Metrics Wonk, when LTCM went down, the NY Fed coordinated a rescue by the big banks (creditors for about $3.6B). Who - other than the taxpayers - have enough resources to rescue Citi (and others)?
And for the conspiracy theorists - look at the time the article was published. Right as the market closed on a Friday. That should get some people to wear tin foil hats this weekend discussing if the story was held until closing (I knew there was rumor about this earlier via emails - so it was all over the street).
I gonna go way out on a limb and say the US taxpayer.
Metrics Wonk
Or would it actually be the US Saver? We'll pay for it because this sort of sh*t is what's causing the US$ to fall and thus our savings are becoming worth less.
Or do you see an explicit taxpayer bailout coming? I tend to think it's coming more in the hidden inflation tax.
Speaking as a taxpayer, what can I expect for my money? Aside from knowing that the banking system is safe from that pesky "free market correction."?
For one, I would like a few banker-scalps nailed to the wall of the SEC or the FDIC or whoever is supposed to oversee and protect against the loss of tens or hundreds of billions of dollars from a bank, so that a bailout and monetization of this much debt doesn't have to become necessary.
I mean, will these guys get a $100 billion dollar bailout AND get a free pass? Paging the dancing Mr. Prince, please report to the pricipal's office.
Since the taxpayer will be funding the super conduit, maybe we get a say on the price?
I don't oppose the government starting a super conduit to purchase these things at say, 10 cents on the dollar. We might make a profit. But, who wants to bet the price will be 100 cents on the dollar?
Well lets see if have a buyer of assets that have at the best indeterminate value and at the worst absolutely no intrinsic value. It definitely sounds like a job for the Feds. Just think of it as the strategic milk reserve, but for bankers.
All joking aside a properly functioning Fed would indeed get the big players to sort out their own mess in the communal interest of the market, without tapping federal funds. But I'm not big on faith these days.
MaxedOutMama, sorry about that ... when I heard about this earlier, I couldn't figure out who the sucker - uh, I mean funder of the super conduit - was. Then I remembered the old gamblers saying "If you can't spot the sucker at your table, it's probably you"
Hey, who kicked over that rock and exposed those writhing worms?
We need a big recession (and drying up of Treasury bill/note purchases by foreigners) to, in the future, prevent the Feds from even contemplating buying up that junk.
With the LTCM solution, banks took over assets that couldn't be immediately marketed. It's the banks themselves who are on the hook for these assets already, so how would a "super conduit" solve the problem?
Assuming there is some sort of Treasury bail-out, how exactly would it work? Are you all suggesting the Treasury would guarantee the short-term debt? Seems unlikely there is a mechanism to even do that.
I'm genuinely curious about what sort of bailout you all suspect is coming.
I was hoping CR was going to fund this super-conduit with all that excess liquidity accumulating in the CR tip jar.
Can we maybe ask the new Iraqi government to fund it? Like, they totally OWE us, right? And besides- those Iraqis are already used to hyperinflation, so it should be no big deal for them.
My understanding from previous discussions of this idea was that the banks involved would all contribute to the "super SIV" with the goal being to put these suddenly long term debts on the new entity's books so that "what happens off balance sheets, stays off balance sheets" (to pervert Las Vegas' tagline). One of the sticking points as I recall is that the assets will have to be marked to market when it is sold to the new entity (the problem is everyone is going to be anxious to make sure they aren't taking more of a haircut than any of the other players, which could get ugly with hard to value assets).
BTW, Tanta - civil disobedience, in my view, is when joesixpack and marymix reach out to others and form collective action which has the intent to defy set order.
So another week ended and the Tanman gets another $9M or so. "Look Marrymix, I'm paying you 9 bucks an hour to sit on your fanny calling past due accounts. Better deliver results or your a** is mine. Ive got another 10M coming next week, you wentch".
One of the sticking points as I recall is that the assets will have to be marked to market when it is sold to the new entity (the problem is everyone is going to be anxious to make sure they aren't taking more of a haircut than any of the other players, which could get ugly with hard to value assets).
Don | Homepage | 10.12.07 - 5:42 pm | #
Sounds like a Tarantino-style Mexican-standoff to me.
Keep in mind that Congress can keep this item off the budget as it is a special one time charge. Many of the bills for Iraq funding are processed this way "emergency this or that, yada yada".
It will magically appear on the national debt, but not the current year deficit. I never learned about this in school.
Shaking my head...me...an old fart conservative REPUBLICAN of means, hoping the democrats (spit..ptooey...yuck) win the next elections sweeping both houses and the oval office. Is time for the pendulum to swing the other way.
So the R's spend public money to bail out big money boys with connections and the D's waste it on poor folks who are poor because they make bad decisions.
I'm failing to see the difference on the effect to my wallet.
BTW, remember how the lost tax revenue from forgiveness of mortgage debts was going to be paid for by revoking the $500k Cap Gains exclusion? Does anyone think that some congressman scientifically calculated the two events and determined the final effect would be a wash?
You have a lousy memory. What I said was that we'd have begun our way out of the woods and even gave a couples of things we'd see by the end of September. I was correct.
Let's not get too smug like it's somebody elses problem. How many money market and short term bond funds out there in 401(k) land purchased commercial paper from the SIV's who offered CDO's and the like as collateral?
How will the short term debt be repaid or rolled over if the long term assets cannot be priced?
So far I haven't heard of any funds "breaking the buck" but I wonder what deals have been made to buy time awaiting some form of new money.
Any losses in "safe" funds would really shake up the average investor. This seems very serious to a dumb ol'redneck like me.
NC Jim you are spot on- I would be in treasury securities. The fact is that many money market funds have invested in this crap. that is why the government will get involved and we will all pay for this IMHO
BTW, Tanta - civil disobedience, in my view, is when joesixpack and marymix reach out to others and form collective action which has the intent to defy set order.
does anyone else have a problem with our Treasury Secty Paulsen being in the same room we these chumps? why is it we have a former GS guy with the keys to our Treasury. remember the day he travelled over to the UK was the same day King changed his mind and decided to guarantee all N. Rock deposits? what a sad situation.
Financial Times
Citi looks to reverse research separation...
Citigroup has considered moving its stock research analysts back to its institutional securities business five years after they were separated under pressure from regulators investigating Wall Street conflicts of interest.
It is pretty outrageous that they released this on a Friday afternoon. That is the old Washington game of releasing bad/embarrassing news on a Friday because the news cycle is different. Most people don't focus on the news over the weekends.
They absolutely refuse to allow a credit contraction. They are scared to death of deflation, but they are only going to make the eventual outcome worse by not letting the markets correct.
Is this why Treasury 2, 5,10 year yields have risen(prices dropped) the last 3 days ? ) I'd been treating it simply as "THE RETURN OF THE CREDIT CRUNCH" where IMO people HAVE TO SELL so are selling what they can not what they want to ( I saw it happen last June - it was amazing - the 10 year went to 5.30 for a day ). Maybe there is a LOT more to this than just that then ?
Rich you are OK, even if you do have some delusions about the ability of the Democrats to get their act together in time to take advantage of the Republican implosion.
I gonna go way out on a limb and say the US taxpayer.
First post was 100% correct. Shortest thread ever.
Nice to have done a tidy bit of business there! Next post CR?
Metrics Wonk, when LTCM went down, the NY Fed coordinated a rescue by the big banks (creditors for about $3.6B). Who - other than the taxpayers - have enough resources to rescue Citi (and others)?
And for the conspiracy theorists - look at the time the article was published. Right as the market closed on a Friday. That should get some people to wear tin foil hats this weekend discussing if the story was held until closing (I knew there was rumor about this earlier via emails - so it was all over the street).
Best to all.
A "super conduit" straight to the fed discount window is my guess
Those fortunate enough to encash Social Sec will get SIVs instead.
DING DING DING DING DING DING DING DING DING DING DING DING DING!
We have a winner!
thread over.
I gonna go way out on a limb and say the US taxpayer.
Metrics Wonk
Or would it actually be the US Saver? We'll pay for it because this sort of sh*t is what's causing the US$ to fall and thus our savings are becoming worth less.
Or do you see an explicit taxpayer bailout coming? I tend to think it's coming more in the hidden inflation tax.
The Chinese perhaps? hahahahaha
The Chinese SWF, or Warren Buffett.
Speaking as a taxpayer, what can I expect for my money? Aside from knowing that the banking system is safe from that pesky "free market correction."?
For one, I would like a few banker-scalps nailed to the wall of the SEC or the FDIC or whoever is supposed to oversee and protect against the loss of tens or hundreds of billions of dollars from a bank, so that a bailout and monetization of this much debt doesn't have to become necessary.
I mean, will these guys get a $100 billion dollar bailout AND get a free pass? Paging the dancing Mr. Prince, please report to the pricipal's office.
My headache just got worse....
That's principal's office.
(I'll be in spelling class.)
Who would fund the "super Conduit"?
Why, Captain America!
Since the taxpayer will be funding the super conduit, maybe we get a say on the price?
I don't oppose the government starting a super conduit to purchase these things at say, 10 cents on the dollar. We might make a profit. But, who wants to bet the price will be 100 cents on the dollar?
Well lets see if have a buyer of assets that have at the best indeterminate value and at the worst absolutely no intrinsic value. It definitely sounds like a job for the Feds. Just think of it as the strategic milk reserve, but for bankers.
All joking aside a properly functioning Fed would indeed get the big players to sort out their own mess in the communal interest of the market, without tapping federal funds. But I'm not big on faith these days.
MaxedOutMama, sorry about that ... when I heard about this earlier, I couldn't figure out who the sucker - uh, I mean funder of the super conduit - was. Then I remembered the old gamblers saying "If you can't spot the sucker at your table, it's probably you"
In this case, it's all of us.
Best to all.
Sounds like the main question discussed at this "confidential meeting" is "where can we find a Greater Fool to be the Final Bag Holder".
Isn't that what Cioffi was trying to do with that Evergreen Financial IPO?
"But who would fund the "super conduit"?"
Our kids...
Hey, who kicked over that rock and exposed those writhing worms?
We need a big recession (and drying up of Treasury bill/note purchases by foreigners) to, in the future, prevent the Feds from even contemplating buying up that junk.
What, liquidity problem still here??? I thought Banker said this was going to be solved by the end of Spetember.
According to the Bloomberg article:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aVuIHO4.0sPU
...both the banks and the government are giving the press a multi-hundred-billion dollar "no comment".
Nothing to see here! Move along!
Man -
How come the good stuff always get wheeled out on Friday afternoon? LOL.
They've gone to plaid!
i still stand by my name.
With the LTCM solution, banks took over assets that couldn't be immediately marketed. It's the banks themselves who are on the hook for these assets already, so how would a "super conduit" solve the problem?
Assuming there is some sort of Treasury bail-out, how exactly would it work? Are you all suggesting the Treasury would guarantee the short-term debt? Seems unlikely there is a mechanism to even do that.
I'm genuinely curious about what sort of bailout you all suspect is coming.
Will they take a postdated check on a closed account?
Perhaps Citi will do a JV with me to buy the monies at a discount and they can provide the financing.
I'm not beholden to shareholders, so I can hold the notes at my leisure only selling paper to cover the interest payments.
What, liquidity problem still here??? I thought Banker said this was going to be solved by the end of Spetember.
Neal
He said he hoped it would be, but at the same time he said that the longer this went on the worse things would be.
My guess the reason why Costco showed such great numbers last month is that the Bunkerdome was being restocked.
I was hoping CR was going to fund this super-conduit with all that excess liquidity accumulating in the CR tip jar.
Can we maybe ask the new Iraqi government to fund it? Like, they totally OWE us, right? And besides- those Iraqis are already used to hyperinflation, so it should be no big deal for them.
My understanding from previous discussions of this idea was that the banks involved would all contribute to the "super SIV" with the goal being to put these suddenly long term debts on the new entity's books so that "what happens off balance sheets, stays off balance sheets" (to pervert Las Vegas' tagline). One of the sticking points as I recall is that the assets will have to be marked to market when it is sold to the new entity (the problem is everyone is going to be anxious to make sure they aren't taking more of a haircut than any of the other players, which could get ugly with hard to value assets).
Some more SIV info:
1. 110M loss:
FT.com / Financials - Axon SIV reveals losses of $110m in firesale
FT.com / Financials - SIVs forced into deleveraging as few signs of recovery seen in sector
Please correct me if I am wrong...did we not just hear that the credit crunch was behind us. Again, no contagion.
For those with seriously big tin hats, you might consider relocating to a silo w/ a private airstrip. You see it here:
Page Not Found!
BTW, Tanta - civil disobedience, in my view, is when joesixpack and marymix reach out to others and form collective action which has the intent to defy set order.
So another week ended and the Tanman gets another $9M or so. "Look Marrymix, I'm paying you 9 bucks an hour to sit on your fanny calling past due accounts. Better deliver results or your a** is mine. Ive got another 10M coming next week, you wentch".
One of the sticking points as I recall is that the assets will have to be marked to market when it is sold to the new entity (the problem is everyone is going to be anxious to make sure they aren't taking more of a haircut than any of the other players, which could get ugly with hard to value assets).
Don | Homepage | 10.12.07 - 5:42 pm | #
Sounds like a Tarantino-style Mexican-standoff to me.
What, liquidity problem still here??? I thought Banker said this was going to be solved by the end of Spetember.
Speaking of Banker, what happened to him? Is he hunkered down in the BankerDome?
Keep in mind that Congress can keep this item off the budget as it is a special one time charge. Many of the bills for Iraq funding are processed this way "emergency this or that, yada yada".
It will magically appear on the national debt, but not the current year deficit. I never learned about this in school.
Shaking my head...me...an old fart conservative REPUBLICAN of means, hoping the democrats (spit..ptooey...yuck) win the next elections sweeping both houses and the oval office. Is time for the pendulum to swing the other way.
So the R's spend public money to bail out big money boys with connections and the D's waste it on poor folks who are poor because they make bad decisions.
I'm failing to see the difference on the effect to my wallet.
BTW, remember how the lost tax revenue from forgiveness of mortgage debts was going to be paid for by revoking the $500k Cap Gains exclusion? Does anyone think that some congressman scientifically calculated the two events and determined the final effect would be a wash?
Neal,
You have a lousy memory. What I said was that we'd have begun our way out of the woods and even gave a couples of things we'd see by the end of September. I was correct.
These woods are lovely, dark and deep...
Let's not get too smug like it's somebody elses problem. How many money market and short term bond funds out there in 401(k) land purchased commercial paper from the SIV's who offered CDO's and the like as collateral?
How will the short term debt be repaid or rolled over if the long term assets cannot be priced?
So far I haven't heard of any funds "breaking the buck" but I wonder what deals have been made to buy time awaiting some form of new money.
Any losses in "safe" funds would really shake up the average investor. This seems very serious to a dumb ol'redneck like me.
Please tell me I am wrong to worry.
Hey! Dollar holders! Touch yer damn toes on the QT! Okay, now hold it right there...
Damn it! Where's the friggin' vaseline?
What? There ain't none? Oh, what the hell...
Ahhh, quit yer belly achin'...
NC Jim you are spot on- I would be in treasury securities. The fact is that many money market funds have invested in this crap. that is why the government will get involved and we will all pay for this IMHO
Who would fund the "super Conduit"?
Why, Captain America!
Tanta
BTW, Tanta - civil disobedience, in my view, is when joesixpack and marymix reach out to others and form collective action which has the intent to defy set order.
and you thought my CD solution was R.
practical, imo
Fleckenstein was on this back in September. He's had a pretty good track record of pointing out which shoe is going to drop next.
Banks' dark off-balance-sheet world
Banks' dark off-balance-sheet world - MSN Money
does anyone else have a problem with our Treasury Secty Paulsen being in the same room we these chumps? why is it we have a former GS guy with the keys to our Treasury. remember the day he travelled over to the UK was the same day King changed his mind and decided to guarantee all N. Rock deposits? what a sad situation.
Financial Times
Citi looks to reverse research separation...
Citigroup has considered moving its stock research analysts back to its institutional securities business five years after they were separated under pressure from regulators investigating Wall Street conflicts of interest.
FT.com / Financials - Citi looks to reverse research separation
It is pretty outrageous that they released this on a Friday afternoon. That is the old Washington game of releasing bad/embarrassing news on a Friday because the news cycle is different. Most people don't focus on the news over the weekends.
They absolutely refuse to allow a credit contraction. They are scared to death of deflation, but they are only going to make the eventual outcome worse by not letting the markets correct.
IPT - confused by by your comment
Given where the Dow is and how strong bank stocks are, you wouldn't think that they have this SIV issue.
How does this help the subprime home owner?
How does this prevent foreclosures?
How does this get people to spend more?
It doesn't, but it could make options expirey week interesting.
I'd like to know when I'll be given a tour of the Citigroup structured finance trading office.
Seems only fair - since my tax dollars fund their damn operation, I mean.
Is this why Treasury 2, 5,10 year yields have risen(prices dropped) the last 3 days ? ) I'd been treating it simply as "THE RETURN OF THE CREDIT CRUNCH" where IMO people HAVE TO SELL so are selling what they can not what they want to ( I saw it happen last June - it was amazing - the 10 year went to 5.30 for a day ). Maybe there is a LOT more to this than just that then ?
-K
"These woods are lovely, dark and deep"
Rich you are OK, even if you do have some delusions about the ability of the Democrats to get their act together in time to take advantage of the Republican implosion.
I give up. To which country should I ex-patriat?