So, what's the feel about the "new" naked shorting rules? How do you think SKF/UYG will react? ANy concern for small day-traders who short?

Why is it that all of the policymakers and pundits seem to be more worried about the financial system than the real economy?

@Nobody

Not much "real economy" left.

"There is no Dana....only Zuul."

It is a good idea but the underlying problem still exists: how do we pay for it?

At what point does the addict stop denying?

OK, real time I'm seeing MS -35%.

Volcker has to be the party pooper...again.

yep MS down 33.9 %

No doubt there will be considerable debate over "fair market value".

So if the givernment can bail out insurance funds, and brokerages.... why not home builders? Why not automakers?

We have a new form of moral hazard creeping in.... to what degree do we let government decide how companies unwind.

Aren't we supposed to already have bankruptcy courts and a process for all this? Nah. Let's just make more government institutions.

Jennifer writes:
So, what's the feel about the "new" naked shorting rules? How do you think SKF/UYG will react? ANy concern for small day-traders who short?
Jennifer | 09.17.08 - 11:32 am | #

Isn't shorting another way to say betting on failure? Why have concern for the ruthless? If they are too small to be swimming with sharks, maybe they ought to switch schools.

This is what I can't get over:

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.

Yes - this will probably decrease the severity of the financial crisis. But it's going to hurt the real economy. Markets need to clear, right?

There's no end to the financial crisis until the real estate markets come back down to Earth. Period. Since nobody's underwriting risky loans with teaser rates anymore, pirces of real estate need to come down in order for people to actually have sufficient income to qualify to buy these homes.

"Well, obviously the Congress is not going to sit by and watch the whole system collapse while we can borrow money from Russia / China / petro-states for 30 years at 4% interest."

Wait... those countries are going to keep on letting us do that? After we've demonstrated that our financial system is a house of cards?

Since nobody's underwriting risky loans with teaser rates anymore, pirces of real estate need to come down in order for people to actually have sufficient income to qualify to buy these homes.

Or just devalue the currency to get there. I have always suspected it will be a combination of both.

Just like last time. Folks will try to pay off debt with even more debt...and then MORE debt. Until it all collapses.

All you are doing is increasing the size of the crash.

just....let....it....fail.

Then we can pull out the 1930s law books and get started on the clean up.

Like watching an insect just keep on flying into the reflection in the glass....over and over.

UK bank runs? It is one year since the run on Northern Rock. What that revealed was the absence of coherent and sufficient deposit insurance in the UK. Although the UK nationalized Northern Rock, did they put a new system of deposit insurance in place? With the sudden news of Lloyds TSB in talks to take over HBOS apparently at the behest of Prime Minister Gordon Brown, what is the prospect of runs on UK banks? I think it has to be a real possibility at this point.

These people are trying to organize resistance to an avalanche.

Just run away as fast as you can!

The problem with just "letting it fail" is alot of people get hurt...badly.
When people can't feed their children, can't keep even a minimal roof over their head, and no money in the kitty for a social safety net, there becomes the danger of massive social unrest which endangers us all.

Here's the story on Lloyds TSB/HBOS
Banking crisis: Lloyds TSB in talks to buy HBOS |
Business |
guardian.co.uk

If we don't get some frigging honesty on Wall Street, and Washington with a shit pot full of people going to prison soon the US markets are toast. No games, Honesty.

The hell with bringing back the RTC. We need to bring back a GOLD STANDARD.

We need sound money not more financial engineering.

@Whereismyretirement

It's coming anyway. I know this is hard to swallow, but it must. Be it war, famine, what have you.

Society is always a function of the lowest common denominator.

When that lowest common denominator has been piloting the ship, there be trouble ahead.

I wish there was a better way, but I don't see it. There is too much entitlement. The mob will want "strong" leadership, and strong leadership will want to shift responsibility(war).

"Morgan Stanley's 6 percent notes due in 2015 traded at 61 cents on the dollar, up from about 73 cents at the start of Wednesday's session and 94 cents a week ago, according to MarketAxess. Those notes now yield 12.25 percentage points over Treasuries. Bonds that yield 10 percentage points over Treasuries or more are widely considered "distressed,""

Page not found - - CNBC.com

@Science is Golden

No, shorting is not betting on failure. Shorting is making the assertion that an asset is overvalued.

Buyers make the claim an asset is undervalued.

If we only had buyers, the system would not allocate investments to the best firm as well.

Me, I don't short stocks. However, I purchase PUTS which are basically the same assertion. Many businesses are way, WAY overpriced right now.

I work at a university and yesterday for the first time, when I looked at the students walking blithely around, I saw the dollar amounts of their individual loan obligations superimposed over each of their heads.

Kind of like that "I'm Thinking Arby's" commercial where everyone has Arbys hats over their heads, but... not.

ew thread btw

All I can think of now is empty strip malls and McMansions where the wind blows the doors open and shut.
slid

You do just what Kunstler has said would happen. You carve up those McMansions and make duplexes and triplexes out of them. The strip malls go down in price and Mom and Pop businesses rise again and provide real goods and services to their neighbors. Sometimes, if need be, on a barter system.
The problem is we are reaching beyond macro and micro and drilling down to systemic moral value.
Kunstler:
"At issue now will be the question of legitimacy in all its human social dimensions. Is our money legitimate? Is the authority of our elected officials legitimate? Are our values and ideas legitimate? These are the things that will determine what kind of future we find ourselves in."
http://www.kunstler.com/index.html

Ok- to everybody here who is much smarter than I-- if all the horrible things happen that many here predict will happen-- social chaos, nationwide Katrina-esque people-- then shouldn't I just give the hell up on "waiting the market out", and jump in and buy a house now?

For the single simple reason that my landlord will not allow me to build permanent defensive structures and mount a machine gun on my (her) roof?

@Philip Crawford

Potato, p0+@+0.

Seriously. The question was "where is the concern for the small day trader." The answer is the same. Concern is not warranted.

Whether because shorting is a ruthless game or because it is part of a mechanism inherent in a healthy market, my answer that you shouldn't be in it if you can't take a hit is the same. TBTF is BS, TSTF is too.

If you define shorting as the necessary and logical counterpart to buying, then it is obvious that there is no good reason for more concern to be held out for those who short foolishly than for those who buy foolishly.

Didn't RTC end up costing $10,000 per taxpayer?

It looks like such a move (an RTC+) may be the only thing to stop panic but it will be very difficult to set prices for bonds/CDS etc. that both give the holders sufficient pain to teach them a lesson without forcing institutions into bankruptcy. The Scandinavian countries' nationalization of banks in the early 90s is an alternative - I'll leave it to US citizens to decide if they think a US administration could do this competently.
In the UK the same housing market problems plus many (not all) banks with too much toxic waste on the books are only part of the problem troubling markets - we also have a government with 18 months to run paralysed by infighting and attempts to change the Prime Minister!!

The problem with just "letting it fail" is alot of people get hurt...badly.
When people can't feed their children, can't keep even a minimal roof over their head, and no money in the kitty for a social safety net, there becomes the danger of massive social unrest which endangers us all.
Whereismyretirement

Unfortunately the firemen who would come to the rescue are out of rescue tools.

And agreeing with the comment above, the troubled paper securitized by massively over-priced homes is worth far less than the current owners wish. Let it sell for "fair market value" and you have companies such as Bear Stearns and Lehman Bros. in bankruptcy.

then shouldn't I just give the hell up on "waiting the market out", and jump in and buy a house now?

With what? You plan on using 100% cash?

OUCHhhhhhhhhh!!!!

On Feb. 12, 2008, the Board of Directors of the Pension Benefit Guaranty Corporation (PBGC) unanimously
adopted a new diversified investment policy to increase the likelihood that the Corporation will be able to
meet its long-term obligations. The PBGC currently has a shortfall of $14 billion, and faces the possibility that
someday it will run out of money. The overarching goal of the new policy is to help ensure that the PBGC will
be able to meet its obligations to the 1.3 million Americans who depend on it for their pension benefits.
The new policy is designed to take advantage of the PBGC’s long-term investment horizon, and will allocate
45 percent of Corporation assets to equity investments, 45 percent to fixed income, and 10 percent to
alternative investments such as private equity. This strategy of increased diversification aims at generating
better returns, while providing superior protection against ultimate downside risks over time. The previous
policy was not diversified, and therefore carried greater risk.
The new policy was adopted after an extensive review process that began in mid-2007. The review showed
the new diversified portfolio would have yielded better results than the old investment policy 98 percent of the
time over rolling 20-year periods. Most telling, stochastic scenario analysis performed as part of the review
demonstrates that the new policy will give the PBGC a 57 percent likelihood of achieving full funding within
ten years, compared to 19 percent under the previous policy

ipodius
yes homedad. and what's not to like about the floor? well, if your j&j6p you might not like being chained to your house for the next 20 years until the value meets the loan balance. but if you're not going anywhere who cares?

and if your buying these, and the income to support the loan is there, do you care?

Well, ipodius...how will this affect house prices? It seems like they will stay where they are, which is not good for me if I'm looking to buy. And if I'm looking to invest in the restructured loans, it seems like the interest paid by j&j6p would have to be pretty low so that they can continue to make the payments. this also doesn't look too good for me.

@ rubberbandman |

LOL! The PBGC shortfall is $14B!

Remember a few weeks ago when that kind of money seemed like a big deal?

Russ: (on my buying a house now) you asked "with what?-- all cash?"--

No. With current events as they are, I wouldn't even risk paying a down payment on it-- we'd use a VA, $0 down loan.

Funny thing-- here in Norfolk VA, with its large concentration of Navy & other military personnel, back when the bubble first shot up here in 2003, arrogant sellers would write it into their listings, "Will not accept VA or FHA loans". Sellers then thought VA & FHA loans weren't "good enough"-- the VA appraisers were "too conservative" and slow, and "held up the sale for days" (!) when the seller could have quick-sold to another buyer within hours of listing.

There was somewhat of a local stink about this at the time-- military people asked "hey, isn't that discrimination against servicepeople, violating Fair Housing?"-- & the answer was, "No".

When I remember how bloody snotty some of the sellers I met back then were to us-- more than one actually had their agent tell us to "write a letter about why we should sell our house to you"-- I'm glad many of these assholes are now charging groceries at Kmart to make their mortgage nut.

My how times & attitudes have changed. Most of these people here now would cheerfully kill if they could find a VA buyer.

Dodd says legislation would take too long, and that the Fed already has the authority to act as a resolution trust thingie. Where did this authority come from? Apparently from Dodd saying so. Unless anybody knows something more...?