Argues that the reason for such crises as this is not just bad politics but bad thinking...
...exemplified by the quotes like this: In our base case simulation there is an upside case that, er, corresponds on the flipside of the downside case in kind of an adverse direction.
Am I understanding this correctly? We/taxpayers take the paper and the bank shareholders get the benefit? They are not touching the common stock. I have seen it all now.
Yeah! Sure, we're spending a couple trillion of taxpayer money to strip all the worthless assets off the books of the insolvent banks ... and sure, we'll make sure all the bondholders are made whole ... and, OK, we're even preserving the common stock ...
... but we're gonna get rid of "some" of the management teams in return! Maybe! We think!
That'll show those uppity Wall Street types who's boss!
Bank seizures are going to happen, Senator Bob Corker, a Tennessee Republican, said in an interview after a meeting between Obama and Republican lawmakers in Washington yesterday. I know it. They know it. The banks know it.
Laura Tyson, an adviser to Obama during his campaign, said banks need to be recapitalized with different management so they start lending again. You find some new sophisticated management unlike the failed management of the past, Tyson, a University of California, Berkeley professor, said at the World Economic Forum conference in Davos, Switzerland today.
Still, nationalization of a swath of the banking industry is unlikely. House Financial Services Chairman Barney Frank said yesterday the government should not take over all the banks. Bair said earlier this month she would be very surprised if that happened.
won't nationalize all the banks, just some of them at a time, on a rolling basis . . .
won't run all the banks, but will run some of them long enough to run the management out of town and then privatize the banks with new management, rinse and repeat. . .
won't pay any money for the toxic assets but maybe give shares in the bad bank . . . leaving the question open of how the "good" banks get recapitalized and on what terms. Krugman dissected this creature back in the time of Hanky's 3 Page Plan.....
Yes, there will be a bad bank, more or less RTC style, and FDIC is the part of govt most skilled at starting up such a thing. But once we all accept that premise then we get to discuss the how the bad assets are acquired and how the good banks are recapitalized.
This is the way to get people aboard the nationalization express....
See Bob Free Market Corker. Bank seizures are going to happen, said Senator Bob Corker, a Tennessee Republican . . . I know it. They know it. The banks know it.
Let's not call it nationalization. Let's call it seizure. Corker supports that.
Puzzling over the inflation/deflation arguments, and the effect of stimulus, one thing has consistently bothered me. The most common argument for coming inflation runs something like this: monetary and fiscal stimulus will be used to counter recession and deflation, but the fed and gov won't stop in time, and serious inflation will follow. Fine, but this implies that it's possible to get it âjust right" so that growth resumes without inflation. I'll argue that this isn't possible; that for the stimulus to be effective there must be substantial inflation. At a fundamental level, the financial crisis reflects a misallocation of resources. Thus unused capacity is readily available only in sectors where there are existing surpluses. Putting stimulus into these sectors (e.g. housing) will only make things worse, and might be ultimately deflationary due to excess supply. So to effectively counter recession and deflation, stimulus must be: 1) large enough to balance contraction elsewhere, 2) put into sectors with insufficient current capacity. So this (borrowed/printed) money would be spent now, to boost future productivity. Put these together, and sufficient stimulus means keeping a constant or expanding circulation of money, while decreasing the supply of products (new capacity in needed areas takes time; existing excess capacity is for the wrong products, so less utilized). More money circulating + less products = inflation! Now debt-financed investment in future productivity may be a good idea, if done wisely, but short of wildly optimistic developments (e.g. power too cheap to meter, etc.) it seems inevitable that it will lead to inflation; even more so if the investment choices are poor. Is there a flaw in my reasoning? I hope there is!
Gee, ya think BAC C JPM WFC ... all been out in the distressed market buying up assets over the past coupla weeks, ya know, "in case" this might have come to pass ?
How realistic is a North American currency?
Commentary: Uniting U.S., Canada, Mexico money could result from crisis
NEW YORK (MarketWatch) -- Thomas Jefferson once said: "When you reach the end of your rope, tie a knot in it and hang on." As the global financial system pushes on a string, investors are desperately trying to hold tight.
The New World Order is upon us, full of hope, promise and a fair amount of fear. In our recent discussion regarding the direction of our country, we noted the risks of catering to conventional wisdom and the implications for the U.S. dollar.
You find some new sophisticated management unlike the failed management of the past
But of course it needs to be experienced management, so we'll get the guys who used to run BAC to run JPM, and the guys who used to run JPM will run WFC, and the guys who used to run WFC will run C....
"in the hopes of stemming a crisis that has stripped more than 1.3 million Americans of their homes"
'Stripped' makes it sound like they deserved to have it in the first place.
It's not a "crisis" when they never should have had them n the first place. AS someone already mentioned...it's as if Paulson and Bush are still there.
Let's see if I understand this.
Create a Bad Bank in order to preserve the bad bankers, then people will have confidence in banks again. Is that about it?
"Bad bank" has such poor spin potential. All I think of is scolding my dog: "bad bank, baaaad bank, you smell awful - did you get into some rotten mortagages?".
"Oh good bank(s), you're such a good boy, you swam in a river of money and cleaned yourself off before coming home".
when will there be some adults in dc? a new bad bank structure is not needed. there is one in place already, it is called the fdic. however, use of the fdic bad bank requires for the bank to be closed and equity holders eliminated and haircuts applied to uninsured depositors and non-depository creditors. the only reason to create a new structure is to avoid having the holders of bank capital take the hit and passing the losses to taxpayers. this is a sham and citizens of this country need to stand-up against it.
I know I'm late to this, but just finished Krugman's book, the updated version. He writes lucidly in a synoptic fashion of the history of all the crises of the last several decades annd concludes with each that:
1) The PTB did it wrong or too late.
2) If they did the right thing, they did it too small (size does, after all is said and done, matter.).
3) He was the only voice of dissent and was told on at least one occasion to stop since he was the 'only voice in the room that disagreed'.
4) Bernanke hired him away from MIT and as such BB is the best and only option to run the FED.
5) There are no good options to the solution of our problem. In fact, in each example from history there were no good options either.
6) His solution is MASSIVE spending on a scale not seen before.
7) That it's up to you, me and the person next to you to get back to spending, start working on the demand side to fix it.
Well, bullshit. He walks the reader to the door of suggesting a gold standard then turns away without knocking. Yet, he seems to be saying that the problem is the system. Hmmmmmm.....
I agree. I can't believe some group or senator or someone is not front in the news against this robbing of the taxpayer. Equity holders need to be eliminated. I imagine they'll be paying their dividends, too.
Because I have some really bad issues on my books, and I would like them written off on a "bad sheet" too. It would clear away a lot of the reason why I am not living up to my consumer potential in this economy.
Who is going to stand up for me and make legislation to toss all my bad finances into a neat little mini-book and throw them into the ozone?
It's only for the good of the country. Then I will be a good little consumer again. I promise.
And if I hear someone else in the MSM, or PTB, push this idiotic canard that all we need is for banks "to start lending" again...I'm truly going to loose it...yeah I know, I'm toast on that bet.
While the phrase "bad bank" is a little silly, "toxic assets" is just absurd.
Still, nationalization of a swath of the banking industry is unlikely. House Financial Services Chairman Barney Frank said yesterday the government should not take over all the banks. Bair said earlier this month she would be very surprised if that happened.
Well, as long as you don't consider consider C and BAC and Fannie and Freddie a "swath", well, then I'd agree with you, Barney.
well at least, Mr. Geithner has some new help - as he is going to be a busy man:
Mark Patterson, the new chief of staff to Treasury Secretary Timothy Geithner was a top lobbyist for Goldman Sachs Group Inc. until last year, and will have to recuse himself from some government duties under new White House ethics rules.
What was all that hub-bub about Obama's new EXECUTIVE ORDER regarding ETHICS, again?
These two pieces of legislation are conjoined twins. I don't think one happens without the other. Obama is giving Barney Frank something and the bondholders something.
--
The toxic assets will keep on increasing and getting more toxic as the housing prices in the US continue to decline at the FASTEST RATE EVER:
The Latest Trend (Transactions That Originated In November), Decline in PPSF (% Annual Rate)\t
Metro_____\tAnnual Rate for November
San Fran, CA\t-60%
Phoenix, AZ\t-58%
San Jose, CA\t-56%
St. Louis, MO\t-47%
Tampa, FL\t-45%
Boston, MA\t-43%
Atlanta, GA\t-43%
Charlotte, NC\t-42%
Miami, FL\t-42%
San Diego\t-41%
New York\t-39%
\t
25 MSA Composite\t-37%
\t
Chicago, IL\t-36%
Cleveland\t-34%
Los Angeles\t-29%
Based on PPSF (Source: Radar Logic). What were the buyers thru most of 2008 thinking when they were buying foreclosed and other homes at bargain prices? Dopes, no?
Peter Jones suggested that an "urgent" review of Labour's policy on recycling was needed to make sure the collection, transportation and processing of recyclable material was not causing a net increase in greenhouse gases.
"Banksters keep the capital...we get the crapital. Pretty simple really."
Yeah but then stocks go up and the insiders get rich then they start hiring a bunch of peons to pay for all of this don't in order to have a good fleecing ya gotta have peons.
Speaking of witchdoctors, I was in China for a couple of weeks and caught a bad sinus infection.
I asked one of my Chinese associates why I couldn't find something like Mucinex (aka, guaifenisin) in the drug stores. The stuff's been on the market in the West for decades and it really does clear congestion.
I was told most Chinese prefer 'traditional' medicine to Western-style (read: 'evidence-based') medicines.
Later, in Guangzhou, I went to an open-air market where street vendors were selling traditional medicines. These included dried roots, berries, snakes, & boxes of what looked like dried rats. You also had an additional option for dried rats: flayed on a stick--I'm not kidding.
I'm not trashing the Chinese--one of my doctors (an orthopaedic surgeon) is from Beijing, and I have two Chinese-born daughters.
The Chinese have done some amazing things in their 5000-yr history--but selling dried rat-on-a-stick as medicine? Please...
the biggest con during any election cycle is the idea that anyone represents change. well, gitmo is closing so I guess, depending on your leanings, it will tide you over.
You know that one-laigged nigger dat b'longs to old Misto Bradish? Well, he sot up a bank, en say anybody dat put in a dollar would git fo' dollars mo' at de en' er de year. Well, all de niggers went in, but dey didn't have much. I wuz de on'y one dat had much. So I stuck out for mo' dan fo' dollars, en I said 'f I didn' git it I'd start a bank mysef. Well, o' course dat nigger want' to keep me out er de business, bekase he says dey warn't business 'nough for two banks, so he say I could put in my five dollars en he pay me thirty-five at de en' er de year.
"So I done it. Den I reck'n'd I'd inves' de thirty-five dollars right off en keep things a-movin'. Dey wuz a nigger name' Bob, dat had ketched a wood-flat, en his marster didn' know it; en I bought it off'n him en told him to take de thirty-five dollars when de en' er de year come; but somebody stole de wood-flat dat night, en nex day de one-laigged nigger say de bank's busted. So dey didn' none uv us git no money."
Scientists Not So Sure 'Doomsday Machine' Won't Destroy World
Three physicists have reexamined the math surrounding the creation of microscopic black holes in the Switzerland-based LHC, the world's largest particle collider, and determined that they won't simply evaporate in a millisecond as had previously been predicted.
This is the way to get people aboard the nationalization express.... joe shmoe | 01.28.09 - 9:19 am | #
I don't know if I agree that this is what they are doing but it is what I would have done... you don't show all your cards at once especially not at the Washington Poker Table... there aren't many suckers in that game. Well except for the taxpayers.
I can support it--hell I'll even bring my business there--if they tweak the name to "Bad Ass Bank". I'll pay a premium for an ATM card with that written on it, I tell ya.
Either our "leaders" are really this stupid or they are doing everything they can to strip any and all value from the financial system and stick me with the bill.
They never die; they move to other institutions. In present-day America, they have moved into economics. American economists can't match the African witchdoctors! American dopes' faith in the economists to cure the economy is just as widespread.
It is a human behavior problem and Americans suffer from all of the known human weaknesses. They just change form over time.
what does nationalization do that is different than what they've been doing? arw | 01.28.09 - 9:46 am | #
What would be different? Uncle Sam owning the equity - ALL of it. Wipe out the common completely... clip the bondholders substantially THEN recap the banks & IPO or sell them to another healthy bank. If they don't do that this will fail - period.
That is what RTC did in the last one of these affairs and what we should have done 18 months ago.
You want moral hazard - wipe out the equity first and ALL of upper mgmt. That will get some attention.
They never die; they move to other institutions. In present-day America, they have moved into economics. American economists can't match the African witchdoctors! American dopes' faith in the economists to cure the economy is just as widespread.
Thanks for the clarification, Jas. Nassim Taleb would be pleased with that metaphor.
Have you ever considered a career as a televangelist?
Nah, nah, nah. I checked and I don't know about you loosers but my mortgage is going to a good bank. All you bad borrowers are going to the bad bank where you'll have to endure the shame and paperwork just to get your rate, balance and terms reduced. And all that time I'll be sitting pretty with the same monthly check to write proving I'm worth every penny they lent me. I want a bumper sticker to help hold my '91 Corolla together. It will read "good bank customer." The rest of you will have to settle for "bad bank victim" on the back of your Escalade.
First, they slash interest rates to zero. Second, they dump $350 billion of TARP money into banks at below market interest rates and with no oversight. Third, they vastly overpay for bad assets so that banks reap a windfall and the public gets stuck with the big losses.
So far, Obama looks like another Banana Republican to me.
I hate to tell FDIC, but they are already running the bad bank scenario because they are all insolvent. It's just a question of when the sheeple wake up from their slumber. They can't manipulate the Bond Market, but they will damn well try which should make for some great popcorn time.
It's enough to make us who were responsible....not be any longer. Wish I had the balls to not pay my mortgage....too bad the wife would have some issues with that though.
MS writes:
It's enough to make us who were responsible....not be any longer. Wish I had the balls to not pay my mortgage....too bad the wife would have some issues with that though.
Ciao
MS
I feel like the designated driver who somehow ended up with a hangover.
Well, the S&P opened up 20 or so points and is going... nowhere. We got our 860, too. Could that be it for now? The FOMC & bailout vote might mark yet another top.
IMHO the difference ise that RTC was designed to dispose of and NOT to operate the institutions, whereas "nationalization" implies otherwise. Comrade Bear (tj & the bear) | 01.28.09 - 9:57 am | #
RTC ran a number of the institutions (hell they failed outright as these WOULD HAVE if not for TARP)... up to two years as they figured out what to do with the really bad stuff - RTC lasted way longer than the original intent because the pollution spread farther than they thought. Here at least they are acknowledging it isn't going to be a quick fix. I'm better with that then a phony short time table.
And they are going to end up at FDIC anyway - just a matter of how they get there & how it gets processed & how much we spend to support them while they are circling waiting to land at FDIC international. Fasten your seat belts.
It's enough to make us who were responsible....not be any longer. Wish I had the balls to not pay my mortgage....too bad the wife would have some issues with that though.
Ciao
MS
MS | 01.28.09 - 9:57 am | #
As the very, very old saying goes: Virtue is its own reward.
However, that was pre-modern age. Therefore, you don't hear it much anymore.
Why can't we go the way of the Sweden model: wipe out the equity holders by writing down the toxic assets and then inject capital? Of course Sweden didn't slice the debt holders which I think we should in the case of the US since the needed capital injection is so high and debt holders knew the risks when they jumped in.
So when does the dollar finally fall into its grave?
careful laying into shorts today.....we get a "juicing" opp. from the Fed later on when they tell us they "might" buy 10 year T notes.....too bad they started that already though...
Japan tried the Bad Bank thing and it failed ....what makes us any different? Anonymous | 01.28.09 - 10:00 am | #
Because they didn't wipe out the equity - and start over. Plus they wanted to 'preserve' the jobs and allow for the managers to 'save face'. Here in 'Merica saving face mean we rip your face off and put it on display.
I'm simply arguing intent. Nationalization implies an intent to run, whereas the RTC had no such designs. Operation of failed institutions was simply a means to an end, not the end itself.
I have no problem with them going the RTC route, but nationalization is another thing altogether.
CITIGROUP INC\t\t 4.11\t0.56\t15.78%\t59,951,649\t09:42
BANK OF AMERICA\t7.46\t0.96\t14.77%\t46,454,172\t09:42
JPMORGAN CHASE\t26.89\t1.83\t 7.30%\t9,310,196\t09:42
AMERICAN EXPRESS\t17.75\t1.07\t 6.42%\t2,067,883\t09:42
You have been granted a gift. Do not delay in opening it.
Interesting article in my paper this morning that now seems to be hitting the internet forums. It appears the rich are now "embarassed" by their wealth and are hiring people to deliver their pricy purchases to their homes. Can you say FEAR? It's begun. Conjure is right, he's always right...bah...
Executive Order 6102 - Requiring Gold Coin, Gold Bullion and Gold Certificates to Be Delivered to the Government
By virtue Of the authority vested in me by Section 5 (b) of the Act of October 6, 1917, as amended by Section 2 of the Act of March 9, 1933, entitled "An Act to provide relief in the existing national emergency in banking, and for other purposes," in which amendatory Act Congress declared that a serious emergency exists, I, Franklin D. Roosevelt, President of the United States of America, do declare that said national emergency still continues to exist and pursuant to said section do hereby prohibit the hoarding of gold coin, gold bullion, and gold certificates within the continental United States by individuals, partnerships, associations and corporations and hereby prescribe the following regulations for carrying out the purposes of this order:
Section 1. For the purposes of this regulation, the term "hoarding" means the withdrawal and withholding of gold coin, gold bullion or gold certificates from the recognized and customary channels of trade. The term "person" means any individual, partnership, association or corporation.
Section 2. All persons are hereby required to deliver on or before May 1, 1933, to a Federal Reserve Bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion and gold certificates now owned by them or coming into their ownership on or before April 28, 1933
We have shit loads of 'equity' - look around at the bricks and mortar, farms, factories, etc. We have a PAPER clusterfuck... okay then wipe out the paper.
Too many accountants on this forum - stop looking at the balance sheet entries and start look at the physical assets - there is more there than you realize. The RTC method (or nationalization & re-privatization) is a way to 'reset'. That is in effect what we are seeing - a forced and systemic 'reset'.
As a Swedish, I am a little surprised at that there is not much more of protesting among taxpayers in the US against this. Here in Sweden most people are brainwashed taxslaves. But I thought that in the US there would be a lot more of freedomlovers speaking out against this giant ripping of taxpayers. It is your freedom they are taking away. Best wishes to US freedomlovers from a libertarian in Sweden.
dryfly, all the banks are way up.... Not sure why such enormouse optisim if that is the case. My sense is the biggest will survive and they will through the lesser ones under.
In Q4, Conoco incurred a > $30 billion charge off for good will.
That has to make private equity investors feel great. So many of the assumptions about the future of take-over targets were crazy optimistic. And that cheap debt they used in 2003-2007 is a time bomb. No way will they be able to refinance that crap on those idiotic terms.
Private equity became a roach motel - you can get in, but you can't get out.
But I thought that in the US there would be a lot more of freedomlovers speaking out against this giant ripping of taxpayers. It is your freedom they are taking away. me | 01.28.09 - 10:16 am | #
You assume we are planning on making good on the debt? I see no reason for the rest of us to pay for the excess of prior generatons...
dryfly [What would be different? Uncle Sam owning the equity - ALL of it. Wipe out the common completely... clip the bondholders substantially THEN recap the banks & IPO or sell them to another healthy bank. If they don't do that this will fail - period.
That is what RTC did in the last one of these affairs and what we should have done 18 months ago.]
I agree that's what needs to happen. Except what's different now than 20 years ago is Greenspan cultivated the wondrous CDS market that did so much to disperse systemic risk and lower capital costs.
If the bondholders got clipped as they should across the board to share in this collosal loss (instead of passing the whole thing to taxpayers) the entire financial market will implode. CDS should be eliminated. It's totally useless for the real economy. Just a license to steal.
But I thought that in the US there would be a lot more of freedomlovers speaking out against this giant ripping of taxpayers. me | 01.28.09 - 10:16 am | # ----- Subtlety is the name of the game, my good man. I think that you will see people claiming for exemptions on the federal taxes, and people hiding/avoiding the state tax man either through cash-only transactions or funny accounting within corporate structures.
What you may see is a variation of the old adage: "When you owe the bank a million dollars, you have a problem. When you owe the bank a billion dollars, the bank has a problem."
The underground economy is picking up speed, and I don't think the gov't folks are aware of how fast it is moving yet.
As a Swedish, I am a little surprised at that there is not much more of protesting among taxpayers in the US against this. Here in Sweden most people are brainwashed taxslaves. But I thought that in the US there would be a lot more of freedomlovers speaking out against this giant ripping of taxpayers. It is your freedom they are taking away. Best wishes to US freedomlovers from a libertarian in Sweden.
It'll come, just give it time. While the stock market has collapsed most people are still gainfully employed, so the credit crisis is largely something on the news. Now that layoffs are gaining momemntum and non-bubbly businesses are hurting, people are going to become much more aware.
Should be a real mess by the time the mid-term elections come around, and look for the resurgance of fiscal conservative republicans in Congress (after 8 yrs of rubber stamping massive deficit spending).
Watch this 4 minute video from Itulip which explains everything very clearly. WE ARE SCREWED!
http://www.garynorth.com/public/4527.cfm \t SPECTRE of Deflation | \t \t \t \t01.28.09 - 9:59 am | # Spectre, I was speechless after that. I need to gather my thoughts (or perhaps my GO bag).
Blackhalo, You're right. The rest of the world should start getting pretty dubious on whether we're really planning to pay it all back, because we're not.
@Angry Saver - did you see the article about private equity being able to buy back their distressed debt and then being able to spread the tax burden out?
Based on PPSF (Source: Radar Logic). What were the buyers thru most of 2008 thinking when they were buying foreclosed and other homes at bargain prices? Dopes, no?
Jas, yes they are dopes, but maybe catching falling knives is a possible new job as part of the Stimulus Bill.
You know, I'd love to take out a loan from a Bad Bank. At least then you know what you are getting and I'd rather have my 5.5% interest go to help with the national debt instead of to asshat to pay for his new office.
And of course, calling a bank 'bad' means that some place there are still 'good' banks out about about. Kind makes you wonder.
FLL Renter writes:
As a Swedish, I am a little surprised at that there is not much more of protesting among taxpayers in the US against this. Here in Sweden most people are brainwashed taxslaves. But I thought that in the US there would be a lot more of freedomlovers speaking out against this giant ripping of taxpayers. It is your freedom they are taking away. Best wishes to US freedomlovers from a libertarian in Sweden.
When the democrats fail as the last 8 yrs of republican rule failed, that's when it gets interesting
It'll come, just give it time. FLL Renter | 01.28.09 - 10:23 am | # ----- I agree with the above. We have a history of hating taxes. It is one of the reasons that we exist, and it is one of the things that both sides of the political spectrum can rally around sans a foreign invader.
When the "hatin'" on the Tax Man begins, remember to pass the popcorn.
I would not be suprised if the amount of cash in accounts under $65,200 has been steadily dropping. Partially for economic reasons; partly out of fear.
Comrade Kristina writes:
Interesting article in my paper this morning that now seems to be hitting the internet forums. It appears the rich are now "embarassed" by their wealth and are hiring people to deliver their pricy purchases to their homes. Can you say FEAR? It's begun. Conjure is right, he's always right...bah...
Nothing will happen, I think, until enough people (critical mass) can see a negative change in their lifestyles. We are not there yet.
If it does not happen in one giant event that is media friendly is will not get through. When enough people look back, sigh, and see the golden years. When all they see ahead is the bleak years. yea, maybe the
..........I guess it's a good thing the HDef TV changeover thing will be delayed till June. No sense in the low-incomers missing out on all the upcoming fun. I was looking forward to "muted white-noise"
If anyone is interested, this is a link to a pdf file of David Rosenberg's Jan 26 Economic Commentary, where he suggests the US is currently in Depression:
@Angry Saver - did you see the article about private equity being able to buy back their distressed debt and then being able to spread the tax burden out?
No. But I was familiar with a few of the takeover targets through work. The deals were total stupidity. They made no more sense than buying and flipping a house in 2007, just before the housing bubble collapsed.
Private equity shops became glorified house flippers. Many of the late deals will flop big time.
You're right. The rest of the world should start getting pretty dubious on whether we're really planning to pay it all back, because we're not.
Which is why it blows my mind that 10- and 30-year Treasuries are yielding 2.5% and 3.2% respectively.
As it stands today, I wouldn't lend our federal government money for 30 years at 3.2% interest if Warren Buffett himself were in charge of our public finances, far less the merry band of misfits and incompetents who have the reins. There's just no way. I'd rather lend against Las Vegas real estate ... at least you can't print it.
Chew on this: It took 140 years of this republic to incur a net public debt equal to what we are currently adding to the tab every day. Every day! Does that sound like the fiscal habits of someone to whom you want to lend money at 3 percent and change?
the scary part of that video is that it doesn't even calculate the repo. process that was ramped up in 2002. Honestly I stopped counting it after $2t...so you can most likely add in a few extra trillion to that.
Now I know I'll get people who say it gets "paid back" however you don't really factor in what is done with the money in the ensuing time-frame that it leaves the Fed and is in the system. For me, it's just like printing it up and "lending it out" without paying it back because the damage it does is still very real no matter what the terms are for what they call "repayment" is/are.
CONJURE'S GLOBAL DEPRESSION CLOCK
The time is now--
12:00:00
Conjure says, "Good Luck."
mp | 01.28.09 - 3:51 am | #
FINALLY! It is time! To the hoopajoop mobile! I shall fly unharmed above the carnage in my whimsical contraption, and escape to my hidden cave in iceland!
It took 140 years of this republic to incur a net public debt equal to what we are currently adding to the tab every day. Mook | 01.28.09 - 10:37 am | #
I doubt that's true when you use real dollars. Anyone know?
Volker The Viking, pretty strong stuff when you are trying to drink the first cup of coffee during pre-dawn hours. I almost spit coffee clear across the room to my sleeping wife. Pretty much says it all in 4 minutes, and even a neophyte can understand those scary as Hell pictures/charts.
JP, that is I and my husband in the wedding album. I am trying to find a link to the story, it was written by John Rodgers of the AP but I can't find an online version, still looking...
@JP - I have a nice chart in my archives of the national debt both in $ and % of GDP terms up until 2004. It's pretty spectacular, though the debt as % of GDP was higher at the end of WW2 time period - well over 100% GDP. So it's been done before.
Then again, after WW2 a significant chunk of the world's manufacturing capacity had been levelled - except in the US. Something to think about I guess.
Obama's all about justice and taking care of the Middle Class, right ? He's going to throw the uberRich and bankers under the bus raising their taxes so we get some loss sharing, right ? Where's the outrage ?
You Obama worshippers are total Born & Bred DOPES.
Not that I can find. Good to see you around, BTW. \t Comrade Bear (tj & the bear) | \t \t \t \t01.28.09 - 9:42 am | Thanks tj. I've been lurking, but very quite. Increasing gain in the financial feedback seems to have brought the system rapidly from semi-stable, to unstable, to chaotic, and I fear the next step is complete loss of control and an exponential blow-up. This makes everything so unpredictable I've been afraid to comment!
sparkle "the debt as % of GDP was higher at the end of WW2 time period - well over 100% GDP. So it's been done before"
In a vastly different world. We were the only remaining insustrial superpower, had debt financed within our own shores and had the capacity to grow out of it. Now, not so much.
We have a history of hating taxes. It is one of the reasons that we exist
It isnt even paying income tax that galls me. I am reasonably okay with supporting my government.
It is the waste. Let me waste my own money. I will enjoy it more that way.
Heres an example:
Until he got caught (he now pledges to give the money back), John Thain spent my tax money on a $1.2M office redecoration. Expressed in terms of dollars per taxpayer, my share of his folly probably amounts to one or two beers.
Given a choice between John Thain flicking his boogers into a $1400 wastebasket and me having a couple of beers, Ill take the beer.
Yes I'm old enough (just) to actually have had to do "duck and cover". We really should have been doing "bend and spread"........sure would have prepared us to act accordingly....for our own selfish reasons.
In a vastly different world. We were the only remaining insustrial superpower, had debt financed within our own shores and had the capacity to grow out of it. Now, not so much.
They, being the world, needed to rebuild an entire infrastructure. I think that will not be so important this time.
@bearly - agree 100%. Hence my comment that after WW2, the world's industrial capacity (the majority of it) resided within the US borders since we had bombed most of it flat in Europe and Japan.
Just wait until the peons start dragging these bastards out in the street and giving them the beat down. Anonymous | 01.28.09 - 10:41 am | #
The gated communities with the Wakenhut guards are going to become tempting tagets for rioters who are smart enough to not burn down thier own neighborhoods.
"So, we'll stuff all the toxic assests into a black hole and call it a Bad Bank."
Not bad, it's the kind of thing that investors can believe in. Much like the "The Goldilocks Economy", "The Santa Claus Rally","The Soft Landing","The New Paradigm" and all the other supermagical ideas that drove America to where they are now.
@ Kristina: Thanks for the link. And it was my guess that the photos were you and hubby, I was trying to throw you guys a witty compliment... Next time I'll try harder.
@ MS, Sparkle: I've seen the debt vs GDP graphs, and I realize well that national debt was out of control. My question was genuine curiosity about the real dollar value of that amount, which should no doubt be correlated to GDP but not equal.
Sue (Capital S), I was in a fetal position after that 4 minute horror show. It's why I have tried my best to hedge against as many possibilities as I can get my arms around even if it seems tinfoil. Better to have it and never need it then to need it and not have it when people are depending on you. It's called insurance in every other circumstance in life.
I don't have a link but I saw on the ticker last night that AIG was handing out "retention" bonus' to about 400 derivative traders....something like almost $40m...
It may just be the actual release of the money from the announcement in Nov. however I can't think of one group or institution that meets the definition of moral hazard any better...besides...where would they go?
Since they did so well we need to reward them further...
The gated communities with the Wakenhut guards are going to become tempting tagets for rioters who are smart enough to not burn down thier own neighborhoods.
That gives rioters a lot of credit. See: Argentina
Really it'll hit the rich when people figure out the art of kidnapping for profit.
Spectre, don't feel bad, yesterday when the Smurfit/Stone news scrolled across my ticker, I cried. For the first time in this crisis, I just broke down and cried...My poor husband had no idea why I was crying until I pointed to the screen and he realized he is never going back to work...
the only reason to create a new structure is to avoid having the holders of bank capital take the hit and passing the losses to taxpayers. this is a sham and citizens of this country need to stand-up against it.
I agree, except so many of those holders are institutional - wipe them out and then we'll be bailing them out months from now anyway.
The whole point of the bad bank is to throw money at the underfunded-FDIC - and an attempt to throw some confusion into the mix so the moral hazard created by not charging the reckless lenders the proper deposit insurance premiums in the first place is overlooked. This is the inevitable course of action - negotiation has been going on for months. The open question is whether we have one new RTC or a few regional ones.
No. But I was familiar with a few of the takeover targets through work. The deals were total stupidity. They made no more sense than buying and flipping a house in 2007, just before the housing bubble collapsed.
Private equity shops became glorified house flippers. Many of the late deals will flop big time. Angry Saver | 01.28.09 - 10:36 am | #
That was my message for the last two years: PEs were just doing 'flip this firm'... And medium sized regional banks will get killed as these deals blow up. I know of two myself where the debt was crammed down onto the bank's balance sheet (as phony equity). This part of the mess is just now starting to unfold.
Maureen Dowd in the Nytimes having fun with the Socialist Jet Set...and the comments are pretty darn angry...Thain really made himself an icon of greed and arrogance...but since this is a global catastrophe, I do wonder where these banker folks and their families think they are going to hide.
Soros wants America to create a "Good Bank" as aggregator.
(America replies that they lack expertise in creating good banks, but that the idea has merit, and then could sell TV rights for the apocalyptic grudge match.)
What about all the bad CEO's that had a hand in this mess? Will they get to keep their jobs in the "good" banks clevis slackjaw's brother | 01.28.09 - 11:02 am | #
Is that not the entire point? Keeping the good ol' boys who contribute to polictica campains, gainfully employed is job #1.
@JP - here is a google doc link to my old archive. It only goes up to 2004 and I can't find the links to my original sources. Also, keep in mind that prior to Roosevelt, I believe, the GDP values are just estimates based on extrapolation and models.
"But I thought that in the US there would be a lot more of freedomlovers speaking out against this giant ripping of taxpayers."
But we're not paying extra taxes, we're just borrowing the money.
We've had 25 years pretending that lowering taxes will magically balance the budget, and the taxpayers don't need to pay anything. Americans think we just need to lower taxes more to pay off the debt.
So of course Americans aren't upset; we don't actually expect to pay the bill.
Yes, but it concludes with the suggestion that those running things don't know what they're doing.
I say they do.
Newbie 101 | 01.28.09 - 11:03 am | #
In honorary tin foil hat style, I agree. I would say they don't ALL know, but I would say a select # do. But as with most of my thoughts, they are better kept inside my noggin.
I also post comments to an irc channel as they appear on haloscan. Click for a web irc interface: Mibbit IRC client widget (Or join the irc server directly: irc.realize.org:9996 #calculatedrisk)
What others have said about CRBot: Gary writes: This CRbot is pretty nifty. EvilHenryPaulson writes: CRBot is great on mobiles Loudocracy writes:
Thank god CRbot spared me from that dead thread. Hoopajoops writes: Posting a test message from the IRC Channel... THIS THING ROCKS
CRBot: Killing dead threads deader since last week.
as far as the "masses" being outraged...it still in contained to forums and until the people wake up and show up in Washington in the same numbers of just last week to "celebrate change" (heavy does of sarcasm) the system will continue to rip us all off until we don't let it.
On a personal level I am making sure I owe NOTHING in taxes...being self-employed there are ways to creatively make that happen (all legal too!)....I suggest you all do the same to the extent of your situation.....
They may be doing what (they believe) is necessary under very difficult circumstances. It would seem to me they need to have bond yields down for refinancing while inflation expectations up or otherwise people will not invest but hoard cash. They may be achieving but are they manipulating the market from both ends in surprising ways?
The country already has enough bad banks, Bank of America (BAC) and Citigroup (C) for starters. Ok, thats just snarky, but we do have an existing mechanism for a bad bank, it is called the FDIC. If a bank makes too many bad bets and becomes insolvent, the FDIC comes in on a Friday night and holds a pizza party. The insured depositors get paid off, or transferred to a healthy bank. The branches and other physical assets get sold to other banks. The shareholders of the insolvent bank are wiped out and the uninsured depositors and other creditors take a haircut. If that is the plan, I have no problem with it, and I suspect that as things are going, Dominos and Pizza Hut are going to be getting lots of business from the FDIC this year. If given the scale of the problem, some new entity (Lets call it RTC2) needs to be set up to hold these assets until they either run off or can be sold back to the private sector, so be it. However, as I read it, that does not seem to be the plan. The new bad bank that is being proposed seems like a replay of Hank Paulsons misbegotten 3 page plan of last fall. The government would buy up the existing toxic assets from the existing banks and hold them.
The problem is: how much do you pay for these assets? If you pay market price, then the bank is insolvent, and you are back to square one. If you pay more than market price, it is simply an inefficient way to give a gift to the bankers who got us in to this mess in the first place. If you bought 100 shares of XYZ Corp. six months ago at $100, and they are currently trading at $50, if I come in and buy that stock at $75, I am giving you a gift of $2,500. This is true even if my cost of capital is lower, or if I have a computer model that says that XYZ Corp is undervalued at $50 and is really worth $80. It is a lot easier to see with openly traded and straight forward assets like common stock, than it is with thinly traded, obtuse, opaque and complex assets like some of the toxic assets, but the principal is the same.
The second approach that was done with the first half of the TARP was conceptually much better than overpaying for lousy assets, it was just very poorly implemented. The problem is that the banking system is almost insolvent system wide. Some banks are very deeply insolvent, and others are in better shape. But the scale of the losses that are hidden on the books of the banks exceeds their equity, even with the money already injected. The answer then is to provide more equity to the banking system. With a leveraged balance sheet, a decline in the value of assets reduces equity much faster than it reduces assets, which further increases leverage, until equity reaches zero, leverage becomes infinite and the entity is insolvent. If a balance sheet is levered 30:1 and you want to spend 1 to reduce leverage, you dont subtract the 1 from the 30 (to get to 29:1) you add it to the 1 (to get to 15:1). Its called getting the most bang for your buck, or billions of bucks as the case may be.
However, the Treasury should get a market price for the investment. Last Fall, Warren Buffet invested $5 billion in Goldman Sachs (GS), two week later the TARP program also invested $10 billion. However, Buffet got a bigger percentage of Goldman, and the same number of dollars in dividend payments for his $5 billion investment than the Treasury did for its $10 billion investment. So far both investments have proved to be turkeys as the value of GS has slid significantly since then, making the warrants very far out of the money. However, any way you slice it, we got a far worse deal than Buffet did. The next tranche of the TARP could easily, at current prices, be sufficient for the taxpayers to become 50% owners of all the major banks in the country. The existing shareholders would be severely diluted, but the banks would be better capitalized and in the position to lend again. The government would also then be in a position to stop the obscenely high salaries and bonuses that are paid out up and down Wall St. This would also help firm up the capital position of the banks. Common dividends would also be eliminated for several years. A few years from now when the economy has recovered the Treasury could sell off the bank stock and use the proceeds to pay down some of the ballooning federal debt.
Comrade Kristina, I listened to a Lincoln quote yesterday that I must find for you. Anyone who says this debacle couldn't be forseen is more full of crap than a stuffed Christmas Turkey. As bad as we are being pillaged, and it's quite severe, our children and grandchildren are actually being pillaged worse because they are the ones supposed to pay back this debt.
I can accept selfishness as part of human nature, but these are our kids we are talking about for God's sake. Do we have no shame or honor in our bones?
Here's a few general ideas, but I suspect they don't apply directly to you.
Boycott the debt system. Pay cash or if you use credit pay it off every month. Cars bought with cash only (used if necessary). Get out of debt, including mortgage.
As far a investments, only self managed accounts via low cost companies such as Vanguard or ETFs. No active money managers or financial advisors.
way ahead of that.....I was sort of asking that rhetorically to generate some discussion for others and hopefully find or see something I have not done already. All good advice and should be heeded by all..
\tWhew! The SKF is getting hammered. I hope folks' ideology on this site doesn't guide their investment decisions. RuffRednsore | 01.28.09 - 11:21 am | #
You do realize that SKF is a terrible investment based on a macroeconomic call, right?
show up in Washington in the same numbers of just last week to "celebrate change" (heavy does of sarcasm) the system will continue to rip us all off until we don't let it. MS | 01.28.09 - 11:10 am | #
You'll have to wait for it. The plebes will wait to see if O's actions have any positive effect, and after the 1st 100 days when lay-offs continute and housing continutes to fall, and the bankers continue to get a free ride... some one of note with a little charisma will rise up and start bashing TPTB.
The Geithner thing with China is purely theatrics.......Paulson did it every once in a while but he was just more subtle about it. I'm certainly not agreeing with the policy of pissing off your largest debt holder however it's just talk for the masses here.
Hoenstly..I'd be more worried about the UK and what they plan to do with it's holdings...that could start the game of musical chairs and then China is forced to participate for reasons of protection.
Comrade Kristina, I believe Gerald Celente quotes Lincoln in the first segment which I copied for you. To say it rings true is the understatement of the year.
No, because "good Congress" is an oxymoron. Hence why our founding fathers tried so hard to protect the people from the appetites of the beast. Outsider | 01.28.09 - 10:09 am | #
This again is another stupid gov't plan - moving one pile of crap over to, in this case, the tax-payer. Why does this make sense?
Solution:
1) Mandate all banks to immediately write-down all 'toxic' crap to current market value. Yea, I know this number will be huge and the banks will show huge losses, but keep in mind, the saying "pay me now or pay me later" holds even stronger in this case. On-going delays will only forestall worldwide economic recovery.
The governments role is not to act as babysitter. The governments role in this case should simply be to act as the lender of last resort - to lend (or guarantee) to the banks at near zero rates (banks would also be required to issue substantial warrants and options).
2) If the banks refuse to the mandatory write-downs, then, and only then, should the gov't take managing control of said bank(s).
As a Swedish, I am a little surprised at that there is not much more of protesting among taxpayers in the US against this. me | 01.28.09 - 10:16 am | #
Wow! If this shocks the Swedes, it must be bad. Seriously, when the first bailout was enacted, perhaps 98% of the calls to congressmen were against it. They voted for it anyway. I guess the American public at large has decided that DC is goingt o do whatever they want regardless of public opinion. We'll all see how that turns out. Thanks for stopping by.
Black Star Ranch(Excellent) writes: \t..........I guess it's a good thing the HDef TV changeover thing will be delayed till June. No sense in the low-incomers missing out on all the upcoming fun. I was looking forward to "muted white-noise" Black Star Ranch | 01.28.09 - 10:34 am | #
They're probably going to time the stimulus check to coincide with the changeover to make sure the money gets spent this time;-)
Yea, I know this number will be huge and the banks will show huge losses, but keep in mind, the saying "pay me now or pay me later" holds even stronger in this case. bdwnnc | 01.28.09 - 11:49 am | #
While is support this course of action, I do not think you grasp the scope of the impact. All five previous IBs + BOA and Ctii, woudl be in FDIC stewardship. TPTB do not want this to happen, as thiese are ths guys that fund their extravagant lifestyles. Just think of all the stadiums and bowl games that would have to be renamed.
It is the waste. Let me waste my own money. I will enjoy it more that way. Anonymous | 01.28.09 - 10:47 am | #
According to Keynes, taking your money and giving it to someone else results in greater average enjoyment. This is his argument for transfer payments. Seriously!
All taxpaying US citizens are hereby ordered to spend some amount of their future time working for free in order to preserve the structure, jobs, and executive teams of the banks that have looted them of their 401k and investment money.
PonziMonetizaCoruptiCapitalism writes:
i think what we need is a sleuth to uncover the names of these 400 aig thiebes and publish it online. afterall, the government(we the people)
Don't stop with AIG. Get the names of the other pigmen as well. If there's one thing that pisses me off, it's welfare for the wealthy, or very wealthy in this case. They love the 'free market' unless it turns against them, then they need a rescue or the world will end.
"On a personal level I am making sure I owe NOTHING in taxes...being self-employed there are ways to creatively make that happen (all legal too!)....I suggest you all do the same to the extent of your situation....."
Months ago I was accused of being a "tax-cheat". While that is incorrect, is there any wonder why so many choose that avenue? The only way to not condone the irresponsible spending is stop the irresponsible funding.
Whew! The SKF is getting hammered. I hope folks' ideology on this site doesn't guide their investment decisions. RuffRednsore | 01.28.09 - 11:21 am | #
Yeah, they better show some results by 2010 or the turnover with the new "contract with America" will be huge. \t Blackhalo | \t \t \t \t01.28.09 - 11:55 am | # Blackhalo | 01.28.09 - 11:55 am | #
All taxpaying US citizens are hereby ordered to spend some amount of their future time working for free in order to preserve the structure, jobs, and executive teams of the banks that have looted them of their 401k and investment money. wally | 01.28.09 - 11:59 am | #
Wally, We already work for free until sometime in March or April. You must be new to the working scene.
Wally,
We already work for free until sometime in March or April. You must be new to the working scene.
You should really try working overseas sometime....don't just whine about opposing the system, but your money where your mouth is. Enjoy your tax exemption on the first $85k and say FU to the system. . Every time I get my check and there are no taxes deducted....I smile.
Expert Help from the World Bank | Systemically Important
Argues that the reason for such crises as this is not just bad politics but bad thinking...
...exemplified by the quotes like this: In our base case simulation there is an upside case that, er, corresponds on the flipside of the downside case in kind of an adverse direction.
They use pure Afgan grown opium. What is the GDP of Afghanistan?
Isn't Bank of America a bad bank, same as AIG is a bad insurer?
He's back.
Jas - discovering GIGO, 2008.
Wait until the discovery of what that means for a Treasury portfolio, 2009.
Am I understanding this correctly? We/taxpayers take the paper and the bank shareholders get the benefit? They are not touching the common stock. I have seen it all now.
Somewhat less OT:
Bad (United States) Bank (FDIC/Treasury)
Definitely a must r
Is Bush still our president?
Is Hank still our treasury secretary?
Gideon Gono
"hope" for "change"
The US Federal Reserve is also running a bad bank.
YouTube - When the Levee Breaks
Jas Jain(Irritating) writes:
\t--
Mmckinl: âJas Jain says... Rogue economists says it all.
Jas Jain | Homepage | 01.28.09 - 9:11 am | #
Why don't you just use that as you by-line?
"...some management teams could be ousted..."
Yeah! Sure, we're spending a couple trillion of taxpayer money to strip all the worthless assets off the books of the insolvent banks ... and sure, we'll make sure all the bondholders are made whole ... and, OK, we're even preserving the common stock ...
... but we're gonna get rid of "some" of the management teams in return! Maybe! We think!
That'll show those uppity Wall Street types who's boss!
Who's with me?
"...some management teams could be ousted..."
to become managers at the new bad bank. lol
Key section:
Bank Seizures
Bank seizures are going to happen, Senator Bob Corker, a Tennessee Republican, said in an interview after a meeting between Obama and Republican lawmakers in Washington yesterday. I know it. They know it. The banks know it.
Laura Tyson, an adviser to Obama during his campaign, said banks need to be recapitalized with different management so they start lending again. You find some new sophisticated management unlike the failed management of the past, Tyson, a University of California, Berkeley professor, said at the World Economic Forum conference in Davos, Switzerland today.
Still, nationalization of a swath of the banking industry is unlikely. House Financial Services Chairman Barney Frank said yesterday the government should not take over all the banks. Bair said earlier this month she would be very surprised if that happened.
won't nationalize all the banks, just some of them at a time, on a rolling basis . . .
won't run all the banks, but will run some of them long enough to run the management out of town and then privatize the banks with new management, rinse and repeat. . .
won't pay any money for the toxic assets but maybe give shares in the bad bank . . . leaving the question open of how the "good" banks get recapitalized and on what terms. Krugman dissected this creature back in the time of Hanky's 3 Page Plan.....
Yes, there will be a bad bank, more or less RTC style, and FDIC is the part of govt most skilled at starting up such a thing. But once we all accept that premise then we get to discuss the how the bad assets are acquired and how the good banks are recapitalized.
This is the way to get people aboard the nationalization express....
See Bob Free Market Corker. Bank seizures are going to happen, said Senator Bob Corker, a Tennessee Republican . . . I know it. They know it. The banks know it.
Let's not call it nationalization. Let's call it seizure. Corker supports that.
Puzzling over the inflation/deflation arguments, and the effect of stimulus, one thing has consistently bothered me. The most common argument for coming inflation runs something like this: monetary and fiscal stimulus will be used to counter recession and deflation, but the fed and gov won't stop in time, and serious inflation will follow. Fine, but this implies that it's possible to get it âjust right" so that growth resumes without inflation. I'll argue that this isn't possible; that for the stimulus to be effective there must be substantial inflation. At a fundamental level, the financial crisis reflects a misallocation of resources. Thus unused capacity is readily available only in sectors where there are existing surpluses. Putting stimulus into these sectors (e.g. housing) will only make things worse, and might be ultimately deflationary due to excess supply. So to effectively counter recession and deflation, stimulus must be: 1) large enough to balance contraction elsewhere, 2) put into sectors with insufficient current capacity. So this (borrowed/printed) money would be spent now, to boost future productivity. Put these together, and sufficient stimulus means keeping a constant or expanding circulation of money, while decreasing the supply of products (new capacity in needed areas takes time; existing excess capacity is for the wrong products, so less utilized). More money circulating + less products = inflation! Now debt-financed investment in future productivity may be a good idea, if done wisely, but short of wildly optimistic developments (e.g. power too cheap to meter, etc.) it seems inevitable that it will lead to inflation; even more so if the investment choices are poor. Is there a flaw in my reasoning? I hope there is!
Mook,
This is RIDICULOUS! Is anyone at any level of govt speaking out against this.
Gee, ya think BAC C JPM WFC ... all been out in the distressed market buying up assets over the past coupla weeks, ya know, "in case" this might have come to pass ?
Wouldn't that make it the "Worse Bank"?
Eat up America, time to munch.
I think I should just start making illegal, unethical and just plain stupid decisions so I can get me some bailout too.
What a really, really, really, really, reallly fucked up system we have here.
Reward the scum, punish the people who play by the rules.
Can I opt out?
http://www.marketwatch.com/news/story/Do-we-need-a-North/story.aspx?guid={D10536AF-F929-4AF9-AD10-250B4057A907}&dist=SecMostRead
How realistic is a North American currency?
Commentary: Uniting U.S., Canada, Mexico money could result from crisis
NEW YORK (MarketWatch) -- Thomas Jefferson once said: "When you reach the end of your rope, tie a knot in it and hang on." As the global financial system pushes on a string, investors are desperately trying to hold tight.
The New World Order is upon us, full of hope, promise and a fair amount of fear. In our recent discussion regarding the direction of our country, we noted the risks of catering to conventional wisdom and the implications for the U.S. dollar.
You find some new sophisticated management unlike the failed management of the past
But of course it needs to be experienced management, so we'll get the guys who used to run BAC to run JPM, and the guys who used to run JPM will run WFC, and the guys who used to run WFC will run C....
Does this mean Sheila is now in charge of all banks? Because I thought all banks were bad.
/
"in the hopes of stemming a crisis that has stripped more than 1.3 million Americans of their homes"
'Stripped' makes it sound like they deserved to have it in the first place.
It's not a "crisis" when they never should have had them n the first place. AS someone already mentioned...it's as if Paulson and Bush are still there.
Massive failure
Ciao
MS
I've been a Bad Bank, a VERY bad bank. I need a spanking.
Puleze don't throw me in that briar patch!
Let's see if I understand this.
Create a Bad Bank in order to preserve the bad bankers, then people will have confidence in banks again. Is that about it?
Ousted? OUSTED? F that, I want the sonofabitches waterboarded and then hung in the public square, Phil and Wendy go first.
"Bad bank" has such poor spin potential. All I think of is scolding my dog: "bad bank, baaaad bank, you smell awful - did you get into some rotten mortagages?".
"Oh good bank(s), you're such a good boy, you swam in a river of money and cleaned yourself off before coming home".
when will there be some adults in dc? a new bad bank structure is not needed. there is one in place already, it is called the fdic. however, use of the fdic bad bank requires for the bank to be closed and equity holders eliminated and haircuts applied to uninsured depositors and non-depository creditors. the only reason to create a new structure is to avoid having the holders of bank capital take the hit and passing the losses to taxpayers. this is a sham and citizens of this country need to stand-up against it.
I know I'm late to this, but just finished Krugman's book, the updated version. He writes lucidly in a synoptic fashion of the history of all the crises of the last several decades annd concludes with each that:
1) The PTB did it wrong or too late.
2) If they did the right thing, they did it too small (size does, after all is said and done, matter.).
3) He was the only voice of dissent and was told on at least one occasion to stop since he was the 'only voice in the room that disagreed'.
4) Bernanke hired him away from MIT and as such BB is the best and only option to run the FED.
5) There are no good options to the solution of our problem. In fact, in each example from history there were no good options either.
6) His solution is MASSIVE spending on a scale not seen before.
7) That it's up to you, me and the person next to you to get back to spending, start working on the demand side to fix it.
Well, bullshit. He walks the reader to the door of suggesting a gold standard then turns away without knocking. Yet, he seems to be saying that the problem is the system. Hmmmmmm.....
I thought pretty much every bank in the US right now is a bad bank.
C is up over 20% in premarket? Unreal.
Wally-
"that's about the size of"....as General Buck Turdgeson would say.
Ciao
MS
surferdude,
I agree. I can't believe some group or senator or someone is not front in the news against this robbing of the taxpayer. Equity holders need to be eliminated. I imagine they'll be paying their dividends, too.
The Baddest Bank, it will be.
Change you can believe in when you bend over and grab your ankles.
Everquest USA
Bear Stearns' Subprime IPO
This country is on the express line to hell.
I think we the people need a union.
Because I have some really bad issues on my books, and I would like them written off on a "bad sheet" too. It would clear away a lot of the reason why I am not living up to my consumer potential in this economy.
Who is going to stand up for me and make legislation to toss all my bad finances into a neat little mini-book and throw them into the ozone?
It's only for the good of the country. Then I will be a good little consumer again. I promise.
Sheila BLiar = Fail
And if I hear someone else in the MSM, or PTB, push this idiotic canard that all we need is for banks "to start lending" again...I'm truly going to loose it...yeah I know, I'm toast on that bet.
It's so much fun being a comrade.
I wonder if Gulag Denizen will fit...
Nostrovia,
Worst National Bank?
I'm still not getting it.
Nationalization is a good idea because...why?
Bad bank is a good idea because...why?
These are different than direct capital infusions how?
Isn't the West Bank was the worst bank?
Outsider,
If they give me 1 Billion Dollars (pinky to cheek) I promise to spend most of it.
(On Glod and silver...shhhhhh!)
Nostrovia,
While the phrase "bad bank" is a little silly, "toxic assets" is just absurd.
Still, nationalization of a swath of the banking industry is unlikely. House Financial Services Chairman Barney Frank said yesterday the government should not take over all the banks. Bair said earlier this month she would be very surprised if that happened.
Well, as long as you don't consider consider C and BAC and Fannie and Freddie a "swath", well, then I'd agree with you, Barney.
THE TRUMPETS
Ten thousand years from Jericho
Forever theft and slaughter,
Never will the total show
A final sum of murder
Preach as much as you may wish,
Invoke the stares of heaven,
Try as well the wind to catch
And bake it in an oven
Carve in slices breeze by breeze,
The wind will still go laughing,
Much as murders never cease
If loot is for the taking
The fervent prophet prophesied
A lamb and lion truce,
Though millions of the flocks have died,
The lions on the loose
Still I think the walls came down
To hear the trumpets blow,
Far away I hear them sound
In heedless Jericho
\t\t\t\tPavel
\t\t\t\tMarch 5, 2008
Outsider,
ethics only applies to taxpayers. sorry.
well at least, Mr. Geithner has some new help - as he is going to be a busy man:
Mark Patterson, the new chief of staff to Treasury Secretary Timothy Geithner was a top lobbyist for Goldman Sachs Group Inc. until last year, and will have to recuse himself from some government duties under new White House ethics rules.
What was all that hub-bub about Obama's new EXECUTIVE ORDER regarding ETHICS, again?
The US Federal Reserve is also running a bad bank.
LOL!
Bad Bank + Cramdown
These two pieces of legislation are conjoined twins. I don't think one happens without the other. Obama is giving Barney Frank something and the bondholders something.
Let the beatings continue.
"These are different than direct capital infusions how?"
Banksters keep the capital...we get the crapital. Pretty simple really.
Nostrovia,
--
The toxic assets will keep on increasing and getting more toxic as the housing prices in the US continue to decline at the FASTEST RATE EVER:
The Latest Trend (Transactions That Originated In November), Decline in PPSF (% Annual Rate)\t
Metro_____\tAnnual Rate for November
San Fran, CA\t-60%
Phoenix, AZ\t-58%
San Jose, CA\t-56%
St. Louis, MO\t-47%
Tampa, FL\t-45%
Boston, MA\t-43%
Atlanta, GA\t-43%
Charlotte, NC\t-42%
Miami, FL\t-42%
San Diego\t-41%
New York\t-39%
\t
25 MSA Composite\t-37%
\t
Chicago, IL\t-36%
Cleveland\t-34%
Los Angeles\t-29%
Based on PPSF (Source: Radar Logic). What were the buyers thru most of 2008 thinking when they were buying foreclosed and other homes at bargain prices? Dopes, no?
Jas
Black Star Ranch,
Good lobbyist, bad lobbyist?
Bad bank with Tax payer money!..sweet just think of next years 1040EZ the deductions were all going to have!
Oh wait?
Great poem, Pavel.
So... how many of these tranches are now on the FED's balance sheet:
"Carve in slices breeze by breeze"
Recycling 'could be adding to global warming' - Telegraph
Peter Jones suggested that an "urgent" review of Labour's policy on recycling was needed to make sure the collection, transportation and processing of recyclable material was not causing a net increase in greenhouse gases.
Let the beatings continue.
\t Anonymous | \t \t \t \t01.28.09 - 9:34 am | #
## The beatings will continue until morale improves.
It's taking Obama 30 days to do as much damage than what took Bush 8 years.
/grabs popcorn/
This is going to be fun to watch.
...Conjours clock has struck twelve?
...D&G Denninger talks of UP mkt today?
...Bad Bank really real & not trial balloon?
...Geithner raising Hell with Chinese again?
...why am I filled with uncertain dread?
"Banksters keep the capital...we get the crapital. Pretty simple really."
Yeah but then stocks go up and the insiders get rich then they start hiring a bunch of peons to pay for all of this don't in order to have a good fleecing ya gotta have peons.
Jas,
Speaking of witchdoctors, I was in China for a couple of weeks and caught a bad sinus infection.
I asked one of my Chinese associates why I couldn't find something like Mucinex (aka, guaifenisin) in the drug stores. The stuff's been on the market in the West for decades and it really does clear congestion.
I was told most Chinese prefer 'traditional' medicine to Western-style (read: 'evidence-based') medicines.
Later, in Guangzhou, I went to an open-air market where street vendors were selling traditional medicines. These included dried roots, berries, snakes, & boxes of what looked like dried rats. You also had an additional option for dried rats: flayed on a stick--I'm not kidding.
I'm not trashing the Chinese--one of my doctors (an orthopaedic surgeon) is from Beijing, and I have two Chinese-born daughters.
The Chinese have done some amazing things in their 5000-yr history--but selling dried rat-on-a-stick as medicine? Please...
Proof that old superstitions die hard.
--
America's economic and political problems can be summarized by:
Americana: Evil Government, Rogue Economists and Thoroughly Doped Population
The evil govt of America doesn't know its proper role when it comes to the single most important economic variableDEBT.
It is the debt, Stupid!
Jas
the biggest con during any election cycle is the idea that anyone represents change. well, gitmo is closing so I guess, depending on your leanings, it will tide you over.
Darth Paulson - Maybe they can pull Ralph Cioffi out of his jail cell to run Everqueef USA.
you know that "'different management so they start lending again." thing.
I'm waiting for the USG to open the Bad REIT
You know that one-laigged nigger dat b'longs to old Misto Bradish? Well, he sot up a bank, en say anybody dat put in a dollar would git fo' dollars mo' at de en' er de year. Well, all de niggers went in, but dey didn't have much. I wuz de on'y one dat had much. So I stuck out for mo' dan fo' dollars, en I said 'f I didn' git it I'd start a bank mysef. Well, o' course dat nigger want' to keep me out er de business, bekase he says dey warn't business 'nough for two banks, so he say I could put in my five dollars en he pay me thirty-five at de en' er de year.
"So I done it. Den I reck'n'd I'd inves' de thirty-five dollars right off en keep things a-movin'. Dey wuz a nigger name' Bob, dat had ketched a wood-flat, en his marster didn' know it; en I bought it off'n him en told him to take de thirty-five dollars when de en' er de year come; but somebody stole de wood-flat dat night, en nex day de one-laigged nigger say de bank's busted. So dey didn' none uv us git no money."
Huckleberry Fi
Scientists Not So Sure 'Doomsday Machine' Won't Destroy World - Science News | Science & Technology | Technology News - FOXNews.com
Scientists Not So Sure 'Doomsday Machine' Won't Destroy World
Three physicists have reexamined the math surrounding the creation of microscopic black holes in the Switzerland-based LHC, the world's largest particle collider, and determined that they won't simply evaporate in a millisecond as had previously been predicted.
Conjure's clock struck twelve? When?
Is there a flaw in my reasoning?
anotherajh | 01.28.09 - 9:19 am | #
Not that I can find. Good to see you around, BTW.
Bearly has already beaten me to it. We have the bad bank in place, and Bernanke is running it already.
Conjure's clock struck twelve? When?
Comrade Kristina | Homepage | 01.28.09 - 9:42 am | #
Not yet... just getting damned close.
Remember when you used to play Monopoly when you were a kid, and mysteriously the banker always won?
That game was so relevant on so many levels.
"and mysteriously the banker always won?"
Winning that way had a high percentage chance of the winner getting pounded by 4 or 5 kids. At least in my neighborhood.
Nostrovia,
Monopoly!, of course!!!!
Everyone always wanted to be the banker!!!!
This is the way to get people aboard the nationalization express....
joe shmoe | 01.28.09 - 9:19 am | #
I don't know if I agree that this is what they are doing but it is what I would have done... you don't show all your cards at once especially not at the Washington Poker Table... there aren't many suckers in that game. Well except for the taxpayers.
Comrade Tiberius:
Those CERN folks want their own Nobel prizes worse than Jimmy Carter....
Isn't this "bad bank" just a remake of the original Super SIV proposed by Paulson?
What are the unintended consequences of a bad bank and putting worth less assets in it?
dryfly,
what does nationalization do that is different than what they've been doing?
Seriously...
First it was Bear Stearns and Everquest...
Then the Super SIV, and many other FAILED attempts at the same thing under a different name.
I mean HOW MANY F&*KING TIMES are they try the SAME THING?
Insanity: doing the same thing over and over again and expecting different results. - Albert Einstei
My concern is that the bad bank will acquire bad assets at prices that are bad for taxpayers but good for bank management and shareholders.
I hope joe shmoe is right and this is all smokescreen to win support for de-facto nationalization.
Then again, the new administration has yet to show us the goods.
"The time is now--
11:59:57
Conjure asks, "Do you know where your money is?"
"Have a nice day."
mp | 01.28.09 - 12:34 am | # "
Whew.........sorry about that last post. I feel a little better..
Winning that way had a high percentage chance of the winner getting pounded by 4 or 5 kids. At least in my neighborhood.
Nostrovia,
Gulag Denizen Misean is Toast | 01.28.09 - 9:44 am | #
Obviously you didn't live on Capitol Hill.
awgee,
"Isn't this "bad bank" just a remake of the original Super SIV proposed by Paulson?"
In a sense. In this round the taxpayer is all in and the Banksters are all out counting their winnings. They like it better that way. Check the DOW.
Nostrovia,
From Basel Too:
"Obama is giving Barney Frank something"
Thanks, that is one image I didn't need.
"Bad bank" has such poor spin potential....
Herding | 01.28.09 - 9:27 am | #
Rich Bank Poor Bank - maybe Sheila could write a book, do some infomercials and hold seminars for bankerss.
I can support it--hell I'll even bring my business there--if they tweak the name to "Bad Ass Bank". I'll pay a premium for an ATM card with that written on it, I tell ya.
Whaddaya mean it's not that kind of bank?
Conjure asks, "Do you know where your money is?"
Yeah. Probably on vacation right now in Aruba. Sipping margaritas, or whatever they sip with those umbrellas.
Either our "leaders" are really this stupid or they are doing everything they can to strip any and all value from the financial system and stick me with the bill.
Either way, the brick wall is dead ahead.
"Conjure's Global Depression clock reads:
11:59:59.8
mp | 01.28.09 - 1:07 am | #"
mp(Unrated) writes:
Our satellite connection is at least temporarily restored.
CONJURE'S GLOBAL DEPRESSION CLOCK
The time is now--
12:00:00
Conjure says, "Good Luck."
mp | 01.28.09 - 3:51 am | #
It's taking Obama 30 days to do as much damage than what took Bush 8 years.
Senorito American Mugabe | 01.28.09 - 9:39 am | #
LOL wingers wet dream.
--
"Proof that old superstitions die hard."
Samdog,
They never die; they move to other institutions. In present-day America, they have moved into economics. American economists can't match the African witchdoctors! American dopes' faith in the economists to cure the economy is just as widespread.
It is a human behavior problem and Americans suffer from all of the known human weaknesses. They just change form over time.
Jas
BSR, that's the bond clock right? Last I saw the GD clock it was at 11:59:59. and some change.
Outsider writes:
"Sipping margaritas, or whatever they sip with those umbrellas."
Mai Tai, perhaps?--I know that's kind of a passe drink....
mp writes:
Our satellite connection is at least temporarily restored.
CONJURE'S GLOBAL DEPRESSION CLOCK
The time is now--
12:00:00
Conjure says, "Good Luck."
mp | 01.28.09 - 3:51 am | #
"It's taking Obama 30 days to do as much damage than what took Bush 8 years."
I would phrase it as Bush just needed an extra 30 days to finish the job, but that's a distinction without a difference at this point.
what does nationalization do that is different than what they've been doing?
arw | 01.28.09 - 9:46 am | #
What would be different? Uncle Sam owning the equity - ALL of it. Wipe out the common completely... clip the bondholders substantially THEN recap the banks & IPO or sell them to another healthy bank. If they don't do that this will fail - period.
That is what RTC did in the last one of these affairs and what we should have done 18 months ago.
You want moral hazard - wipe out the equity first and ALL of upper mgmt. That will get some attention.
Damn guys, you're right -- the clock did strike midnight. Hmmm... when's the last time I cleaned my Beretta?
Bad bank sounds like an admonition to a favoured pet.
Naughty Bank has sex appeal and might sell.
Just sayin'
Nostrovia,
Jas Jain writes:
"Proof that old superstitions die hard."
Samdog,
They never die; they move to other institutions. In present-day America, they have moved into economics. American economists can't match the African witchdoctors! American dopes' faith in the economists to cure the economy is just as widespread.
Thanks for the clarification, Jas. Nassim Taleb would be pleased with that metaphor.
Have you ever considered a career as a televangelist?
well, I needed a few things from the store anyway.....it might make sense to "beat the crowds"....
ARW
read this on nationalization vs this other stuff:
Why Nationalization Is The Best Alternative - Market Movers - Portfolio.com
The simple fact is that you could buy it (nationalize it) for real for FAR less then we have shoved down there holes trying to save them.
When that scenario changes only them does it ever become a "good deal"....that's to say it's never going to happen.
Glad I made the scratch shorting these zombies last year......can't imagine laying on any shorts now.
Crap, crap and just more crap...
Ciao
MS
and dryfly is spot on, too.
Nah, nah, nah. I checked and I don't know about you loosers but my mortgage is going to a good bank. All you bad borrowers are going to the bad bank where you'll have to endure the shame and paperwork just to get your rate, balance and terms reduced. And all that time I'll be sitting pretty with the same monthly check to write proving I'm worth every penny they lent me. I want a bumper sticker to help hold my '91 Corolla together. It will read "good bank customer." The rest of you will have to settle for "bad bank victim" on the back of your Escalade.
dryfly writes:
You want moral hazard...[?]
Yes, and I also want TARP, free ice cream, a pony, and a tinfoil hat (whatever the heck that refers to...).
Let's look at Obama's version of change:
The government recapitalizes banks in three ways.
First, they slash interest rates to zero. Second, they dump $350 billion of TARP money into banks at below market interest rates and with no oversight. Third, they vastly overpay for bad assets so that banks reap a windfall and the public gets stuck with the big losses.
So far, Obama looks like another Banana Republican to me.
I hate to tell FDIC, but they are already running the bad bank scenario because they are all insolvent. It's just a question of when the sheeple wake up from their slumber. They can't manipulate the Bond Market, but they will damn well try which should make for some great popcorn time.
That is what RTC did
dryfly | 01.28.09 - 9:54 am | #
IMHO the difference ise that RTC was designed to dispose of and NOT to operate the institutions, whereas "nationalization" implies otherwise.
It's enough to make us who were responsible....not be any longer. Wish I had the balls to not pay my mortgage....too bad the wife would have some issues with that though.
Ciao
MS
Crappy Mae?
Japan tried the Bad Bank thing and it failed ....what makes us any different?
I have an assumption that no on really know WTF there doing.
Quite the mess, please pass that popcorn this way.
Yes, and I also want TARP, free ice cream, a pony, and a tinfoil hat (whatever the heck that refers to...).
Samdog | 01.28.09 - 9:56 am | #
Sam - I said I want MH... I didn't say I'd get it. It's on the list right next to pony, free ice cream and all the rest.
Crappy Mae? - Justin Credible
Thread's over. We have a winner. Post of the day.
And I want Conjure to run Treasury, the Fed, and the SEC, all at the same time.
Sometimes you just have to settle.
Watch this 4 minute video from Itulip which explains everything very clearly. WE ARE SCREWED!
A Low-Budget, 4-Minute Video Makes the Strongest Case I Have Seen for the Magnitude of This Crisis
Rob Dawg,
Mine will read I recapitalized my local bank! Or The bank is my customer. That is extra good?
MS writes:
It's enough to make us who were responsible....not be any longer. Wish I had the balls to not pay my mortgage....too bad the wife would have some issues with that though.
Ciao
MS
I feel like the designated driver who somehow ended up with a hangover.
"I have an assumption that no on really know WTF there doing."
I assume no such thing. I GROK it.
Nostrovia,
bfatz writes:
Japan tried the Bad Bank thing and it failed ....what makes us any different?
Because our eyes are round
dryfly:
I think right now we're over the limit on Moral Hazard...do I still get a tinfoil hat?
Well, the S&P opened up 20 or so points and is going... nowhere. We got our 860, too. Could that be it for now? The FOMC & bailout vote might mark yet another top.
I like this plan.
It combines all the previous bad plans into one plan.
Efficient.
Funniest thing to come out of this economic downturn:
Dating a Banker Anonymous
My favorite quote "it's not what I signed on for".
I owe my employer an hour of time back.
dryfly 9:54 am - GOLD STAR!
IMHO the difference ise that RTC was designed to dispose of and NOT to operate the institutions, whereas "nationalization" implies otherwise.
Comrade Bear (tj & the bear) | 01.28.09 - 9:57 am | #
RTC ran a number of the institutions (hell they failed outright as these WOULD HAVE if not for TARP)... up to two years as they figured out what to do with the really bad stuff - RTC lasted way longer than the original intent because the pollution spread farther than they thought. Here at least they are acknowledging it isn't going to be a quick fix. I'm better with that then a phony short time table.
And they are going to end up at FDIC anyway - just a matter of how they get there & how it gets processed & how much we spend to support them while they are circling waiting to land at FDIC international. Fasten your seat belts.
It's enough to make us who were responsible....not be any longer. Wish I had the balls to not pay my mortgage....too bad the wife would have some issues with that though.
Ciao
MS
MS | 01.28.09 - 9:57 am | #
As the very, very old saying goes: Virtue is its own reward.
However, that was pre-modern age. Therefore, you don't hear it much anymore.
That is extra good?
Economist Moe Howard 3SU
Doubleplus noneconomic bankster good.
Perhaps something more menacing than Bad Bank...
Cthulian Bank might do it.
Nostrovia,
Did G. Hathaway want to run me down again about the SETUP ALERT?
I goin' short anywhere above 865
I think right now we're over the limit on Moral Hazard...do I still get a tinfoil hat?
Samdog | 01.28.09 - 10:00 am | #
It is an option at Bair Nat'l - instead of the toaster.
Mine will read I recapitalized my local bank!
Mine will read "the banks decapitalized our future."
So long and thanks for TARP!
Take the toaster.
Nostrovia,
Well we have a bad Congress can we re-vote in a new good Congress ????
Round huh best look in the mirror genius.
Unless of course your an alien from another planet.
Why can't we go the way of the Sweden model: wipe out the equity holders by writing down the toxic assets and then inject capital? Of course Sweden didn't slice the debt holders which I think we should in the case of the US since the needed capital injection is so high and debt holders knew the risks when they jumped in.
So when does the dollar finally fall into its grave?
Lets face facts.
The paper called asset's is kindling.
The bad bank would only allow for insolvent institutions to continue operations as normal.
Normal being giving away money on real property that tenants can't service at current prices.
careful laying into shorts today.....we get a "juicing" opp. from the Fed later on when they tell us they "might" buy 10 year T notes.....too bad they started that already though...
Ciao
MS
Japan tried the Bad Bank thing and it failed ....what makes us any different?
Anonymous | 01.28.09 - 10:00 am | #
Because they didn't wipe out the equity - and start over. Plus they wanted to 'preserve' the jobs and allow for the managers to 'save face'. Here in 'Merica saving face mean we rip your face off and put it on display.
Different.
Well we have a bad Congress can we re-vote in a new good Congress ????
Credit enima is coming | 01.28.09 - 10:06 am | #
No, because "good Congress" is an oxymoron. Hence why our founding fathers tried so hard to protect the people from the appetites of the beast.
dryfly,
I'm simply arguing intent. Nationalization implies an intent to run, whereas the RTC had no such designs. Operation of failed institutions was simply a means to an end, not the end itself.
I have no problem with them going the RTC route, but nationalization is another thing altogether.
In Japan they call it "honor"....here we call it fucking stupid....
Fine line that....
Ciao
MS
MS,
i think this IS the place to lay out some shorts . It's oil earnings week, and the first downgrade is already in print. more to follow.
Because they didn't wipe out the equity.
Funny from the looks of it America has no equity.
Just play doe.
CITIGROUP INC\t\t 4.11\t0.56\t15.78%\t59,951,649\t09:42
BANK OF AMERICA\t7.46\t0.96\t14.77%\t46,454,172\t09:42
JPMORGAN CHASE\t26.89\t1.83\t 7.30%\t9,310,196\t09:42
AMERICAN EXPRESS\t17.75\t1.07\t 6.42%\t2,067,883\t09:42
You have been granted a gift. Do not delay in opening it.
Gulag Denizen Misean is Toast,
Should that be chthonian bank?
Interesting article in my paper this morning that now seems to be hitting the internet forums. It appears the rich are now "embarassed" by their wealth and are hiring people to deliver their pricy purchases to their homes. Can you say FEAR? It's begun. Conjure is right, he's always right...bah...
How long before we this speech again?
Here's FDR in '33. Enjoy:
Executive Order 6102 - Requiring Gold Coin, Gold Bullion and Gold Certificates to Be Delivered to the Government
By virtue Of the authority vested in me by Section 5 (b) of the Act of October 6, 1917, as amended by Section 2 of the Act of March 9, 1933, entitled "An Act to provide relief in the existing national emergency in banking, and for other purposes," in which amendatory Act Congress declared that a serious emergency exists, I, Franklin D. Roosevelt, President of the United States of America, do declare that said national emergency still continues to exist and pursuant to said section do hereby prohibit the hoarding of gold coin, gold bullion, and gold certificates within the continental United States by individuals, partnerships, associations and corporations and hereby prescribe the following regulations for carrying out the purposes of this order:
Section 1. For the purposes of this regulation, the term "hoarding" means the withdrawal and withholding of gold coin, gold bullion or gold certificates from the recognized and customary channels of trade. The term "person" means any individual, partnership, association or corporation.
Section 2. All persons are hereby required to deliver on or before May 1, 1933, to a Federal Reserve Bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion and gold certificates now owned by them or coming into their ownership on or before April 28, 1933
dryfly writes:
I think right now we're over the limit on Moral Hazard...do I still get a tinfoil hat?
Samdog | 01.28.09 - 10:00 am | #
It is an option at Bair Nat'l - instead of the toaster.
I'm out of luck--can't meet the $50 minimum deposit to qualify...
maybe ALCOA has some left over from its heyday...
Will the common stock be diluted? If so, why the run-up today? If not, this is Japan, no.
SPECTRE of Deflation | \t \t \t \t01.28.09 - 9:59 am | #
wow, nothing says more than a picture, thanks.
Comrade Kristina, Next up is "let them eat cake".
Hah Rob, you forgot
RBS up over 30%
Funny from the looks of it America has no equity.
Just play doe.
bfatz | 01.28.09 - 10:11 am | #
We have shit loads of 'equity' - look around at the bricks and mortar, farms, factories, etc. We have a PAPER clusterfuck... okay then wipe out the paper.
Too many accountants on this forum - stop looking at the balance sheet entries and start look at the physical assets - there is more there than you realize. The RTC method (or nationalization & re-privatization) is a way to 'reset'. That is in effect what we are seeing - a forced and systemic 'reset'.
As a Swedish, I am a little surprised at that there is not much more of protesting among taxpayers in the US against this. Here in Sweden most people are brainwashed taxslaves. But I thought that in the US there would be a lot more of freedomlovers speaking out against this giant ripping of taxpayers. It is your freedom they are taking away. Best wishes to US freedomlovers from a libertarian in Sweden.
We are Japan..on steroids.
As I opened the video Spectre provided, it began to pour down rain here, how apropos...
You have been granted a gift. Do not delay in opening it.
Rob Dawg | 01.28.09 - 10:11 am | #
Seems early yet.
Will the common stock be diluted? If so, why the run-up today? If not, this is Japan, no.
blu | 01.28.09 - 10:14 am | #
If we don't get as a minimum 'warrants' severely diluting or laying claim to future earnings then 'yes' this is Japan.
Corker though slipped the word out - gonna be a lot of bank failures. Somebody is going to get diluted to zero.
dryfly, all the banks are way up.... Not sure why such enormouse optisim if that is the case. My sense is the biggest will survive and they will through the lesser ones under.
In Q4, Conoco incurred a > $30 billion charge off for good will.
That has to make private equity investors feel great. So many of the assumptions about the future of take-over targets were crazy optimistic. And that cheap debt they used in 2003-2007 is a time bomb. No way will they be able to refinance that crap on those idiotic terms.
Private equity became a roach motel - you can get in, but you can't get out.
But I thought that in the US there would be a lot more of freedomlovers speaking out against this giant ripping of taxpayers. It is your freedom they are taking away.
me | 01.28.09 - 10:16 am | #
You assume we are planning on making good on the debt? I see no reason for the rest of us to pay for the excess of prior generatons...
gonna be a lot of bank failures. Somebody is going to get diluted to zero.
Kneels " Please be CITI"
dryfly [What would be different? Uncle Sam owning the equity - ALL of it. Wipe out the common completely... clip the bondholders substantially THEN recap the banks & IPO or sell them to another healthy bank. If they don't do that this will fail - period.
That is what RTC did in the last one of these affairs and what we should have done 18 months ago.]
I agree that's what needs to happen. Except what's different now than 20 years ago is Greenspan cultivated the wondrous CDS market that did so much to disperse systemic risk and lower capital costs.
If the bondholders got clipped as they should across the board to share in this collosal loss (instead of passing the whole thing to taxpayers) the entire financial market will implode. CDS should be eliminated. It's totally useless for the real economy. Just a license to steal.
But I thought that in the US there would be a lot more of freedomlovers speaking out against this giant ripping of taxpayers.
me | 01.28.09 - 10:16 am | #
-----
Subtlety is the name of the game, my good man. I think that you will see people claiming for exemptions on the federal taxes, and people hiding/avoiding the state tax man either through cash-only transactions or funny accounting within corporate structures.
What you may see is a variation of the old adage: "When you owe the bank a million dollars, you have a problem. When you owe the bank a billion dollars, the bank has a problem."
The underground economy is picking up speed, and I don't think the gov't folks are aware of how fast it is moving yet.
"Somebody is going to get diluted to zero.:
That would be the taxpayer.
yes it's too early......two major "lovefest opps" coming today.
and then who knows what rabbit they will pull from the hat....or turd. That's the problem trying to play short term now.
Ciao
MS
Corker though slipped the word out - gonna be a lot of bank failures. Somebody is going to get diluted to zero.
dryfly | 01.28.09 - 10:19 am | #
CAPITULATION.
As a Swedish, I am a little surprised at that there is not much more of protesting among taxpayers in the US against this. Here in Sweden most people are brainwashed taxslaves. But I thought that in the US there would be a lot more of freedomlovers speaking out against this giant ripping of taxpayers. It is your freedom they are taking away. Best wishes to US freedomlovers from a libertarian in Sweden.
It'll come, just give it time. While the stock market has collapsed most people are still gainfully employed, so the credit crisis is largely something on the news. Now that layoffs are gaining momemntum and non-bubbly businesses are hurting, people are going to become much more aware.
Should be a real mess by the time the mid-term elections come around, and look for the resurgance of fiscal conservative republicans in Congress (after 8 yrs of rubber stamping massive deficit spending).
We don't just want the DIRTY DIAPERS.
We Want the BABY!
Put C and BAC into Receivership.
The only way to clean house is for the US Treasury to be on both sides of the trade! They will both be public agan with 4 years.
"We have a PAPER clusterfuck... okay then wipe out the paper."
Then who's going to finance election campaigns?
Watch this 4 minute video from Itulip which explains everything very clearly. WE ARE SCREWED!
http://www.garynorth.com/public/4527.cfm
\t SPECTRE of Deflation | \t \t \t \t01.28.09 - 9:59 am | #
Spectre, I was speechless after that. I need to gather my thoughts (or perhaps my GO bag).
Blackhalo,
You're right. The rest of the world should start getting pretty dubious on whether we're really planning to pay it all back, because we're not.
As the very, very old saying goes: Virtue is its own reward.
However, that was pre-modern age. Therefore, you don't hear it much anymore.
Outsider, it was freighted with the very same irony then as now.
@Angry Saver - did you see the article about private equity being able to buy back their distressed debt and then being able to spread the tax burden out?
Based on PPSF (Source: Radar Logic). What were the buyers thru most of 2008 thinking when they were buying foreclosed and other homes at bargain prices? Dopes, no?
Jas, yes they are dopes, but maybe catching falling knives is a possible new job as part of the Stimulus Bill.
resurgance of fiscal conservative republicans in Congress
FLL Renter | 01.28.09 - 10:23 am | #
One hopes so, but I still the the usual fundie beholden leadership. Who is going to replace them in the red state primaries?
You know, I'd love to take out a loan from a Bad Bank. At least then you know what you are getting and I'd rather have my 5.5% interest go to help with the national debt instead of to asshat to pay for his new office.
And of course, calling a bank 'bad' means that some place there are still 'good' banks out about about. Kind makes you wonder.
Then who's going to finance election campaigns?
lama | 01.28.09 - 10:23 am | #
Now THAT is the line of the day.
FLL Renter writes:
As a Swedish, I am a little surprised at that there is not much more of protesting among taxpayers in the US against this. Here in Sweden most people are brainwashed taxslaves. But I thought that in the US there would be a lot more of freedomlovers speaking out against this giant ripping of taxpayers. It is your freedom they are taking away. Best wishes to US freedomlovers from a libertarian in Sweden.
When the democrats fail as the last 8 yrs of republican rule failed, that's when it gets interesting
It'll come, just give it time.
FLL Renter | 01.28.09 - 10:23 am | #
-----
I agree with the above. We have a history of hating taxes. It is one of the reasons that we exist, and it is one of the things that both sides of the political spectrum can rally around sans a foreign invader.
When the "hatin'" on the Tax Man begins, remember to pass the popcorn.
A "Bad Bank" restores confidence in the system.
I would not be suprised if the amount of cash in accounts under $65,200 has been steadily dropping. Partially for economic reasons; partly out of fear.
I would rather that FFDIC run the bad bank.
Linky?
Comrade Kristina writes:
Interesting article in my paper this morning that now seems to be hitting the internet forums. It appears the rich are now "embarassed" by their wealth and are hiring people to deliver their pricy purchases to their homes. Can you say FEAR? It's begun. Conjure is right, he's always right...bah...
My friend bought BAC when it was ~$4 a share, I told him he was a fool for gambling, he told me the government had his back. I guess he was right.
Nothing will happen, I think, until enough people (critical mass) can see a negative change in their lifestyles. We are not there yet.
If it does not happen in one giant event that is media friendly is will not get through. When enough people look back, sigh, and see the golden years. When all they see ahead is the bleak years. yea, maybe the
Interesting article in my paper this morning that now seems to be hitting the internet forums.
Comrade Kristina | Homepage | 01.28.09 - 10:11 am | #
Link please? I clicked on your homepage, and I hope that the beautiful bride and groom were not the embarrassed ones.
..........I guess it's a good thing the HDef TV changeover thing will be delayed till June. No sense in the low-incomers missing out on all the upcoming fun. I was looking forward to "muted white-noise"
YouTube - Fed Reserve Fails to Reflate the US Banking System
If anyone is interested, this is a link to a pdf file of David Rosenberg's Jan 26 Economic Commentary, where he suggests the US is currently in Depression:
Some Inconvenient Truths
(I agree)
I don't want to spam CR's blog, but it's also on my homepage for anyone who wants to check it out later rather than now.
@Angry Saver - did you see the article about private equity being able to buy back their distressed debt and then being able to spread the tax burden out?
No. But I was familiar with a few of the takeover targets through work. The deals were total stupidity. They made no more sense than buying and flipping a house in 2007, just before the housing bubble collapsed.
Private equity shops became glorified house flippers. Many of the late deals will flop big time.
You're right. The rest of the world should start getting pretty dubious on whether we're really planning to pay it all back, because we're not.
Which is why it blows my mind that 10- and 30-year Treasuries are yielding 2.5% and 3.2% respectively.
As it stands today, I wouldn't lend our federal government money for 30 years at 3.2% interest if Warren Buffett himself were in charge of our public finances, far less the merry band of misfits and incompetents who have the reins. There's just no way. I'd rather lend against Las Vegas real estate ... at least you can't print it.
Chew on this: It took 140 years of this republic to incur a net public debt equal to what we are currently adding to the tab every day. Every day! Does that sound like the fiscal habits of someone to whom you want to lend money at 3 percent and change?
the scary part of that video is that it doesn't even calculate the repo. process that was ramped up in 2002. Honestly I stopped counting it after $2t...so you can most likely add in a few extra trillion to that.
Now I know I'll get people who say it gets "paid back" however you don't really factor in what is done with the money in the ensuing time-frame that it leaves the Fed and is in the system. For me, it's just like printing it up and "lending it out" without paying it back because the damage it does is still very real no matter what the terms are for what they call "repayment" is/are.
BTW does Mish still think they don't print??
Ciao
MS
CONJURE'S GLOBAL DEPRESSION CLOCK
The time is now--
12:00:00
Conjure says, "Good Luck."
mp | 01.28.09 - 3:51 am | #
FINALLY! It is time! To the hoopajoop mobile! I shall fly unharmed above the carnage in my whimsical contraption, and escape to my hidden cave in iceland!
It took 140 years of this republic to incur a net public debt equal to what we are currently adding to the tab every day.
Mook | 01.28.09 - 10:37 am | #
I doubt that's true when you use real dollars. Anyone know?
"It appears the rich are now "embarassed" by their wealth and are hiring people to deliver their pricy purchases to their homes. Can you say FEAR?"
Just wait until the peons start dragging these bastards out in the street and giving them the beat down.
JP-
I wouldn't be surprised if it were true.....BTW what's a "real" dollar nowadays....
Ciao
MS
I watched that video. Jeebus, we are soooo screwed.
Comrade Kristina - You probably already figured this out. Dogfood. Got to be able to feed the fuzzy faced one.
The magician, not being able to pull any more rabbits out of the hat, will now proceed to make things disappear.
Volker The Viking, pretty strong stuff when you are trying to drink the first cup of coffee during pre-dawn hours. I almost spit coffee clear across the room to my sleeping wife. Pretty much says it all in 4 minutes, and even a neophyte can understand those scary as Hell pictures/charts.
JP, that is I and my husband in the wedding album. I am trying to find a link to the story, it was written by John Rodgers of the AP but I can't find an online version, still looking...
Volatile 1 hour for the volatility index
days range:33.48 - 42.25
@JP - I have a nice chart in my archives of the national debt both in $ and % of GDP terms up until 2004. It's pretty spectacular, though the debt as % of GDP was higher at the end of WW2 time period - well over 100% GDP. So it's been done before.
Then again, after WW2 a significant chunk of the world's manufacturing capacity had been levelled - except in the US. Something to think about I guess.
Insolvent Bank, the Bank you can trust!
Member: W.T.F, L.O.L, R.O.T.F.L
Obama's all about justice and taking care of the Middle Class, right ? He's going to throw the uberRich and bankers under the bus raising their taxes so we get some loss sharing, right ? Where's the outrage ?
You Obama worshippers are total Born & Bred DOPES.
Here is a link
The wealthy turn stealthy as economy weakens
-
Bay News 9
All my life the fear was the dumb asses would push the button.
Instead, they blew us up the economy. Pretty freakin sneaky.
Not that I can find. Good to see you around, BTW.
\t Comrade Bear (tj & the bear) | \t \t \t \t01.28.09 - 9:42 am |
Thanks tj. I've been lurking, but very quite. Increasing gain in the financial feedback seems to have brought the system rapidly from semi-stable, to unstable, to chaotic, and I fear the next step is complete loss of control and an exponential blow-up. This makes everything so unpredictable I've been afraid to comment!
sparkle "the debt as % of GDP was higher at the end of WW2 time period - well over 100% GDP. So it's been done before"
In a vastly different world. We were the only remaining insustrial superpower, had debt financed within our own shores and had the capacity to grow out of it. Now, not so much.
We have a history of hating taxes. It is one of the reasons that we exist
It isnt even paying income tax that galls me. I am reasonably okay with supporting my government.
It is the waste. Let me waste my own money. I will enjoy it more that way.
Heres an example:
Until he got caught (he now pledges to give the money back), John Thain spent my tax money on a $1.2M office redecoration. Expressed in terms of dollars per taxpayer, my share of his folly probably amounts to one or two beers.
Given a choice between John Thain flicking his boogers into a $1400 wastebasket and me having a couple of beers, Ill take the beer.
ova-
Yes I'm old enough (just) to actually have had to do "duck and cover". We really should have been doing "bend and spread"........sure would have prepared us to act accordingly....for our own selfish reasons.
Ciao
MS
Boeing cuts 10,000 jobs
In a vastly different world. We were the only remaining insustrial superpower, had debt financed within our own shores and had the capacity to grow out of it. Now, not so much.
They, being the world, needed to rebuild an entire infrastructure. I think that will not be so important this time.
A bad bank can be just as uninterested in price discovery as the current mess.
Just in case anyone thinks nationalization avoids the Japan-style zombification.
Thread's over. We have a winner. Post of the day.
Rob Dawg | 01.28.09 - 9:59 am | #
Yes! Give that man a pony!
@bearly - agree 100%. Hence my comment that after WW2, the world's industrial capacity (the majority of it) resided within the US borders since we had bombed most of it flat in Europe and Japan.
Just wait until the peons start dragging these bastards out in the street and giving them the beat down.
Anonymous | 01.28.09 - 10:41 am | #
The gated communities with the Wakenhut guards are going to become tempting tagets for rioters who are smart enough to not burn down thier own neighborhoods.
"So, we'll stuff all the toxic assests into a black hole and call it a Bad Bank."
Not bad, it's the kind of thing that investors can believe in. Much like the "The Goldilocks Economy", "The Santa Claus Rally","The Soft Landing","The New Paradigm" and all the other supermagical ideas that drove America to where they are now.
We do so want to believe!
I'm starting to think Kunstler was an optimist. We're pretty freaking doomed.
@ Kristina: Thanks for the link. And it was my guess that the photos were you and hubby, I was trying to throw you guys a witty compliment... Next time I'll try harder.
@ MS, Sparkle: I've seen the debt vs GDP graphs, and I realize well that national debt was out of control. My question was genuine curiosity about the real dollar value of that amount, which should no doubt be correlated to GDP but not equal.
@ anybody: What pushed conjure over the edge?
Sue (Capital S), I was in a fetal position after that 4 minute horror show. It's why I have tried my best to hedge against as many possibilities as I can get my arms around even if it seems tinfoil. Better to have it and never need it then to need it and not have it when people are depending on you. It's called insurance in every other circumstance in life.
I don't have a link but I saw on the ticker last night that AIG was handing out "retention" bonus' to about 400 derivative traders....something like almost $40m...
It may just be the actual release of the money from the announcement in Nov. however I can't think of one group or institution that meets the definition of moral hazard any better...besides...where would they go?
Since they did so well we need to reward them further...
Ciao
MS
The gated communities with the Wakenhut guards are going to become tempting tagets for rioters who are smart enough to not burn down thier own neighborhoods.
That gives rioters a lot of credit. See: Argentina
Really it'll hit the rich when people figure out the art of kidnapping for profit.
Spectre, don't feel bad, yesterday when the Smurfit/Stone news scrolled across my ticker, I cried. For the first time in this crisis, I just broke down and cried...My poor husband had no idea why I was crying until I pointed to the screen and he realized he is never going back to work...
As the very, very old saying goes: Virtue is its own reward.
Outsider, it was freighted with the very same irony then as now.
burnside | 01.28.09 - 10:26 am | #
D'oh! I missed that in the translation.
the only reason to create a new structure is to avoid having the holders of bank capital take the hit and passing the losses to taxpayers. this is a sham and citizens of this country need to stand-up against it.
I agree, except so many of those holders are institutional - wipe them out and then we'll be bailing them out months from now anyway.
The whole point of the bad bank is to throw money at the underfunded-FDIC - and an attempt to throw some confusion into the mix so the moral hazard created by not charging the reckless lenders the proper deposit insurance premiums in the first place is overlooked. This is the inevitable course of action - negotiation has been going on for months. The open question is whether we have one new RTC or a few regional ones.
sparkle "the debt as % of GDP was higher at the end of WW2 time period - well over 100% GDP. So it's been done before"
can you say that with a striaght face?
GDP has been basdtardized by fraudlent accounting to justify higher amounts of borrowing.
No. But I was familiar with a few of the takeover targets through work. The deals were total stupidity. They made no more sense than buying and flipping a house in 2007, just before the housing bubble collapsed.
Private equity shops became glorified house flippers. Many of the late deals will flop big time.
Angry Saver | 01.28.09 - 10:36 am | #
That was my message for the last two years: PEs were just doing 'flip this firm'... And medium sized regional banks will get killed as these deals blow up. I know of two myself where the debt was crammed down onto the bank's balance sheet (as phony equity). This part of the mess is just now starting to unfold.
Maureen Dowd in the Nytimes having fun with the Socialist Jet Set...and the comments are pretty darn angry...Thain really made himself an icon of greed and arrogance...but since this is a global catastrophe, I do wonder where these banker folks and their families think they are going to hide.
OP-ED COLUMNIST; Wall Street's Socialist Jet-Setters - NY Times
I doubt that's true when you use real dollars. Anyone know?
JP | Homepage | 01.28.09 - 10:39 am | #
It isn't true BUT inflation is one way to 'default' - at least from the eyes of a person who isn't inside the 'dollar zone'.
Geez I was wrong about the amount of Bonus' AIG is handing out.....it's more like $450m...
AIG Said to Pay $450 Million to Retain Swaps Staff (Update1) - Bloomberg.com
Totally outrageous.....
Ciao
MS
Different.
dryfly | 01.28.09 - 10:08 am
Beautiful, yet so crisp!
Bad bank? Bad name.
What about all the bad CEO's that had a hand in this mess? Will they get to keep their jobs in the "good" banks?
Soros wants America to create a "Good Bank" as aggregator.
(America replies that they lack expertise in creating good banks, but that the idea has merit, and then could sell TV rights for the apocalyptic grudge match.)
SPECTRE of Deflation writes:
Watch this 4 minute video from Itulip which explains everything very clearly. WE ARE SCREWED!
A Low-Budget, 4-Minute Video Makes the Strongest Case I Have Seen for the Magnitude of This Crisis
SPECTRE of Deflation | 01.28.09 - 9:59 am | #
Yes, but it concludes with the suggestion that those running things don't know what they're doing.
I say they do.
Will they get to keep their jobs in the "good" banks?
clevis slackjaw's brother | 01.28.09 - 11:02 am | #
Because clearly they've demonstrated adroit management in the past. ::eyeroll::
What about all the bad CEO's that had a hand in this mess? Will they get to keep their jobs in the "good" banks
clevis slackjaw's brother | 01.28.09 - 11:02 am | #
Is that not the entire point? Keeping the good ol' boys who contribute to polictica campains, gainfully employed is job #1.
@JP - here is a google doc link to my old archive. It only goes up to 2004 and I can't find the links to my original sources. Also, keep in mind that prior to Roosevelt, I believe, the GDP values are just estimates based on extrapolation and models.
GDP & Debt
"But I thought that in the US there would be a lot more of freedomlovers speaking out against this giant ripping of taxpayers."
But we're not paying extra taxes, we're just borrowing the money.
We've had 25 years pretending that lowering taxes will magically balance the budget, and the taxpayers don't need to pay anything. Americans think we just need to lower taxes more to pay off the debt.
So of course Americans aren't upset; we don't actually expect to pay the bill.
Yes, but it concludes with the suggestion that those running things don't know what they're doing.
I say they do.
Newbie 101 | 01.28.09 - 11:03 am | #
In honorary tin foil hat style, I agree. I would say they don't ALL know, but I would say a select # do. But as with most of my thoughts, they are better kept inside my noggin.
New Thread
This "change" is like swapping your underwear with your neighbor.
here is a google doc link to my old archive.
Mr. Sparkle | Homepage | 01.28.09 - 11:05 am | #
Thanks for that...
New Thread: WSJ on Jumbo Loans ( 0 comments ...You could be FIRST! )
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as far as the "masses" being outraged...it still in contained to forums and until the people wake up and show up in Washington in the same numbers of just last week to "celebrate change" (heavy does of sarcasm) the system will continue to rip us all off until we don't let it.
On a personal level I am making sure I owe NOTHING in taxes...being self-employed there are ways to creatively make that happen (all legal too!)....I suggest you all do the same to the extent of your situation.....
Any other suggestions?
Ciao
MS
I say they do.
They may be doing what (they believe) is necessary under very difficult circumstances. It would seem to me they need to have bond yields down for refinancing while inflation expectations up or otherwise people will not invest but hoard cash. They may be achieving but are they manipulating the market from both ends in surprising ways?
More inflation vs deflation: consider your data carefully | Capital Chronicle
good series of videos
FT.com / Short View
Whew! The SKF is getting hammered. I hope folks' ideology on this site doesn't guide their investment decisions.
The country already has enough bad banks, Bank of America (BAC) and Citigroup (C) for starters. Ok, thats just snarky, but we do have an existing mechanism for a bad bank, it is called the FDIC. If a bank makes too many bad bets and becomes insolvent, the FDIC comes in on a Friday night and holds a pizza party. The insured depositors get paid off, or transferred to a healthy bank. The branches and other physical assets get sold to other banks. The shareholders of the insolvent bank are wiped out and the uninsured depositors and other creditors take a haircut. If that is the plan, I have no problem with it, and I suspect that as things are going, Dominos and Pizza Hut are going to be getting lots of business from the FDIC this year. If given the scale of the problem, some new entity (Lets call it RTC2) needs to be set up to hold these assets until they either run off or can be sold back to the private sector, so be it. However, as I read it, that does not seem to be the plan. The new bad bank that is being proposed seems like a replay of Hank Paulsons misbegotten 3 page plan of last fall. The government would buy up the existing toxic assets from the existing banks and hold them.
The problem is: how much do you pay for these assets? If you pay market price, then the bank is insolvent, and you are back to square one. If you pay more than market price, it is simply an inefficient way to give a gift to the bankers who got us in to this mess in the first place. If you bought 100 shares of XYZ Corp. six months ago at $100, and they are currently trading at $50, if I come in and buy that stock at $75, I am giving you a gift of $2,500. This is true even if my cost of capital is lower, or if I have a computer model that says that XYZ Corp is undervalued at $50 and is really worth $80. It is a lot easier to see with openly traded and straight forward assets like common stock, than it is with thinly traded, obtuse, opaque and complex assets like some of the toxic assets, but the principal is the same.
The second approach that was done with the first half of the TARP was conceptually much better than overpaying for lousy assets, it was just very poorly implemented. The problem is that the banking system is almost insolvent system wide. Some banks are very deeply insolvent, and others are in better shape. But the scale of the losses that are hidden on the books of the banks exceeds their equity, even with the money already injected. The answer then is to provide more equity to the banking system. With a leveraged balance sheet, a decline in the value of assets reduces equity much faster than it reduces assets, which further increases leverage, until equity reaches zero, leverage becomes infinite and the entity is insolvent. If a balance sheet is levered 30:1 and you want to spend 1 to reduce leverage, you dont subtract the 1 from the 30 (to get to 29:1) you add it to the 1 (to get to 15:1). Its called getting the most bang for your buck, or billions of bucks as the case may be.
However, the Treasury should get a market price for the investment. Last Fall, Warren Buffet invested $5 billion in Goldman Sachs (GS), two week later the TARP program also invested $10 billion. However, Buffet got a bigger percentage of Goldman, and the same number of dollars in dividend payments for his $5 billion investment than the Treasury did for its $10 billion investment. So far both investments have proved to be turkeys as the value of GS has slid significantly since then, making the warrants very far out of the money. However, any way you slice it, we got a far worse deal than Buffet did. The next tranche of the TARP could easily, at current prices, be sufficient for the taxpayers to become 50% owners of all the major banks in the country. The existing shareholders would be severely diluted, but the banks would be better capitalized and in the position to lend again. The government would also then be in a position to stop the obscenely high salaries and bonuses that are paid out up and down Wall St. This would also help firm up the capital position of the banks. Common dividends would also be eliminated for several years. A few years from now when the economy has recovered the Treasury could sell off the bank stock and use the proceeds to pay down some of the ballooning federal debt.
Boeing to cut 10k jobs. Just another reason to jam the market higher.
Comrade Kristina, I listened to a Lincoln quote yesterday that I must find for you. Anyone who says this debacle couldn't be forseen is more full of crap than a stuffed Christmas Turkey. As bad as we are being pillaged, and it's quite severe, our children and grandchildren are actually being pillaged worse because they are the ones supposed to pay back this debt.
I can accept selfishness as part of human nature, but these are our kids we are talking about for God's sake. Do we have no shame or honor in our bones?
Any other suggestions?
Here's a few general ideas, but I suspect they don't apply directly to you.
Boycott the debt system. Pay cash or if you use credit pay it off every month. Cars bought with cash only (used if necessary). Get out of debt, including mortgage.
As far a investments, only self managed accounts via low cost companies such as Vanguard or ETFs. No active money managers or financial advisors.
End of month games being played again. This thing will rally thru Friday. I'm really getting sick of this market manipulation.
angry-
way ahead of that.....I was sort of asking that rhetorically to generate some discussion for others and hopefully find or see something I have not done already. All good advice and should be heeded by all..
Ciao
MS
Black Star Ranch(Excellent) writes:
\t...Conjours clock has struck twelve?
...D&G Denninger talks of UP mkt today?
...Bad Bank really real & not trial balloon?
...Geithner raising Hell with Chinese again?
...why am I filled with uncertain dread?
Black Star Ranch | 01.28.09 - 9:39 am | #
Ummm......because you should be?
\tWhew! The SKF is getting hammered. I hope folks' ideology on this site doesn't guide their investment decisions.
RuffRednsore | 01.28.09 - 11:21 am | #
You do realize that SKF is a terrible investment based on a macroeconomic call, right?
show up in Washington in the same numbers of just last week to "celebrate change" (heavy does of sarcasm) the system will continue to rip us all off until we don't let it.
MS | 01.28.09 - 11:10 am | #
You'll have to wait for it. The plebes will wait to see if O's actions have any positive effect, and after the 1st 100 days when lay-offs continute and housing continutes to fall, and the bankers continue to get a free ride... some one of note with a little charisma will rise up and start bashing TPTB.
The Geithner thing with China is purely theatrics.......Paulson did it every once in a while but he was just more subtle about it. I'm certainly not agreeing with the policy of pissing off your largest debt holder however it's just talk for the masses here.
Hoenstly..I'd be more worried about the UK and what they plan to do with it's holdings...that could start the game of musical chairs and then China is forced to participate for reasons of protection.
Ciao
MS
Comrade Kristina, I believe Gerald Celente quotes Lincoln in the first segment which I copied for you. To say it rings true is the understatement of the year.
YouTube - Gerald Celente on the Alex Jones Show 27 January 2009 - Part 1/5
market manipulation.
RuffRednsore | 01.28.09 - 11:25 am | #
Doubtful, the bazooka is empty and not a high enough caliber to do the job.
The problem is: how much do you pay for these assets?
Dirk van Dijk | 01.28.09 - 11:21 am | #
I feel like we are having deja vu on a nationwide scale. Didn't we all just go thru this with TARP I? Major frustration...
it is called the FDIC
Dirk van Dijk | 01.28.09 - 11:21 am | #
Yeah but does the CEO get to keep his job? Remember, the top 1% want to keep thier winnings.
So far, Obama looks like another Banana Republican to me.
\t Angry Saver | \t \t \t \t01.28.09 - 9:56 am | #
Angry Saver | 01.28.09 - 9:56 am | #
Reality bites, huh?
I'd be more worried about the UK and what they plan to do with it's holdings
MS | 01.28.09 - 11:30 am | #
That ends badly for the bonds and $. I bet on early next month for it to get rolling, say the 9th after an auction failure?
No, because "good Congress" is an oxymoron. Hence why our founding fathers tried so hard to protect the people from the appetites of the beast.
Outsider | 01.28.09 - 10:09 am | #
+1
This again is another stupid gov't plan - moving one pile of crap over to, in this case, the tax-payer. Why does this make sense?
Solution:
1) Mandate all banks to immediately write-down all 'toxic' crap to current market value. Yea, I know this number will be huge and the banks will show huge losses, but keep in mind, the saying "pay me now or pay me later" holds even stronger in this case. On-going delays will only forestall worldwide economic recovery.
The governments role is not to act as babysitter. The governments role in this case should simply be to act as the lender of last resort - to lend (or guarantee) to the banks at near zero rates (banks would also be required to issue substantial warrants and options).
2) If the banks refuse to the mandatory write-downs, then, and only then, should the gov't take managing control of said bank(s).
No reason to invest, no reason to work, no reason to borrow, no reason to spend.
Fuck'em
As a Swedish, I am a little surprised at that there is not much more of protesting among taxpayers in the US against this.
me | 01.28.09 - 10:16 am | #
Wow! If this shocks the Swedes, it must be bad. Seriously, when the first bailout was enacted, perhaps 98% of the calls to congressmen were against it. They voted for it anyway. I guess the American public at large has decided that DC is goingt o do whatever they want regardless of public opinion. We'll all see how that turns out.
Thanks for stopping by.
i think what we need is a sleuth to uncover the names of these 400 aig thiebes and publish it online. afterall, the government(we the people)
We'll all see how that turns out.
xxxxx | 01.28.09 - 11:51 am | #
Yeah, they better show some results by 2010 or the turnover with the new "contract with America" will be huge.
Black Star Ranch(Excellent) writes:
\t..........I guess it's a good thing the HDef TV changeover thing will be delayed till June. No sense in the low-incomers missing out on all the upcoming fun. I was looking forward to "muted white-noise"
Black Star Ranch | 01.28.09 - 10:34 am | #
They're probably going to time the stimulus check to coincide with the changeover to make sure the money gets spent this time;-)
Yea, I know this number will be huge and the banks will show huge losses, but keep in mind, the saying "pay me now or pay me later" holds even stronger in this case.
bdwnnc | 01.28.09 - 11:49 am | #
While is support this course of action, I do not think you grasp the scope of the impact. All five previous IBs + BOA and Ctii, woudl be in FDIC stewardship. TPTB do not want this to happen, as thiese are ths guys that fund their extravagant lifestyles. Just think of all the stadiums and bowl games that would have to be renamed.
The top 1% want to keep thier money.
It is the waste. Let me waste my own money. I will enjoy it more that way.
Anonymous | 01.28.09 - 10:47 am | #
According to Keynes, taking your money and giving it to someone else results in greater average enjoyment. This is his argument for transfer payments.
Seriously!
All taxpaying US citizens are hereby ordered to spend some amount of their future time working for free in order to preserve the structure, jobs, and executive teams of the banks that have looted them of their 401k and investment money.
We can throw all the bad debt into one of those black holes the collider makes!
changeover to make sure the money gets spent this time;-)
xxxxx | 01.28.09 - 11:55 am | #
I am dissappointed for my RSH shares at the delay.
PonziMonetizaCoruptiCapitalism writes:
i think what we need is a sleuth to uncover the names of these 400 aig thiebes and publish it online. afterall, the government(we the people)
Don't stop with AIG. Get the names of the other pigmen as well. If there's one thing that pisses me off, it's welfare for the wealthy, or very wealthy in this case. They love the 'free market' unless it turns against them, then they need a rescue or the world will end.
"On a personal level I am making sure I owe NOTHING in taxes...being self-employed there are ways to creatively make that happen (all legal too!)....I suggest you all do the same to the extent of your situation....."
Months ago I was accused of being a "tax-cheat". While that is incorrect, is there any wonder why so many choose that avenue? The only way to not condone the irresponsible spending is stop the irresponsible funding.
Whew! The SKF is getting hammered. I hope folks' ideology on this site doesn't guide their investment decisions.
RuffRednsore | 01.28.09 - 11:21 am | #
That's just going to make it a better investment in a few weeks/months.
According to Denniger:
This is a great trader's market.
Yeah, they better show some results by 2010 or the turnover with the new "contract with America" will be huge.
\t Blackhalo | \t \t \t \t01.28.09 - 11:55 am | #
Blackhalo | 01.28.09 - 11:55 am | #
That's what I was thinking. ;--)
All taxpaying US citizens are hereby ordered to spend some amount of their future time working for free in order to preserve the structure, jobs, and executive teams of the banks that have looted them of their 401k and investment money.
wally | 01.28.09 - 11:59 am | #
Wally,
We already work for free until sometime in March or April. You must be new to the working scene.
Yes throw the bad management teams out and replace them with guys like this in banks that are actually strong...
Regional Banks on TARP Funding: "No Thanks!"
GNE
http://goodnewseconomist.com
We already had a bad bank and the concept failed dismally: Bear Sterns.
Wally,
We already work for free until sometime in March or April. You must be new to the working scene.
You should really try working overseas sometime....don't just whine about opposing the system, but your money where your mouth is. Enjoy your tax exemption on the first $85k and say FU to the system.
. Every time I get my check and there are no taxes deducted....I smile.
Meet the new boss, same as the old boss...