden, Citigroup's chief financial officer, said in an interview.
more funny... Was at Washington Mutual today huge line teller ran out of $20's started giving money out in $5's
They can't just go around and sell them at 5 cents. That would destroy the banks because they would then have to mark to market at 5 cents...
From the last thread.
Anyone from the military knows what a section 8 is.
It was used to get rid of sexual perverts, undesirables and just plain crazy personel.
Remember Klinger on 'M.A.S.H.'?
Justly appropriate. Section 8.
Why don't we just skip the preliminaries? Let the banks drive container trucks up to the Treasury, drag the cash out with backhoes and be done with it.
If Washington Mutual fails this week it will be the "media's fault"... Watch.
tbapple,
Great question. The government will own well over 50% of the mortgages outstanding between the TARP and Fannie and Freddie. The TARP will put it in the position of owning the mortgages most likely to be foreclosed upon.
Cue the video of people being thrown out of their houses. Some of those people will be newly-unemployed in a declining economy and have few housing options. Some will even end up homeless.
Now, do you think the government wants to be in the business of taking away people's dream of homeownership?
We will have a moratorium on foreclosures of government-owned mortgages. The cost of the TARP and F&F bailouts will explode as a result.
An Answer for Nemo
Nemo writes:
Remind me what TARP stands for?
"Taxpayer A**-Rape Program", or something?
Nemo,
Not long after TARP appeared, someone posted in comments that TARP was
Taxpayer
Anal
Recurrent
Plunger
or something close to that
"Recurrent" seems especially apt given Hank wants to do it again and again and again, just so long as he doesn't exceed his $700 billion credit line.
comrade awgee writes:
"You assume a buyer. Who would pay the nickel if the value of the tranche is zero."
Call me a cynic, but I am thinking he will sell them back to the original owner, with the agreement that he will buy more worthless assets for 30 cent on the dollar. At least that is what I would do if I were him.
comrade awgee | 09.20.08 - 9:17 pm | #
I suspect there are enough low grade securities to load up the whole 700B with some left over. I agree with CR's assessment that the initial cost to the taxpayer is 700B.
"The Treasury Department said on Saturday that its financial rescue plan could permit it to buy assets beyond those backed by mortgages and potentially buy them from foreign holders."
http://www.reuters.com/article/bondsNews/idUSN2053279320080920
Treasury keeps options open on asset purchases
Sat Sep 20, 2008 7:54pm EDT
WASHINGTON (Reuters) - The Treasury Department said on Saturday that its financial rescue plan could permit it to buy assets beyond those backed by mortgages and potentially buy them from foreign holders...
I dunno, I think my own suggestion is catchier. But I'm biased.
Wow, only $700,000,000.00 ? That's not too bad. I thought we were talking about some real money.
Anonymous writes:
They can't just go around and sell them at 5 cents. That would destroy the banks because they would then have to mark to market at 5 cents...
Anonymous | 09.20.08 - 9:21 pm | #
--
That probably won't be true:
(c) Sale of Mortgage-Related Assets.--The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.
I read this as a grant to transform any mortgage related asset into another security with a totally different value. They could strip them apart, value only some of it at the lowest amount to not affect banks and sell off some new government (tax payer) backed security for whatever they like.
Wait, isn't this what makes this thing so goddamned awful in the first place??
Nothing is outside the Constitution. If the CIA commits a crime on US soil, it is not beyond "judicial review". Don't know about consular visas but I assume if it ever came up that there is Constitutional authority for giving it solely to the Executive. Agency decisions of course can not be arbitrary or capricious. What if the Secretary commits fraud? We have to wait for Congress to maybe catch him 3 months later?
$700,000,000.00
off by 1000
$700,000,000,000 . 00
Even if the banks are somehow made whole (unlikely) how will they be made profitable in the future? The gov't will have to wean the banks back into the home loan business which is likely to be depressed for years to come.
Wait, I was off by a few zeros.
$700,000,000,000.00.
Ok, now we're talking real money.
All these actions by the fed awaken in me the long-in-slumber rothschild connections. Anybody else in this boat?
All these actions by the fed awaken in me the long-in-slumber rothschild connections. Anybody else in this boat?
No.
I honestly dont understand how this cannot be good if done with integrity.
In 5-10 years time house prices will be almost back to where they were in 2006 - already 2 years ago. Inflation is now at a 17 year high.
Prudently purchased interest bearing securities will return a profit for the treasury.
Let me see if I can make this more clear. This new Federal Entity will buy the dregs that the banks desperately need to get off their books. Significant sales out of the facility aren't real likely because they will be buying the worst of the worst. No one will buy this stuff now, what will make them want to buy it from the Feds? Ergo, if the legislation is passed as proposed, 700 Billion is the cost, maybe a little more.
So is 30 cents on the dollar what the houses and MBS are actually going to be purchased at, or is that what we're guessing?
Any chance that Moody's or another rating agency downgrades or announces that they will downgrade US debt if they move forward with this crap? Do they have the cojones?
All these actions by the fed awaken in me the long-in-slumber rothschild connections. Anybody else in this boat?
Yep. The public was so easily fooled and manipulated into buying into the need for a "Federal Reserve" (the words Central Bank were intentionally not used) back in the day in order to prevent crisis' such as bank runs, many of which were provoked by bankers themselves.
It's like we've come full circle.
I'm sure someone has already pointed out the fact that treasury has nationalized or at least has a call on the balance sheet of every citizen.
They already have a call on your income statement.
Wealth taxes are sure too follow.
New IRS form.
1) What is your true net worth?
2) Send in 5% of same.
Nemo,
"I am a little surprised that their reaction to that panic is to throw $700 billion at Hank Paulson to spend however he likes."
In my opinion, resignation of the current administration ought to be a condition set by Congress for approval. In any other country on earth, hitting your Treasury for a $700 billion partial patch to avert total breakdown would be regarded as evidence of having done a bad job.
The video is crap at the beginning...
Substitute Chinese for Arabs and this may not be too far off...
Network
YouTube - Network - Arabs are simply buying us
Why@ ZIRP.
Currently even prime mbs is not an attractive assett. But it is if you can wait 10 years or more. If prime is made attractive then better alt-a is. The cancer has to be stopped. That is also clear.
$700B / 360M Americans = $2k per American.
If we're going to hasten the bankruptcy the country, I'd prefer another round of stimulus checks. I could put those $2k to a lot of good uses. Like my rent. Yes I am bitter.
CR,
You have persuaded me that this is probably the wrong intervention.
Question: is this structure a "done deal" or does it make sense to object to one's elected representatives? This looks likely to go down quite quickly next week. Is it too late for constituent outcry?
China Blames Wall Street Meltdown On Fed Overissuance Of Currency
I can tell you honestly that people like me are prepared to buy US real estate because our own real estate overseas is so expensive. But first we need to see that Americans are going to do what is necessary. What is necessary is not to just allow prices to fall back to super cheap while you drag the entire world with you.
Don't even sweat over it. Democrats and Reps are going to sign on the dotted line.
I really want Hank or someone to take the money and move to China. The courts cannot come after him because the new law will say so.
I think there is actually a much better use for the 700B....
Round up 700 of the top morons on wall street, pay them each a billion to never ever interact with the economy again (except as a consumer)...
I gotta believe we would be better off....
Btw: Imagine how many jobs 700B could create....
Don't worry. We'll make it up on volume.
TANF: Temporary Aid for Needy Families ("welfare"): $16.5 billion (FY 2007)
TARP: Troubled Asset Relief Program ("welfare for bankers"): $700 billio
From the proposal:
(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;
When I read that I just cannot get this scene out of my mind:
Taggart! Take this down!
Probably closer to the truth than I care to realize.
"Who would pay the nickel if the value of the tranche is zero"
This is getting at the heart of the design of many of these MBS, and what they really are going to find down in Level 3. Tranches (literally, in Fr, 'slices') cut apart the inflow from mortgages into more or less assured cash flows.
Say you forecast that under a certain default/prepayment scenario, $100 would come into the pool in a month. The issuers would issue a "A" tranche that would get, say $60, a "B" tranche that would get $30, and a "Z"-tranche that would get $10. That's simplified, but it's the basic idea.
Now, in the light of day, the default/prepayment scenario turns out to be 15% worse than that: only $85 is coming in. The "A" still gets its 60. The "B" now only gets 25. The Z gets nothing.
One of the problems is that the issuers, IB's and F&F, sold the top tranches out, and largely kept, with their fees, disproportional holding of the Z's.
While rates were falling, and the average life of a mortgage was, literally, sometimes weeks, the payout favored the Z's. Today, not so much.
These are what the market has, since the beginning, termed the toxic waste of the securitization. It used to be, in fact, kind of a fond, ironic term. Today, not so much.
It isn't $2k per american, it is $7000 per family. Taking out the families that live below the poverty line it is probably $10k per family.
Thats $10k added to each families invisible "USA" credit card, accumulating interest and no minimum payments forever along with the other $90k that was already there.
Question: is this structure a "done deal" or does it make sense to object to one's elected representatives?
Depends how spineless the Democrats in Congress show themselves to be.
Whatever happened to Just Say No?
The toxic waste represents the mortgages of families in the US. If you abandon your toxic waste you will abandon them. If you can float out of this mess you all allowed to be created then there is no toxic waste.
Wait till Tanta reads the article by Gretchen. That one is rally bad. She seems to think that CDSs are synonymous with real estate. She thinks that AIG's CDS portfolio of $400B is all guarantees on troubled real estate loans. AIG might have been dumb but they weren't that dumb. Their problematic part of the CDS portfolio, the super senior tranche collateralized by the mezzanine tranches of subprime MBSs is more like $28B not $400B and marks so far on that part is about $16B. AIGs estimate of actual cash losses is about $5B. AIGs problem is liquidity and not solvency. Of course to understand that, you need to understand the idea of subordination and that is too complicated for most journalists which is why they should not be writing on it.
Humbly, I submit that CR always gets it, but now he really get it. Evidence:
1) He just wrote a catchy headline.
2) He has begun to use the casino analogy.
What is necessary is not to just allow prices to fall back to super cheap while you drag the entire world with you.
No, what is necessary is to artificially prop up overpriced real estate fundamentally disjointed from income.
Comrade patient renter writes:
All these actions by the fed awaken in me the long-in-slumber rothschild connections. Anybody else in this boat?...
It's like we've come full circle.
...or downward spiral
With this in mind subsection (3) is even scarier...
"(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;"
This wealth redistribution!!!...or am I just looking at it wrong?
"AIGs estimate of actual cash losses is about $5B"
you trust a company fighting for its life to estimate its own cash losses conservatively!?!?
This situation is evil and dangerous.
jd & Comrade patient renter ---
To ease your troubled minds, a quote from GWB himself:
"In our economy, the Fed is the independent body responsible for setting monetary policy, for overseeing the integrity of our banking system, for containing the risk that can arise in financial markets, and for ensuring a functioning payment system. Across the world, the Fed is the symbol of the integrity and the reliability of our financial system..." --Oct. 24, 2005
this is the most opinionated CR writing i have seen thus far.
very interesting.
Leaks are already coming out of Congress that seem to indicate that Frank's staff is plugging something like the Schumer plan into Paulson's bill, with the selling institutions' common and preferred shareholders in first loss position ahead of the treasury. (Don't ask me exactly how this would work.)
At this point I'm pretty well reassured that this will never pass as proposed. But I'm still disturbed by comments like this:
It sounds like Paulson is asking to be a financial dictator, for a limited period of time,'' said historian John Steele Gordon, author ofHamilton's Blessing,'' a chronicle of the national debt. ``This is a much-needed declaration of power for the Treasury secretary. We can't wait until the next administration in January.''
Treasury Seeks Authority to Buy $700 Billion Assets (Update1) - Bloomberg.com
Here's an economic historian who understands that this is a proposal for a sort of dictatorship and thinks that it's much needed.
If this kind of thinking catches on more generally (and I'm worried that it already has--we've had similar sentiments expressed on this board today), I'm going to give serious consideration to emigration.
real estate prices can continue to fall but if the ABS fall to no value and destroy the banking system i cant see any gain. We are talking about being a lender of last resort here. In time these assetts can perform.
TC confirms it.
"What is necessary is not to just allow prices to fall back to super cheap while you drag the entire world with you."
What is necessary is that housing prices fall to a safe metric...2.5 times median income.
The rest of the world can f@@k itself.
"Across the world, the Fed is the symbol of the integrity and the reliability of our financial system..."
William McChesney Martin, who ran the Fed from '51 to '70, once described the role of that institution as taking away the punch bowl when the party is really getting going.
Clearly, Greenspans Fed did not play that role.
And Bernanke's fate is having to try to fill the punch bowl after the booze and fruit are all gone and the water has been turned off.
"Across the world, the Fed is the symbol of the integrity and the reliability of our financial system..."
They're reliable for sure, as they've presided over one reliable recession every few years since they were instituted. Quite reliable.
i said this 2 weeks ago, and it got little notice. i predict:
my dad was severely disabled. With assistance from his dad and his dads friends in 1955 he bought a house at 10 times earnings and did ok since he was able to get promotion and my mum worked too when she could. We never had any money but at least he was independant.
People who imagine they have some right to cheap owner occupation need to face some realities of life.
GET ON THE PHONES PEOPLE! CALL YOUR SENATOR AND CONGRESSMAN AND TELL THEM YOU WILL BE IN WASHINGTON DC WITH YOUR PITCHFORK.
$700b at any one time? No judicial or Agency review? This is complicit fascism by congress!
Can't we get some United States Senators to filibuster this legislation? Maybe Bernie Sanders
(I-VT), or Jim Bunning (R-KY)?
Doc, right next door to the Network video was this:
YouTube -
2. 50 year government backed mortgages will become common place.
nullpointer | 09.20.08 - 10:04 pm | #
It probably didn't get much notice because interest-only loans already became commonplace, and those are effectively amortized over an infinite period. What's 50 years when you can get infinity?
Trickle Down Tax Cuts.
It has become obvious that this ridiculousness has left the realm of economics and is now a political problem. There is no question but that the Bush tax cut, spending increases and decreased regulations, all financed by borrowing, have allowed the Wall Street oligarchs to game the system in their favor and make an inordinate amount of money (who wouldn't want to pay 15% taxes on 100 million dollar bonus?). But we are well past the point where anybody thinks that this is either right or moral. The question is, what's next? What Mr. Paulson suggests is the largest tax cut for the rich in American history. 1 Trillion dollars of debt relief for the Wall Street oligarchs, financed either by tax increases or inflation, is what is on the table for us. I cannot for the life of me understand why the Democratic candidate for the US president, Mr. Obama, is favor of this solution. The Democratic party has always been the party of the working Joe, so how can Mr. Obama support one trillion dollars of debt relief for the Morgan Stanley's of this world. He is such a big critic of trickle down economics (rightly so), yet he is in favor of trickle down debt relief. Can you just imagine that you had one trillion dollars to play around with. You could give back to Wall Street, who created this mess, or you could spend it as your wish. How many factories, roads, power plants, schools, bridges, solar farms, etc.... could you build? How many jobs could you create with a trillion dollars. How many fiscal stimuli could one inject with a trillion dollars? But Mister Paulson believes the best utilization of our fiat currency is to fortify the Wall Street Oligarchs, "so credit could flow through our system!" This is bull shit!!!!! This is a false choice that is being presented to us!!!! I implore any and all who read my little blog to contact your congressman and senator and tell him/her that you do not want your money to go to Wall Street. Do you believe that is fair that the taxes paid by the brave men and women of our armed services, who put their lives on the line for us day in and day our, be sent to people vacationing on their yachts? If there is any debt relief to be had, let it be had by regular working people who were ensorcelled into taking excessive debt by the oligarchs' sales force. I propose that people have direct debt relief by sending any kind of debt that was incurred from 2003-2006 (or so) to a DRC (Debt Reduction Corporation), and thus 1 trillion dollars of debt relief can be had by the American consumer. Thus, they will have excess capital that can be used for spending, saving or investing. Much of this can be taxed by the government, so they will have a return on investment. I am shocked that Democrats have allowed Wall Street to flim flam them into their nonsense. Please, America, let us unite in this effort to end the Wall Street Debt Reduction plan. They don't deserve it!!!
Bernie is my hero.
Housing prices will fall because there is no way to prop them up any more.
The lie of endless RE appreciation has been shattered. The American consumer is maxed out,
Helocs cut off, and food and gas prices are eating into any discretionary cash. The value of the dollar is falling, and the bailout will hasten its fall. That means even more expensive food and energy costs.
Job losses and layoffs will continue. State and local budgets are in crisis, and those taxes will rise.
Even less money for new household formation.
real estate prices can continue to fall but if the ABS fall to no value and destroy the banking system i cant see any gain
The paradox is that if home values rise enough to make the MBS regain their value, then more toxic mortgages will have to be written for those gains to be realized. Wages are not going up in a recessionary, global labor arbitrage era. And if wage inflation does occur, it's unlikely to keep pace with price/asset inflation.
Rinse. Lather. Repeat
A few comments about the value and future value of the outstanding cdos, cmos, mbss or whatever they are called. I have been reading Irvinehousingblog that goes through individual foreclosures (about 5 a week for the last year in Irvine). The losses in general seem to fall in this pattern.
2nd mortgages value 0
equity tranch 0
mezzanine tranch battered
senior debt mostly intact but sometimes hurt.
This is for mortgages with some downpayment or a 2nd. Those 0 down firsts show some seriously damaged senior debt.
These are the houses that are selling in a market that is about half way back to equilibrium in the Schiller curve. This is not a subprime market either, the properties sold mostly in the 400K to 800K range with some over a million.
These properties will likely decline another 20% to 30%. This means the senior tranches in prime mortgages will be hit. How hard will be determined by how many people that go under water decide to walk as well as those who simply cannot afford their mortgages and resets.
I believe making a good estimate of the value of all mortgage bonds, assuming a Schiller equilibrium, is quite feasible. This could be done by examining a significant sample of these bonds, researching household income of a sample of those mortgages and making a good guess on how many people that are underwater who can afford their mortgage will make the economically sensible choice to default.
HOOCOULDANOODE?
Worried,
you're not an American, are you? 2.5 times median income is the traditional lending metric for housing in this country, until greenspan and his bubble distorted the economy. It will be again.
So,you're getting burned on your investments?
Too freaking bad.
America for Americans..screw the rest of you.
it is not clear what will happen but prices dont have to rise in real terms. Inflation can do the work. Once financial armageddon is averted you still have to become a more productive nation. I dont think you Americans realise that most of the rest of the world does not live as well as you do.
yalt-
RE: 50 yr mortgages
precisely my point. even the dullest knife in the drawer realizes an interest only mortgage is folly, something that happened in "the bubble".
but a 50 year is "different". you own the house. it just takes longer to pay off.
and low, low monthly payments!
whats not to like!
In the military, the catch all clause to get rid of weirdos isn't section 8 anymore. I forget the legal term, but we just call it "failure to adjust" or "going sad" (as in "Chaplain, I just can't take it anymore). The easiest way to get rid of people, at least in the Nuclear Navy, is to rack them out constantly (ie wake them up at all hours), then put them in a position where they fall asleep on watch (instant loss of nuclear rating).
But I digress,
There is no way this doesn't cause a government funding crisis in the near future. This could easily create deficits over 1 trillion dollars. Why isn't anyone talking about what this will do to the government's ability to fund its operations?
Fried
The only investments i have are the euro and a house in NZ. But i am expecting to be a father in February and hope Finland, where i am now, is a safe place to live.
America for Americans..screw the rest of you.
fried | 09.20.08 - 10:15 pm | #
And just when I had almost convinced myself I was merely paranoid...it really is 1931.
The toxic waste represents the mortgages of families in the US. If you abandon your toxic waste you will abandon them.
The houses are an asset in a bubble. The values are largely illusory. People have mortgages that obligate them to pay loans of values the property will never again command without another asset bubble.
If you want to prop up those "values" so you can buy a Miami condo investment on a lark, be prepared to keep subsidizing the US state because at a half-million a crack, those superficial suburbanites in their mcmansions are going to add up fast.
Also, the lack of the HELOC ATM is going to severely depress economic activity, so if you want to keep the bubble propped open, it'll all need to be refinanced regularly at increasingly higher values.
What part of asset bubble are you missing? We aren't going to let houses "slide down to nothing" we're going to let them slide back to their real value. If that fucks with your yield assumptions, that is not "dragging you down", that is you having chained yourself to the anchor of the patently, superficially unreal finding out that water is wet and consequences are real. Say hello to Davey Jones. What are we supposed to do, grab on and go down with you?
This IS what the Republican party does . . . serve the top 0.5% of the population (in wealth terms) and bugger the rest of us.
Toonces Bush, "The Cat Who Could Drive A Proud Country Into The Ground."
I've got it at 50-50 that this bill is never going to pass. Democrats want too much (equity stakes, forclosure prevention, etc.) and Republicans don't want it at all.
If it does pass, it seems more and more likely that the entire this is going to be a logistical and PR nightmare which will lead to the mother of all panics, making the government look more impotent than ever and sending the national debt well through the roof.
God help us all.
Brigade homeland tours start Oct. 1 - Army News, news from Iraq, - Army Times
Beginning Oct. 1 for 12 months, the 1st BCT will be under the day-to-day control of U.S. Army North, the Army service component of Northern Command, as an on-call federal response force for natural or manmade emergencies and disasters, including terrorist attacks.
But this new mission marks the first time an active unit has been given a dedicated assignment to NorthCom, a joint command established in 2002 to provide command and control for federal homeland defense efforts and coordinate defense support of civil authorities.
whats not to like!
nullpointer | 09.20.08 - 10:18 pm | #
I'm not suggesting it won't happen, I just don't think it makes much difference. We had to resort to widespread neg am loans to keep the game going. Whether we revert to 30-year or 50-year the result will be pretty much the same--the monthly payments on either will be too high.
There is no way this doesn't cause a government funding crisis in the near future. This could easily create deficits over 1 trillion dollars. Why isn't anyone talking about what this will do to the government's ability to fund its operations?
Nuke | 09.20.08 - 10:18 pm |
Start the presses!
Gulp.
And Bernanke's fate is having to try to fill the punch bowl after the booze and fruit are all gone and the water has been turned off.
Austin Tex | 09.20.08 - 10:04 pm | #
There's plenty of urine?
Question: is this structure a "done deal" or does it make sense to object to one's elected representatives? This looks likely to go down quite quickly next week. Is it too late for constituent outcry?
Absolutely not!
Contact your representatives.
https://forms.house.gov/wyr/welcome.shtml
U.S. Senate: Senators Home
Byzantine_Ruins
If house prices fall it only benefits me. But if there is no system left what benefit do i have? I think you are living in an alternate reality if you do not realise how serious the financial crisis became last week. We need an orderly unwind not a fucking collapse back to the stoneage!
Out of respect for the dead, we should at least change our flag. Maybe just one star?
Nationalize the strongest bank, and use the 700B to gobble up all the others. Then clean up the balance sheet and spin off healthy entities.
50 year mortgages are actually not much cheaper than 30 year.
An interest only loan (at a fixed rate) actually would make some sense... if you just think of it as a low, fixed (inflation-proof) payment and the ability to take advantage of any inflation generated gains in the price of the house.
I think you are living in an alternate reality if you do not realise how serious the financial crisis became last week.
How serious did it become, really?
Who says this is a crisis that has to be solved next week?
The Bush Administration is the only source of "serious crisis" that must be dealt with "next week" and they are, to put it mildly, proven liars.
Just Say No.
From Bloomberg:
The Treasury would also have discretion, after discussions with the Fed, to make non-U.S. financial institutions eligible under the program.
What the hell? So we are not only bailing out Wall Street, but the whole damn world?
LET THEM FAIL!
I will probably be convicted of plagiarizing Robert Goodloe Harper, but our rallying cry should be ...
Billions for FDIC, but not one cent for Wall Street
Banks need to fail but it has to happen in some kind of orderly manner so that the survivors are separated from the dead.
This is the worst goddamn policy I have ever seen. I am still flabbergasted. I'm not even kidding, this is giving me bowel trouble.
I have been blind with rage for almost 48 hours straight.
Who says this is a crisis that has to be solved next week?
Agreed. So what if a few major banks go under. Take the hit and move on.
I get the feeling the Fed, and banking industry in general, has an over-evolved sense of self-importance. What is good for the banks is not necessarily what is good for the people of the US.
worried writes:
Banks need to fail but it has to happen in some kind of orderly manner so that the survivors are separated from the dead.
Spending 700 Billion of our tax dollars to prop up gamblers won't be as orderly as you think.
From the WSJ: "LONDON U.K. Prime Minister Gordon Brown said Saturday that he is working with U.S. authorities to get billions of dollars returned to Lehman Brothers Holdings Inc.'s London operations from the firm's U.S. business."
Canz we have ourz $8 billion back plueeze?
Dear Soldiers,
We want you to come home. Your family misses you. Mr. Obama supports that plan. You get to come home; your family benefits. Please believe. It is going to happen.
Worried,
We are facing a fascist takeover in the guise of "saving" some bankers, and you're whining about your "investments".
Here's a clue...we're concerned about the dollar being even more devalued. We are worried about state and local governments going bankrupt. We are worried about job losses. We are concerned about a 10 trillion dollar plus deficit and the costs of servicing that deficit. We are all worried about our economic futures.
Simple enough for you to understand?
"What the hell? So we are not only bailing out Wall Street, but the whole damn world?"
You guys have been living beyond your means for decades. And now some of you say screw the rest of the world. Meanwhile a major chunk of the rest of the world is dominated by American TV, films, multinational products, microsoft and your military while you pig out on most of the worlds resources.
How about some guilt and a sense of responsibility for what you have all allowed to happen:-)
Byzantine_Ruins writes:
The values are largely illusory...
BR --- You got it right...That's the crux of the biscuit...The tendency to think that when the value is on the upside, a "house" is an investment and when it is on the downside it's a "home", and I need the government to protect me (from having to live under bridges and such)...You can't have it both ways...
Unless, to continue the metaphor, your home just happens to be a boat! Then you're safe!
And now for something completely different:
YouTube - La Pequeña Madre Teresa de Calcuta
kis: "Agreed. So what if a few major banks go under. Take the hit and move on.
I get the feeling the Fed, and banking industry in general, has an over-evolved sense of self-importance. What is good for the banks is not necessarily what is good for the people of the US."
The rule I think is to identify the institutions that are too small to not fail. If you're insolvent, but your failure does not pose a systemic risk, then a speedy liquidation is the best option. Let's save the government money for when the really big pieces of crap hit the fan.
Always wondered how the British empire managed to unwind slowly without any major domestic catastrophes. It could be that they will crash with us.
The administration has zero credibility at this point. Now they are telling us how much money the taxpayers are going to make on this deal? And they want to give Paulson absolute power with this bill?
You don't give a hopelessly conflicted fraudster anything. You show him the darn door. Thanks for coming out to help us Hank.
The entire mess just shows what an absence of leadership we have in government today. This "made for t.v." method of governance is absolutely destroying the U.S.
Oh well, very sad.
syvanen @ 10:14
"I believe making a good estimate of the value of all mortgage bonds, assuming a Schiller equilibrium, is quite feasible. This could be done by examining a significant sample of these bonds, researching household income of a sample of those mortgages"
Syvanen, a commenter above suggested that it would be easy to establish [snapshot] debt to income ratios by automatically comparing tax return information with the mortgage information.
In many cases they probably wouldn't even need to get permission from the borrowers since there is an executed required form that allows the lender (servicer, guarantor?) to verify the returns.
Tanta would know when this form is required, by whom, and approximately what percentage of borrowers signed them. Tanta?
I always say the Federal Reserve should not make decisions based on the stock market. This should apply to Congress too. That is what they are doing here - they are throwing trillions of dollars in a rush to solve a problem they do not understand (and probably do not have a prayer of understanding) just because of volatility in the stock market. Reviving the uptick rule would have been a hell of a lot cheaper.
Time magazine cover is out on the newsstand in NYC.
Headline is...
How Wall Street Sold Out America.
Wall Street Had a Party and Why You Are Going to Pay.
worried
dude get off you high horse ok, being in finland with a house in nz you're just as much apart of the global crisis as anyone. If coming here and being a douche makes you feel better then your life must really suck
The hub just read the article. He said it was accurate but superficial.
Helps inform non readers of CR, and people who are not their spouses.
The rule I think is to identify the institutions that are too small to not fail. If you're insolvent, but your failure does not pose a systemic risk, then a speedy liquidation is the best option. Let's save the government money for when the really big pieces of crap hit the fan.
More and more, it sounds like the tide (as described by Warren Buffett) is about to go out. We will soon learn that the ABA has a previously undisclosed nudist colony down by the beach.
yogi: "Always wondered how the British empire managed to unwind slowly without any major domestic catastrophes. It could be that they will crash with us."
Well they gave up their global empire, for starters. That's a suggestion that needs to be thrown out there for the U.S.
Also, the Bloomberg article that said $700 billion is more than the U.S. spends on the military is bunk. When you add black budget expenditures, the Dept. of Energy's budget for maintaining nukes, the Dept. of Veteran's Affairs, and the pro rata share of the interest on the national debt, you get at least double the official figure.
"Always wondered how the British empire managed to unwind slowly without any major domestic catastrophes. It could be that they will crash with us."
Sharia law is now legally binding - Public Service
Sharia law is now legally binding
Monday, September 15, 2008
Its been described by one commentator as an example of Great Britain surrendering itself and the Archbishop of Canterbury Rowan Williams was criticised for saying it will happen, but whatever the reaction, Islamic law now officially operates in the UK.
Whereas before rulings by sharia courts in Britain could only be enforced if all parties in a Muslim civil case agreed to abide by them, now what the courts say will be legally binding, backed by county courts or the High Court.
The five sharia courts are Birmingham, Bradford, London and Manchester with others planned for Glasgow and Edinburgh. They will be run by the Muslim Arbitration Tribunal whose Sheikh Faiz-ul-Aqtab Siddiqi said: "We realised that under the Arbitration Act [1996] we can make rulings which can be enforced by county and high courts. The act allows disputes to be resolved using alternatives like tribunals."
[...]
CSC- you give new meaning to the phrase "high finance". This new meaning is the only possible meaning of that phrase from now on.
Worried,
I do not care if banks in other countries mimicked our financial mistakes or bought them either for that matter. Unless they are picking up my tax bill, other countries can deal with their own financial institutions.
Here's another thing I find amusing. They are giving Hank Paulson unprecendented power to spend money. The dude isn't even going to be around in January.
Wearbear
All i am saying is that i honestly dont understand why people are so against the government buying assett backed securities to stablise the market and encourage others to realise that the world will keep on spinning and that in time this mess will be resolved.
worried says
and hope Finland, where i am now, is a safe place to live.
Wait till the ice starts melting. LOL
they are throwing trillions of dollars in a rush to solve a problem they do not understand (and probably do not have a prayer of understanding) just because of volatility in the stock market.
The stock market is a sideshow here--I think the real crisis, to the extent there is one, is the blowout in spreads on ST commercial paper. I suspect the nightmare scenario presented in Pelosi's room was a world where companies couldn't convert cash equivalents into cash. Tell Congress there's a good chance of hundreds of companies not meeting their payroll next month and you can probably instigate a panic.
One more post; the voice from the other end of the house is demanding we start to watch "A good year." Chick flick for sure, (R. Crowe), but I can't get enough of Marion Cotillard, so it's a push.
A. Blinder (not a real heavyweight) says this is basically about real estate. I'm no heavyweight either, but I believe it's basically about credit disloacations, and has been from LTCM and the explosion in securitization.
At the time of the 29 crash, US credit was 175% of GDP. In '33, with debt rising and GDP falling, it was almost 300%. At the top of the dotcom, it was again something under 300%, but not much. In '06, it was over 300% again, but that time during the Greenspan/Bush "expansion." I have no idea what it is now, and it's rising faster than meaningful tracking anyway. But it cannot stand, and debt destruction, starting in the FIRE sector, inevitably spreads to the real economy.
That's why I must still disagree with the rapidly growing hyperinflation opinion. The credit wasn't real, it was mispriced, it was not based in payback ability, and I believe the infinite amount of money they're going to throw is going to disappear in Fisher's debt deflation like rain on hot pavement.
The movie calls. Hope she made popcorn.
yogi writes: Always wondered how the British empire managed to unwind slowly without any major domestic catastrophes.
I suppose that WWII bombing of London stuff is best catagorized as an inconvience?
Yeah, but we are not going to let this pass, are we?
I wont keep my mouth shut and let congress run over me next week.
Why can't this bailout program be limited to companies/firms that give 90+% of their equity to the govt? Why would the markets fail if there was known to be this $700B available to fill the void left by any counterparties that fail as a result of the crap securities? This is a simplistic solution that will forever change the US markets- they are no longer a free market- they are a fixed game where bad decisions are not punished and it pays to take massive risks within organizations that can create a systemic impact of their own failure.
"The stock market is a sideshow here--I think the real crisis, to the extent there is one, is the blowout in spreads on ST commercial paper."
Yalt, I'm sorry to disagree with you, but it's the bond market that will hand the US government its head.
Bond Girl: "I do not care if banks in other countries mimicked our financial mistakes or bought them either for that matter. Unless they are picking up my tax bill, other countries can deal with their own financial institutions."
Other countries have been importing dollars for decades, financing U.S. spending. The U.S. has been living off of the world, not the other way around. In fact, the main reason this fiasco happened was because those dollars that were recycled through Wall St. ran out of decent investments and ended up in CDO's and CDO^2's.
They are giving Hank Paulson unprecendented power to spend money. The dude isn't even going to be around in January.
Bond Girl | 09.20.08 - 10:43 pm | #
January!
This stuff is going to be wiped out of the Treasury by the end of September....
What percentage of small businesses rely on short-term commercial paper to make payroll? None of my companies ever did.
BondGirl@10:27
"What the hell? So we are not only bailing out Wall Street, but the whole damn world?"
I suspect that this is part of the multi-national emergency "credit union" arrangements.
Bush today said he's unconcerned that the price tag on the package may seem high.
I'm sure there are some of my friends out there that are saying, I thought this guy was a market guy, what happened to him,'' the president said.My first instinct was to let the market work, until I realized, while being briefed by the experts, how significant this problem became.''
That's so cute that he thinks he has friends.
Worried
yeah you're not worried because it's not your TAXES being used as a transfer of wealth from the have nots (your average american) to the haves the plutocrats and croney capitalists.
Frankly I'd hope that someone who lives outside the US of A would see this for the naked power grab it is.
If house prices fall it only benefits me. But if there is no system left what benefit do i have?
Have you learned something about letting capital structures get too large and interpenetrated? How about learning some lessons about loose lending standards?
I think you are living in an alternate reality if you do not realise how serious the financial crisis became last week.
I would say I understand it 'very' well to 'exceedingly' well. I am not a quant / trader like many of the people here, but I'm a student of strained and failing states. The general arc of things was predetermined when they started slashing interest rates after 9/11.
We need an orderly unwind not a fucking collapse back to the stoneage!
Who's the "we"? I'ma get stoned and watch Babylon fall.
Anyone know the price of CDS covering T-bills ?
"All i am saying is that i honestly dont understand why people are so against the government buying assett backed securities"
For the last time, the"government" ain't buying anything. The bill is being dumped on us, the taxpayers of America. We are displeased.
My first instinct was to let the market work, until I realized, while being briefed by the experts, how significant this problem became.''
wow
I feel so much better.
btw
Its
(202) 224-3121
(Congress)
Leave a message, or call Monday after 9 am EST
At this point I wonder how the thermonuclear war will be blamed on people who couldn't pay their mortgages.
Bush today said he's unconcerned that the price tag on the package may seem high.
"Uhh ... people are saying $1 trillion. Trillion. That's the one comes after 'thousand', right?"
Worried--there is a distinct possibility that all that's gonna be sold to the govt is stuff that's worth virtually NOTHING. And we don't like it.
And we don't like that the courts are told they can't opine on it.
We are never gonna like it.
The gov't for the moment is trying to act as the backstop to the shadow banking system. Providing the cover for the lack of meaningful reserve's (leverage) that the shadow banking gearing has allowed. Now the Gov't has enjoyed this massive credit creation since it has allowed the economy to experience a higher level of growth without large liquid capital reserves. Clearly without this high level of credit gearing the economy will slow down and with it goes millions of jobs and various business of all types.
This bailout cannot resolve the issue because the shadow banking system has crashed and AIG being the private insurance vehicle that everyone believed was the final backstop, basically said the system is a fraud. While the shadow banking system or parts of it may be overhauled in the coming months and years it cannot operate without either gov't financial backing or much higher reserve's which is exactly what it was designed to avoid.
Yalt, I'm sorry to disagree with you, but it's the bond market that will hand the US government its head.
mp | 09.20.08 - 10:47 pm | #
I don't think we disagree, mp. It's the bond market that's got Congress scared, and the bond market will win.
CSC:
Did you see Pequena Hillary?
YouTube - Las ultimas palabras de la Pequeña Hillary Clinton
"Anyone know the price of CDS covering T-bills ?"
Got back for a minute while the microwave popcourn is popping.
There are none. Bills carry no interest, and are paid in the notes of the Federal Reserve. Used to be paid in the notes of the T, but we don't have them anymore. Bills are as riskless as the Federal Reserve note in you pocket.
"Who's the "we"? I'ma get stoned and watch Babylon fall."
Aint that right. Babylon is falling. The only consolation is knowing that some illusions will finally become obvious. I hope the squares handle the realization well.
I wonder how many whole seconds it took to convince Bush.
At this point I wonder how the thermonuclear war will be blamed on people who couldn't pay their mortgages.
Comrade Tech Sargent Chen | 09.20.08 - 10:52 pm | #
Not a chance. It's those short-selling terrorists who are the war criminals.
"For the last time, the"government" ain't buying anything. The bill is being dumped on us, the taxpayers of America. We are displeased."
The taxpayers are the government. You have been living beyond your means and have refused to reign in your spending. Indeed as a people you have begged the government for more spending. And up until last month the rest of the world was paying for that.
mp
totally agree the bond market is the tell. The US Gov needs the bond market as its condiut for funding. It is the oxygen which ensures its survival. Rest assured TPTB would throw away the equity market in a heartbeat to protect thier funding mechanism. THe real tell is when no one shows up for the auction.
Also, on inflation and house prices. Inflation is meaningless unless (1) interest rates compensate you for it, or (2) wages reflect it. Neither are true and neither are likley to be true. So inflation will solve no problem whatsoever. Why is this so hard for people to comprehend?
Want to save the US economy on the cheap? Export investment bankers to China to be processed as a replacement for melamine augmentation in baby formula. $0.50 a pound sound about right?
Makes as much sense as anything being currently discussed. Sorry to be so crass, but this one is going to the streets.
Uncle Billy: I posted Hillary earlier. It gave me ED.
This one is also disturbing:
YouTube -
There are multiple reasons for resistance to this bailout:
Is it that shocking that the citizens are up in arms? Its almost like the administration wants to provoke the people. Very hamfisted approach to asking the taxpayers for an additional $800B.
"Yalt, I'm sorry to disagree with you, but it's the bond market that will hand the US government its head.
mp | 09.20.08 - 10:47 pm | # "
And not two weeks ago, I read people asking: What ever happened to the Bond Vigilantes?
Nobody forced the rest of the world to pay for this. They shouldn't have. They didn't do their due diligence either. They lose too.
yogi writes: Always wondered how the British empire managed to unwind slowly without any major domestic catastrophes.
Well they were bankrupt in 1940 but then a sugar dady stepped in with lend-lease and later the Marshall Plan to tide them over. That plus dismantling their empire seemed to provide a soft landing.
Who is going to our sugar dady?
Isn't it just incredible that the banks don't know the value of these various products within any reasonable range of certainty? Doesn't that suggest that the pricing models used to price them were useless? And what good was the insurance value of a CDS when the counterparty could just go away? The cost of this bailout has to work out to tens of thousands of dollars per each household that pays real taxes.
mp! You're back! How was entrenching?
Are you just here while the eshu is making positional adjustments?
And up until last month the rest of the world was paying for that.
The rest of the world will continue to pay us. If they stop paying the bailout is off and we will all witness armageddon. Call it black mail or whatever you want.
"2. The majority of citizens in the U.S. either own their home free and clear or rent."
Yet they are being asked to bail out the speculators.
Austin Tex - Thanks!
"And up until last month the rest of the world was paying for that."
No one held a gun to their fucking head. If you got a problem go talk to your own central bank who has been ripping you off. Mercantile bastards.
Who is going to our sugar dady?
long march meet US ; US meet long march.
possibility that taxpayers could profit from the effort
That's all the koolaid drinkers need to hear.
It is really difficult to wrap one's head around the disaster that is waiting for us right now.
"Doesn't that suggest that the pricing models used to price them were useless?"
Um, yes. Only now they are going to have to admit the fact. Too bad they didn't read any of Taleb's books as they were cooking up that witch's brew.
Party Dissident Gerkinov writes:
possibility that taxpayers could profit from the effort
That's all the koolaid drinkers need to hear.
Just wait til Kramer and the other gasbags on CNBC get a hold of that line.
lawyerliz: "Nobody forced the rest of the world to pay for this."
Yeah, everybody decided to loan money to the global empire with the nukes and carriers because they liked us so much.
Like all enablers, I see the world Bankers all going to Al Anon after this....we need our fix....and if we don't get it, no one is going to have a good day.
Anonymouse:
No one held a gun to their fucking head. If you got a problem go talk to your own central bank who has been ripping you off. Mercantile bastards.
Worried is just verklempt 'cause with living in Finland and a house in NZ he's afraid things won't keep going his way.
How will Boopsie ever get the Saab he promised her? LOL.
Yet they are being asked to bail out the speculators.
sm_landlord | 09.20.08 - 10:58 pm | #
Nobody is being asked to do anything. This is how it works now; the Boss just tells you how it's going to be.
Yeah. We're going to listen to your phone calls.
Yeah. We're going to film you, look through your library records, track your purchases. Yeah.
And yeah. We're going to bill you for it.
It was a coup. We didn't have time for it.
Escariot writes:
Like all enablers, I see the world Bankers all going to Al Anon after this....we need our fix....and if we don't get it, no one is going to have a good day.
Escariot | 09.20.08 - 11:02 pm |
Hell I haven't stopped drinking since November 3, 2004.
This will not set well with this audience, however I would like to throw up a suggestion-
2 Let individual home owners declare BK, if they are not willing to pay their debts (mortgage, auto loans and credit cards).
This is SOP. We should proceed down this path. We do not want the Supreme"s make a legal decision that is a one time only decision with no percipient.
Heck, the positive, no further political contribution to either party. We must drain the swamp!!!
jmho
I heard finland is next on Russia's todo list.
Yeah, everybody decided to loan money to the global empire with the nukes and carriers because they liked us so much.
We held a nuclear weapon over your head? I find that unlikely. I think a buyer's strike in the Treasuries market is worth ten carriers. Ya did it 'cause you were dumb and greedy. Be honest.
"The rest of the world will continue to pay us. If they stop paying the bailout is off and we will all witness armageddon. Call it black mail or whatever you want."
Sounds like we are then, after all, on a similar page.
Not that this will make any difference, but Bernie Sanders, the only 'admitted socialist' in Congress OR Senate, has posted four principles that ANY bailout should follow. I'll just list the first.
(1) The people who can best afford to pay and the people who have benefited most from Bushs economic policies are the people who should provide the funds for the bailout.
Read the rest.
Sanders Billions for Bailouts! Who Pays? - Newsroom: U.S. Senator Bernie Sanders (Vermont)
Discuss among yourselves.
Ok, we have people like me who are free and clear.
Then we have renters, who don't owe anything but the rent.
Then we have people who can make their payments and aren't underwater.
Then we have people who are a little or a lot underwater, but can and do make their payments, either because it's honorable, or because they haven't a clue what's going on.
So what percent is left: those who are underwater and can't or won't make their payments. It's a lot. It's enough to break the banking system, at least temporarily. But it's not everybody.
It's not worth losing the Republic over.
By the way, the Roman republic had dictators a lot during certain periods. They did their jobs and then went away. Even Sulla in late republican Rome eventually retired.
But their system was set up that way.
Ours isn't and shouldn't be.
REBear: "I heard finland is next on Russia's todo list."
Damned Finnish short sellers!
Sounds like we are then, after all, on a similar page.
same page but different book.
Oops. Last Anon was me.
Troubled Relief Asset Program
The funny thing, as Krugman suggests, is that the banks and other financial institutions may get this aid and still fail. What are we going to do then?
I wonder what is going through the heads of our esteemed leaders right now. I wonder if they are truly afraid or if they even care.
(1) interest rates compensate you for it, or (2) wages reflect it.
I've never understood the inflate-out-of-it argument either. To the extent interest rates move with inflation, the cost to service debt goes up far faster than revenues (inflation goes from 4% to 12% you get 8% more revenue/wage but your cost to service your debt triples). If interest rates don't move with inflation the noteholder gets the shaft.
Any inflationary move either crushes demand or crushes bondholders, and I don't see how either is feasible.
If the debt was all owed to foreign parties, like 30s Germany and postwar Hungary, crushing the bondholders might be politically feasible, but not in our situation.
Hey worried,
got a house New Zealand? Too bad, housing bubble there is imploding.
Guess you're safe in Finland, unless Pultin is feeling peckish again.
Me? I'm still bemused by thought of the government making money. Maybe we need a clause in there to prevent them from making off with their windfall profits. And then we need to worry about other branches of the government profiteering. Why, in a few years, they might not even need the taxpayers. Then what will we do?
""Too bad they didn't read any of Taleb's books as they were cooking up that witch's brew.""
sm_landlord
Would have made ZERO difference. Highly paid consultants are POSITIVE that they're right, ALL the time.
Ask their first wives.
"I heard finland is next on Russia's todo list"
There is nothing to do here, which is why there are so many Russian holiday homes here in the best locations. Historically Finland was just a killing/buffer zone managed by rival empires. Finland helps Russia solve its infrastructure inadequacies with its skills in engineering and has shown it understands Russia.
I wonder what is going through the heads of our esteemed leaders right now. I wonder if they are truly afraid or if they even care.
Bond Girl | 09.20.08 - 11:05 pm | #
I have to believe they care, if for no other reason that they like to think their peeps admire them, and this is just such a clusterfuck. I imagine they are also cramming like crazy to get up to speed on what the hell is going on. We have the luxury of having been schooled by the bears already.
Pity they can't come on here and read the archives.
But there isn't time. That must be the worst part. This thing is moving so fast we are almost certainly looking at this thing that is too little, too late.
Is anything in Bush's head?
I bet he's drunk a good part of the time. I can't even blame him for that.
And B and P have got to be so tired they aren't capable of making rational decisions. This is why dictatorship is not a good idea. 2 guys can't control the global economy.
Bond Girl writes:
...I wonder what is going through the heads of our esteemed leaders right now
Worms, maggots, all sorts of creepy crawly things!!!!
lawyerliz: "This is why dictatorship is not a good idea. 2 guys can't control the global economy."
That why you need at least 3, so they can take eight hour shifts.
It worked after Caesar got snuffed...
True London got bombed. But I believe law and order was generally maintained. They seem to have respected freedom of expression and though I'm sure there have been incidents of secret police intervention (they produced Orwell) they let the Sex Pistols get away with "God save the Queen, the fascist regime..."
That's a soft enough landing. Better than occupation or reign of terror.
Maybe thats why Stalin invaded Finland.
CSC: I think we've entered a Fellini movie directed by Bunuel, with music by Frank Zappa, and produced by Allesandra Mussolini.
I was so worried about the douchebags on Wall Street who've lost and will lose their jobs, and then I saw this in the proposal:
"Paulson is asking for the power to hire asset managers and award contracts to private companies."
And now I know, this proposal will work. Everything will be OK. The guys who got us into this mess will be highfiving as they go from fleecing each other to fleecing the taxpayers.
Forget TRAP, Amerikkka - this is:
S.ecuritized
H.ome
I.nvestment
T.rust
Get used to eating a lot of cheese, yo!
"True London got bombed. But I believe law and order was generally maintained."
By turning it into a surveillance state.
Fried
NZ and Australia are more or less commodity countries. After ww2 NZ was the seventh richest nation per capita. Food prices are sky high. So NZ has some buffer there as does the US with its massive agricultural produce and agricultural machinery sales. I never heard of John Deere before i went to NZ i just knew of small Massey Fergusons. My car (stolen while i was away) was a ford. And curiously you can buy a well known brand of Finnish steel products (Fiskars) in NZ that are made in the USA.
The Fins are the smartest people in the whole world. It's true if you look at the test scores.
What are you doing there worried?
Are we toast, or is this just another bad 'A-Team' TV show?
And how come I haven't seen one Ron Paul refernce today?
Will anyone stand up for America???
yogi writes:
...Better than occupation or reign of terror.
Don't forget Axis-of-Evil!
I think we are toast.
lawyerliz writes:
Is anything in Bush's head?
I bet he's drunk a good part of the time. I can't even blame him for that.
Maybe, but I recall him saying quite some time ago that the banks should take their marks. Bet he didn't realize those marks would BK them.
Comrade NSA writes:
I think we are toast.
Comrade NSA | 09.20.08 - 11:17 pm | #
oh
no ponies then. I knew it was too good to be true.
If you want ponies, go to Eschaton blog. Duncan skirts the limits of pedophilic law to ensure Atriots get PONIES!!
Comrade NSA writes:
Are we toast, or is this just another bad 'A-Team' TV show?
Comrade NSA | 09.20.08 - 11:16 pm |
Its much worse than that. Its another bad episode of 'Greatest American Hero' and Congress evidently thinks giving Paulson the superhero suit is the way out of this mess.
maybe if they call it a Dutch Tulip Auction it will work ...
Nitey nite everybody.
Buy those groceries.
worried,
I personally find myself in something of a quandary. I do not want the financial markets to crash, but the current US policies of corporatism (low taxes, low regulation, privatization) are now (I hope) once and for all proven to be a disastrous mistake.
While much of the spending spree was going on in the US it seems to me that it was really global in nature. Many countries have been partying hard on credit, or have made their economies dependent on the party and the music stopped back in July of 2007.
My biggest concern, as better described by others on the board, is that most of this so called "wealth" that was created is illusory. Attempts to preserve this wealth by propping up artificially high home prices (in this country, anyway) or buying distressed assets will probably be akin to throwing the money into a furnace. We need to set a realistic price on the value of these assets (if that's possible) - right now the value of these assets is zero, since noone will buy them.
Do I think the value is zero? No, but I sure don't know if and when they can be resold for what the US Govt will end up paying for them as part of this proposal. And giving any non-elected official the kind of wide-ranging powers that are being asked for is a refutation of the democratic values that many of us hold near and dear.
If this type of legislation was proposed in Finland, how do you think the people living there would react?
Well, what can we little people do?
laterz Liz!!!
OT - How does this affect GM, Ford, and Chrysler ?
Congress evidently thinks giving Paulson the superhero suit is the way out of this mess.
No, Paulson thinks giving Paulson the superhero suit is the way out of the mess. This was Treasury's proposal; it didn't come from anyone in Congress.
Why cant Obama not back this and just come out and say, "look, we're in a pickle. If I dont support this, and it does not happen, we are looking at the real risk of a seizing up of the finance that businesses need to run, and expand, and if that happens, a lot of the lower, middle and upper classes are going to lose jobs. Frankly, since the last few years gains have all gone to the rich, those people are quite well equipped to handle job losses, if they come. However, most of you are not, and living standards have already gone down in eight years based on no income growth and runaway inflation. So, my proposal is to take the chance, and to be at the ready with a series of taxpayer funded initiatives, stimuli, and jobs programs, including rebuilding our infrastructure. We will also support banks that are soundly run, and help them fill the need for business capital. And once we get to the point where people in there houses are the ones who an actually afford them, and home prices have fallen back in line with income and rental values, and the insolvent banks have disappeared, and banks get back to the business of funding sensible investments, well perhaps then we can get back to moving forward. But it is going to require some pain, for many. And it will require time. But there are lessons to be learned and systems to fix, etc... but rewarding the very people that put us in this mess, is not the way we move forward."
Why can't we at least have the debate about who should foot the bill for this fiasco?
Yes Finns have 100% literacy. Which is kind of weird but seems true. I met a blonde and now seem to be here for the duration! Given the mayhem i would prefer to be back in NZ but sometimes life is very complicated. Actually at the moment nothing much is happening here. But the worry for me is that it becomes a rerun of the 1990's crisis where all finnish banks began recalling loans to save themselves. I know some people who had good buisinesses who could not renew loans who were ruined. Already this week banks have admitted they are changing loan terms to unilaterally protect themselves with higher rates if it all turns to custurd. No crisis here though.
"After years of deregulation, of promotion of greed and assertion of the superiority of the market, and in particular of financial makrets to decide how to run the economy, it appears - nay, make that: it is now blatantly, in your face, obvious - that none of this worked. Worse, the people that have mocked government throughout, as wasteful, inefficient and incompetent are now counting on the very same government to bail them out from the hole they have dug."
-- J Paris
I was thinking of stockpiling manhole covers, but the work involved is a bitch.
I say we approve these measures for the next administration. Let everyone know we'll do it, so they know all they have to do is survive until January, and then we'll see how much this plan appeals to the current administration. Or, as I suggested before, put a Democrat or Ron Paul in charge. How good would it look then?
"OT - How does this affect GM, Ford, and Chrysler ?"
I suppose they'll stay afloat on the "rising tide".
Comrade Geoff ,
None of the presidential candidiates will vote on this bill.
Comrade NSA writes:
Well, what can we little people do?
Comrade NSA | 09.20.08 - 11:20 pm | #
Well, I intend to maintain as much dignity as I can. I can give up a lot (and have over the years) but I won't give that up without a fight.
There will be work enough, and food. We are a resourceful lot.
So does Goldman survive as an independant? An earlier poster commented on this. Level 3 to the moon. Nice job waiting BB if he can eliminate GS's competition in a week's time and keep em flying solo.
"How does this affect GM, Ford, and Chrysler ?"
Not much yet. It probably means that they can continue making loans to cur buyers, if they can find any such animal.
At this point, I'd say their special pleading for bailout $$ is off the table until next year.
No, Paulson thinks giving Paulson the superhero suit is the way out of the mess. This was Treasury's proposal; it didn't come from anyone in Congress.
Yalt | 09.20.08 - 11:21 pm
Absolutely correct. I bet he is wearing his Underoos underneath his suit these days.
Comrade NSA,
Tell all your friends that the saame mofos who got you into this mess will now help get you out, that it's being rammed down Congress with all speed during election season and you need to make sure someone has the cojones to question the wisdom of every clause instead of kissing babies next week.
POWER TO THE PEOPLE
As long as we can talk like this there is hope.
I will share any information I can to help people on the net.
God bless CR and this blog. It takes away a lot of the stress just to be able to share this with someone.
BitterRenter writes:
$700B / 360M Americans = $2k per American.
I'm a little short right now, you know illiquid and all, can you guys spot me?
No doubt this thing is going to have 'homeowner' or 'housing' or 'mortgage' or some other suggestive word in the name to convince J6P that it is going to save housing prices. It will approved with thunderous applause.
God help us.
I also hope that CR is going to get some quality sleep time in. We need him and the Tantanator in peak shape, because the financial Olympics have started, and we are all on the team.
anon writes:
I was so worried about the douchebags on Wall Street who've lost and will lose their jobs, and then I saw this in the proposal:
"Paulson is asking for the power to hire asset managers and award contracts to private companies."
This is what Bill Gross gets out of the deal.
Great Russo-Finnish movie made around 02.
It concerned a Finnish sharpshooter, who really wasn't, a Russian officer and a, what is called, Chuchka, the equivilent of our Eskimo.
Great flic. It was basically about misunderstanding among languages.
I think the name was 'KUKUSCHKA' which is cookoo in Russian.
If it is ever subtitled, I would recommend.
Can I haz a Saturday Night Live skit out of this, please?
My father went through the Depression as an orphan in an orphanage; so he's laughing at us pussies now (from Heaven). He told me it was an opportunity to build character.
"Uncle Billy, Diosa del Caño" Oh no. LOL. She scars the mind, but I must admit that in a foreign country, with no witnesses, after many drinks...I would still rather rip my own dick off.
I just got home from an evening out and read CR's comments. You have this thing nailed. What a wreck. One of our our Senators was to speak at the function we attended tonight and he was summoned to return to Washington just before he went on stage tonight. This is on a fast track. He is on Senate Banking Committee so will be in the action. He is a smart and decent man and I hope he can resist the pressure and tell Paulson to back off.
Captain E. J. Smith writes:
The Fins are the smartest people in the whole world. It's true if you look at the test scores.
Hmm, now why did always think that was true?
RE Bear, I am aware of that. I mean to vote on it publicly, as in, make a pronouncement as to your take on it. Did I say vote, I dont think I did. My point is that if you get one of the two presidential candidates saying this isnt right, it will wake a lot of people up.
W's change of heart regarding the wisdom of the market reminds me of something i read on a thread on Eschaton ages ago now:
You're a Republican until 'it' happens to you.
A lot of wisdom came out of the Great Depression. Their kids were America's Greatest Generation. I don't know what our kids will be.
Finns, Finns everywhere! Run for your liquor.
Finns build great sailboats
"If this type of legislation was proposed in Finland, how do you think the people living there would react?"
Finland operates under the Nordic model. Taxes are very high. Medical care is good and free i think. Education is also good. Thats not to say it is a paradise. Life is hard here compared to NZ and not just because of the winters.
In the 1990´s banking crisis the Nordic regions governments recapitalised the many failing banks (there were not many) but ensured i believe that all share holders and bond holders were wiped out and all directors were replaced. Whatever it was it was pretty drastic. No depositors lost any money.
Bush today said he's unconcerned that the price tag on the package may seem high.
Who in their right mind could have voted for this fellow? Do we really want to repeat this calamity and send a really old man with already limited facilities to the plate AGAIN?
These yankees need to bite the bullet.
"Roskapankki", nationalization of all major financial institutions and equity of leadinbg banks wiped out completely.
GDP falls 10%, but the pain is over for most people in 2-3 years.
That's how we rolled in Finland and the GDP grew 5% per annum for a decade afterwards.
Bond Girl writes:
... I don't know what our kids will be.
Very broke!
OT. Of interest to lawyerLiz.
LawyerLiz was asking about the takeover of Constellation - which runs the Baltimore Gas & Electric utility by Buffett.
A commentary is availiable at the site Crikey
Follow the the link to "Buffett energy deal shows them how it is done. Again"
All the finns here will be happy to know that Lefty's has a large selection of Lakka to choose from.
Lefty, I will take my commission for this paid advertisement in bottles of the best.
Dear Everybody,
Don't feed the douche bags.
Warmest,
prat
P.S. mp, please post more.
Bond Girl writes:
A lot of wisdom came out of the Great Depression. Their kids were America's Greatest Generation. I don't know what our kids will be.
Bond Girl | 09.20.08 - 11:32 pm |
Ever see the movie Threads?
You can watch here on Google Video if you haven't.
Captain E. J. Smith writes:
The Fins are the smartest people in the whole world. It's true if you look at the test scores.
They have to be smart to speak their language.
super siv baby daddy paulson is adopting the wide stance to restore confidence
gov=siv
please grovel
My dad used to think that:
You are a democrat when you're young, dumb, and poor.
You are a republican when you're older, and you've made some money.
You are a democrat again when you become wealthy enough to afford it.
I'd like to add: My dad thought he was wealthy up until very recently.
RE writes:
Bush today said he's unconcerned that the price tag on the package may seem high.
Who in their right mind could have voted for this fellow? Do we really want to repeat this calamity and send a really old man with already limited facilities to the plate AGAIN?
Hey, Obama says this BS has his full support.
for all of you who say let these banks die, you do realize that you are begging for 5 - 10 years of pain. that being said, paulson's proposal is criminal. why isn't there an in between?
Cuckoo has been subtitled in English, Ross, and I heartily second the recommendation. One of the best movies I've ever seen.
seu bobo,
Yah Finnish is a Turko Urgaic base. Funny that far north.
They make good weapons also. I have a 1942 Moshen Nagant issues by the Russian Army.
Sorry if this has already been discussed, but:
If Banker were around, would $700B qualify as a "burger"?
Also, has PonyBurger been coined yet? Because this certainly looks to contain any and all pony I might have been hoping for.
I'll be buying 500 silver american eagles on Monday, if I can find any. Last week I checked multiple silver dealers and there were none to be had.
Supposedly I can get them on Monday at $3 above spot. On eBay they are selling at $8 above.
Section 8 is a poison pill for the deal.
The question is when.
If the DEMs had any balls they would kill it right now over this provision.
If they don't, the courts will. This whole deal will be eviscerated. But WHEN?
Several years from now the taxpayer will be stuck with all the bad debt and the courts will be awarding all the decent assets back to those effected...the surviving banks & IBs...at bottom market prices. Their won't be enough to go around but we know who will get first in line and its first come first serve.
Tell me why I'm wrong.
hummm. just a new thought:
maybe we should save/bailout/liquify all the smallest banks and those bigger banks that don't have tons of toxic waste on their balance sheets or hidden off-balance sheets. buy out the toxic stuff (if present) from the little guys, and establish 'market' for valuing the level 3 crap.
depend on them to keep the economy liquid (including mortgages).
then require those with toxic waste to get transparent. No mark to model. just disclose what the level 3 stuff is in detail.
as the level 3 picture (market value) becomes clearer, require that the banks/whatever to either take market value plus a haircut or deal with the consequences themselves - including bankruptcy.
Rallying Motto: No More Too Big to Fail.
Dave writes:
for all of you who say let these banks die, you do realize that you are begging for 5 - 10 years of pain.
I don't see why this is necessarily so as long as an alternate funding mechanism is made available. I actually think there'd be less pain if we found a less leaky conduit.
so can we just cancel the election?
and make Paulson president?
I'm sure someone posted thios already but:
IT'S A TRAP!
YouTube -
Dave...not sure of this, but my sense (after reading on here for months now, daily) is that the die was cast years ago. What's done cannot be undone.
None of the solutions will be popular.
My reading of this board's general feeling (nodding to the loyal opposition here present) is that there is some sense in trying to have us deal with this in a way that limits the damage to the present generation as opposed to sending it upstream to the next.
We have benefited (some more some less it is true) so we should bear the cost.
Paulson hardly wants to be a president.
America is about to make him the emperor of the world - bound by now laws, floating above the American citizens like Baron Harkonnen.
What fool would turn down a trillion in favor of becoming a mere president?
Hey Yalt,
All I have is a VCR of Kukuschka in Russian. Glad to hear it is subtitled for the rest of the world.
What a GREAT flic. I've watched it 10 times. Great cast and the scenery is wonderful.
Good message also.
comrade bailbottoms writes:
so can we just cancel the election?
and make Paulson president?
I thought he already did that...
maybe we should save/bailout/liquify all the smallest banks and those bigger banks that don't have tons of toxic waste on their balance sheets or hidden off-balance sheets. buy out the toxic stuff (if present) from the little guys, and establish 'market' for valuing the level 3 crap.
I agree, but I would have a limit on leverage before you can visit the Treas. candy shop. If you're leveraged beyond let's say the industry mean you're banished to go die a quick painful death.