Assume you were in Geithner's shoes.

You know the outcome of the stress test is going to be that C needs to be nationalized and BAC, JPM and WFC need large capital injections, perhaps nationalization. You know that doing this would cause a meltdown of all the markets for the assets on the banks' books. What would you do?

Wouldn't you try to first move the bulk of those assets to the Government's account, leaving just enough toxic sludge on their balance sheets to be able to come back after the stress tests and declare them bankrupt? In the interim, before the stress test outcomes are declared, you can auction of the assets to the market at whatever they will fetch but do it in an orderly fashion.

If so, isn't the Geithner plan exactly the first step needed to do that?

Nemo? Again?

Maybe there is an opportunity here for added transparency ...

More like added prosecutions, if and when those ever get started. Banks these days are often squandering taxpayer's money, regardless of whether it's through negligence (as probably exemplified by this video) or fraud (as potentially described in the bulk sale post).

Wow - what a well-run organization. Nationalization would clearly be a bad thing....

.....CR .....link is broken.........

File Not Found!
You have followed a link that no longer exists on the server or has been relocated.

Shut up! If it wasn't for dysfunctional Banks I would have to get a real job.

..............point well taken ......JD.............

1) Interesting post at Angry Bear. Apparently the people that would buy into Geithner's plan won't play because they're afraid any money they made would be "bonus taxed" away. Gotta love it!

Tim - you are wasting your time. Time for the d00dz getting GS pay scale to handle it all - shut'em down if they don't have the collateral & adequate capital reserves. Sunday night wouldn't be too soon [wait for the games to be done though - don't want a bunch of new alerts getting in the way of 'March Madness'].

Anon,

Agreed. Although I do well, bonuses haven't figured into it. Talk to anyone self-employed about "bonuses" and they'll laugh their butts off.

Comrade Bear:

Anon @ 11:02 was me.

ATM card:

Auctions are big where I'm at and a local auctioneer routinely rents the firehall nearby for Saturday morning lot auctions.

I've begun taking the kids there on Saturday mornings to watch the action. We've started some early conversation on the idea of finding "value" and the audience as a market. Case in point was the 91 piece Sterling Silver set at auction.

1. What's the deal about sterling silver since many younger marrieds could care less?
2. What's the cost of regular settings of sterling via a retailer? What's the value of having any set you can get cheaper from an auction versus paying a premium for a design that you actually might like?
3. With my wife afterwards, what would've been the value for just selling for the silver content at a PM dealer versus what I might've paid at auction?

No, I passed since I told the kids before going that I'm not spending a red cent.

If you haven't done an auction recently, I highly recommend...

For example, a unit of Citigroup, the troubled financial giant, sold a foreclosure in Temecula to an Arizona investment firm for $139,000 when comparable homes in the area were selling for $240,000 to $260,000.

Perhaps Citi is involved in a fraud scheme. They are being backstopped by the government. Maybe the investment firms who are buying up blocks of foreclosures need to be investigated more thoroughly. Who are they?...

test failed

Having a giant, non-transparent, public/private Super-SIV to participate in these transactions would improve the situation for reasons that I cannot disclose because they are confidential. Just trust me on this. And please write your congressperson and ask them to be generous when they are considering funding for TARP II.

So the guy says people are willing to pay a $100,000 more for a house than they could if they wait a little bit to deal with the bank. Plus, they can buy a house for $100,000 less than market and there are buyers who want to pay full price and they do not immediately resell the house to those buyers?

Notice they did not show us the comparable homes selling for the higher prices. I would not believe any of this story w/o seeing comparable houses actually selling at the $100,000 higher price. Also, we did not get to see the inside of the homes. Many foreclosures are a mess inside and require a lot of money to make them livable again.

Sounds like a guy just promoting his company's services without any real life situations to back up his claims and the reporter had the wool pulled over her eyes. Plus, he was not aware he lost a commission on not being able to sell these houses. Seems like he never reallly thought he had real buyers.

FYI.

Was just reading the morning thread on the Toxic Asset crap plan and noted cd's question about just putting a large purchase of silver on the credit card and then defaulting...

My PM dealer will not put any purchases of PM bullion/coinage on credit. He only does cash on the barrelhead.

Can't speak for an online dealer...

just another example of how human systems are not at all designed or expectant of shrinkage or downsides, even IF they say they are - folks SAY they are provisioned and planning in case of bad events, but the sum of all folks/entities is NOT - and we are facing an across-the-board situation

buckle up

Wow, I was posting about this last week when there were only 28 cosponsers.

homedad43,

Call me tinfoil, but all my PM purchases were made in cash.

CR Wrote: Maybe there is an opportunity here for added transparency ...

CR with respect you forgot the snark off flag.
Though it was evilly funny.

Perhaps Citi is involved in a fraud scheme. They are being backstopped by the government. Maybe the investment firms who are buying up blocks of foreclosures need to be investigated more thoroughly. Who are they?...

My thoughts exactly, Doc. If you own a company whose losses are being backstopped, the obvious strategy is to lose lots of money trading with another entity which you also control. It'll probably look a lot more complicated than that, but scams are usually a quite simple plan overlaid with a lot of deception and diversion.

Money quote from the NCT article:

And Norris said there is a huge number of foreclosures not even listed on the market yet, meaning those discounts will get bigger and banks will rush to unload properties as quickly as possible.

"Capitulation is here already," he said. "What's coming, there's a new name. It's something we still have to dream up. It's complete terror."

Caught part of "Life on the Edge" by John Stoessel. Urban pioneers buying houses in Detroit for $500. Fix up, move in and live life. Artists and others. Cool.

This whole underpricing is another way moral hazard is raising its ugly head. How many of these fire sale houses are part of MBS collateral being "held" as TARP collateral?

"Oakland back in the '70s and '80s before it gentrified" ??

OAKLAND ??? Gentrified ?? Which street ? That place still looks like a warzone. Beruit in 1987 looked better.

"The view may look good, and the the water smooth, but we're all in The Vanishing Edge Economy, some closer to the fall, moving faster, others further back, moving slower, but all moving to the edge."

It's beginning to seem that you've got to be so diversified that you are guaranteed to lose money. Because that's the only way you can expect to keep any.

@DIPing in China,

Indeed the graph is nice. And the winner is...Mackinac County, Mich. @ 27.6%. Hmm...one can walk on the street and wonder if the person passing by has a job.

"Like it or not, this is a blog focused on the US"

"Oh, my god!
They killed Kenya!"

Those bastards.

Anonymous says:
Today, 6:33:20 AM
Why does the discussion keep returning to the relatively minor problems of the U.S., when as we all know, it is the larger world that it is suffering much worse than anything reported in the American media.

Most Americans, even most American economists, have a national-scope paradigm of economic analysis. I'm sure the Chinese are the same way, which is kind of a salient point when understanding this crisis, I bet. The global scope events just has not yet integrated as part of the same picture.

And can you blame them? I don't know about -- in proportion to their ecumene's economy, if there have been bigger bubbles -- but by raw numbers this really dwarfs any of the human races previous economic blunders. Two global hegemons in a three-legged race to perdition.

Why would you have an analytic toolset that encompassed it? I mean, there are good reasons to have done so, but not natural ones whereby any thinking individual would have built the model as a part of coming to awareness of the milieu. Especially as the currency regime hegemon, Americans have virtually no experience with life in the world of soft currencies.

Anyway, it wouldn't really matter if they did. Even with perfect self-awareness, the best game for the bankrupt hegemon is to play it to the hilt and hope to come out on top of the footrace to Weimar by being the last one still presumptively alive. That's without question our national policy on this matter.

Frank Rich on Obama's Katrina Moment 

So he should cut the knot.

"Anyway, it wouldn't really matter if they did. Even with perfect self-awareness, the best game for the bankrupt hegemon is to play it to the hilt and hope to come out on top of the footrace to Weimar by being the last one still presumptively alive. That's without question our national policy on this matter."

I like this analysis for its scope and attempt at a deeper understanding.

Something I wrote last year in these comment boxes:

Pavel Chichikov writes:
Mistakes are inevitable. There is no way of learning without them. But
this morning it occurred to me that although we may see plenty of
hysteria, what we really ought to worry about is hysteresis, that the
system may settle into a new and unforeseeable state.
Pavel Chichikov | 11.15.08 - 12:11 pm | #

Neither Rich nor the NYTimes are favorites of mine, but I must say that Rich's commentary resonates with me.

r

..........Ken Karpman Plummeted From a Six-Figure Salary to Earning $7.29 an Hour.........

Down But Not Out: From Hedge Funds to Pizza Delivery - ABC News

..........you better prepare to learn riding a bike rather than commenting in this blog...

Jay D,

I was amazed at Ken's sense of humor in the face of adversity. I thought this video was inspiring rather than depressing.

This is what happens in any industry when those at the top think they have an exclusively indoor job. When they just sit at their desk and read reports or go to indoor meetings they loose all touch with reality. Every layer of management that reports upwards adds a little more spin.

One of the things the Marine Corps does right is that the Top Brass get out and inspect the lowest troops where they live and work.

Looks like the market having trouble clearing. Not sure why. Prices seem fairly set and agreed.

Oh, wait.

C

Small things: noisy neighbors gathering in the yard across the street, drinking, partying; neighbors up the street with noisy mufflers and oversized wheels gathering in the driveway, comparing cars, drinking; a police cruiser prowling the area with a spotlight searching, sweeping, slowing, backing up, looking for what?

this is the stuff of civil disobedience, not newsworthy, gathering energy

volker - same around here. Massive party next door Friday night by the kids on army scholarships at American U, cops in the mall carpark Saturday night. Siphoning. Random vandalism. And this is a neigborhood where 6 months ago the definition of crime was letting your grass grow over two inches.

C

Comparing oakland to Beirut is grotesque.Bob Dobbs is correct in stating that large parts of the city have been gentrified as a walk around many parts of the city will confirm.There are still large pockets where multigenerational poverty and lack of any opportunity are evident,the schools are still completely dysfunctional,and the entrenched corruption of the last 100 plus years still has deleterious effects.However many thousands of older homes have been repaired and thousands of new good quality units built.if you look at the geography and climate of oakland you will see that the problems are the result of political decisions made over many decades.The ugly parts of town you see from BART are not the city in whole,and after the next big quake I expect some one with $ and intelligence to see the opportunities.Look at the port and the fact that oakland is the biggest rail and highway hub in the SF bay area.Corruption and political expediency have made oakland what it is,those things can change over time.

"Think of many of us 'self-employed as 'high performing' ADHD " -- that's so funny because it's so true!

Why did you never become a business consultant? I know someone who did just that after he sold his mfg. business. He did really well and personally I think you'd do better.

60 Minutes interview quote from Obama:

"Tim Geithner is as sharp and as skilled a public servant as we have..."

Translation: We're freaking doomed! =-O

"tim can be a skillful force for evil or a skillful force for good...ive got him on a leash"

Didn't Nixon say the same thing about G. Gordon Liddy? Something like 'Liddy is a Hitler but at least he is OUR Hitler." Maybe it was Halderman who said it - whatever.

Next thing you are going to tell us that those "Investment firms" are being funded and staffed by the same billionaires who started this mess.

HEDGE FUNDS
SEC concerned about 'preferential redemptions'
Regulator forms Hedge Fund Working Group to handle probes, Walter says

For now, Timmay and Summers have O by the leash.

I think you confuse 'leash' with 'short hairs'.

mock - they have a wide stance.

C

The REOs in the Miami area are a mess, according to
the young couple who looked at 70 of them.

It may be that an employee is being bribed to sell so low.

But it is possible that the inside was terrible and the buyer made a serious mistake buying for that much.

all South Fla needs is a small hurricane. Empty houses with storm shutters won't have them put up.
Small leaks that even a poor owner would have fixed
will turn into huge leaks. Banks will be too overwhelmed to ask for claims to be paid for quite a while and then far too overwhelmed to fight for the payment, one house at a time.

The problem, as I've posted before, is where the rubber meets the road: figuring out a reasonable price and a reasonable loss to take and not blaming the employee for making the decision and taking the
loss. I suggest starting with the property appraiser's office. We gone from a state of affairs where the homes were always underappraised (from 72 to 2006,7,8) to where they are overappraised. So, if you are rule minded, you could allow the employee to go, say 20-30% below tax appraisal. With a bonus (!) if the employee gets more, and allowed to take another 10% off after so many days. and another 5% after so many more days. But you'd still have to hire more people and the banks still think (if there is any thinking here) that you get more efficient by firing people.

Frank Rich on Obama's Katrina
Frank Rich on Obama's Katrina Moment

Because people need those cars to drive to work? Or look for work? It's stupid to destroy your own--if I'd burn any cars it'd be in employee parking lots--and then I'd torch upper management's.

whoa, we have a name for the treasury program.

The Treasury Department will unveil the next step in its financial rescue efforts tomorrow, announcing that it intends to create a government body, called the Public Investment Corp., to finance the purchase of as much as $1 trillion in soured loans and toxic assets from ailing banks, according to sources.

The PIC

Mrs. Dawg calls this AADOS (Adult Attention Deficit... Oh! Shiny!).

A friend informed me there were 'meds' for that. I replied... "I medicate myself enough already - thank you very much."

"systemically important non-financial," refers to bank holding companies, I think.

Here is a better link to Bernanke's speech:
FRB: Speech--Bernanke, The Financial Crisis and Community Banking--March 20, 2009

Brilliant analysis! This should be circulated to all US Politicians.

We've run into a human chasm. J6P is angry over the bonuses not just because they are bonuses but because they are so very large, On the other side of the chasm are the people in the financial industry who are psychologically incapable of admitting that not only are they grossly overcompensated but they have been for decades and that level of pay contributed to the implosion of the world economy. Government employees? Fine, use the GS pay scale and I don't mean Goldmans. http://www.militaryfactory.com/military_pay_scale.asp

BTW the guy who I first heard suggest they all go 'GS pay scale' wasn't some angry 'leftist lib-uh-ral'... it was George Will. I heard him suggest it back when the first bailouts were being trial ballooned (2006?)... he referred to it as the 'Will Doctrine'... any firm taking direct gov't payment without rendering REAL compensating services or warrants must see to it that NO employee's compensation exceeds the GS pay scale.

That would include bailouts, no-bid contracts and subsidies... GS, Haliburton, Freddy & Fanny, ADM, Conagra... etc., would all roll over and die.

Apologies if I'm retracing steps here...

Maybe it has something to do with the fact that by the time a property goes to auction, the note holder has already received the value of the note by making claims against the "note insurance" covering the tranche that the note securing the property was bundled into.... Yes, I ended that with a preposition....

Then again, note holders are sucking up any equity left in properties at auctions - the smaller, county or individual auctions as opposed to the big televised REDC clusters... My understanding was that note holders were supposed to do their best to get as close to FMV as possible on a foreclosed property and any overage after all amounts are paid is supposed to be returned to the FC'd borrower. Problem is that if no one bids at auction, the note holder purchases it for what they claim is the outstanding amount on the loan including fees, etc. If a property is worth FMV $200k, the note holder FCs for $100k and no one bids higher on the property the note holder purchases for $100k and $100k in equity immediately evaporates for the FC'd borrower and xfers to the note holder.

Take a look at the auction practices in Florida. I forget which county it is but at auction the note holder will signal either verbally or by a little hand held piece of paper, sign, etc. letting bidders know what the bank is willing to pay for the property. If no bidder is willing to pay more than that the bank purchases the property. Here's the kicker though - if no bid is recorded - and who would bother if they know the note holder will pay more than them - the note holder is allowed to purchase the property for $100.00 (one hundred dollars).

So the note holder gets the value of the note covered by "note insurance", they get to use the appraised value of the property on their books AND they get the physical property itself. Not a bad haul. This would be a prime example of why I tend to vomit every time I hear "No one makes any money on foreclosures. We lose money on foreclosures." :'(

The problem being, they aren't the only players, but act as if they were.

Well I'm talking about the management of the dollar and they really are the only players in that game. GM, whatever, it's just another component of the backdrop of demand destruction as ponzimoneticapitalism collapses down to whatever real economy remains. Check back in September when the exciting truth is revealed.

Maybe I can sum it up, poorly, this way - under Hoover, the U.S. had much of what you described as a distinctly neutral group, and it failed.

I mean neutral policy in that it's a strong, naturally defensive policy that will tend to draw bureaucracies because it rests on the status quo. "Be the last guy left standing and win by default" is pretty much "what we were doing anyway" so it's very easy for passive policy groups to adopt. Don't be so tangled up in trying to attack some other thing -- Hoover's "neutral" state? Dunno about that. People say it was pretty activist. Not what I was talking about in any case.

Under Roosevelt, the U.S. had a national policy, and though it continuity with the past is beyond dispute, the rules changed.

No policy to all policy? I smell a facile assertion. I don't want to source the argument to death, so I'm just going to say, I bet Hoover was not just sitting there placidly puffing on his Samuel Gompers.

To put it differently - the rest of the world has yet to understand the brilliance of paying public bonuses for failure.

Yah, only in America.

And it is reasonable to assume that the world has the more reasonable perspective - at least, at a bare minimum, of not looting the treasury in full public view, defending your right to engage in such because the free market's invisible hand is better at sleight of hand than taxation.

Yeah that never happened anywhere else. Kleptocracy, remember? I sure didn't develop this sophisticated technical vocbulary out of the clear blue.

Also, nobody except the shills are really defending it on those grounds.

Sorry you're pissed off. Try not using our currency and not buying our debt if you want things to change, rather than talking about how you're going to take your bat and ball and go home, one of these days some time soon, just you wait. As someone being victimized by these policies, I wish you'd get off your ass and stop buying Treasuries already rather than enabling the problem and talking out the other side of your mouth about how you abhor it.