wow, what a tease! ya think you're getting some of the good stuff and poof! someone changes their mind, it's no dice and your standing there in your underwear looking the fool. it's like high school all over again.
I had the same sorta thing happen to me. I contacted my bank about increasing my home equity line of credit, as I needed to pay a few bills, and at first I was told that they would be happy to help me.
Once they pulled up my account though, they gave me some jibber-jabber about LTV stuff that I didn't understand, and their story changed. End result...I was denied the credit.
Why is everyone so worked up against banks non lending money? Would YOU lend YOUR money? With the economy going down the drain faster and faster, any loan beyond a few weeks is highly risky, so it has to be overcollateralized and to have very stringent covenants.
One cannot expect private enterprise to solve this problem. The government must lead the economy out of this prisoner's dilemma.
on a serious note, i keep getting offers from Wells Fargo to expand my business LOC. i haven't needed it so I don't know if they'd approve it. mind you it's a tiny business and a very small LOC ($50k).
The problem is that the banks with the infrastructure to handle $100M+ loans (i.e. money center TARP banks) are insolvent and probably can't legally lend.
What HP should have done with TARP is drop $35B on the IndyMac National Federal Bank, since it's actually in conservatorship.
We are experiencing similar issues within the jumbo/super jumbo mortgage space. Solid client's who could pay all cash or pay off their homes are being turned down for having too much property or too many inquiries in the last year. Banks(portfolio) are passing on 50-60% LTV deals that are rate and term refis. It says to me that they don't have the money.
"i haven't needed it so I don't know if they'd approve it."
It would be interesting to know if they are serious, or if it is just a mailing that had already been contracted for, and is going out for that, and only that, reason.
Why is everyone so worked up against banks non lending money? Would YOU lend YOUR money?
To a friend of CR's ? Sure. But it's not their money the banks aren't lending, it's taxpayer money,...which wouldn't be so bad if they weren't trying to line their own pockets and lie about their willingness to lend.
I have a deal pending that was to close in January. The deal guys want to fly up from California to meet with me to explain their financing situation, which has apparently changed over-night.
Their hope is I will accept some kind of non-refundable deposit (which they do not want me to cash) in hopes I would accept a far way closing date until the financing is resolved and not make the deal available to someone else.
Seriously, they want to fly up and take up a day making their case. Wow. I have never encounter this before.
WTF is going on? This is a big name investment firm in this particular vertical market and I have to be wined and dined to please wait for their financing to resolve itself.
CR,
Name names. Banks that are acting thus in the best interests of their business, stockholders, potentially taxpayers and society in general need to be rewarded for these acts of fudiciary excellence.
Obviously the bank was wasting resources to get to tis point so it is important to identify thm as a public service to those of us seeking similar funding conduits.
Not lending . I received a letter from Sunbust closing my checking account after 10 years ( never bounced a check 10k in account ). Not really sure why . Several friends receive letters also (one been banking there for 17 years ).
The reasons why I consider bankers as parasites are becoming clearer every day.
My question- In a fiat currency based world, banks have no money. They are dependent upon the government who alone can make rules, collect revenue and create new money.
So, why are bankers allowed to make decisions that can destroy millions of lives, when they have shown themselves to be bunch of incompetent, greedy, short sighted twits. You would not allow a surgeon who killed every patient in the last ten years to practice, but we reward bankers who fail. Why???
Are our current crop of bankers any better than the control freaks who ran socialist and communist countries? Are they doing a better job, or are they killing the goose?
Further proof as to why the Feds should be lending the money directly to credit worthy taxpayers. Just cut out the cancerous middle man (the banks) and lend directly to the people. I realize that would be against this particular administration's obtuse, knuckleheaded right wing "free market" (we're so far beyond that now, don't you think?) ideology but this is getting ridiculous.
MrM writes: Why is everyone so worked up against banks non lending money? Would YOU lend YOUR money? With the economy going down the drain faster and faster, any loan beyond a few weeks is highly risky, so it has to be overcollateralized and to have very stringent covenants.
One cannot expect private enterprise to solve this problem. The government must lead the economy out of this prisoner's dilemma.
The reason is that the banks are running on OUR money now. We lent/gave it to them to be lent out to us.
Now they are not lending it. They are hoarding it.
craig, draw it down, and then ask for more- but I would draw it down if you think you might need it, or if you want to buy some equipment from your bk'ed competitors.
But it's not their money the banks aren't lending, it's taxpayer money
Nope, it is the shareholders' money (leave aside the difference b/w preferreds and common). The money came from taxpayers but was donated unconditionally to banks. So why do you want bank to screw their shareholders, who are not going to be as charitable and clueless as the taxpayers?
Blame should go to the politicians, both the Administration and the Congress.
It's because the government is pushing all the banks to put their money into housing. All money not in housing shall be mopped up and put back into housing.
Kashkeri testified today: On December 1, Secretary Paulson underscored the critical priorities for the most effective deployment of remaining TARP funds, foremost of which is to ensure our banking sector has the necessary capital base to continue lending to consumers and businesses and support economic growth, and to help homeowners avoid preventable foreclosures.
I will briefly discuss these priorities:
One, in order to continue their critical role as providers of credit, both banks and non-banks may need more capital given their troubled asset holdings, continued high rates of foreclosures, and stagnant global economic conditions. We continue to look at additional capital strategies and, as we do so, we will assess the impact of the first capital program and also take into consideration existing economic and market conditions.
Two, we continue to aggressively examine strategies to mitigate foreclosures and maximize loan modifications, which are a necessary part of working through the necessary housing correction and maintaining the strength of our communities. The new program which I highlighted above with the FHFA, the GSEs, and HOPE NOW is just one example and we will continue working hard to make progress here.
Finally, as we consider potential new TARP programs, we must also maintain flexibility and firepower for this Administration and the next, to address new challenges as they arise.
List of banks getting money from treasure can be found here.
My company has actively shopped a term loan, AR financing, and an equipment loan. Trying to get a similar offer to those already in place (we don't really trust them, and they are finding creative ways to reduce available borrowing).
Anyway, nobody will bite.
In particular the equipment line item is concerning. We can't finance capital equipment, necessary for operations. Vendors have to be suffering mightily.
Granted we're a startup, and a bit risky, but this doesn't bode well for IT manufacturers.
Convexity buying: bond yields are a convex (smile-like) function of interest rates. Therefore they decline less for a 1 basis point decrease in rates than they increase on a 1 basis point increase. And therefore (draw this to see) the expected yield increases when there is more volatility in rates, that is, more movement.
So "that announcement" was expected to increase volatility, giving convexity value to bonds above what they would be worth if rates had less volatility.
I'm sure Bond Girl can do better but for now all you have is a humble artichoke.
You can throw as much money as you like at this debacle and it will swallow it like the BLOB. You can't force a lender to lend, and/or a borrower to borrow. We really are pushing on a string at this point.
Nope, it is the shareholders' money (leave aside the difference b/w preferreds and common). The money came from taxpayers but was donated unconditionally to banks. So why do you want bank to screw their shareholders, who are not going to be as charitable and clueless as the taxpayers?
Blame should go to the politicians, both the Administration and the Congress.
True, banks created this mess and screwed up everybody. However, fixing this mess is above their pay grade (sarcasm intended). I cannot see how it can be resolved without most direct and active government intervention.
bond yields are a convex (smile-like) function of interest rates.
Well, I know what "convex" means; I used to be a math guy. And I read the Wikipedia articles on "duration" and "convexity", so I can see the formulae, but I am trying to get at the meaning.
Can you be more specific about how "yield" and "interest rate" are defined here? I thought a bond's "yield" was its interest rate.
Specifics and/or an example would help.
After that, I will want to know what trades qualify as "buying convexity", exactly, and what it has to do with buying Treasuries...
The super low treasury yields are a big problem and adding to the deflationary forces and the Fed is responsible by manufacturing it. BB needs to retract the "buying treasuries" remark if he has any brains, in the hope that inflation might have a chance. Treasries are soaking up any hint of liquidity making matters much worse...
MrM writes:
True, banks created this mess and screwed up everybody. However, fixing this mess is above their pay grade (sarcasm intended). I cannot see how it can be resolved without most direct and active government intervention.
I agree.
Thing is one of the purposes of a bank is to allocate capital in an effective manner.
If they fail to lend money for worthy ventures - they are not fulfilling one of their reasons for existence.
I wish we could remove their corporate charters and create new banks that will lend to worthy borrowers.
re new york times post linked above, here is Angry Bear's summary.
...You cant just say, Credit isnt moving through the system, she said in her first public comments since being named to the panel. You have to ask why.
If the answer is that banks do not have money to lend, it would make sense to push capital into their hands, as the Treasury has been doing over the last two months, she continued. But if the answer is that their potential borrowers are getting less creditworthy with each passing day, pouring money into banks isnt going to fix that problem, she said...
...
Like much of the public, lawmakers have just been stunned by these economic and financial developments, she said. There wasnt time even to develop a coherent list of questions to ask Treasury about what its doing and what it plans to do and whether either of those are likely to address whats going wrong.
She added: Our role is to make sure that the right questions are asked as early as possible.
Credit enima,
not that you asked, but...
I have been banking with a credit union for 15 years and couldn't be happier. It's like doing business with a bank from 30 years ago, except they have internet banking too.
CR: but isn't this a very rational decision on the bank's part? $100Million isn't exactly chump change and a loan for "expansion" isn't exactly the kind of thing that the banks would feel comfortable with in this environment (unless it was to expand a bankruptcy biz or a foreclosure biz or something like that).
Thing is one of the purposes of a bank is to allocate capital in an effective manner. If they fail to lend money for worthy ventures - they are not fulfilling one of their reasons for existence.
Sorry, but in a depression very few ventures are worthy. They don't call it depression for nothing.
Yes, it is a circular problem, but from the perspective of each bank they are acting rationally. These are banks and not charities. This is an example of the invisible hand strangling itself. You need a Collective Planner - the government has to take over banks to start acting in the aggregate interest of the society.
We know that we are just entering the high-unemployment part of the cycle and we are also unable to see the light at the end of the tunnel. In addition, there is a small (but dangerous) chance that this could be the start of a very serious long term down turn. Given all that, what rational (read responsible) bank would lend money unless they had very, very protective provisions? I don't know what CR's friend's company had in the agreement, but I can certainly see why a bank wouldn't be lending right now given the uncertaintly out there. I think the best solution right now would be for the gov't to fully take over a bank and lend through those branches. Just call 1-800-FED-GOVT for your loan. The only problem with this is the other banks will go apeshit for stealing their market share but they can participate in the market by buying treasuries.
Sorry, but in a depression very few ventures are worthy. They don't call it depression for nothing.
Yes, it is a circular problem, but from the perspective of each bank they are acting rationally. These are banks and not charities. This is an example of the invisible hand strangling itself. You need a Collective Planner - the government has to take over banks to start acting in the aggregate interest of the society.
MrM | 12.04.08 - 8:41 pm | #
Honestly, do some research on Andrew Carnegie. Find times when he was most effective at expanding his business and grabbing market share. Then compare those times with the boom/bust cycles.
"You need a Collective Planner - the government has to take over banks to start acting in the aggregate interest of the society."
Prisoner's dilemma, no? But between firms' pure self interest and Collective Planning there might be other options. E.g., WPA was something that worked -then, I'm not saying now, necessarily.
MrM writes: Sorry, but in a depression very few ventures are worthy. They don't call it depression for nothing.
Yes, it is a circular problem, but from the perspective of each bank they are acting rationally. These are banks and not charities. This is an example of the invisible hand strangling itself. You need a Collective Planner - the government has to take over banks to start acting in the aggregate interest of the society.
Thank you. I agree.
Although collective planning by the current government frightens me.
Honestly, do some research on Andrew Carnegie. Find times when he was most effective at expanding his business and grabbing market share. Then compare those times with the boom/bust cycles.
Why can't we have better commenters.
This is offensive but at least the last line is self-reflective.
Do the names Jamie Dimon and Ken Lewis ring a bell?
Gaining market share is not the same as lending freely. Buying up cometitors is much more effective.
Not sure why everyone is dumping on the bankers here in this case. It makes sense for them to try to preserve their capital at this point. Do I really want them lending out taxpayer money for business "expansion" at this point? I think that ultimately I'd rather get that taxpayer money back from the banks.
The mailman (sign for the letter ) said several where on his route.
I'm assuming you live in a bubble-zone.
The only reason that I think of on why SunTrust would close checking accounts with balances is that they are trying to improve their capitalization ratios (demand deposits are liabilities).
Since deposits are what banks generally use to make loans, I'm not exactly going out on a limb by saying that SunTrust is more concerned about solvency than making loans.
Sorry, but in a depression very few ventures are worthy. They don't call it depression for nothing.
Exactly MrM. How are the banks supposed to determine what ventures are "worthy" at this point? Many ventures that may have been very "worthy" six months ago, may be very shakey now.
This is an ag land deal too. The deal guys
have had the most complicated PSA and due
diligence process my broker had ever seen. This
is THE broker for this specialized ag land in
the Willamette Valley. 30 years experience.
These kind of deals would close 45 days max.
We are into month 4 since the LOI and no PSA nailed down. I guess flying up to offer assurances
is supposed to make me feel good?
It makes sense for them to try to preserve their capital at this point.
To what point? How are they going to make money if they don't loan?
(Although we are assuming that CR's friend's business plan made sense. And apparently it made sense to the bank up until today.)
If they fail to lend money for worthy ventures - they are not fulfilling one of their reasons for existence.
And I might add that the banks "reason for existence" is so that I can deposit money in a bank and be really, really sure that when I need to get my money back out it will be there. That's the main reason for their existence. Banks should have a very boring, conservative business model like they did before we repealed Glass-Steagle.
Actually, I had entertained the idea of doing a post on exactly that topic a earlier this week. (Mainly because I am getting tired of the flight-to-quality explanation for T yields.) It won't happen tonight, however, as I am on my way out the door. I also thought about doing a post suggesting that this might kill state and local housing finance agencies, but that's another matter.
Front-running is probably a better explanation of what is currently going on in the long end of the curve, however.
CR,
Sorry your friend had the misfortune of trying to secure lending at a particularly bad year-end....
We're going to have to nationalize the banks because that's the only way to get the pigmen away from the trough. The Citibank giveaway shows that as long as we have major private banks and a financial crisis, the banks will use panic, their role in campaign finance, and the ignorance of the public to extract trillions from the taxpayer's pocket.
Public banking will have inefficiences, but not this monstrous. Not hundreds of billions lost per month.
"Aren't those defaults much more likely if the banks don't lend?"
Not just the CDS and CDO. There's probably (I'm guessing here) $3 of interest rate swap notional out for each $1 of swap to a buy side/real economy client. The other two are bank-to-bank offsets: mirroring transactions.
Someone posted a few night ago a discussion of the forced novations of swaps that are going to be coming in the court ordered LEH unwind.
Holders could end up with counterparties that their risk managers do not have approved. Even the "little" issue of LEH might be a problem.
and strong ongoing business with a bank relationship?
Please tell this to Lehman bankers. Everybody is very scared now. It is not about making a bit more or less money. It is about survival, not making more holes the balance sheet, not getting downgraded so as to retain access to Fed facilities
And I might add that the banks "reason for existence" is so that I can deposit money in a bank and be really, really sure that when I need to get my money back out it will be there.
That's why you have a mattress. Banks take deposits and lend, if they don't lend they're not banks, they're vaults.
Why can't we just pull the damn trigger, quit holding the gun with quivering hands, sweating profusely and get this over with? Mercy...someone put this lame "PONY" out of his misery.
I also don't see the motivation for banks to lend in the macro sense. The government is giving out free money to everyone with an insider connection or a paid-for Congresstool, with no regard for risk or losses (in fact, they want to lose money to "recapitalize" insider institutions). On the other side, everybody knows private businesses are going to take a severe beating under the Obama administration, as they always do under increasing Socialism.
It just doesn't make any business sense at all to loan to private business right now, none. Much better to take the TARP money and pay yourself, and put the rest in Treasuries to live to see the next round of bailouts. We'll call it easily foreseeable consequences.
With amounts being bandied about for bailouts totaling well over the $5 trillion level it is a smallish loan. In any other environment it would be front page news.
Let's us all know how far we've gone through the looking glass.
What the hell has happened to the type of people hanging out at CR? Six months ago banks were evil because they WOULD lend to anyone with a pulse - now they're evil because they WON'T.
It is not like we didn't already know this. I thought I had everything I needed... Cash, Gold, Food, Guns..
Now I need to get a crash helmet.
Former Treasury chief O'Neill issues warning of potential economic disaster
Thursday, December 04, 2008
By Bill Toland, Pittsburgh Post-Gazette
If the United States doesn't get its finances in order, the coming years will make the current recession "look like a child's birthday party," said former Treasury secretary and Alcoa chairman Paul O'Neill.
"We're headed for the wall at lightning speed. And every day that we don't deal with that set of problems is another day closer to absolutely vaporizing our economy," he said.
What the hell has happened to the type of people hanging out at CR? Six months ago banks were evil because they WOULD lend to anyone with a pulse - now they're evil because they WON'T.
Not a surprise here. As a business owner, I'm shopping for 3 month to get a loan package together for a $500k deal for DoD, guaranteed money from the USG. My bank or any bank? Won't touch it (except for terms that would bankrupt the business) like my business has the bubonic plaque. Meanwhile my bank received $10B+ from the TARP.
It pains me to say this but Fair Economist is right. We need "PUBLIC'banking.
Not Henry loaning Vikram some TBA later amount of money based on who knows what collateral for some TBA purpose.
I want to know what in the hell taxpayer money is being loaned for. Is it on some synthetic CDO that some
trading desk got on the wrong end of or am I loaning money so Mr. and Mrs.
Smith, with an annual income of 75,000 can buy a 300,000 house after they have put down 50,000?
Cynical Dude: The banks were evil when they were making money ripping of clueless customers and investors. They remain evil but now it is not the problem. The problem now is the inaction of the government, giving away taxpayers' moeny and not doing anything to stop the economy from going into cardiac arrest
When this whole complicated mess finally gets deconstructed....It will be as if the keys to the kingdom have been found and Salomon with all His Glory decrees free ponys for all. The schiesters will be drug out into the streets...shot, hanged, and disembowled. The new American "TARP Party" will clense us of the impurities within the capitalist system. Just a thought...Tin foil hat back on. I know there are those with mucho education in the realm of econ and finance who want endless drivel on derivitives, yen carry, globalization, and other highly complicated theory...but lets be real "it's all bullshit". If it were so sophisticated and advanced, we would not be trying to figure out how to deconstruct it. Simple is key. Lend only what you have in reserves to back the loans. The profit from those loans allows for newer loans. We (falsely) grew by loaning money we never had and now we want banks to loan more money that now the taxpayers or their great grandchildern or Chinamen do not have. INSANE...Shoot ALL PONIES on SIGHT!
For what it's worth, I don't think the banks are evil: they are acting entirely predictably in their best interest given the circumstances created by the government. I don't fault them any more than I fault the auto executives trying to get a hand in the wealth-redistribution cookie jar by claiming their colossal business failures were just unfortunate circumstances beyond their control.
Also, nationalization doesn't really help anything. Sure, it helps keep cheap credit with no risk consideration flowing in the short-term, but that's exactly what caused the overarching problem, except with nationalized banks there would be nothing to slow down the spiral to economic collapse. At least in the current economy, the system is trying to fix itself, even if the government is doing everything in its power to keep it broken.
What the hell has happened to the type of people hanging out at CR? Six months ago banks were evil because they WOULD lend to anyone with a pulse - now they're evil because they WON'T.
I admit when you phrase it that way it looks like hypocrisy, but of course that's not we're saying,..it's what you are saying. How about we just shorten it to "banks are evil"? Sometimes what appears as hypocrisy is just not understanding the argument, just as holding firmly to one position might look like consistency, but in reality just masks a firmly held prejudice.
If credit is so bad, then I want to know why my 22 year old daughter (who has her own business (hairdresser, but no college education)) is getting zero percent offers from US Bank? She has no debt and cash on hand and banks with them; I told don't take the loan there has to be catch.
I've been using a hedge strategy lately of short stocks and long PMs/commodities, with frequent rebalancing. The end game of it was always to end up holding as many PMs/commodities as possible.
This week has been a little rough with the decline in commodities, but on the whole it's done what I wanted and held value.
With the big decline in commodities today, and the crazy manipulated gyrations in stocks, I'm seeing reason to change the strategy. I'm going to start systematically liquidating the shorts and ultra shorts into cash and then, gradually, moving the cash into PMs and commodities. I may be leaving some short stock profits on the table, but I don't care.
This market is saying to me that everything is rigged for hyperinflation, and it will be starting fairly soon. The stock market is being propped up as best the mad central bank scientist can rig it, certainly in the U.S. and maybe all over the world.
I just think in two years most investments in PMs or commodities at these levels will be at least a triple. That's enough for me, and I don't need the money in the meantime. I'm tired of being a victim of a manipulated stock market, too.
NEW YORK (MarketWatch) -- DuPont Co. slashed its fourth-quarter earnings forecast on Thursday and announced plans to dismiss 6,500 workers, including contractors, due to the downturn in the construction and automotive markets and a severe slump in consumer spending.
Cynical Dude writes:
What the hell has happened to the type of people hanging out at CR? Six months ago banks were evil because they WOULD lend to anyone with a pulse - now they're evil because they WON'T.
Hypocrisy running very deep in Bear Land.
Well no one here is saying that banks should lend to anyone with a pulse.
However some lending to those who need it and would more than likely pay it back would be reasonable. Wouldn't it?
Japanese Must Have More Sex for Economys Sake: William Pesek
Email | Print | A A A
Commentary by William Pesek
Dec. 5 (Bloomberg) -- Jim Rogers probably didnt set out to make 500 bankers blush at a recent conference in Seoul. The well- known investor did just that when he encouraged South Koreans to have more babies.
Anyone who hasnt done it, I urge you to get home and get on with it said Rogers, chairman of Singapore-based Rogers Holdings, who co-founded the Quantum Fund with George Soros in the 1970s. He joked that folks should take a day off, if necessary.
Urging Koreans to procreate is about more than Rogerss love of parenthood: Korea needs to increase its birth rate for the sake of the economy. So do Japan and other key Asian nations, he said.
South Koreas birth rate (1.2 children per couple) is the second lowest in the world after Hong Kong, according to a recent United Nations report. Hong Kong, South Korea and Japan all have lower birth rates than North Korea.
Such demographic trends are a widening crack in Asias potential. Nowhere is this issue more acute than in Japan. And if Rogers made Koreans blush, he annoyed some Japanese in 2006 when he said: If the current birth rate, which is the lowest in the major developed countries, continues, there will be no Japanese. Who will pay the enormous debt?
The result, we may lose all the taxpayers' donations because the banks won't lend, won't earn money, and PS will destroy the economy.
Nationalize. Now.
Don't forget about the role the credit markets play and the fact that these are voluntary.
You can't nationalize the market participants and force them to lend.
In fact nationalization might send them running.
Credit in by its nature voluntary.
Once you have to resort to legal force or coercion it is no longer credit.
The mutual trust and cooperation are gone and with it the benefits of to resource sharing and efficiency that make credit essential to a modern economy.
Of course these things appear to already be gone, but I think to suggest that the government can force the restoration of credit is to misunderstand the nature of what it is.
I don't see the hypocrisy either. Making loans to credit worthy business' and individuals is the banks function. I don't see anyone advocating they give loans to homeless people here.
Steve writes:
Broken deal: Must have ready the post yesterday from BofA
Follow the conservative strategy of "HOARDING CASH"
Yeah that's it!
Steve | 12.04.08 - 8:51 pm | #
dryfly told me the same thing a couple of years ago.
our operating company is slow paying like a bitch. i hate riding vendors and subs and even the feds but you gotta do what you gotta do.
take the following sentiment and multiply it times a brazillion:
"would you rather have a business with accruing AP, vendors complaining, consultants bitching, potential law suits hanging, and yet make payroll, lease, and some marketing? or would you rather pay your AP, vendors, consultants and lose your employees, get evicted and not be able to pay your own mortgage."
It started with the banks mistrust of one another.
Nationalization would clean up their books. More than half the problem is banks' bad bets that are already on the balance sheet, or about to be from their QSPEs.
Sounds like good "old time" lending to me. Approve one day, pull the next. Banker gets cold feet, loan dept.overrules, bank examiners onsite. You never know what the real reasons are. Prior to easy lending of the last several decades, happened all the time.
800 billion here, 800 billion there, after a while it adds up to the realization that there is no real money -- only "trust" is important, because you can't cheat someone who doesn't trust you.
I just lost my job last week. The angel investor funding the start-up I worked for pulled our funding without warning. As far as we knew, everything was fine. We kept costs very low and were growing ... but when that margin call comes I guess it can't be ignored.
What the hell has happened to the type of people hanging out at CR? Six months ago banks were evil because they WOULD lend to anyone with a pulse - now they're evil because they WON'T.
Hypocrisy running very deep in Bear Land.
Astounding isn't it?
I think people are starting to see that their lives and wealth are at risk and are starting to panic.
Again, the nature of ponzi finance is that the disease becomes the only possible cure because it is the only thing that postpones the collapse. But it is a cure that only prolongs the disease and makes the final outcome worse.
People can't psychologically deal with what we've done to ourselves.
As we are seeing, credit, at the end of the day, is dependant on the public purse should it not be dependant on it at the start of the day?
I ask that.
I an perfectly OK with private banking at a limited level but if we
are going to have but 4 or 5 superbanks ( TOO BIG TO FAIL) then why in the hell call them private.
Either we break up the banks into manageable sizes and let them 'syndicate' for major loan projects or lets just dispense with the ( highly paid) middlemen and have a Public Bank that lends to all on the same basis the GSE's do/did.
rich said: This market is saying to me that everything is rigged for hyperinflation, and it will be starting fairly soon. The stock market is being propped up as best the mad central bank scientist can rig it, certainly in the U.S. and maybe all over the world.
rich, come on man. i appreciate being contrary but hello, -1(shadowbanking market)+(new fed money)=negative money supply.
Now this is something that CR (the blog)followers can do positively: rate banks. Reggie Middleton has been doing it on his site, but he hasn't found any good ones yet. Good banks should be promoted on sites like these through word of mouth and gain market share.
250K is insured anyway...
You know what I noticed in the people I know. The ones who look like then don't have a dime in their pocket are really loaded and he ones that look like they are loaded don't have a dime in their pocket. What does that say about us?
It started with the banks mistrust of one another.
Nationalization would clean up their books. More than half the problem is banks' bad bets that are already on the balance sheet, or about to be from their QSPEs.
We need to nationalize: period.
I wish I were as optimistic as you, but I honestly don't differentiate between the US government and a company like, say, Citibank.
The US is just a bigger, but I see the same type of people running things and the same massive debt problems consuming both their futures.
I think a big part of our problem is that Wall Street and Washington have been in bed together. Nationalization just seems to formalize this relationship.
I don't believe that we hold our politicians to higher standards then our financiers, so I think the only way to get any useful outcome from them is to ensure the relationship between the two remains adversarial.
I believe even Soros made a similar point recently.
[The ones who look like then don't have a dime in their pocket are really loaded and he ones that look like they are loaded don't have a dime in their pocket]
dc1000:
"would you rather have a business with accruing AP, vendors complaining, consultants bitching, potential law suits hanging, and yet make payroll, lease, and some marketing?"
You've described my current professional life to a T, sir.
"People can't psychologically deal with what we've done to ourselves."
QFT.
We can't handle the fact that for the past 30 years we have voluntarily allowed ourselves to be plundered and have put on the shackles and chains of debt.
The fact that credit-worthy businesses can't get loans is a reflection on that.
The system needs to be purged, unfortunately all gov. meddling or nationalization (as some seem to insanely call for, b/c the gov. is soooo smart!) does is make it impossible for the system to be purged.
Cynical Dude writes:
What the hell has happened to the type of people hanging out at CR? Six months ago banks were evil because they WOULD lend to anyone with a pulse - now they're evil because they WON'T.
Hypocrisy running very deep in Bear Land.
Couple points. First six months ago we were upset at loose lending because we knew we would ultimately be forced to pay for it. Second, now we are upset because we are being made to pay for it. Third, we are upset that ultimately we will have to pay for the current excessively tight lending of our own money. Seeing a pattern yet? See any hypocrisy?
I think we have at least one more major down move from here. And I have confidence that it will happen despite the government's actions to prop up equities.
I will put some of my eggs in the the PM/miner's camp, but I don't think deflation is done yet. It will be several months, if not quarters.
I still see many attractive short candidates: GS, SPG, COF, VNO, railroads, AMZN, SHLD, homebuilders. The party isn't over yet, IMO. It's just starting to get interesting.
I will use gold to hedge against a hyperinflation cure, but I don't see that happening for quite some time.
I think people are starting to see that their lives and wealth are at risk and are starting to panic.
I think you're right. That plus I strongly suspect the CR old timers didn't just talk the talk - they walked the walk and spent some time actually preparing for what they saw coming. Likely not so much the case with newcomers who are more likely to be running on real thing margins.
Which sucks - I empathize - been there myself once before and it's a horrible horrible place to be.
But flipping the bird at The Man with one hand while holding the other hand out for an implicit bailout isn't going to get us anywhere...
Told ya we would have been better off giving away ponies instead of doing the stoopid bank bailout. At least you can eat ponies if you have to. Or ride them when the car breaks down and you can't afford to get it fixed anymore.
So, You know The Donald personally ?
bearly | 12.04.08 - 9:29 pm | #
No, but I work for an corporate/estate planning attorney who is now getting into bankruptcy. It just amazes me that his clients, who I thought were very well off, are showing their true colors, i.e., being rude on the phone, demanding, etc. What is ironic is that ones that "don't look like they have a dime in their pocket" are the nicest ones and actually pay their bills!
Credit Suisse on Thursday boosted its forecast on U.S. home foreclosures over the next four years to 8.1 million from 6.5 million, warning of a "subprime society" as economic weakness and falling home prices take a larger toll on homeowners.
The increase from April's forecast represents 16 percent of all mortgages, Credit Suisse analysts said in a report.
Well the loose lending was caused in part by the gov. so many want to protect us.
Gov. has insanely low rates and lends money to banks for practically nothing. Banks have lots of money, good times are rolling, housing going up, banks need to lend to make money, so they lend to the highest credit worthy, then to the next highest credit worthy, then on down the line until you get NINJA loans.
TOOO MUCH MONEY CAUSED THE @#$ problem in the first place!
Now take the above process and run it in reverse. That's what's happening now.
Credit bubble go up, credit bubble go down.
And no this credit crisis is no more a death spiral than a credit bubble. At some point (just like at some point there was too much credit and the bubble burst) there will be such a lack of credit that new banks will (if left on the free market) spring up to make money. This unfortunately will not happen with gov. meddling.
You reap what you sow.
We are reaping what we sowed and trying to squirm out of it. If we squirm out of it for now the consequences will just be that much bigger later on as the right lessons are not learned collectively as a society.
Most everyone in the know, have said that the RE is suffering more (further losses?) since the sales volume from the last 3 to 4 years was inflated by borrowing from future sales. By extending the same logic, IMHO:
1) The banks have also borrowed from future lending, i.e. future loans need to reduced to drop back to the mean.
2) GDP growth: especially emerging economies - China, India and Brazil - regardless of the spike in valuation of commodities. Which is why I think commodities are not gonna exceed their recent highs for at least another 2 years.
3) Income growth: for the service sector especially finance industry, and manufacuturing including auto, oil and gas OEMs.
I wonder what the reversion to mean (or below mean) will do to these jobs and economies
rich, come on man. i appreciate being contrary but hello, -1(shadowbanking market)+(new fed money)=negative money supply.
You just try to put the puzzle pieces together as best you can.
And you try to match your time frame and needs to what you invest in.
I don't believe in paper assets any more. I'm not as smart as many other people on the Web saying this, but hyperinflation is the only way out of massive, unrepayable debts.
I don't want to own paper any more. I want to own gold, oil, silver, food and ultimately copper and zinc. I want to own farmers and miners, not bankers.
I don't care if oil goes to $25. I'll buy it on the way down and hold until it goes to $75. Are you saying you don't think oil will hit $75 at some point in the next five years?
I personally have no debt and I am prepared for a downturn.
I just don't want to see it get worse.
Going from lending like there is no tomorrow to not lending at all is a disaster.
Particularly when the banks went hat in hand to the taxpayers (me/ us) to get money saying that they needed it so the economy would not collapse.
Then not lending it is total bull crap.
"the government may not do better but cant do worse
and at least you and i can vote the gov b tards out"
You obviously have either never a) worked for the government or b) known someone who has worked for the gov.
You will NOT be able to vote them out. You will vote out the figureheads, but not the people in charge.
Did you vote for Paulson, Bernanke?
Did you vote for the whole rest of the mess of gov. employees working in the Treasury department?
At least with a private company the employees are beholden to either a) shareholders b) their bosses or c) profit lines.
Gov. employees are beholden to nobody. As long as you don't do something illegal or are appointed, you will not get fired.
Hmmm, a whole mess of gov. employees who can't get fired, have no profit motive or work motive except for "good conscience" or "serving country" and you trust them to fix the mess??? . . . yeah I think I'll take private over gov. any day.
ac - in the regular recession the government has to maintain employment. It is great if it does it by spending money on useful projects, like highways. It is stupid but still helpful if it does it on useless projects, like digging holes and filling them back next day. Yet this stupid option is better than doing nothing. One has to maintain employment in order to maintain aggregate demand.
In the current deleveraging recession the government has to find a way to keep the credit flowing to those woh need. I agee one cannot force credit upon unwilling. However, there are many companies who do need credit but the banks are too afraid and too capital constrained to lend. Hence the government must step in. It will be inefficient, sure, but it is still better than doing nothing.
We (falsely) grew by loaning money we never had and now we want banks to loan more money that now the taxpayers or their great grandchildern or Chinamen do not have
Even here, the myth of money is powerful. Almost no Americans can grasp that money itself means nothing.
it's a symbolic representation of goods & services and we sent all that away to other countries.
Moving decimal points around on a ledger sheet means nothing.
Banks. They're run by idiots on the way up and on the way down. If they're not full of misguided confidence, lending to build housing developments in the desert, they're shaking under the table, refusing to risk a penny towards good ideas and great plans.
I think you're right. That plus I strongly suspect the CR old timers didn't just talk the talk - they walked the walk and spent some time actually preparing for what they saw coming. Likely not so much the case with newcomers who are more likely to be running on real thing margins.
Which sucks - I empathize - been there myself once before and it's a horrible horrible place to be.
I've been there too. I think the key to being able to look at the situation clearly is either having prepared (which I don't think you can really do) or having some kind of detachment that makes you able to deal with the concept of living on the streets for a few years.
I don't think anybody (with a conscience) is saying this isn't a disaster or that we haven't let people down in some terrible way. But I also think you're only going to get sensible proposals from people who aren't immediately subject to the effects of the crisis. I've seen my own reactions to such situations.
You obviously have either never a) worked for the government or b) known someone who has worked for the gov
I worked as a contractor for the Department of Transportation and I have to say that I started out as a libertarian but there is no doubt in my mind that the USDOT was more efficient than a lot of the crap I've seen in major corporations over the past seven years of "efficent outsourcing".
Yes, I know the Fed. is not in the constitution, neither is a heck of a lot else that the Fed. gov. does these days.
The constitution is practically dead for all intents and purposes, (not that I like that or want it . . . far from it, just stating an observation).
There is still plenty of power in the Treasury and while yes there is a lot of collusion between private banks (Citibank, etc) and the Fed. People are advocating the wrong solution.
Why are do we want MORE gov. intervention? The solution is to get the gov. out of the situation, free up the monetary system from the government granted monopoly of the Fed.
Sorry to hear about your friend. I imagine there is a "confessional" post to come as the company reports its liquidity issue. The damn shame will be the pink slip Christmas Party that will ensue.
One one end its numbers and on the other end its people.
God bless the people.
Deacon
PS - I seem to recall a Dickens book with a similar holiday message.
you and did vote for paulson, when we voted for bush
as for bernanke
as for the federal reserve you andd i have little or no influence
you talk about stock holders voting
you are kidding right?
1/2 of 1% of the population owns more than half of the shares of common stock voted in these companies...unless, shane you are one of the super wealthy...super elite
rich, we've both been around here for a while. respect your viewpoints. i just dont see enough money / demand to cause mad inflation.
trust me, as someone who owns businesses with pricing power in case of inflation, as well as fixed debt, i WISH we'd have hyper inflation. that'd be the greatest.
what we do have here is the ability to write stuff down and off and start over.
but the demand destruction is one head of the deflation hydra, the other is the -1(shadow banking)+(fed money)=less money supply
"NAVSPECWARCOM writes:
Not a surprise here. As a business owner, I'm shopping for 3 month to get a loan package together for a $500k deal for DoD, guaranteed money from the USG"
I know the Federal Govt's left hand often doesn't know what the right hand is doing, but isn't this exactly the right kind of thing for an SBA loan?
Public banking will have inefficiences, but not this monstrous. Not hundreds of billions lost per month.
Fannie and Freddie, which were leveraged 120-1 under special Congressional charter and their own special "regulator", are behaving even more recklessly now that they are under full federal control.
rich: I don't believe in paper assets any more. I'm not as smart as many other people on the Web saying this, but hyperinflation is the only way out of massive, unrepayable debts.
The one problem with your logic is it assumes there is a choice. It may not be as easy as helicopter Ben imagined. Another alternative is default.
That's not a prediction, and I have some calls on gold LEAPs and have been buying TBT.
I just have absolutely no faith that anyone has even the slightest bit of control over this situation.
Lot's of people are using the 1930s as a template (with China in the role of the U.S.), but I think it could play out completely differently.
I'm hedged against everything but a meteor strike on my bedroom.
Calculated Risk(Excellent) writes:
This is a public company (I have no position) so I can't disclose any more. This was a huge surprise.
Not to me it wasn't - I'd have been surprised if they had got the loan.
About two months ago I was at a trade show - met a person designing a new product. There was a part on it that I could help them produce at a significant cost saving [payback less than a year]... they were excited told me to call them in November.
I called back - voice mail, no call back - did that about four times and finally got a hold of real person today: I was told the program was shelved indefinitely due to funding. They said all their programs are 'temporarily' shelved. They were just glad they still had jobs.
I think that will be the story all through 2009 unless something significant changes.
ac - in the regular recession the government has to maintain employment. It is great if it does it by spending money on useful projects, like highways. It is stupid but still helpful if it does it on useless projects, like digging holes and filling them back next day. Yet this stupid option is better than doing nothing. One has to maintain employment in order to maintain aggregate demand.
Honestly I don't believe you can build a society or culture around the pursuit of aggregate demand. I think the aggregate demand has to be a byproduct of some other pursuit.
If we spend money on filling holes then credit will become unavailable to us.
Lenders will not participate in such an environment. It makes absolutely no sense to loan out money to such an enterprise because such an enterprise consumes wealth but does not generate wealth to repay loans.
If such activities become endemic to this society, credit will atrophy and not return.
We will become mired in a long-lived intractable poverty.
When will the social unrest reach a state serious enough to threaten the governmental authority? In some places, like Thailand, Maylasia, Indonesia, the Stans, it is already close.
How to preserve capital is the question. Gold? Agriculture? Mining stocks? Convertibles on AAA's?
In the end the social unrest of the world will demand a policeman to bring order and stability. Only one country - USA has a Big Army, Big Air Force, Big Navy, Big Marines - capable of keeping the peace.
The price? US Treasuries. Before the play is over - many years from now - the Policeman will work for pay and the pay is US Treasuries.
Bernanke knows it, Dodd Knows it, Dingell knows it, Hillary knows it and of course Obama knows it.
Buy Treasuries - it is your only safe course - 30 year out may pay only 1.5% in a few years but it will be more than any foreign coupon can offer.
i would but its a dead horse 'round here and there are other points which people listen to like demand destruction and decreased money supply. the productivity bit is the wild card that no one wants to talk about but is going to drive this thing home.
of course i dont speak of the standard of living element of that discussion, but one thing is for sure, shit's gonna cost less moving forward until we're printing money like crazy, demand increases, and productivity falls.
booms and busts catch the news but its the long road out of the busts where the real wealth is made.
O/T...or maybe not? Today, the Chicago City Council signed off on a deal to privatize all of the parking meters in the city. Evidently, this will mean a) higher meter rates b) no parking meter "holidays" must pay 365 days a year c) additional enforcement by "private contractors" with multiple ticketing allowed..(if parked all day at an expired meter, could end up with a SHITHOUSE of parking tickets...not just 1 ticket).
Honestly I don't believe you can build a society or culture around the pursuit of aggregate demand. I think the aggregate demand has to be a byproduct of some other pursuit. said AC
great point!!!!
thats why some good ole fashion industrial policy is what we need now.
why not spend 2 trillion bucks on making us energy independent? create a new industry, solve many foreign policy issues, save money on military expenses, and create new tax paying industries?
ac - it is meant as a short term solution, although the Japanese has been deploying it for many many years and have become leaders in building bridges to nowhere.
Once the economy stabilizes and business will get some visibility in the near future, the economic activity will return. We just have to stop the free fall.
[I'm not as smart as many other people on the Web saying this, but hyperinflation is the only way out of massive, unrepayable debts]
I am with you 100%. The thing is, it's not like you won't have a chance to play that game once it starts. You'll see it coming from a mile away as treasury yields rip. In the meantimem deflation in all assets is still the only game in town. Why fight it...
Once the economy stabilizes and business will get some visibility in the near future, the economic activity will return. We just have to stop the free fall
Wow, I can't even this group sometimes. It's like almost nobody can recognize that YOU DO NOT GET TO KEEP MAKING EMPTY PROMISES.
We are running up against resource limits, therefore the economy must shrink. Fractional reserve fiat dollars don't handle that too well.
~~~
Yep, nor does it handle a decreasing population well either. Without geometric growth fractional reserve banking convulses, like we are doing now, and dies.
"Could it be that banks are not lending the money they got from the TARP is because they need to pay year end bonuses? Come on year end is almost here."
I got laid off in November, and YES I am receiving a year end bonus.
Even though I a recipient of said bonus, this is madness. What the hell reason is there for a TARP- recipient financial institution to pay bonuses to people who no longer work there, in an absolutely awful banking environment? I suspect that the people making such decisions worry they will be in the next round of layoffs.
Fannie and Freddie, which were leveraged 120-1 under special Congressional charter and their own special "regulator", are behaving even more recklessly now that they are under full federal control.
The US government just looks like a giant leveraged hedge fund to me. So I have to expect it is heading for a similar fate as these funds.
Again, having a ponzi based economy essentially forces the leverage on us.
Like I used to say on almost a daily basis back in the happy old bubble times:
Leverage or die.
Except this time it's the US government, not the hedge funds.
"the productivity bit is the wild card that no one wants to talk about but is going to drive this thing home.
of course i dont speak of the standard of living element of that discussion, but one thing is for sure, shit's gonna cost less moving forward until we're printing money like crazy, demand increases, and productivity falls."
I completely agree. It's a force that is a strong undercurrent and it's not getting any attention. I envision it grabbing stories and headlines years from now, after the effects are all too obvious to be ignored.
"the Chicago City Council signed off on a deal to privatize all of the parking meters in the city"
maybe the city council ought to vote to privatize the city council
and maybe it would be kool to have private police departments!!!
or how about private courts! and jails
and lets sell all the roads to the highest bidder
and hey private armies would be kool too
kind like militias in iraq
we could have the catholic militia and the jewish militia and the republican's and the democrat's militias
hey and how bout this..they could each control some of those private roads and charge what ever tolls they wanted to let people and business transportation get thru
like the mongols did at the kyber pass! and the crips and bloods and mafia etc do in their neighborhoods
ac, i'm still thinking about your aggregate demand comment.
where did i read that the object of your analysis changes in ways that are separate from its natural environment solely due you paying attention to it?
and regardless, simply pushing for aggregate demand wont make it happen.
we should pick something that has a multiplier effect across industry, foreign and domestic policy, militarily and just common sense-arily.
dc1000: that's why some good ole fashion industrial policy is what we need now.
Might of worked 4-5 years ago. What will become apparent over the next year is that their is way too much industrial capacity around the world, in steel, in solar voltaic chips, the green and the ungreen.
What we need to do now is live within our means and no government spending policy is going to change that.
When talking aggregate price deflation/inflation an important point to remember is the following.
Price points are basically made up of four factors:
supply and demand of general goods
supply and demand of money
supply of general goods goes up, prices go down.
supply of money goes up, purchasing power of money goes down and prices go up.
Mix and match the combinations to determine what will happen.
Lot's of things in flux right now. Base money going WAY up, (supply of money way up), Credit contracting sharply (b/c credit and money are tied together w/ FRB this means supply/demand of money on this side are tied together), so supply of money down and demand of money up.
Demand for goods way down, supply of good either stable or falling slightly.
I would gather right now it looks like temporary either a) stable prices or b) small general price deflation. However, with JIT manufacturing, companies can and will cut their supply sharply. What happens if and when the gov. doesn't turn off the money spigot fast enough, or they get the credit machine working again. A huge increase in base money and an increase in credit could lead to some very, very bad consequences down the road.
Given that the Fed. exists to inflate the money supply, while we may go through temporary "deflation". I would be willing to bet all my life's saving that in 20-30 years (I'm still young, I can look that far down the road), instead of thinking 100k is a good job, my son will think 1m is a good job (if the system still exists)-just like 30 years ago my dad thought 10k was a good job.
in my line of work i often meet with local politicians. in a red county of virginia (a blue state now baby!!), i met with a county supervisor. he owns and runs a multigenerational grocery store. he is about as far away from new york mba wall street high finance global politics washington dc player as possible.
he told me the single biggest problem in america is borrowing money from china to pay for petro products we get from the middle east.
wouldnt $2 trillion or more be better spent fixing that then paying LAID OFF BANKERS?!?! holy shit thats infuriating as hell!!!!!!
Broward Horne: I myself am puzzled as to where the government will find the money to fulfill all of its recent promises. Some people argue that the newly discovered propensity of US consumers to save will be sufficient. I do not see it this way - consumer are deleveraging and that does not necessarily generate funds for investments. Other countries are going to spend more and more to stimulate their own domestic demand, so they won't have much to lend to the US.
My point was that the US government already got the money - for now cheap and plenty. It has to start using it immediatley and directly and not waffle about buying toxis assets.
just how does a bear blog capitulate?
by nipping the tendons of the bull as it slowly looses momentum during the grinding decline to x=7600, 7100, 6000, 4000 less
or is the bull run going to launch here at 8500?
I don't know, but looking at the magnitude of value destruction, what will uphold these values?
Shane: I would gather right now it looks like temporary either a) stable prices or b) small general price deflation. However, with JIT manufacturing, companies can and will cut their supply sharply. What happens if and when the gov. doesn't turn off the money spigot fast enough, or they get the credit machine working again. A huge increase in base money and an increase in credit could lead to some very, very bad consequences down the road.
This is precisely the huge risk we are running. The Fed is fighting wild fire with even wilder fire. If it does not react in time, its anti-deflationary measures will become hyper-inflationary.
And, oh, by the way, when was the last time the Fed reacted in time?
I myself am puzzled as to where the government will find the money to fulfill all of its recent promises.
~~~~~
They can just print it. That's what Lincoln did to pay for the Civil War. He just printed , not borrowed the money. In a deflation it won't cause inflation if they don't print too much. When things turn around withdraw the money through higher taxes on the wealthy.
Those assertions are made in a fascinating lawsuit filed by Mr. Trump, the real estate developer, television personality and best-selling author, in an effort to avoid paying $40 million that he personally guaranteed on a construction loan that Deutsche Bank says is due and payable.
Rather than have to pay the $40 million, Mr. Trump thinks the bank should pay him $3 billion for undermining the project and damaging his reputation.
why not spend 2 trillion bucks on making us energy independent? create a new industry, solve many foreign policy issues, save money on military expenses, and create new tax paying industries?
is it really that hard to figure out?
These are more reasonable suggestions, and I think in different circumstances we could solve most of our problems in this way. But the proposals I see for "fixing" this economy don't address the fundamental problem we face in this specific situation.
The falling aggregate demand is just a symptom. The cause is too much debt.
The flaw I see in these proposals is simply that they involve making the underlying debt disease worse.
I don't see how a debt crisis can be solved by more debt.
The current debt is a poison that is killing the economy and probably enough to choke off the benefits of any public investment, no matter how well thought out.
Default is the only option, but nobody can handle the pain or the consequences.
So the disease will spread until we lose the ability to issue new debt.
The crisis will end only when we lose the ability to make it worse.
Once we get to that point and are forced to look at ourselves in the mirror, then the rebuilding can begin.
I've got a friend who's part of the management team for a smallish private oil & gas company. They need to roll their financing in two months, and the best offer they can get is ... Libor+20 (no, that's not missing a decimal point).
My point was that the US government already got the money - for now cheap and plenty. It has to start using it immediatley and directly and not waffle about buying toxis assets.
mmckini, yes. exactly. volcker was fed pres during a time when highest marginal tax rates were what, 100%?
shane -
good analysis but i disagree with your conclusion. i believe that the unwinding of the ability to create $50 trillion in notional wealth out of 1 single mortgage made to an unworthy borrower is far far greater than the measly few trillion thats being injected into the economy.
if i was at the right moment in life, that'd be the phd dissertation topic i'd use as my acceptance to MIT
until then i'm just speculating based on far less detailed viewpoints.
but i believe it.
less money less demand lower prices higher dollar cheaper commodities lower prices higher productivity lower prices
About six months ago I called two different large banks and told them to cancel my credit cards. I was transferred to a department that played devil's advocate trying to retain my business. I firmly said, "no". Six months later I am still receiving bank statements. And all annual fees (i.e. card membership, FF mileage programs etc) were waived. Reminds me of the crack dealer.
Responding to the economic downturn and weaker revenue at its businesses, Viacom Inc. is slashing more than 850 jobs, or about 7% of its workforce, and freezing salary increases next year for senior managers.
The deepest cuts came at Viacom's largest division -- MTV Networks, which includes cable channels MTV, Nickelodeon, VH1 and Comedy Central. Viacom's Hollywood movie studio, Paramount Pictures, let go 140 employees -- 100 in the U.S. and the remainder in its international operations. Cable channel BET is cutting about 50 jobs.
We have forgotten as a nation the value of blue collar work. Dignity, pride, respect a days pay for a days work.
Labor is the only true store of value.
but at the same time i think we're talking about different things with perhaps the same income.
sure using the bailout money for IO is same debt. but take away that debt and really, the scenario is still the same. i mean, look at what the 1000's of 1000's of 1000's of dollars that have been spent already have done? jack squat.
but if those some 1000's of 1000's of 1000's of dollars would have been use building something useful across so many different sectors, that would have been a boon.
instead we'll be left with the same scenario in the end but via different routes:
less money with lower velocity. what a double whammy!
Credit enima is coming.....(Unrated) writes:
Dryfly what do you design ? What program do you use ?
Credit enima is coming..... | 12.04.08 - 10:00 pm | #
I use napkins - seriously - it's the CAD wonks (like my wife) who then turn it into detailed design solid models.
What I do is look at the part and ask - 'why don't you make it this way?' and then either find somebody for them to make it (for a cut) or go hungry. I already KNEW who they should be talking to and also knew we could save them a bunch - but all for not.
Most designers work the other way - here's a design, now how do we make it?
FWIW most of the firms I work with use Solidworks, ProE or CATIA. I'm terrible at all of them but pretty good with napkins.
To Mock Turtle- I think you are on it to suggest bypassing the banks. I have e-mailed my congressperson that a national credit union model would be better than sinking more money into the institutions that are only interested in keeping this game afloat. There is no reason a sound business model should be ignored for the sake of more trading. Sure this is socialism. More effective than taxpayer subsidies for failed businesses.
They sold the Skyway a few years back to a private infrastructure consortium (think it might have been a GS run fund), and Midway Airport is in play, too.
I am new to this blog, but I am shocked by the number of commenters here who quite clearly are operating in a vacuum, believing that if they "have no debt," or enough physical gold, stored food and guns and ammunition, then they are not only more moral than anyone who has debt but also going to be immune from the coming anarchy that will reign if our government does not rachet up big-time its intervention in the economy. It's the derivatives, stupid, and until our government intervenes and either nationalizes the banks or a similar action, things will catapult out of control. I am frankly appalled by many commenters' lack of concern for others, by their false assumptions about other people and their economic needs, by their ignorant rushes to judgment when those very judgments appear to be based on nothing but mere conjecture. Frankly, as a 66-year-old man who lived through several economic bad times, I would feel ashamed if I had raised some of you. Enough, already.
Well, everybody agree it is better to spend money on worthwhile pursuits like energy independence etc. Duh. The problem is such projects will take a while to get going. So while the government still should do that, it has to act now to stop the tsunami of unemployment.
Worries about next year - Paul Krugman Blog - NYTimes.com
" a new Goldman Sachs report suggests that projects that are shovel-ready are probably only a few tens of billions worth, and that a larger effort would take much of a year to get going. Meanwhile, its very questionable how much effect tax rebates will have on consumer demand."
MrM writes:
Well, everybody agree it is better to spend money on worthwhile pursuits like energy independence etc. Duh. The problem is such projects will take a while to get going.
first
CR channels his inner Bill&Ted
This is a public company (I have no position) so I can't disclose any more. This was a huge surprise.
Best to all.
yep that is not good
PS first?
Any reason (generally) given or just kind of "we ain't lendin' nuttin" vibe.
Excellent- NOT!
Bogus!
Loved the first flick!
I can't break away!!!
Well, I guess business should once again depend on internal finance and private money.
Welcome to the ugly side of finance, where real money is made and lost, and wall street feared to tread.
Someday this war's gonna end...
Bank probably decided that Treasuries offer a more attractive return at this point.
CR,
Can you tell us if the bank received any TARP money?
Did they pull the entire amount?
Joining the many clamoring to hear any rationale that can be provided.
Is it possible that the banks could be holding this country hostage until the Fed buys all their worthless "junk" at par?
Probably not, I'm sure they're all patriots!
Give us the name, address of said bank. We will storm it, seize it. A friend of CR is a friend of ours.
Completely off topic, a musical interlude: Gay Marriage will save the economy, starring Jack Black as Jesus
Hey, why not? It's not like anything else is working.
I understand that our economy is quite resilient. Still, at some point...
Wow. How did they notify them? An email that said "Yoink!" ???
Do you have any idea how much private equity would want to fund this loan?
That's incredible. Perhaps they should email Sen. Dodd, he seemed pretty yoked up at the banks/HP/BB today.
I know it's a public show of outrage, but I swear he turned 3 shades pinker!
®, I'm trying to get more info. I'll post when I know more.
lama, yes, I know the name of the bank (can't disclose), and they received TARP funds.
Bond Girl, I don't know the details yet - just came in as a text message with an unprintable expletive!
Best to all.
Just closed an ag land deal with an insurance company...normally a no brainer, but this time they made us sweat.
wow, what a tease! ya think you're getting some of the good stuff and poof! someone changes their mind, it's no dice and your standing there in your underwear looking the fool. it's like high school all over again.
Tried to do a CRE refi with this same insurance company and they laughed at me and said not now...
A friend of mine was recently refused a refi at 70% LTV on his home. (Would have been a plain old ARM -> fixed refi, no cash out.)
They said the "land" part of the valuation was too high w.r.t. the structure. Hmm...
I had the same sorta thing happen to me. I contacted my bank about increasing my home equity line of credit, as I needed to pay a few bills, and at first I was told that they would be happy to help me.
Once they pulled up my account though, they gave me some jibber-jabber about LTV stuff that I didn't understand, and their story changed. End result...I was denied the credit.
This crisis is getting bad.
"lama, yes, I know the name of the bank (can't disclose), and they received TARP funds."
Well that narrows it down a bit, don't it! LOL
Why is everyone so worked up against banks non lending money? Would YOU lend YOUR money? With the economy going down the drain faster and faster, any loan beyond a few weeks is highly risky, so it has to be overcollateralized and to have very stringent covenants.
One cannot expect private enterprise to solve this problem. The government must lead the economy out of this prisoner's dilemma.
remember when 100 mil was a lot of money?
on a serious note, i keep getting offers from Wells Fargo to expand my business LOC. i haven't needed it so I don't know if they'd approve it. mind you it's a tiny business and a very small LOC ($50k).
The problem is that the banks with the infrastructure to handle $100M+ loans (i.e. money center TARP banks) are insolvent and probably can't legally lend.
What HP should have done with TARP is drop $35B on the IndyMac National Federal Bank, since it's actually in conservatorship.
CR,
If you're not an insider, you can tell other friends who aren't insiders.
As long as nobody tells something to insiders, it's okay.
Do tell.
Hey Bond Girl --
Want to show off a little? Do a blog post explaining what this quote is saying:
There will be some decent convexity buying on the back of that announcement
Extra credit if you can get it down below 50 words.
Can we nationalize now ?
We are experiencing similar issues within the jumbo/super jumbo mortgage space. Solid client's who could pay all cash or pay off their homes are being turned down for having too much property or too many inquiries in the last year. Banks(portfolio) are passing on 50-60% LTV deals that are rate and term refis. It says to me that they don't have the money.
pretty soon the catch phrase will be "100 billion trillion here 100 billion trillion there and pretty soon we are talking real money!"
"i haven't needed it so I don't know if they'd approve it."
It would be interesting to know if they are serious, or if it is just a mailing that had already been contracted for, and is going out for that, and only that, reason.
Sure, let's just nationalize all companies to ensure they are run in the public interest.
I cannot believe nobody ever thought of trying that before.
Why is everyone so worked up against banks non lending money? Would YOU lend YOUR money?
To a friend of CR's ? Sure. But it's not their money the banks aren't lending, it's taxpayer money,...which wouldn't be so bad if they weren't trying to line their own pockets and lie about their willingness to lend.
I have a deal pending that was to close in January. The deal guys want to fly up from California to meet with me to explain their financing situation, which has apparently changed over-night.
Their hope is I will accept some kind of non-refundable deposit (which they do not want me to cash) in hopes I would accept a far way closing date until the financing is resolved and not make the deal available to someone else.
Seriously, they want to fly up and take up a day making their case. Wow. I have never encounter this before.
WTF is going on? This is a big name investment firm in this particular vertical market and I have to be wined and dined to please wait for their financing to resolve itself.
Not good news.
CR,
Name names. Banks that are acting thus in the best interests of their business, stockholders, potentially taxpayers and society in general need to be rewarded for these acts of fudiciary excellence.
Obviously the bank was wasting resources to get to tis point so it is important to identify thm as a public service to those of us seeking similar funding conduits.
Well that narrows it down a bit, don't it! LOL
Weather Helm | 12.04.08 - 8:13 pm |
Hey, it rules out my credit union...
Not lending . I received a letter from Sunbust closing my checking account after 10 years ( never bounced a check 10k in account ). Not really sure why . Several friends receive letters also (one been banking there for 17 years ).
Some detail on the move in the long bond.
http://acrossthecurve.com/?p=2236
It says to me that they don't have the money.
~~~
Or they know the situation will get a lot worse ...
Or they want our house of cards to fold ...
[Give us the name, address of said bank. We will storm it, seize it. A friend of CR is a friend of ours.
Anonymous ]
Or short the crap out of it & buy the CDS ? Or how 'bout just stage a bank run?
The reasons why I consider bankers as parasites are becoming clearer every day.
My question- In a fiat currency based world, banks have no money. They are dependent upon the government who alone can make rules, collect revenue and create new money.
So, why are bankers allowed to make decisions that can destroy millions of lives, when they have shown themselves to be bunch of incompetent, greedy, short sighted twits. You would not allow a surgeon who killed every patient in the last ten years to practice, but we reward bankers who fail. Why???
Are our current crop of bankers any better than the control freaks who ran socialist and communist countries? Are they doing a better job, or are they killing the goose?
Further proof as to why the Feds should be lending the money directly to credit worthy taxpayers. Just cut out the cancerous middle man (the banks) and lend directly to the people. I realize that would be against this particular administration's obtuse, knuckleheaded right wing "free market" (we're so far beyond that now, don't you think?) ideology but this is getting ridiculous.
Extra credit if you can get it down below 50 words. - Nemo
Tantacredit if you can get get it over five thousand.
Nemo writes:
Sure, let's just nationalize all companies to ensure they are run in the public interest.
~~~~
Hey, remember when getting a corporate charter was a privilege ?
We need that attitude again, especially when we give them the right to print our money ... screw 'em.
MrM writes:
Why is everyone so worked up against banks non lending money? Would YOU lend YOUR money? With the economy going down the drain faster and faster, any loan beyond a few weeks is highly risky, so it has to be overcollateralized and to have very stringent covenants.
One cannot expect private enterprise to solve this problem. The government must lead the economy out of this prisoner's dilemma.
The reason is that the banks are running on OUR money now. We lent/gave it to them to be lent out to us.
Now they are not lending it. They are hoarding it.
Screw the banks.
craig, draw it down, and then ask for more- but I would draw it down if you think you might need it, or if you want to buy some equipment from your bk'ed competitors.
In other words- use it or lose it.
Someday this war's gonna end...
But it's not their money the banks aren't lending, it's taxpayer money
Nope, it is the shareholders' money (leave aside the difference b/w preferreds and common). The money came from taxpayers but was donated unconditionally to banks. So why do you want bank to screw their shareholders, who are not going to be as charitable and clueless as the taxpayers?
Blame should go to the politicians, both the Administration and the Congress.
It's because the government is pushing all the banks to put their money into housing. All money not in housing shall be mopped up and put back into housing.
Kashkeri testified today:
On December 1, Secretary Paulson underscored the critical priorities for the most effective deployment of remaining TARP funds, foremost of which is to ensure our banking sector has the necessary capital base to continue lending to consumers and businesses and support economic growth, and to help homeowners avoid preventable foreclosures.
I will briefly discuss these priorities:
One, in order to continue their critical role as providers of credit, both banks and non-banks may need more capital given their troubled asset holdings, continued high rates of foreclosures, and stagnant global economic conditions. We continue to look at additional capital strategies and, as we do so, we will assess the impact of the first capital program and also take into consideration existing economic and market conditions.
Two, we continue to aggressively examine strategies to mitigate foreclosures and maximize loan modifications, which are a necessary part of working through the necessary housing correction and maintaining the strength of our communities. The new program which I highlighted above with the FHFA, the GSEs, and HOPE NOW is just one example and we will continue working hard to make progress here.
Finally, as we consider potential new TARP programs, we must also maintain flexibility and firepower for this Administration and the next, to address new challenges as they arise.
List of banks getting money from treasure can be found here.
So its one of these on this list...
I received a letter from Sunbust closing my checking account after 10 years ( never bounced a check 10k in account ).
Credit enima: are you saying that the bank closed a checking account with a 10K balance?
last few were not a mailing, been verbals when i've talked to my banker.
you mean the TARP was abad idea? poorly adminstrated? a giveaway? with no safeguards? and with no impetus to lend?
well then lets get the money back!
oh, what's that, they already spent it? oh good, they bought the 10 year and 30yr USTs with it? excellent, nice loop we've completed there
Shocked, gambling, establishment, etc...
My company has actively shopped a term loan, AR financing, and an equipment loan. Trying to get a similar offer to those already in place (we don't really trust them, and they are finding creative ways to reduce available borrowing).
Anyway, nobody will bite.
In particular the equipment line item is concerning. We can't finance capital equipment, necessary for operations. Vendors have to be suffering mightily.
Granted we're a startup, and a bit risky, but this doesn't bode well for IT manufacturers.
Repeat after me: "cascading bankruptcies"
Convexity buying: bond yields are a convex (smile-like) function of interest rates. Therefore they decline less for a 1 basis point decrease in rates than they increase on a 1 basis point increase. And therefore (draw this to see) the expected yield increases when there is more volatility in rates, that is, more movement.
So "that announcement" was expected to increase volatility, giving convexity value to bonds above what they would be worth if rates had less volatility.
I'm sure Bond Girl can do better but for now all you have is a humble artichoke.
You can throw as much money as you like at this debacle and it will swallow it like the BLOB. You can't force a lender to lend, and/or a borrower to borrow. We really are pushing on a string at this point.
MrM writes:
Nope, it is the shareholders' money (leave aside the difference b/w preferreds and common). The money came from taxpayers but was donated unconditionally to banks. So why do you want bank to screw their shareholders, who are not going to be as charitable and clueless as the taxpayers?
Blame should go to the politicians, both the Administration and the Congress.
Why does it have to be either or?
It is both - the banks and the government.
I am extremely angry about this now.
can we come up with a new one instead of pushing on a string?
pushing on air (there is no string)
Unlike manufacturing and construction, apparently investment banking is truly "jobs Americans won't do."
It is both - the banks and the government.
True, banks created this mess and screwed up everybody. However, fixing this mess is above their pay grade (sarcasm intended). I cannot see how it can be resolved without most direct and active government intervention.
Telling any truth is always fine. You just can't trade on insider information until it's made public.
yep ... Keep sending me a certified letter . The other account friend was closed with $3458 bucks in it .
After GD2, economists can spend years speculating about what SHOULD have been done to end it. They will all be wrong, too.
Hubbert, Morgan Stanley has been firing Americans and keeping / hiring foreigners.
They make sure Americans are not allowed to do the job.
Then they extract government help.
Sorry if this is a repost, but I found this encouraging.
quoted on Angry Bear re Elizabeth Warren in her new job. I love Elizabeth Warren.
Bailout Monitor Sees Lack of a Coherent Plan - NY Times
comrade artichoke --
bond yields are a convex (smile-like) function of interest rates.
Well, I know what "convex" means; I used to be a math guy. And I read the Wikipedia articles on "duration" and "convexity", so I can see the formulae, but I am trying to get at the meaning.
Can you be more specific about how "yield" and "interest rate" are defined here? I thought a bond's "yield" was its interest rate.
Specifics and/or an example would help.
After that, I will want to know what trades qualify as "buying convexity", exactly, and what it has to do with buying Treasuries...
Thanks
The super low treasury yields are a big problem and adding to the deflationary forces and the Fed is responsible by manufacturing it. BB needs to retract the "buying treasuries" remark if he has any brains, in the hope that inflation might have a chance. Treasries are soaking up any hint of liquidity making matters much worse...
MrM writes:
True, banks created this mess and screwed up everybody. However, fixing this mess is above their pay grade (sarcasm intended). I cannot see how it can be resolved without most direct and active government intervention.
I agree.
Thing is one of the purposes of a bank is to allocate capital in an effective manner.
If they fail to lend money for worthy ventures - they are not fulfilling one of their reasons for existence.
I wish we could remove their corporate charters and create new banks that will lend to worthy borrowers.
re new york times post linked above, here is Angry Bear's summary.
...You cant just say, Credit isnt moving through the system, she said in her first public comments since being named to the panel. You have to ask why.
If the answer is that banks do not have money to lend, it would make sense to push capital into their hands, as the Treasury has been doing over the last two months, she continued. But if the answer is that their potential borrowers are getting less creditworthy with each passing day, pouring money into banks isnt going to fix that problem, she said...
...
Like much of the public, lawmakers have just been stunned by these economic and financial developments, she said. There wasnt time even to develop a coherent list of questions to ask Treasury about what its doing and what it plans to do and whether either of those are likely to address whats going wrong.
She added: Our role is to make sure that the right questions are asked as early as possible.
After GD2, economists can spend years speculating about what SHOULD have been done to end it.
~~~~~~~~~
Booms and busts are inevitable with fractional reserve banking.
What would cause banks to lend? The sense that they are losing money by holding money.
The Manipulation of Gold Prices -- Seeking Alpha
Credit enima,
not that you asked, but...
I have been banking with a credit union for 15 years and couldn't be happier. It's like doing business with a bank from 30 years ago, except they have internet banking too.
[I thought a bond's "yield" was its interest rate]
coupon is the interest rate and yield is real time interest return.
Booms and busts are inevitable with fractional reserve banking.
mmckinl | 12.04.08 - 8:37 pm | #
Yes, because they never happened before fractional banking.
Why can't we have better commenters.
CR: but isn't this a very rational decision on the bank's part? $100Million isn't exactly chump change and a loan for "expansion" isn't exactly the kind of thing that the banks would feel comfortable with in this environment (unless it was to expand a bankruptcy biz or a foreclosure biz or something like that).
Yes, because they never happened before fractional banking.
```````
They happened when there was a shortage of specie, but there wasn't leverage.
Thing is one of the purposes of a bank is to allocate capital in an effective manner. If they fail to lend money for worthy ventures - they are not fulfilling one of their reasons for existence.
Sorry, but in a depression very few ventures are worthy. They don't call it depression for nothing.
Yes, it is a circular problem, but from the perspective of each bank they are acting rationally. These are banks and not charities. This is an example of the invisible hand strangling itself. You need a Collective Planner - the government has to take over banks to start acting in the aggregate interest of the society.
We know that we are just entering the high-unemployment part of the cycle and we are also unable to see the light at the end of the tunnel. In addition, there is a small (but dangerous) chance that this could be the start of a very serious long term down turn. Given all that, what rational (read responsible) bank would lend money unless they had very, very protective provisions? I don't know what CR's friend's company had in the agreement, but I can certainly see why a bank wouldn't be lending right now given the uncertaintly out there. I think the best solution right now would be for the gov't to fully take over a bank and lend through those branches. Just call 1-800-FED-GOVT for your loan. The only problem with this is the other banks will go apeshit for stealing their market share but they can participate in the market by buying treasuries.
The mailman (sign for the letter ) said several where on his route .
Sorry, but in a depression very few ventures are worthy. They don't call it depression for nothing.
Yes, it is a circular problem, but from the perspective of each bank they are acting rationally. These are banks and not charities. This is an example of the invisible hand strangling itself. You need a Collective Planner - the government has to take over banks to start acting in the aggregate interest of the society.
MrM | 12.04.08 - 8:41 pm | #
Honestly, do some research on Andrew Carnegie. Find times when he was most effective at expanding his business and grabbing market share. Then compare those times with the boom/bust cycles.
Why can't we have better commenters.
These are banks and not charities.
Well, they are living off of donations. From the taxpayers.
IIRC, Hank and Ben have followed in Hoover's footsteps--pure "top-down" bailouts expecting a trickle down recovery.
The result, we may lose all the taxpayers' donations because the banks won't lend, won't earn money, and PS will destroy the economy.
Nationalize. Now.
"You need a Collective Planner - the government has to take over banks to start acting in the aggregate interest of the society."
Prisoner's dilemma, no? But between firms' pure self interest and Collective Planning there might be other options. E.g., WPA was something that worked -then, I'm not saying now, necessarily.
I agree with those who state that 'why would a bank want to lend' right now
of course, that begs the question then, of 'why would we give money to the banks' right now
Nationalize. Now.
Markel
~~~~
Nationalize yesterday ...
"fairly small loan of around $100 million "
Dear CR,
Can I be your friend, too? Please!
MrM writes:
Sorry, but in a depression very few ventures are worthy. They don't call it depression for nothing.
Yes, it is a circular problem, but from the perspective of each bank they are acting rationally. These are banks and not charities. This is an example of the invisible hand strangling itself. You need a Collective Planner - the government has to take over banks to start acting in the aggregate interest of the society.
Thank you. I agree.
Although collective planning by the current government frightens me.
But if the answer is that their potential borrowers are getting less creditworthy with each passing day,
Is that possible? Isn't the problem that they lent to the least creditworthy and now don't have a clue what responsible lending means?
The IDF is drawing up options for a strike on Iranian nuclear facilities that do not include coordination with the United States, The Jerusalem Post has learned. Won't this drive up oil prices ? IDF preparing options for Iran strike | Iranian - Iran News | Jerusalem Post
I'm not saying now, necessarily.
~~~~
Then what are you saying ?
"of course, that begs the question then, of 'why would we give money to the banks' right now"
Fear of the derivatives in the face of widespread counterparty defaults.
Honestly, do some research on Andrew Carnegie. Find times when he was most effective at expanding his business and grabbing market share. Then compare those times with the boom/bust cycles.
Why can't we have better commenters.
This is offensive but at least the last line is self-reflective.
Do the names Jamie Dimon and Ken Lewis ring a bell?
Gaining market share is not the same as lending freely. Buying up cometitors is much more effective.
We make loans here at Leftys for small appliances, shotguns, and chrome wheels. Collateral is required, and so is promptness.
Not sure why everyone is dumping on the bankers here in this case. It makes sense for them to try to preserve their capital at this point. Do I really want them lending out taxpayer money for business "expansion" at this point? I think that ultimately I'd rather get that taxpayer money back from the banks.
The IDF is drawing up options for a strike on Iranian nuclear facilities that do not include coordination with the United States,
~~~~
They always draw up those plans ... just in case. If indeed they use them grab your ankles...
The mailman (sign for the letter ) said several where on his route.
I'm assuming you live in a bubble-zone.
The only reason that I think of on why SunTrust would close checking accounts with balances is that they are trying to improve their capitalization ratios (demand deposits are liabilities).
Since deposits are what banks generally use to make loans, I'm not exactly going out on a limb by saying that SunTrust is more concerned about solvency than making loans.
@ 1 currency soon [yogi] | 12.04.08 - 8:31 pm
The truth shall set you free,
unless you are a tipper or tippee...
Insider trading laws are tough to navigate; best to take CR at his word
Fear of the derivatives in the face of widespread counterparty defaults.
~~~~
Aren't those defaults much more likely if the banks don't lend?
Virginia Beach ... Weird huh .. they still run adds on Tv talking about how strong of bank they are .
Sorry, but in a depression very few ventures are worthy. They don't call it depression for nothing.
Exactly MrM. How are the banks supposed to determine what ventures are "worthy" at this point? Many ventures that may have been very "worthy" six months ago, may be very shakey now.
Crispy & Cole,
This is an ag land deal too. The deal guys
have had the most complicated PSA and due
diligence process my broker had ever seen. This
is THE broker for this specialized ag land in
the Willamette Valley. 30 years experience.
These kind of deals would close 45 days max.
We are into month 4 since the LOI and no PSA nailed down. I guess flying up to offer assurances
is supposed to make me feel good?
So I am sweating it as are the deal guys.
Strange days.
"Insider trading laws are tough to navigate; best to take CR at his word"
+1
Broken deal: Must have ready the post yesterday from BofA
Follow the conservative strategy of "HOARDING CASH"
Yeah that's it!
Aron Krowne (sp) over at implode-o-meter got sued awhile back for posting an email from an insider.
It makes sense for them to try to preserve their capital at this point.
To what point? How are they going to make money if they don't loan?
(Although we are assuming that CR's friend's business plan made sense. And apparently it made sense to the bank up until today.)
...a fairly small loan of around $100 million
Jeez, and I only need $8m for my internet venture. Does that make me a micro cap? Should I hit up the other seamstresses in the village?
If they fail to lend money for worthy ventures - they are not fulfilling one of their reasons for existence.
And I might add that the banks "reason for existence" is so that I can deposit money in a bank and be really, really sure that when I need to get my money back out it will be there. That's the main reason for their existence. Banks should have a very boring, conservative business model like they did before we repealed Glass-Steagle.
Joining the many clamoring to hear any rationale that can be provided.
Seems to me the burden of "rationale" is on the business trying to borrow, not the bank deciding whether or not to lend.
Nemo,
Actually, I had entertained the idea of doing a post on exactly that topic a earlier this week. (Mainly because I am getting tired of the flight-to-quality explanation for T yields.) It won't happen tonight, however, as I am on my way out the door. I also thought about doing a post suggesting that this might kill state and local housing finance agencies, but that's another matter.
Front-running is probably a better explanation of what is currently going on in the long end of the curve, however.
CR,
Sorry your friend had the misfortune of trying to secure lending at a particularly bad year-end....
very few ventures are worthy.
~~~~
and strong ongoing business with a bank relationship?
When the banks want to lend it's a business.
When you need the money it's a venture ...
We're going to have to nationalize the banks because that's the only way to get the pigmen away from the trough. The Citibank giveaway shows that as long as we have major private banks and a financial crisis, the banks will use panic, their role in campaign finance, and the ignorance of the public to extract trillions from the taxpayer's pocket.
Public banking will have inefficiences, but not this monstrous. Not hundreds of billions lost per month.
Banks should have a very boring, conservative business model.
skeptictank | 12.04.08 - 8:53 pm | #
Unfortunately they equate that with failure.
"Aren't those defaults much more likely if the banks don't lend?"
Not just the CDS and CDO. There's probably (I'm guessing here) $3 of interest rate swap notional out for each $1 of swap to a buy side/real economy client. The other two are bank-to-bank offsets: mirroring transactions.
Someone posted a few night ago a discussion of the forced novations of swaps that are going to be coming in the court ordered LEH unwind.
Holders could end up with counterparties that their risk managers do not have approved. Even the "little" issue of LEH might be a problem.
and strong ongoing business with a bank relationship?
Please tell this to Lehman bankers. Everybody is very scared now. It is not about making a bit more or less money. It is about survival, not making more holes the balance sheet, not getting downgraded so as to retain access to Fed facilities
And I might add that the banks "reason for existence" is so that I can deposit money in a bank and be really, really sure that when I need to get my money back out it will be there.
That's why you have a mattress. Banks take deposits and lend, if they don't lend they're not banks, they're vaults.
Why can't we just pull the damn trigger, quit holding the gun with quivering hands, sweating profusely and get this over with? Mercy...someone put this lame "PONY" out of his misery.
To what point? How are they going to make money if they don't loan?
The name of the game isn't making money at this point. The game now is all about preserving the money you have.
@ Money Man - ROFLMAO
I also don't see the motivation for banks to lend in the macro sense. The government is giving out free money to everyone with an insider connection or a paid-for Congresstool, with no regard for risk or losses (in fact, they want to lose money to "recapitalize" insider institutions). On the other side, everybody knows private businesses are going to take a severe beating under the Obama administration, as they always do under increasing Socialism.
It just doesn't make any business sense at all to loan to private business right now, none. Much better to take the TARP money and pay yourself, and put the rest in Treasuries to live to see the next round of bailouts. We'll call it easily foreseeable consequences.
It is about survival,
~~~~
Then it is time to nationalize ...
"and a fairly small loan of around $100 million"
With amounts being bandied about for bailouts totaling well over the $5 trillion level it is a smallish loan. In any other environment it would be front page news.
Let's us all know how far we've gone through the looking glass.
BTW tip of the week....YCL
Ciao
MS
Nemo:
i enjoy seeing proper latin. +1 for writing "formulae" and not "formulas"
What the hell has happened to the type of people hanging out at CR? Six months ago banks were evil because they WOULD lend to anyone with a pulse - now they're evil because they WON'T.
Hypocrisy running very deep in Bear Land.
It is not like we didn't already know this. I thought I had everything I needed... Cash, Gold, Food, Guns..
Now I need to get a crash helmet.
Former Treasury chief O'Neill issues warning of potential economic disaster
Thursday, December 04, 2008
By Bill Toland, Pittsburgh Post-Gazette
If the United States doesn't get its finances in order, the coming years will make the current recession "look like a child's birthday party," said former Treasury secretary and Alcoa chairman Paul O'Neill.
"We're headed for the wall at lightning speed. And every day that we don't deal with that set of problems is another day closer to absolutely vaporizing our economy," he said.
What the hell has happened to the type of people hanging out at CR? Six months ago banks were evil because they WOULD lend to anyone with a pulse - now they're evil because they WON'T.
Hypocrisy running very deep in Bear Land
Exactly Cynical Dude. Exactly.
Not a surprise here. As a business owner, I'm shopping for 3 month to get a loan package together for a $500k deal for DoD, guaranteed money from the USG. My bank or any bank? Won't touch it (except for terms that would bankrupt the business) like my business has the bubonic plaque. Meanwhile my bank received $10B+ from the TARP.
It pains me to say this but Fair Economist is right. We need "PUBLIC'banking.
Not Henry loaning Vikram some TBA later amount of money based on who knows what collateral for some TBA purpose.
I want to know what in the hell taxpayer money is being loaned for. Is it on some synthetic CDO that some
trading desk got on the wrong end of or am I loaning money so Mr. and Mrs.
Smith, with an annual income of 75,000 can buy a 300,000 house after they have put down 50,000?
Although collective planning by the current government frightens me.
Ticker Tape of Doom | 12.04.08 - 8:46 pm | #
Frankly, collective planning by ANY government frightens me...
Cynical Dude: The banks were evil when they were making money ripping of clueless customers and investors. They remain evil but now it is not the problem.
The problem now is the inaction of the government, giving away taxpayers' moeny and not doing anything to stop the economy from going into cardiac arrest
Former Treasury chief O'Neill issues warning of potential economic disaster ...
~~~~
Was he wearing his African tribal hat ?
If not , no problemo ...
When this whole complicated mess finally gets deconstructed....It will be as if the keys to the kingdom have been found and Salomon with all His Glory decrees free ponys for all. The schiesters will be drug out into the streets...shot, hanged, and disembowled. The new American "TARP Party" will clense us of the impurities within the capitalist system. Just a thought...Tin foil hat back on. I know there are those with mucho education in the realm of econ and finance who want endless drivel on derivitives, yen carry, globalization, and other highly complicated theory...but lets be real "it's all bullshit". If it were so sophisticated and advanced, we would not be trying to figure out how to deconstruct it. Simple is key. Lend only what you have in reserves to back the loans. The profit from those loans allows for newer loans. We (falsely) grew by loaning money we never had and now we want banks to loan more money that now the taxpayers or their great grandchildern or Chinamen do not have. INSANE...Shoot ALL PONIES on SIGHT!
For what it's worth, I don't think the banks are evil: they are acting entirely predictably in their best interest given the circumstances created by the government. I don't fault them any more than I fault the auto executives trying to get a hand in the wealth-redistribution cookie jar by claiming their colossal business failures were just unfortunate circumstances beyond their control.
Also, nationalization doesn't really help anything. Sure, it helps keep cheap credit with no risk consideration flowing in the short-term, but that's exactly what caused the overarching problem, except with nationalized banks there would be nothing to slow down the spiral to economic collapse. At least in the current economy, the system is trying to fix itself, even if the government is doing everything in its power to keep it broken.
What the hell has happened to the type of people hanging out at CR? Six months ago banks were evil because they WOULD lend to anyone with a pulse - now they're evil because they WON'T.
I admit when you phrase it that way it looks like hypocrisy, but of course that's not we're saying,..it's what you are saying. How about we just shorten it to "banks are evil"? Sometimes what appears as hypocrisy is just not understanding the argument, just as holding firmly to one position might look like consistency, but in reality just masks a firmly held prejudice.
Gordon Gekko sounds an awful lot like Brad de Long trying to get a rise here.
Even if not, I ain't gonna.
monta's ankle - agreed, it's the Boxing Smoke strategy.
And it never works. By definition.
C
Frankly, collective planning by ANY government frightens me...
yfactor
~~~~
Yeah , just look at Iraq's economy ...
If credit is so bad, then I want to know why my 22 year old daughter (who has her own business (hairdresser, but no college education)) is getting zero percent offers from US Bank? She has no debt and cash on hand and banks with them; I told don't take the loan there has to be catch.
I've been using a hedge strategy lately of short stocks and long PMs/commodities, with frequent rebalancing. The end game of it was always to end up holding as many PMs/commodities as possible.
This week has been a little rough with the decline in commodities, but on the whole it's done what I wanted and held value.
With the big decline in commodities today, and the crazy manipulated gyrations in stocks, I'm seeing reason to change the strategy. I'm going to start systematically liquidating the shorts and ultra shorts into cash and then, gradually, moving the cash into PMs and commodities. I may be leaving some short stock profits on the table, but I don't care.
This market is saying to me that everything is rigged for hyperinflation, and it will be starting fairly soon. The stock market is being propped up as best the mad central bank scientist can rig it, certainly in the U.S. and maybe all over the world.
I just think in two years most investments in PMs or commodities at these levels will be at least a triple. That's enough for me, and I don't need the money in the meantime. I'm tired of being a victim of a manipulated stock market, too.
NEW YORK (MarketWatch) -- DuPont Co. slashed its fourth-quarter earnings forecast on Thursday and announced plans to dismiss 6,500 workers, including contractors, due to the downturn in the construction and automotive markets and a severe slump in consumer spending.
At least in the current economy, the system is trying to fix itself, even if the government is doing everything in its power to keep it broken.
~~~~
The current system heaving in the throes of death. Paulson has a pillow over its face and Bernanke is saving the organs for transplant.
I'm closing on a small loan(by those standards) as we speak... hurrying so no minds change!!!
Cynical Dude writes:
What the hell has happened to the type of people hanging out at CR? Six months ago banks were evil because they WOULD lend to anyone with a pulse - now they're evil because they WON'T.
Hypocrisy running very deep in Bear Land.
Well no one here is saying that banks should lend to anyone with a pulse.
However some lending to those who need it and would more than likely pay it back would be reasonable. Wouldn't it?
Both extremes are to be avoided in my opinion.
Last post of the night....funniest damn thing I have seen all year.
Thread music
YouTube - Marvin Gaye - Let's Get It On live in Montreux 1980
Japanese Must Have More Sex for Economys Sake: William Pesek
Email | Print | A A A
Commentary by William Pesek
Dec. 5 (Bloomberg) -- Jim Rogers probably didnt set out to make 500 bankers blush at a recent conference in Seoul. The well- known investor did just that when he encouraged South Koreans to have more babies.
Anyone who hasnt done it, I urge you to get home and get on with it said Rogers, chairman of Singapore-based Rogers Holdings, who co-founded the Quantum Fund with George Soros in the 1970s. He joked that folks should take a day off, if necessary.
Urging Koreans to procreate is about more than Rogerss love of parenthood: Korea needs to increase its birth rate for the sake of the economy. So do Japan and other key Asian nations, he said.
South Koreas birth rate (1.2 children per couple) is the second lowest in the world after Hong Kong, according to a recent United Nations report. Hong Kong, South Korea and Japan all have lower birth rates than North Korea.
Such demographic trends are a widening crack in Asias potential. Nowhere is this issue more acute than in Japan. And if Rogers made Koreans blush, he annoyed some Japanese in 2006 when he said: If the current birth rate, which is the lowest in the major developed countries, continues, there will be no Japanese. Who will pay the enormous debt?
The result, we may lose all the taxpayers' donations because the banks won't lend, won't earn money, and PS will destroy the economy.
Nationalize. Now.
Don't forget about the role the credit markets play and the fact that these are voluntary.
You can't nationalize the market participants and force them to lend.
In fact nationalization might send them running.
Credit in by its nature voluntary.
Once you have to resort to legal force or coercion it is no longer credit.
The mutual trust and cooperation are gone and with it the benefits of to resource sharing and efficiency that make credit essential to a modern economy.
Of course these things appear to already be gone, but I think to suggest that the government can force the restoration of credit is to misunderstand the nature of what it is.
Just another piece of evidence that the banks are insolvent- badly insolvent.
I don't see the hypocrisy either. Making loans to credit worthy business' and individuals is the banks function. I don't see anyone advocating they give loans to homeless people here.
Yes, because they never happened before fractional banking.
One take on history of banking.
http://www.mises.org/books/desoto.pdf
announced plans to dismiss 6,500 workers,
more workers for the underground economy
Money Man
Fractional Reserve Banking doesn't work without increasing amount of born and bread dopes (jj).
Steve writes:
Broken deal: Must have ready the post yesterday from BofA
Follow the conservative strategy of "HOARDING CASH"
Yeah that's it!
Steve | 12.04.08 - 8:51 pm | #
dryfly told me the same thing a couple of years ago.
our operating company is slow paying like a bitch. i hate riding vendors and subs and even the feds but you gotta do what you gotta do.
take the following sentiment and multiply it times a brazillion:
"would you rather have a business with accruing AP, vendors complaining, consultants bitching, potential law suits hanging, and yet make payroll, lease, and some marketing? or would you rather pay your AP, vendors, consultants and lose your employees, get evicted and not be able to pay your own mortgage."
there ya go people.
Both extremes are to be avoided in my opinion.
And how exactly does anybody here posting shit about the bank in question have any idea whether the loan was "more than likely" to be paid back?
What a minute - what am I complaining about? It's a Good Thing (TM) that moral outrage is justifiable based entirely on whose ox is being gored.
Calculated Relativism is in the house!
The whole goal of TARPing over the banks notion is retarded. Expecting them to lend and de-leverage at the same time. Guaranteed to fail miserably...
fudiciary=that explains everything
CR has got to get rid of the PULSE smartpen. It's screwing with my PC and clicking away and freezing windows
ac
It started with the banks mistrust of one another.
Nationalization would clean up their books. More than half the problem is banks' bad bets that are already on the balance sheet, or about to be from their QSPEs.
We need to nationalize: period.
Sounds like good "old time" lending to me. Approve one day, pull the next. Banker gets cold feet, loan dept.overrules, bank examiners onsite. You never know what the real reasons are. Prior to easy lending of the last several decades, happened all the time.
800 billion here, 800 billion there, after a while it adds up to the realization that there is no real money -- only "trust" is important, because you can't cheat someone who doesn't trust you.
Good night and thanks.
I just lost my job last week. The angel investor funding the start-up I worked for pulled our funding without warning. As far as we knew, everything was fine. We kept costs very low and were growing ... but when that margin call comes I guess it can't be ignored.
What the hell has happened to the type of people hanging out at CR? Six months ago banks were evil because they WOULD lend to anyone with a pulse - now they're evil because they WON'T.
Hypocrisy running very deep in Bear Land.
Astounding isn't it?
I think people are starting to see that their lives and wealth are at risk and are starting to panic.
Again, the nature of ponzi finance is that the disease becomes the only possible cure because it is the only thing that postpones the collapse. But it is a cure that only prolongs the disease and makes the final outcome worse.
People can't psychologically deal with what we've done to ourselves.
As we are seeing, credit, at the end of the day, is dependant on the public purse should it not be dependant on it at the start of the day?
I ask that.
I an perfectly OK with private banking at a limited level but if we
are going to have but 4 or 5 superbanks ( TOO BIG TO FAIL) then why in the hell call them private.
Either we break up the banks into manageable sizes and let them 'syndicate' for major loan projects or lets just dispense with the ( highly paid) middlemen and have a Public Bank that lends to all on the same basis the GSE's do/did.
I had a line of credit will Suntrust ( for my Pawn Shop ) it was called in at the same time .
TARP...Guaranteed to fail miserably... bearly
Brought to you by the financial investment group, The Miserable Failures; Paulson, Bush, Bernanke, and CONgress
rich said: This market is saying to me that everything is rigged for hyperinflation, and it will be starting fairly soon. The stock market is being propped up as best the mad central bank scientist can rig it, certainly in the U.S. and maybe all over the world.
rich, come on man. i appreciate being contrary but hello, -1(shadowbanking market)+(new fed money)=negative money supply.
Now this is something that CR (the blog)followers can do positively: rate banks. Reggie Middleton has been doing it on his site, but he hasn't found any good ones yet. Good banks should be promoted on sites like these through word of mouth and gain market share.
250K is insured anyway...
Expecting them to lend and de-leverage at the same time. Guaranteed to fail miserably...
Man, you'd think that would be blindingly obvious.
ac and dc1000
well said in both cases.
You know what I noticed in the people I know. The ones who look like then don't have a dime in their pocket are really loaded and he ones that look like they are loaded don't have a dime in their pocket. What does that say about us?
satan
mmckinl
manwich
tickertape of doom
MrM
Markel
all posts between 820 and 844
i agree...direct government action
or
bypass the banks
or nationalize
they just got trillions and they are strangling the country
f em all
loan to those able to pay back or
we want the trillions back damnit
Credit enima is coming..... writes:
I had a line of credit will Suntrust ( for my Pawn Shop ) it was called in at the same time .
Suntrust is toast...but pawn shops are gold mines
ac
It started with the banks mistrust of one another.
Nationalization would clean up their books. More than half the problem is banks' bad bets that are already on the balance sheet, or about to be from their QSPEs.
We need to nationalize: period.
I wish I were as optimistic as you, but I honestly don't differentiate between the US government and a company like, say, Citibank.
The US is just a bigger, but I see the same type of people running things and the same massive debt problems consuming both their futures.
I think a big part of our problem is that Wall Street and Washington have been in bed together. Nationalization just seems to formalize this relationship.
I don't believe that we hold our politicians to higher standards then our financiers, so I think the only way to get any useful outcome from them is to ensure the relationship between the two remains adversarial.
I believe even Soros made a similar point recently.
[The ones who look like then don't have a dime in their pocket are really loaded and he ones that look like they are loaded don't have a dime in their pocket]
So, You know The Donald personally ?
mock turtle
satan
mmckinl
manwich
tickertape of doom
MrM
Markel
Welcome to the club !
dc1000:
"would you rather have a business with accruing AP, vendors complaining, consultants bitching, potential law suits hanging, and yet make payroll, lease, and some marketing?"
You've described my current professional life to a T, sir.
"People can't psychologically deal with what we've done to ourselves."
QFT.
We can't handle the fact that for the past 30 years we have voluntarily allowed ourselves to be plundered and have put on the shackles and chains of debt.
The fact that credit-worthy businesses can't get loans is a reflection on that.
The system needs to be purged, unfortunately all gov. meddling or nationalization (as some seem to insanely call for, b/c the gov. is soooo smart!) does is make it impossible for the system to be purged.
Cynical Dude writes:
What the hell has happened to the type of people hanging out at CR? Six months ago banks were evil because they WOULD lend to anyone with a pulse - now they're evil because they WON'T.
Hypocrisy running very deep in Bear Land.
Couple points. First six months ago we were upset at loose lending because we knew we would ultimately be forced to pay for it. Second, now we are upset because we are being made to pay for it. Third, we are upset that ultimately we will have to pay for the current excessively tight lending of our own money. Seeing a pattern yet? See any hypocrisy?
Reggie Middleton 'shorts' banks. Of course he hasn't found any 'good' ones. In the midst of a credit crisis there aren't any.
gekko's comments don't impress
well art, it aint speculation on my part i tell ya.
thank god for creative estate planning, special purpose entities, bankrupt remote vehicles, charging orders, phantom income and marital assets.
ac
"The US is just a bigger, but I see the same type of people running things and the same massive debt problems consuming both their futures."
~~~
What debts? ... those will be written off ... national emergency - so sorry ...
OCT 1.AUGHT 8
Bronte Capital: How to make the bailout work
from an Aussie no less, OIYEE!
SunTrust has serious problems which are coming to a head.
So Rich has capitulated? Wow. Good to know.
I think we have at least one more major down move from here. And I have confidence that it will happen despite the government's actions to prop up equities.
I will put some of my eggs in the the PM/miner's camp, but I don't think deflation is done yet. It will be several months, if not quarters.
I still see many attractive short candidates: GS, SPG, COF, VNO, railroads, AMZN, SHLD, homebuilders. The party isn't over yet, IMO. It's just starting to get interesting.
I will use gold to hedge against a hyperinflation cure, but I don't see that happening for quite some time.
AC
nationalizing, or skipping over the banks and lending direct
is about disintermediation
the banks have become blood suckers
they share responsibility in causing this mess and are hoarding money that taxpayers are on the hook to pay back
why should they get a cut...
why do we need them as middlemen...
why do their stockholders deserve dividends,
why do their top execs deserve salaries and bonuses in the millions payed out of taxpayer dollars
f those bankers... period
the government may not do better but cant do worse
and at least you and i can vote the gov b tards out
I think people are starting to see that their lives and wealth are at risk and are starting to panic.
I think you're right. That plus I strongly suspect the CR old timers didn't just talk the talk - they walked the walk and spent some time actually preparing for what they saw coming. Likely not so much the case with newcomers who are more likely to be running on real thing margins.
Which sucks - I empathize - been there myself once before and it's a horrible horrible place to be.
But flipping the bird at The Man with one hand while holding the other hand out for an implicit bailout isn't going to get us anywhere...
irreverent writes:
gekko's comments don't impress ...
~~~~
gekko has good points for a beginner ...
Told ya we would have been better off giving away ponies instead of doing the stoopid bank bailout. At least you can eat ponies if you have to. Or ride them when the car breaks down and you can't afford to get it fixed anymore.
Banks suck. Credit unions FTW.
Rob Dawg at 931
exactly right
my words
first the banks were like credit whores
and now they act like credit virgins
where the hell is the middle?
So, You know The Donald personally ?
bearly | 12.04.08 - 9:29 pm | #
No, but I work for an corporate/estate planning attorney who is now getting into bankruptcy. It just amazes me that his clients, who I thought were very well off, are showing their true colors, i.e., being rude on the phone, demanding, etc. What is ironic is that ones that "don't look like they have a dime in their pocket" are the nicest ones and actually pay their bills!
We are all subprime now (says Credit Suisse)
Credit Suisse Boosts Home Foreclosure Forecast
Credit Suisse on Thursday boosted its forecast on U.S. home foreclosures over the next four years to 8.1 million from 6.5 million, warning of a "subprime society" as economic weakness and falling home prices take a larger toll on homeowners.
The increase from April's forecast represents 16 percent of all mortgages, Credit Suisse analysts said in a report.
Well the loose lending was caused in part by the gov. so many want to protect us.
Gov. has insanely low rates and lends money to banks for practically nothing. Banks have lots of money, good times are rolling, housing going up, banks need to lend to make money, so they lend to the highest credit worthy, then to the next highest credit worthy, then on down the line until you get NINJA loans.
TOOO MUCH MONEY CAUSED THE @#$ problem in the first place!
Now take the above process and run it in reverse. That's what's happening now.
Credit bubble go up, credit bubble go down.
And no this credit crisis is no more a death spiral than a credit bubble. At some point (just like at some point there was too much credit and the bubble burst) there will be such a lack of credit that new banks will (if left on the free market) spring up to make money. This unfortunately will not happen with gov. meddling.
You reap what you sow.
We are reaping what we sowed and trying to squirm out of it. If we squirm out of it for now the consequences will just be that much bigger later on as the right lessons are not learned collectively as a society.
What debts? ... those will be written off ... national emergency - so sorry ...
Who would lend to such a nation? They'd have to be insane.
It sounds like you're saying we should destroy credit, not create it.
We have the wealth be do precisely because we cooperate.
Once we begin using the force of law to take wealth from one another, credit is gone.
We won't see the kind of economy we had (until recently) for a long, long, time.
I wonder if Jim Rodgers is doing his part to help over there in Korea..
Tall Korean girls are hot..just having a problem thinking of JR with one...
Its the first rule of banking, don't lend money to people who need it.
Most everyone in the know, have said that the RE is suffering more (further losses?) since the sales volume from the last 3 to 4 years was inflated by borrowing from future sales. By extending the same logic, IMHO:
1) The banks have also borrowed from future lending, i.e. future loans need to reduced to drop back to the mean.
2) GDP growth: especially emerging economies - China, India and Brazil - regardless of the spike in valuation of commodities. Which is why I think commodities are not gonna exceed their recent highs for at least another 2 years.
3) Income growth: for the service sector especially finance industry, and manufacuturing including auto, oil and gas OEMs.
I wonder what the reversion to mean (or below mean) will do to these jobs and economies
sb
A friend seeking a small loan of just $100 million?
I need some new friends like that.
Amazing. The problem is clearly that we've reached Peak Debt, every fix results in a new leak at the next weakest spot...
but 90% of the comments revolve around getting a new loan somehow.
"No loan".
How hard is that?
You just try to put the puzzle pieces together as best you can.
And you try to match your time frame and needs to what you invest in.
I don't believe in paper assets any more. I'm not as smart as many other people on the Web saying this, but hyperinflation is the only way out of massive, unrepayable debts.
I don't want to own paper any more. I want to own gold, oil, silver, food and ultimately copper and zinc. I want to own farmers and miners, not bankers.
I don't care if oil goes to $25. I'll buy it on the way down and hold until it goes to $75. Are you saying you don't think oil will hit $75 at some point in the next five years?
credit e- you have any stamp collections to move cheap?
I am a buyer...
Someday this war's gonna end...
Cynical Dude -
You know nothing about me.
I personally have no debt and I am prepared for a downturn.
I just don't want to see it get worse.
Going from lending like there is no tomorrow to not lending at all is a disaster.
Particularly when the banks went hat in hand to the taxpayers (me/ us) to get money saying that they needed it so the economy would not collapse.
Then not lending it is total bull crap.
Yeah, the Pulse things is screwing up my Mac as well.
Shane
with all do respect
the federal reserve is not mentioned in the US constitution
and at best it is a GSE
but certainly not a part or a branch of the US government
i blame this governement for a lot...lack of regulation and supervision
but i dont blame the government for fomc decisions from the federal reserve
I'm with the nationalize/Swedish model crowd. We need to get the inevitable write-downs over with.
Will this be done? No. Or at least not until U3 hits 20%.
with all due respect...sorry
"the government may not do better but cant do worse
and at least you and i can vote the gov b tards out"
You obviously have either never a) worked for the government or b) known someone who has worked for the gov.
You will NOT be able to vote them out. You will vote out the figureheads, but not the people in charge.
Did you vote for Paulson, Bernanke?
Did you vote for the whole rest of the mess of gov. employees working in the Treasury department?
At least with a private company the employees are beholden to either a) shareholders b) their bosses or c) profit lines.
Gov. employees are beholden to nobody. As long as you don't do something illegal or are appointed, you will not get fired.
Hmmm, a whole mess of gov. employees who can't get fired, have no profit motive or work motive except for "good conscience" or "serving country" and you trust them to fix the mess??? . . . yeah I think I'll take private over gov. any day.
The gov. can do a heck of a lot worse!
ac - in the regular recession the government has to maintain employment. It is great if it does it by spending money on useful projects, like highways. It is stupid but still helpful if it does it on useless projects, like digging holes and filling them back next day. Yet this stupid option is better than doing nothing. One has to maintain employment in order to maintain aggregate demand.
In the current deleveraging recession the government has to find a way to keep the credit flowing to those woh need. I agee one cannot force credit upon unwilling. However, there are many companies who do need credit but the banks are too afraid and too capital constrained to lend. Hence the government must step in. It will be inefficient, sure, but it is still better than doing nothing.
We (falsely) grew by loaning money we never had and now we want banks to loan more money that now the taxpayers or their great grandchildern or Chinamen do not have
Even here, the myth of money is powerful. Almost no Americans can grasp that money itself means nothing.
it's a symbolic representation of goods & services and we sent all that away to other countries.
Moving decimal points around on a ledger sheet means nothing.
Banks. They're run by idiots on the way up and on the way down. If they're not full of misguided confidence, lending to build housing developments in the desert, they're shaking under the table, refusing to risk a penny towards good ideas and great plans.
here my shop Greenbrier Pawn - Chesapeake Virginia no stamps mostly jewelry . Never had luck reselling stamps or coin collections .
I think you're right. That plus I strongly suspect the CR old timers didn't just talk the talk - they walked the walk and spent some time actually preparing for what they saw coming. Likely not so much the case with newcomers who are more likely to be running on real thing margins.
Which sucks - I empathize - been there myself once before and it's a horrible horrible place to be.
I've been there too. I think the key to being able to look at the situation clearly is either having prepared (which I don't think you can really do) or having some kind of detachment that makes you able to deal with the concept of living on the streets for a few years.
I don't think anybody (with a conscience) is saying this isn't a disaster or that we haven't let people down in some terrible way. But I also think you're only going to get sensible proposals from people who aren't immediately subject to the effects of the crisis. I've seen my own reactions to such situations.
We are running up against resource limits, therefore the economy must shrink. Fractional reserve fiat dollars don't handle that too well.
Nemo writes:
Bank probably decided that Treasuries offer a more attractive return at this point.
ROTFL
I'm with Bondgirl and wishing condolences.
As to the trolls trying to find fault where there is none:
But in a way the Trolls are reassuring. It means they still dislike what is said.
spring up to make money. This unfortunately will not happen with gov. meddling.
Sad but true. Law of unintended consequences at work...
Got Popcorn?
Neil
You obviously have either never a) worked for the government or b) known someone who has worked for the gov
I worked as a contractor for the Department of Transportation and I have to say that I started out as a libertarian but there is no doubt in my mind that the USDOT was more efficient than a lot of the crap I've seen in major corporations over the past seven years of "efficent outsourcing".
It's a fricking joke.
My daughter just told me about one of her teachers. He announced in class today he had lost 50,000. It was his "safe money."
This is the 2nd to make this kind of statement in the past 3 months.
Yes, I know the Fed. is not in the constitution, neither is a heck of a lot else that the Fed. gov. does these days.
The constitution is practically dead for all intents and purposes, (not that I like that or want it . . . far from it, just stating an observation).
There is still plenty of power in the Treasury and while yes there is a lot of collusion between private banks (Citibank, etc) and the Fed. People are advocating the wrong solution.
Why are do we want MORE gov. intervention? The solution is to get the gov. out of the situation, free up the monetary system from the government granted monopoly of the Fed.
Cannot aggregate demand be met by Cessna as easily as McDonalds MrM?
A Citation Jet or a Hatteras Yacht employs people just as does a Big Mac,
albeit that those building the former earn a higher wage than the latter.
I think some French classical economist pointed that ugly fact out.
I'd rather have a society of Hatteras
Yacht builders than burger flippers so there is catering to the more affluent is not inherently evil.
That said there is a problem with allowing 'Big Mac" customers to get loans that enable them to buy a yacht.
CR,
Sorry to hear about your friend. I imagine there is a "confessional" post to come as the company reports its liquidity issue. The damn shame will be the pink slip Christmas Party that will ensue.
One one end its numbers and on the other end its people.
God bless the people.
Deacon
PS - I seem to recall a Dickens book with a similar holiday message.
Business needs to focus on profitability without running up credit and debt....no matter if a vp has to make 60k a ceo 70k etc..
Hp came out of a garage...
ova, was that in the teacher's pension fund?
Shane
you and did vote for paulson, when we voted for bush
as for bernanke
as for the federal reserve you andd i have little or no influence
you talk about stock holders voting
you are kidding right?
1/2 of 1% of the population owns more than half of the shares of common stock voted in these companies...unless, shane you are one of the super wealthy...super elite
then you, (and i have) no vote and no say
and they control the money
rich, we've both been around here for a while. respect your viewpoints. i just dont see enough money / demand to cause mad inflation.
trust me, as someone who owns businesses with pricing power in case of inflation, as well as fixed debt, i WISH we'd have hyper inflation. that'd be the greatest.
what we do have here is the ability to write stuff down and off and start over.
but the demand destruction is one head of the deflation hydra, the other is the -1(shadow banking)+(fed money)=less money supply
shane...i made a mistake
i was trying to say you and i voted for paulson when and if we voted for bush
sorry
"NAVSPECWARCOM writes:
Not a surprise here. As a business owner, I'm shopping for 3 month to get a loan package together for a $500k deal for DoD, guaranteed money from the USG"
I know the Federal Govt's left hand often doesn't know what the right hand is doing, but isn't this exactly the right kind of thing for an SBA loan?
Public banking will have inefficiences, but not this monstrous. Not hundreds of billions lost per month.
Fannie and Freddie, which were leveraged 120-1 under special Congressional charter and their own special "regulator", are behaving even more recklessly now that they are under full federal control.
rich: I don't believe in paper assets any more. I'm not as smart as many other people on the Web saying this, but hyperinflation is the only way out of massive, unrepayable debts.
The one problem with your logic is it assumes there is a choice. It may not be as easy as helicopter Ben imagined. Another alternative is default.
That's not a prediction, and I have some calls on gold LEAPs and have been buying TBT.
I just have absolutely no faith that anyone has even the slightest bit of control over this situation.
Lot's of people are using the 1930s as a template (with China in the role of the U.S.), but I think it could play out completely differently.
I'm hedged against everything but a meteor strike on my bedroom.
who really selected paulson...Did bush hang out with him before 06 ?
I doubt it was bush who selected him...
DC1000, hit us up with a little productivity deflation. From 2 factors...1) Technological Advances 2) Outsourcing due to our flat world.
Preach it
Calculated Risk(Excellent) writes:
This is a public company (I have no position) so I can't disclose any more. This was a huge surprise.
Not to me it wasn't - I'd have been surprised if they had got the loan.
About two months ago I was at a trade show - met a person designing a new product. There was a part on it that I could help them produce at a significant cost saving [payback less than a year]... they were excited told me to call them in November.
I called back - voice mail, no call back - did that about four times and finally got a hold of real person today: I was told the program was shelved indefinitely due to funding. They said all their programs are 'temporarily' shelved. They were just glad they still had jobs.
I think that will be the story all through 2009 unless something significant changes.
cd,
it was hank who selected him.
ac - in the regular recession the government has to maintain employment. It is great if it does it by spending money on useful projects, like highways. It is stupid but still helpful if it does it on useless projects, like digging holes and filling them back next day. Yet this stupid option is better than doing nothing. One has to maintain employment in order to maintain aggregate demand.
Honestly I don't believe you can build a society or culture around the pursuit of aggregate demand. I think the aggregate demand has to be a byproduct of some other pursuit.
If we spend money on filling holes then credit will become unavailable to us.
Lenders will not participate in such an environment. It makes absolutely no sense to loan out money to such an enterprise because such an enterprise consumes wealth but does not generate wealth to repay loans.
If such activities become endemic to this society, credit will atrophy and not return.
We will become mired in a long-lived intractable poverty.
Could it be that banks are not lending the money they got from the TARP is because they need to pay year end bonuses? Come on year end is almost here.
"I'm hedged against everything but a meteor strike on my bedroom."
at my age..id like to hedge for, not against that possibility
Didn't Madison make some crack about tax not being in the Constitution? Think I saw that at Montpelier last month.
C
Bob in Ma- I think your in good shape regarding meteors, Arizona..maybe not....
When will the social unrest reach a state serious enough to threaten the governmental authority? In some places, like Thailand, Maylasia, Indonesia, the Stans, it is already close.
How to preserve capital is the question. Gold? Agriculture? Mining stocks? Convertibles on AAA's?
In the end the social unrest of the world will demand a policeman to bring order and stability. Only one country - USA has a Big Army, Big Air Force, Big Navy, Big Marines - capable of keeping the peace.
The price? US Treasuries. Before the play is over - many years from now - the Policeman will work for pay and the pay is US Treasuries.
Bernanke knows it, Dodd Knows it, Dingell knows it, Hillary knows it and of course Obama knows it.
Buy Treasuries - it is your only safe course - 30 year out may pay only 1.5% in a few years but it will be more than any foreign coupon can offer.
"Collective planning is an oxymoron"
giezcubed,
i would but its a dead horse 'round here and there are other points which people listen to like demand destruction and decreased money supply. the productivity bit is the wild card that no one wants to talk about but is going to drive this thing home.
of course i dont speak of the standard of living element of that discussion, but one thing is for sure, shit's gonna cost less moving forward until we're printing money like crazy, demand increases, and productivity falls.
booms and busts catch the news but its the long road out of the busts where the real wealth is made.
Dryfly what do you design ? What program do you use ?
I'm just waiting for class warfare. Should be interesting ....
O/T...or maybe not? Today, the Chicago City Council signed off on a deal to privatize all of the parking meters in the city. Evidently, this will mean a) higher meter rates b) no parking meter "holidays" must pay 365 days a year c) additional enforcement by "private contractors" with multiple ticketing allowed..(if parked all day at an expired meter, could end up with a SHITHOUSE of parking tickets...not just 1 ticket).
The purchaser? An MS infrastructure fund...
Honestly I don't believe you can build a society or culture around the pursuit of aggregate demand. I think the aggregate demand has to be a byproduct of some other pursuit. said AC
great point!!!!
thats why some good ole fashion industrial policy is what we need now.
why not spend 2 trillion bucks on making us energy independent? create a new industry, solve many foreign policy issues, save money on military expenses, and create new tax paying industries?
is it really that hard to figure out?
jesus!!!
ac - it is meant as a short term solution, although the Japanese has been deploying it for many many years and have become leaders in building bridges to nowhere.
Once the economy stabilizes and business will get some visibility in the near future, the economic activity will return. We just have to stop the free fall.
Banks. They're run by idiots on the way up and on the way down.
~~~
Idiots don't get paid like that ...
[I'm not as smart as many other people on the Web saying this, but hyperinflation is the only way out of massive, unrepayable debts]
I am with you 100%. The thing is, it's not like you won't have a chance to play that game once it starts. You'll see it coming from a mile away as treasury yields rip. In the meantimem deflation in all assets is still the only game in town. Why fight it...
capitulation hits at CR
capitulation hits at USA=six months
WAG
Roxy: When did the class warfare stop?
Once the economy stabilizes and business will get some visibility in the near future, the economic activity will return. We just have to stop the free fall
Wow, I can't even this group sometimes. It's like almost nobody can recognize that YOU DO NOT GET TO KEEP MAKING EMPTY PROMISES.
Jiminy Christmas.
It's done.
Deal with it.
We are running up against resource limits, therefore the economy must shrink. Fractional reserve fiat dollars don't handle that too well.
~~~
Yep, nor does it handle a decreasing population well either. Without geometric growth fractional reserve banking convulses, like we are doing now, and dies.
"Could it be that banks are not lending the money they got from the TARP is because they need to pay year end bonuses? Come on year end is almost here."
I got laid off in November, and YES I am receiving a year end bonus.
Even though I a recipient of said bonus, this is madness. What the hell reason is there for a TARP- recipient financial institution to pay bonuses to people who no longer work there, in an absolutely awful banking environment? I suspect that the people making such decisions worry they will be in the next round of layoffs.
Fannie and Freddie, which were leveraged 120-1 under special Congressional charter and their own special "regulator", are behaving even more recklessly now that they are under full federal control.
The US government just looks like a giant leveraged hedge fund to me. So I have to expect it is heading for a similar fate as these funds.
Again, having a ponzi based economy essentially forces the leverage on us.
Like I used to say on almost a daily basis back in the happy old bubble times:
Leverage or die.
Except this time it's the US government, not the hedge funds.
irreverent:
just how does a bear blog capitulate?
Would I extend $100m in credit?
Depends on economy, borrower, terms, collateral and use.
"the productivity bit is the wild card that no one wants to talk about but is going to drive this thing home.
of course i dont speak of the standard of living element of that discussion, but one thing is for sure, shit's gonna cost less moving forward until we're printing money like crazy, demand increases, and productivity falls."
I completely agree. It's a force that is a strong undercurrent and it's not getting any attention. I envision it grabbing stories and headlines years from now, after the effects are all too obvious to be ignored.
Speaking of the GSEs, I found this NYFed page earlier: Agency Coupons - Federal Reserve Bank of New York
the poster formerly known as ni
wrote
"the Chicago City Council signed off on a deal to privatize all of the parking meters in the city"
maybe the city council ought to vote to privatize the city council
and maybe it would be kool to have private police departments!!!
or how about private courts! and jails
and lets sell all the roads to the highest bidder
and hey private armies would be kool too
kind like militias in iraq
we could have the catholic militia and the jewish militia and the republican's and the democrat's militias
hey and how bout this..they could each control some of those private roads and charge what ever tolls they wanted to let people and business transportation get thru
like the mongols did at the kyber pass! and the crips and bloods and mafia etc do in their neighborhoods
way kool
ac, i'm still thinking about your aggregate demand comment.
where did i read that the object of your analysis changes in ways that are separate from its natural environment solely due you paying attention to it?
and regardless, simply pushing for aggregate demand wont make it happen.
we should pick something that has a multiplier effect across industry, foreign and domestic policy, militarily and just common sense-arily.
dc1000: that's why some good ole fashion industrial policy is what we need now.
Might of worked 4-5 years ago. What will become apparent over the next year is that their is way too much industrial capacity around the world, in steel, in solar voltaic chips, the green and the ungreen.
What we need to do now is live within our means and no government spending policy is going to change that.
I'm applying to the SBA for 530K.
I'm in business 20 years.
The money is to buy a building. (Asset)
I'm on pins & needles waiting to hear back...
When talking aggregate price deflation/inflation an important point to remember is the following.
Price points are basically made up of four factors:
supply and demand of general goods
supply and demand of money
supply of general goods goes up, prices go down.
supply of money goes up, purchasing power of money goes down and prices go up.
Mix and match the combinations to determine what will happen.
Lot's of things in flux right now. Base money going WAY up, (supply of money way up), Credit contracting sharply (b/c credit and money are tied together w/ FRB this means supply/demand of money on this side are tied together), so supply of money down and demand of money up.
Demand for goods way down, supply of good either stable or falling slightly.
I would gather right now it looks like temporary either a) stable prices or b) small general price deflation. However, with JIT manufacturing, companies can and will cut their supply sharply. What happens if and when the gov. doesn't turn off the money spigot fast enough, or they get the credit machine working again. A huge increase in base money and an increase in credit could lead to some very, very bad consequences down the road.
Given that the Fed. exists to inflate the money supply, while we may go through temporary "deflation". I would be willing to bet all my life's saving that in 20-30 years (I'm still young, I can look that far down the road), instead of thinking 100k is a good job, my son will think 1m is a good job (if the system still exists)-just like 30 years ago my dad thought 10k was a good job.
in my line of work i often meet with local politicians. in a red county of virginia (a blue state now baby!!), i met with a county supervisor. he owns and runs a multigenerational grocery store. he is about as far away from new york mba wall street high finance global politics washington dc player as possible.
he told me the single biggest problem in america is borrowing money from china to pay for petro products we get from the middle east.
wouldnt $2 trillion or more be better spent fixing that then paying LAID OFF BANKERS?!?! holy shit thats infuriating as hell!!!!!!
Broward Horne: I myself am puzzled as to where the government will find the money to fulfill all of its recent promises. Some people argue that the newly discovered propensity of US consumers to save will be sufficient. I do not see it this way - consumer are deleveraging and that does not necessarily generate funds for investments. Other countries are going to spend more and more to stimulate their own domestic demand, so they won't have much to lend to the US.
My point was that the US government already got the money - for now cheap and plenty. It has to start using it immediatley and directly and not waffle about buying toxis assets.
Broward - you're shorting verbs again. What up? As a sociolinguist I'm concerned about the marginalization of verbs.
What did they ever do to you?
C
just how does a bear blog capitulate?
by nipping the tendons of the bull as it slowly looses momentum during the grinding decline to x=7600, 7100, 6000, 4000 less
or is the bull run going to launch here at 8500?
I don't know, but looking at the magnitude of value destruction, what will uphold these values?
Shane: I would gather right now it looks like temporary either a) stable prices or b) small general price deflation. However, with JIT manufacturing, companies can and will cut their supply sharply. What happens if and when the gov. doesn't turn off the money spigot fast enough, or they get the credit machine working again. A huge increase in base money and an increase in credit could lead to some very, very bad consequences down the road.
This is precisely the huge risk we are running. The Fed is fighting wild fire with even wilder fire. If it does not react in time, its anti-deflationary measures will become hyper-inflationary.
And, oh, by the way, when was the last time the Fed reacted in time?
I myself am puzzled as to where the government will find the money to fulfill all of its recent promises.
~~~~~
They can just print it. That's what Lincoln did to pay for the Civil War. He just printed , not borrowed the money. In a deflation it won't cause inflation if they don't print too much. When things turn around withdraw the money through higher taxes on the wealthy.
The Donald is always good for few laughs:
HIGH & LOW FINANCE; Trump Sees Act of God In Recession - NY Times
Those assertions are made in a fascinating lawsuit filed by Mr. Trump, the real estate developer, television personality and best-selling author, in an effort to avoid paying $40 million that he personally guaranteed on a construction loan that Deutsche Bank says is due and payable.
Rather than have to pay the $40 million, Mr. Trump thinks the bank should pay him $3 billion for undermining the project and damaging his reputation.
why not spend 2 trillion bucks on making us energy independent? create a new industry, solve many foreign policy issues, save money on military expenses, and create new tax paying industries?
is it really that hard to figure out?
These are more reasonable suggestions, and I think in different circumstances we could solve most of our problems in this way. But the proposals I see for "fixing" this economy don't address the fundamental problem we face in this specific situation.
The falling aggregate demand is just a symptom. The cause is too much debt.
The flaw I see in these proposals is simply that they involve making the underlying debt disease worse.
I don't see how a debt crisis can be solved by more debt.
The current debt is a poison that is killing the economy and probably enough to choke off the benefits of any public investment, no matter how well thought out.
Default is the only option, but nobody can handle the pain or the consequences.
So the disease will spread until we lose the ability to issue new debt.
The crisis will end only when we lose the ability to make it worse.
Once we get to that point and are forced to look at ourselves in the mirror, then the rebuilding can begin.
MrM,
While I don't agree with some of your other comments, you nailed it there.
I've got a friend who's part of the management team for a smallish private oil & gas company. They need to roll their financing in two months, and the best offer they can get is ... Libor+20 (no, that's not missing a decimal point).
Maybe I should add a tag like AllenM:
Turn out the lights, the party is over...
LCDX is around 75 now. Bank loan portfolios are dust. Remember they are at least 8x leveraged, most over 10x leveraged.
My point was that the US government already got the money - for now cheap and plenty. It has to start using it immediatley and directly and not waffle about buying toxis assets.
But this is exactly what blew up Wall Street.
Why won't it blow up the US government?
mmckini, yes. exactly. volcker was fed pres during a time when highest marginal tax rates were what, 100%?
shane -
good analysis but i disagree with your conclusion. i believe that the unwinding of the ability to create $50 trillion in notional wealth out of 1 single mortgage made to an unworthy borrower is far far greater than the measly few trillion thats being injected into the economy.
if i was at the right moment in life, that'd be the phd dissertation topic i'd use as my acceptance to MIT
until then i'm just speculating based on far less detailed viewpoints.
but i believe it.
less money less demand lower prices higher dollar cheaper commodities lower prices higher productivity lower prices
Shane
Bernanke would do flips if saw inflation right now.
Inflation is tamable, deflation is a monster.
MLM - Credit card rates are better than Libor+20
MrM -
I think their loans are a fair ways north of what CR's friend was hoping to get. That's a lot of credit cards.
When things turn around withdraw the money through higher taxes on the wealthy.
How does raising taxes on the wealthy reduce the money supply?
About six months ago I called two different large banks and told them to cancel my credit cards. I was transferred to a department that played devil's advocate trying to retain my business. I firmly said, "no". Six months later I am still receiving bank statements. And all annual fees (i.e. card membership, FF mileage programs etc) were waived. Reminds me of the crack dealer.
ac - Why won't it blow up the US government?
15% U3 unemployment is a higher risk than souvereign default
How does raising taxes on the wealthy reduce the money supply?
~~~
Since the money is printed, not borrowed the taxes would be destroyed not spent.
Can anyone explain to me why it wouldn't have been more fair and better for us all to just have a one year tax holiday?
Also rich I really like your posts and if you could email my moniker @ gmail any of your moves I'll hang on to your coat tails.
ac,
very well said and i'm inclined to agree with you on several points and just generally with the sentiment.
Why won't it blow up the US government?
It's already blown up. We're already poorer.
All we are trying to do now is keep the decline from being catastrophic.
More layoff news, from the LATimes....
Responding to the economic downturn and weaker revenue at its businesses, Viacom Inc. is slashing more than 850 jobs, or about 7% of its workforce, and freezing salary increases next year for senior managers.
The deepest cuts came at Viacom's largest division -- MTV Networks, which includes cable channels MTV, Nickelodeon, VH1 and Comedy Central. Viacom's Hollywood movie studio, Paramount Pictures, let go 140 employees -- 100 in the U.S. and the remainder in its international operations. Cable channel BET is cutting about 50 jobs.
We have forgotten as a nation the value of blue collar work. Dignity, pride, respect a days pay for a days work.
Labor is the only true store of value.
Remember when we had industry?
YouTube - Springsteen "Youngstown" Montage
ac,
but at the same time i think we're talking about different things with perhaps the same income.
sure using the bailout money for IO is same debt. but take away that debt and really, the scenario is still the same. i mean, look at what the 1000's of 1000's of 1000's of dollars that have been spent already have done? jack squat.
but if those some 1000's of 1000's of 1000's of dollars would have been use building something useful across so many different sectors, that would have been a boon.
instead we'll be left with the same scenario in the end but via different routes:
less money with lower velocity. what a double whammy!
Credit enima is coming.....(Unrated) writes:
Dryfly what do you design ? What program do you use ?
Credit enima is coming..... | 12.04.08 - 10:00 pm | #
I use napkins - seriously - it's the CAD wonks (like my wife) who then turn it into detailed design solid models.
What I do is look at the part and ask - 'why don't you make it this way?' and then either find somebody for them to make it (for a cut) or go hungry. I already KNEW who they should be talking to and also knew we could save them a bunch - but all for not.
Most designers work the other way - here's a design, now how do we make it?
FWIW most of the firms I work with use Solidworks, ProE or CATIA. I'm terrible at all of them but pretty good with napkins.
Basel Too
The problem with privately run fractional banking is that the supply can fluctuate too dramatically.
With a public utility bank the money supply can be managed in aggregate so that the leverage is managed.
err
change income to outcome in the first sentence of my last post. duh.
villagers aren't poorer
don't kid me
ready to eat Obama alive
(he might turn out to be a piece of work)
hard to digest
To Mock Turtle- I think you are on it to suggest bypassing the banks. I have e-mailed my congressperson that a national credit union model would be better than sinking more money into the institutions that are only interested in keeping this game afloat. There is no reason a sound business model should be ignored for the sake of more trading. Sure this is socialism. More effective than taxpayer subsidies for failed businesses.
mock,
They sold the Skyway a few years back to a private infrastructure consortium (think it might have been a GS run fund), and Midway Airport is in play, too.
I am new to this blog, but I am shocked by the number of commenters here who quite clearly are operating in a vacuum, believing that if they "have no debt," or enough physical gold, stored food and guns and ammunition, then they are not only more moral than anyone who has debt but also going to be immune from the coming anarchy that will reign if our government does not rachet up big-time its intervention in the economy. It's the derivatives, stupid, and until our government intervenes and either nationalizes the banks or a similar action, things will catapult out of control. I am frankly appalled by many commenters' lack of concern for others, by their false assumptions about other people and their economic needs, by their ignorant rushes to judgment when those very judgments appear to be based on nothing but mere conjecture. Frankly, as a 66-year-old man who lived through several economic bad times, I would feel ashamed if I had raised some of you. Enough, already.
It's already blown up. We're already poorer.
All we are trying to do now is keep the decline from being catastrophic.
Everytime we've attempted to do that we've simply postponed the problem and created a worse problem a few years ahead in the future.
We have demonstrated no ability to halt declines, only defer them.
Well, everybody agree it is better to spend money on worthwhile pursuits like energy independence etc. Duh. The problem is such projects will take a while to get going. So while the government still should do that, it has to act now to stop the tsunami of unemployment.
Worries about next year - Paul Krugman Blog - NYTimes.com
" a new Goldman Sachs report suggests that projects that are shovel-ready are probably only a few tens of billions worth, and that a larger effort would take much of a year to get going. Meanwhile, its very questionable how much effect tax rebates will have on consumer demand."
what blew up wall street was exotic debt securitization, casino CDSs squared, and synthetic securities etc
a 3 to 6 % default rate on subprime loans, or even all loans should not be enough to destroy the worlds largest economy..
unless the debt is ponzi-d to the moon
if the government loans direct and does not engage in exotic securitization models, things should end better, NO?
dad of five | Homepage | 12.04.08 - 10:35 pm | #
Bravisimo ! ! !
sold those parking meters in chi town too I hear
pull in that sled and weep I say, fractional reserve parking I hear
MrM writes:
Well, everybody agree it is better to spend money on worthwhile pursuits like energy independence etc. Duh. The problem is such projects will take a while to get going.
~~~
Medicare for All ...