Damm, these are the times I really miss Tanta, she would ahve had an eriudite, witty spot on 10,000 word analysis of the results that was absolutely spot on and full of insights that nobody else would spot for ages, if ever, up by now. Now to go and read CR's write up.
Some of the numbers don't make much sense. Using BofA as an example, the indicative two year loss rates for first lien mortgages are 7% to 8.5%, and I believe BofA is in worse shape (because of their acquisition of Countrywide) than most banks. So I would expect losses substantially higher than the indicative rates. Instead they were lower (only 6.8% of first lien mortgages).
Supposedly Countrywide is taking a huge portion of the re-fi boom... Could all of those new conforming mortgages be diluting the old "bad" pools and driving down the loss rate predictions?
You should read the full link to the Newsweek article about the Obama dinner. The piece the CR posted makes it seem as though Obama is thinking ahead. If you read the full article, you can see that Obama is most likely a sell-out of the worst kind. The kind of person who climbs the ladder and knocks it down for everyone else.
It's not like we didn't know these assumptions weren't baked into the cake when the original white-paper went out. Spend an hour looking through the sources of their assumptions and timelines... some of them assume things like historical loss rates (I think, not sure... posted on this at some point in the past 2 weeks when I had time to look at the whitepaper). Of course everyone just looked at the first couple of pages...I've strated to learn technical papers from the back to the front... and then see if my conclusions match the executive summary... or if there are holes in the story.
This is like a cardiologist giving a patient a stress test and passing him after only 30 seconds on the treadmill because the patient needed a cigarette.
As I understand it, lenders factor in a loss amount of only 3-4%, so 7 to 8.5 is double the estimated losses. The US residential lending market is about 19 trillion. So the difference is an extra 500 million in losses just on the loan balances.
Anyone else notice that the loss rate on FITB's second mtg loans is lass than that of its 1st mortgage book? How does that happen when the loss severities on seconds is close to 100% most of the time, and one would think that borrowers with 2nds will generally have higher CLTV's than those w/o? Very odd, also looks like KEY has no mtg book what so ever, and what it has is clean as a whistle, only 3.4% on 1sts and 6.3% on seconds?
Nemo, that is possible. I was just expecting worse from them - and maybe I'm wrong.
I really wish we could see the CRE breakouts. And the first liens by category too: Prime, Alt-A, and subprime. That was in the white paper too and would really help
BofA will sell more than a billion new shares, using an "ATM Program" (truth can be stranger than fiction). They may have already started: It's back near $15.00 after closing around $13.50.
"SAN FRANCISCO (MarketWatch) --
Chief Financial Officer Joe Price said late Thursday that the company will sell 1.25 billion new common shares as the lender tries to raise capital to meet requirements from the government's stress test. Price said the stock will be sold through an "ATM program," in which securities are sold through "normal stock trading," he explained. "We would access the market over time, with the goal of optimizing pricing and timing and price execution," Price added. Bank of America also plans on generating roughly $10 billion in gains from sales of businesses including First Republic, Columbia Management and a through a joint venture. "That leaves us with approximately $7 billion or so, which we think can be satisfied by our actual financial performance over the next six months," Price said. The government said earlier on Thursday that Bank of America needs to raise $33.9 billion in new capital. End of Story"
I wonder whether "optimizing pricing" means that they keep a bid under the stock? Is that legal?
I suppose that "optimizing timing" might mean that the price will be run up in the after-hours and pre-market.
Sounds like BAC is putting a cap on it's common stock price for the rest of the year - we should see what the number is if the rally continues for another week....
I used to look for companies that were doing share buybacks, and look at the order book on Island to speculate on what the floor price was the company was putting under the stock, then I would buy right above that - actually a form of front running but not illegal since it was done with all public information...
Aren't we just waiting for PPIP to fail or something like that? Is PPIP currently even running? When PPIP was announced weren't stocks at like the 6500 range for the Dow? So didn't people say, "Wow, PPIP will be awesome at these levels"... wonder how that changes now? Or am I just getting everything confused... following the blogs and the news is like a slow-motion fear and loathing in Las Vegas experience... where did we go and where have we been again? Haven't we already been here or are we in unchartered territory? I swear I am so tempted to dump 100% of my "investment account" into SRS, TWM, TBT combination in hopes of getting a 100% return...
Don't you think the whole 'stress test' is a diversion to buy time? It puts the focus elsewhere (dicscuss among yourselves...) and lets time pass while banks try to make money on free money before the game is on again and the run begins?
The biggest single question was posed in the last thread: what off-balance-sheet components are represented here? Any at all? Whether or not these are sound banks is a secondary question compared to whether they are sound businesses.
Nigel, it is hard to say - the prime delinquency rate was 2.89% in January for the GSEs and increasing rapidly. I don't know the cure rate (obvious loan mods help), but the indicative rate for prime loans over 2 years was 3% to 4%.
If only half go into default (I think that is optimistic), and the delinquency rate stops surging (it increased from 1.93% in December to 2.89% in January so this is pretty optimistic) we would be near the low end of the two year indicative range already!
I wish they had broken this out by first lien category ...
"That leaves us with approximately $7 billion or so, which we think can be satisfied by our actual financial performance over the next six months," Price said.
He also said, that with the appointment of his daughters imaginary unicorn as CFO, there was little doubt about the firms profitability going forward.
YLSP...yes, we've been here before, at least twice. Think back to the days when everyone was lauding the kitchen sink quarterly reports for the banks. Same camisa, different day/month/year.
Plan B - stop interfering in the marketplace and let things find their own level. Dislocations - yes, of course, after over 100 years of interference there are some unnatural imbalances which will correct - but it will be sharp and fast and when it's over things will be much more stable and sustainable without any actions by government at all.
BAC has tacked on another 8 bil of market cap AH and is close to being a 12-digit stock for the first time in a few months
More like the first time in a few hours ... BAC traded above $15 early this morning before the market reversal.
On another note, where does anyone think that all of these banks are going to be able to find $75 billion? Sure Morgan Stanley and Wells may find some takers, but what about the "rest of the worst?"
Especially with Komrade Ben's treasury market debacle. Soon it will be our duty to the collective good of society to sink every last nickel into supporting the U.S.S.A long bonds.
"let's place the blame where it belongs. Not on the bankers, who are not responsible for assuring economic stability, but on the government officials who had that responsibility and failed to discharge it. They failed even to develop contingency plans to deal with what everyone knew could happen in a context of escalating housing prices (it had happened in Japan in the late 1980s and the 1990s). Lacking such plans, the government responded to the crisis with spasmodic improvisations, amplifying uncertainty and mistrust and thus retarding recovery.
And let's not forget to apportion some of the blame to the influential economists who assured us that there could never be another depression. They argued that in the face of a recession the Federal Reserve had only to reduce interest rates and flood the banks with money and all would be well. If only."
I like the inclusion of words like "spasmodic" and "retard"...and I think the lack of contingency plans was intentional.
Aren't the banks pretty much nationalized as it is? Federal Reserve money + TARP warrants that Congress will not release (in order to pressure them to loan?)... I don't know the true significance of these stock warrants that the Treasury is holding, but Dodd was adamant Treasury hold onto them for some reason... maybe a "faux" leverage over banks?
Here's the follow-up paragraph from the Newsweek piece on the Obama dinner....
"But after Krugman and Stiglitz made their now-familiar case for nationalizing the banks and forcing other dramatic changes, Obama gave no indication he was changing his policies, Blinder added."
"Supposedly Countrywide is taking a huge portion of the re-fi boom... Could all of those new conforming mortgages be diluting the old "bad" pools and driving down the loss rate predictions?"
BINGO. We have a winner.
Also, see JPM with WM, WFC with WB...
Gee, who now gets stuck with the risk --> FHA, Fannie/Freddie --> Fed --> US Taxpayers (via inflation).
Is it just me but is Obama speaking about to be the curse like Bernanke was a couple of months ago? I mean, Obama is on TV more than the freaking Ad guy Billy Lane selling all sorts of crap no one wants......Guess they could actually be one in the same.
If that's the case, I want to know if I'll be made right for the tens of thousands of dollars of obligations that have been undertaken in my name while the administration walked in circles before compelled to acknowledge the obvious. Doing the right thing eventually isn't good enough, because the "right thing" will have log ago become obsolete by then. Look at our own policy environment, for example. This has stopped being a bank issue more than 6 months now. It's a national balance sheet crisis in the making now.
Who cares what they do with the banks? It's just a punch-and-judy show. What makes one bank healthy and one bank not? Decisions made at the Fed / Treasury, that's what. And all this public mummery about stress tests and asset valuations is just talk talk talk.
Did KEY focus on CRE?????? If so, that would be a BIGGER red flag than being a sub prime shop. That is the sector that will blow away the "adverse outcome" expectations these Stress(less) Tests measured.
"ZERO reason why that White House meeting wasn't public." - owc yogi
I'd swear it was you who a few days ago supported his right to confidential discussions. Must everything be 'on the record'? I apologise in advance if I am wrong, as I have no way to prove my assertion.
Just read the article in Newsweek where they discuss the meeting as O' inviting criticism and allowing his advisors to defend their position to those critics. Kind of annoyed that such a meeting would BE, "off the record." When do we get to the public debate? Congressional hearings are woefully inadequate, as the pubic officials spend way too much time pontificating for the cameras and not enough asking the hard questions and follow-ups.
Do we have to continue to wait for the markets to give truth to the lie, that the banks are sound, before we can discuss how best to put them down?
I'd swear it was you who a few days ago supported his right to confidential discussions.
Nope, that was me. I also said I thought the dinner was a photo op, and the more I hear about it, the more it is. The president took two whole hours to hear from a host of people and also his own advisors? Why bother, I might as well just email him a PPT, it'd say more and it wouldn't cost my fellow Citizens an overpriced dinner.
This is just political cover to keep his true believers yammering about how he's the man for all seasons who sees all sides.
"Just look at the U.S. financial sector debt – the source of all problems in this crisis. It has not come down, despite all the talk about deleveraging. It stood at $17.2 trillion at the end of 2008, higher than $15.8 trillion in September 2007, when the crisis began. Even though it can’t borrow from the market like before, it is borrowing from the Fed and the government. How could we say that the crisis is over when the U.S. financial sector’s leverage hasn’t declined?
...
The U.S. financial system is technically bankrupt. The strength of a banking system reflects the strength of the economy it serves. Just look at the balance sheet of the U.S. household sector. How could U.S. banks survive when so many of their customers have negative equity?"
No, not me, I think it was Byz, who said he'd give him one pass. This is not troop movements, but economic analysis. I'm a "Government in the Sunshine" type in general, and especially regarding financial regulation.
money man, sort of looks like it but not enough info, but 2.3/0.125 = 18.4, or 17.2% of the risk based assets of 106.7. I'm not really sure if that is a valid way to look at it though, but is the best aproximation that is available with the data
broward wrote on Thu, 5/7/2009 - 5:23 pm
This is Plan 9 and it is from Outer Space.
Did you also know this factoid that Plan 9 was a computer operating system and associated utilities. It was built by the Computing Science Research Center of Lucent Technologies Bell Laboratories, the same group that developed Unix, C, and C++.
Subject: What are its key ideas?
Plan 9 exploits, as far as possible, three basic technical ideas: first, all the system objects present themselves as named files that are manipulated by read/write operations; second, all these files may exist either locally or remotely, and respond to a standard protocol; third, the file system name space - the set of objects visible to a program - is dynamically and individually adjustable for each of the programs running on a particular machine. The first two of these ideas were foreshadowed in Unix and to a lesser extent in other systems, while the third is new: it allows a new engineering solution to the problems of distributed computing and graphics. Plan 9's approach means that application programs don't need to know where they are running; where, and on what kind of machine, to run a Plan 9 program is an economic decision that doesn't affect the construction of the application itself.
$600 billion, of which $455 billion will come from whole loans held on the banks balance sheets, and $135 billion will come from available for sale securities.
i think the telling fact is that its "held on the balance sheets" the 3 trillion dollars worth of stuff was taken off 4 weeks ago...
broward (homepage, profile) wrote on Thu, 5/7/2009 - 8:28 pm
What are you saying here, BR?
The banks are climbers of Mt Everest and if one falls, the others will be pulled down by their safety cords?
No, that all of them fell and died some time ago. They're zombies. If it wasn't for the fact that years of America's future are being poured onto them to give them months of life, they'd all have long collapsed. The government evaluating their "balance sheets" is like taking the blood pressure of a medical doll they control. It's going to say exactly what is expected, because while the right hand it operating the cuff, the left hand is operating the dial that sets the reading.
This is an interesting article/vision from one writing on Seeking Alpha, I don't agree with all the points, but it is always useful to think ahead. BTW, I think Predictions 1 and 2 have already happened.
Who was the senator who asked about the backup plan?
Ah here it is.
"Rep Gresham Barrett: "The last question I have guys, which is the $64 million question or I guess I should say $64 trillion question is: What's the backup plan? If everything fails what do we do? Where do we go from here?"
Treasury Secretary Geithner: "Congressman, this plan will work. This plan because of the authority provided not just by Congress but the treasury and the Fed gives us broad ability to do what you need to do to get through a financial crisis like this."
I still laugh at this "plan." And not because it is funny...
""Supposedly Countrywide is taking a huge portion of the re-fi boom... Could all of those new conforming mortgages be diluting the old "bad" pools and driving down the loss rate predictions?"
The new home loans are substantially agency conforming loans that are sold off to Freddie and Fannie, with no effect on the balance sheet.
1 currency now -yogi (profile) wrote on Thu, 5/7/2009 - 8:30 pm
No, not me, I think it was Byz, who said he'd give him one pass.
And by one pass, I mean, my visit would not be leaked like a "stress test" "result". Confidentiality runs both ways -- if I'm not going to reveal what went on, I'm not interested in having it imputed on me. I would be happy to offer my advice and get ignored, but not to offer my advice and be a stalking horse.
China's central bank frets over Fed bond purchases
Last update: 2:10 p.m. EDT May 7, 2009
SAN FRANCISCO (MarketWatch) -- Chinese bank authorities warned the Federal Reserve's programs to pump more cash into the financial system by buying $300 billion in Treasurys risked jolting bond prices and devaluing the dollar.
The overnight comments from the world's biggest holder of U.S. government debt helped depress Treasury prices in trading Thursday, said one analyst.
In a monetary report dated Wednesday and posted on the People's Bank of China's Web site, the central bank said the quantitative easing policy pursued by the Fed may help keep bond yields at low levels in the short term.
But over a longer period, higher inflation expectations, interest rates and central bank measures to take extra liquidity out of the system could cause a sharp adjustment to bond prices, the report said.
The central bank also said plans by the Fed and other central banks to drive lending rates lower by buying their own government debts risks depreciating major currencies.
The report "has been making the rounds overnight and is partially responsible for the selling pressure in Treasurys," said Ian Lyngen, interest-rate strategist at RBS Securities, in emailed comments early Thursday.
...
Shocking though that anyone actually writes a story about the bond market (which we rely on entirely to fund our lifestyles). It is WAY more fun watching the casino everyday.
I was flipping around the TV on the floor today, even the local news broadcasts have a Dow ticker in the corner. This is what we have come to - a nation of fast money gamblers.
POTUS knows all the arguments very well, it had to be to collect opinion on something new and of a monumental scale, not an academic discussion at the dinner table!
"If the POTUS asks you to keep something confidential, you keep it confidential unless he tells you of a planned felony."
The admin that delayed the results, and "leaked" the the "stress" test over the course of weeks has something yet that they do not want public speaks volumes: The banks are still broke, and they have no plan. They also may be trying to get the public on board with having the banks that put us in this mess, BENIFIT in any solution.
That 700 billion for TARP, sure would have come in useful for capitalizing "good banks" to back fill the role of the zombies, while liquidation procedures of the zombies commenced. Which then could have then been privitized giving us our money back. Instead we now have T-Bills blowing up and debt that we may not be able to service without a "soft" default, resulting in hyper-inflation.
"Do you really think Bernanke can pull MBS rates below Treasury rates?"
Sure, he can pay whatever he wants. He is buying MBS directly from the originators (well, through dealers), and if he says "buy the FNMA 4% at 102", they will by the FNMA 4% at 102.
There is about 150B or so of new MBS issuance a month (give or take a bit), or a run rate of about 1.8T for the year. Some weeks higher, some weeks lower.
BB has committed, what, 1.3T to buy MBS? He IS the market. If he wants to overpay, there is no reason in the world he can't overpay.
Everything that should/could have said about stress tests, has been said already in the past couple of months. Nothing new, except the confirmation of the worst fears. Just one point of clarification - when people talk about "banks earning their way out of the crisis", they really talk about subsidizing of these banks by savers, who still have money in their bank and money market accounts. But, hey, that's free market for you!
In other news - abysmal results of the 30yr bond auction. The awarded yield was 4.29%, or 20bps higher then yesterday's yield.
Actually, I feel pretty strongly about the issue. Either public transcripts(or at least press coverage), or it's a photo-op. I don't care what the f. they all write in their memoirs in 15 years to justify their actions.
Anyone ought to see through all the transparency talk.
Bernanke is NOT worried about wagging tails...he will do whatever he thinks necessary to maintain the illusion of a functioning market, just as long has the CHOSEN ONES maintain appearances. Treasury be damned....The Feds will own 50% of all equities and the long end of the curve to force money and markets to bend to his whims. It truly is going to end badly and we are ALREADY at a place none of US wanted to go. "SIN will take you farther than you wanted to go, make you stay longer than you wanted to stay, and cost you MORE than you wanted to pay"....Johnny Hunt....Baptist Preacher What has happened to our leadership and economy is truly SINFUL!!!!!!!!
Strikes me that the yield on the 10 rise, oil rising, most equity market soaring, etc, all takes place on the same timeline...early March til now. And most of it seems odd. I mean, oil up from $mid 30s to mid 50s, yet inventories skying and demand still falling? Hm. And equities? Youve gotta be kidding. We're gonna cheer THESE earnings? And the rising 10yr yield in the face of QE? That seems perverse too. It all seems perverse, but mostly, the bank stock pumping seems the MOST perverse, but also the one thing that has the most easy to figure out reason for being the way it is. Nevertheless, none of this looks sustainable.
We never did retest the march lows or even make a trip down there... that has to happen sooner or later... with all the money coming out of DC this is looking more like a double dipper - a year from now when the flames are dying down from this batch of gas, congress will be wanting to do it again for the election but by next year the bond market might have a "Road Closed" sign up... then what??
-if you think they give these comments ( edit: especially yours) any serious consideration, you are deluded"
Disagree. Rising star students like Basel Too and EHP are regulars at this public forum. E-mails get put in the virtual circular file. The comments here get vetted by hundreds, and can carry more weight.
he will do whatever he thinks necessary to maintain the illusion of a functioning market, just as long has the CHOSEN ONES maintain appearances.
There is some method to his madness. I'm seriously considering dumping dollars for something. Real Estate/Foreign Currency/Commodities/etc. Something. Probably not another flat screen or car or latte.
if you think they give these comments ( edit: especially yours) any serious consideration, you are deluded.
Yeah, you go. Gotta keep hatin', gotta keep pushin' everyone down, show them they're nothing, show them they don't mean shit. If you can't pull yourself up, you can at least drag everyone down to be a failure just like you. Stop hatin', hater. I'ma take your flag if you don't.
yogi - I doubt seriously that they are looking for anything more than crazy threats. Certainly there are smart people here, but we all seem to be chasing events, not leading or influencing them. Maybe there are one or two here who might actually have something worthwhile to contribute to the larger discussion, but for the most part we are only talking amongst ourselves, IMO.
Blackhalo (homepage, profile) wrote on Thu, 5/7/2009 - 6:10 pm reply Ignore user
"BB has committed, what, 1.3T to buy MBS? He IS the market. If he wants to overpay, there is no reason in the world he can't overpay."
Buyer of last resort? No one else would touch it with the 30 year where it is.
It isn't paranoia when they really are out to get you. The end game of all this is that solvent taxpayers will be burdened with bailing out the insolvent home buyers and insolvent home lenders. It is even worse than the old scheme of pay now or pay later. This is pay now AND pay later.
"Buyer of last resort? No one else would touch it with the 30 year where it is. "
Very few others do touch it. Some banks have to buy and sell to hedge their MSR risks. A few funds buy to track bond indexes. Some MBS/Bonds ETFs. Some MBS mutual funds. Etc.
But as far as I can tell, no one who has a real choice is buying MBS. Even the Mr Arrogant, Bill Gross, seems to be lightening up.
"The end game of all this is that solvent taxpayers will be burdened with bailing out the insolvent home buyers and insolvent home lenders."
All taxpayers will pay through rampant inflation. As will net debtors. You can't rob savers to pay debtors forever, sooner or later that equation moves in the other direction.
Rob, you're a smart guy - you know the real end game is Nuevo Dollares at a penny a buck. Now, of course, it may take a decade or two to get there what with our necessary trip back to a 8-digit nonfarm payroll, but we will. And all of those middle-class strivers will learn a lesson or two in the meantime.
HollywoodHack (homepage, profile) wrote (in reply to...) on Thu, 5/7/2009 - 6:21 pm reply Ignore user
"The end game of all this"
Rob, you're a smart guy - you know the real end game is Nuevo Dollares at a penny a buck. Now, of course, it may take a decade or two to get there what with our necessary trip back to a 8-digit nonfarm payroll, but we will. And all of those middle-class strivers will learn a lesson or two in the meantime.
Ohhhh, you mean "pesobucks." Yeah, an the GM reverse stock split is a dry run.
1 currency now -yogi (profile) wrote on Thu, 5/7/2009 - 9:08 pm
Disagree. Rising star students like Basel Too and EHP are regulars at this public forum. E-mails get put in the virtual circular file. The comments here get vetted by hundreds, and can carry more weight.
Yep, exactly. The knowledge I drop is heard by thousands, not one aide, who deletes it because they don't like it. Even if it never reaches a policymaker NOW, it will color policymakers for decades to come, 'cause people reading this shit are not a general USA Today-type newspaper audience.
In terms of direct penetration, figuring this is about 1 remove from O -- a reasonable assessment given that Krugs answered CR in his blog immediately, and that's just one connection we know of -- I have a much better chance to actually get through, even if by indirect relay, while emails flow through a vetting process and a single point of failure. If I could talk directly to him, I'd have to worry about, what if he really is a banker's puppet and I'm wasting my words. Here, it doesn't matter if any one person ignores it, no matter how important or highly placed.
Done, Basel. I realize there are people who equate a one-world currency with treason. Even the Federalist papers were anon... How'd ethics go ? Tell 'em what they want to hear, but remember loose lips save lives too.
Has anyone else noticed the recent emphasis on stopping the movement of currency out of the country - under the guise of fighting the "war on drugs"? Not to mention the recent attacks on people with overseas accounts (if the country/bank does not report your information to the IRS, the IRS presumes that you are a tax cheat).
It is starting to feel like there are darn good reasons to get money out of the country.
professional responsibility was fine; i don't think anyone takes the class seriously. it's only required by the ABA because of the Watergate affair. Now talk about transparency....
"Andrew Leonard and Calculated Risk want to know why I didn’t blog about dinner at the White House.
Um, because the conversation was off the record."
A nice tactical move by O' there since anything discussed should now not show up in a Krugman column or post. They have effectively silenced a critic on presumably a wide range of subjects that may become very pertinent shortly.
I meant to put in a trailing stop order for my FAS/AIG twinbill before the exam; couldn't put it in during the exam since it was closed-internet policy. Then i saw what happened from 9:30 till about 11:00...
Certainly there are smart people here, but we all seem to be chasing events, not leading or influencing them. Maybe there are one or two here who might actually have something worthwhile to contribute to the larger discussion, but for the most part we are only talking amongst ourselves, IMO.
The most powerful weapon Babylon possesses is the ability to make you victimize yourself.
Look around, who is 'ourselves'? There are not a lot of places in the world to discuss this stuff, and not a lot of people who care to talk about it. It's like online Go -- the big servers have constant multi-p dan matches 'cause where else are those people going to play? The local club? Their nth match with the one 3a they know locally who can hang in here if you give them a 6 stone lead?
If you are not comfortable talking directly to power, you should think hard about posting here.
I thought the meme might be skepticism but it has positive sentiment. It's fascinating to see displacement of "recession" with "green shoots". In 2005 I documented three simple design patterns for meme propagation but this is a fourth that I should have thought of.
The negative of a thing can displace that thing.
Wow.
That's just awesome.
It reminds me of the McDonald's coffee ads last year.... "Large is the new Grande".
I find it hilarious the Chinese are 'worried' about currency devaluation [that is other than their own]. WTF.
They want to export lights out generating MASSIVE deficits among their trading partners and they want those partners' currencies to stay rock solid regardless of those deficits. I'd suggest they are either stupid or two faced. Since I know they aren't stupid that leaves only one option.
There are calls for W's law team to disbarred and debenched. It doesn't mean much to law students, but if you pursue a legal career on the Hill, your conscience will be tested. Watergate corruption is the rule rather than the exception, I'm afraid. One of the things they nailed Abe Fortas, a fine Justice, with was confidentially advising the President. Fortas got suckered by the notion expressed above, that "If the POTUS asks you to keep something confidential...", especially one like LBJ.
The judge I worked for used to say "a judge has no friends", which Fortas forgot.
ghostfaceinvestah (profile) wrote on Thu, 5/7/2009 - 6:20 pm
"The end game of all this is that solvent taxpayers will be burdened with bailing out the insolvent home buyers and insolvent home lenders."
If so, the revolution will indeed be televised, blogged, and Twittered for sure
"There are calls for W's law team to disbarred and debenched."
Rumor is that Alberto can't find a job. No firm wants him. And Yoo has been (temporarily) exiled from California's best public law school to one of its worst private ones.
Premier Wen Jiabao left no doubt at the Communist Party summit in March that China is irked by Washington's response to the credit crunch, suspecting that the US is engaging in a stealth default on its debt by driving down the dollar. "We have lent a massive amount of capital to the United States, and of course we are concerned about the security of our assets. To speak truthfully, I do indeed have some worries," he said.
We aren't engaging in stealth default - YET - we are engaging in stealth job preservation... and so is Wen... the bonds defaulting are straw men.
BTW - how does Wen expect the US to pay back the bonds if we don't make trade anything? They can't be that stupid can they? Or that poorly advised? I would think Wen knows exactly what is going on and he has a choice - save protect his US debt assets or protect domestic Chinese jobs - he can't simultaneously protect both.
"I find it hilarious the Chinese are 'worried' about currency devaluation [that is other than their own]. WTF."
Meh, what can they do other than complain? They can't sell as that would tank the dollar, their assets and their economy. They can argue for a new reserve currency, but that would garner the same result.
Time to float the Yuan and give something back to your people.
yeah, i had class on john yoo and jay bybee, and the torture memos. no question they sold their souls, especially bybee, but at the same time, i think that the people beating the war drum are being a little too zealous.
The next few months will be fun to watch as individual States report shortfalls from their quarterly cash sweeps of 40% + (I'm in NC). Funding of State budgets will be impossible and, for NC, using Fed bailout paper for a short term shot of crack won't last long. I figure by Q3 the proverbial shit will hit the fan. Goldman can walk the market up and BB may use a night drop of cash at State capitols to cover the shortfall. Who will cook the books for all 50 states?
A question, What is an appropriate down payment and interest rate for a 30 year fixed loan on a $500k SFR in a good area of Sonoma County assuming prices are 40% above historic price/rent ratios for this area?
In the piece, the Chinese official clearly stated that he wouldn't sell because it'd be too disruptive to the crisis. Instead, what they're trying to do is to diversify the new surplus into hard assets.
Comrade Coinz (homepage, profile) wrote on Thu, 5/7/2009 - 9:52 pm reply Ignore user That Zero Hedge graph of credit destruction is stunning. Credit down == MZM down. That doesn't smell like inflation to me
"There are calls for W's law team to disbarred and debenched."
Yep, I know someone who worked for W's JD and WH and he is still looking. Who wants to hire someone who is going to be spending some time before a grand jury? K street ain't hiring (R) as they know which way the wind is blowing.
Still, I hope he is not on the docket as I will miss all the Harriet Myers jokes at his expense.
bruce: i've been following the 50-state budget situation very closely. I think that by Q3, there will be an emergency lending facility at the Federal Reserve for the states. Even with that, I think that the local governments are still screwed. Their cost structure got too distorted by real estate revenue.
broward (homepage, profile) wrote on Thu, 5/7/2009 - 10:07 pm reply Ignore user The Zero Hedge credit graph is interesting, it's a diverging series - higher highs and higher lows.
I think the implication is that iTulip.com is right. If a recovery starts, asset prices will rocket up and then collapse even harder
Dryfly: I would think Wen knows exactly what is going on and he has a choice - save protect his US debt assets or protect domestic Chinese jobs - he can't simultaneously protect both.
I think it's one of those things where cultural and physical distance makes it easy to forget the other guy is floundering as well. I think once about 30 years ago there was this plan to lure in Western capital with a sort of "thousand flowers" moment and it went so well, that institutions being what they are, everyone forgot it was an elephant trap for money. Now they are stuck on the problem, pumping money into the system to keep their workers afloat in symmetric futility to our attempt to keep the banks afloat. The sounds you hear are the Chinese equivalent to "green shoots / the bottom's in / everything is fine".It's not, but they're jacked and have no idea what else to do except make impossible threats, "don't let your currency decay and also don't revert to protectionism". I just read it to mean, they are as clueless and on the defensive as we are.
"There cost structure got too distorted by real estate revenue."
Well when 40%+ of GDP disappears in a puff of smoke and mirrors. Sure am glad Texas is sales tax only. Of course that does not leave much for a safety net when time turn tough.
Basel Too (profile) wrote on Thu, 5/7/2009 - 10:00 pm
yeah, i had class on john yoo and jay bybee, and the torture memos. no question they sold their souls, especially bybee, but at the same time, i think that the people beating the war drum are being a little too zealous.
Not to remonstrate with you, but, to try to be educational -- those guys endangered the Republic. That's something that we could never replace, and may never be able to replace -- they may have dealt it fatal damage by establishing precedents and opinions used as a fig leaf by some future tyrant.
Even if you think otherwise, it's worth noting that subsequent to taking such an action, you will have legions of enemies who will never relent or forgive, regardless of what you think about it.
A good number of folks are now setting their plans on raising money. Not peanuts either - hundreds of billions. And if dilution is the next option, prefs to common - so, for every 100 BAC shares I get 1. Not sure about those economics.
The USD bond auction was revealing today - up the yield and get the interest.
I just read it to mean, they are as clueless and on the defensive as we are.
I don't think their guys are clueless - I don't think our guys are clueless... I think they are both disingenuously 'defensive'. Feigning 'ignorance' or confusion or 'anger' - they know the tough choices - don't want to make them... we have to kill our banks, they have to kill their 'job engine'. It means we both have to dig out the hard way. Sucks but that's where we are.
"if a POTUS tells you of a planned felony, you're either on-board, STFU, or are... "
In the version I read, LBJ called Chief Justice in for a private conference. (Warren had said it would be inappropriate for a Justice to sit on an assassination investigative committee.) Warren left the room in tears, and naturally found Oswald acted alone, with help from truth seekers like Arlen Specter, Gerald Ford, and Allen Dulles.
Doesn't the current equity price for common stock have a significant bearing on equity calculations? That is, if BOA equity is$86.5 Billion as of today, and it needs to raise $34 Billion, would another 40% increase in the stock price mean they magically have enough equity? And if they had released the stress test in bac in March, when the stock bottomed out at $3.14 per share, would they have needed $65 Billion more (total $99 Billion) additional equity?
Doesn't the current equity price for common stock have a significant bearing on equity calculations? That is, if BOA equity is$86.5 Billion as of today, and it needs to raise $34 Billion, would another 40% increase in the stock price mean they magically have enough equity? And if they had released the stress test in bac in March, when the stock bottomed out at $3.14 per share, would they have needed $65 Billion more (total $99 Billion) additional equity?
yogi - I recently spent a day (or three) watching everything I could find on the JFK story, and am left with a conclusion quite unsettling, and I am no conspiracy theorist.
So for opposing views Obama invited Alan Blinder, a liberal who wants huge bailouts; Paul Krugman, whose WSJ editorial blog is named "Conscience of a Liberal" (and who also wants larger bailouts); Ken Rogoff, who according to Wikipedia grew up in a family of "true liberals"; and Joseph Stiglitz, who has criticized free market economics. Sounds more like a chorus Obama can preach to!
Define "if this fails".
More Stess Test ?
CR you are stressed....relax and thx for all your fine work !
CR has spoken, BOA = FAIL.
Damm, these are the times I really miss Tanta, she would ahve had an eriudite, witty spot on 10,000 word analysis of the results that was absolutely spot on and full of insights that nobody else would spot for ages, if ever, up by now. Now to go and read CR's write up.
Asun (profile) wrote on Thu, 5/7/2009 - 7:37 pm
CR has spoken, BOA = FAIL.
Repeat the Mantra:
"B of A is a criminal enterprise ... [repeat]"
Calculated Risk --
Some of the numbers don't make much sense. Using BofA as an example, the indicative two year loss rates for first lien mortgages are 7% to 8.5%, and I believe BofA is in worse shape (because of their acquisition of Countrywide) than most banks. So I would expect losses substantially higher than the indicative rates. Instead they were lower (only 6.8% of first lien mortgages).
Supposedly Countrywide is taking a huge portion of the re-fi boom... Could all of those new conforming mortgages be diluting the old "bad" pools and driving down the loss rate predictions?
BAC has tacked on another 8 bil of market cap AH and is close to being a 12-digit stock for the first time in a few months
"What to do next? If this fails, nationalize."
And WHEN that fails, Mad Max!
Wh00T!
You should read the full link to the Newsweek article about the Obama dinner. The piece the CR posted makes it seem as though Obama is thinking ahead. If you read the full article, you can see that Obama is most likely a sell-out of the worst kind. The kind of person who climbs the ladder and knocks it down for everyone else.
It's not like we didn't know these assumptions weren't baked into the cake when the original white-paper went out. Spend an hour looking through the sources of their assumptions and timelines... some of them assume things like historical loss rates (I think, not sure... posted on this at some point in the past 2 weeks when I had time to look at the whitepaper). Of course everyone just looked at the first couple of pages...I've strated to learn technical papers from the back to the front... and then see if my conclusions match the executive summary... or if there are holes in the story.
What to do next? If this fails, nationalize. - CR
"If." I do not think that words means what you think it means.
This is like a cardiologist giving a patient a stress test and passing him after only 30 seconds on the treadmill because the patient needed a cigarette.
dr. munch,
You forgot the beer and Big Mac....
ROFL.
Nostrovia,
As I understand it, lenders factor in a loss amount of only 3-4%, so 7 to 8.5 is double the estimated losses. The US residential lending market is about 19 trillion. So the difference is an extra 500 million in losses just on the loan balances.
CR, where do you think the loan losses should be?
.
Anyone else notice that the loss rate on FITB's second mtg loans is lass than that of its 1st mortgage book? How does that happen when the loss severities on seconds is close to 100% most of the time, and one would think that borrowers with 2nds will generally have higher CLTV's than those w/o? Very odd, also looks like KEY has no mtg book what so ever, and what it has is clean as a whistle, only 3.4% on 1sts and 6.3% on seconds?
Nemo, that is possible. I was just expecting worse from them - and maybe I'm wrong.
I really wish we could see the CRE breakouts. And the first liens by category too: Prime, Alt-A, and subprime. That was in the white paper too and would really help
best to all.
"How does that happen"
it happens when your methodology is based on coming up with answers first, then plugging in the variables to make it happen.
One last serving of taxpayer money, then we'll close them down. By Christmas, one of the 19 will be in the process, probably Citi.
Nigel,
"CR, where do you think the loan losses should be? "
Just above the neckline.
Nostrovia,
BofA will sell more than a billion new shares, using an "ATM Program" (truth can be stranger than fiction). They may have already started: It's back near $15.00 after closing around $13.50.
"SAN FRANCISCO (MarketWatch) --
Chief Financial Officer Joe Price said late Thursday that the company will sell 1.25 billion new common shares as the lender tries to raise capital to meet requirements from the government's stress test. Price said the stock will be sold through an "ATM program," in which securities are sold through "normal stock trading," he explained. "We would access the market over time, with the goal of optimizing pricing and timing and price execution," Price added. Bank of America also plans on generating roughly $10 billion in gains from sales of businesses including First Republic, Columbia Management and a through a joint venture. "That leaves us with approximately $7 billion or so, which we think can be satisfied by our actual financial performance over the next six months," Price said. The government said earlier on Thursday that Bank of America needs to raise $33.9 billion in new capital. End of Story"
I wonder whether "optimizing pricing" means that they keep a bid under the stock? Is that legal?
I suppose that "optimizing timing" might mean that the price will be run up in the after-hours and pre-market.
Here's the best quote from that article...
“Too big to fail” could soon become “too powerful to change.”
Sounds like BAC is putting a cap on it's common stock price for the rest of the year - we should see what the number is if the rally continues for another week....
I used to look for companies that were doing share buybacks, and look at the order book on Island to speculate on what the floor price was the company was putting under the stock, then I would buy right above that - actually a form of front running but not illegal since it was done with all public information...
Aren't we just waiting for PPIP to fail or something like that? Is PPIP currently even running? When PPIP was announced weren't stocks at like the 6500 range for the Dow? So didn't people say, "Wow, PPIP will be awesome at these levels"... wonder how that changes now? Or am I just getting everything confused... following the blogs and the news is like a slow-motion fear and loathing in Las Vegas experience... where did we go and where have we been again? Haven't we already been here or are we in unchartered territory? I swear I am so tempted to dump 100% of my "investment account" into SRS, TWM, TBT combination in hopes of getting a 100% return...
Don't you think the whole 'stress test' is a diversion to buy time? It puts the focus elsewhere (dicscuss among yourselves...) and lets time pass while banks try to make money on free money before the game is on again and the run begins?
The biggest single question was posed in the last thread: what off-balance-sheet components are represented here? Any at all? Whether or not these are sound banks is a secondary question compared to whether they are sound businesses.
Nigel, it is hard to say - the prime delinquency rate was 2.89% in January for the GSEs and increasing rapidly. I don't know the cure rate (obvious loan mods help), but the indicative rate for prime loans over 2 years was 3% to 4%.
If only half go into default (I think that is optimistic), and the delinquency rate stops surging (it increased from 1.93% in December to 2.89% in January so this is pretty optimistic) we would be near the low end of the two year indicative range already!
I wish they had broken this out by first lien category ...
best to all.
ZERO reason why that White House meeting wasn't public.
Transparency now.
Geithner may not have a Plan B, but Obama better have one in his own mind, if not out in the open yet.
"That leaves us with approximately $7 billion or so, which we think can be satisfied by our actual financial performance over the next six months," Price said.
He also said, that with the appointment of his daughters imaginary unicorn as CFO, there was little doubt about the firms profitability going forward.
YLSP...yes, we've been here before, at least twice. Think back to the days when everyone was lauding the kitchen sink quarterly reports for the banks. Same camisa, different day/month/year.
Plan B - stop interfering in the marketplace and let things find their own level. Dislocations - yes, of course, after over 100 years of interference there are some unnatural imbalances which will correct - but it will be sharp and fast and when it's over things will be much more stable and sustainable without any actions by government at all.
6 months from now, people defending the stress test will start all their sentences by saying, "Hindsight is 20-20, nobody could have forseen...."
Don't you mean... hoocoodanode?
BAC has tacked on another 8 bil of market cap AH and is close to being a 12-digit stock for the first time in a few months
More like the first time in a few hours ... BAC traded above $15 early this morning before the market reversal.
On another note, where does anyone think that all of these banks are going to be able to find $75 billion? Sure Morgan Stanley and Wells may find some takers, but what about the "rest of the worst?"
Especially with Komrade Ben's treasury market debacle. Soon it will be our duty to the collective good of society to sink every last nickel into supporting the U.S.S.A long bonds.
Richard Posner is scathing over at the WSJ:
"let's place the blame where it belongs. Not on the bankers, who are not responsible for assuring economic stability, but on the government officials who had that responsibility and failed to discharge it. They failed even to develop contingency plans to deal with what everyone knew could happen in a context of escalating housing prices (it had happened in Japan in the late 1980s and the 1990s). Lacking such plans, the government responded to the crisis with spasmodic improvisations, amplifying uncertainty and mistrust and thus retarding recovery.
And let's not forget to apportion some of the blame to the influential economists who assured us that there could never be another depression. They argued that in the face of a recession the Federal Reserve had only to reduce interest rates and flood the banks with money and all would be well. If only."
I like the inclusion of words like "spasmodic" and "retard"...and I think the lack of contingency plans was intentional.
Aren't the banks pretty much nationalized as it is? Federal Reserve money + TARP warrants that Congress will not release (in order to pressure them to loan?)... I don't know the true significance of these stock warrants that the Treasury is holding, but Dodd was adamant Treasury hold onto them for some reason... maybe a "faux" leverage over banks?
The simple sentence "I was wrong" is the hardest for leaders to utter and the most necessary for them to learn.
Alan Greenspan came close to saying it in the heat of the global financial meltdown, but not quite.
I want to hear a public confession of "I was wrong" from
1) CEO's of all the TARP bailed out banks
2) Hank Paulson
3) Ben Bernanke
4) Tim Geithner
many others...
then we can tar and feather them all right on Wall St.
"On another note, where does anyone think that all of these banks are going to be able to find $75 billion?"
I think I see a "Bake Sale" in these firms' futures.
Nostrovia,
Plan B2 - The bond market finally sends a message to the administration that they cant ignore, and then proceed with Plan B above...
In Dough We Trust...
"More like the first time in a few hours"
15.07 isn't quite 100 bil. almost.
Dang it....... CR...... They can do whatever they want because Bernanke says they can. It's HIS party...quit peeing in the punch bowl!
This is plan A and it will not fail.
anonymous1 (profile) wrote on Thu, 5/7/2009 - 5:13 pm
This is plan A and it will not fail.
A few more lines and this could be a rap hit...
"I like the inclusion of words like "spasmodic" and "retard""
Timmay?
YouTube -
I swear I am so tempted to dump 100% of my "investment account" into SRS, TWM, TBT combination in hopes of getting a 100% return
treasury auction nearly failed. Obama was in front of the cameras this morning to reassure the bond market.
Here's the follow-up paragraph from the Newsweek piece on the Obama dinner....
"But after Krugman and Stiglitz made their now-familiar case for nationalizing the banks and forcing other dramatic changes, Obama gave no indication he was changing his policies, Blinder added."
"Supposedly Countrywide is taking a huge portion of the re-fi boom... Could all of those new conforming mortgages be diluting the old "bad" pools and driving down the loss rate predictions?"
BINGO. We have a winner.
Also, see JPM with WM, WFC with WB...
Gee, who now gets stuck with the risk --> FHA, Fannie/Freddie --> Fed --> US Taxpayers (via inflation).
Is it just me but is Obama speaking about to be the curse like Bernanke was a couple of months ago? I mean, Obama is on TV more than the freaking Ad guy Billy Lane selling all sorts of crap no one wants......Guess they could actually be one in the same.
"If you read the full article, you can see that Obama is most likely a sell-out of the worst kind. "
Sell out is too mean, he is nothing but a puppet, bought and paid for.
CR:
What to do next? If this fails, nationalize.
If that's the case, I want to know if I'll be made right for the tens of thousands of dollars of obligations that have been undertaken in my name while the administration walked in circles before compelled to acknowledge the obvious. Doing the right thing eventually isn't good enough, because the "right thing" will have log ago become obsolete by then. Look at our own policy environment, for example. This has stopped being a bank issue more than 6 months now. It's a national balance sheet crisis in the making now.
Who cares what they do with the banks? It's just a punch-and-judy show. What makes one bank healthy and one bank not? Decisions made at the Fed / Treasury, that's what. And all this public mummery about stress tests and asset valuations is just talk talk talk.
"Very odd, also looks like KEY has no mtg book what so ever, and what it has is clean as a whistle, only 3.4% on 1sts and 6.3% on seconds?"
I am in the mtg business, and I didn't even know KEY did mortgages, they are a very, very small player in that space.
"This is plan A and it will not fail."
This is Plan 9 and it is from Outer Space.
Did KEY focus on CRE?????? If so, that would be a BIGGER red flag than being a sub prime shop. That is the sector that will blow away the "adverse outcome" expectations these Stress(less) Tests measured.
"ZERO reason why that White House meeting wasn't public." - owc yogi
"Nothing to say
Andrew Leonard and Calculated Risk want to know why I didn’t blog about dinner at the White House. Um, because the conversation was off the record."
Paul Krugman Blog - NYTimes.com
Just read the article in Newsweek where they discuss the meeting as O' inviting criticism and allowing his advisors to defend their position to those critics. Kind of annoyed that such a meeting would BE, "off the record." When do we get to the public debate? Congressional hearings are woefully inadequate, as the pubic officials spend way too much time pontificating for the cameras and not enough asking the hard questions and follow-ups.
Do we have to continue to wait for the markets to give truth to the lie, that the banks are sound, before we can discuss how best to put them down?
barfly (profile) wrote on Thu, 5/7/2009 - 8:23 pm
I'd swear it was you who a few days ago supported his right to confidential discussions.
Nope, that was me. I also said I thought the dinner was a photo op, and the more I hear about it, the more it is. The president took two whole hours to hear from a host of people and also his own advisors? Why bother, I might as well just email him a PPT, it'd say more and it wouldn't cost my fellow Citizens an overpriced dinner.
This is just political cover to keep his true believers yammering about how he's the man for all seasons who sees all sides.
"It's just a punch-and-judy show. What makes one bank healthy and one bank not?"
What are you saying here, BR?
The banks are climbers of Mt Everest and if one falls, the others will be pulled down by their safety cords?
No, Obama's going to end up like that "Computer Professor" on TV that sells his CD-ROMS;
Buy my product.
Buy my bonds.
Please buy my bonds...
First one's free...
Buy my bonds.
Bulls, not Bears, May End in Tears
"Just look at the U.S. financial sector debt – the source of all problems in this crisis. It has not come down, despite all the talk about deleveraging. It stood at $17.2 trillion at the end of 2008, higher than $15.8 trillion in September 2007, when the crisis began. Even though it can’t borrow from the market like before, it is borrowing from the Fed and the government. How could we say that the crisis is over when the U.S. financial sector’s leverage hasn’t declined?
...
The U.S. financial system is technically bankrupt. The strength of a banking system reflects the strength of the economy it serves. Just look at the balance sheet of the U.S. household sector. How could U.S. banks survive when so many of their customers have negative equity?"
No, not me, I think it was Byz, who said he'd give him one pass. This is not troop movements, but economic analysis. I'm a "Government in the Sunshine" type in general, and especially regarding financial regulation.
money man, sort of looks like it but not enough info, but 2.3/0.125 = 18.4, or 17.2% of the risk based assets of 106.7. I'm not really sure if that is a valid way to look at it though, but is the best aproximation that is available with the data
broward wrote on Thu, 5/7/2009 - 5:23 pm
This is Plan 9 and it is from Outer Space.
Did you also know this factoid that Plan 9 was a computer operating system and associated utilities. It was built by the Computing Science Research Center of Lucent Technologies Bell Laboratories, the same group that developed Unix, C, and C++.
Subject: What are its key ideas?
Plan 9 exploits, as far as possible, three basic technical ideas: first, all the system objects present themselves as named files that are manipulated by read/write operations; second, all these files may exist either locally or remotely, and respond to a standard protocol; third, the file system name space - the set of objects visible to a program - is dynamically and individually adjustable for each of the programs running on a particular machine. The first two of these ideas were foreshadowed in Unix and to a lesser extent in other systems, while the third is new: it allows a new engineering solution to the problems of distributed computing and graphics. Plan 9's approach means that application programs don't need to know where they are running; where, and on what kind of machine, to run a Plan 9 program is an economic decision that doesn't affect the construction of the application itself.
Plan 9 from Bell Laboratories FAQ
This is the secret plan between Obam admin and Wall St.
If the POTUS asks you to keep something confidential, you keep it confidential unless he tells you of a planned felony
Dirk,
from previous thread..
$600 billion, of which $455 billion will come from whole loans held on the banks balance sheets, and $135 billion will come from available for sale securities.
i think the telling fact is that its "held on the balance sheets" the 3 trillion dollars worth of stuff was taken off 4 weeks ago...
broward (homepage, profile) wrote on Thu, 5/7/2009 - 8:28 pm
What are you saying here, BR?
The banks are climbers of Mt Everest and if one falls, the others will be pulled down by their safety cords?
No, that all of them fell and died some time ago. They're zombies. If it wasn't for the fact that years of America's future are being poured onto them to give them months of life, they'd all have long collapsed. The government evaluating their "balance sheets" is like taking the blood pressure of a medical doll they control. It's going to say exactly what is expected, because while the right hand it operating the cuff, the left hand is operating the dial that sets the reading.
This is an interesting article/vision from one writing on Seeking Alpha, I don't agree with all the points, but it is always useful to think ahead. BTW, I think Predictions 1 and 2 have already happened.
The Worst Case Scenario (Someone Has to Say It) -- Seeking Alpha
And in case anyone is wondering why long bond yields are starting to creep (explode) up.
China fears bond crisis as it slams quantitative easing - Telegraph
How does 30-year @ 4.31% affect mtg rates? Can the risk premium go negative?
"This is plan A and it will not fail."
Who was the senator who asked about the backup plan?
Ah here it is.
"Rep Gresham Barrett: "The last question I have guys, which is the $64 million question or I guess I should say $64 trillion question is: What's the backup plan? If everything fails what do we do? Where do we go from here?"
Treasury Secretary Geithner: "Congressman, this plan will work. This plan because of the authority provided not just by Congress but the treasury and the Fed gives us broad ability to do what you need to do to get through a financial crisis like this."
I still laugh at this "plan." And not because it is funny...
""Supposedly Countrywide is taking a huge portion of the re-fi boom... Could all of those new conforming mortgages be diluting the old "bad" pools and driving down the loss rate predictions?"
The new home loans are substantially agency conforming loans that are sold off to Freddie and Fannie, with no effect on the balance sheet.
1 currency now -yogi (profile) wrote on Thu, 5/7/2009 - 8:30 pm
No, not me, I think it was Byz, who said he'd give him one pass.
And by one pass, I mean, my visit would not be leaked like a "stress test" "result". Confidentiality runs both ways -- if I'm not going to reveal what went on, I'm not interested in having it imputed on me. I would be happy to offer my advice and get ignored, but not to offer my advice and be a stalking horse.
B_R, thx for the correction. btw, why not email him?
Contact the White House | The White House
"Can the risk premium go negative?"
It already is.
And just funning with you, BR.
barfly (profile) wrote on Thu, 5/7/2009 - 8:39 pm
B_R, thx for the correction. btw, why not email him?
He hears me better from here.
RTC II,
Welcome.
I think you've already been introduced to Bank Holiday.
--bh
BH:
And just funning with you, BR.
I figured you were just giving me a deliberate counterpoint. S'okay, w.ever.
So what are our real lenders up to?
http://www.marketwatch.com/news/story/china-central-bank-says-fed/story.aspx?guid={2B1DC06C-6E35-4C7F-8291-8C3D3CB7283E}&dist=msr_4&print=true&dist=printMidSection
China's central bank frets over Fed bond purchases
Last update: 2:10 p.m. EDT May 7, 2009
SAN FRANCISCO (MarketWatch) -- Chinese bank authorities warned the Federal Reserve's programs to pump more cash into the financial system by buying $300 billion in Treasurys risked jolting bond prices and devaluing the dollar.
The overnight comments from the world's biggest holder of U.S. government debt helped depress Treasury prices in trading Thursday, said one analyst.
In a monetary report dated Wednesday and posted on the People's Bank of China's Web site, the central bank said the quantitative easing policy pursued by the Fed may help keep bond yields at low levels in the short term.
But over a longer period, higher inflation expectations, interest rates and central bank measures to take extra liquidity out of the system could cause a sharp adjustment to bond prices, the report said.
The central bank also said plans by the Fed and other central banks to drive lending rates lower by buying their own government debts risks depreciating major currencies.
The report "has been making the rounds overnight and is partially responsible for the selling pressure in Treasurys," said Ian Lyngen, interest-rate strategist at RBS Securities, in emailed comments early Thursday.
...
"How does 30-year @ 4.31% affect mtg rates? Can the risk premium go negative? "
If Zimbabwe Ben wants to buy MBS through the curve, he can do so, he is basically the 800 pound gorilla in that market.
And, quite honestly, without any political pressure, I have no doubt he will. We could see current coupon MBS through 10 year Treasuries.
Bernanke is the single most dangerous person in the country today. He is going to lead us into a situation that none of us really wants to see.
i missed this last month re: ireland:
Ireland is ECB's sacrifical lamb to satisfy German inflation demands - Telegraph
link from gfi's link...
"So what are our real lenders up to?"
Amen, brother.
Shocking though that anyone actually writes a story about the bond market (which we rely on entirely to fund our lifestyles). It is WAY more fun watching the casino everyday.
I was flipping around the TV on the floor today, even the local news broadcasts have a Dow ticker in the corner. This is what we have come to - a nation of fast money gamblers.
This is not going to end well at all.
in about 8 months, it's gonna be zimbabwe larry. i'm sure his ego is salivating at the chance to press all those shiny buttons...
YouTube - Caddyshack - Oh Rat Farts!
well this sums it up.....
POTUS knows all the arguments very well, it had to be to collect opinion on something new and of a monumental scale, not an academic discussion at the dinner table!
"He hears me better from here. "
-if you think they give these comments ( edit: especially yours) any serious consideration, you are deluded. Write to them direct.
"The new home loans are substantially agency conforming loans that are sold off to Freddie and Fannie, with no effect on the balance sheet."
I think the question was, could they be using the agencies and FHA to refi crap from their balance sheets onto the shoulders of the government?
The answer is a resounding YES!!!! This is exactly what is happening.
Then Bernanke buys all the MBS that are created.
A sweet, virtuous cycle.
Rob Dawg,
Thanks for the follow-up answer on the previous thread.
I know I can always get clear and concise answers from you sans any snarky lead in.
@ghostface: Do you really think Bernanke can pull MBS rates below Treasury rates? Is Bernanke so confused about the tail wagging the dog?
"If the POTUS asks you to keep something confidential, you keep it confidential unless he tells you of a planned felony."
The admin that delayed the results, and "leaked" the the "stress" test over the course of weeks has something yet that they do not want public speaks volumes: The banks are still broke, and they have no plan. They also may be trying to get the public on board with having the banks that put us in this mess, BENIFIT in any solution.
That 700 billion for TARP, sure would have come in useful for capitalizing "good banks" to back fill the role of the zombies, while liquidation procedures of the zombies commenced. Which then could have then been privitized giving us our money back. Instead we now have T-Bills blowing up and debt that we may not be able to service without a "soft" default, resulting in hyper-inflation.
Nationalize?! CR, you're scaring the children. I thought we'd agreed to use the term 'Pre-privatize'?
"Do you really think Bernanke can pull MBS rates below Treasury rates?"
Sure, he can pay whatever he wants. He is buying MBS directly from the originators (well, through dealers), and if he says "buy the FNMA 4% at 102", they will by the FNMA 4% at 102.
There is about 150B or so of new MBS issuance a month (give or take a bit), or a run rate of about 1.8T for the year. Some weeks higher, some weeks lower.
BB has committed, what, 1.3T to buy MBS? He IS the market. If he wants to overpay, there is no reason in the world he can't overpay.
Everything that should/could have said about stress tests, has been said already in the past couple of months. Nothing new, except the confirmation of the worst fears. Just one point of clarification - when people talk about "banks earning their way out of the crisis", they really talk about subsidizing of these banks by savers, who still have money in their bank and money market accounts. But, hey, that's free market for you!
In other news - abysmal results of the 30yr bond auction. The awarded yield was 4.29%, or 20bps higher then yesterday's yield.
The green shoots are getting greener.
Samdog (profile) wrote on Thu, 5/7/2009 - 5:50 pm
Rob Dawg... I know I can always get clear and concise answers from you sans any snarky lead in.
Man! Are you sure you aren't talking about the marijuana thread? I want what you're smoking.
it's all a failure to communicate...
YouTube - Bill Murray - Kill Golfers
thought we'd all go crazy with laughter
Actually, I feel pretty strongly about the issue. Either public transcripts(or at least press coverage), or it's a photo-op. I don't care what the f. they all write in their memoirs in 15 years to justify their actions.
Anyone ought to see through all the transparency talk.
Dawg knows his fibers...
Bernanke is NOT worried about wagging tails...he will do whatever he thinks necessary to maintain the illusion of a functioning market, just as long has the CHOSEN ONES maintain appearances. Treasury be damned....The Feds will own 50% of all equities and the long end of the curve to force money and markets to bend to his whims. It truly is going to end badly and we are ALREADY at a place none of US wanted to go. "SIN will take you farther than you wanted to go, make you stay longer than you wanted to stay, and cost you MORE than you wanted to pay"....Johnny Hunt....Baptist Preacher What has happened to our leadership and economy is truly SINFUL!!!!!!!!
ShadowInventory (profile) wrote on Thu, 5/7/2009 - 5:58 pm reply Ignore user
Dawg knows his fibers...
Don't go harshing my buzz man. That Timmay show today where the press corps groans out loud is better than the early SNL skits.
"The green shoots are getting greener."
I told you so!
http://www.realmeme.com/roller/page/realmeme?entry=green_shoots
First thing we do, we kill all the golfers...
Strikes me that the yield on the 10 rise, oil rising, most equity market soaring, etc, all takes place on the same timeline...early March til now. And most of it seems odd. I mean, oil up from $mid 30s to mid 50s, yet inventories skying and demand still falling? Hm. And equities? Youve gotta be kidding. We're gonna cheer THESE earnings? And the rising 10yr yield in the face of QE? That seems perverse too. It all seems perverse, but mostly, the bank stock pumping seems the MOST perverse, but also the one thing that has the most easy to figure out reason for being the way it is. Nevertheless, none of this looks sustainable.
We never did retest the march lows or even make a trip down there... that has to happen sooner or later... with all the money coming out of DC this is looking more like a double dipper - a year from now when the flames are dying down from this batch of gas, congress will be wanting to do it again for the election but by next year the bond market might have a "Road Closed" sign up... then what??
" "He hears me better from here. "
-if you think they give these comments ( edit: especially yours) any serious consideration, you are deluded"
Disagree. Rising star students like Basel Too and EHP are regulars at this public forum. E-mails get put in the virtual circular file. The comments here get vetted by hundreds, and can carry more weight.
he will do whatever he thinks necessary to maintain the illusion of a functioning market, just as long has the CHOSEN ONES maintain appearances.
There is some method to his madness. I'm seriously considering dumping dollars for something. Real Estate/Foreign Currency/Commodities/etc. Something. Probably not another flat screen or car or latte.
If the POTUS asks you to keep something confidential, you keep it confidential unless he tells you of a planned felony
How about unplanned felonies, such a the bailouts of the previous and current admins?
barfly (profile) wrote on Thu, 5/7/2009 - 8:53 pm
if you think they give these comments ( edit: especially yours) any serious consideration, you are deluded.
Yeah, you go. Gotta keep hatin', gotta keep pushin' everyone down, show them they're nothing, show them they don't mean shit. If you can't pull yourself up, you can at least drag everyone down to be a failure just like you. Stop hatin', hater. I'ma take your flag if you don't.
"BB has committed, what, 1.3T to buy MBS? He IS the market. If he wants to overpay, there is no reason in the world he can't overpay."
Buyer of last resort? No one else would touch it with the 30 year where it is.
"10yr yield in the face of QE? That seems perverse too."
That is exactly what should happen. Added dilution and risk of inflation merits a tidy premium to attract investors.
yogi - I doubt seriously that they are looking for anything more than crazy threats. Certainly there are smart people here, but we all seem to be chasing events, not leading or influencing them. Maybe there are one or two here who might actually have something worthwhile to contribute to the larger discussion, but for the most part we are only talking amongst ourselves, IMO.
Blackhalo (homepage, profile) wrote on Thu, 5/7/2009 - 6:10 pm reply Ignore user
"BB has committed, what, 1.3T to buy MBS? He IS the market. If he wants to overpay, there is no reason in the world he can't overpay."
Buyer of last resort? No one else would touch it with the 30 year where it is.
It isn't paranoia when they really are out to get you. The end game of all this is that solvent taxpayers will be burdened with bailing out the insolvent home buyers and insolvent home lenders. It is even worse than the old scheme of pay now or pay later. This is pay now AND pay later.
"Buyer of last resort? No one else would touch it with the 30 year where it is. "
Very few others do touch it. Some banks have to buy and sell to hedge their MSR risks. A few funds buy to track bond indexes. Some MBS/Bonds ETFs. Some MBS mutual funds. Etc.
But as far as I can tell, no one who has a real choice is buying MBS. Even the Mr Arrogant, Bill Gross, seems to be lightening up.
"The end game of all this is that solvent taxpayers will be burdened with bailing out the insolvent home buyers and insolvent home lenders."
All taxpayers will pay through rampant inflation. As will net debtors. You can't rob savers to pay debtors forever, sooner or later that equation moves in the other direction.
yogi: please edit that out... no offense...
"The end game of all this"
Rob, you're a smart guy - you know the real end game is Nuevo Dollares at a penny a buck. Now, of course, it may take a decade or two to get there what with our necessary trip back to a 8-digit nonfarm payroll, but we will. And all of those middle-class strivers will learn a lesson or two in the meantime.
What's Obama afraid of with a bunch of Nobel Prize winners and an elected official who's a Constitutional scholar: the public may get too educated?
HollywoodHack (homepage, profile) wrote (in reply to...) on Thu, 5/7/2009 - 6:21 pm reply Ignore user
"The end game of all this"
Rob, you're a smart guy - you know the real end game is Nuevo Dollares at a penny a buck. Now, of course, it may take a decade or two to get there what with our necessary trip back to a 8-digit nonfarm payroll, but we will. And all of those middle-class strivers will learn a lesson or two in the meantime.
Ohhhh, you mean "pesobucks." Yeah, an the GM reverse stock split is a dry run.
Bank of Ass is going to slip in an additional 1.25 shares surreptitiously while the market is trading?????????????
WTF x 2000 = OK, cheney, shoot me in the face!
bizarre, outlandish, freaky, and a horrible horrible precedent.
is it legal to dump new shares oover time into the market?
cheney, please, shoot me in the face!
make it all go away
http://www.marketwatch.com/news/story/b-sell-125-billion-common/story.aspx?guid={5F32B6AB-2EB1-4E3E-ABB7-31C73044FC89}&dist=msr_4
1 currency now -yogi (profile) wrote on Thu, 5/7/2009 - 9:08 pm
Disagree. Rising star students like Basel Too and EHP are regulars at this public forum. E-mails get put in the virtual circular file. The comments here get vetted by hundreds, and can carry more weight.
Yep, exactly. The knowledge I drop is heard by thousands, not one aide, who deletes it because they don't like it. Even if it never reaches a policymaker NOW, it will color policymakers for decades to come, 'cause people reading this shit are not a general USA Today-type newspaper audience.
In terms of direct penetration, figuring this is about 1 remove from O -- a reasonable assessment given that Krugs answered CR in his blog immediately, and that's just one connection we know of -- I have a much better chance to actually get through, even if by indirect relay, while emails flow through a vetting process and a single point of failure. If I could talk directly to him, I'd have to worry about, what if he really is a banker's puppet and I'm wasting my words. Here, it doesn't matter if any one person ignores it, no matter how important or highly placed.
BT, I understand, I'd also be embarrassed by any connection to that institution...
B_R: can you please edit out that your quote of yogi's comments. this is like a wild goose chase
Everybody goes forward... or nobody does.
I know you guys with big piles of money don't really understand this yet.
But you will.
Time to share the juice, Jas!
Done, Basel. I realize there are people who equate a one-world currency with treason. Even the Federalist papers were anon... How'd ethics go ? Tell 'em what they want to hear, but remember loose lips save lives too.
hack: been meaning to ask, you're formally bgates, right?
i'm not a guitar, but I play one on TV - informally, of course
Has anyone else noticed the recent emphasis on stopping the movement of currency out of the country - under the guise of fighting the "war on drugs"? Not to mention the recent attacks on people with overseas accounts (if the country/bank does not report your information to the IRS, the IRS presumes that you are a tax cheat).
It is starting to feel like there are darn good reasons to get money out of the country.
Not so much..."supposedly" being the key word. BoA has no interest in writing any loans...
professional responsibility was fine; i don't think anyone takes the class seriously. it's only required by the ABA because of the Watergate affair. Now talk about transparency....
"
"The green shoots are getting greener."
I told you so!
http://www.realmeme.com/roller/page/realmeme?entry=green_shoots
"
Green shoots looks over-bought.
-if you think they give these comments ( edit: especially yours) any serious consideration, you are deluded"
I thought it was common knowledge that Sheila is listening.
and where professional responsibility ends, zealous advocacy begins, right?
"Andrew Leonard and Calculated Risk want to know why I didn’t blog about dinner at the White House.
Um, because the conversation was off the record."
A nice tactical move by O' there since anything discussed should now not show up in a Krugman column or post. They have effectively silenced a critic on presumably a wide range of subjects that may become very pertinent shortly.
I meant to put in a trailing stop order for my FAS/AIG twinbill before the exam; couldn't put it in during the exam since it was closed-internet policy. Then i saw what happened from 9:30 till about 11:00...
I'm Sheila.....
byz - your egotism is only exceeded by your ability to spew invective.
barfly (profile) wrote on Thu, 5/7/2009 - 9:16 pm
Certainly there are smart people here, but we all seem to be chasing events, not leading or influencing them. Maybe there are one or two here who might actually have something worthwhile to contribute to the larger discussion, but for the most part we are only talking amongst ourselves, IMO.
The most powerful weapon Babylon possesses is the ability to make you victimize yourself.
Look around, who is 'ourselves'? There are not a lot of places in the world to discuss this stuff, and not a lot of people who care to talk about it. It's like online Go -- the big servers have constant multi-p dan matches 'cause where else are those people going to play? The local club? Their nth match with the one 3a they know locally who can hang in here if you give them a 6 stone lead?
If you are not comfortable talking directly to power, you should think hard about posting here.
WTF x 2000 = OK, cheney, shoot me in the face!
Guess I must have dosed off the day they covered WTF multiplication in math class. What does this mean?
"Green shoots looks over-bought."
I thought the meme might be skepticism but it has positive sentiment. It's fascinating to see displacement of "recession" with "green shoots". In 2005 I documented three simple design patterns for meme propagation but this is a fourth that I should have thought of.
The negative of a thing can displace that thing.
Wow.
That's just awesome.
It reminds me of the McDonald's coffee ads last year.... "Large is the new Grande".
barfly (profile) wrote on Thu, 5/7/2009 - 9:39 pm
byz - your egotism is only exceeded by your ability to spew invective.
My grandma
and your grandma
were sitting by the fire.
My grandma
tole your grandma
I'm gonna set your flag on fire.
it means a particularly emphatic expression of wonderment and/or exasperation as exemplified by the phrase "what the f**k"
Took care of that thing for you Basel.
thanks, byz...
And in case anyone is wondering why long bond yields are starting to creep (explode) up.
Telegraph | Error 404 | Sorry, the page you have requested is not available...
I find it hilarious the Chinese are 'worried' about currency devaluation [that is other than their own]. WTF.
They want to export lights out generating MASSIVE deficits among their trading partners and they want those partners' currencies to stay rock solid regardless of those deficits. I'd suggest they are either stupid or two faced. Since I know they aren't stupid that leaves only one option.
Zero Hedge:
http://2.bp.blogspot.com/_FM71j6-VkNE/SgM0TELgdQI/AAAAAAAACbM/Y5WlDA0jmY8/s1600-h/consumer+credit+bberg.gif
There are calls for W's law team to disbarred and debenched. It doesn't mean much to law students, but if you pursue a legal career on the Hill, your conscience will be tested. Watergate corruption is the rule rather than the exception, I'm afraid. One of the things they nailed Abe Fortas, a fine Justice, with was confidentially advising the President. Fortas got suckered by the notion expressed above, that "If the POTUS asks you to keep something confidential...", especially one like LBJ.
The judge I worked for used to say "a judge has no friends", which Fortas forgot.
Sounds like buyers remorse to me....
That Zero Hedge graph of credit destruction is stunning. Credit down == MZM down. That doesn't smell like inflation to me.
ghostfaceinvestah (profile) wrote on Thu, 5/7/2009 - 6:20 pm
"The end game of all this is that solvent taxpayers will be burdened with bailing out the insolvent home buyers and insolvent home lenders."
If so, the revolution will indeed be televised, blogged, and Twittered for sure
"There are calls for W's law team to disbarred and debenched."
Rumor is that Alberto can't find a job. No firm wants him. And Yoo has been (temporarily) exiled from California's best public law school to one of its worst private ones.
Karma, I s'pose.
it means a particularly emphatic expression of wonderment and/or exasperation as exemplified by the phrase "what the f**k"
I know what WTF means, it was the mathematical context I was commenting on.
On TV I play Sheila Spartacus Krugman.
From the Telegraph link...
Premier Wen Jiabao left no doubt at the Communist Party summit in March that China is irked by Washington's response to the credit crunch, suspecting that the US is engaging in a stealth default on its debt by driving down the dollar. "We have lent a massive amount of capital to the United States, and of course we are concerned about the security of our assets. To speak truthfully, I do indeed have some worries," he said.
We aren't engaging in stealth default - YET - we are engaging in stealth job preservation... and so is Wen... the bonds defaulting are straw men.
BTW - how does Wen expect the US to pay back the bonds if we don't make trade anything? They can't be that stupid can they? Or that poorly advised? I would think Wen knows exactly what is going on and he has a choice - save protect his US debt assets or protect domestic Chinese jobs - he can't simultaneously protect both.
"I find it hilarious the Chinese are 'worried' about currency devaluation [that is other than their own]. WTF."
Meh, what can they do other than complain? They can't sell as that would tank the dollar, their assets and their economy. They can argue for a new reserve currency, but that would garner the same result.
Time to float the Yuan and give something back to your people.
Time to float the Yuan and give something back to your people.
Amen Brother Blackhalo...
The equally important corollary to WTF is FTW... For the Win!
E.g. Goldman Sachs gets 10 Billion FTW.
yeah, i had class on john yoo and jay bybee, and the torture memos. no question they sold their souls, especially bybee, but at the same time, i think that the people beating the war drum are being a little too zealous.
There has never been a bunch of greater and outright corrupt liars and thieves as there has been in the U.S. government in the last 10 years.
RIP America as we once knew it....
I won't even get into the problems of my frat brother, assigned to investigate the Vince Foster episode for Justice.
The next few months will be fun to watch as individual States report shortfalls from their quarterly cash sweeps of 40% + (I'm in NC). Funding of State budgets will be impossible and, for NC, using Fed bailout paper for a short term shot of crack won't last long. I figure by Q3 the proverbial shit will hit the fan. Goldman can walk the market up and BB may use a night drop of cash at State capitols to cover the shortfall. Who will cook the books for all 50 states?
A question, What is an appropriate down payment and interest rate for a 30 year fixed loan on a $500k SFR in a good area of Sonoma County assuming prices are 40% above historic price/rent ratios for this area?
Time to float the Yuan and give something back to your people. Bh
Careful thats a double edged sword.... rising Yen = "no job for you!" (Chinese worker)
They can't sell as that would tank the dollar
In the piece, the Chinese official clearly stated that he wouldn't sell because it'd be too disruptive to the crisis. Instead, what they're trying to do is to diversify the new surplus into hard assets.
Comrade Coinz (homepage, profile) wrote on Thu, 5/7/2009 - 9:52 pm reply Ignore user That Zero Hedge graph of credit destruction is stunning. Credit down == MZM down. That doesn't smell like inflation to me
No it doesn't.
St. Louis Fed: Series: MZM, MZM Money Stock
"There has never been a bunch of greater and outright corrupt liars and thieves as there has been in the U.S. government in the last 10 years."
Except for the previous 233 years, nope, that's spot on.
I expect U.S. Grant would think these guys mere pickers, however.
"There are calls for W's law team to disbarred and debenched."
Yep, I know someone who worked for W's JD and WH and he is still looking. Who wants to hire someone who is going to be spending some time before a grand jury? K street ain't hiring (R) as they know which way the wind is blowing.
Still, I hope he is not on the docket as I will miss all the Harriet Myers jokes at his expense.
bruce: i've been following the 50-state budget situation very closely. I think that by Q3, there will be an emergency lending facility at the Federal Reserve for the states. Even with that, I think that the local governments are still screwed. Their cost structure got too distorted by real estate revenue.
The Zero Hedge credit graph is interesting, it's a diverging series - higher highs and lower lows.
I think the implication is that iTulip.com is right. If a recovery starts, asset prices will rocket up and then collapse even harder.
Comrade Misean is Dope (profile)
For the past 10 yes. think scope and scale
BOL
"I expect U.S. Grant would think these guys mere pickers, however."
Yep. Particularly how bad they are at it. I mean stress test? Really?
Blackhalo,
Exactly.
broward (homepage, profile) wrote on Thu, 5/7/2009 - 10:07 pm reply Ignore user The Zero Hedge credit graph is interesting, it's a diverging series - higher highs and higher lows.
I think the implication is that iTulip.com is right. If a recovery starts, asset prices will rocket up and then collapse even harder
Doesn't look like a new bull market to me
Dryfly:
I would think Wen knows exactly what is going on and he has a choice - save protect his US debt assets or protect domestic Chinese jobs - he can't simultaneously protect both.
I think it's one of those things where cultural and physical distance makes it easy to forget the other guy is floundering as well. I think once about 30 years ago there was this plan to lure in Western capital with a sort of "thousand flowers" moment and it went so well, that institutions being what they are, everyone forgot it was an elephant trap for money. Now they are stuck on the problem, pumping money into the system to keep their workers afloat in symmetric futility to our attempt to keep the banks afloat. The sounds you hear are the Chinese equivalent to "green shoots / the bottom's in / everything is fine".It's not, but they're jacked and have no idea what else to do except make impossible threats, "don't let your currency decay and also don't revert to protectionism". I just read it to mean, they are as clueless and on the defensive as we are.
"There cost structure got too distorted by real estate revenue."
Well when 40%+ of GDP disappears in a puff of smoke and mirrors. Sure am glad Texas is sales tax only. Of course that does not leave much for a safety net when time turn tough.
Basel Too (profile) wrote on Thu, 5/7/2009 - 10:00 pm
yeah, i had class on john yoo and jay bybee, and the torture memos. no question they sold their souls, especially bybee, but at the same time, i think that the people beating the war drum are being a little too zealous.
Not to remonstrate with you, but, to try to be educational -- those guys endangered the Republic. That's something that we could never replace, and may never be able to replace -- they may have dealt it fatal damage by establishing precedents and opinions used as a fig leaf by some future tyrant.
Even if you think otherwise, it's worth noting that subsequent to taking such an action, you will have legions of enemies who will never relent or forgive, regardless of what you think about it.
"Of course that does not leave much for a safety net when time turn tough."
Those who rely on such systems will have little of the former and a great deal of the latter.
Simple Question: Where will the money come from?
A good number of folks are now setting their plans on raising money. Not peanuts either - hundreds of billions. And if dilution is the next option, prefs to common - so, for every 100 BAC shares I get 1. Not sure about those economics.
The USD bond auction was revealing today - up the yield and get the interest.
just say'n
"If the POTUS asks you to keep something confidential, you keep it confidential unless he tells you of a planned felony.
Unless your friends are really really good, if a POTUS tells you of a planned felony, you're either on-board, STFU, or are...
I just read it to mean, they are as clueless and on the defensive as we are.
I don't think their guys are clueless - I don't think our guys are clueless... I think they are both disingenuously 'defensive'. Feigning 'ignorance' or confusion or 'anger' - they know the tough choices - don't want to make them... we have to kill our banks, they have to kill their 'job engine'. It means we both have to dig out the hard way. Sucks but that's where we are.
"if a POTUS tells you of a planned felony, you're either on-board, STFU, or are... "
In the version I read, LBJ called Chief Justice in for a private conference. (Warren had said it would be inappropriate for a Justice to sit on an assassination investigative committee.) Warren left the room in tears, and naturally found Oswald acted alone, with help from truth seekers like Arlen Specter, Gerald Ford, and Allen Dulles.
Doesn't the current equity price for common stock have a significant bearing on equity calculations? That is, if BOA equity is$86.5 Billion as of today, and it needs to raise $34 Billion, would another 40% increase in the stock price mean they magically have enough equity? And if they had released the stress test in bac in March, when the stock bottomed out at $3.14 per share, would they have needed $65 Billion more (total $99 Billion) additional equity?
Doesn't the current equity price for common stock have a significant bearing on equity calculations? That is, if BOA equity is$86.5 Billion as of today, and it needs to raise $34 Billion, would another 40% increase in the stock price mean they magically have enough equity? And if they had released the stress test in bac in March, when the stock bottomed out at $3.14 per share, would they have needed $65 Billion more (total $99 Billion) additional equity?
yogi - I recently spent a day (or three) watching everything I could find on the JFK story, and am left with a conclusion quite unsettling, and I am no conspiracy theorist.
"Those who rely on such systems will have little of the former and a great deal of the latter."
I rely on them to keep the down and out, off crack, off skid row and out of my home.
So for opposing views Obama invited Alan Blinder, a liberal who wants huge bailouts; Paul Krugman, whose WSJ editorial blog is named "Conscience of a Liberal" (and who also wants larger bailouts); Ken Rogoff, who according to Wikipedia grew up in a family of "true liberals"; and Joseph Stiglitz, who has criticized free market economics. Sounds more like a chorus Obama can preach to!
What to do next? If this fails, nationalize.
Seems like they're almost setup for failure, no?