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First in line?
Why don't they just close the markets until after the election?
wow. first?
so we are all AIG now. right?
Playing hit and run all the way into the election.
someday this war's gonna end...
There would still be an awful lot of bankruptcies.
All Your Debt Belong To Us
We are all comrades now.
My sweet melody will brighten the Friday afternoon...
Great! The Wall Street bonuses may be saved yet.
I was starting to get worried for these people.
MaxedOutMama has doen a great job of summarizing how the financial world got so screwed up, including the major role played by Gramm-Leach-Bliley and an inoperative SEC, as well as many other players of both parties.
I see debt people.
I will support this if I am allowed to sell my house into the fund at peak pricing. They can hold it, lease it, and sell it later for a profit. Hey, if I have to backstop the fund, I want some sugar too.
Good to see a principled small government admin in action.
The mess is too big to bail out . . .
Volker to the rescue.
My condolences to those who took enough of a beating on their short positions today that they're currently under water. While I'm thankfully not in that situation, the $RUT explosion certainly pissed me off enough that I'm loading up on more TWM.
Market wise, everywhere you want to look, we made lower lows on record volume - that will get tested, sooner rather than later. No IT bottom has formed.
Nothing with financial sense should be expected until after the elections. Anything before that is proposed before that is tainted.
And to gain acceptance by the public, the new Congress and President should be doing whatever needs to be done.
Anyway, the Congress is half-way out the door for a recess till the end of the year. Any plan forced through in a day or two (Phil Gramm-style) and done with no hearings, no debate, and no time to read the details is bogus.
who knew Atlas' shrug would cost the Taxpayers so much money.
I wish I could fast forward 200 years and read the history book about how badly and comically this all failed.
If these Plutards get bonuses this year, I'm moving to Sweden.
Now that's the ticket!!
I'm a gonna start me a company, loan a bunch of dollars to losers, collect fees, say I can't collect, give it to the gubermint, and start all over again.
Beautiful!
The problem is that there's going to no farking reason to have elections if things continue on the present course.
I keep getting old-posted on this comment. We'll see if this blog post stays live enough for anyone to read it:
(Two) Four (!) posts ago, a commenter came up with a calculation, which seemed correct, show that among households with mortgages, equity averaged 20.5%
I come up with the same number, but would like to see someone else run the numbers. 20% equity is stunning.
Input:
- 31% of homeowners have no mortgage, i.e. 100% equity
- ALL homeowners (including that 31%) have equity of 45.2%.
Simple math, right?
(0.311) + (0.69x) = 0.452
x = 0.205 = 20.5%
The 69% of homeowners who have a mortage have, on average, equity of 20.5%
Please show me that I'm wrong. If this number is correct, no WONDER Moody's is increasing its estimates on mortgage losses.
Time to party like it's 1979. WOO HOO!
comrade my poor savings accoun writes:
who knew Atlas' shrug would cost the Taxpayers so much money.
Greenspan knew. smiles
I got out of 90% of my shorts this week. I knew come cock and bull plan would rally the market. This doesn't make sense if the government buys from banks at market prices--the banks have been doing everything to avoid pricing to market. Even if approved, this would do nothing.
I haz WM @ $2.63 AH..
If I recall RTC operated by wiping out the firms originally holding the bad debt then passed the 'operational assets' on to stronger hands who then operated it...
1) the original equity interests were zeroed out.
2) most of the managers and many 'line workers' became 'redundant'.
3) only then were the debts & liabilities assumed by RTC.
Yes/No?
If so how is this 'bullish' considering the span & scope of bad debts? Sort of like cattle at the feedlot celebrating that a nice big truck has come to take them away from their current squalid mess.
Message to Wall Street: Be careful of what you ask for - it might come to pass.
Our workers: remaining 69% have equity as large as 99% to negative equity
Time to party like it's 1979. WOO HOO!
I have a Quiana shirt somewhere... my wife is gonna not be happy if I pull it out.
"life and be run by nonpartisan professional management"
Blackrock. Time to go long BLK.
Dryfly: Seidman who ran the RTC opined that this trust is not as simple as back then RTC didnot need to buy the assets
I think traders would not go far wrong by simply basing every trade on the assumption that ANY facility of the executive branch (and I don't believe the Fed is very independent any more) is working to stimulate the markets as much as possible before the election.
If so how is this 'bullish' considering the span & scope of bad debts?
Exactly!
It is forced and widespread wipeouts! The CNBC bozos were obviously not around for the RTCv1, because it is not a pretty situation for shareholders.
Please correct me if I'm wrong, but didn't RTC only deal with assets from dead entites?
I am guessing from the momentary euphoria that the markets are assuming that entities cna dump bad debts on RTC-2 at will while they re a going concern. Also, that they will not have to sell they at painful discounts. Why would anyone assume this?
Unless it's based on the recent behavior of our esteemed leaders.
Sebastian writes:
Our workers: remaining 69% have equity as large as 99% to negative equity
Yes, but I am still waiting for someone to dispute that ON AVERAGE, HOMEOWNERS WITH MORTGAGES HAVE 20.5% EQUITY.
Input:
- 31% of homeowners have no mortgage, i.e. 100% equity
- ALL homeowners (including that 31%) have equity of 45.2%.
Simple math, right?
(0.311) + (0.69x) = 0.452
x = 0.205 = 20.5%
Three questions:
1. Where does the government get its money from to buy these assets - don't tell me - more debt right ?
-K
This is nuts !
Everybody in Fla who bought from 2005 on is underwater, unless they put at least 40% down. My house is paid off. People who bought from 2000 on may have a little equity, unless they HELOC-ed it out. Before 2000? Considerable equity, unless pulled out.
That is not gonna happen in this Congress. When you hear 499 Congressmen opining on the plan on cable TV tonight, pay attention to their parties and body language.
The Republicans will straddle the fence McCain style, which lately has sounded more populist and anti-Wall Street. The Democrats will hold their noses and try to distance themselves from it as far as possible.
Thank you, China!
Seriously, why are they so insanely shortsighted so as to continue to fund us? Any Chinese in the audience?
Lawyerliz:
in Sofla (selling) prices are back to 2002 level.
It may bottom at 1999-2000 prices
Well, I did my part. I called both my senators
dryfly - you are correct...they only bought the assets after wiping out the banks holding them
Yes, but I am still waiting for someone to dispute that ON AVERAGE, HOMEOWNERS WITH MORTGAGES HAVE 20.5% EQUITY.
Your conclusion is correct.
As the RTC sells, price discovery occurs in regions. This causes more selling and forces realization of more failures.
The problem in front of the treasury would be: how to implement so that large cascading defaults do not occur.
Also, the Govt. has got to be saving whatever financial and political ammo it has for missions #1 and #2, both of which are probably only a year or so away: 1) serious bailout of FDIC; and 2) serious bailout of PBGC.
safe_as_apartments writes:
Thank you, China!
Seriously, why are they so insanely shortsighted so as to continue to fund us? Any Chinese in the audience?
I've been wondering
I've been wondering the same about all investors in US debt.
So I say go ahead...wipe out Goldy, WaMooo, Moron-Stupidly, etc...
You and hundreds of thousands of other people.
How is FDIC going to take over WaMu with so few employees?
A-mouse,
Hey question on internals, looking at Yahoo for:
NYSE Advancers:Decliners about 3:1;
Up vol 42%, Down vol 56%;
52 wk High:Low is 72:1,041 (or Low:High is 14.5:1)
NASDAQ about the same for adv:dec;
the Up vol 90%, Down vol 10%;
52 wk High:Low is 97:396 (or Low:High is 4.1:1).
What is your impression of those and wtf with the up/down vol on NYSE, is that a bad print or a big message?
The orginal RTC was prone to a lot of asset looting by those who were well connected. Given Washington's allergic reaction to regulatory oversight the last twenty years I'm guessing this will be a real bonanza for the same people. Do we really expect strict oversight on this? The pigmen will eat well.
Komrade JPnovski writes:
Yes, but I am still waiting for someone to dispute that ON AVERAGE, HOMEOWNERS WITH MORTGAGES HAVE 20.5% EQUITY.
Your conclusion is correct.
As the RTC sells, price discovery occurs in regions. This causes more selling and forces realization of more failures.
The problem in front of the treasury would be: how to implement so that large cascading defaults do not occur.
Thanks. It amazes me that more people here are not reacting to this number. If you pool all mortgages together, the associated homeowners have, on average, equity of 20.5%. AND HOUSE PRICES ARE STILL FALLING.
Just a WAG, but I believe that the euphoria over an RTC-like operation relates to the idea that assets might not be dumped and thus force all other players to take ugly marks. The weakest would have their equity wiped out, obviously, but that's of no concern to anybody that's left so long as our RTC2 liquidates at a "measured" pace. Every ticker for himself, so to speak.
Cuomo will be investigating short sellers. I'm betting he'll discover (if he doesn't know already) that GS has been the most aggressive shortseller in the marketplace!
GG,
Some have opined that has been the plan all along...
2nd UPDATE: Pelosi: US House To Hold Hearings On Mkt Turmoil
Last update: 9/18/2008 5:34:32 PM
Well, that ought to get us through the election....
I think this makes more sense from a forward-looking perspective. The original RTC was a holding company for the assets of failed S&L's. With so many bank failures looming, setting this up now for MBS that have an unknown market value just makes it easier to deal with the assets (REO) of firms like WAMU and Downey later.
theyieldcurve writes:
Volker to the rescue.
What did you have in mind?
Wow! See the update on this story from CR.
From the link:
Schumer urged forming an agency to inject funds into financial companies in exchange for equity stakes ...
THat is pretty huge.
Schumer is calling for someting different than RTC II.
Directive 10-289
rich writes:
Also, the Govt. has got to be saving whatever financial and political ammo it has for missions #1 and #2, both of which are probably only a year or so away: 1) serious bailout of FDIC; and 2) serious bailout of PBGC.
are you saying WM and WB won't fail for another year? wishful thinking.
Our Workers,
I think your equation works if all houses are the same price. If you apply a third factor which is the average price of paid-off homes to the numerator and average price of all homes to the denominator, I think that's your number.
But, I'm pretty tired so I'm not so confident.
How this could be a good thing: The Federal government unravels each aggregated asset down to its individual piece and then examines the property, the appraisal, the builder, the seller, the broker, the rating agency, the purchaser. And when they find anything at all, prosecute them to the fullest extent of the law. Feed them to the IRS, the media, the blogs. Think inquisition, sell tickets, start a cspanIII channel, spawn blogs, hire lawyers and accountants, get them all. And a new service industry arises like a phoenix. Sell stock?
Sure there's millions of things to look at. Cool. There's probably thousands of things to send people to jail for. Works for me.
Comrade NSA --
I see debt people.
Best comment today.
"How is FDIC going to take over WaMu with so few employees?"
I've been wondering this as well. Forget about the money (they'll be backstopped as other have noted). It's the logistics of the thing that scare me. Has FDIC ever taken over such a large thrift? In the S&L debacle, weren't they mostly small institutions?
Personally, I wouldn't want equity in these firms the way things are. Better to get their assets such as they are in a RTC type situation.
Lawyerliz writes:
How is FDIC going to take over WaMu with so few employees?
Lawyerliz | 09.18.08 - 5:46 pm | #
That's why i don't think the FDIC takes WaMu over. They don't possibly have the manpower, nor do they want to see the lines all over the TV.
IMO, this is why we will see somebody acquire them.
For this to happen, the government is going to have to pony up the difference between assets and liabilities, or at least backstop the deal so that it is still attractive to an acquiring bank that wants to gamble with depositor funds.
Will we hear about the deals of this transaction? Probably not. And shareholders probably eat donuts.
Gareth is quite right. The rules under which prices would be set would be critical. We are in a Bagehot situation, so we should expect Bagehot rules. Anything more generous would be a political BJ.
While Chuckie Schumer has become the butt of jokes, he is still a Senator from the Financial State. Senator Clinton is touting a plan other than the RTC-from-the-grave. Congress will ultimately decide which plan flies, so today's rally is on thin ice till we hear more support from that quarter.
Now, I think Volcker is a bright, honorable guy, but I still want to know whether he was asked to float this idea, or did so independently. With the current pace of change, there is the possibility that Paulson wasn't on board when the OpEd was published, but I' suspicious it was a trial balloon, which brings us back to Gareth's worry. At least with the capital for equity model Schumer likes, we know what we are getting, and any good the effort does the bank does Treasury good in the same measure.
Care to tell how that is all funded No Frog Speak?
Volker to the rescue.
theyieldcurve
Again!
This will help out Obama who had made it a part of his new economic plan (Volcker is an advisor).
Their feeling the heat from the direct bailots . Just create agency and give it a nice name .
Our Workers,
The math is not that simple. You have to weight by the value of each house. Since you don't know that, any simple calculation will result in nonsense.
For example, suppose there were exactly 100 houses in the country. Mean value is $100k, so the total value of the housing stock is $10m. 31 are owned outright; the other 69 have mortgages. The Fed tells you that total equity is $4.52m, i.e. 45.2%. So far, everything matches the FoF report.
Here is some additional data you don't have but which could be the case. The 31 houses with no mortgage are worth $150k each; the other 69 are worth $80k each.
Do your calculations again. You will find that there is no equity at all in the 69 mortgaged houses.
I'm not saying that example reflects reality. I'm saying you can't model reality with the simple division you did.
Is WaMu meat for FDIC? I think Bair said it isn't. Same problem, but different spoonful of alphabet soup.
ARRGHH!!!
From the article:
Third, by giving the agency the ability to manage mortgages with flexibility to keep people in their homes and businesses running, it should lessen the number of foreclosures. This, in turn, would help moderate the decline in real estate values and the deterioration of neighborhoods, thus supporting house prices that in fact lie at the heart of the crisis.
Maybe some foreclosures could be avoided, but how can anybody like Volcker be thinking that current house prices can be supported? Current house prices were due to funny money loans; you might as well say that we can repeal the law of gravity.
energyecon writes:
What is your impression of those and wtf with the up/down vol on NYSE, is that a bad print or a big message?
We've had four days in a row of increasing/record volume. Long-term support on SPX/NYSE is being pounded into - moves like this can never break long term support on a single attempt. It's like a jackhammer: it keeps pounding away at the 1150-1170, each time with more volume until it breaks and becomes the new resistance.
Those other indicators mean little to me. Take a look at the $TICK. It basically measures extreme buying/selling. It went from recording one of the lowest levels yesterday to one of the highest I've ever seen. That means a lot of bears threw in the towel, and sentiment should have gotten less bearish.
Long and short (haha) of it, we'll test this weeks lows this week or next.
U.S. Economy: Leading Index Falls More Than Forecast (Update1)
By Bob Willis and Shobhana Chandra
Sept. 18 (Bloomberg) -- The U.S. economy was heading for a deeper slowdown than forecast even before this month's collapse in financial markets, a gauge of its future performance showed.
U.S. Economy: Leading Index Falls More Than Forecast (Update1) - Bloomberg.com
rich,
The person in Webb's office said "I'll add you to the list".
Wouldn't it be easier for the Fed to sell these financial entities their own printing presses?
More streamlined, and cuts out the middle man from the process.
YOu guys are all wrong, Hannity has decided this was all Fannie and Freddie's fault because the 2005 legislation didn't pass to reform them. None of this would have happened otherwise...Newt concurs.
Thanks A-mouse, appreciate your thoughts.
"Is WaMu meat for FDIC? I think Bair said it isn't. Same problem, but different spoonful of alphabet soup."
Been wondering thistoo...is it OFfice of Thrift Supervision? But I think someone explained the other day how it really is the FDIC this time... I can't keep up!
Still trying to digest the Schumer Idea
(Volcker is an advisor).
And, if you play the tapes back, you'll notice that he sits at the right hand of Obama.
Recall also that he comes from Chase Manhattan and was the hand picked successor to Fed Chairmanship by none other than David Rockefeller.
Keep in mind, that the same people have been, are and will remain in control.
But, it pretty much puts the ecomomy as THE issue and alll but assures Obama's election, unless that catch him in bed with a goat.
I think it's getting about that time, Comrades. To arms?
One other point everyone who's short should consider: moves like today never occur in bull markets. Brian Pretti did a nice piece a while back on the number of 3%+ up days on the SPX in bull and bear markets. The bull markets had 0; since the bear began last Oct, we've had over a dozen of them.
the last few days really got me stoked so I grabbed my camera and went out to shoot my anger fueled rant about those nit-wits on Wall Street... it's up on YouTube... at YouTube - Masters of Universe Crash Planet into Financial Black Hole
notice the unique backdrop, quite fitting!
Komrade JPnovski writes:
Wow! See the update on this story from CR.
From the link:
Schumer urged forming an agency to inject funds into financial companies in exchange for equity stakes ...
THat is pretty huge.
Komrade JPnovski | Homepage | 09.18.08 - 5:51 pm | #
Hell with Quiana shirts... CHE Lives!! And who knew he lived on Wall Street and in the Capital Rotunda...
OTS is WaMu's regulator but FDIC covers WaMu's deposits.
Could things get anymore out of hand. USA (United Serfs of America)
OTS is WaMu's regulator but FDIC covers WaMu's deposits.
curious
I wondered about this. So the OTS could move in leaving the retail banking part alone?
740 Visitors Online
tranches of lumpenproletariat writes:
"How is FDIC going to take over WaMu with so few employees?"
~~~~~~~~~
National Guard ... expect some on your block shortly ....
Third-Quarter S&P 500 Profits May Sink Most Since '01 (Update2)
By Meg Tirrell
Sept. 18 (Bloomberg) -- Third-quarter profits in the U.S. may sink the most in seven years as borrowing costs increase amid the worst financial-markets crisis since the 1920s, causing companies and consumers alike to rein in spending.
I don't think most people realize how bad it is out there,'' said Ken Simon, a managing director at Loughlin Meghji & Co., a New York restructuring firm.The events on Wall Street will only make it more difficult for companies to expand their credit lines and get new credit.''
This week Lehman Brothers Holdings Inc. filed for bankruptcy, Merrill Lynch & Co. sold itself to Bank of America Corp. and American International Group Inc. agreed to an $85 billion government takeover. Even before those events, economists said the third quarter may mark the end of the longest expansion of consumer spending on record, according to a Bloomberg survey in the first week of September.
Third-Quarter S&P 500 Profits May Sink Most Since '01 (Update2) - Bloomberg.com
This reminds me of the scene from the "Marathon Man" where Olivier asks.... "Is it safe?"
Unfortunately, there are only a few more "teeth" left to pull.
the schumer idea is esentially what japan did. gov't buys preferred shrares to recapitalize, common does not go to 0. banks pay back over presecribed period and this is done in conjunction with RTC type fund to take some assets off banks books. it works if done on a big enough scale.
OT
Dry,
Did you know that famous photo of Che Guevara with the beret is the most commercially successful image ever produced?
No, excuse me, I wrote that, tranches merely quoted me. Grumble grumble. All this crap is making me grouchy.
Mom called me panicked because Constellation (formerly Baltimore Gas & Electric) was folding/being acquired. My family has owned that stock since dinosaurs roams the earth.
Need to drive to Merritt island. Need to stay tethered to CR for fear would will end without my imput.
good, we're just turning japanese
camarade lama - says alot about the idiocy of the left. he is on par with hitler but for some reason a socialist psychopath is ok.
Mom called me panicked because Constellation (formerly Baltimore Gas & Electric) was folding/being acquired. My family has owned that stock since dinosaurs roams the earth.
Warren Buffet bought it. Her money is golden.
RTC had a discreet and distinct known level of assets and liabiiltes because of the FSLIC oversight. I thought an RTCII would work for the bad debt; but derivatives sink this plan unless the government plans to corral all 63T (notional value) of OTC derivatives and then zero out the zero sum game. Of course there's still all that leverage on the derivatives; sort of like getting a 30xloan on the hypothetical winnings on a lottery ticket.
Don't see how this works unless the government underwrites a derivatives exchange and that may be the deal!
A couple of questions;
Who will fund the RTC II?
Where will the funder get the money to buy the assets"
How is a fair market price determined for a CDO or an MBS? Will they be bought at market prices? Who will determine the fair market value?
What happens if the purchased assets decrease in value? Who makes up the difference?
Will the RTC II purchase CDSes? And if so, how will they be valued?
Can anyone (who's older than a quarter century) remember a week of more financial events than this one? And we still have Friday.
That would be some rich irony, if we end up following the Japan model of recapitalization. I'm trying to remember the Japanese word for crow...
I too fail to see how the FDIC can take over Wamu. Its why it has to be a merger or sale. But since Wamu can't be sold or merged with its current balance sheet, the balance sheet will have to change.
The "least cost option" for protecting depositors and the FDIC fund may well be tossing some or all of those bad loans into an RTC.
Remember that we already insure all those deposits, and the FDIC will need as check from the treasury to pay that bill. Its going to costs the taxpayers a lot of cash either way.
world will end, not would will end.
so far the fallout has unfolded exactly the same. lehman = yamaichi, t bills at 0, deflation on the way
So, is the rumour about an FTC2 good enough to carry the rally through the rest of the week? Or is this a one day wonder?
sean writes:
the schumer idea is esentially what japan did. gov't buys preferred shrares to recapitalize, common does not go to 0. banks pay back over presecribed period and this is done in conjunction with RTC type fund to take some assets off banks books. it works if done on a big enough scale.
LOL. I wonder if anyone remembers the holier than thou US speeches given to Japan about their lack of bankruptcies.
No mater what the government does there will be one certainty, they'll f--k it up. They want their fraud back.
Another vehicle for Wall Street to reach straight into your wallet.
Whether or not it's necessary it doesn't change the fact that you get to pay for Wall Street's mistakes instead of Wall Street paying for Wall Street's mistakes.
Why is it that people cheer these things?
This bailout means that our leadership failed so badly that they're being forced to take your wealth and give it to precisely the people that caused all this damage to begin with.
It's like somebody shot your parents and the government comes in and makes you pay for the bullets.
Komrade JPnovski - you are 100% right. everyone was astonished at how they could screw it up so badly and i have to admit that we are doing a worse job so far - especailly since we had their experience to learn from
Once we reset the banks, what's the next bubble?
Well said ac.
Komrade JPnovski - you are 100% right. everyone was astonished at how they could screw it up so badly and i have to admit that we are doing a worse job so far - especailly since we had their experience to learn from
I change my handle in honor of our Japanification.
the next bubble - the usd
Bottom Dweller writes:
Once we reset the banks, what's the next bubble?
Haloscan. These visitor levels are clearly unsustainable. No offense CR!
jp sama
Anonymouse writes:
Can anyone (who's older than a quarter century) remember a week of more financial events than this one? And we still have Friday.
Not even close.
I don't remember anything like this in all my years. I don't remember the days of 17% mtges being as bad as this. Sales were happening back then. Now, nothing is moving. Nothing at all. If no sales are happening nothing is worth anything. Everything (for the moment is level 3.
We are all level 3.
"what's the next bubble"
Oil availability?
Russia threatens to seize swathe of Arctic - Telegraph
Russia threatens to seize swathe of Arctic
President Dmitry Medvedev said that Russia should unilaterally claim part of the Arctic, stepping up the race for the disputed energy-rich region.
sean,
when that bubble fails, we will all be in trouble.
Then the war will have ended.
ot to worry ...
since everybody will be laid off they won't have to pay taxes for RTCII
Not even close.
Thats Ballgame Folks | 09.18.08 - 6:10 pm | #
me neither
ext bubble is all the American families going bankrupt.
In truth, it was Freddie and Fannie who effectively underwrote the CDS markets anyway; so there is some expertise there. AIG, F&F and Bear have to give the government a pretty huge chunk of that market. Makes sense then that they did AIG and can now tame the beast. Geithner is the go to guy on this for years and Corrigan before that (now at Goldman). Houston we have a plan.
Again!
This will help out Obama who had made it a part of his new economic plan (Volcker is an advisor).
Whereismyretirement | 09.18.08 - 5:54 pm | #
Tell that to my squirrel eating fellow rubes in western PA, southern Ohio, Missouri, Wisconsin, Iowa... O Biden needs those electoral college votes BIG TIME. They already have NY locked up - getting the additional IB votes from the Wall Street precincts won't be a help.
My fellow rubes still don't understand what exactly happened back then but they remember RTC 1 vaguely... it isn't a happy memory. Factories closing - farms lost - lay offs - migration & diaspora - broken families. If you think Phil Gramm is an albatross around McPalin - wait 'til my fellow hicks get reminded of Volcker's connection to RTC 2 & 17% interest rates & that he is an adviser to OB. It absolutely assures OB will have to jettison Volcker as fast and throw him as far as McP launched Gramm.
Just sayin'...
Why don't we just print up a couple gazillion dollars and pay off every debt the exists anywhere in the country.
Seems we're willing to do it for these morons that made billions making bad loans.
I'm pissed. Rich guys get bailed out, we pay, and no one is punished.
RTC in 1989 and now RTC2 in 2008. We never learn.
I got out of 90% of my shorts this week.
So I'm not the only one that was praying for a big bounce today?
Thats Ballgame Folks-
I have mine preplanned should I lose my employment.
everybody needs to have a plan man,
because if you don't you can't live by just reacting to events.
Someday this war's gonna end...
The families are already going bankrupt and have been for some time now. Bankruptcy firm down the hall rolling in money.
I forget. Are the pink ponies worth 10 and the unicorns 100 or the other way round?
First they'll "break the buck" and that applies to assets on the books as well as MMF and then they break "bucky" but only after a sufficient pause to allow the inside money to get out of the way.
If no sales are happening nothing is worth anything.
I do not agree. I, like you, outright own my home. It has intrinsic value - it is my
home, my shelter, MY CASTLE.
Since i don't whore it out using it as an atm, the market value could go to zero for all I care.
Yet Another Canadian Cynic writes:
Our Workers,
The math is not that simple. You have to weight by the value of each house. Since you don't know that, any simple calculation will result in nonsense.
Thank you!!! And especially thank you for setting forth an example. Whew ...
Liz,
One of my colleagues has a family business reposessing cars. Business is booming for her.
I do not agree. I, like you, outright own my home. It has intrinsic value - it is my
home, my shelter, MY CASTLE.
Since i don't whore it out using it as an atm, the market value could go to zero for all I care.
Yankee
LOL Same position.
Hey CR,
The joke in the 90's was that the most dangerous place in Washington was between Phil Gramm and a TV camera.
Thing to dig about this RTCII nonsense is that, back in the last Bush crash, the assets were (mostly) there, and the leveraging was only a little crazy. This time, supposedly the CDS market alone is good for $70 trillion in notional assets. That's about $30 trillion more than all the $ in the world. If you take over those "assets" and agree to settle them for more than, let's say, 0, you've got a lot of liability.
Baltimore City Paper: Crash Course: All the Money in the World-and Then Some
Laugh it up now Americans. You won't be laughing so much when we repossess California as collateral.
True, yankee. And I don't want or need to sell now. But I will want to someday, unless by then the hub and I are serfs, tied to the land. At least we have some land to be tied to.
Now, I really have to go. World don't end in the next 4 hours!!!
Yet Another Canadian Cynic,
Do you need to know each mortgage or will the average of each pool be enough (not that either one is known).
I'm just curious.
The two "Sebastian" posts below are fake, i.e., not me.
Fair warning, whoever you are, this behavior will get you banned from the blog. If you have something to say, of value or not, say it, but use your own name and stop jerking-around other posters.
S.
Sebastian writes:
Our workers: remaining 69% have equity as large as 99% to negative equity
Sebastian | 09.18.08 - 5:39 pm | #
Sebastian writes:
Dryfly: Seidman who ran the RTC opined that this trust is not as simple as back then RTC didnot need to buy the assets
Sebastian | 09.18.08 - 5:40 pm | #
Interesting backstory on debt leverage
(good quoted source, no-so-good journal)
The Securities and Exchange Commission can blame itself for the current crisis. That is the allegation being made by a former SEC official, Lee Pickard, who says a rule change in 2004 led to the failure of Lehman Brothers, Bear Stearns, and Merrill Lynch.
Special deal for five firms:
The SEC allowed five firms the three that have collapsed plus Goldman Sachs and Morgan Stanley to more than double the leverage they were allowed to keep on their balance sheets and remove discounts that had been applied to the assets they had been required to keep to protect them from defaults.
Rule for Brokers (other than the five exempted:
The net capital rule also requires that broker dealers limit their debt-to-net capital ratio to 12-to-1, although they must issue an early warning if they begin approaching this limit, and are forced to stop trading if they exceed it, so broker dealers often keep their debt-to-net capital ratios much lower.
Rules for the Five Special Case Firms:
This alternative approach, which all five broker-dealers that qualified Bear Stearns, Lehman Brothers, Merrill Lynch, Goldman Sachs, and Morgan Stanley voluntarily joined, altered the way the SEC measured their capital. Using computerized models, the SEC, under its new Consolidated Supervised Entities program, allowed the broker dealers to increase their debt-to-net-capital ratios, sometimes, as in the case of Merrill Lynch, to as high as 40-to-1. It also removed the method for applying haircuts, relying instead on another math-based model for calculating risk that led to a much smaller discount.
Outcome from the 2004 SEC (Chris Cox):
"The SEC modification in 2004 is the primary reason for all of the losses that have occurred," Mr. Pickard, who is now a senior partner at the Washington, D.C.-based law firm Pickard & Djinis, said. [emphasis added]
The director of equity research at Fusion IQ and an influential Web logger, Barry Ritholtz, called the 2004 rule change "a hornets nest" that "proves the importance of having stringent rules in place."
The SEC said it has no plans to re-examine the impact of the 2004 changes to the net capital rule, and last week, it put out a proposal to revise the rule once again. This time, it is looking to remove the requirement that broker dealers maintain a certain rating from the ratings agencies. [emphasis added]
Three of the five firms exempted from leverage limits are now gone in one form or another, and the other two are suffering in the market and may go too.
[snark]
Yeah, deregulation is good for the economy. [/snark]
There is moral hazard here in terms of the banks not being held responsible for the debt, but I am curious how far they'll go in trying to stave off foreclosures. Are some people basically going to get free houses just for the sake of showing that this works?
But the question is since they are buying not actual property as they did with RTC I but instead Level II & III assets who prices this stuff. Do the banks just say give me whatever you think it's worth, consign it to the RTC and as it is sold off get some of the (profit?), or what?.
Aw, Gavie... you noticed me. I'm only around when a bottom forms. See in the cave my uber-bear...
RTC v2- what of the jurisdictional issue?
The crisis in capital marketes is global, and entities around the world hold distressed assets derived from US mortages.
Congress can meet tonight to relieve MS GS, BAC, C etc, but what of UBS, Deutsche, Credit Suisse etc?
witching tomorrow ...
Dow ?
Somebody shoot Cramer. His babbling about how we are nearing the bottom is starting to irk me, what is he pumping this week?
Anonymouse,
You're not seeing this as a short term bottom (i.e., for a month or so)?
Lawyerliz writes:
I don't remember anything like this in all my years. I don't remember the days of 17% mtges being as bad as this.
Were you in rust belt then?
I was. It was WAY WORSE then than now. WAY WORSE. You don't even want to get me started on it - memories of small town S&L loan officers gunned down in murder suicides by farmers being evicted from their family's 'century farm'.
Then there are the places that USED to exist - like the Bethlehem Steel plant in Lackawanna NY - Comrade Misean can tell you about it. Something like 17,000 employees making high quality steel - good wages, benefits, middle class homes they could afford - gone POOF. The plant was something like ten miles long - HUGE amount of machinery - cut up for scrap metal.
We haven't even cracked the 'good stuff' yet on how bad it can get and they are already reaching for the RTC bottle?
Wow... this isn't good.
I'm all for expediting the liquidation of bad debt & helping people who are really suffering w/ basic needs & a solid shot at restarting their lives. Seriously - I have a bleeding heart so big I give it transfusions every morning.
But saving I bankers? When did the safety net get stretched to save them?
I will await the details but I sense this isn't good.
GALVESTON, Texas (AP) Hundreds of people whose beachfront homes were wrecked by Hurricane Ike may be barred from rebuilding under a little-noticed Texas law. And even those whose houses were spared could end up seeing them condemned by the state.
\tNow heres the saltwater in the wound: It could be a year before the state tells these homeowners what they may or may not do.
\tWorse, if these homeowners do lose their beachfront property, they may get nothing in compensation from the state.
\tThe reason: A 1959 law known as the Texas Open Beaches Act. Under the law, the strip of beach between the average high-tide line and the average low-tide line is considered public property, and it is illegal to build anything there.
\tOver the years, the state has repeatedly invoked the law to seize houses in cases where a storm eroded a beach so badly that a home was suddenly sitting on public property. The aftermath of Ike could see the biggest such use of the law in Texas history.
\tI dont like it one bit, said Phillip Curtis, 58, a Dallas contractor who owns two homes a $350,000 vacation home and a $200,000 rental on Galveston Islands Jamaica Beach. I think the state should allow us to try to save the houses. I dont appreciate the state telling people, Now it belongs to us. It breaks your heart.
It would be difficult even to come up with a theoretical (as opposed to market) value at this point. IMO value will be what they think will keep things afloat.
Lawyerliz:
in Sofla (selling) prices are back to 2002 level.
It may bottom at 1999-2000 prices
That was about the last time houses were affordable. Since wages haven't risen in 8 years, prices should have been static.
The thing that I read into Schumer's plan vs. the Volcker plan is under the Schumer/Clinton plan it's all about keeping homeowners in their homes. While I think there were some folks who need a hand, I am opposed to a bailout for folks who just couldn't live with that granite countertop. Volcker's plan is more systemic and while I am sure it will be painful I would rather share that pain to get the system right again as opposed to funding somebody in Cali keeping their McMansion.
Thank you, Sebastian, for letting us know. You show up honorably to take your lumps (or occasional triumphs).
I disagree with almost all your analyses, but you get major props from me for showing up and defending your views. I'm sorry imposters try to steal you identity. CR will defend you!
"The two "Sebastian" posts below are fake, i.e., not me.
Fair warning, whoever you are, this behavior will get you banned from the blog. If you have something to say, of value or not, say it, but use your own name and stop jerking-around other posters.
S."
Ted ~ 3.13
how much money do the central banks put in tomorrow ?
dude writes:
This reminds me of the scene from the "Marathon Man" where Olivier asks.... "Is it safe?"
Unfortunately, there are only a few more "teeth" left to pull.
dude | 09.18.08 - 6:03 pm | #
..and without anesthesia. How about the scene when he drills directly into and through the Hoffman's front tooth. freakin' ouch!
Comrade Kristina writes:
Somebody shoot Cramer. His babbling about how we are nearing the bottom is starting to irk me, what is he pumping this week?
His guest is the Pulte Homes CEO. He just said, "last time I looked they're not making any more land." Seriously. Do I hear a "buy now or be priced out forever?"
sorry forgot to add....but they are buying paper not real stuff
When they excavate my bones, they'll find my 3 favorite material things. Barbaric relics all...but still mean a great deal to me. Gold, my semi-auto .30 cal pitchfork, and the Constitution of the United States of America. Certain to have tear stains on that old rag.
It may bottom at 1999-2000 prices
Wishful thinking.
u thread
energyecon said: "...What is your impression of those and wtf with the up/down vol on NYSE, is that a bad print or a big message?"
It's a bad print, the site has a problem on high-volume and high-volatility days, don't know why. Here's a site I use that's more reliable (just scroll down a bit for the breadth data):
Barchart.com - Market Momentum
The number of NYSE stocks making 52-week lows indicates a short-term bottom for sure, and maybe a major low. Not only that, but the market had it's best opportunity yet to crash today, and it just wasted it.
Sebastia
Impersonating Sebastian (or anyone else) is not cool. Speak with your own voice or SFTU.
Someone needs to clue in the Pulte guy that they are making new land in Dubai. Oh, and can someone repost the link to the graph for the CR VIX?
CNBC and RTCII should be tits up in the sewer right now...........
I could live with honest consistent socialism. And I could live with honest consistent capitalism.
But we get hard-nosed capitalism for the masses and the sweet protective socialist embrace of big brother for the elite. Not sure if the dumb masses will take it forever, even in this cowed country.
dryfly: But saving I bankers? When did the safety net get stretched to save them?
Hey Taxpayer! Get back to work you little piece of shit. And don't forget to vote for one of my two stooges!
Whereismyretirement
OK so we sit on our moral indignation and the family leaves the house and the bank takes it back over.
Then what???
Just who is going to buy that house with what 20% down with what mortgage. Are you happy with the bank taking the haircut? What about their shareholders etc.
What happens to the SIV where this mortgage was bundled into?
et cetera, et cetera, et cetera.
You can either curse the darkness or help light a candle
Thank you!!! And especially thank you for setting forth an example. Whew ...
Our Workers | 09.18.08 - 6:15 pm | #
Did you read that example? It seems a little worse case don't you think?
Do your calculations again. You will find that there is no equity at all in the 69 mortgaged houses.
CR had something awhile back that the average 100% equity home was in the 100K-150K range and the others were considerably higher. Can't trust my memory now cause I just finished reading the local community papers with a lot of NOTs.
The thing that I read into Schumer's plan vs. the Volcker plan is under the Schumer/Clinton plan it's all about keeping homeowners in their homes. While I think there were some folks who need a hand, I am opposed to a bailout for folks who just couldn't live with that granite countertop. Volcker's plan is more systemic and while I am sure it will be painful I would rather share that pain to get the system right again as opposed to funding somebody in Cali keeping their McMansion.
Whereismyretirement
Pure politics. Saving people from losing their homes gets them more votes then saving people from losing their retirement.
tj & the bear writes:
Anonymouse,
You're not seeing this as a short term bottom (i.e., for a month or so)?
Let me use the S&P500 cash as an example. The SPX made a high on May 19th at 1440.24 with ~2B shares. On July 15th, it made a low at 1200.44 on >6B shares. So that sets up the possibility of an A-B=C-D structure
(A-B=C-D structures work like this: A point has light volume (benchmarked off prev. time down, which was true; B point has acceleration of volume; C point retraces the A to B move with light volume; D point breaks the B point with higher volume).
"The orginal RTC was prone to a lot of asset looting by those who were well connected."
I personally know someone who made 4 million bucks practically overnight via this scheme. Made me sick but was apparently legal.
Haloscan won't let me finish
So what does RTC2 do this financial toxic waste ( i.e. inflated asset prices still heading down ) and who is going to pay for it ?
FACT: so far the Treasury and Fed have pledged or made available for loans so far, close to $800 billion.
FACT: The Savings & Loan crisis of the early 1990s cost taxpayers a net of $124 billion in 1999 dollars
DING DING DING the American taxpayers will ultimately pay for this just like the S&L crisis ( mike McCain Keating 5 and not the Wall St and Bush admin crooks !
Massive US financial ponzi scheme needed to keep the fake bullshit US economy going wins again !
So let's continue. The C point was on August 11th at 1313.15 on greater than 4B shares (massive contraction of volume versus the B point). And this week we broke the B point with 7B shares on Monday and today pounding it with 8.3B shares.
The A-B=C-D price projection is: 1440.24(A) - 1200.44(B) = 239.8. 1313.15(C) - 239.8 = 1073.35(D). That's if we do a 1 to 1 A-B-C structure. We could always do an extension: 1:1.382, 1:1.50, or 1:1.618 (which is an immediate change of trend).
So my answer is, SPX is on a mission to 1070-1080 area.
This is not a done deal, and neither is BAC/MER
Sebastian writes:
The two "Sebastian" posts below are fake, i.e., not me.
Fair warning, whoever you are, this behavior will get you banned from the blog. If you have something to say, of value or not, say it, but use your own name and stop jerking-around other posters.
S.
Same what the "O-Joe" imposter said above is not from me.
O-Joe
Liz:
Whereismyretirement writes:
Mom called me panicked because Constellation (formerly Baltimore Gas & Electric) was folding/being acquired. My family has owned that stock since dinosaurs roams the earth.
Warren Buffet bought it. Her money is golden.
Sorry about your family, and the average people that owned stock in a regulated utility and then found out they owned a hedge fund.
They are getting a significant haircut but after AIG, etc. at least they will get something that will , in the future, resemble a utility more then a commodity speculation outfit.
Does anyone remember if Volcker left the Fed voluntarily after his second term or was passed over (fired?) by Reagan for Greenspan? I recall Volcker was appointed in '78 by Carter and reaffirmed by Reagan in '82 during the inflation battle.
Anyone with a better memory?
Jim
Dry:
I would say that what we are seeing today is more volatile but way less painful as the Volker years.
It was brutal. Carter/Volker essentially froze all credit. Couldn't get a credit card in 1979. Then it was 17% mortgage rates.
Obviously they needed to "break" inflation, but it was no fun.
People that lived in the rust belt and saw that area decline over 30 years have seen real pain.
"Then there are the places that USED to exist - like the Bethlehem Steel plant in Lackawanna NY "
The abandoned plant is till there...with weeds and empty windows..never rehabbed, never used. Buffalo and environs is littered with abandoned manufacturing plants. Even the old Pierce Arrow building is still there and empty. And my personal favorite, Tyco, makers of windshield wipers...gone to Mexico.
NC Jim...
Don't remember but it was definitely not pitched as a firing. However, sometimes there isn't much difference between retired and fired.
fried....
The Russians bought the Baltimore Sparrows Point plant. BS Bethleham Steel (loved the ticker symbol) had a chart that declined more or less steadily over 30 years. Today's financials seem to implode to $0 much more quickly.
I once made a very half assed effort to short BS when it was insanely BK and still selling for $1 / share. Couldn't do it, for some reason.
It used to be that a lot of BK or essentially BK firms used to have stock prices around $1 for long periods of time. I also looked at United Air once in the same situation and it was $1-$2 dollars. Now they seem to go for closer to a quarter.
NC Jim said: "Does anyone remember if Volcker left the Fed voluntarily after his second term or was passed over (fired?) by Reagan for Greenspan? I recall Volcker was appointed in '78 by Carter and reaffirmed by Reagan in '82 during the inflation battle."
"...It is understood that Mr. Volcker would have accepted a reappointment to the post if the President himself had urged him to do so. But no such effort was made.
It was also understood that Mr. Volcker felt that the Administration was looking for a way to avoid an outright rejection and that it asked him to meet with Howard H. Baker Jr., the President's chief of staff, who was said to have made no serious attempt to urge him to remain.
President Reagan, in a short appearance at the White House briefing room, said he had accepted Mr. Volcker's decision ''with great reluctance and regret'' and Treasury Secretary James A. Baker 3d said later that someone ''at my level'' had urged Mr. Volcker to ''give some reconsideration'' to his inclination to leave.
''After eight years as chairman, a natural time has now come for me to return to private life as soon as reasonably convenient and consistent with an orderly transition,'' Mr. Volcker said in a letter he carried to the White House Monday afternoon for a meeting with the President. ''Consequently I do not desire reappointment.''
Mr. Volcker, who recently denied reports that he had turned down the presidency of Princeton University, said today he had ''not the vaguest idea'' about his future employment.
The main philosophical difference between Mr. Volcker, a Democrat, and Mr. Greenspan, a Republican, appears to be in their views of the structure and regulation of the banking system. Mr. Volcker has tended to resist deregulation of banks while Mr. Greenspan is more favorably disposed to it.
Analysts noted that Mr. Volcker was considered almost a national hero for chopping inflation from an average rate of 12.8 percent in 1979 and 1980 to less than one-third that level for each of the past five years, while Mr. Greenspan's anti-inflation credentials have not been tested in practice..."
VOLCKER OUT AFTER 8 YEARS AS FEDERAL RESERVE CHIEF; REAGAN CHOOSES GREENSPAN - The New York Times
S.
Comrade Vito going to eat squirrel.
I remember camping once long ago at a federal campground and our neighbor who normally lived in a trailer with his numerous kids and wife were next door.
He showed me his uncased rifle on the truck seat and his boat. Later that night I heard gunshots and saw a light in the trees.
I still do not know what was shot. Raccoon comes to mind. I hear it tastes like chicken.
There will be less live raccoon and squirrel soon.
Lawyerliz writes:
I don't remember anything like this in all my years. I don't remember the days of 17% mtges being as bad as this. Sales were happening back then. Now, nothing is moving. Nothing at all. If no sales are happening nothing is worth anything. Everything (for the moment) is level 3.---
The banks are in denial - they refuse to admit the foreclosed properties are worth so much less than they loaned out against them - yet the same banks won't lend that much money for those properties to any prospective buyers -- as if the banks expect purchase loans are unnecessary, not realizing they need to finance the buyers. In short, the banks' left hands and right hands have not yet met, and are many dollars apart. Nothing will change or move until the banks admit defeat and drop prices. One thing an RTC agency might do is liquidate more effectively - though the warnings sounded here about prior cozy dealings to insiders are well taken.
Just a little more proof that playing by the rules is for suckas...
Interesting talk of a rebound:
There had been much talk about eliminating short selling. The NYSE now requested lists of all holders of borrowed stock (short sellers). The rush to cover to stay off the list and to realize profits assisted in ending the decline.
The discount rate was reduced again, to 4 1/2%. Congress rushed a tax cut.
The gyrations quieted. The stock market rallied in quiet trading for the rest of November 1929.
http://www.futurecasts.com/Depression_descent-beginning-'30.htm
Zig,
If you want to see the difference between the US and Canada, the Peace Bridge customs is a good place to look. Canada's is new, beautifully designed and efficient. The US side is from the early 50s...cramped, crumbling and a bottleneck day or night.
Canadian socialism works...of course, they actually voted for it.
American kleptocracy is a con game run by swine.
Given the huge uncertainties and horrendous complexities discussed in this thread, it may be a blessing that Congress, due to political countercurrents, may prove unable to act in the remainder of this session on any of the several proposals being vetted by Bernanke, Paulson and Cox. Sometimes no government is good government.
I favor time as the healer, rather than more government intervention in what essentially is uncharted water.
You guys are making this too complicated. All the government will have to do is ask the holders of the distressed debt what they feel is a fair price. The government will then agree to that price. As to reducing the balance of individual mortgages, FDIC Chair Bair will ask each homeowner what he or she can comfortably afford. That will become the newly adjusted balance. As to those of you who feel that the current owners of the debt will ask too high a price, and that the current mortgagors will ask for too large of an adjustment, you are cynical. We can trust each other, can't we? (In which key is China's anthem sung?)
huh
I was at a wake tonight. Small North Georgia town (Exurb Atlanta). Solid Gingrich kinda place...mega churches, "Sportsman for McCain" bumper stickers next to the fading W ones...you get the drill.
The whole place was talking NOTHING but Wall Street...they had been glued to Fax all friggin day....and they were HOT....so friggin pisssed....they were having NONE of this bailout crap...it was potent.
I was pretty amazed. We are talking
a w a k e
they have been taking their lumps all year and by God so will those on the top....
It's like somebody shot your parents and the government comes in and makes you pay for the bullets. -ac
When someone is executed in China they charge the person's family for the cost of the bullets. If they don't pay, then they arrest the family.
Yup, those Georgians will rise up and demand one that the banking crisis gets fixed by one of the Keating Five.
Wanna get rich? Get a job as an RTC loss mitigation specialist doling out property to the right people.
I know a few from the 90s RTC who are tempted to come off their boats for one more shot.
In the past, when a government bailout has come out, Tanta has inevitably explained why it will impact relatively few people and is largely cosmetic.
But I fear the RTC II is going to break that streak. I think that the responsible are going to end up paying the mortgages of the irresponsible. I am quite distressed about it. I cannot believe that I am going to end up directly subsidizing the lifestyles of people who took out HELOCs to buy expensive cars and flat panel TVs.
Komrade JPnovski writes:
Wow! See the update on this story from CR.
From the link:
Schumer urged forming an agency to inject funds into financial companies in exchange for equity stakes ...
Sounds like the pimp who pumping his lady with horse.