and we're back to housing! ahhh! Where's the illustration of Pooh Bear being dragged up the steps by Christopher Robin. It's like that, only downstairs.
General Motors dealership personnel will earn bonus money for sending consumer financing deals to non-GMAC lenders.
The new incentive program underscores the severe retail lending restrictions implemented by GMAC Financial Services, GM's partially owned finance unit.
An Oct. 7 memo to dealers summarizes the upcoming program. According to a copy obtained by Automotive News, the program pays up to $250 in incentives for non-GMAC transactions. Salespersons get $100, sales managers get $100 and the dealer can designate an employee of choice to receive another $50.
The term of the incentive program is unclear. Eligible vehicles include all 2008 and 2009 Chevrolet, Pontiac, Buick, GMC, Hummer, Cadillac and Saturn vehicles, according to
"Comrade Misean: ...and killin shit. 'mericans luuuuv to kill shit. Little critters, brown people, and other economies. So killin shit's gotta be on there."
"Let everyone remember after this crisis, who solved it. Politicians did, not bankers." - said Jean-Claude Juncker, Luxembourg premier and Eurogroup chair.
"There has been a persistent rise in the level of delinquencies among the Alt-A mortgage loans supporting these transactions,''
CR, to put words in the speakers' mouth; there has been an excessive and unexplainable rise far beyond our model.
This is the moral hazard I've been trying to raise for years. The mathematics don't cover it. Past trends don't cover it. We've established an environment wherein we reward debt renunciation.
Ratings agencies have switched from being the enablers to the executioners.
While people rightfully criticize GBLA for its role in this mess, not enough attention has been focused on Basel II, and it's institutional ratings based approach to capitalization. Bogus AAA ratings allowed banks to be overly aggressive during the faux-boom; downgrades would have been the death knell. Thank goodness for the Kashkari lifeline.
So true. I think this is the biggest unintended consequence of all. Borrowers feel less and less obligated to repay debts. In fact, it has become obvious that those who don't pay are often given a better deal. This will have far reaching consequences, and I haven't heard the issue raised much.
It seems that now that it's cheaper to rent that many should just walk away from their mortgages. That is the economically sensible thing to do. It may have been in the 80s -- 1980s for you youngsters -- that there was an energy bust and Houston went down the drain. They had many walkaways, with whole neighborhoods destroyed.
I think this is the biggest unintended consequence of all. Borrowers feel less and less obligated to repay debts. In fact, it has become obvious that those who don't pay are often given a better deal. This will have far reaching consequences, and I haven't heard the issue raised much. - deb
This was the biggest argument when this blog first took off. CR kept accurately projecting past performance and some critics politely tried to assert that this time was different because we had embedded a moral hazard effect that would have people abandoning responsible behavior in favor of short term benefit.
"Standard & Poor's said it may downgrade $280.1 billion of Alt-A mortgage securities, the most that the ratings company has identified in a single announcement for bonds backed by the loans."
S&P just got word that all day loans are gonna reset.
They still rely on a slow boat from India to deliver their researcher's reports.
October 15, 2008
Arrow: Crisis a Challenge to Standard Economic Theory
Kenneth Arrow:
Risky business, by Kenneth Arrow: The current financial crisis ... presents ... a challenge to standard economic theory, a challenge all the more important since the development of policies to prevent future financial crises will depend on a deeper understanding of the processes at work.
That economic decisions are made without certain knowledge of the consequences is pretty self-evident. But, although many economists were aware of this elementary fact, there was no systematic analysis of economic uncertainty until about 1950. There have been two developments in the economic theory of uncertainty in the last 60 years, which have had opposite implications for the radical changes in the financial system. One has made explicit and understandable a long tradition that spreading risks among many bearers improves the functioning of the economy. The second is that there are large differences of information among market participants and that these differences are not well handled by market forces. The first point of view tends to argue for the expansion of markets, the second for recognising that they may fail to exist and, if they do come into being, may fail to work for the benefit of the general economic situation.
The value of spreading risks has, of course, been recognized as the basis of conventional insurance as well as the issue of company shares that spread corporate risks widely. The central element of standard economic analysis since the 1870s has been the concept of general economic equilibrium, which, under competitive conditions, leads to an optimal allocation of resources. In the 1950s, it was shown how to incorporate uncertainty into general equilibrium, which suggests, at least, that increasing the number and coverage of risk-bearing instruments would improve the running of the economy. Not only would risks be more efficiently borne, but, more importantly, additional socially valuable risky enterprises would be undertaken. Research showed how derivative securities should be priced, how individuals should choose portfolios to minimise their variability, and how individual contracts, such as mortgages, could be bundled so as to distribute the risks for different parts of the market with different risk tolerances.
The second strand of analysis was a growing recognition of the importance of information in governing reactions to uncertainties. If individuals in the market have different degrees of information, the ability to create securities or engage in other forms of contracts becomes limited; the less informed understand that the more informed will take advantage and react accordingly. This situation was long recognized by insurance companies under such terms as, "moral hazard" ... and "adverse selection"... Economists began to realise that "asymmetric" information was the key to understanding the limits of health insurance and the incentive problems of socialism and then that these concepts found their most important application in financial markets, precisely in the complex securities that the first strand of analysis had called for.
There is obviously much more to the full understanding of the current financial crisis, but the root is this conflict between the genuine social value of increased variety and spread of risk-bearing securities and the limits imposed by the growing difficulty of understanding the underlying risks imposed by growing complexity.
Arrow has the credentials to speak on these issues, that's for sure. Simply recognizing the market failures that are present in these markets due to asymmetric information and other problems is a first step to taking corrective action. For too long it was assumed that these markets would self-correct for any problems due to information asymmetries, agency problems, excessive market concentration and power, etc., but we know that that is not always the case. When these problems are large and persistent, regulatory intervention to correct the market failures can improve how these markets function. As Arrow notes, "increasing the number and coverage of risk-bearing instruments would improve the running of the economy," but only if these markets are working properly.
Posted by Mark Thoma on Wednesday, October 15, 2008 at 11:34 AM in Economics, Financial System, Methodology
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The debt renunciation issue is one thing that will make this play out differently in the us and in Europe. In Europe, if the foreclosure doesn't cover your debt, you're generally stuck with the remainder. Bankruptcy laws in the US are extremely lenient compared to other countries
We've gone from saying "it's all contained" to having to all wear contamination suits (the kind nuclear power station workers wear) to avoid having to touch the stuff...
A fearless prediction: History should show that Debt Renunciation is only profitable for a short term.
5:40 p.m.[C] Citigroup to lay off stock analysts globally: report
5:40 p.m.Citadel's main fund down over 25% this year; CDS spreads widen
5:38 p.m.[EBAY] EBAY CEO says PayPal 'did suffer' from slowdown in Q3
5:35 p.m.[EBAY] EBay CFO says weak trends will continue in fourth quarter
"some critics politely tried to assert that this time was different because we had embedded a moral hazard effect that would have people abandoning responsible behavior in favor of short term benefit."
Not sure how short term that benfit will be now. If it gets out that people are better off for longer periods, well all bets are off.
FB circa 2011: "Yep, walked away in '08. Never looked back. The peace of mind was worth any hassle. No one can get a credit card these days anyway, so at least I got some savings.
So what are the odds of the federal government issuing Treasuries, giving the proceeds to the banks, who (looking at the market and their balance sheet) then put the proceeds into Treasuries?
History should show that Debt Renunciation is only profitable for a short term
Debt renunciation is an inevitable component of the last stage of the credit cycle. Some people want it to be a moral issue because they got into the pyramid early and are vested.
It's a Tragedy of the Commons problem that most people were forced into debt at the end to compete, they didn't morally (or immorally) choose it.
So what are the odds of the federal government issuing Treasuries, giving the proceeds to the banks, who (looking at the market and their balance sheet) then put the proceeds into Treasuries?
I think you just described the nationalization plan...
Broward:"It's a Tragedy of the Commons problem that most people were forced into debt at the end to compete, they didn't morally (or immorally) choose it."
Bravo. Will not be a widely held belief.
Said it before, if the government doesn't default then we will see very draconian bbk laws enacted.
I am impressed that a "true" canuck like you has not committed suicide yet. I mean.. the future for your "kind" looks rather bad.
You are not going to grow old in a society like the one you live in today (by a long shot). All your cherished dreams of canuck whites-better-than-others are going to die in front of your eyes.
Either that, or you will become too poor to care otherwise (protectionism = ruin). Unless your society/ economy/ attitudes change (a lot),you will never be a country of any consequence. By that I mean - much less important than it is right now (if that is possible).
EvilHenryPaulson writes:
satan,
Allow me the liberty to say that I think we all are impressed that you are smart enough to even type
EvilHenryPaulson | 10.15.08 - 5:50 pm | #
If you're referring to mortgages, those are a creature of state law, from back in the day when states feared that their residents would be targeted by "foreign" (out of state) banks.
That was done in the 90's during the "silent" bank bailout.
The Fed drove the borrowing rate below the rate of Treasuries so the banks could borrow and buy at a positive spread.
Problem now is who is going to buy beyond 2 years, when they see all the money being printed today, will have an inflationary effect in the near future.
Welcome to the next wave. And soon, the one after that, and the one after that, until all the sandcastles are erased or transmuted into something strange and unrecognizable.
Ms. Tanta explained to all of us that it is very difficult to determine who is renunciating their debts and who could never afford it in the first place. It all goes back to fog-the-mirror underwriting.
"I'm walking away" (right before they kick my ass out the door)
"Either that, or you will become too poor to care otherwise (protectionism = ruin). Unless your society/ economy/ attitudes change (a lot),you will never be a country of any consequence. By that I mean - much less important than it is right now (if that is possible)."
Spoken like a true American who has no idea how far their stature in the world will fall after all is said and done.
I actually am not interested in what happened in the earlier Paulson meetings. I'm sure we can all guess how those went down.
But what are those weasels cooking up now - right at this minute? After everything they have done, after all those panicky, desperate lunges and saves... what are they discussing tonight? This intrigues me.
CROX is down 97.3% YoY, and last I checked there's only one company that can do what they do. These are generational buying opportunities. The economy is clearly no where near down 97% in size, so you can lock in maybe a 200% gain over the next 5 years
Even Cramer, the uber-bear who said sell everything and hold cash for 5 years, has capitulated and is turning for a bullish retesting of the oct 10 lows with a rehypothecated bagel movement. Once you watch the markets enough, it's like the matrix where you can all of a sudden understand it just by watching hundreds of tickers
I've been screaming about the obvious rehypothecated bagel movement ever since I found it easier as a bread street vendor to just make holes in the things and carry them on sticks.
Too bad third parties have little chance in this "system".
Yes but mostly by those with a vested interest in denial.
There's a lot more gunpowder leverage than there used to be. A very small number of people could topple this whole thing with just a little outside / monetary help because the general population has been forced into moral qualms that, deep inside, they resent.
We're not alone. Day before yesterday, Suze Orman basically told everyone in middle age and beyond to sell it ALL and get out of the market, 'cause it's not coming back for a long, long time.
When bloody Suze Orman tells you to abandon ship, you know the rats are already halfway down the anchor cables.
I am impressed that a "true" canuck like you has not committed suicide yet. I mean.. the future for your "kind" looks rather bad.
You are not going to grow old in a society like the one you live in today (by a long shot). All your cherished dreams of canuck whites-better-than-others are going to die in front of your eyes.
Either that, or you will become too poor to care otherwise (protectionism = ruin). Unless your society/ economy/ attitudes change (a lot),you will never be a country of any consequence. By that I mean - much less important than it is right now (if that is possible).
What ever gave you the idea I was white? You obviously have made all attempts to avoid educating yourself since the last time we spoke. I respect that your boisterous nationalism is near bottomless, but I will venture a guess that no one here finds any value in your comments.
OK, here's the deal with CROX> you go all in tomorrow, and it moves from 98% down to 99% down. ONly problem is, now you are 50% under water. Is the true value yesterday's price, or tomorrows? Does the %80 a share price have any connection to the reality of the market they face. dont think so.
Go ahead and buy it. See what happens. But first, go back and read what those prior price targets were built upon.
Also, think about the reality of fashion. Most trends dont last very long. And it is going to be some time before consumer spending recovers. So, do you want to wait to see if CROX are still in fashion when the recovery starts? They might be BK by then.
Said it before, if the government doesn't default then we will see very draconian bbk laws enacted.
Gone Fishin'
I think it depends on who wins the election. If McCain wins, we will indeed get those laws, no matter what the Senator spouts about his "housing" plan. He is surrounded by those who most benefitted from the bubble years. I think if O wins, we will get reform in the BK laws as far as housing is concerned. Sheila Barr (bless her heart) wanted to make cramdowns a bigger part part of the TARP. Fixed rate, current value, etc for individuals who were honest buyers, no speculators. She was over-ruled. I think they should keep the stringent re-pay on CC. Shame on you if you ran them up, shame on the guys who gave them out so freely.
And then some of us chose not to, understanding that the game was rigged.
A fallacy that I believed for awhile as I avoided debt, too. The problem is systemic and beyond simple debt. It's created a cultural of denial.
Ass-covering by others becomes the black mark on your record instead of theirs.
I've been shocked at how long it takes certain memes to permeate the general population. A great deal of resistance has been erected by most people to protect themselves and their egos.
But that resistance is also a capacitance which can be triggered by the right means.
This is my question that has been baffling me for over a year. What is the deal with WFC's Alt-A porfolio? Why haven't they blown-up? Did they effectively pass all their trash for cash at the Fed Window and are lean and mean now? Or are they just good at hiding their crap and will imminently reveal it?
In my experience with canucks, only white canadians whose ancestors came to canada before WW2 (canucks) have such uncritical belief in their "superiority".
Almost everyone who came to canada post WW2, especially since the 1960s has a rather dim view of canada and canucks. This dim view of canada is shared by many immigrants irrespective of color or language. Some of worst critics of canucks are brits who moved to canada in the 1960s-and 1970s.
Bob Dobbs writes:
"I can't believe you people are so pessimistic."
We're not alone. Day before yesterday, Suze Orman basically told everyone in middle age and beyond to sell it ALL and get out of the market, 'cause it's not coming back for a long, long time.
Elvis writes:
This is my question that has been baffling me for over a year. What is the deal with WFC's Alt-A porfolio? Why haven't they blown-up? Did they effectively pass all their trash for cash at the Fed Window and are lean and mean now? Or are they just good at hiding their crap and will imminently reveal it?
Good question E. I understand they are neck deep in Helocs, too.
The banks have hit the gas and waved the bird out the window as they are driving this bus over the edge. Obama will do as he's told like every other politician.
Default of the national debt, destruction of the national banking system, intense turmoil followed by rebuilding based on a sustainable lifestyle(read subsistence) is my view of a better future then the future we are heading into. I could be wrong but there is no way this ends with anything resembling the society we live in today.
"In my experience with canucks, only white canadians whose ancestors came to canada before WW2 (canucks) have such uncritical belief in their "superiority".
Almost everyone who came to canada post WW2, especially since the 1960s has a rather dim view of canada and canucks. This dim view of canada is shared by many immigrants irrespective of color or language. Some of worst critics of canucks are brits who moved to canada in the 1960s-and 1970s."
And which Canadians are these that you have met? One of the hallmarks of Canadians, white, non-white pre-1960's or post is a lack of feelings of "superiority".
Canadians are not known for tooting their own horns, and this is precisely why they have been welcomed as peace-keepers for decades throughout the world.
You're obviously very bitter towards Canadians and I won't waste everyone's time trying to convince you otherwise. I'm pretty sure you know you are beyond wrong in your gut which is why you hyperbolize, so if this anger is based off of any real experience I suggest you reevaluate if the problem was with yourself (instead of the pan-Canadian conspiracy against you)
"Welcome to the next wave. And soon, the one after that, and the one after that, until all the sandcastles are erased or transmuted into something strange and unrecognizable."
A beautiful and complex metaphor in the context, actually.
hey, susie orman is smart the way she tells people to deal with their money issues. I don't know if i've ever seen her give financial advice... usually she's more like "pay your debts and don't by crap you can't afford!"
Hmm.. Let's see. Have you considered that I might have lived in Canada for many years? So the answer to your question is - of the hundreds of people who moved here after ww2 (especially after the 60s)- I have not met one (non-canuck)person who has lived in canada for over an year and thinks canucks are not delusional. That is quite an achievement!
Given that almost everyone who moved to canada before WW2 was not wanted in their own country- this is hard to explain.
They range from well educated brits, US citizens, east-europeans, russians, chinese, taiwanese, indians, south-americans and the list goes on and on..
To have a feeling of accomplishment that is not delusional, one must have some real accomplishments. The book of canadian accomplishments worthy of note is rather small- if it exists.
Of course between the media, textbooks and public discourse, canucks believe in that c**p more that north koreans believe in Kim Jung.
Now go back to raping haitians and drug-running in cyprus (canuck "peace keepers").
And which Canadians are these that you have met? One of the hallmarks of Canadians, white, non-white pre-1960's or post is a lack of feelings of "superiority".
Canadians are not known for tooting their own horns, and this is precisely why they have been welcomed as peace-keepers for decades throughout the world.
Pissed Off In California | 10.15.08 - 6:35 pm | #
"Despite the vagaries of fast-moving money markets and the quirks of international finance, certain iron rules hold fast. One of them is that if something looks too good to be true, it usually isn't true. Take, for example, the assertion often heard this week from those who believe the guarantee, that governments cannot go bust. That goes to show how little we learn from experience - or how quickly we forget inconvenient lessons from history." Link
Banks backed by governments might not seem like a good idea in weeks or months to come. Just ask Iceland.
Depository Trust released opinion a day or two ago (NakedCapitalism, maybe?) that the net is only around 5 billion, barring counterparty defaults.
Which made no sense. The average CDS contract isn't passing through 60+ intermediaries, as would be required for 5b net on 400b gross. Close reading indicated that there was 5 billion of extra net due to the settlement coming in low - it was only 5 billion because the rest has already been written off. Assuming similar ratios of gross to net, that's another 100-150 billion net that's already written down. Supposedly. I'm willing to bet that a lot of the hedge funds JPM bought balancing contracts from do not have adequate reserves.
It is somewhat peculiar that all canucks think and talk in the same way (down with the USA!!). I have never known a canuck who was able to see the world objectively. What is with you guys and objectivity anyway?
About canuck conspiracies.. nahh.. conspiracies require intelligence. There is a difference between being intelligent and being clever. Never seen any manifestation of intelligence in canucks.
Actually your explanations of Canada indicate that either you haven't lived in Canada, or you've been stuck in some hamlet up North surrounded by a bunch of 90 year old alcoholic White Canadians.
Sorry, none of your explanations/observations make any sense or in any way stand up to the history of Canada.
You simply sound like an asshole with an axe to grind and nothing to back your statements up with.
Actually your explanations of Canada indicate that either you haven't lived in Canada, or you've been stuck in some hamlet up North surrounded by a bunch of 90 year old alcoholic White Canadians.
Canadians unfortunately tend to define themselves in terms of what they are against not in terms of what they are for. For example, most Canadians when pressed will define themselves as "not American." Canada never had a revolution and never had a defining moment as a nation.
As the largest trading partner with the US, Canada is not in any way immune to the economic climate of the US. Canadians continue to be smug and are seriously dillusional in thinking that they somehow won't be seriously impacted by what is happening south of the border.
I agree.. and that is one of the roots of the problem.
__
Canadians unfortunately tend to define themselves in terms of what they are against not in terms of what they are for. For example, most Canadians when pressed will define themselves as "not American." Canada never had a revolution and never had a defining moment as a nation.
Plummeting property values? Check. Rising adjustable rate mortgage payments? Check. Massive negative equity? Check. Ability to rent similar property relatively cheaply? Check. Increasing social acceptance of ruthless defaults? Check.
Even the most math-challenged homeowners will easily be able to calculate their monthly/yearly savings and the positive net worth implications of walking away.
If you have ever seen the Serengeti Wildebeast migration then you have an idea of what is coming.
Consider for a minute whether visible immigrants or their kids have any reason to keep your welfare system going 5-10 years from now. Do you think they are not going to reciprocate?
"Canadians unfortunately tend to define themselves in terms of what they are against not in terms of what they are for. For example, most Canadians when pressed will define themselves as "not American." Canada never had a revolution and never had a defining moment as a nation."
Canadians don't define themselves as not American. They tend to define themselves as (Chinese/Russian/Itialian.. first) and Canadian second.
Canada is made up of people leaving another country rather than coming to Canada, unlike what you see in the US.
Does that make Canadians bad or delusional? No that just makes them different.
And as I said previously look at how Canadian peace-keepers are generally accepted around the world versus Americans. In the political realm world-wide Canadians tend to be accepted more openly as in general they don't have ulterior motives.
It was on the tube, CNBC, early morning. To be perfectly honest, I didn't see it -- but my wife rushed upstairs to tell me about it. She's a big Suze fan.
I agree that one or two percent of notional is too small a netting overall. But there are several mitigants underlying that number, I believe.
First, the hedge funds were net short exposure. For them, it was like writing out of the money puts with 20x leverage, and they got 20% of the premium in their 2-and-20 payment arrangements. But most of the net short was in the form of premium capture "curve trades:" short the 5 year, long the 2 year or whatever maximized their carry. So the hedges were largely -in the default event- self netting.
Second, a huge amount of the notional was probably carried in prime brokerage accounts, so the net customer short was kept marked in as the spreads blew out, and the primes themselves knew what their book was, and could hedge accordingly, again bringing a lot of self-netting between the banks and the PB customers.
So, while the net exposure is probably a good deal bigger than 5 or 6, it's probably not more than one order of magnitude bigger, and a lot of the short liability is already in via the margin marks of the prime brokers.
Canadians are very smart and will not be effected in any way with the economic troubles of the rest of the world. I am stupid, I am stupid, I am stupid, I am stupid, help me ahhhhhhhhhhhhhhhhhhhhhh my brain is frozen aaaahhhhhhhhhhhhhhh, help me, make it go away.
Canada's achievements are limited to creating a relatively peaceful, non-violent, affluent and socially just society. No wonder Americans can't give them their due.
"Canadians don't define themselves as not American. They tend to define themselves as (Chinese/Russian/Itialian.. first) and Canadian second."
Beg to differ. I grew up on the border and still spend every August on a lake in Ontario. You may only be familiar with recent immigrants, who most resemble hypenated-Americans of recent vintage.
Canadians, whether French or English speaking most assuredly define themselves as such.
Small towns in Ontario and Quebec are filled with fiercely patriotic Canadians, and the old money crowd that summers at Muskoka and Georgian Bay do not confuse themselves with other identities.
Canada is crucial to civilization...without Canada there would be no hockey.
That was plastered all over one of the hallways at National Semiconductor in the early '90's . Each time I had to pass it , on the way to yet another "meeting", I just laughed out loud. It got so bad that the finance people who were located just on the other side of it knew it was me each time someone laughed in the hallway.
When I left there I got a little certificate that read "For his ability to quickly assess the importance of a meeting...and leave"
Me!
umber 1
How much reality can this market take?
Ruh-roh...
and we're back to housing! ahhh! Where's the illustration of Pooh Bear being dragged up the steps by Christopher Robin. It's like that, only downstairs.
Start of the downgrade dance!
Ratings agencies have switched from being the enablers to the executioners.
Nice to see S&P staying ahead of the curve.
Ah, the Alt-A's are gonna get in on the dance now..That should liven things up considerably..
GM reaches DESPERATION point:
GM offers dealer bonuses for non-GMAC loans
Amy Wilson and Donna Harris
General Motors dealership personnel will earn bonus money for sending consumer financing deals to non-GMAC lenders.
The new incentive program underscores the severe retail lending restrictions implemented by GMAC Financial Services, GM's partially owned finance unit.
An Oct. 7 memo to dealers summarizes the upcoming program. According to a copy obtained by Automotive News, the program pays up to $250 in incentives for non-GMAC transactions. Salespersons get $100, sales managers get $100 and the dealer can designate an employee of choice to receive another $50.
The term of the incentive program is unclear. Eligible vehicles include all 2008 and 2009 Chevrolet, Pontiac, Buick, GMC, Hummer, Cadillac and Saturn vehicles, according to
Wayne Angel former fed governor on Fast money just suggested the Fed fire its last cannon and drop the fed funds rate to .1 !!
Any ideas on the consequences of this???
We're all Alt-A now.
charles hugh smith-Weblog and Essays
Good CDS market analysis.
Excuse me.
Alt-A is contained.
CSC,
"Comrade Misean: ...and killin shit. 'mericans luuuuv to kill shit. Little critters, brown people, and other economies. So killin shit's gotta be on there."
Oh it's there.
Nostrovia,
this should be good news for the market tomorrow.
I'm sorry, I can't even read these charts anymore.
I thought this -- downgrades/threatened downgrades -- and truthful, accurate accounting were outlawed by the Bush/Bernanke/Paulson troika/cabal?
Mission Accomplished
"Let everyone remember after this crisis, who solved it. Politicians did, not bankers." - said Jean-Claude Juncker, Luxembourg premier and Eurogroup chair.
Dummy,
"Any ideas on the consequences of this???"
Ted spread opens up wider than a crack whore offered an ounce for services rendered. Other less savory things as well I'm sure.
Nostrovia,
LOL Nemo, that looks more like a three year old got ahold of some magic markers...wow.
"There has been a persistent rise in the level of delinquencies among the Alt-A mortgage loans supporting these transactions,''
CR, to put words in the speakers' mouth; there has been an excessive and unexplainable rise far beyond our model.
This is the moral hazard I've been trying to raise for years. The mathematics don't cover it. Past trends don't cover it. We've established an environment wherein we reward debt renunciation.
Juncker just needs to borrow one of our aircraft carriers now to make his folly complete.
Ratings agencies have switched from being the enablers to the executioners.
While people rightfully criticize GBLA for its role in this mess, not enough attention has been focused on Basel II, and it's institutional ratings based approach to capitalization. Bogus AAA ratings allowed banks to be overly aggressive during the faux-boom; downgrades would have been the death knell. Thank goodness for the Kashkari lifeline.
Any ideas on the consequences of this???
Japan 2.0
This thread demands an enlightening theme:
YouTube -
It's goin red down here inna Babylon...
You talk too much ,
you will pay for what you don't eat
Goat never know the use of him tail till the butcher cut it off
Nemo,
Um those charts look like there thinking 1.25%. 2.00% went from .7 to 0 cuz nobody thinks the fed will go below zero. That's like going to 11.
Nostrovia,
Juncker just needs to borrow one of our aircraft carriers now to make his folly complete.
I think we found our t-shirt quote of the day.
@ scav, "Where's the illustration of Pooh Bear being dragged up the steps by Christopher Robin. It's like that, only downstairs."
Downstairs it is: http://tinyurl.com/3pb5ct
We've established an environment wherein we reward debt renunciation
I wish. I'm fairly we're past renunciation with one foot into the gunpowder world.
Wow! Just, wow.
Number of zeros
\t
3 \tthousand
6 \tmillion
9 \tbillion
12 \ttrillion
15 \tquadrillion
18 \tquintillion
21 \tsextillion
Hit me baby one more time......
So where's the problem?
$280 billion is less than $700 billion so throw a TARP over it - all gone!
Japan 2.0 except with social unrest.
"we reward debt renunciation"
Rob,
So true. I think this is the biggest unintended consequence of all. Borrowers feel less and less obligated to repay debts. In fact, it has become obvious that those who don't pay are often given a better deal. This will have far reaching consequences, and I haven't heard the issue raised much.
A few trillion to go..
I'm still waiting for the blanket downgrade that Alt-A deserves. Subprime, too.
So what's next from the ruling brain trust? Total government ownership of all assets? Karl Marx would love this bunch of clowns.
Borrowers feel less and less obligated to repay debts.
The god-worship of "free markets" to gut employement while boosting debt wasn't a factor, I'm so sure.
It seems that now that it's cheaper to rent that many should just walk away from their mortgages. That is the economically sensible thing to do. It may have been in the 80s -- 1980s for you youngsters -- that there was an energy bust and Houston went down the drain. They had many walkaways, with whole neighborhoods destroyed.
Forgive me if this has already been posted:
Flaming Squirrel Blamed for Northern California Wildfire
I think this is the biggest unintended consequence of all. Borrowers feel less and less obligated to repay debts. In fact, it has become obvious that those who don't pay are often given a better deal. This will have far reaching consequences, and I haven't heard the issue raised much. - deb
This was the biggest argument when this blog first took off. CR kept accurately projecting past performance and some critics politely tried to assert that this time was different because we had embedded a moral hazard effect that would have people abandoning responsible behavior in favor of short term benefit.
"Standard & Poor's said it may downgrade $280.1 billion of Alt-A mortgage securities, the most that the ratings company has identified in a single announcement for bonds backed by the loans."
S&P just got word that all day loans are gonna reset.
They still rely on a slow boat from India to deliver their researcher's reports.
Always ahead of the curve their S&P.
Nostrovia,
Good Stuff from Economist View Blog
October 15, 2008
Arrow: Crisis a Challenge to Standard Economic Theory
Kenneth Arrow:
Risky business, by Kenneth Arrow: The current financial crisis ... presents ... a challenge to standard economic theory, a challenge all the more important since the development of policies to prevent future financial crises will depend on a deeper understanding of the processes at work.
That economic decisions are made without certain knowledge of the consequences is pretty self-evident. But, although many economists were aware of this elementary fact, there was no systematic analysis of economic uncertainty until about 1950. There have been two developments in the economic theory of uncertainty in the last 60 years, which have had opposite implications for the radical changes in the financial system. One has made explicit and understandable a long tradition that spreading risks among many bearers improves the functioning of the economy. The second is that there are large differences of information among market participants and that these differences are not well handled by market forces. The first point of view tends to argue for the expansion of markets, the second for recognising that they may fail to exist and, if they do come into being, may fail to work for the benefit of the general economic situation.
The value of spreading risks has, of course, been recognized as the basis of conventional insurance as well as the issue of company shares that spread corporate risks widely. The central element of standard economic analysis since the 1870s has been the concept of general economic equilibrium, which, under competitive conditions, leads to an optimal allocation of resources. In the 1950s, it was shown how to incorporate uncertainty into general equilibrium, which suggests, at least, that increasing the number and coverage of risk-bearing instruments would improve the running of the economy. Not only would risks be more efficiently borne, but, more importantly, additional socially valuable risky enterprises would be undertaken. Research showed how derivative securities should be priced, how individuals should choose portfolios to minimise their variability, and how individual contracts, such as mortgages, could be bundled so as to distribute the risks for different parts of the market with different risk tolerances.
The second strand of analysis was a growing recognition of the importance of information in governing reactions to uncertainties. If individuals in the market have different degrees of information, the ability to create securities or engage in other forms of contracts becomes limited; the less informed understand that the more informed will take advantage and react accordingly. This situation was long recognized by insurance companies under such terms as, "moral hazard" ... and "adverse selection"... Economists began to realise that "asymmetric" information was the key to understanding the limits of health insurance and the incentive problems of socialism and then that these concepts found their most important application in financial markets, precisely in the complex securities that the first strand of analysis had called for.
There is obviously much more to the full understanding of the current financial crisis, but the root is this conflict between the genuine social value of increased variety and spread of risk-bearing securities and the limits imposed by the growing difficulty of understanding the underlying risks imposed by growing complexity.
Arrow has the credentials to speak on these issues, that's for sure. Simply recognizing the market failures that are present in these markets due to asymmetric information and other problems is a first step to taking corrective action. For too long it was assumed that these markets would self-correct for any problems due to information asymmetries, agency problems, excessive market concentration and power, etc., but we know that that is not always the case. When these problems are large and persistent, regulatory intervention to correct the market failures can improve how these markets function. As Arrow notes, "increasing the number and coverage of risk-bearing instruments would improve the running of the economy," but only if these markets are working properly.
Posted by Mark Thoma on Wednesday, October 15, 2008 at 11:34 AM in Economics, Financial System, Methodology
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And yet I am busy. Even some real estate work. All FHA. Or hard money.
Most people are paying, and the one who didn't referred me a fabulous case.
Still debating when to get back in. 7000? 6000?
The debt renunciation issue is one thing that will make this play out differently in the us and in Europe. In Europe, if the foreclosure doesn't cover your debt, you're generally stuck with the remainder. Bankruptcy laws in the US are extremely lenient compared to other countries
Kung Fu Panda,
Blaming the one that can save you...
Hey, Alt-A, you were supposed to wait your turn and not bring down the economy until 2010. Get in line.
Everyone looking after their own self interest doesn't seem like such a good idea now, does it?
Flaming Squirrel Blamed for Northern California Wildfire - Kung Fu Panda
Sauces? Garnishes? Flaming squirrel without details is just charred meat. This iz a classy joint.
We've gone from saying "it's all contained" to having to all wear contamination suits (the kind nuclear power station workers wear) to avoid having to touch the stuff...
A fearless prediction: History should show that Debt Renunciation is only profitable for a short term.
News updates:
5:40 p.m.[C] Citigroup to lay off stock analysts globally: report
5:40 p.m.Citadel's main fund down over 25% this year; CDS spreads widen
5:38 p.m.[EBAY] EBAY CEO says PayPal 'did suffer' from slowdown in Q3
5:35 p.m.[EBAY] EBay CFO says weak trends will continue in fourth quarter
Rob Dawg,
"some critics politely tried to assert that this time was different because we had embedded a moral hazard effect that would have people abandoning responsible behavior in favor of short term benefit."
Not sure how short term that benfit will be now. If it gets out that people are better off for longer periods, well all bets are off.
FB circa 2011: "Yep, walked away in '08. Never looked back. The peace of mind was worth any hassle. No one can get a credit card these days anyway, so at least I got some savings.
Nostrovia,
It was very kind of them to wait until after earnings seaso
http://img359.imageshack.us/img359/158/bushaccidentlyeconomypy1.jpg
Someone has to take the blame.
I would rather be a thriving socialist than a dead capitist.
Phil Gramm:
Hazardous morale.
.....the party aint over till someone dances with the ugly girl.
So what are the odds of the federal government issuing Treasuries, giving the proceeds to the banks, who (looking at the market and their balance sheet) then put the proceeds into Treasuries?
History should show that Debt Renunciation is only profitable for a short term
Debt renunciation is an inevitable component of the last stage of the credit cycle. Some people want it to be a moral issue because they got into the pyramid early and are vested.
It's a Tragedy of the Commons problem that most people were forced into debt at the end to compete, they didn't morally (or immorally) choose it.
Interesting video that shows the collapse of the USA in 3 minutes.
YouTube - The Collapse of America in Three Minutes
Kung Fu Panda,
Flaming squirrel...
Bwahahahaahaha!
Nostrovia,
... it's just an illusion oh oh oh ah ...
pay the debt.
or the guys with the money, wont be buying the debts.
repudiation via monetization is the global sovereign killer. We'll be burning global fiat at that point. mad max indeed.
Bond Girl --
Well, I guess that would be one way to increase the velocity of money...
I think that is a game the government can always "win" if it really wants to.
Which idiot introduced non-recourse loans
So what are the odds of the federal government issuing Treasuries, giving the proceeds to the banks, who (looking at the market and their balance sheet) then put the proceeds into Treasuries?
I think you just described the nationalization plan...
Broward:"It's a Tragedy of the Commons problem that most people were forced into debt at the end to compete, they didn't morally (or immorally) choose it."
Bravo. Will not be a widely held belief.
Said it before, if the government doesn't default then we will see very draconian bbk laws enacted.
BH:
Tragedy of the Commons? Forced to compete? Didn't morally choose it?
Set the pipe down. The commons we're just as greedy as Wall Street.
Did someone made a tar and feather list yet?
Hi EvilHenryPaulson,
I am impressed that a "true" canuck like you has not committed suicide yet. I mean.. the future for your "kind" looks rather bad.
You are not going to grow old in a society like the one you live in today (by a long shot). All your cherished dreams of canuck whites-better-than-others are going to die in front of your eyes.
Either that, or you will become too poor to care otherwise (protectionism = ruin). Unless your society/ economy/ attitudes change (a lot),you will never be a country of any consequence. By that I mean - much less important than it is right now (if that is possible).
EvilHenryPaulson writes:
satan,
Allow me the liberty to say that I think we all are impressed that you are smart enough to even type
EvilHenryPaulson | 10.15.08 - 5:50 pm | #
Which idiot introduced non-recourse loans
If you're referring to mortgages, those are a creature of state law, from back in the day when states feared that their residents would be targeted by "foreign" (out of state) banks.
Bond Girl,
That was done in the 90's during the "silent" bank bailout.
The Fed drove the borrowing rate below the rate of Treasuries so the banks could borrow and buy at a positive spread.
Problem now is who is going to buy beyond 2 years, when they see all the money being printed today, will have an inflationary effect in the near future.
Welcome to the next wave. And soon, the one after that, and the one after that, until all the sandcastles are erased or transmuted into something strange and unrecognizable.
"and we're back to housing!"
We never left it.
Ms. Tanta explained to all of us that it is very difficult to determine who is renunciating their debts and who could never afford it in the first place. It all goes back to fog-the-mirror underwriting.
"I'm walking away" (right before they kick my ass out the door)
the guys with the money, wont be buying the debts.
A lot of the debts are in real estate prices. Why do you think they're so keen to maintain them?
Default means real estate prices go back to what people can actually afford with their labor.
Lenders generally do not ask for deficiency judgments even in recourse states, like Florida.
And what good would it do beyond toilet paper?
"Either that, or you will become too poor to care otherwise (protectionism = ruin). Unless your society/ economy/ attitudes change (a lot),you will never be a country of any consequence. By that I mean - much less important than it is right now (if that is possible)."
Spoken like a true American who has no idea how far their stature in the world will fall after all is said and done.
I actually am not interested in what happened in the earlier Paulson meetings. I'm sure we can all guess how those went down.
But what are those weasels cooking up now - right at this minute? After everything they have done, after all those panicky, desperate lunges and saves... what are they discussing tonight? This intrigues me.
Nobody even cares to speculate about what the mkt is gonna do tomorrow?
Louie Sez writes:
.....the party aint over till someone dances with the ugly girl.
Dance? Dude we're already hoggin'.
When Ken Lewis slayed Countrywide, it was GAME ON.
JP Morgan then went for the heffer with the mustache.
Lots of fat, empty ladies, stinking of a toxic stench, getting chatted up these days.
Now we're waiting for the morning after to see who wins.
As soon as reality sets in about the home foreclosures and the derivatives we are going to see some serious selling. I can't wait..
I can't believe you people are so pessimistic.
CROX is down 97.3% YoY, and last I checked there's only one company that can do what they do. These are generational buying opportunities. The economy is clearly no where near down 97% in size, so you can lock in maybe a 200% gain over the next 5 years
Even Cramer, the uber-bear who said sell everything and hold cash for 5 years, has capitulated and is turning for a bullish retesting of the oct 10 lows with a rehypothecated bagel movement. Once you watch the markets enough, it's like the matrix where you can all of a sudden understand it just by watching hundreds of tickers
Pay your debts or go to prison? That will flush some capital out of the consumer. Won't happen you say, history says otherwise, repeatedly.
Debtors priso - Wikipedia, the free encyclopedia
It's a Tragedy of the Commons problem that most people were forced into debt at the end to compete
And then some of us chose not to, understanding that the game was rigged.
@ satan fan
CROX is down 97.3% YoY - and so they should be.
"Cramer" - its in bad taste to swear on this blog
Oh, well, going home, happy to be with you guys for the End of the World.
lawyerliz,
you'll know the bottom when no ones looking for the bottom.
Not tomorrow, unless you are a day trader.
satan fan,
I've been screaming about the obvious rehypothecated bagel movement ever since I found it easier as a bread street vendor to just make holes in the things and carry them on sticks.
Too bad third parties have little chance in this "system".
LOL.
CSC,
"Now we're waiting for the morning after to see who wins."
We're waiting for morning to see who has to chew his arm off.
Nostrovia,
Bravo. Will not be a widely held belief
Yes but mostly by those with a vested interest in denial.
There's a lot more gunpowder leverage than there used to be. A very small number of people could topple this whole thing with just a little outside / monetary help because the general population has been forced into moral qualms that, deep inside, they resent.
"I can't believe you people are so pessimistic."
We're not alone. Day before yesterday, Suze Orman basically told everyone in middle age and beyond to sell it ALL and get out of the market, 'cause it's not coming back for a long, long time.
When bloody Suze Orman tells you to abandon ship, you know the rats are already halfway down the anchor cables.
karelian:
Plan A - Market and bank holidays. 401K and Mutual Fund freezes.
Plan B - Withdrawal limits. Supervised access to lock boxes.
Plan C - Rationing. Curfew.
CSC:"Dance? Dude we're already hoggin'.
When Ken Lewis slayed Countrywide, it was GAME ON.
JP Morgan then went for the heffer with the mustache.
Lots of fat, empty ladies, stinking of a toxic stench, getting chatted up these days.
Now we're waiting for the morning after to see who wins."
BEST.POST.EVER. still laughing
satan writes:
Hi EvilHenryPaulson,
I am impressed that a "true" canuck like you has not committed suicide yet. I mean.. the future for your "kind" looks rather bad.
You are not going to grow old in a society like the one you live in today (by a long shot). All your cherished dreams of canuck whites-better-than-others are going to die in front of your eyes.
Either that, or you will become too poor to care otherwise (protectionism = ruin). Unless your society/ economy/ attitudes change (a lot),you will never be a country of any consequence. By that I mean - much less important than it is right now (if that is possible).
What ever gave you the idea I was white? You obviously have made all attempts to avoid educating yourself since the last time we spoke. I respect that your boisterous nationalism is near bottomless, but I will venture a guess that no one here finds any value in your comments.
Suze O said that???
OMG.
Now I really am leaving.
We're waiting for morning to see who has to chew his arm off.
I can't wait to see these guys doing the walk of shame down Wall St. the next morning.
Supervised visits to lockboxes... i like the way your mind works!
OK, here's the deal with CROX> you go all in tomorrow, and it moves from 98% down to 99% down. ONly problem is, now you are 50% under water. Is the true value yesterday's price, or tomorrows? Does the %80 a share price have any connection to the reality of the market they face. dont think so.
Go ahead and buy it. See what happens. But first, go back and read what those prior price targets were built upon.
Also, think about the reality of fashion. Most trends dont last very long. And it is going to be some time before consumer spending recovers. So, do you want to wait to see if CROX are still in fashion when the recovery starts? They might be BK by then.
"5:40 p.m.[C] Citigroup to lay off stock analysts globally: report "
No need for cheerleaders if no fans show up for your games to cheer.
What happens on the 20th and 21st when insurers of Lehman's debt have to pony-up? Octobers can be the market's worst months.
Said it before, if the government doesn't default then we will see very draconian bbk laws enacted.
Gone Fishin'
I think it depends on who wins the election. If McCain wins, we will indeed get those laws, no matter what the Senator spouts about his "housing" plan. He is surrounded by those who most benefitted from the bubble years. I think if O wins, we will get reform in the BK laws as far as housing is concerned. Sheila Barr (bless her heart) wanted to make cramdowns a bigger part part of the TARP. Fixed rate, current value, etc for individuals who were honest buyers, no speculators. She was over-ruled. I think they should keep the stringent re-pay on CC. Shame on you if you ran them up, shame on the guys who gave them out so freely.
"and we're back to housing!"
We never left it.
Housing is the root of all evil (unless you want to argue loose lending and you could probably do well there, too.)
Some thread music. Y'all gonna hate me for this...
YouTube - Sonny & Cher - The Beat Goes On
And then some of us chose not to, understanding that the game was rigged.
A fallacy that I believed for awhile as I avoided debt, too. The problem is systemic and beyond simple debt. It's created a cultural of denial.
Ass-covering by others becomes the black mark on your record instead of theirs.
I've been shocked at how long it takes certain memes to permeate the general population. A great deal of resistance has been erected by most people to protect themselves and their egos.
But that resistance is also a capacitance which can be triggered by the right means.
What would a laid off stock analyst do if other banks aren't hiring?
House appraising is not available at the moment
"What happens on the 20th and 21st when insurers of Lehman's debt have to pony-up?"
Depository Trust released opinion a day or two ago (NakedCapitalism, maybe?) that the net is only around 5 billion, barring counterparty defaults.
Little Caesar's Pizza: 2009's largest IPO?
QSR pizza...$5 for a pie and ready when you are. There is a line out the door at our local store.
It will probably taste better after a bit of famine, but LC is the future of American pizza.
Did you know that light takes just about 8 minutes to reach Earth?
And do you call that a bounce?
This is my question that has been baffling me for over a year. What is the deal with WFC's Alt-A porfolio? Why haven't they blown-up? Did they effectively pass all their trash for cash at the Fed Window and are lean and mean now? Or are they just good at hiding their crap and will imminently reveal it?
Illuminated we are not!
Hi EvilHenryPaulson,
In my experience with canucks, only white canadians whose ancestors came to canada before WW2 (canucks) have such uncritical belief in their "superiority".
Almost everyone who came to canada post WW2, especially since the 1960s has a rather dim view of canada and canucks. This dim view of canada is shared by many immigrants irrespective of color or language. Some of worst critics of canucks are brits who moved to canada in the 1960s-and 1970s.
What would a laid off stock analyst do if other banks aren't hiring?
Hearing/seeing lots of ads offering help renegotiating mortgages. Clearly, there is a whole new round of fleecing going on.
Bob Dobbs writes:
"I can't believe you people are so pessimistic."
We're not alone. Day before yesterday, Suze Orman basically told everyone in middle age and beyond to sell it ALL and get out of the market, 'cause it's not coming back for a long, long time.
You listen to Suze Orman? Bwahahahahaha
Elvis writes:
This is my question that has been baffling me for over a year. What is the deal with WFC's Alt-A porfolio? Why haven't they blown-up? Did they effectively pass all their trash for cash at the Fed Window and are lean and mean now? Or are they just good at hiding their crap and will imminently reveal it?
Good question E. I understand they are neck deep in Helocs, too.
RE: LEH CDS.
Here's the link:
DTCC Claims Lehman Credit Default Swap Worries Overblown, Net Payments Only $6 Billion « naked capitalism
DTCC said 6B, not 5B as I remembered it.
LawyerLiz,
Why wouldn't banks sell the defaulted mortgage debt to a collection agency for pennies on the dollar?
Lawyerliz writes:
Lenders generally do not ask for deficiency judgments even in recourse states, like Florida.
Whereismyretirement:
The banks have hit the gas and waved the bird out the window as they are driving this bus over the edge. Obama will do as he's told like every other politician.
Default of the national debt, destruction of the national banking system, intense turmoil followed by rebuilding based on a sustainable lifestyle(read subsistence) is my view of a better future then the future we are heading into. I could be wrong but there is no way this ends with anything resembling the society we live in today.
"In my experience with canucks, only white canadians whose ancestors came to canada before WW2 (canucks) have such uncritical belief in their "superiority".
Almost everyone who came to canada post WW2, especially since the 1960s has a rather dim view of canada and canucks. This dim view of canada is shared by many immigrants irrespective of color or language. Some of worst critics of canucks are brits who moved to canada in the 1960s-and 1970s."
And which Canadians are these that you have met? One of the hallmarks of Canadians, white, non-white pre-1960's or post is a lack of feelings of "superiority".
Canadians are not known for tooting their own horns, and this is precisely why they have been welcomed as peace-keepers for decades throughout the world.
Gone Fishin', I hope you're wrong...I'm afraid you're not;)
I grew up watching Haley Mills, I just want to be Pollyanna for a few more months. LOL
Suze Orman - link?
satan,
You're obviously very bitter towards Canadians and I won't waste everyone's time trying to convince you otherwise. I'm pretty sure you know you are beyond wrong in your gut which is why you hyperbolize, so if this anger is based off of any real experience I suggest you reevaluate if the problem was with yourself (instead of the pan-Canadian conspiracy against you)
"Welcome to the next wave. And soon, the one after that, and the one after that, until all the sandcastles are erased or transmuted into something strange and unrecognizable."
A beautiful and complex metaphor in the context, actually.
A beautiful and complex metaphor in the context, actually.
Pavel Chichikov | 10.15.08 - 6:41 pm |
That imagery is growing on me too now
hey, susie orman is smart the way she tells people to deal with their money issues. I don't know if i've ever seen her give financial advice... usually she's more like "pay your debts and don't by crap you can't afford!"
Sound advice.
Do they have to pay on the Lehman contracts on the 20th?
would like to buy my own mortgage for pennies on the dollar
Bond Girl
Protocol says they need to settle by Oct 21. If they're late I am vaguely aware of what would be legal proceedings to reclaim money
Suze Orman is the CalculatedRISK for those educated by Orpah Winfrey. And probably a few others. She has an important place.
would like to buy my own mortgage for pennies on the dollar
comrade poor savings account | 10.15.08 - 6:45 pm |
Only if Merrill Lynch finances 75% of the cost. Don't be their fool
Hmm.. Let's see. Have you considered that I might have lived in Canada for many years? So the answer to your question is - of the hundreds of people who moved here after ww2 (especially after the 60s)- I have not met one (non-canuck)person who has lived in canada for over an year and thinks canucks are not delusional. That is quite an achievement!
Given that almost everyone who moved to canada before WW2 was not wanted in their own country- this is hard to explain.
They range from well educated brits, US citizens, east-europeans, russians, chinese, taiwanese, indians, south-americans and the list goes on and on..
To have a feeling of accomplishment that is not delusional, one must have some real accomplishments. The book of canadian accomplishments worthy of note is rather small- if it exists.
Of course between the media, textbooks and public discourse, canucks believe in that c**p more that north koreans believe in Kim Jung.
Now go back to raping haitians and drug-running in cyprus (canuck "peace keepers").
And which Canadians are these that you have met? One of the hallmarks of Canadians, white, non-white pre-1960's or post is a lack of feelings of "superiority".
Canadians are not known for tooting their own horns, and this is precisely why they have been welcomed as peace-keepers for decades throughout the world.
Pissed Off In California | 10.15.08 - 6:35 pm | #
I'm game if the Canuck-bashing shifts to anti-Swedish vitriol.
I agree that Suze Orman gives sound advice. But I weep for the fools that need it. It is just common sense.
satan,
This is not group therapy
boosted estimates for losses on each foreclosure .. to 40 percent, from 35 percent.
Not so dire.
As CR has pointed out their peak resets will be next spring, I think.
"Despite the vagaries of fast-moving money markets and the quirks of international finance, certain iron rules hold fast. One of them is that if something looks too good to be true, it usually isn't true. Take, for example, the assertion often heard this week from those who believe the guarantee, that governments cannot go bust. That goes to show how little we learn from experience - or how quickly we forget inconvenient lessons from history."
Link
Banks backed by governments might not seem like a good idea in weeks or months to come. Just ask Iceland.
Depository Trust released opinion a day or two ago (NakedCapitalism, maybe?) that the net is only around 5 billion, barring counterparty defaults.
Which made no sense. The average CDS contract isn't passing through 60+ intermediaries, as would be required for 5b net on 400b gross. Close reading indicated that there was 5 billion of extra net due to the settlement coming in low - it was only 5 billion because the rest has already been written off. Assuming similar ratios of gross to net, that's another 100-150 billion net that's already written down. Supposedly. I'm willing to bet that a lot of the hedge funds JPM bought balancing contracts from do not have adequate reserves.
Hi EvilHenryPaulson,
It is somewhat peculiar that all canucks think and talk in the same way (down with the USA!!). I have never known a canuck who was able to see the world objectively. What is with you guys and objectivity anyway?
About canuck conspiracies.. nahh.. conspiracies require intelligence. There is a difference between being intelligent and being clever. Never seen any manifestation of intelligence in canucks.
satan,
Actually your explanations of Canada indicate that either you haven't lived in Canada, or you've been stuck in some hamlet up North surrounded by a bunch of 90 year old alcoholic White Canadians.
Sorry, none of your explanations/observations make any sense or in any way stand up to the history of Canada.
You simply sound like an asshole with an axe to grind and nothing to back your statements up with.
Try Calgary, Toronto and Vancouver.
Actually your explanations of Canada indicate that either you haven't lived in Canada, or you've been stuck in some hamlet up North surrounded by a bunch of 90 year old alcoholic White Canadians.
Pissed Off In California | 10.15.08 - 6:59 pm | #
Canadians unfortunately tend to define themselves in terms of what they are against not in terms of what they are for. For example, most Canadians when pressed will define themselves as "not American." Canada never had a revolution and never had a defining moment as a nation.
As the largest trading partner with the US, Canada is not in any way immune to the economic climate of the US. Canadians continue to be smug and are seriously dillusional in thinking that they somehow won't be seriously impacted by what is happening south of the border.
"Try Calgary, Toronto and Vancouver."
Among the same places I've lived in Canada.
You're obviously on a multitude of medications to come to the conclusions you've come to.
Like I said, you're either a troll or out to lunch. Maybe CNBC can hire you for market commentary?
I agree.. and that is one of the roots of the problem.
__
Canadians unfortunately tend to define themselves in terms of what they are against not in terms of what they are for. For example, most Canadians when pressed will define themselves as "not American." Canada never had a revolution and never had a defining moment as a nation.
Sardonic | 10.15.08 - 7:03 pm |
Plummeting property values? Check. Rising adjustable rate mortgage payments? Check. Massive negative equity? Check. Ability to rent similar property relatively cheaply? Check. Increasing social acceptance of ruthless defaults? Check.
Even the most math-challenged homeowners will easily be able to calculate their monthly/yearly savings and the positive net worth implications of walking away.
If you have ever seen the Serengeti Wildebeast migration then you have an idea of what is coming.
Please, enough of the Canada talk already.
Hi Pissed Off In California,
Consider for a minute whether visible immigrants or their kids have any reason to keep your welfare system going 5-10 years from now. Do you think they are not going to reciprocate?
Shoddy treatment begets shoddy treatment.
"Canadians unfortunately tend to define themselves in terms of what they are against not in terms of what they are for. For example, most Canadians when pressed will define themselves as "not American." Canada never had a revolution and never had a defining moment as a nation."
Canadians don't define themselves as not American. They tend to define themselves as (Chinese/Russian/Itialian.. first) and Canadian second.
Canada is made up of people leaving another country rather than coming to Canada, unlike what you see in the US.
Does that make Canadians bad or delusional? No that just makes them different.
And as I said previously look at how Canadian peace-keepers are generally accepted around the world versus Americans. In the political realm world-wide Canadians tend to be accepted more openly as in general they don't have ulterior motives.
Paulson on CNBC
"Speed writes:
Suze Orman - link?"
It was on the tube, CNBC, early morning. To be perfectly honest, I didn't see it -- but my wife rushed upstairs to tell me about it. She's a big Suze fan.
Don't put down the Canadians. They have kindly given US a 15% discount on their currency to help with our problems in the US.
@FairEconomist:
I agree that one or two percent of notional is too small a netting overall. But there are several mitigants underlying that number, I believe.
First, the hedge funds were net short exposure. For them, it was like writing out of the money puts with 20x leverage, and they got 20% of the premium in their 2-and-20 payment arrangements. But most of the net short was in the form of premium capture "curve trades:" short the 5 year, long the 2 year or whatever maximized their carry. So the hedges were largely -in the default event- self netting.
Second, a huge amount of the notional was probably carried in prime brokerage accounts, so the net customer short was kept marked in as the spreads blew out, and the primes themselves knew what their book was, and could hedge accordingly, again bringing a lot of self-netting between the banks and the PB customers.
So, while the net exposure is probably a good deal bigger than 5 or 6, it's probably not more than one order of magnitude bigger, and a lot of the short liability is already in via the margin marks of the prime brokers.
All of this is opinion.
Canadians are very smart and will not be effected in any way with the economic troubles of the rest of the world. I am stupid, I am stupid, I am stupid, I am stupid, help me ahhhhhhhhhhhhhhhhhhhhhh my brain is frozen aaaahhhhhhhhhhhhhhh, help me, make it go away.
Sardonic,
"Everyone looking after their own self interest doesn't seem like such a good idea now, does it?
Sure it does! You may be screwed, but I'm doing fine. And I have ammo. ;^)
Canada's achievements are limited to creating a relatively peaceful, non-violent, affluent and socially just society. No wonder Americans can't give them their due.
Nothing against the Canadians but they did win the Most Boring Headline:
Worthwhile Canadian Initiative
Elvis, not sure where Wells Fargo hides their stuff, but maybe in Faribault, Minnesota?
Wells was taken over by Norwest Bank Minnesota (but they kept the good WF name).
Something tells me its all hiding at Wells Fargo Faribault N.A.
Hmmm?
Said Suze Orman link. Skip ahead 3 minutes.
YouTube - Pedro Alvarez Highlight Reel - Vanderbilt Baseball
Gavshire Hathaway writes:
I agree that Suze Orman gives sound advice. But I weep for the fools that need it. It is just common sense.
Old saying: The trouble with common sense is that it is not all that common.
That was baseball.... I don't get it.
Re: " S&P Reviews $280.1 Billion of Alt-A Mortgage Debt
We told you so.
"Canadians don't define themselves as not American. They tend to define themselves as (Chinese/Russian/Itialian.. first) and Canadian second."
Beg to differ. I grew up on the border and still spend every August on a lake in Ontario. You may only be familiar with recent immigrants, who most resemble hypenated-Americans of recent vintage.
Canadians, whether French or English speaking most assuredly define themselves as such.
Small towns in Ontario and Quebec are filled with fiercely patriotic Canadians, and the old money crowd that summers at Muskoka and Georgian Bay do not confuse themselves with other identities.
Canada is crucial to civilization...without Canada there would be no hockey.
FOOLPROOF BOTTOM SIGNAL
When you have NO money to invest, that's it.
(patent applied for)
jp-
That was plastered all over one of the hallways at National Semiconductor in the early '90's . Each time I had to pass it , on the way to yet another "meeting", I just laughed out loud. It got so bad that the finance people who were located just on the other side of it knew it was me each time someone laughed in the hallway.
When I left there I got a little certificate that read "For his ability to quickly assess the importance of a meeting...and leave"
I still have it......
Ciao
MS