Mon 22 Sep 2008
“You cannot just turn over $700 billion of taxpayer money and not insist that that taxpayer is going to be protected in this.”
Categories: Economics , Housing Bubble , National Real EstateFrom the Wall Street Journal:
Lawmakers Battle Over Rescue Plan
By GREG HITT, DAMIAN PALETTA and DEBORAH SOLOMON
SEPTEMBER 22, 2008
Lawmakers are scrambling to put their mark on the Bush administration’s $700 billion plan to save financial markets — a fast-moving test of wills that could reshape one of the biggest bailouts in U.S. history.
There’s no sign yet that Congress will delay or derail the proposal. Democrats are looking to add provisions that include beefed-up congressional oversight, aid for individual homeowners and changes to bankruptcy laws.
Some of the measures are opposed by the administration. Perhaps the biggest looming fight is over Democratic efforts to require the program’s participants to curb what they pay their executives.
Last week, as deep new fissures opened in global financial markets, the U.S. Treasury unveiled a plan to spend up to $700 billion to buy soured mortgages and mortgage-related securities from financial institutions. In many respects, the financial sector last week all but ceased to function.
In discussions with lawmakers late Sunday, Treasury Secretary Henry Paulson prodded Congress to move forward, voicing worry about how financial markets will react Monday and whether those institutions still standing could be in for more turmoil, officials said. Since unveiling the plan, the administration has kept up pressure for rapid action, in hopes that relieving banks of their troublesome holdings will help lending markets to stabilize.
The bailout is raising thorny questions that could be tough to address as the bill speeds through Congress. Until this proposal, the government’s response to the worst financial crisis in 80 years had been led largely by the Treasury and the Federal Reserve, with Congress consulted often only after the fact. As a result, lawmakers view the bailout plan as a chance to reassert their authority. Many are unnerved by Treasury’s request for a blank check with few conditions.
The proposal has also stirred a populist backlash, with many members of Congress saying the bill needs to be better geared to Main Street than Wall Street.
…
Another likely area for compromise is aid for homeowners. The administration already believes its plan will provide relief to borrowers even though the specific legislative language doesn’t address the question. Because Treasury will own mortgage-backed securities and actual home loans, Mr. Paulson said on ABC’s “This Week” that the government will be able to exert pressure on mortgage servicers to modify terms.The debate could expose a peculiar irony in the government’s rescue planning, because taxpayers are now both creditors and debtors in the housing mess. While some taxpayers would benefit from attempts to aid homeowners by modifying mortgages or easing the bankruptcy process, others could be hurt if those moves increase the overall cost of the bailout.
Sorry for the delay, traveling this morning, was finally able to pick up on a wifi connection.
From Bloomberg:
U.S. Widens Scope of Bad-Debt Plan Beyond Home Loans
The Bush administration widened the scope of its $700 billion plan to avert a financial meltdown by including assets other than mortgage-related securities.
The U.S. Treasury submitted revised guidance to Congress on its plan late yesterday as lawmakers and lobbyists push their own agendas. The department also adjusted its plan to insure money-market funds to limit protection to balances as of Sept. 19, after complaints from bank lobbyists.
Officials made the changes two days after unveiling plans for an unprecedented intervention in financial markets. The change to potentially allow purchases of instruments such as car loans, credit-card debt and other devalued assets may force an increase in the size of the package as the legislation proceeds through Congress.
“The Treasury’s thinking is to make it as big and wide as possible so they have the flexibility to act if need be,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, which manages about $108 billion. “There have been losses on a whole range of U.S. debts and as the economy deteriorates in response to the housing slump those losses could escalate.”
Treasury officials now propose buying what they term troubled assets, without specifying the type, according to a document obtained by Bloomberg News and confirmed by a congressional aide.
From Bloomberg:
New York Loses More Jobs, London Homes Drop in Race for Bottom
The London-New York tug-of-war for bragging rights as the world’s preeminent financial center is now a race to the bottom.
Six months after Bear Stearns Cos. was bailed out by JPMorgan Chase & Co. and a week after Lehman Brothers Holdings Inc. filed for bankruptcy, both cities are bleeding. While it will take months to determine which will be hardest hit, New York has so far lost more financial-services jobs and London’s luxury housing market has taken the first hit.
“London and New York will be hit comparatively harder than other financial centers,” said Mark Yeandle, a risk consultant at London-based Z/Yen Group and lead author of the Global Financial Centres Index, which ranks the competitiveness of such cities. “New York, up until a month ago, seemed to be recovering more quickly than London, but we have to wait and see what sort of fallout the more recent turmoil will generate.”
The market value of London’s publicly traded financial firms has dropped by 99.4 billion pounds ($182.3 billion) in the past 12 months, cutting their worth by about 25 percent. Their counterparts in New York have lost $477 billion in market capitalization, or 37 percent.
“We won’t see the big Christmas parties this year,” says Sinead Mallozzi, chief executive officer of the Michelin-starred Sketch restaurant in London’s West End.
In New York, Vincent Alessi, general manager of Bobby Van’s Steakhouse on Broad Street, says the same. “It’s tense,” he says. “But my bar business is doing great.”
you are late, yet first?
1020!
Apologies to mobile users for not splitting the weekend thread, but I wanted to see a 1k-comment thread.
From the NY Times:
Cash for Trash
Some skeptics are calling Henry Paulson’s $700 billion rescue plan for the U.S. financial system “cash for trash.” Others are calling the proposed legislation the Authorization for Use of Financial Force, after the Authorization for Use of Military Force, the infamous bill that gave the Bush administration the green light to invade Iraq.
There’s justice in the gibes. Everyone agrees that something major must be done. But Mr. Paulson is demanding extraordinary power for himself — and for his successor — to deploy taxpayers’ money on behalf of a plan that, as far as I can see, doesn’t make sense.
Some are saying that we should simply trust Mr. Paulson, because he’s a smart guy who knows what he’s doing. But that’s only half true: he is a smart guy, but what, exactly, in the experience of the past year and a half — a period during which Mr. Paulson repeatedly declared the financial crisis “contained,” and then offered a series of unsuccessful fixes — justifies the belief that he knows what he’s doing? He’s making it up as he goes along, just like the rest of us.
#6 I think we were all hoping you’d get 1K!
#2 Car loans?? Credit card debt??? Why don’t I just write a check for all the money I have and go live in a tent down by the railroad tracks! This is outrageous!
What annoys me the most is there is not the least bit of humility in this whole thing.
These people don’t deserve a bail out under these terms. They screwed up royally. This is a systematic failure. Why should we close our eyes and not expect them to take responsibility for their actions.
We’re not going to hear them say. Listen, we all #*$& up. We need money to keep things from getting worse and we promise to behave from now on.
It’s we need the money or all of you will suffer. :(
Remember what we did to the last group of people that tried to hurt our economy? We didn’t give them billions of dollars.
“Apologies to mobile users for not splitting the weekend thread, but I wanted to see a 1k-comment thread.”
I’m getting ready for 1K also.
“Some are saying that we should simply trust Mr. Paulson, because he’s a smart guy who knows what he’s doing.”
Just give him the keys to the vault that he has already robbed.
From Bloomberg:
Goldman, Morgan Stanley Bring Down Curtain on an Era
The Wall Street that shaped the financial world for two decades ended last night, when Goldman Sachs Group Inc. and Morgan Stanley concluded there is no future in remaining investment banks now that investors have determined the model is broken.
The Federal Reserve’s approval of their bid to become banks ends the ascendancy of the securities firms, 75 years after Congress separated them from deposit-taking lenders, and caps weeks of chaos that sent Lehman Brothers Holdings Inc. into bankruptcy and led to the rushed sale of Merrill Lynch & Co. to Bank of America Corp.
“The decision marks the end of Wall Street as we have known it,” said William Isaac, a former chairman of the Federal Deposit Insurance Corp. “It’s too bad.”
…
“You can’t kiss goodbye to the last two important investment banks without noting that the house is empty,” said David Becker, a former SEC general counsel who is now a partner at Cleary Gottlieb Steen & Hamilton in Washington. “It’s a downward spiral where the less significant the population you regulate, the less your available resources.”
The change is also likely to lead to less risk-taking by the companies and possibly lower pay for their employees. Both Goldman and Morgan Stanley held more than $20 of assets for every $1 of shareholder equity, making them dependent on market funding to operate.
Hey everybody - I’ve been offline for a few weeks. What did I miss?
$700 billion, another joke. Just the tip of the iceberg. If $700B was all that was required, we would not be on the verge of a systemic collapse. By the way, I didn’t hear Hank utter one word regarding our dollar? Sorry, meant to say penny.
Holy crap! Did you guys see the news?!! Westfield is getting a Staples dowtown!!!!!
From the WSJ:
Goldman, Morgan Scrap Wall Street Model,
Become Banks in Bid to Ride Out Crisis End of Traditional Investment Banking, as Storied Firms Face Closer Supervision and Stringent New Capital Requirements
By JON HILSENRATH, DAMIAN PALETTA and AARON LUCCHETTI
The Federal Reserve, in an attempt to prevent the crisis on Wall Street from infecting its two premier institutions, took the extraordinary measure on Sunday night of agreeing to convert investment banks Morgan Stanley and Goldman Sachs Group Inc. into traditional bank holding companies.
With the move, Wall Street as it has long been known — a coterie of independent brokerage firms that buy and sell securities, advise clients and are less regulated than old-fashioned banks — will cease to exist. Wall Street’s two most prestigious institutions will come under the close supervision of national bank regulators, subjecting them to new capital requirements, additional oversight, and far less profitability than they have historically enjoyed.
Already, the biggest rivals of Goldman Sachs and Morgan Stanley — Merrill Lynch & Co., Lehman Brothers and Bear Stearns Cos. — have merged into larger banks or sought bankruptcy protection.
“This fundamentally alters the landscape,” a Goldman Sachs spokesman said Sunday night. “By becoming a bank holding company and being regulated by the Federal Reserve, we have directly addressed issues that have become of mounting concern to market participants in recent weeks.”
The rapid pace of change in recent weeks highlights the severity of the financial crisis, and suggests it is deeper than many on Wall Street were willing to admit. Some investors may view the move as a negative signal, for it suggests that Goldman and Morgan Stanley, two institutions who were once considered rock solid, may have been facing greater liquidity issues than was apparent.
Becoming a bank holding company can help both Morgan Stanley and Goldman organize their assets, and puts both in a much better position to be acquired, to merge or to acquire smaller companies with insured deposits. It also may allow Goldman and Morgan Stanley to avoid using of mark-to-market accounting — which forces companies to value their assets based on the current market price. Instead, these firm may be able to classify assets as “held for investment,” as many banks do.
grim, not sure if you saw the comments over the weekend, but would you be interested in some kind of bailout protest?
Paulson’t entire motivation is likely the preservation of Goldman as a free standing entity. Like BC is saying $700B will not cut it for all the cr*p on the books.
I’ll protest.
Protest? Nah.
Do wake me up for the revolution though…
Re: Protest.
I liked the idea someone had about putting plastic bags over people’s heads.
From Fat Cat “SEC needs to go into banks, open up their L3 holdings to public scrutiny, auction off a sampling of the securities, and apply those prices to the L3 portfolios of all the banks. In this way, we will know which banks are solvent.” The core problem is there is no transparency about these portfolios and their real worth.
And Clot who questioned “Seen anything this weekend like a gubmit prohibition of future SIVs, CDOs, MBS..”
It seems to me you first need to stop the bleeding with any trauma patient.
They had better put their eye on reining in what caused the existing problems before the forge ahead. Because if they blow this, with all of this money involved - I truly shudder to think what comes next.
Here you go.
“Sept. 22 (Bloomberg) — The Bush administration widened the scope of its $700 billion plan to avert a financial meltdown by including assets other than mortgage-related securities”
“The change to potentially allow purchases of instruments such as car loans, credit-card debt and other devalued assets may force an increase in the size of the package as the legislation proceeds through Congress.” {Edit} May force an increase? Lobbyists are wetting their pants.
I’m not voting for Obama, I’m libertarian, but this is funny:
http://www.1001words.com/2008/09/obama-to-nation-im-outta-here.html
What happens in four months when “King Henry” is gone?
Who would folks here like to see in charge?
I ran across this guys two videos on youtube yesterday.
Kettle1 is this you?
http://www.youtube.com/watch?v=G2ixlgHfRes
GM, GE, Moody’s added to list of the unshortables.
Pure idiocy. Just ban short-selling entirely. Then, the next panic will just trigger a selloff that takes everything to 0.
#24 - What happens in four months when “King Henry” is gone?
If they pass this bill as is why wouldn’t he just suspend elections until the financial crisis is resolved?
grim (1)-
Never a need for you to apologize. This blog has gone from being an interesting forum to an absolute necessity as the gubmint has moved to help a small pack of thieves impoverish the US.
“What happens in four months when “King Henry” is gone?”
“Who would folks here like to see in charge?”
Cindy,
We can make it very easy. Keep the last name, change the first name to John.
grim (2)-
“The change to potentially allow purchases of instruments such as car loans, credit-card debt and other devalued assets may force an increase in the size of the package as the legislation proceeds through Congress.”
Hoo boy. Here it comes. I was wondering when the car loans and revolving debt got added to the Treasury shitpile.
I guess King Henry took some time over the weekend to read some old threads here. I remember people 18 months ago predicting the meltdown of some of these other credit sectors.
I’m wondering if they won’t have to jack up interest rates to GET folks to put money in bank CDs (like the 14% you could earn in the 70’s.) Otherwise the trust will be so eroded - and the mattresses will be full…
Protest?
Just write to Menendez and Lautenberg, not that they will listen to you.
Clot,
Don’t you think if they were really concerned about market activity driving the prices down further for these companies on the do-not-short list they would also want to limit insider sales? From what I’ve seen there seems to a decent amount of insider trading going on. Not a whole lot of acquisitions though.
Seems like a big joke. People can’t make money because they see the writing on the wall but let the people that ran the company poorly sell off their shares. Makes a whole lot of sense.
Richard Shelby on Squawk now, expressing real doubt about King Henry’s blank check.
Wonder how much the bank thieves will have to pay him to change his tune?
When push comes to shove, will Shelby, Bunning, etc really have the guts to vote no?
Man - this new computer is cool - you press refresh…and it does!
But I have no idea how to restore my email bar info off to the left. I tried running my ATT disc and it doesn’t work - must not work with Vista.
I am just curious how will we get $1T in few months any way? Will they just print the $s? Is this a way to inflate ourselves from the problem?
grim (6)-
“Apologies to mobile users for not splitting the weekend thread, but I wanted to see a 1k-comment thread.”
I bet you knew on the day you started this blog what would trigger a 1,000+ comment thread, too.
Wow. GS and MS go FRS. Nom has no comments or analysis for awhile dur to being busy. May write an article on it. Skep, BC and chifi can handle the banking law blog.
Frank (36)-
Go back to sleep.
#28 - This blog has gone from being an interesting forum to an absolute necessity
Seriously. I am getting extremely nervous with regards to the provisions of this bailout. Hopefully I am over reacting, and the wildness in the markets has made me a touch paranoid. However, I’ve read more than a fair share of history and can hear strong echoes of the past in the noise from Congress. There isn’t too much I would be beyond any of these people.
An interesting read from Minyanville.
BC (14)-
All the smart guys I know say the real number is more like 10 trillion, minimum.
Was probably posted yesterday, but for those (like me) who may have missed it…
From Mike Morgan:
Paulson Backlash - Open Conference Call
I will hold an Open Conference Call beginning at 9:20AM Monday morning, September 22, 2008.
We will discuss the financial crisis, the opening of the financial markets for the week, and why Paulson’s Plan is nothing more than a gift to him and his friends on Wall Street. I encourage you to invite your friends to join the call. This is an historic event, and you need to be prepared. You may forward the link below to your friends and family.
The call will be open to everyone, clients and non-clients. You will have the opportunity to ask questions live, or via a chat window online or email.
I recommend emailing your questions in advance of the call to Mike@MorganFlorida.orgThe registration link for the Open Conference Call is - https://www2.gotomeeting.com/register/901329612
You must register in advance of the call to obtain the Internet and/or dial in codes. This call will also be available online and via telephone.
http://realestateandhousing2.blogspot.com/
Frank,
We’re at around $1.8Trillion from a report I recently read.
We’re not going to get there in a few months. The plan is going to take a couple of years. and “we” are not getting the trillion.
The 700B is more like a line of credit. I expect Paulson to buy these bad mortgages at close to face value. Sell them off for maybe 20-40 cents on the dollar back to wall st which can then profit from them.
TOKYO (Reuters) - Mitsubishi UFJ Financial Group, Japan’s largest bank, said it would announce an investment into U.S. investment bank Morgan Stanley on Monday at 8:30 a.m. EDT
frank 36
the 1 trillion will all be electronic money. you can add or delete it with a few key strokes.
we will not see inflation until 5+ trillion has been created. we have lost more then 5 trillion already and are losing more everyday.
CLott:
Wait, the government is going of payoff my credit card and my car note?????
There would be less moral hazard in this mess if the government actually paid off private citizens debts as opposed to writing a check to the financial companies!
Clot [41],
Yep, at minimum.
Grim - 42 awaiting moderation. It’s regarding an open conference call Mike Morgan is holding today at 9:20am.
Why Yahoo finance numbers can’t be trusted:
06:40 am : S&P futures vs fair value: -21.40. Nasdaq futures vs fair value: -26.25.
06:36 am : S&P futures vs fair value: +1237.00. Nasdaq futures vs fair value: +1733.30.
Good thing I didn’t look at 6:36am.
“The 700B is more like a line of credit.”
Just the appetizer.
I’m pretty sure I heard Mcca*n mentioned on 60 minutes last night that he would consider someone like Andrew Cuomo to head the SEC.
cindy (24)-
My vote goes to the Career Builder monkeys.
They’d be an upgrade.
Damn it. I must be doing something wrong.
No credit card debt, my car payment at .5% interest rate has 15 payments left and I put 20% down on my home mortgage 4 years ago.
Perhaps the best protest us irresponsible taxpayers could make would be to stop making payments on our loans in good standings? After all, WE ARE paying for the insurance… no?
Cindy,
to adjust font size in the web browser do the following:
Hold down the “control” key while scrolling up or down with the “scroll wheel” located on the mouse. Alternately you can hold down the “control” key while pressing the “+” or “-” keys to increase or decrease font size.
Buck (46)-
If you listen to Morgan’s conference call, pack a lunch.
He sometimes goes 4-5 hours. They are also utterly riveting.
I rearranged my morning to hear as much as I can. He should be in rare form today.
Tosh #40: Good link indeed. I especially like the chart which showed what happened in the Pakistani market when the short ban was lifted.
Clottpoll,
Got back to drinking, it will help your depression.
Stu, didn’t you hear? The six of us with no debt are going to be exempted from income and property taxes for the next 100 years or three generations, whichever comes first.
It’s in the bill.
Gotcha.
Real question for the board. How much of this toxic debt do you think was held by foreign purchasers? I ask this because foreign investors are not contributing to the bail out but get to reap the reward financed by the American taxpayer.
Breaking News.
Bailout will also be extended to institutional investors that purchased technology stocks during that bubble and their wives who have been desperately waiting for a rescue in the beanie babie market.
Pat (56): “The six of us with no debt are going to be exempted from income and property taxes for the next 100 years or three generations, whichever comes first.”
Phew!
Crossing Wall Street:
September 21, 2008
NYC Strippers Screwed by Sucky Stocks
Is stripping too big to fail?
So the NYC economy is headed for the crapper, sure — but who’s really suffering? Weep for the strippers.
We’re told first-hand by the pole-gymnasts at joints like the Penthouse Executive Club in NYC that biz has come to a grinding halt — and to add insult to injury, strippers say one-dollar bills have replaced tens and twenties. Oh, the humanity!
Sources tell us traffic at some super-exclusive Manhattan nightspots is down 40-50% since the wheels came off.
Frank (55)-
I’ve never stopped drinking (nor would I).
Unfortunately, there’s no way you can replace your missing frontal lobe.
(Kettle1) 52 Thanks!
I went in to “appearances” -font size - and changed from 96 to 120 - that helped for emails etc. It was just the font size for articles and here that seems to be teeny.
If Goldman is now a traditional bank, are they giving away toasters with new checking accounts? Also can I get my first set of checks with pictures of Ex-Goldman CEOs hugging fuzzy kittens?
grim Says:
September 22nd, 2008 at 7:34 am
Apologies to mobile users for not splitting the weekend thread, but I wanted to see a 1k-comment thread.
grim: What about the apologies for not wearing an undershirt to the IOUSA GTG?
How about getting a car loan from Goldman :P
(48) BC Bob
“The 700B is more like a line of credit.”
“$700B is not the maximum that the Treasury may spend, it’s the ceiling on the outstanding at any one time. It’s a balance sheet number, not an expenditure limit.”
http://www.nakedcapitalism.com/2008/09/why-you-should-hate-treasury-bailout.html
The following is probably the most important words I’ve seen written on how best to improve the financial conditions on Wall Street. The author is (who else) N. Roubini:
Now that the shadow banking system is effectively being folded into the traditional banking system the circle is completed: the former shadow banks will receive some of the same safety net of banks (deposit insurance and lender of last resort support) but because of the moral hazard that such safety net induces they will have to be supervised and regulated in similar ways as traditional banks.
While this process may make the financial system more stable over time it will require that banks (and former shadow banks) be regulated and supervised better than they have been in the last decade. After all traditional banks have performed as poorly – and some more poorly – and have lost more money than shadow banks during this severe financial crisis. So both the poor regulation and supervision of banks (as regulator were asleep at the wheel while the laissez fair ideology and voodoo-cult of self-regulation and market discipline and internal risk management became dominant) and the lack of sensible regulation of shadow banks lies behind the current financial disaster. Thus, folding shadow banks back into the traditional banking system will make the overall financial system more stable only if the proper reform of the regulation and supervision of financial institutions in a world of financial globalization will be undertaken. This important matter is the subject of the chapter (titled “Financial Crises, Financial Stability, and Reform: Supervision and Regulation of the Financial System in a World of Financial Globalization”) that I have written for the recently published World Economic Forum’s Financial Development Report.
This chapter analyzes in detail the episodes of financial crisis in emerging market economies and advanced economy; discusses the causes and consequences of such crisis; measures the economic and fiscal costs of such crises; discusses the debate on whether monetary and credit policy should target asset prices and asset bubbles; studies the weaknesses of financial regulation and supervision in advanced economies financial systems that led to the recent crises; and finally considers eleven separate key issues in the reform of the regulation and supervision of financial institutions in a world of financial globalization that are necessary to prevent future crisis and make them less virulent.
The eleven issues that are key in reforming financial regulation and supervision are: the distorted compensation system of bankers/traders and the related agency problems between financial institutions shareholders and their managers; the flaws of the originate and distribute securitization model; regulatory arbitrage and the instability of the shadow banking system given its reliance on short term liquid financing, high leverage and long term illiquid lending; the weaknesses of self-regulation and market discipline and the need of greater rules-based regulation; pro-cyclical capital requirements and other issues with the Basel II capital requirements; the distorted incentives of credit rating agencies; asset valuation and fair value accounting in a world where assets can be highly illiquid and hard to price; the lack of transparency in financial markets; the inadequate regulatory regime; the lack of international coordination of regulatory policies; and the issue of who will regulate the regulators, i.e. how to avoid the regulatory capture by the financial industry of the regulators and supervisors of financial institutions.
So now that the shadow banking system is being folded in the formal banking system it is high time to rethink how both banks and the former non-bank financial institutions should be properly regulated and supervised.
Clottpoll,
When are you going to come out of the dark side? When the government spends one more $1T to bail out greedy RE agents like you?
got a call (nice voice message actually) from a real live person at E-Trade this weekend.
The 10 shares of SKF I bought as a lark on Thursday night ($88 at open on Fri), then tried to sell at around 9:30AM when they looked to have spiked to 126 (in the afternoon they showed up as being ’sold’ one by one at $92), well he was sorry but I actually still own those, and will until at least Oct 2nd.
If little ol me gets a personal call for 10 measely share (bought/sold less than 200 SKF shares in the past month), what does Electric Sheep or Clot get, a personal visit complete with a hearfelt reach-around?
Actually that is HSBC, for those of us who grew up in New York Republic Bank was the original toaster bank, they even get out color tvs, they invented that gimmick. Plenty of old ladies got their first blender that way. Poor old Republic lent money to both russia and the mafia due to poor internal controls and lax AML and when the russian bond crisis happened in October 1998 down they went in flames much like their founding father Mr. Safra whose male nurse burned him to death.
Escape from New Jersey Says:
September 22nd, 2008 at 8:51 am
If Goldman is now a traditional bank, are they giving away toasters with new checking accounts? Also can I get my first set of checks with pictures of Ex-Goldman CEOs hugging fuzzy kittens?
The Treasury could give every man, woman, child, and illegal alien $1M, enough to bail out every household in America and most of Mexico and it would be less than half the current bailout.
P.S. I still want my free house.
Stu and other’s posting copied text from other sites.
I’d like to make a suggestion. When you do that, please include a link to the original. I usually prefer to read it on the original site. Plus it’s a nice thing to do when you’re copying someone else’s words.
I hear the casinos are pushing for bad gambling debt to be included, as are the bookies in Newark.
Did’nt everyone love Paulson’s comment that they might not stop at $700B? Like we did not already know that. And now the estimates inthe press are $1.8T, nearly tripple what was the “top estimate” from our friends in the administration. It would likely cost less in the end just to buy everyone in the country a free house and be done with it. Oh yea, and lets not forget to bail out the foreign banks.
(68) Stu
Thanks, Stu. I love that guy. If I had my way, he’d be in charge tomorrow.
“Thus, folding shadow banks back into the traditional banking system will make the overall financial system more stable only
if the proper reform of the regulation and supervision of financial institutions in a world of financial globalization will be undertaken.”
Sorry Tom (73). I agree.
http://tinyurl.com/DukesofMoralHazard
“Stu Says:
September 22nd, 2008 at 8:53 am
How about getting a car loan from Goldman :P”
Sure, but only on Mercedes limos, Bentleys, and such. The Lexus, Lincoln, and Chevy set, well they just have to get loans from banks that are small enough to fail.
I am urging folks on the Hill to obtain $2 in equity in the firms they assist for every $1 in toxic debt they take off their hands, and to limit nbonuses and executive salaries at those firms. If the firms want the money, they take it with the strings. If they do not want to accept the strings, they are too healthy to get assistance.
I urge others to advocate the same.
“grim Says:
September 22nd, 2008 at 8:04 am
Protest? Nah.
Do wake me up for the revolution though…”
No need, Grim. Just Tivo it, and watch it whenever you want.
I’d rather have the gubmint obtain a box of red jello, a roll of packing tape, and one pack of pez for each $1 in toxic debt.
At least we could have a big flea market stand after the last one finally falls.
Shore,
I agree and came up with some of my own crazy ideas. I liked the post someone linked to yesterday about doing something humiliating like making all the executives attend a mandatory credit counseling course.
I think they should also be required to send a personal thank you note/appology to each taxpayer.
What is the link to the conference call?
Ummmmm, because this was soooo much fun back in the 70’s. It is bad enough that clothes fashions from the 70’s are back:
http://www.cnbc.com/id/26834653
The financial system bailout plan, which could end up by costing Washington around $1.8 trillion, may increase the risk of stagflation and will probably cause problems for hedge funds and smaller banks, Mohamed El-Erian, co-CEO of bond giant Pimco, told CNBC on Monday.
[snip]
I never thought anyon would pay as much as Spitzer dif to get F**cked; and now here comes Paulson, asking us to pay even more.
@81
note must be handwritten
Stan,
In blood?
An Open Letter to Congress
Michael Shedlock
“The Paulson solution fails because it does not help consumers or businesses service debt, and it encourages more reckless lending by banks. Attempting to bail out banks on the backs of cash-strapped consumers is doomed to fail.”
http.//seekingalpha.com/article/96222-an-open-letter-to-congress-on-the-700b-paulson-bailout-plan
OOpps. link failed - I’m new at this -is this it?
http.//seekingalpha.com/article/96622-an-open-letter-to-congress-on-the-700b-paulson-bailout-plan
Well - D@MN - Obviously - I need more computer taining…
Who was the Harry Potter character who had a pen that when one wrote in it etched the words into the skin of the person using it. I wonder if we can require they use one of those?
Goldman is a bank this morning.
This should make everyone’s investments startegy crystal clear.
Buy Goldman, Sell USA.
You know the economy must be bad when the Waffle House can’t make money…
Waffle House. Inc.’s franchisees are being scattered, smothered and covered
by the economic downturn.
(Embedded image moved to file: pic11478.jpg)Waffle House scattered hash
browns
For the second time in less than a month, a large Waffle House franchisee
has filed for bankruptcy. This time, it’s the restaurant’s largest
franchisee.
Northlake Foods Inc. filed for Chapter 11 on Monday in U.S. Bankruptcy
Court for the Middle District of Florida, listing estimated assets and
liabilities each of between $10 million and $50 million. Trenam Kemker
partners Roberta Colton and Lori Vaughan in Tampa are bankruptcy counsel to
Northlake, which is headquartered in Brandon, Fla.
In a court filing, Northlake attributed its bankruptcy filing to a decline
in sales due to “current economic conditions.” Northlake also said its
costs have risen because of the recent increase in the minimum wage.
Northlake said it had 2007 sales of about $88 million.
On Aug. 25, SouthEast Waffles LLC filed for bankruptcy in Nashville, Tenn.
SouthEast Waffles operates about 100 Waffle Houses in Tennessee, Alabama,
Mississippi and Kentucky. Northlake operates 146 Waffle Houses, more than
half of which are in Florida with the rest in Georgia and Virginia,
according to a court document.
Northlake said it was forced into bankruptcy when Waffle House attempted to
terminate its franchise agreement, according to a court docu
(Embedded image moved to file: pic29358.jpg)Waffle House signment.
Northlake said it received from Waffle House a final notification of
termination on Monday and that Northlake filed for Chapter 11 at 3 p.m. on
the same day.
Northlake listed Waffle House as its largest unsecured creditor, owing the
Norcross, Ga. company about $551,580. Northlake said its largest secured
creditor is Bank of America, which is owed about $9.7 million.
As in the SouthEast Waffles case, DLA Piper partner bankruptcy partner
Philip Martino in Tampa is representing Waffle House in the Northlake case.
DLA Piper litigation partner Lonnie Simpson, also in Tampa, is joining
Martino on the Northlake case.
One more try…
htt.//seekingalpha.com/article/96622-an-open-letter-to-congress-on-the-700b-paulson-bailout-plan.html
make [91],
If you drop the MAN, I agree.
Make,
Heck, the MM insurance allows one to put unlimited funds into MM, risk free, with opportunities for outsized gains. No market risk at all. Savings accounts pay essentially nothing and if one loses bet on MM one still comes out where they would have been in savings account, and there is no chance of market loss one gets from equities now.
This bailout must sting the cery few prudent executives that ran sound financial firms and didn’t participate in this bubble.
firms ala Hudson City Bank, those executives denied themselves millions in bonuses.
Jokes on them.
You know the economy must be bad when the Waffle House can’t make money…
Waffle House. Inc.’s franchisees are being scattered, smothered and covered
by the economic downturn.
Waffle House scattered hash
browns
For the second time in less than a month, a large Waffle House franchisee
has filed for bankruptcy. This time, it’s the restaurant’s largest
franchisee.
Northlake Foods Inc. filed for Chapter 11 on Monday in U.S. Bankruptcy
Court for the Middle District of Florida, listing estimated assets and
liabilities each of between $10 million and $50 million. Trenam Kemker
partners Roberta Colton and Lori Vaughan in Tampa are bankruptcy counsel to
Northlake, which is headquartered in Brandon, Fla.
In a court filing, Northlake attributed its bankruptcy filing to a decline
in sales due to “current economic conditions.” Northlake also said its
costs have risen because of the recent increase in the minimum wage.
Northlake said it had 2007 sales of about $88 million.
On Aug. 25, SouthEast Waffles LLC filed for bankruptcy in Nashville, Tenn.
SouthEast Waffles operates about 100 Waffle Houses in Tennessee, Alabama,
Mississippi and Kentucky. Northlake operates 146 Waffle Houses, more than
half of which are in Florida with the rest in Georgia and Virginia,
according to a court document.
Northlake said it was forced into bankruptcy when Waffle House attempted to
terminate its franchise agreement, according to a court docu
Waffle House signment.
Northlake said it received from Waffle House a final notification of
termination on Monday and that Northlake filed for Chapter 11 at 3 p.m. on
the same day.
Northlake listed Waffle House as its largest unsecured creditor, owing the
Norcross, Ga. company about $551,580. Northlake said its largest secured
creditor is Bank of America, which is owed about $9.7 million.
As in the SouthEast Waffles case, DLA Piper partner bankruptcy partner
Philip Martino in Tampa is representing Waffle House in the Northlake case.
DLA Piper litigation partner Lonnie Simpson, also in Tampa, is joining
Martino on the Northlake case.
By the way… last week I noticed I was getting a lot of traffic to a posting I made over a month ago on the repeal of the glass-steagall act through the gramm-leach-bliley act.
I was trying to figure out why it had become such a hot topic lately. I ran across a bunch of conservative blogs that were blaming Bill Clinton for signing it into law. Completely glossing over the fact that the gramm in the act is Phil Gramm McC@in’s economic advisor.
The bill received enough votes to make it veto proof. This is clearly a bi-partisan screw up. Gramm claimed in an interview that the repeal of glass-steagall didn’t contribute to current problems. I don’t necessarily agree with that.
Glass-Steagal has been under attack since the 60’s.
I hate election season.
cindy,
I suspect you need the http// but need to dreop the period you have been inserting. I have never seen http.// or htp.//
Grim,
Unmod help for Cindy
Shore 94
They changed the rule again. New inflowing funds are not insured only the money that was there as of 09/19/2008.
I looked into it.
Cindy,
I suspect you need to drop the period in http.//
I have never seen one there.
#85 and #86
Must be handwritten personally by the EXECUTIVES. The handwritten notes is not valid if written by their Executive Assitants !!!!!
OOHHH I got it..
I had a period!
Does this work???
http://seekingalpha.com/article/96622-an-open-letter-to-congress-on-the-700b-paulson-bailout-plan.html
Cindy,
http colon slash slash
Just copy and paste it from the browser’s address bar. You’re using Vista now, so you might have to deal with a dozen or so warning messages asking if you are sure you want to copy and paste to the clipboard :)
http://seekingalpha.com/article/96622-an-open-letter-to-congress-on-the-700b-paulson-bailout-plan.html
Make,
GREAT. I prudently moved money out of MM to protect it (after getting battered in Reserve) and the imprudent who left it there get an advantage. I am becoming a grumpy old man.
Thanks Shore - You’re the Man…
Cindy,
Nyet, Tavarish, eta nee roobotyete. Get used to Russian, here in the new SSR.
Got it - Thanks Everyone
Time to get ready for work …
Enjoy…
On a slightly brighter note:NYC real estate should be a lot more affordable in the near future!
A little more seriously though; what is NYC going to do? A large amount of the city was tied to and dependent upon the money generated by IBs. There’s nothing even close to being able to replace that income. Does SoHo go back to the artists?
Over/under on when Stuy-town & PCV go back on sale?
Tosh,
C’mon. This just presents an opportunity for wealthy Europeans, Asians, and the Russian Mob to invest in NYC. After all, neither economic laws nor gravity apply to NY RE. Get with it.
#96 Tom.
NPR had Jim Leech on. The host was pushing him on his vote to repeal glass-steagall. He spun it quite nicely. He said that the repeal did not create this as the IBs were already allowed to trade in insurance and other such areas. He said that the GS repeal is actually part of the solution, as today it allows the likes of BOA to buy MER.
#108 - *Sigh*, you are, of course, correct.
Here I was getting hopeful that million dollar lofts in the Bowery were a tad overpriced. I had forgotten about the influx of Irish plumbers the denizens of curbed.com insist will buy everything.
Just in: 30 more companies added to the no-short list, including GM (yes, General Motors).
NYSE listing update
I hear refrigerator boxes, updated with wallpaper,of course, are very very hot in DUMBO.
It is not gloomy enough over here…Here ya go!
“Default by the US government is no longer unthinkable”
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/09/21/ccliam121.xml&page=1
Hey the Dow is down a bit. Anyone got a trillion to keep the bankers in $400 shirts?
111 -
“Just in: 30 more companies added to the no-short list, including GM”
Looks like these are the next people we will be bailing out.
If not, they are dead come Oct 2.
Victorian,
You don’t expect the American people to sit back and watch the domestic auto industry collapse do you? Nosirtee, Bob. If a farmer cant drive to market in a Ford or a GMC, and folks can’t take a Jeep up to their favorite trout spot, well, it is not worth living anymore. In for a trillion, in for 10. Get with the program and open up your wallet.
Well, this could be the next distraction to keep peoples’ eyes off the economic issue.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a01N7Xb._8Sg&refer=home
Is anybody else having difficulty driving past McMansion Drop Zones without thinking of the word “TRILLIONS” and clenching the steering wheel a bit tighter?
It’s also happening when I drive past those Matrix/Power Center plexes.
There certainly are a lot of “Let Them Eat Cake” artifacts around.
I hope younger and ambitious congresspersons realize how angry many people are.
From the list;
Canadian Imperial Bank of Commerce
Toronto Dominion Bank
Banco Bilbao Vizcaya SA
Mizuho Financial Group, Inc. (hey, I used to work for these guys!)
Finally! The administration engages in multilateralism.
Frank (69)-
Please find me a real estate agent who’s being bailed out.
117-
I am actually surprised that they have not started a war with Iran yet. Ahh, it is not October yet.
Shore Guy Says:
September 22nd, 2008 at 9:32 am
Who was the Harry Potter character who had a pen that when one wrote in it etched the words into the skin of the person using it. I wonder if we can require they use one of those?
_______________
Dolores Umbridge.
Why don’t they change the shorting rules so stocks with a share price below $10 can not be shorted and those having shorts in place must buy the shares at $10 if it reaches that low?
This way, the free speech of the market can still be heard, but this should limit the ability of hedge funds to beat firms down into bankruptcy.
Just a screwball idea, but it’s better than a temporary ban on shorts that will cause mass selling the day the short ban is lifted.
As Leona Helmsley might have said, had she lived long enough: Only the little people pay for Wall Street bailouts.
nuburg (70)-
“If little ol me gets a personal call for 10 measely share (bought/sold less than 200 SKF shares in the past month), what does Electric Sheep or Clot get, a personal visit complete with a hearfelt reach-around?”
Little ol Clotpoll gets the pleasure of a big dish of revenge in a few weeks, served ice cold on sterling silver.
PGC,
I don’t think the repeal of glass-steagall would have stopped the problems but it was a contributing factor.
Companies like BofA and Citigroup which benefited from the repeal had the stability of their commercial banking segments to help cushion they hit they took from their IB activities. Pure IB’s didn’t and that’s why they’re in worse shape. But that doesn’t mean that the deregulation didn’t contribute to what was happening.
BofA got out of subprime lending in 2001 but still suffered a number of losses due to I think their investment in subprime mortgage related products.
The point of GS was to seperate the higher risks that IB’s take from the security that should be provided to depositors.
The depression-era regulations came along with guarantees. I don’t think it was smart to get rid of the regulations and still keep the guarantees.
But like I said, there was more at work. In my opinion the bubble could have and should have been stopped by 2003 at the latest. As early as 2001 states were trying to put an end to predatory lending by putting buyers of mortgage backed securities on the hook as well as the originators. That would have killed the craziness in the secondary market for subprime laws. NY recently passed another similar law, and this time, the Controller of Currency is not likely to step in. That new law was what made Fannie and Freddie (RIP) decide not to purchase subprime mortgages in NY.
The FHA also was working on rules in 2001 to put an end to lenders artificially inflating prices of homes they took possession of through foreclosures.
Had the bubble burst in 2003 it would have been bad, but not catostrophic.
Victorian,
I doubt Bush will attack Iran unless O wins the election. If O wins, I suspect the cynical SOBs currently running the executive branch will want to take actions to handcuff the O administration.
Clot -
I am on the Mike Morgan call right now. Feels like facing up to Joba Chamberlain fastballs.
I have a simple but powerful idea.
Start Virtual Net Goverment. Where members are citizens and every individual gets vote on same Bills that Congress votes on. This would show how similar or divergent the Net audience is to the people voted into Congress. Majority of morons in congress don’t understand even 10% of economics and yet consider them to be expert.
Victorian,
Please provide hourly updates ;)
Vic (129)-
I’m there, too. Gotta love his talk about Depression, a Biblical generation (40 years) of doom and outbreaks of violence.
This is not some wacko from a blog saying this stuff.
“Majority of morons in congress don’t understand even 10% of economics and yet consider them to be expert.”
Think Schumer understands 1%?
“Please find me a real estate agent who’s being bailed out.”
Clotpoll,
You are.
131 Stu -
He says that most of the REITs are dead. Looks like SRS will be alive and kicking soon.
This Monday AM, Gator is trying to appreciate the irony in the government response to the economic meltdown.
As I have skewed a bit more to the left than Stu, he has always said that the problem with government, is that it’s not run like a business. There’s no incentive to do things well and no consequences for screwing up royally, because you can always go back to the taxpayer for more money.
So now it looks like instead of government being run like a business, we will just have the business world run like it is part of the government. No problem if you screw up, no matter how colossal the scale, the taxpayer will be there to clean up the mess.
Clot [132],
Play by play analysis.
Gator,
You see how poorly business is being run? And you see how poorly the ececutive branch is being run?
Think back to 2000, when bush said that, as the first MBA president, he would run government like a business executive. It seems he has been true to his word.
“Think Schumer understands 1%?”
You give him too much credit.
I’m not sure we could afford to fight Iran. If we have to go to war with them I think a bunch of olive drab supply trucks filled with body armor and m16’s will drive down to wall st along with orders “Go earn your bail out soldiers”.
Frank (134)-
Idiot, if I’m being bailed out, what am I doing here? Why am I on Morgan’s conference call right now?
Am I a troll? Who’s the real troll here?
“I’m not sure we could afford to fight Iran.”
Tom,
Why not. We are the largest SWF in the world.
Victorian #135: “He says that most of the REITs are dead.”
Yup, I knew that already as Bi mentioned SRS on Friday.
Thank you.
Clot [141],
We know Frand is an idiot. That has been established a long time ago. What’s Morgan saying?
Morgan just stated that the Repubs are deliberately throwing the election, just so they can get the executive and both houses of Congress back in four years.
He called McPain and VPILF an “old man in a wheelchair and a cheerleader”.
“old man in a wheelchair and a cheerleader”.
no!
…said Paulson is deliberately handing O a “giant truck of poop”.
The saddest RE news of the year:
http://ap.google.com/article/ALeqM5h7lS-3R1T1ZlDp2TqhgX0_gaWqKwD93BP9VG0
BC Bob,
At least I can spell, unlike you.
Morgan: next stop, Dow 7,200.
Morgan admits he’s going to Sam’s Club every week and building a personal hoard of food and water.
…claims now that short/double short ETFs are being criminally manipulated.
…forget retirements; many pensioners are now wiped out.
…calling Bobby Ginn’s development projects Ponzi schemes. Begging Ginn to sue him.
173 people on the call! Damn, the sheeple are waking up.
OT Photokina news, Leica unveils a mega-cam. Pretty cool Olympus stuff as well.
Um, there is no money. The government has no money, these financial entities have no money, the taxpayers have no money. All they really have is debt. The only stores of value out there are tangible things like gold or the extra boxes of macaroni and cheese in the pantry. These guys can dance all they like but they are really just adjusting the invisible robes on the emperor. (And it ain’t a pretty sight).
“old man in a wheelchair and a cheerleader”
That also describes the ideal picture I have for life in my 90’s.
By the way. After McC got screwed in the 2000 primaries I assumed there was some sort of conversation regarding backing him in 2008, because Cheney won’t be running, in exchange for his support.
This weekend after the bailout announcement, I imagined there was an angry call to the white house with McC screaming “what the #*&&^ are you doing!?!?! You were supposed to help!”
“BC Bob,
At least I can spell, unlike you.”
Frank,
My spelling was correct, idiot. How do you spell it?
Frank,
Wall Street STILL hiring like mad?
I did hear something about a few tellers positions coming available.
I still think that Hammerin’ Hank is really only interested in bailing out his buddies at GS. Where was the bailout when Citi and UBS were writing down billions, when Bear Stearns was sold for $2, when he drew the line in the sand and let Lehman resolve, and Merril was forced into a shotgun wedding but somehow when the rumors hit GS and they start getting taken down… short selling is abolished and Paulson digs up a few trillion from, the couch cushions for a bailout. How this does not constitute conflict of interest, I am astounded. I call for Paulson to be tried and sentenced to jail for fleecing the US tax payer to help his buddies.
credit card debt - NO WAY!
These are unsecured loans!
…calling Pelosi a “jackass”. Says her nephew is a criminal who’s fleeced Calpers.
I knew they would try to slip this credit card crap it.
That’s the mother of all bubbles.
For the past several years, we’ve had this phony economy geared toward credit growth instead of income growth, and the credit card companies have made billions on usurious interest and late fees - no way I’m going to bail these greedy b*stards out. They wanted to hand out this easy credit - now let them face the music!
Morgan Quote on Bailout -
“This is like a rescuing a pilot who is drunk and crashed a plane. Then, give him another plane and a bottle of whisky.”
Clot,
Thanks. Entertainment, at its best.
Morgan, back onto the outbreak of violence theme.
Reminiscing about the Newark riots. He grew up in Newark!
Stop with the bellyaching. Short selling needs to be totally banned anyway. You ain’t seen nothing yet, wait until we have to place some currency controls on you terrorists/liberals.
What you guys have never understood is that you were only going to get so far with this crap before someone took away your punch bowl.
Clotpoll Says:
September 22nd, 2008 at 8:13 am
GM, GE, Moody’s added to list of the unshortables.
Pure idiocy. Just ban short-selling entirely. Then, the next panic will just trigger a selloff that takes everything to 0.
#127 Tom:Had the bubble burst in 2003 it would have been bad, but not catostrophic.
Exactly,a nd that is when it should have burst. The longer it was delayed, the more dire the consequences.
I still think that Hammerin’ Hank is really only interested in bailing out his buddies at GS. Where was the bailout when Citi and UBS were writing down billions, when Bear Stearns was sold for $2, when he drew the line in the sand and let Lehman resolve, and Merril was forced into a shotgun wedding but somehow when the rumors hit GS and they start getting taken down… short selling is abolished and Paulson digs up a few trillion from, the couch cushions for a bailout. How this does not constitute conflict of interest, I am astounded. I call for Paulson to be tried and sentenced to jail for fleecing the US tax payer to help his buddies.
I nominate this for Quote of the Day.
I heard a suggestion from someone in my office. He was joking but it was funny enough to share.
“They should standardize the cost of a single family home after the FedCo owns all the mortgages.”
I second your nomination for quote of the day.
I’m not so much into conspiracy theories but I am certainly motivated and angry at the sequence of events that have brought us to this juncture. I nominate that the word “consequence” be mandatory in every piece of bailout legislation.
I also nominate “Consequence” by Incubus as required listening.
Didn’t Bear Sterns finally sell for $10 after a lawsuit from shareholders?
172 -
Yes, Jimmy Cayne bought some for $2 and then sold at $10.
#96
“The bill received enough votes to make it veto proof. This is clearly a bi-partisan screw up. Gramm claimed in an interview that the repeal of glass-steagall didn’t contribute to current problems. I don’t necessarily agree with that.”
the fact that we eliminated Glass-Steagall is the reason Goldman and Morgan are left standing this morning. What the GLBA allows is nothing more than the banking model that exists the world over (i.e., universal banking)
Skep, while I agree glass-Steagall wouldn’t have helped. Universal Banking is a crock of you know what. Even in the places where it “works” there are tremendous conflict of interest situations and the firms take advantage of their clients.
#127
“The point of GS was to seperate the higher risks that IB’s take from the security that should be provided to depositors.”
yes, but as we are seeing now, simply separating these functions does not eliminate the risk due to counterparty risk. the reality that some do not want to recognize is that IBs are essential to modern capital markets. if you accept this as a given, the goal becomes to minimize the downside risk that IBs bring to the system. this is done by having a reliable, stable capital base, which deposits bring.
And meanwhile back to real estate. In my small town 4 new lsitings have come on the market since Friday, and nothing appears to be selling.
everywhere that universal banking exists, there are different models that exist alongside it with respect to certain of its capacities. if you look at Europe, for example, there are still many community banks that take deposits. there are boutique advisory firms, independent private banks, etc. what you do not have, however, is underwriting of securities by stand alone IBs which depend mostly on short term debt for a capital base. I can understand that there are real conflicts of interest associated with this model. Every model has flaws. But to me it seems pretty clear that this model is more stable
3b sales are dead, people are too freaked by the economic situation and the only people bidding are people like my father who have a pile of cash and want to buy at a rock bottom price. He is trying to buy a home in FL at the 1992 price when the place was built.
Minyanville:
Betting on Financial Armageddon, Part 1
“Best explanation I’ve seen yet on the RMBs.”
http://www.minyanville.com/articles/C-citigroup-banks-Investment-loans-RMBS/index/a/19103
Indexes are not looking so good today.
Perhaps everyone is using the bailout as a short-term opportunity to go to cash positions?
http://www.swamppolitics.com/news/politics/blog/2008/09/mc*cain_camp_runs_ad_on_oba*mas.html
remove *s to activate link. Here we go.
Forget Gramm-Leach it was only grease for the skids, it was another bill(Commodity Futures Modernization Act) that allowed the unchecked, unregualted and unbalanced CDS market to exist.Warren Buffet called swaps instruments of mass distruction a monster measured in trillions, to the tune of around 62 trillion.
The legislation was slipped into a general spending bill on December 15, 2000 right before Congress was to adjourn for the Holidays and lame duck Clinton was busy looting the White House.
Here is some good background.
http://www.motherjones.com/news/feature/2008/07/foreclosure-phil.html
Does anyone know if that wily Texan Foreclosure Phil is still in the country?
I tried to post earlier on this but somehow got kicked into moderation. You know the economy is in trouble when even the waffle house can’t make money. Will post article next.
Waffle House. Inc.’s franchisees are being scattered, smothered and covered
by the economic downturn.
For the second time in less than a month, a large Waffle House franchisee
has filed for bankruptcy. This time, it’s the restaurant’s largest
franchisee.
Northlake Foods Inc. filed for Chapter 11 on Monday in U.S. Bankruptcy
Court for the Middle District of Florida, listing estimated assets and
liabilities each of between $10 million and $50 million. Trenam Kemker
partners Roberta Colton and Lori Vaughan in Tampa are bankruptcy counsel to
Northlake, which is headquartered in Brandon, Fla.
In a court filing, Northlake attributed its bankruptcy filing to a decline
in sales due to “current economic conditions.” Northlake also said its
costs have risen because of the recent increase in the minimum wage.
Northlake said it had 2007 sales of about $88 million.
On Aug. 25, SouthEast Waffles LLC filed for bankruptcy in Nashville, Tenn.
SouthEast Waffles operates about 100 Waffle Houses in Tennessee, Alabama,
Mississippi and Kentucky. Northlake operates 146 Waffle Houses, more than
half of which are in Florida with the rest in Georgia and Virginia,
according to a court document.
Northlake said it was forced into bankruptcy when Waffle House attempted to
terminate its franchise agreement, according to a court docu
Northlake said it received from Waffle House a final notification of
termination on Monday and that Northlake filed for Chapter 11 at 3 p.m. on
the same day.
Northlake listed Waffle House as its largest unsecured creditor, owing the
Norcross, Ga. company about $551,580. Northlake said its largest secured
creditor is Bank of America, which is owed about $9.7 million.
As in the SouthEast Waffles case, DLA Piper partner bankruptcy partner
Philip Martino in Tampa is representing Waffle House in the Northlake case.
DLA Piper litigation partner Lonnie Simpson, also in Tampa, is joining
Martino on the Northlake case.
#179 jcer: Your Dad might just get it at that price. Anything is possible these days.
“waffle house can’t make money.”
Say it ain’t so!
Clotpoll, BC Bob,
This shows the level of your intelligence, when you can’t write a sentence without the word idiot or dumb in it. No wonder you need a bailout. If you had any brain you could solve your own problems without crying for government’s help.
Frank:
Your ignorance is showing. Let it go.
Moderation again. Don’t know why, but basically the largest Waffle House franchisee has just filed for bankruptcy. This is the second large franchisee to do so in a month.
Unemployment Rises .5% to 5.9% in NJ
It looks like with all the market turmoil Grim missed the NJ Unemployment numbers for the month last week.
“Increasing numbers of New Jerseyans entered an already tight labor market in August, driving the state’s unemployment rate up by 0.5 percentage point to a five-year high of 5.9 percent. The New Jersey rate remained below the national rate which also hit a five-year high of 6.1 percent.”
http://lwd.dol.state.nj.us/labor/lwdhome/press/2008/approved/091708_unemployment_release.html
it doesn’t seem to matter if there’s naked shorting or not… nobody wants to hold these dogpiles of uncertainty. man this is getting bad… these guys have completely lost control and credibility.
btw– Got gold?
3b the problem is they can’t sell at those prices, the bank is owed too much money and banks are too, um stupid/shortsighted to understand what the value is, so they are unlikely to do a short sale at that price and when they foreclose they demand too much money and it takes to long to sell. Additionally once the person realizes they’re getting foreclosed the home goes to crap, the electric goes off, the pool goes green, and in FL the home grows mold.
The NJ unemployment chart grim usually puts up is available here:
http://lwd.dol.state.nj.us/labor/forms_pdfs/lwdhome/pres/2008/091708unemploymenttables.pdf
Scroll down to the bottom.
skep-tic,
You are obviously biased and For this bailout plan.
Do you mind sharing where you come from? Are you a trader? A home owner unable to see and hoping this will help? A CEO?
Why are you beating Uncle Sam’s drum?
Frank [187],
I guess you’re brain dead also. I’m flush; no mortgage, no cc, no car loans. Remember, when you were walking in, I was walking out.
Please don’t take this the wrong way, but your father is a real dirtbag for trying to do that. 1992 is nearly 20 years ago, and he can’t realistically expect to get a house for the price it sold nearly 20 years ago without ripping someone off.
jcer Says:
September 22nd, 2008 at 11:21 am
3b sales are dead, people are too freaked by the economic situation and the only people bidding are people like my father who have a pile of cash and want to buy at a rock bottom price. He is trying to buy a home in FL at the 1992 price when the place was built.
My guess is skep is from a European ibank UBS perhaps credit suisse?
Randy [192],
Buried in it.
Anytime someone mentions Universal Banking the swiss banks immediately come to mind.
the gov’t does have money. there is massive waste that can be redirected to fix our problems. did anyone see the Times article yesterday about the federal agency that deals with railroad worker disability claims? 97% of retired LIRR workers received disability from the federal government! the agency had to get a $3.6 billion injection from social security last year. this extreme scenario we are in right now may finally be the wake up call the public needs to do a wholesale review of the entire federal budget
To disclose myself.. I have been a prudent saver, renting - since I sold my home earlier this year, stashed up cash for a down payment and have zero debt.
Like most regular folks here, I would like to see unbiased opinions that are not forging an agenda..
How the Democrats Created the Financial Crisis: Kevin Hassett
h++p://www.bloomberg.com/apps/news?pid=newsarchive&sid=aSKSoiNbnQY0
I check the OFHEO website every once in a while for some news. I don’t know if this was posted or not but the bailout should have more of this type of action tied to it.
http://www.ofheo.gov/newsroom.aspx?ID=462&q1=0&q2=0
Statement on Golden Parachute Payments Today, September 14, 2008, the Federal Housing Finance Agency notified former Fannie Mae Chief Executive Officer Daniel Mudd and former Freddie Mac Chief Executive
Officer Richard Syron that “golden parachute” payments contemplated under their
contracts would not be paid. The Agency, serving as conservator, determined that under applicable statute and regulation, the Enterprises should not make such payments to these individuals and directed the Enterprises accordingly.
retard101, the home has 20 years of wear on it, needs work kitchen, baths, pool redo prob 150k of work, 20 years ago it was new! Not a dirtbag smart, buy low, when they bought their home in NJ in 1989 they bought it 20 days after the market crash paid almost 300k less than the original listing price from 6 month earlier and 150k lower than the list. It is not ripping someone off, a year ago they would have wanted double what they paid for the home is that not ripping my father off. Is this not a double standard?
Apparently, the action on late Thursday and Friday was short covering.
Bill Clinton is on the View selling the bailout to Masses.
Ok watching 60 minutes last night and the big o states that taxes are only going up for top 5% of people and the other 95% will get a tax cut. But wait something like the bottom 25% of people pay zero taxes right now. So in my math only 70% of people can get a tax cut, oh yea o is cutting taxes for people who don’t pay taxes I guess he wants to bring back the govt. cheese model.
Bill Clinton is on the View right now selling the bailout to masses.
Frank few things to keep you busy,
Job hunting on Wall Street? The line forms here
Just last month, 10,000 financial jobs were lost in New York alone, according to Robert Olman, management partner for financial executive search firm Alpha Search Advisory. While nearly two thirds of Lehman’s entire workforce could be lost, Merrill Lynch could lose 20 percent to 40 percent of its jobs. In the recent government bailout and takeover by JPMorgan Chase & Co of Bear Stearns Cos. about 50 percent of jobs at Bear Stearns were cut.
http://treas.gov/press/releases/hp1151.htm
Anybody know what the impact of the no short rule has on the SDS?
Bill Clinton on the View this morning also said not to withdraw your money from the bank, and he said that cause of the financial crisis was “we made too much money out of money.”
He also mentioned that Gramm-Leach was not the issue to cover his own arse, and talked about home ownership bla, bla bla.
this financial crisis goes beyond partisan political bickering. if you are a politician in the executive of legislative branch you are guilty, with a very few exceptions (i.e ron paul).
this people are too distracted by bread and circus to see the core issues. Even the people on this blog who are head and shoulders above the average joe are still getting caught up in which party is guilty. A crisis of this magnitude requires all parties participate in one form or another.
Randy [192],
Buried in it.
BC,
I got a couple pieces here in the US.
Brought them to a dinner with some friends last night. You should have seen the look on their face when I let them hold it last night.
Got an e-mail from one saying he picked up some this morning.
Justin (2003):
More lies and deceit from the author of your article.
Kevin Hassett, director of economic-policy studies at the American Enterprise Institute, is a Bloomberg News columnist. He is an adviser to Republican Senator John McCain of Arizona in the 2008 presidential election.
“No bias there!”
Justin (2003):
More lies and deceit from the author of your article.
Kevin Hassett, director of economic-policy studies at the American Enterprise Institute, is a Bloomberg News columnist. He is an adviser to Republican Senator John McCane of Arizona in the 2008 presidential election.
“No bias there!”
I am off to Europe for two weeks folks, so don’t try and short the dollar too much since the exchange rate is already horrible.
I will bring back some stories to tell, it will be interesting to see how the Europeans are reacting to this mess.
Look, all he has to do is pay a fair price. He knows good and damn well that the price level has changed since 1992 and to offer a 1992 price in 2008 is like being a lowdown dirty vulture. He’s got the damn money, let him pay a fair price and stop being a cheapskate. It’s people like him that are ruining this economy.
Tell you what, I’d never sell my house to someone like him.
jcer Says:
September 22nd, 2008 at 11:45 am
retard101, the home has 20 years of wear on it, needs work kitchen, baths, pool redo prob 150k of work, 20 years ago it was new! Not a dirtbag smart, buy low, when they bought their home in NJ in 1989 they bought it 20 days after the market crash paid almost 300k less than the original listing price from 6 month earlier and 150k lower than the list. It is not ripping someone off, a year ago they would have wanted double what they paid for the home is that not ripping my father off. Is this not a double standard?
Retard:
“Tell you what, I’d never sell my house to someone like him.”
But the bank might :P
“Apparently, the action on late Thursday and Friday was short covering.”
MJ[206],
The last 4-5 bottoms this year, [at least we were told they were bottoms], were ignited by short covering. Clot is exactly right, you eliminate short selling and you subsequently create a giant vacuum.
#218 recrybaby: You got what you wnated Comrade, now the melt down begins.
You call yourself an investor, you should attempt to profit from this.
We the USA are humbled before the world.
#196
“skep-tic,
You are obviously biased and For this bailout plan.
Do you mind sharing where you come from? Are you a trader? A home owner unable to see and hoping this will help? A CEO?
Why are you beating Uncle Sam’s drum?”
RentLord– I am for this bailout because I believe it is necessary as the only possible way out of this mess (and even it might not be enough). I rent and do not own a home like most here. I am certain my taxes will go up because of this bailout and I am not happy about this, but I believe this is far better than the alternative, which is a repeat of the great depression or worse. I think a lot of the complaints on this board and elsewhere are the very short-sighted me-first type attitude that many here have complained about others having for so very long. this sucks for everyone, but it is also for everyone’s benefit.
The last 4-5 bottoms this year, [at least we were told they were bottoms], were ignited by short covering. Clot is exactly right, you eliminate short selling and you subsequently create a giant vacuum.
Bullshlt. The elimination of short selling will curtail volitility and eliminate the participation of those who don’t have the interests of this great nation at heart.
What I want to know from you is this: Are you squeezing the Charmin and buying the damn stuff?
3b Says:
September 22nd, 2008 at 11:58 am
#218 recrybaby: You got what you wnated Comrade, now the melt down begins.
You call yourself an investor, you should attempt to profit from this.
We the USA are humbled before the world.
50.5,
At one time you were entertaining. Now you are just monotonous. Why don’t you simply step up to the plate and buy more RE. You certainly have a boatload of inventory to choose from. No?
meanwhile, oil is having a stealth rally that nobody’s talking about. i’m telling you, oil is going to be the weapon the rest of the world uses to bring the USA to it’s knees. it doesn’t matter what happens to demand here in the US, these BRIC’s are bound and determined to soak up any freed-up supply. yes, this is going to get ugly the next few years…
Yes it appears the mother of hard asset rallies is about to be born.
skep -
“this sucks for everyone, but it is also for everyone’s benefit.”
Could you please elaborate on this - how is it in the TaxPayer’s benefit? LEH opened its books to the market and nobody wanted to buy it for $4 a share.
Now, the govt wants to pay 60c on the dollar for these derivatives. They are paying way above market price for this. (Merrill sold these for 22c on the dollar, while financing 75% on the deal). So, there is a huge downside for the taxpayer.
Where is the upside?
I say let them fail and as you said credit is the grease for the economy. Let government supply credit to honest, productive businesses which need them.This will utilize the trillion much more effectively.
The only people affected by this are the ones holding huge amounts of the toxic stuff, they deserve to fail.
217 Sean:
I was in Germany for a friend’s wedding last summer. Over some beers his father (an engineer) said, quite confidently, that the US government would be bailing out the bad mortgages, as the alternative was catastrophe.
I didn’t want to believe him, even argued a bit.
The average German knows more about what’s really going on in our country than we do.
Not to mention the spanferkel, spaetzle and red cabbage his wife made.
bon voyage
Randy [226],
In addition to that, nobody is discussing the dollar getting crushed. Yes, higher taxes, higher inflation and higher interest rates coming to our doorsteps. Gotta love govt bailouts.
At one time you were entertaining. Now you are just monotonous. Why don’t you simply step up to the plate and buy more RE. You certainly have a boatload of inventory to choose from. No?
I’ll buy when I get good and damn ready. Unlike you, I support this country by making real investments rather than speculate on the misfortune of others. You’re yet another vulture.
randy
the rally in oil is most likely due to currency effects, the current turmoil in the market is limiting the credit available to oil companies. oil companies need access to large amounts of credit at all steps of the process, exploration-extraction-refining. if the current financial mess wasnt involved you would see oil prices continue to drop.
Tack this information onto the short sale ban and what you get is some real pain for hedge funds.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aAr0S8U56nRk&refer=home
Another twist of irony that shows yet again who is running the show.
The finance industry had the bankruptcy laws strengthened earlier this decade to make it harder for businesses and individuals to liquidate their debts. The thought being this would strengthen the CDO’s, MBS’s etc, and protect the financial institutions.
Now look who is seeking government help to avoid declaring bankruptcy:)
It’s official Goldman and Morgan are now bank holding companies
http://www.federalreserve.gov/newsevents/press/bcreg/20080922a.htm
Schaudenfreude for everyone
http://dealbreaker.com/2008/09/a-lot-of-people-blame.php
232 ket-
that’s probably right… but just as before, oil is bouncing harder than the dollar is falling… it’s not a 1-to-1 relationship or anything. i mean, dollar falls 5% and oil bounces 10-15%. from a strict safe-haven aspect, oil has been a better play than buying Euros etc..
I keep hearing this talking point that the next depression will happen if we do not pass this. This is eerily similar to the dire warnings that we will see a mushroom cloud if we do not act immediately in Iraq. The fact that its coming from the same people in power should be enough of a contrarian indicator to the validity of the statement.
#239 in moderation
randy:
The problem with buying oil is where to store it. Gold and Euros are much more portable.
i like some aspects of the democrats new proposal. obviously, there needs to be oversight of the Treasury. and there needs to be some limits put on this compensation crap. unreal.
/US gov’t closing the barn door after the horses have left
Justin 203,
Where do I begin?
Did you read the footnote on the bottom? The person that wrote that post is currently one of McCa1n’s advisors.
More importantly, how do you blame the dems that republicans couldn’t get the bill out of committee in a republican majority senate with a republican committee chairman?
The reason they say it would have prevented the crisis is that without those two GSE’s providing liquidity in the mortgage market then the banks would have stopped writing mortgages and problem solved. Uhm. Aren’t the current and recent bailouts designed to provide liquidity in the market so that these financial institutions can keep making money? Rhetorical question, the answer is ‘yes it is’ for those playing along.
The GSE’s already had a regulator. If the OFHEO can’t handle the job, there should have been legislation to improve the current regulator not pass it off to the treasuy.
The Federal Reserve and possibly the Treasury and SEC could have done things on their end to put a stop to the nonesense too.
haha, good point Stu… though it doesn’t seem to be stopping the meteoric appreciation. i guess buying USO is one easy way. I get your meaning though… you can actually pocket the Euros and gold.
btw- people have asked this on this board before, but not sure if solid answers were offered: Where is everybody getting their physical gold ??
Tom, (justin 203)
I doubt he read the footnote or much of the article. The headline was all that someone of such shallow intellect needs to post on a blog.
So, a 9.25% increase in unemployment in NJ. Who wants to bet that nearly every paper, radio, and TV station reports it as a .4% increase?
.5%, excuse me.
#229
“Could you please elaborate on this - how is it in the TaxPayer’s benefit?”
it is to the taxpayer’s benefit because the alternative is all out economic collapse. the gov’t is intervening now instead of after the collapse as they did in the 1930s. Some people are losing more than others because of this approach. Some are protected more than they would be otherwise. Focusing on these distributive issues misses the point.
GAtor,
The news about the waffle house is great news; now FedCo can diversify into food services too.
#229
“I say let them fail and as you said credit is the grease for the economy. Let government supply credit to honest, productive businesses which need them.”
gov’t does not have the infrastructure to replace all of these institutions overnight. the transition you are describing would be extremely painful and potentially so destabilizing that we would never recover.
you guys do not need to take my word for it. everyone across the ideological spectrum understands the need for this bailout except for the very hard core radicals on the left and the right, who would actually rather welcome the total destruction of our society. If you count yourself in that camp, we will not have a reasonable debate.
We are reaching the point where it pays to default on your mortgage. Screw bad credit, cash will be king. Besides, if you are in a home where you owe more than its worth, your
better off. Got to have the guts for it , but i think this is what its going to come to.
Same with the credit cards, and autos.
Shore - would you like your economic meltdown “scattered” (spread on the grill), “smothered” (with onions), “covered” (with cheese), “chunked” (with diced ham), “diced” (with diced tomatoes), “peppered” (with jalapeño peppers), “capped” (with mushrooms), “topped” (with chili) or “all the way” (with all available toppings)?
skep-tic,
Regarding investment banks and deposits.. you’re missing something big. Deposits are federally insured to increase confidence in the banking system after the great depression.
By letting investment banks use deposits as a cussion when they take on too much risk is essencially federally insuring IB’s.
IB’s need proper underwriting and risk management and if there is proper regulation to prevent market manipulation, everything runs fine.
The problem was the regulators looked the other way or in some cases stepped in to let these companies do what they want. They took on too much risk thinking they could indefinately manipulate the system.
They screwed up royally. If they want a cushion they should set aside a portion of quarterly profits instead of giving out raises and bonuses. At least until they’re satisfied they’re risk analysis was correct.
Would you like your economic meltdown scattered, smothered, covered, chunked, diced, peppered, capped, topped or “all the way”?
Arrrrgh. Something about the waffle house hash brown options throws a post into moderation!
portion of moderated post above, don’t think grim is around to unmoderate:
VIEW FROM ASIA:
Paulson’s dreadful scheme will become law, because Americans love their bankers. The bankers enable their collective gambling habit. Think of America as a town with one casino, in which the only economic activity is gambling. Most people lose, but the casino keeps lending them more money to play. Eventually, of course, the casino must go bankrupt. At this point, the townspeople people vote to tax themselves in order to bail out the casino. Collectively, the gamblers cannot help but lose; individually they nonetheless hope to win their way out of the hole.
Americans are so deep in the hole that they might as well keep putting borrowed quarters into the one-armed bandit. They have hardly saved anything for the past 10 years. Instead, they counted on capital gains to replace the retirement savings they never put aside, first in tech stocks, then in houses. That hasn’t worked out. The S&P 500 Index of American equities today is worth what it was in 1997, after adjusting for inflation (and a pensioner who sells stock purchased in 1997 will pay a 20% capital gains tax on an illusory inflationary gain of 40%). Home prices doubled between 1997 and 2007 before falling by more than 20%, with no floor in sight…
more at
http://www.atimes.com/atimes/Global_Economy/JI23Dj06.html
Skep,
It may well be that we had no choice but to rush in with cash. A conversation I had last week with an economic advisor at the White House, persuaded me that this was likely the case. That said, if the institutions we are going to help are in such dire condition, then they should be willing to accept pretty stringent terms. We being the ones to save their @$$es should receive a minimum of $2 in equity in the firm for each dollar invested in their sorry @$$ companies. The Executives in those companies should have to give up all bonuses received the past 10 years, as well as deferred comp they have squirled away. Their retirement accounts should be stripped of everything abobe $5 million in assets (most Americans would kill for one so large), and no salary/bonus should be greater than 3X the salary of the Secretary of the Treasury. If the firms really need the money, they will accept the terms. If they choose to pass on accepting the money with these terms, they are not really in need.
Union County Compkiller
35 Hampton Drive
Berkeley Heights
4BD 2.5Bth
(The house is in excellent shape)
OLP $599,000
LP $534,900
SP $510,000
Last Previous Sale 1991 - $325,000. An annual increase of 2.7%.
#243 Randy
Try 47th and 6th in Manhattan.
John-
I miss goverment cheese.
Read with care. Try to balance it out with something light and positive, like McCane’s tax plan to be paid for by eliminating earmarks.
HYPERINFLATION SPECIAL REPORT
Issue Number 41
April 8, 2008
http://www.shadowstats.com/article/292
I mean government
#253
“They screwed up royally. If they want a cushion they should set aside a portion of quarterly profits instead of giving out raises and bonuses. At least until they’re satisfied they’re risk analysis was correct.”
this is the point of GS and MS becoming bank holding companies. they will have to increase their capital cushion, improve their risk management practices and restrict their investments in exchange for a federal backstop.
Skep,
The chips are going to fall where they are going to fall whether this bail-out is passed or isn’t passed.
#224 recrybaby: Picked up the 30 pack in Price Club;I prefer Scott.
“That said, if the institutions we are going to help are in such dire condition, then they should be willing to accept pretty stringent terms.”
Exactly. Right now Paulson is essentially saying that we have to make these companies whole, or else.
Asked about regulation, oversight, compensation - he says that there is time for that later.
So, he wants a blank check with no oversight. How is that going to work out?
Scotties makes my butt cheeks sore.
I have my limits on cheapness.
“this is the point of GS and MS becoming bank holding companies”
As I understand it, it also prevents them from having to mark the assets to market and continue to take writedowns and, instead, can hold them as “investments” thus allowing an artificially-high value to remain on the books until the gain/LOSS is realized.
#256
“if the institutions we are going to help are in such dire condition, then they should be willing to accept pretty stringent terms.”
Shore– I agree with this and have said so repeatedly. I think the AIG model should be used– new secured debt and warrants to purchase a majority stake in equity, with the goal that if the firms are ultimately acquired by the gov’t, that they will be spun off after certain benchmarks are achieved. what I am arguing against is this idea that every one of them should simply be allowed to fail.
skep-tic,
You make it seem like there are only two options, accept paulson’s plan or collapse of the financial market. That’s not the case.
Here are the problems. Paulson and Bernake waited too long and now they’re expecting congress to just sign them over the authority to bail out with out any consequences to the industry. No deal and not necessary. If they are in such bad shape they should be willing to accept stipulations. That’s what happened after the great depression. Governement helps you out but you have to kick in a few things and we watch you like a hawk so you don’t do it again. That’s not unreasonable.
The government doesn’t need the infrastructure to lend the money out directly. It’s already there. Many banks around the country are still doing well and didn’t get involved in the mess. Take the 700 billion dollars and give it to them to subsidize their purchase of these mortgages. And they directly negotiate with the other lenders to get a fair price.
The banks can then modify these mortgages since they got them at a discount. This not only helps the homeowners but also reduces the risk. Then sell these to Fannie/Freddie to provide liquidity to these prudent banks and Fannie/Freddie can more easily sell these to investors now that the risk level has been greatly reduced.
“The chips are going to fall where they are going to fall whether this bail-out is passed or isn’t passed.”
HEHE– let’s say this is a forest fire that has been building for some time. some people who observed the lack of rain in the area, high winds and temperatures, etc are angry that the warning were ignored. people are also angry because much attention is being given to the mansions built on the edge of the forest. the fire is now raging out of control, heading toward LA or Phoenix– do we simply say, f’ it— let the whole thing burn, or do we at least try to put it out?
“The government doesn’t need the infrastructure to lend the money out directly. It’s already there. Many banks around the country are still doing well and didn’t get involved in the mess. Take the 700 billion dollars and give it to them to subsidize their purchase of these mortgages. And they directly negotiate with the other lenders to get a fair price.”
Tom– I have said this before– credit is not simply about financing assets. All credit markets are going haywire. Your local community bank may know how to finance a house purchase or even a shopping mall, but they have no capacity for commercial paper, repos and any number of other forms of credit that are essential to day to day functioning of the economy.
skep,
The fire has certainly heated up the Comex.
skep:
The forest fire is an excellent analogy. Of course you put it out, but first you must decide how to do it. What method will provide the greatest protection against future fires. Should we drop water from choppers or fight it with fire lines.
The Paulson plan does not help avoid future fires because it does not address in any way shape or form the cause of the fire.
Perhaps we put the fire out. What good is it if the fire relights days later when the magnifying glass lights another timber. Seems like a big waste of tax payer money to me in this scenario.
Unintended consequences are already beginning to sprout -
Oil up $7.
http://image.minyanville.com/assets/FCK_Aug2007/File/Christy2/lehmanbrotherseffect-done.jpg
E pluribus hokum or
When the gam-blers bail out the cas-ino
By Spengler
Why should American taxpayers give US Treasury Secretary “Hank” Paulson a blank check to bail out the shareholders of bus-ted banks? Why should the Treasury turn itself into a toxic waste dump for their bad loans? Why not let other banks join the unlamented Brothers Lehman in bankruptcy court, and start a new bank with taxpayers’ money? Or have the Treasury pay interest on delinquent mortgages, and make them whole? Even better, why not let the Chinese, or the Saudis or other foreign investors take control of failed American banks? They’ve got the money, and they gladly would pay a premium for an inside seat at the American table.
Skep,
This is not going to stop the fire. There isn’t enough money to stop the fire. What it is going to do is destroy the dollar. So to use youe analogy, is it worth trying to contain the fire when attempting to do will be unsuccessful and it makes the water unusable for future use?
from the Asian times
skep-tic,
“I have said this before– credit is not simply about financing assets. All credit markets are going haywire. Your local community bank may know how to finance a house purchase or even a shopping mall, but they have no capacity for commercial paper, repos and any number of other forms of credit that are essential to day to day functioning of the economy.”
First I never mentioned local community banks so don’t assume that’s all I meant. There are 1,700 banks that issue commercial paper. I doubt all of them need bailing out. If that’s not enough, the scenario I suggested stil provides liquidity to these troubled banks so that they can go on doing what they were doing… Well doing what they are supposed to be doing.
http://www.time.com/time/nation/article/0,8599,1843168,00.html?cnn=yes
We are now France!
Grim, my 281 is in moderation (no politics in it)
“The Paulson plan does not help avoid future fires because it does not address in any way shape or form the cause of the fire.
Perhaps we put the fire out. What good is it if the fire relights days later when the magnifying glass lights another timber. Seems like a big waste of tax payer money to me in this scenario.”
Paulson admitted this on Meet the Press on Sunday. You deal with the emergency at hand and once things stabilize you look at the longer term issues. I am skeptical about giving so much power to one man for an extended period of time– I said so yesterday on this blog that I think it’s probably unconstitutional. There is precedent for this type of concentration of power in the executive in extreme crisis situations which is what I believe we are now facing.
it may be that there is no way at this point to stop the fire (Billy Joel must like this), but I think failing to try would be the ultimate failure of gov’t
Putting out fire with gasoline, is more like it.
#268 Tom:The banks can then modify these mortgages since they got them at a discount. This not only helps the homeowners but also reduces the risk.
Why would anybody want to buy a hosue if theoretically their neighbor could have have his mtg modified.
Why take the risk, especially now that down payments will be required again.
Seems to me a rational potential buyer would need an even bigger discount on price,as an insurance premium to protect against mtg modifications for existing homeowners.
Tom– you take the biggest banks out of the system and the system ceases to function. even if you could somehow juice up the capacity of healthy banks (and I think you greatly overestimate the number of these), the transition from moving accounts around en masse would be chaotic
Shouldn’t we not only put the fire out, but decide if the mansions should be rebuilt? Shouldn’t a fireman be hired to put out the fire? Instead we give the arsonist (Paulson, from an IB) a lighter with as unlimited supply of propane.
I agree that we have to do something, but to sock it to the taxpayer after minimal discussion and with such little forethought was a terrible decision.
There’s more, but I can’t get it through moderation
The goal seems to be to keep prices up. Whatever the cost, KEEP PRICES UP. Do not let people think they are losing anything, even if they lose much in the process of proping-up prices, the real loses will be hidden.
#285 stu: Correct. There is more planning done for a typical wedding.
Perhaps we shoul’a taken the blue pill instead.
#286 shore: It is not going to work.
WM down 20% to 3.40.
Do we restart the deathwatch clock?
Just the fact that bush, a.k.a. Geo III, is pushing to have this adopted without modification is enough to make me say, “Modify the heck out of it and slow it down.” bush has been wrong about everything (except for invading Afghanistan) in his presidency, what are the odds he is correct about this?
any one else notice how hard it is to come by physical bullion lately? I spoke to 9 different places and all were sold out. OF EVERY THING.
The fire has certainly heated up the Comex.
yup.
Shiny stuff is on stereoids.
“Putting out fire with gasoline, is more like it.
Not only that, the Fire Chief is the lead arsonist.
any one else notice how hard it is to come by physical bullion lately? I spoke to 9 different places and all were sold out. OF EVERY THING.
Holler at Peter Schiff at Europac.
Inasmuch as the banks are still being hammered, notwithstanding the short-selling ban. Maybe the next rule will be, “Bank stocks may only be purchased at a minimum price of 1% above the price paid for the last share traded.”
http://biz.yahoo.com/ap/080922/financial_meltdown.html
WASHINGTON (AP) — Judges could rewrite mortgages to lower bankrupt homeowners’ monthly payments as part of changes congressional Democrats are seeking in the Bush administration’s proposed $700 billion financial system bailout.
Also, companies that unloaded their bad assets on the government in the massive rescue would have to limit their executives’ pay packages and agree to revoke any bonuses awarded based on bogus claims, according to a draft of the plan obtained Monday by The Associated Press.
The proposal by Sen. Chris Dodd, D-Conn., the Banking Committee chairman, gives the government broad power to buy up virtually any kind of bad asset — including credit card debt or car loans — from any financial institution in the U.S. or abroad in order to stabilize markets.
WM down 20% to 3.40.
Do we restart the deathwatch clock?
Yup. bottom price support is $0.00. Thanks to Cox and co.
#291 Shore
Does this mean you are renouncing your party affiliation and registering as an independent.
/tongueincheek
The market does not like the Dodd plan. They will be exposed. They will lose money. They will go to jail.
eff em!
Lake Woebegon Stock Exchange
Our motto: Where every stock always goes up.
I used to think used car dealerships were an eye sore. Now when I go to the gym and I pass the used car lot its looking more like a BWM dealership. Just about every make and model BMW now.
I’m not into TA, but what I do know is that this is a very bad looking chart.
http://money.cnn.com/quote/chart/chart.html?symb=djia&sid=1643&time=10dy&Submit1=Refresh
I am not there, yet, but it is harder and harder to be a TR Republican with each passing day. One thing is for sure, the current bunch cannot exit the White House fast enough. Unfortunately, one can do LOTS of damage in four months.
#189 Waffle House is going broke??? Oh no, that means we’ll need a Cardiologist Bailout Bill. All those guys with boat payments…so sad.
I spoke to 9 different places and all were sold out.
kettle [293],
I stated the same about 3 weeks ago, I visisted 3 dealers with a bag of cash. Not one wanted subprime paper.
From Kitco today;
“In order to reflect the current strong demand for Silver Maples and Silver Eagles, Kitco is temporarily increasing its current bid (buyback) price for these particular products.”
http://www.bullionvault.com comes highly recommended by some people I trust.
“Job hunting on Wall Street? The line forms here”
Because of the turmoil a lot of firms have suspended their layoffs. So there goes your story.
PGC
If O wins, it will mean a massive increase in income for me and Mrs. Shore. That said, I still think he is bad for the country overall. On the other hand, If George Deleno Roosevelt Bush, (George Illich Bush?), continues with this vast socialization of the US economy, he will make O look like a Reagan Republican.
“Judges could rewrite mortgages”
Private contracts are now reversed. Heil Hank!
Who wil EVER write a mortgage if a judge can rewrite?
Tvarish, contracts are for the capitalists, like the French and British. They are no longer needed here. What we need is allegience to the commander guy decider.
“So there goes your story.”
Frank [309],
Since it’s story time;
Why don’t you elaborate regarding the effect of the no short rule pertaining to the hedge fund industry, options trading and the resulting consequences for prime brokerage?
You must have a great feel for this, being employed in the hedge fund industry.
“Who wil EVER write a mortgage if a judge can rewrite?”
shore,
Frank?
Put another way, if judges can go and modify the contract, any banker who ever writes a mortgage loan should be fired.
Ron Paul has nothing good to say about the Wall Street bailout plan
PAUL: Well, I think that’s a mistake because we don’t have the money. But that doesn’t mean you have to do nothing. I mean, we could reform the system. We could return to sound money. We could balance our budget. We could change our foreign policy. We could take care of our people at home. We could lower taxes.
There’s a lot of things that we can do. But the worst thing that we can do is perpetuate the bad policies that gave us this trouble in the first place, and that is that we no longer, over the last quite a few decades, believed in free-market capitalism. Capital is supposed to come from savings. We’re supposed to work hard and save.
As a matter of fact, the Chinese work hard, right now, and they save, and they’re buying up the world. But we borrow and spend and consume, and now it’s caught up to us and it’s undermining our whole system. … So this $700 billion is not going to do it.
Imagine what happens to the “seller-held mortgages.” Will we ever see another one of these?
shore [316],
More cash hoarding at banks.
[265] stu
“Scotties makes my butt cheeks sore.”
With what is coming, it won’t be the scotties that will make them sore.
3b, 283
Yeah, that’s what I expect to happen. Eventually house prices will come down to where people can afford to buy with good down payments and slightly higher ineterest rates.
People who bought before the bubble can sell if they want and kick themselves for not selling in 2005.
People will have to consume and borrow less and save more. Ken Lewis of BofA even said this at a speech to NBMBAA.
More real money and less credit will have to go to consumers and changes will need to take place in other areas as banks tighten credit.
It’s going to suck for a while but it doesn’t have to be as bad as the great depression but eventually we’ll get to a point where we have a stronger foundation for our economy.
Stu 307
Unless i am mistaken, the link you posted for purchasing bullion i s a service that hold the physical gold for you. If the SHTF then there is a good chance that private ownership of gold will be banned as was done in the 30’s. You have to make your own call, but holding the physical metal yourself or outside the country is a good option
Mitchell, watch out for those BMWs. Turns out sneaky BMW usually leases cars out for 3 years 36k miles. They come with a factory warranty of 4 years 50K miles. Those BMW guys take all the off lease one owner clean car fax BMWs and try to make them CPO and sell them on their lots. The CPOs get an additional two year warranty after the original four year warrranty expires. The remaining BMWs get auctioned off at auction and any old non BMW dealer can get them. Well the catch is BMW only offers extended warranties to original owners or on CPOs. When you buy off a non BMW the car lot you might just get a few months of warranty or none at all.
Mitchell Says:
September 22nd, 2008 at 1:43 pm
I used to think used car dealerships were an eye sore. Now when I go to the gym and I pass the used car lot its looking more like a BWM dealership. Just about every make and model BMW now.
Kettle1:
I don’t nor plan to hold gold. If I did, it would be an inflation hedge at the most.
What took so long?
NEW YORK (Reuters) - Sallie Krawcheck, head of Citigroup Inc’s wealth management unit, will step down from the company, the Wall Street Journal said on Monday, citing people familiar with the matter.
Krawcheck, 43, has long been one of the highest-profile women on Wall Street, and was once considered a potential candidate to eventually run all of Citigroup.
“Nancy, can you get Lloyd on the phone?”
“Lloyd who, sir?”
“Blankfein, the Goldman CEO, of course.”
“Mr. Blankfein? The Treasury here, I have the Secretary on the line for you.”
“Lloyd, Hank here. Just a quick call to let you know we’re on track. I’m pushing through the $700 billion, and they’re all so scared by now they’ll accept it too.”
“But Hank, I see they’re all trying to change it in all kinds of ways”.
“Don’t worry, I asked for all I could think of, but I don’t need every single bit. They’ll give me enough to work our plan.”
“Well, you asked for total immunity, you really think you can get that?”
“Look Lloyd, it doesn’t matter, does it? They’ll give me immunity from the courts, for sure. And then they can have some token grip on what I’ve done, like some review 6 months after the fact. You know, democracy and all that, haha. It’ll be too late by then to turn anything back.”
“If you can pull this one off, Hank, that’s quite a feat. Got to be honest, I didn’t think you could do it.”
“They’re all the same, Lloyd, these people. You just scare the heebees out of them and they do everything you say. Besides, what do they know about securities and swaps? Their only source is our own Goldman people inside Congress. As long as our guys say jump, they jump. Their number 1 is: they want to keep their seats. And our donations.”
“Oh, and before I forget, Lloyd, I also decided to go to the next step of the plan today. I’m going to make you and MS commercial banks.”
“Weren’t we supposed to wait with that one, Hank?”
“Yeah, but time is of the essence. I don’t want more stock losses at the firm. Goldman hasn’t made a penny for too long now, and I’m going to change that. I’m losing too much on my own stock. You’ll get full Fed access, and a zillion in customer deposits you can use to write more paper. It’s brilliant, when you think about it.”
“Sure, but we’ll get all that oversight and stuff.”
“Lloyd, the only ones overseeing you will be me and the boys at the Fed. How bad could that be? Stop worrying, we got it all worked out.”
“Well, if you say so, Hank, but it’s just four more months for you. What happens after that?”
“Don’t worry, four months is enough. And after that, another of our guys takes over. How about you, Lloyd, you might be good at it? What you need to do now is get the boys ready to start taking over all the banks I’m going to let fail. I’ll get Morgan and BoA some as well, of course, we have a free market here. Ha, I kill me sometimes. You’ll need some bright kids for that, Lloyd, it’ll be a lot of money for nothing. And have some token funds at hand to pay for it. You’ll get it all back, of course.”
“I know the plan, Hank, no worries there, I’ll tell everyone to be prepared for something big.”
“I got to go, Lloyd, Bennie boy just walked in, he’s waiting next door to do some more details. I’ll keep you posted.”
“OK. One more thing, Hank, did you see the markets today? The dollar is falling, and so is the Dow, even with all the shorts covering their bee-hinds That’s going to cost us a lot of dough!”
“Lloyd, I don’t care anymore. I got the power now. It’s not going to cost me a dime. I’ll just make it tax-deductible, or ram it through Fannie, or the FDIC, or something. I can do whatever I want. And believe me, I will.”
#309
“If O wins, … I still think he is bad for the country overall.”
And McC is will be any different from GWB?
I think this election should come down to the decison of; “Are you willing to gamble on change, or will you accept a continuation of the current path.”
Unfortunately I think it will again come down to Red vs Blue and can bring my self to vote for …. (Insert O, McC or SP).
I think B1den is the only straight up/down, yes/no vote.
Which foreign currency is the best to use as a hedge against the weakening US dollar? I see the yen, euro, canadian dollar… they’re all going nuts today. should i just buy up a basket of these guys?
i’m getting out of dodge before the ultimate collapse of this baby. btw- if you plan on making a purchase of something imported, best do it soon before the last vestiges of credibility are stripped from the dollar in the coming weeks/months.
maybe this is hopelessly optimistic, but maybe this is a wakeup call to cause Americans both on an individual level and on a national level to look at their/our finances and realize that we are on an unsustainable path. this is a crazy way for people to snap into reality, but the slow build for so long was too easy for most to ignore. this is like a slap in the face, but it may be what we needed. Everyone knows that I think this bailout is not really a choice but a necessity, but we do have a choice about how we conduct ourselves from here and this may be the moment we drastically shift priorities.
“Tom– you take the biggest banks out of the system and the system ceases to function. even if you could somehow juice up the capacity of healthy banks (and I think you greatly overestimate the number of these), the transition from moving accounts around en masse would be chaotic”
That’s bullshit. The biggest bank BofA is being applauded for helping buy up the losers. I’m not overestimating the 1,700 number. Check statistics on different articles. With over 7k banks is it so hard to imagine 1,700 companies issue commercial paper?
There’s also the banks of other countires.
The fed’s been working on this problem for a while. Virtually bringing the discount window to banks and asking them if they need anything, billions in repurchase agreements, bailouts and extending even more credit. Nothing has worked.
This new bailout depends on two things. The housing market does not return to normal pricing and the credit bubble continues. Neither one of these I see as likely and definately don’t see them as good for the economy.
Peak oil debate hasn’t gone away:
“Here comes $500 Oil”
http://money.cnn.com/2008/09/15/news/economy/500dollaroil_okeefe.fortune/index.htm
I like the part about learning to garden and having good walking shoes.
About Ron Paul’s comment that we don’t have the money:
It seems that Hank and Geo III believe that as long as we have cheques it does not matter. We don’t need money we have Cheques!
Can you say global meltdown!!!! and dont worry skep, it will be a global depression
http://blogs.wsj.com/economics/2008/09/22/european-banks-too-big-to-rescue/
European Banks: Too Big to Rescue?
European banks face greater capital shortages than their U.S. counterparts, but have become too big for any one European country to save, according to an article published Saturday by European economists Daniel Gros and Stefano Micossi on the Centre for European Policy Studies’ Web site.
That means a rescue of the European financial sector like the $700 billion plan proposed by the Bush administration over the weekend would be difficult, requiring coordination by the European Central Bank with the participation of all European countries.
The “overall leverage ratio” - a measure of total assets to shareholder equity - of the average European bank is 35, compared with less than 20 for the largest U.S. banks, the economists say, and relatively small writedowns on their assets could have a devastating impact on a bank’s capital.
For example, Deutsche Bank, with an overall leverage ratio of 50, has liabilities of €2 trillion, over 80% of the entire German economy. The liabilities of Barclays PLC, at £1.3 trillion - with a leverage ratio of 60 - exceed the entire U.K. economy , they say.
“but maybe this is a wakeup call to cause Americans both on an individual level and on a national level to look at their/our finances and realize that we are on an unsustainable path. this is a crazy way for people to snap into reality, but the slow build for so long was too easy for most to ignore. this is like a slap in the face,”
Skep,
Igt is a slap in the face but not inthe way you mean. It is a slap inthe face to those of us who saved and paid off our mortgages.
It is a slap inthe face to those of us who saved money instead of buying things.
It is a slap inthe face to those of us who saw that RE was overpriced and the prices could not be sustained and thus chose to pass on buying overpriced assets at many points during the run-up.
It is a slap in the face to anyone who acted prudently, and it will condition the public to act imprudently at every turn. Faced with a choice to save another $45,000-$50,000 at the end of the year or go on a cruise, in the old days we would have saved it. Now, I think we better spend it before inflation eats it away; at least if we vacation with it, we get enjoyment from it. That may not be the prudent thing, but it is the conditioned response that emerges.
“People want to buy. The problem is you can’t get them qualified for financing because the lenders have tightened up so much that only people with the highest credit ratings get approved,” Montalvo said. “We haven’t seen the interest rates fall and the qualifications become more realistic.”
http://www.businessweek.com/ap/financialnews/D93BC0B80.htm
This is exactly the problem with the entire mess. People think downpayment requirements are unrealistic. I can’t believe we are bailing people like this out.
Randy [328],
You can sell the dollar index, a basket relative to;
EUR
JPY
GBP
CAD
SEK
CHF
On the other hand, you can buy tangibles.
#322 John Thats interesting and good info to know thanks.
I would have suspected it to be those people taking home equity loans to buy themselves a beemer and now not being able to afford them.
This used lot used to have a few classic cars and the usual Buick lineup. Now its mostly BMW’s, Hummer, and a few classics.
To your point I went through something similar with an Infinity. I will never buy another Infinity.
#320 Tom: Eventually house prices will come down to where people can afford to buy with good down payments and slightly higher ineterest rates.
Sooner rather than later.
#15 Steve,
Let not get too excited. It is only a copy center, not a full Staples. ;>)
It is where the Kaybee toys used to be.
On another point, the empty shops in Brigadoon are being snapped up. I saw the Staples, Xocolat’s new home, and a new bakery near Jersey Mike’s subs last night. Where is this recession??
#297Judges could rewrite mortgages to lower bankrupt homeowners’ monthly payments as part of changes congressional Democrats are seeking in the Bush administration’s proposed $700 billion financial system bailout.
Instead of helping the housing market, it will destroy it.
#308 frank:Because of the turmoil a lot of firms have suspended their layoffs. So there goes your story.
Wrong!!! And even if some did SUSPEND, that is the operative word.
A nice trip down Memory Lane, circa 2003:
http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63&sec=&spon=&pagewanted=print
The New York Times
September 11, 2003
New Agency Proposed to Oversee Freddie Mac and Fannie Mae
By STEPHEN LABATON
The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.
Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.
The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.
The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors…
…
“These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. “The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”
Representative Melvin L. Watt, Democrat of North Carolina, agreed.
“I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said.
Crossing Wall Street: First to call bailout plan dead in the water.
http://www.crossingwallstreet.com/archives/2008/09/the_bailout_pla.html
Also see, “We’re All Zimbabwean’s Now”
http://www.crossingwallstreet.com/archives/2008/09/were_all_zimbab.html
hilary at NY Fed,, to get this all straight
Tom– the number of banks out there is irrelevant. the top shelf banks are simply irreplaceable in the short term and doing nothing would ensure that they would be out of business very soon. pretending otherwise is like saying there are tons of local roads in the U.S., so we can certainly do without the interstate highways. We need a long term plan to better manage the systemic risk institutions of this size present, but this can’t all be sorted out in a matter of days. These are massively complex enteprises which literally affect every major corporation in the world either directly or indirectly through cross default provisions. we need to unwind this house of cards deliberately and systematically, not simply watch the bottom wrung collapse and bring the entire tower down with it
Post from another blog:
“hey we are becoming more European now we just have to ban firearms and we are complete”
Stu,
At least in their socialized nations healthcare is provided, college is free for those bright enough to make sense admitting, and retirement is paid for. My party is making one heck of a hash of things here.
Sort of OT: My fourth grader just came home and announced that her school will not be doing class t-shirts (for field trips, etc) this year “because the economy is in the toilet.” I asked if that was a direct quote from her teacher and fortunately, she said no.
Prolly the principal.
Here come the first coffin nails on the plan from the MSM:
http://www.cnbc.com/id/26441422Bailout Plan Will Be Drag On Fragile US Economy
Posted By:Albert Bozzo
Topics:Debt | Interest Rates | Inflation | Ben Bernanke | Employment | Consumers | Federal Reserve | Federal Budget (U.S.) | Economy (Global) | Economy (U.S.)By Albert Bozzo Senior Features Editor | 22 Sep 2008 | 01:53 PM ET Font size: If you’ve been worried about the health of the economy and you also have doubts about the soundness of the Treasury’s Wall Street rescue plan, then be afraid, be very afraid—because the US economy may get a taste of what Japan’s suffered over a decade-long period.
“The Wall Street mess will now have collateral damage to the real economy,” says Steve Hanke, a former White House economist. “We’re coming into this thing in a terrible situation.”
[snip]
You’re lucky. My kid’s the one telling the teacher the economy is in the crapper, so don’t bother sending home those fund raisers to MY MOM.
The actual statement was that the “economy is in ths $hitter.” She cleaned it up for you.
Shore,
Looks like your party may get another 4 years. Slate discussing the 800lb gorilla.
http://www.slate.com/id/2198397/
I don’t see a big difference in asking prices on realtor.com. Our family took a drive around East Brunswick and I didn’t see many for sale signs.
Long Buying Should be Banned!
Abusive long buyers have been artificially inflating the prices of stocks for decades. Stocks that should be trading at book value are priced to the moon based on “expectations”. What BS.
Long buyers are responsible for this whole disaster. The government needs to ban long buying until markets discover the fair prices of equities. Also we need the downtick rule to stop unfair abusive long buying on upticks.
I don’t know that I buy their thesis. THat said, I have no doubt there are some idiots who will not vote for him because of race. I suspect that many of the folks who have a discomfort voting for him have such feelings because of policy differences or questions about his experience. Perhaps some of them are also not comfortable with his race (I don’t get that, but that is me) but I suspect that they would have voted against him for other reasons, even if he were 100% white.
As for me, whenever I hired someone, I wanted to bring in the best person, regardless of gender, race, etc. One looks better when one creates a competent high-performing team than when one bypasses the best people for any reason.
Treasuries Irresistible as Deflation Trumps Paulson
http://www.bloomberg.com/apps/news?pid=20601087&sid=aMY..1Q4savU&refer=home
As details of Treasury Secretary Henry Paulson’s plan to revive the U.S. financial system by pumping as much as $700 billion into the markets emerged Sept. 19, bond investor Michael Cheah was reminded of Japan.
When that country’s real estate bubble burst, leaving a trail of bad real estate loans, officials flooded the economy with cash only to see banks hoard the money instead of lending it out. The result has been a series of recessions and persistent deflation for more than a decade.
“Although the government tried to debase the yen by printing a lot of government bonds, the economy went into a standstill,” said Cheah, an official at the Monetary Authority of Singapore from 1991 to 1999 who manages $2 billion at AIG SunAmerica Asset Management in Jersey City, New Jersey. “The banks used the money to buy safety. I see a repeat happening here. The banks will use it to buy Treasuries.”……..
We need a law. Maybe people should only be allowed to hold stocks for an hour. That way we will always know what everything is worth. Call it mark to clock. With each required sale, the USG gets a $5 convenience fee. To keep everyone happy, stocks may only me sold at a gain.
Lehman Sale to Barclays Challenged by Hedge Fund
http://www.bloomberg.com/apps/news?pid=20601102&sid=aO5x_W0yCMas&refer=uk
Bay Harbour Management LC, a hedge fund that invests in the debt of bankrupt and distressed companies, challenged a court order approving the sale of Lehman Brothers Holdings Inc.’s North American business to Barclays Plc.
Bay Harbour didn’t disclose the grounds for the appeal in a court filing today in U.S. Bankruptcy Court in New York. Bay Harbour and another hedge fund, Amber Capital, filed objections in Lehman’s bankruptcy case last week, claiming $8 billion was improperly transferred out of the failed investment bank’s European units prior to its collapse.
Bay Harbour, a customer of Lehman’s prime brokerage business, said in a court filing that money it deposited with the New York-based bank “appears to have been siphoned from London to the United States as part of an $8 billion asset transfer and then ‘trapped’ by the midnight bankruptcy filing.” This happened, “despite repeated assurances of the integrity of the cash,” according to Bay Harbour’s Sept. 19 objection.
Stu/Gator\\You may want to hord some pesos when you are out west.
A Sense of Resentment Amid the ‘For Sale’ Signs
The bailout doesn’t smell right to the people of Manassas Park, where the foreclosure signs are as common as azaleas. They know all about bad debt here. This is a terrain of oversize dreams, misjudgment, financial calamity — and empty houses. “Foreclosure. Foreclosure. Foreclosure,” said Ed Merkle, 58, as he pointed to the “for sale” signs lining his street.
But Merkle, a defense contractor, said he has lived within his means in an era of easy credit. He didn’t take on a huge loan even when his bank encouraged him to dream bigger. “I’ve been financially responsible with my own money. Why should I now be responsible for the fact that you were not?” he said.
This may be a Main Street bailout backlash in the making. The details of the financial crisis are still hard for most people to follow — what with talk of exotic “derivatives” known as “credit-default swaps” and so on — but the central fact of the matter hasn’t been lost on anyone in this Northern Virginia community: The taxpayers are on the hook for the bad judgment of others.
And they say they don’t like it. They didn’t break it, but now they’ve bought it. Political leaders and financial titans say the bailout is necessary to save the economy, but on the ground, in such places as Manassas Park, people think that the bailout will reward the wrong people. There’s a sense that too many folks bought houses they couldn’t really afford, banks urged them on, common sense went on vacation, and now the grown-ups have to clean up the mess.
“If I spent more money than I have, I don’t deserve to have somebody bail me out,” said John Owens, 45, a developer who lives on Eagle Court, where three houses have gone through foreclosure. The anti-bailout sentiment appears to cut across class lines. You hear it from one end of Manassas Drive, the main drag through town, to the other — from the small, Cape Cod-style homes built with G.I. Bill money after World War II to the muscle-bound houses newly risen along the golf course.
Shore Guy 363: I’m just prayin’ I don’t get run over by the stampede of illegal immigrants returning home to Mexico for work when I’m in LA.
The Obama campaign is missing the target on the older white folk.
Retirees.
He has to put his family - his entire family - on TV. Not just the wife and kids. Where did he come from and who made him stuff. Let them talk and tell their stories.
Everybody knows M was a POW. Not a lot of older folks know O’s story.
I’ve got the solution to this mess.
Let’s let people buy homes with 0% down and no credentials.
Can you all feel the collective doubt of the short-sightedness of the Paulson plan?
Dow down 320!
Here we go again. I feel bad for all of those suckers who called Fidelity and asked to have their bond positions converted back into long stock funds.
DJI down 300. Take that short sellers!
Let’s see if it sticks.
Stu,
I am somewhat surprised at all of the clear-headed opposition to the Paulson-putsch.
Re. LA, a friend of mine just decided to sell. He has illegals roaming through his area en masse and a car pulled alongside his with a couple of, ummm, not-so-savory-looking characters brandishing automatic weapons. He has decided it is time to go.
PGC @ 3:06pm
That Slate article is a classic logical fallacy:
http://en.wikipedia.org/wiki/Denying_the_antecedent
Stop focusing on the color of one’s skin, and instead look at the content of their character.
Do you know what I was wondering this morning…
Why do rednecks always post their IQ on the back of their pickup trucks?
Temporary stop to down sellers. Up Up with people and stocks.
stu,
what is that butterfly feeling in my tummy?
http://tinyurl.com/4bdls4
Crude at 120.
Gold at 909.
I know it’s early, but it seems like the magic bullet shot by Paulson was a blank.
#368 - I am somewhat surprised at all of the clear-headed opposition to the Paulson-putsch.
I’m very relieved at it. I was expecting a rushed through emergency session approval of the bailout over the weekend.
“Why do rednecks always post their IQ on the back of their pickup trucks?”
as in 43?
Exactly Shore Guy.
AP:
Congress, Bush team agree on bailout terms
By JULIE HIRSCHFELD DAVIS, Associated Press Writer 4 minutes ago
WASHINGTON - A key Democrat negotiating a $700 billion financial bailout says the Bush administration has agreed to include mortgage aid and strong congressional oversight in the plan.
ADVERTISEMENT
Rep. Barney Frank, the Financial Services Committee chairman, says a great deal of progress has been made in talks between lawmakers and President Bush’s team on the rescue.
A government official with knowledge of the talks also said the administration has agreed to create a plan to help prevent foreclosures on mortgages it acquires as part of the bailout.
http://news.yahoo.com/s/ap/20080922/ap_on_bi_ge/financial_meltdown
If busa resigned, at least we would have a smart president for the next four months.
“Why don’t you elaborate regarding the effect of the no short rule…”
I kind of like it, SKF and put options are worth more now.
Stu,
In some parts of the country they put their names on the back of their belts. Know why?
Lets try that again.
If bush resigned, at least we would have a smart president for the next four months.
“In some parts of the country they put their names on the back of their belts. Know why?”
All right, let me have it.
So when they pull their heads out of their posteriors they can remember who they are.
Pretty common sight, those belts, in the, ummm, less urbane parts of the western U.S.
I have a much better one for ya Shore Guy. Why do they bury Chinese people with their asses sticking out of the ground?
So when relatives come to visit the cemetery, they have a place to park their bicycles.
I’ll be here all night folks!
And don’t forget to tip your waitresses.
DJIA -350.
Frank (187)-
Please provide me with a synonym for “idiot” that I can use to describe you. I do have a bit of a limited vocabulary, you know.
#368 Qwerty
If you want to take the argument into Predicate Calculus, I’m a bit rusty, but I’ll give it a go.
While all articles are skewed to the writers view, I think there are some valid discussion points here.
Here are is a though in the same vein. I know a few women who would have voted for O in the primary’s, but pulled they leaver for Hil as they thought if I can’t vote for her, there will never be a woman in the WH. No scientific reasoning, purely anecdotal, but a valid talking point.
Gator (189)-
That news is tougher than a Waffle House steak.
Sorry…had to say it.
Hillary is a woman?
“know a few women who would have voted for O in the primary’s, but pulled they leaver for Hil as they thought if I can’t vote for her, there will never be a woman in the WH”
Just finished a meeting with the folks up on the Hill, seems our friend Paulson withe his friend Ben will up there at 9am and Paulson is asking for unlimited authority to buy bad debt, the senate thinks he still works for the US. Govt so he has to be accountable. Seems next week everyone is going to take off to campaign and if this ain’t settled by Friday night they will work through the weekend and may begining of next week on this. If the Senate wants out the door as they always take off in October of Election year and Paulson is holding them back I wonder if the Senate and House will give in. Also no one up there has even thought of how we are going to pay for this. Fun times.
#386,
Call me a NJ real-estate agent instead.
HA. Down 350+.
And there ain’t no more levers left to pull, are there?
Apologies if I missed this earlier in the thread, but somehow I imagine that Bi probably hasn’t posted this already:
O Holds Lead In Today’s Tracking Polls
By Eric Kleefeld - September 22, 2008, 1:59PM
Here’s a wrap-up of the four major national tracking polls for today, with all of them showing O ahead by various margins:
• Gallup: O 48%, McC 44%, with a ±2% margin of error, essentially unchanged from yesterday’s 49%-45% lead for O.
• Rasmussen: O 48%, McC 47%, with a ±2% margin of error, unchanged from yesterday.
• Hotline/Diageo: O 47%, McC 42%, with a ±3.2% margin of error. Yesterday, O had a smaller lead of only 45%-44%
• Research 2000: O 49%, McC 43%, with a ±3% margin of error. Yesterday, O was up 49%-42%.
Adding these polls together and weighting them by sample sizes, O is ahead by a margin of 48.0%-44.8%, not significantly changed from a lead yesterday of 48.2%-45.2%.
http://tpmelectioncentral.talkingpointsmemo.com/2008/09/ob*ama_holds_lead_in_todays_tra.php
No link;
$700 billion bailout package for Wall Street
$438 billion projected deficit in the federal budget for FY 2008
$200 billion for Fannie Mae and Freddie Mac
$150 billion in rebate checks under the guise of “stimulus”
$85 billion for AIG
$29 billion for Bear Stearns
Hmnn… $1,602 billion…. that’s quite a bill for the year… not to mention the nearly $1.6 trillion in Treasury swaps and short-term paper the Federal Reserve has lent out during its auction facilities.
Who’s going to pay for all this?
The national debt ceiling will have to be raised for the second time in as many months to accommodate the request… this time to $11.3 trillion… boosting the national debt to over 70% of GDP. The highest the national debt got during the Great Depression was 44% of GDP.
Stu,
When it dips below 11,000 can we take that as a repudiation of the Paulson Putsch?
BC Bob:
– $700 billion bailout package for Wall Street
It’s a /lot/ bigger than that. Several trillion.
– $200 billion for Fannie Mae and Freddie Mac
That is also actually trillions.
BC Bob,
The question is, “Are you fer us or again us?”
Or put another way, “Do you support the bailout of wall street — via the no former investment banker left behind act — or do you support the terrorists?”
“…boosting the national debt to over 70% of GDP. The highest the national debt got during the Great Depression was 44% of GDP.”
Can’t raise taxes on the rich this time either cause then all our wonderful jobs will disappear!
Raise the god damn interest rates already. Stop delaying the inevitable.
Volcker…where are you!
“When it dips below 11,000 can we take that as a repudiation of the Paulson Putsch?”
Wait for 10K.
BC (220)-
Hear that sucking noise? Dow down 393.
But hey, don’t let parasites like me short anything. I’m a terrorist.
“Clot is exactly right, you eliminate short selling and you subsequently create a giant vacuum.”
King Henry can suck it.
#394
you may not believe it, but even I am rethinking my allegiance to Mr. M. His respose to this situation has not been reassuring. And Mr. O is a better social-ist anyway
Will it be -400?
As bill Clinton said earlier today, “Giant sucking sound, I am so there.”
SRS is over 80?
Wow, that was quick.
skep-
How much extra action do you think Hudson City or Valley National can take, once a couple of the big boys go el foldo?
I think they’d be just fine. Problem is, 80% of their credit applicants would be shown the door.
And the problem with that is?
“I kind of like it, SKF and put options are worth more now.”
Frank,
Funny, you never answered the question.
That said, explain how puts are now worth more, don’t confuse widening spreads with value. How does the market maker, options, hedge his underlying if short selling is banned?
Every hedge fund, on this planet, is vehemently opposed to the ban on short selling. What hedge fund do you work for? On what planet?
Clot 393 - I’m afraid this may result in the need for a bailout of the grits industry if things get any worse. Waffle House is the worlds leading server of grits, amongst many other food stuffs.
http://www.wafflehouse.com/funfacts.asp
The Stock Nazi, “No shorts for you!”
This, unfortunately, may be the “beginning of the end”. Be interesting to see if Corzine finally realizes it.
BC,
you forgot the 300 Billion dollars to save homeowners and home builders earlier this year.
The funny thing is that people still don’t know why oil and gold are up and COMEX as a whole is on stereoids.
Treasury seems to be balking at the USG aqctually getting some equity for our investment.
BC,
There’s a reason I work at a hedge fund and you don’t. I understand this stuff and you don’t.
I think I may act like the USG and walk into a restaurant and throw $200 on the table and walk out, thanking them for a nice evening, before getting a meal. Throwing away money seems all the rage.
skep (250)-
“…everyone across the ideological spectrum understands the need for this bailout except for the very hard core radicals on the left and the right, who would actually rather welcome the total destruction of our society. If you count yourself in that camp, we will not have a reasonable debate.”
Then, we are about to have a very unreasonable debate. Our whole culture has turned to pure crap, and the only way to fix things is to let it all burn down and start over.
I dont agree with allowing thijngs to burn, nevertheless it is time for folks in DC to stop sugarcoating things and level withthe American public. Lets do an emergency cut of the federal budget. Stop automatic COLAs, and at least get equity when we give companies cash.
MJ [397],
I agree, it’s much higher.
Let’s take a breather…..’kay?
http://www.youtube.com/watch?v=CAtZlywzn1Q&feature=related
things, that is, thijngs is, I believe, the Latvian for things.
Shore: SVEIKS!
Chifi,
At least it was not as bad as Richard Simmons.
Sveiks! I just saw two different cars inthe last 24 hours with such bumper stickers.
“There’s a reason I work at a hedge fund and you don’t. I understand this stuff and you don’t.”
Frank,
Just classic.
By the way, you don’t have a clue where I sit.
BC,
Under the Brooklyn bridge?
Gentlemen,
Can we focus our ire on the putzes in DC who seem determined to royally scre-w the nation? We can turn on each other like a pack of hungry dogs some other time.
BC and Clotpoll started it. I have no beef.
Mrs. Shore and I have been discussing whether it is better, even with declining values, to grab some land (either lakefront acreage, or productive land (timber or crops)) or to keep adding to savings, either cash or equities. I think we have changed our minds a dozen times in the past week. What is that Chinese curse, may you livre in interesting times, or something like that?
Mitchell (302)-
What are the popular makes of car in Figure-8 demolition derbies these days?
FIne,
No dessert for them. Frank, you and I will get some frozen shots at a strip joint.
lol
“Can we focus our ire on the putzes in DC”
Shore,
Already have. I took action years ago.
Speaking of Chinese (moving away from Latvian for the moment), isn’t the symbol for chaos a combination of danger and opportunity? If so, I guess we are living in chaos right now.
Or at least focus your ire on Reinvestard
Gator (407)-
“Waffle House is the worlds leading server of grits, amongst many other food stuffs.”
You mean “grits”, the gooey paste of hominy…or “grits”, the terminology for Mitchell’s neighbors?
I’m pretty sure Waffle House is also the #1 server of cutter grade beef and synthetic maple syrup.
Frank (412)-
Please walk over to bi’s desk and ask him to run a blackbox on some stuff I’m about to post.
Speaking of putzes in DC. When I was a lad, I had the feeling that the adults of the world had their $hit together an dknew what they were doing. Again, at that time, I figured the elected officials were top-notch folks. When I got older, was I in for a rude awakening. When I started hanging out on the Hill, the error of my prior thinking kicked me in the shins untilo they were bloody. Nowadays, I am surprised thsat we have ket things as together as we have, given many of the people we have put in charge of running things for us.
“U.S. Stocks Slump on Speculation Financial Bailout Won’t Prevent Recession ”
- They are still “speculating” about this?
Clot– I don’t know you, but I really don’t think you want things to disintegrate as much as you say. Revolution sounds really romantic on paper, but when the mobs are marauding around your neighborhood, you might have a different view. As much as there are many distasteful and even corrupt aspects of the USA, I do not see a better alternative out there today and indeed in the history of the world. So my opinion is that we should focus on saving and improving what we have.
Frank (425)-
And you’re passive/aggressive, too.
That kind of stuff doesn’t play at most hedge funds. They prefer the shoot-from-the-hip types.
It keeps the office air much clearer.
Is bi watching The Office re-runs on his black box? Tell him to get his a** to work. We need some predictions here. It’s 4:25!
skep (436)-
I lived in LA during the riots. I watched a mob rip a Gap store about 50 yards from my front door to pieces in 20 minutes.
I had a bull terrier and a Tec-9. I put the bully on a spike in my front yard, made a lemonade and watched the show.
Don’t worry about me. I am far meaner than I come across here.
Well, duh, as Little Shore says in her teenage way.
http://www.bloomberg.com/apps/news?pid=20601087&sid=adOq9qHfRTyY&refer=home
snip
“They really haven’t changed the economic fundamentals at all,” said Jeffrey Coons, co-director of research at Manning & Napier Advisors Inc. in Fairport, New York, which manages $18 billion. “We still have a debt-laden U.S. consumer facing falling employment.”
Treasury bonds and the dollar tumbled on concern the U.S. government is spending too much to save banks after the collapse of Lehman Brothers Holdings Inc., Fannie Mae, Freddie Mac and American International Group. Oil, heating oil and copper climbed more than 3 percent as the dollar’s biggest slide in seven years against the euro heightened the risk of inflation.
snip
The policy makers really are F*cked. If they raise interewst rates, consumer spending will tank. If that happens we dive deep and hard. If we don’t raise interest rates, we still tank and the dollar slides more.
I think I will break a good bottle of wine out of the cellar tonight. Better get to it before the mobs show up.
437 Clot - Both. One of my fondest college memories was of a man with black teeth offering to buy me breakfast at 3AM in a Gainesville Waffle House. This was when one of my crazy gun nut libertarian friends and I were meeting there on the sly with a dumb frat boy who needed some ethical and electoral advice. Said dumb frat boy later grew up to become a partner at Williams and Connolly.
Classic example of failing forward.
Gator,
He did nearly as well as bush.
Gator (443)-
The American way. F*ck up and move up.
Stolen from CR comments. This is too funny to pass -
“We are utterly, totally effed.
It’s like the Mets bullpen is in charge of the entire world.”
Pete Dawkins, who ended up at Lehman I believe, was featured in an article once about failing upwards.
#406
“How much extra action do you think Hudson City or Valley National can take, once a couple of the big boys go el foldo?”
I do not think it would be a smooth transition. As an example, look at who takes over failed depositary institutions when the FDIC brokers a purchase and assumption transaction: it is always an institution with a bigger balance sheet. These smaller banks cannot assume the roles of the big money center banks– they are simply not equipped. This is not to say that these big banks should have a license to continue to operate forever no matter what. It just means that we need to have a process to unwind these institutions over time while other institutions gear up to take their place (whatever their form). The FDIC holds onto banks when they fail and a P&A transaction is not appropriate. A similar process is being proposed here.
Well, I hear sme shallots, olive oil, white wine, and assorted other goodies calling my name. Remember to bring to your MOC’s district office a stake with a note that it should be used to kill the Paulson Putsch.
Shore: One too many Latvian friends.
BTW: One of the favorite places I ever visited was Talinn, Estonia circa 1986. I’m sure Prague around the same time was even more grand.
Congress, Bush team agree on some bailout terms
But it would end the program at the end of next year, instead of creating the two-year initiative that the Bush administration has sought.
#442
“I think I will break a good bottle of wine out of the cellar tonight. Better get to it before the mobs show up.”
Why stop there? Might as well throw an all out bash like below:
“The Masque of the Red Death,” by Edgar Allen Poe
http://www.online-literature.com/poe/36/
Roubini Update
Who Should Pay for the Bailout?
Luigi Zingales’ reaction to the financial market bailout plan, “Why Paulson is Wrong,” has been getting a lot of attention and a Vox EU version of the argument appears below (my initial reactions are here). The main point is that taxpayers should not pay for the bailout.Several points on this. First, if the government does do a bailout, the size of the bailout won’t necessarily be $700 billion, and it is unlikely that it will be. The government is using the money to purchase assets. Some of those assets will appreciate, some will depreciate, and we don’t know for sure what the net result will be. We could make money on the deal, we could lose money, we just don’t know. But one thing is fairly certain, it’s unlikely that the value of every security the government purchases will fall to zero, and that would be required for the government to lose all the money it spends (invests). See knzn on this point.However let me be clear, even if the expected value of this deal is zero, that is, even if we expect losses and gains to cancel over time, taxpayers still need to be compensated for the risk they are taking. There is a risk that this bailout could lose hundreds of billions of dollars, and, just like in any financial transaction, the parties assuming that risk need to be compensated for it.
Sen. Hillary Clinton has offered a guarded endorsement of the Treasury Department’s plan to purchase as much as $700 billion in bad mortgage-related debt from banks and other financial institutions.
h++p://www.swamppolitics.com/news/politics/blog/2008/09/hillary_clinton_bailout_necess.html
Chifi,
At a future GTG I will share my story about Latvia.
Let me tell you something, put a sock it in. A long position is really a position where one expresses great faith in the future of our great American companies. Short positions are simply reflective of a greedy despicable nature that is a bet against America. History is littered with the corpses of those who’ve bet against America.
You, Gator and little gator are the modern day version of Bonnie & Clyde and little Clyde Jr.; a group of individuals who at first glance appear to be a young family, but who are actually real estate terrorists of the worst kind. There’s absolutely no doubt in my mind that little gator knows how to short stocks already and post negative stuff on a blog. Hell, he probably even wants to vote for Omama. As adults, you and Gator ought to be ashamed of yourselves by not exposing that child to true American values.
Stu Says:
September 22nd, 2008 at 3:11 pm
Long Buying Should be Banned!
Abusive long buyers have been artificially inflating the prices of stocks for decades. Stocks that should be trading at book value are priced to the moon based on “expectations”. What BS.
Long buyers are responsible for this whole disaster. The government needs to ban long buying until markets discover the fair prices of equities. Also we need the downtick rule to stop unfair abusive long buying on upticks.
Contrast the Bloomberg headline -
“U.S. Stocks Slump on Speculation Financial Bailout Won’t Prevent Recession ”
vs
NYT
“Stocks Fall on Objections to Rescue Plan”
- I guess NYT knows where its advertising dollars come from.
#427 Clotpoll
Sorry no derby for me. I cant watch anything that involves cars and wants to be called a sport. Funny part is BMW drivers seem to think they are race car drivers.
Domine Dirige Nos
skep (448)-
You miss my point. I know the smaller banks cannot take the place of the money center banks.
That is precisely my point.
First, a Hudson City wouldn’t want to grow (or, grow at a controlled, pre-determined rate). So, second, the fact that they wouldn’t grow would find them showing the door to 80% of the deal pitches and credit apps that come their way. All that stuff then goes to the graveyard of harebrained ideas…which is where probably 80% of the stuff that needs financing in this country right now should end up.
Contracting credit means just that. Now, it simply has to be implemented.
I am sorry that I keep suggesting painful solutions. They are the only ones that will work.
When we are living like we were in the ’60s, that’s when you’ll know we’ve wrung the excess out of the system.
I particularly liked watching Disney’s Wonderful World of Color and Mission: Impossible on Sunday nights.
SG Says:
September 22nd, 2008 at 4:50 pm
Roubini Update
Who Should Pay for the Bailout?
Luigi Zingales’ reaction to the financial market bailout plan
Shail: You know who Zingales is?
http://www.chicagogsb.edu/faculty/bio.aspx?&min_year=20084&max_year=20093&person_id=312062
skep-
And, I say the above as someone who will probably be strapped with an office building for the rest of his life. I don’t like to see things burn just for the fun of it.
I will accept the value of this place going into the toilet, if we can just restore some sanity to the world.
#432 LOL
So Clotpoll how are you dealing with those Charlotte rednecks bailing New York banking out?
You know the number one bank in America is in Charlotte. Id say that pretty good for a bunch of goobers right?
You act like pain is the only route one can go. Why all this fixation on pain? Look, most people don’t like pain and I want to goverment to make sure I don’t feel any pain. I want to sleep like a baby at night and not worry about a damned thing. Moreover, I don’t wish to relive the 60’s, 70’s or 80’s.
Clod# 460
I am sorry that I keep suggesting painful solutions. They are the only ones that will work.
When we are living like we were in the ’60s, that’s when you’ll know we’ve wrung the excess out of the system.
What’s Happening and What the Government Should (and Shouldn’t) Do About It Some faculty perspectives from the Chicago GSB “lunchroom”
“…the end of capitalism as we know it…”
http://research.chicagogsb.edu/IGM/video/credit-crisis.aspx
Mitchell (463)-
Obviously, nobody has pointed out to you that Ken Lewis may be the biggest goober of all. I’d also put Steel in that category, except I know that guy has got King Hank setting him up to make out like a bandit when things go to black.
Paying $29 for the $2 cesspool known as MER is not what I’d call a sharp move.
The guy on the left is Ragu Rajan….
Tard (464)-
“You act like pain is the only route one can go.”
How are those other routes working out, Einstein?
Speaking of pain, how does one assess how good his dentist is if you have a damn cavity? Do you want the Dentist who doesn’t use novacain and drills the hell out of you or do you prefer the Dentist who is gentle and properly deadens the damn tooth before he drills?
To hell with pain. I shouldn’t have to feel pain.
Stu,
I don’t know if you have ever seen a picture of her but, Bonnie Parker was pretty hot. If Gator is at all like her, you could do worse.
Clod,
You’re like the Dentist who prefers to drill without anesthesia. You want to the patient to suffer while the cavity if dealt with. Rather than talk about how you’re going to address the cavity while making me comfortable, you want to tell me how much pain I’m going to be in.
Don’t be surprised when you don’t get patients in your damn chair.
“Domine Dirige Nos”
That, it seems, is what has passed for sound economic policy these past years.
I bet there is a whole sub group of people who would pay their dentist to hurt them.
I love the media:
Amid Market Turmoil, Some Journalists Try to Tone Down Emotion
http://www.nytimes.com/2008/09/22/business/media/22press.html?_r=1&scp=1&sq=richard%20perez&st=cse&oref=slogin
Shore (473)-
I belong to the growing category of people who’d pay somebody to hurt Tard.
The key word is “subgroup”. In the main, most people will not deal with someone who proposes to make them feel pain to remove a cavity. Similarly, Paulson and Bernanke are charged with making damn sure that they give us some anesthesia. Believe me, if they start off with talking about pain, they ain’t going to get far!
Shore Guy Says:
September 22nd, 2008 at 5:18 pm
I bet there is a whole sub group of people who would pay their dentist to hurt them.
Stu,
Here you go and in kinda Fla Gator colors too: http://www.kossecafe.com/sitebuilder/images/bonnie_parker-373×526.png
#461
Clot– gotcha. I did misunderstand your point. But I also think that there will be credit contraction regardless of the bailout. I just think it will happen more slowly because of the bailout. I think this is a positive because it will reduce the destabilization associated with the transition to drastically tighter credit. I do not see any way that we will return to the practices of the past few years anytime soon. The regulatory environment will be completely different within months and the appetite for absurd risk is gone. Most people’s standard of living will decline, but over time. It is too much to ask that this should happen overnight— I think you would see riots like we have never seen in this country if it happened the other way.
Re agreed, to a point. I do not want my doctor to cut off my foot; however, if the situation is he cuts off my foot, with my biting a bullet, or wait a week to cut off my whole leg whilst I am under anesthesia, hand me the bullet.
#466 Its a risky move but one I certainly feel BOA will profit from in the long run.
Where is the bank of Clotpoll?
“appetite for absurd risk is gone”
IF the people who engaged in risky behavior are allowed to escape without being put through lots of pain, they will be back to the risky behavior faster than any of us can imagine. Why? There is greater reward with greatert risk. If they lack the scars and amputations, so to speak, to remind them of the errors of their ways, they will not change their behavior.
There is a reason why certain folks shoot others in a kneecap rather than the head. Hit in the head, one is dead. Hit in the kneecap, one remembers forever what led to ones current state.
473 Shore
There are and they do.
just got back from DC from assignment..
from what I gather, the politicans & Treasury are just taking the big banks advice, and nothing else.
not good, not good at all.
sas
Last weeks events prompted me to call some places to find a decent price on silver Saturday. I found a coin shop not too far away and rushed to the ATM and then to the shop just before they closed. Bought some silver maple leafs that are now worth $.75 over what I payed.
I thought the price might drop some after last weeks run-up (still might), but silver didn’t have quite the run as gold so I figured it was a better bet. Plus, I just wanted to have something tangible in case of emergency.
Following the great stock market crash of 1929, the US Govt. created the Pecora Commission in 1932 to study what had caused the great crash, to learn about and then adjust financial policy to prevent a similar stock market crash in the future.
One of the main factors the Pecora Commission cited as a possible cause for the 1929 crash was the wide range of abusive practices on the part of banks and bank affiliates… these abusive practices included a variety of conflicts of interest such as the underwriting of unsound securities in order to pay off bad bank loans as well as “pool operations” to support the price of bank stocks… following the the Pecora Commission, the Glass-Steagall Act of 1933 was established to protect the public against the abuses made by the banking industry, unfortuntely; 70 years later, Wall Street interests were able to repeal Glass-Steagall Act in 1999.
With the Glass-Steagall Act repealed 1999, Wall Street was able to start its slow-motion repeat of the banking circumstances preceeding the 1929 crash, for example; the current US Secretary of Treasury is none other than an ex-CEO of the Wall Street giant investment bank; Goldman Sachs… Goldman Sachs has been heavily involved in the securitization business on Wall Street over the past decade… securitization is a buzzword for the packaging of debt which is then sold to investors, products like; sub-prime mortgages, CDO’s, ABCP’s, etc, etc, which have now been found to be riddled with fraud… and which are now at the base of Wall Streets problems.
To me, it looks like Wall Street has essentially already committed the same malfeasance that ultimately lead to the great stock market crash of 1929… so, in my opinion, any major bailout that Hank Paulson is able to swindle out of the US taxpayer will only delay the painful re-adjustments coming to US stock markets.
I hate pain, but since I don’t have money to pay for novacain, I’ll get my cavity fixed without it. It seems like others rather use their pocket money to buy 2 days worth of novacain. 2 days later, I have cleaned up teeth, but your novacain is gone.
So after 700B for the novacain, do we still have money left for the dentist to treat the actual cavity? Sure if we are flush in cash we can pay the novacain plus the drill. But we may be choosing the wrong opportunity cost here.
Regarding O and race…
I’m not surprised that O may lose votes because of his skin color. The thing I don’t understand is African American voters that are supporting McC and I wonder if they’ll be like the women mentioned above that supported O but ultimately pulled the lever for HC.
No disrespect to previous African American candidates but I think O is probably the most qualified/credentialed except for maybe Shirley Chisholm but she ran early in her congressional career. And he’s not some Rev. Civil Rights Activist that most people see running with an agenda.
He graduated from Columbia and then Harvard Law. He taught constitutional law for 12 years Univ of Chicago Law School. He served in the illinois legislature where, contrary to what you hear in the media, he accomplished some very important and difficult things. As a Senator he’s a member of a few important committees and has sponsored quite a bit of legislation. Already included a link but you can check govtrack.us. The Coburn-Ob@m@ Bill created USAspending.gov. Coburn is a republican as well as other cosponsors.
He has a lot of support too. If he gets elected it’s not like we’re going to have an unqualified idiot in office regardless of how the opposition tries to paint him.
Even the republican nominee and party is calling for change from the current republican administration.
I think it’s an important step to have an African-American President and at some point a woman President. If you’re African American how do you not vote for him, if at the very least to counteract the votes he’ll lose to racism and help give a more unbaised playing field.
So many of the “important” issues that the parties have been talking about for years we are so divided on that we’re likely not to make any difference.
There are so many problems the next president will have, barring some extreme case, the next pres will serve only one term, whoever he is. I hope I’m wrong on that and things can drastically improve. We’ve mainly had rep congress and rep president and not even the republicans will say we did good these past few years. Lets try a dem pres now that we have a dem congress and see what happens if we push in the other direction.
Ever since I was a kid, I never understood people that weren’t running or in office or otherwise working for the government that claimed any sort of political affiliation. Even now when I hear someone say “I’m a Democrat” or “I’m a Republican” when I ask them what they think of the candidates it bothers me. Feels like they are just making things easy for them by making assumptions based on what party the candidate is in. I want to say, no, you’re not D or R you’re a recent collage grad making minimum wage outside your field of study. It would really do you good to find out what the candidates are all about.
In 2004 wasn’t the African-American vote like over 80% for the Democratic ticket and isn’t that pretty much how it’s been lately? So that 20% or so isn’t voting for Obama, it’s voting to cancel some of the votes against him due to race.
I think the parties have too much power, even over their own members who should be worried more about their constituents than their party. The less de facto votes either party gets, the better. And yes I do realize this may seem in opposition to what I said above.
what if, without the novacain, you would go into shock?
Shock can be addressed and overcome.
Skep,
We live in such a risk-averse culture that we seem to shirk from doing anything that results in pain, regardless of how necessary it may be to act.
I never had a cavity nor a filling. I do have two fake teeth from playing ice hockey though.
ReTard: My son at age 3 is twice as smart as you’ll ever be. He actually uses reason when making decisions. You might learn something from him.
482 Shore - Egads! Garnet is a Seminole, not a Gator color.
Gator,
But the car is close, no?
Skeptic
If you really want to bail someone out why not bail out the american public. With a population of approx 300 million and about 85 million households, we could give every household approx 8,000 $ each.
If we are going to bailout the credit card companies and auto loan corps, then why not just pay-off the loans for the public?
the moral hazard of just paying off a bunch of citizens bills is just as great as if we hand a private corporation a check and bail them out.
So if we are really going to do this, then give the money to the people. 8K can buy groceries for about 2 years. the people will survive, screw the companies that got us here.
SAS
does the world bank have some unseen hand in all of this?
grim, 497 in mod.
skep-tic,
What you’re saying is that the bailout is going to soften the blow and instead of having the market crash it’s going to glide down gently but it is going to come down.
Tha problem is, that’s not what Paulson has been saying. What he’s saying is that this is going to keep the markets afloat and that the money spent to buy these bad mortgages will not be completely lost and that we will sell them at a later date and recoup most of the money when the housing market improves. What he doesn’t say is that to get what was paid it might take 10 or 20 years and that there’s a better chance of the USA being around at that time than the lenders that we’re buying the mortgages from.
I’m not saying we shouldn’t do anything but I think we should be honest about what this is. We want to prevent a panic that will cause more problems. But while we want to improve confidence lets not make the mistake of instilling false optimism. Things grew too big, too fast and they need to come down for the market to function effectively.
I was looking for a video of Ken Lewis’ speech but I can’t seem to find it. I don’t know much about him so I might be eating my words in the future but there were some things he said that I liked. He said he made mistakes like when he predicted that the market would continue to grow and that their models were completely innacurate. He said things grew too fast. I can’t remember who it was he quoted but he said something to the effect if you’re in this industry and seeing more than 10% growth per year you have to stop and see what’s wrong. He also said americans need to consume less and save more. It’s not this, give us money or we’re doomed, it’s not our fault the housing market tanked.
This is a lot of money we’re going to have to borrow to make this bail out happen and hundreds of millions have already been spent. So far all the representatives have been saying is that we have to do this or it’s going to be worse without giving any details. Reminds me of the lead up to the war. It’s all very vague and we can’t confirm anything and we’re giving a lot of power and money to one person.
I don’t think the war was a good idea and that it was poorly planned and executed in a lot of respects. But I also don’t think we can just yank out our troops. We’re kind of stuck there and we have to make it work. We would have been better off if we weren’t in this position. So I don’t think that all of a suddent Paulson and Bernake should come to Congress with these predictions of doom and major decisions should be made without really thinking things through and being honest about what’s going on so we’re not in a similar situation.
“8K can buy groceries for about 2 years.”
I will take the money, and put it to better use than the banks will, nevertheless $8k will only cover about 7 month’s food for the four of us.
“does the world bank have some unseen hand in all of this?”
when I was in DC in talking to my connections, the word is keep the DOW above 10K, and if it hits 9k… other countrys may step up to so called “help”. basically, to make sure their assets are safe, or to buy more US assets. i.e the state if NJ.
so like I’ve sasid before, be on the lookout for privitization.
in any case… what do I know? wink, wink:)
SAS
sas,
privatization? Doesn’t this bailout kill the main arguments that the private sector runs better, more efficiently and more responsibly with money than the government? Providing better performance and security?
SAS
I already saw a few debates about having the world bank help out with mess and they actually said that one problem would be that they would demand privatization of public resources for that level of backing. It seems someone what odd since the world bank is generally the instrument of the US and European powers
Tom,
not to speak for SAS, but its not about efficiency. It about extracting money for the nation accepting the loan. privatizing the public services allows them to be used as collateral as well as making them more susceptible to sweetheart deals. sort of like iraqi oil contracts.
#493
“If you really want to bail someone out why not bail out the american public. With a population of approx 300 million and about 85 million households, we could give every household approx 8,000 $ each.”
problems with this approach is that it does not target where the stress is in the system. not every individual is in need of a bail out and it is difficult to determine who is and isn’t. simply throwing money at the entire population is ineffecient. I do think a sensible add on on the consumer end is the bankruptcy reform which would allow write down of mortgage principal in certain cases.
kettle1,
I didn’t like the economic stimulous package because ultimately the majority of the money went to pay down debt.
If we’re going to do a bail out lets not do it indirectly again. We save on postage, paperwork and other complications and the money gets to its intended target faster.
How bout a different idea if you want to give the money to individuals. $8,000 per household deposited directly into an fdic insured savings account but it can’t be withdrawn for 2 years. Benefits the taxpayers, provides instant liquidity to the banks and gives them 2 years to work with it to get in a better financial position. Require banks that need the help to cut salaries and bonuses to further improve their financial positions. Increase regulations. Possibly require FDIC insured banks that participate in activities that were banned by glass-stegall to maintain larger reserves but have them build them gradually to not cause any problems.
After two years that 800bln plus interest starts going into the economy.
kettle1,
I understand what the reference was in regards to privatization and the world bank.
My point is, didn’t we just see a great example of how privatization isn’t always the answer and that we might not fall for those claims anymore.
First thing I thought of with the bailout is that all arguments that SS is better off handled by wall st will now be laughed at. Except by the shills.
Lessons to be learned:
* The greediest ppl are in the highest positions.
* ppl in the highest positions have too much power to change the law in their own favor.
* They will take advantage of any law or loophole that allows them to increase their wealth and power at the expensive of everyone else.
#495
“What you’re saying is that the bailout is going to soften the blow and instead of having the market crash it’s going to glide down gently but it is going to come down.
Tha problem is, that’s not what Paulson has been saying. What he’s saying is that this is going to keep the markets afloat and that the money spent to buy these bad mortgages will not be completely lost and that we will sell them at a later date and recoup most of the money when the housing market improves.”
Tom– I think there will be substantial losses as houses continue to decline in value, but I do not think most of these assets will go to zero or anywhere close, so I do think we will recover some of the money that we are putting up. But really I look at this as an infrastructure investment by the federal gov’t: in a major way, our financial markets are a public good. everyone benefits from preventing an implosion of this. I do not know whether Paulson is lying or whether he really thinks we might get everything back. I suspect the former, but I think it is excuseable because I think a full on explanation of the issue could instigate the very thing it is designed to prevent (total panic)
For those who have not contacted their senators/congressmen yet -
Please take some time to sign your name to this petition to stop the
bail-outs. This will send faxes to your senators, Bush, Paulson,
McCane and O
http://www.financialpetition.org/petition-nobail.shtml
#503
“First thing I thought of with the bailout is that all arguments that SS is better off handled by wall st will now be laughed at. Except by the shills.”
I guess I am a shill, but I still think that if you look at your 401k over a 30 yr period and then look at a similar dollar amount put into Soc Sec, you would find that Soc Sec is not superior.
506 - Skep
What if your 401K fund had WAMU, AIG, LEH, FNM, FRE?
These were all blue chips, no?
It looks like Hank Paulson no likee the idea of taxpayers having equity stake in the bailed out companies.
Now, why would that be?
“It about extracting money for the nation accepting the loan. privatizing the public services allows them to be used as collateral”.
hear..hear.. agreed.
Review Argentina Crisis.
because its just around the corner to the US.
As soon as you start to hear collapse of pension funds and a falling market, there will be sell offs of public works, then it for sure…Game Over.
SAS
“I still think that if you look at your 401k over a 30 yr period and then look at a similar dollar amount put into Soc Sec, you would find that Soc Sec is not superior”
Skep,
You are correct but, social security is NOT and should not be looked at as a pension. It is a safety net. Folks have an obligation to put together a pension, and that should be invested in the market, RE, whatever will get the best returns. One’s safety net shouild not be so invested.
skep-tic,
And where would that 401k be now or in 10 years if we didn’t have all these bail outs?
I think people shouldn’t just rely on SS but I don’t think it should go away. If it does, I want every penny I put towards it back plus interest.
“we might not fall for those claims anymore”
thats what they said after Vietnam too.
SAS
“thats what they said after Vietnam too.”
sas,
I mean in the next few years. Once the memories of this crisis fades, it will just be some backdrop in movies and we’ll forget what it was all really about or that it was even a real event.
#460 clot: Don’t forget Mannix on Saturday nights.
#466 clot:when things go to black.
Well now that could be a long,long time.
Reinvestor’s dentist analogy is interesting. But I would say it is better to get the tooth pulled out now without novacaine, compared to waiting for an abscess to form necessitating major surgery with full anesthesia. Because although you won’t feel any pain, you might also never wake up.
#478 skeptic:But I also think that there will be credit contraction regardless of the bailout.
There has already been dramatic credit contraction, without the bailout.
People who held a diversified portfolio in 1929 would still have been better off 30 yrs later than under Soc Sec, I am pretty sure. I do understand the need for a safety net, but I think the scheme adopted by several eastern european countries is promising in that it has a defined benefit portion and a defined contribution portion. that way, you get some of the growth of a 401k without 100% of the downside. I think many people (esp young people) would be happy to have this as an option in the U.S.
“I mean in the next few years”
I think things may get alot worse, and a desperate society will grasp at anything.
I think it could hit the point that states will sell off and privitize public work assets and their are foreign banks who would take it in a heart beat.
You would argue against, but you are thinker, but the general public wets the bed everynight and is still crying that yankee standium will be torn down.
That is why propaganda is to a democracy as violence is to a dictator.
SAS
” I think it could hit the point that states will sell off and privitize public work assets ”
Think? Indiana and some other states have already sold off highways and bridges. Selling airports has already been discussed. Moving to water and other systems can’t be far behind, even in somewhat decent times.
#513 Tom: I think a few years may be too optimisct. Americans are not going to forget this giant enema for a long,long time.
#518 skeptic: Social Security should be way down on the discussion list at this point.
“skeptic: Social Security should be way down on the discussion list at this point.”
agree that it is pretty OT right now in the end times