From the Wall Street Journal:
Senate Vote Gives Bailout Plan New Life
The Senate handily passed a controversial financial rescue package Wednesday, giving the bill its first legislative victory but adding provisions that could complicate efforts to push the $700 billion plan through the House of Representatives.
The compromise bill represented a marriage of the rescue proposal with a host of measures designed to win the support of reluctant lawmakers. Additions include an increase in bank deposit insurance limits, a suggested change to accounting rules, and a $150.5 billion package of unrelated personal and corporate tax cuts.
The additions boosted support in the Senate, which voted 74 to 25 in favor, the latest twist in the proposal’s roller-coaster ride this week. Opposition came from conservatives, populists and senators facing tight races where the rescue bill is drawing criticism.
Senate Majority Leader Harry Reid of Nevada said he expected the House would pass the bill, a sentiment echoed by other senators. House leaders expressed cautious optimism they could secure passage, but couldn’t be definitive.
…
The 10-year, $150.5 billion package of tax proposals includes a measure to ease the bite of the alternative minimum tax, as well as research-and-development tax credits coveted by high-tech companies and drug makers. Its addition is designed to secure the support of Republicans, who were overwhelmingly opposed in the House. But it could irk conservative House Democrats because the measure will add to the deficit.
…
The bill also reaffirms the Securities and Exchange Commission’s authority to suspend so-called mark-to-market accounting, an issue that gained surprising traction among lawmakers looking for less costly alternatives to the Bush plan. The practice, adopted in the aftermath of the savings-and-loan collapse in the 1980s, pegs the value of assets to their current market price, rather than the price paid for them.
…
The bill, which started out less than three pages long, now comprises more than 400 pages.
…
The move to raise deposit insurance offered by the Federal Deposit Insurance Corp. to $250,000 from $100,000 adds billions of dollars of new liabilities to the federal government. As part of the bill, the FDIC earned expanded authority to borrow taxpayer dollars to back the higher coverage. The agency’s deposit insurance fund is already at historically low levels. It now has a $30 billion line of credit with Treasury.Through 2009, the bill would permit the FDIC to request unlimited amounts to cover losses related to the higher limits.
From the Daily Record:
Morris feels pinch of financial crisis
Business owners and college officials said Wednesday that the impact of the banking system meltdown that has Congress sweating over a $700 billion bailout has been felt on Main Street and every other street in every town since last year.
Private banks have cut back on funds for college loans and tightened lending criteria, and some students have not been able to secure a loan, possibly delaying entry into college.
Suppliers of construction materials for homes are seeing troubling signs, and car dealers see higher interest rates for vehicles they sell.
It’s all about credit, money moving from place to place, and the fear about what happens when the money stops moving.
“The credit market is in ever-hardening concrete. Business depends on flowing credit,” said Steve Kalafer, chairman of Flemington Car Country family of dealerships.
…
Michael Corso, director of financial aid for Centenary College in Hackettstown, said the funds for private college loans began to dry up last year. An immediate effect was a rejection of 300 loans out of 3,000 applications received, he said.
…
“Congress is not doing business or Main Street a favor by delaying the bailout,” Kalafer said. “This is affecting those least able to afford it. If credit is not available, it will become more expensive to those with less access to it as they will be paying higher interest rates and being forced to commit more in equity in higher down payments.”
He said the credit crunch is adding 2 to 4 percent to the interest paid on a car loan.
“This is affecting consumers because a car loan is a basic financial transaction. There is a slowdown on Main Street,” Kalafer said.
…
With home sales down — they have fallen in Morris County an average 21 percent for the past three quarters — homeowners and contractors are turning to smaller repair project or single-home projects, lumber and materials suppliers said.
Nick Cerbo, one of the owners of Parsippany’s Cerbo Lumber and Hardware, said that in 60 years of business, the company has positioned itself to supply small contractors and homeowners who even in a slow market have not faced severe credit issues.
There is a lot of home repair and painting going on, he said, typical of a housing market with slow sales. He also said that Morris County, which is the eighth wealthiest county in the country, has more resources to ride out bad times.
Doug Kuiken, president of Kuiken Brothers Co. Inc., a Fair Lawn-based distributor of lumber, cabinets and other building materials, dates the slowdown in the region’s housing market to May 2006. He said that while many of his customers have not slacked off, he has detected the beginning of a slowdown as future orders seem to be slowing.
Kuiken said what seems to be missing is a sense of confidence, made worse by the uncertainty of what Congress will do.
Grim, did you write/call your congressman? Just curious
From the APP:
Realtors, builders discuss bailout
Realtors and builders Wednesday met to discuss the taxpayer buyout of mortgage-suppliers Fannie Mae and Freddie Mac, with lawmakers in Washington looking to break a logjam over a broader government bailout of another private-sector mess — Wall Street.
The real estate agents and builders hosted a seminar on the recently enacted Federal Housing and Economic Recovery Act, in which the government is using tax dollars to save many people who could not afford their mortgages from being foreclosed for nonpayment.
The New Jersey Association of Realtors and the New Jersey Builders Association called the use of the public money “a much-needed boost to the housing industry by creating more home-ownership opportunities.”
Tim Touhy, executive vice president of the builders association, said his group is “hopeful” the plan works.
“This landmark legislation provides a multitude of tools to help strengthen New Jersey’s housing market,” said Jarrod Grasso, Realtors’ Association executive vice president.
On almost any other issue, these are groups that traditionally seek less government regulation, saying it drives up the cost to consumers.
college costs – the next bubble.
why is it that when they complain about houses/ college etc not being affordable, they try everything except the obvious – lower the price.
From the Star Ledger:
Rivals rip incumbent over vote on bailout
Rep. Rodney Frelinghuysen made a major mistake in voting this week against a proposed $700 billion federal economic bailout, his two opponents in the 11th Congressional District race charged yesterday.
Despite reservations about the plan, Democrat Tom Wyka and third-party candidate Chandler Tedholm said they would have voted for it and warned it must be passed as soon as possible to ensure the nation’s economy does not collapse.
…
Frelinghuysen was one of seven New Jersey congressmen to vote against the Emergency Economic Stabilization Act, which lost by a 228-205 tally. Also voting no were Democratic representatives William Pascrell (8th Dist.), Donald Payne (10th Dist.) and Steve Rothman (9th Dist.), plus Republicans Scott Garrett (5th Dist.), Chris Smith (4th Dist.) and Frank LoBiondo (2nd Dist.).
From the Star Ledger:
Garden State Briefs
New Jersey’s small- and mid-size business owners have a pessimistic outlook for their own companies and for the U.S. economy as a whole, and they are struggling with high energy prices and having a tough time getting credit, according to a recent PNC Economic Outlook survey.
The twice-yearly survey was conducted between late July and mid-August, “and the events of the last few days will only add to their pessimism,” Robert Dye, senior economist for PNC Financial Services Group, said yesterday. “The ability businesses have to take short-term loans, which they do as standard procedure to fund payroll and buy equipment, has tightened dramatically.”
Nearly one in four of the 155 New Jersey firms surveyed said they are pessimistic about their prospects for the next six months. A third say it’s more difficult to get credit than it was three months ago, and 63 percent predict higher energy prices will adversely affect their performance. More than half, 59 percent, see a negative outlook for the U.S. economy and are worried about inflation
From Newsday:
NJ senators back financial bailout
New Jersey’s two U.S. senators voted Wednesday in favor of a reworked version of the historic bailout package whose rejection by the House sent U.S. financial markets into a tailspin earlier this week.
The Senate version passed by a vote of 74 to 25.
Sens. Frank Lautenberg and Robert Menendez, both Democrats, joined with the majority of their colleagues in supporting the bill, which was reworked to include tax breaks and other sweeteners.
Bailout: booooooooo!
John: I want to hear your take on the AMT reform. You have been the most vocal about it in the past.
Alternative Three is $700B into Soup Kitchens.
“On almost any other issue, these are groups that traditionally seek less government regulation, saying it drives up the cost to consumers.”
So will the bailout, it will just be a cost paid in higher taxes or programs being cut.
What strikes me as curious in this whole bailout debate is that there has been little discussion of the overuse of credit in Americans’ lives. Why is it that it has become routine to use a credit card to buy coffee? Why do “we,’ and by that I mean other folks, rush out to buy something today, using a credit card, instead of saving for a month or two and then just buying the thing with cash on hand?
The overreliance on credit lies at the heart of this problem. Even when I came out of college, debt was seen as a bad thing, and getting a credit card was hard. Now there are folks — including, as the financial disclosure forms show, members of congress who go around with $15,000, $20,000, or more, in credit card card debt. Even if one has a “low rate”,” what is it 10%? “Yes, but it was on sale, how could I not buy it.”
@11 Shore:
Easy, reward points.
grim (1)-
“Congress is not doing business or Main Street a favor by delaying the bailout,” Kalafer said. “This is affecting those least able to afford it. If credit is not available, it will become more expensive to those with less access to it as they will be paying higher interest rates and being forced to commit more in equity in higher down payments.”
Yep. And one of the things Kalafer won’t be able to do is sell his house…which- oh, so coincidentally- is listed for sale:
http://tinyurl.com/3nfeke
Where you sit is where you stand.
Kalafer’s agent is also playing the serial re-listing game. Contrary to the headline @ Realtor.com, this property has been for sale since March 26, when it was listed for 2.495 mil.
Secondary,
I understand that but, if the bill is paid at the end of the month, I don’t view that as using credit. There are many things I buy with plastic that I purchase for the consumer protection, decreased use of cheques, and reduced need to have large amounts of cash on my person. The difference is that I pay off the bill in fill at the end of the month. The small purchases go unnoticed largely and soon add up to be larger than one’s ability to payoff with one’s salary. At this point, folks are buying things on sale, only to be saddled with finance charges, which can end up being greater than the discount.
Here is a link to the Taleb Black Swan discussion.
http://www.thetakeaway.org/archives/2008/10/02/5
“Libor Rises a Fourth Day as Banks Hoard Cash After Bill Passed”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aBxs213UjqjA&refer=home
NO BAILOUT but that’s Just me!
Take all bonuses’s back from CEOS for last 2 years and no bailout will be needed!
“What strikes me as curious in this whole bailout debate is that there has been little discussion of the overuse of credit in Americans’ lives.”
Shore[11],
Bingo.
We have just experienced a gargantuan credit bubble, the largest in history. Yet, nobody seems to focus on this, except of course, the markets. Pavlov’s dog better dig in for major adjustments. Going forward, consumption will be fueled by savings. GULP!
Also, I have not heard one of our leaders focus on the core issue, the declining value of the underlying. Yet, they put on a dog and pony show and are now armed with water pistols for a gun battle. Oh, one other item, the world’s recession has just taken center stage.
I am all for it!!! I am in AMT and don’t get to deduct a nickle for my stay at home wife and three kids, state income tax and property tax. as well as my state and a house. Without AMT relief people with income as low as 47K can get hit with AMT. AMT was for rich folks but was not inflation adjusted. If AMT was adjusted for inflation you would have to have an income of over a million to get his. A cop married to a nurse with a bunch of kids living in a state with high state and property taxes without the patch gets slaughtered with no AMT patch. That was not the original intention.
Secondary Market Says:
October 2nd, 2008 at 7:52 am
Bailout: booooooooo!
John: I want to hear your take on the AMT reform. You have been the most vocal about it in the past.
“Oct. 2 (Bloomberg) — Tishman Speyer Properties LP and BlackRock Realty’s $5.4 billion investment in Manhattan’s biggest apartment complex depended on converting more rent- regulated units to market rates. That’s proving a bigger challenge than expected”
“A lot of landlords aren’t able to raise their rents right now and I think there is a huge amount of uncertainty given what is happening in the financial markets,” said Victor Calanog, director of empirical research at New York-based Reis Inc., a real estate research firm. “There is quite a bit of sentiment right now that a lot of transactions that went through in the last year or two, or even three, were overvalued.”
http://www.bloomberg.com/apps/news?pid=20601109&sid=aoehJKPajYvY&refer=home
BC (19)-
Focusing on the actual problem is just too painful for people to face. Better that we just try to move everyone from smack (the former problem) to methadone (the bailout). Cold turkey is just too damn tough, and we’re just not very tough anymore.
Look at TED and LIBOR. There are your confirmations that the bailout is already yesterday’s news.
The spark that will detonate the next leg down will come from Spain, Ireland or England. Europe is going down hard…and taking us down with them.
Repost
Chifi,
Thank you for feeling my pain (-: I know your posistion, I respect your knowledge, I just disagree. If I am wrong I have much more to lose than you, not because I am short in the market, but because I am financially unprepared for the upcoming crisis. So I would like it to start and finish, to put it in the most simplest terms.
KL
I got the most interesting note from my bank after logging out of my account today.
Sovereign Bank is fundamentally sound by all financial and operational measures.
Sovereign Bank is well capitalized, according to all regulatory standards.
Sovereign Bank has undertaken a methodical process to reduce risk in recent months, including the liquidation of its entire portfolio of collateralized debt obligations (CDOs).
Sovereign Bank currently has unused committed liquidity of $12 billion from the Federal Home Loan Bank of Pittsburgh and the Federal Reserve.
As always, depositors with Sovereign Bank are insured for at least $100,000 by the Federal Deposit Insurance Corp. More information and a variety of useful resources are available.
Despite recent volatility on Wall Street, our retail and commercial customers will see it is “business as usual” at Sovereign as we continue to offer the same premier levels of services and products.
Thank you for your continued business and support. We appreciate it.
The above and a huge FDIC insured logo
Interesting….
John (20)-
Just so I have this straight: you’re ok with the Trojan horse of AMT relief, veiling a neutron bomb of complete economic ruin?
Why do “we,’ and by that I mean other folks, rush out to buy something today, using a credit card, instead of saving for a month or two and then just buying the thing with cash on hand?
What is this sa-ving you speak of? ;)
Honestly, we have been living on borrowed money for such a long time because it was not in the interests of retail, banking, foreign producers, et al. to do so.
BC (21)-
I told Tishman not to borrow bi’s blackbox when they ran those projections!
That is silly talk. The bonuses are gone and out the door and by the way it is not a bailout, it is an investment in america. Almost like BEOG college grants where they give a poor kid who could not go to college 50k over 4 years but the kid who would have been a HS graduate is a College Graduate who makes an extra million over the course of his 40 year work career which the govt gets 300K back. A bailout is like welfare where you are buying 100 sneakers for crack head kids in Neward. Money out the door forever.
Just me Says:
October 2nd, 2008 at 8:25 am
NO BAILOUT but that’s Just me!
Take all bonuses’s back from CEOS for last 2 years and no bailout will be needed!
I don’t trust you and you don’t trust me.
Put $700B into my account and I’ll love you but I still won’t trust you. Confidence is not restored.
Somethog very disturbing !
http://www.youtube.com/watch?v=Hi9vXKWYaZ8/
John (27)-
How is a commitment of hundreds of billions of dollars to purchase worthless securities NOT welfare?
Overpaying, and then holding a busted-out CDO to maturity does not make it profitable.
“There is quite a bit of sentiment right now that a lot of transactions that went through in the last year or two, or even three, were overvalued.”
Oh, that’s so rich. The Stuy-town/PCV deal was heralded as an act of genius by the RE shills in NYC. Any dissenting views were drowned by the chorus of “you know nothing”, “bitter renter”, etc.
NYC is going to crash hard. The IBs are gone, financial centers are moving and that was all NYC really had.
It is going to be a long hard winter.
YES, it meets my WIIFM requirement. Besides it is sweet revenge my friend. The American Home Mortgage, WAMU, Wachovia, Countrywide, Indy Mac and Lehman Folks who got canned are most likely in there first year ever not in AMT!!! Let them for once chip in. Plus us survivors who are true americans and did not buy the worthless stocks of those companies 401Ks will pop but the bankrupt companies stock are dead forever. Finally, Folks who are in AMT are the only folks who made money in 2008. Giving us folks money will let us buy useless shiny expensive things that will help the econmy more than bailing out the border hopping san diego and miami flippers. Adios Flippers, go back to your mud huts in Tiajna.
Clotpoll Says:
October 2nd, 2008 at 8:37 am
John (20)-
Just so I have this straight: you’re ok with the Trojan horse of AMT relief, veiling a neutron bomb of complete economic ruin?
# 19 BC Bob:Going forward, consumption will be fueled by savings. GULP!
But there will be many who will not be able to save to consume, as much of their disposable income will be going to service existing debt.
Look at TED and LIBOR. There are your confirmations that the bailout is already yesterday’s news.
_______________________________________________
Clot, so true. The TED is sitting at 3.53. It means 2 things to me.
1. The first 700 bilion will not go to the banks but right to China. So the banks will need to wait until January to get their bailout.
2. The banks get the money and sit on it for the coming Alt-A/Option arm sewage. They will not lend to anybody, period.
“The spark that will detonate the next leg down will come from Spain, Ireland or England. Europe is going down hard…and taking us down with them.”
Clot,
Yep.
http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vo98moYJ5zbY.asf
This Bllomberg radio interview with Roubini – 45min. – highlights what should be done with the money.
1. He says we need to sequestor the congress to come up with a viable plan that does the triage NOW before the bad apples (banks) make all of the apples rotten.
2. He points out that there have been many bank failures in history and there are experts in the field that would be able to help…but have not been called on. Congress is rushing through the process. In Europe they recapitalize the banks – not buy and hide the bad assets.
3. He still calls for matching funds where preferred stock is purchased – force matching funds. Warrants that can be sold back at a later date. Dividends need to be suspended.
4. The government could help be identifying the banks: small, medium and large that are viable and could be saved – let the others fail – Often he says do the triage immediately.
5. HLOC – A proven plan used in the 30’s to help keep owners in their homes – less foreclosures.
Means testing – first home buyers.
6. He says there is a silent run now on banks because without the triage no one knows which banks to trust – all banks in the basket with the rotten apples are at risk of being spoiled. That is also why there is no interbank lending – even overnight is scary now.
7. Let the hedge funds fail.
8. Europe has toxic garbage too but their government intervention is different than ours. We are behaving more like Russia.
9. We have gone from no regulation to total regulation. That we must be more pragmatic and less ideological. Self-regulation does not work. Banks need proper regulations in place going forward.
Simple rules.
I’m sure there is much more.
Sequester Congress – don’t let them head out on the campaign trail – interesting idea…
Could the raising of the FDIC limits signal a willingness to prop up all banks for the short term so these bigger “triage” issue can be addressed?
Clot – Underpaying for a devalued asset and holding it long term to make an above average profit has worked for Bill Gross and Warren Buffet. Plus income stream is nice and if properly managed like RTC was it is a sweet deal for all. The anger is the folks who paid 600K for a 400K cape ain’t having the govt cheese truck roll up and give them the 200K back. Stupid folks are awfully stupid. My brother in law bought a crap house off a fliper in 1992 for 250K and overpaid 50K and it was a bit shoddy, he did not know any better at the time well turns out that was the bottom. A few years later the tony baroney flipper from Brooklyn sees the house assesed at 500K and comes banging on my brothers in laws door say he cheated him and said the least he can do is split hte 250K gain with him and wanted my brother in law to write him a check for 125K of course my brother in law called the cops and threw him out but that is how stupid people are.
Clotpoll Says:
October 2nd, 2008 at 8:43 am
John (27)-
How is a commitment of hundreds of billions of dollars to purchase worthless securities NOT welfare?
Overpaying, and then holding a busted-out CDO to maturity does not make it profitable.
“But there will be many who will not be able to save to consume, as much of their disposable income will be going to service existing debt.”
3b,
Yes. GULP!
At least Japan had a positive current account balance and a positive savings rate, during their long trek thru the muck. Our muck is deeper/thicker and zero savings to fall back on. GULP!
#22 & #35 – Any likely candidates? Deutsche, Paribas?
“Sovereign Bank is fundamentally sound by all financial and operational measures.
Sovereign Bank is well capitalized, according to all regulatory standards.”
Humm.
“fundamentally sound by all financial and operational measures”
“well capitalized, according to all regulatory standards”
The careful use of these phrases would give me pause, were I a depositor in this bank, and reminds me of a woman who was quite, ummm, well known, in college who insisted she was not a sl-ut (not that I particularly cared if she was or was not, as nearly every guy I have ever known was or wished to be one). It strikes this reader as being crafted to convey one message, whilst using language designed to free it from later criticism for not communicating to its customers.
“Clot – Underpaying for a devalued asset and holding it long term to make an above average profit has worked for Bill Gross and Warren Buffet.”
John,
First you must draw the distinction between an undervalued asset and a colossal pile of waste.
“The spark that will detonate the next leg down will come from Spain, Ireland or England. Europe is going down hard…and taking us down with them.”
Gotta toss Australia in the mix too. I’ve got my money riding on Spain. Damn spaniards!
Grim – I’m in moderation at 36.
I posted the 45 minute Roubini interview from Bloomberg.
Two main points in case it doesn’t get unmoderated…
1. Immediate triage – the rotten apples (banks) are spoiling the entire basket of apples.
2. Current bailout ideas will not work. We need to follow the recapitalization model -suspension of dividends – warrants that could be bought back.
3. Sequester Congress – Force them to come up with a viable option.
4. We have gone from a system of no regulation/self-regulation that didn’t work to one of total regulation. We need to be more pragmatic and less ideological.
Ahh yes, Spain – the Florida/California of Europe. Flippers galore.
Euro crashing. Trichet now talking out of other corner of his mouth.
The race to the bottom is now entering the bell lap.
@36.
Tony Baroney has a hell of a set for asking such a thing. Unreal.
Well…I guess there are more than two main points there..LOL
http://www.youtube.com/watch?v=NrzXLYA_e6E&feature=bz302
Ahh, Sarah.
What strikes me as curious in this whole bailout debate is that there has been little discussion of the overuse of credit in Americans’ lives… The overreliance on credit lies at the heart of this problem.
I really wish our leaders had the spine to say this. Instead they blame Wall Street because that’s the easy thing to do. Don’t get me wrong, Wall Street played a major role in this crisis and is guilty as h*ll. However, shams of the magnitude and duration of this housing bubble take more than one to tango.
Wall Street made money, average Americans lived beyond their means, housewives and paper boys became high rolling flippers & brokers overnight all while our leaders were falling over themselves to take credit for the prosperity. Many people are to blame for this.
I really wish our leaders could level with people. Life is going to change going forward. We need to go back to saving again. The days of living off home equity and perpetually transferring zero percent credit cards are coming to and end. And, paying a $700 billion bill is going to mean some belt tightening.
We don’t need no stink’n bailouts!
John (36)-
“Underpaying for a devalued asset and holding it long term to make an above average profit has worked for Bill Gross and Warren Buffet.”
John, didn’t they teach you in tycoon school that there’s a difference between undervalued and worthless? I think the technical term is “value trap”.
BTW…some of these CDO/MBS/SIVs do have value. Can you name one reason why a bank would sell its good stuff to the gubmint?
One aspect of this credit crunch neglected are banks don’t have as much to lend because they have to now set aside funds for companies drawing down on the revolving lines of credit. Often banks will extend revolvers to companies to get them in the door for bond, equity or other transactions with a company. These revolvers are offered at little cost and banks do not expect companies to draw down. Now companies are drawing down in droves. Banks are hardpressed to fund the revolvers given their precarious balance sheet situation. So were do they pull back? Underwriting new loans.
Euro crashing. Trichet now talking out of other corner of his mouth.
The race to the bottom is now entering the bell lap.
Euro is a terribly flawed currecy with no central gov’t to back it and the market knows it.
Jobless claims very bad again…
Weak economy pushes jobless claims to 7-year high
http://biz.yahoo.com/ap/081002/economy.html
“The department reported that initial claims for jobless benefits increased by 1,000 to a seasonally adjusted 497,000. That’s significantly above analysts’ estimate of 475,000. The total is the highest since just after the Sept. 11 terrorist attacks seven years ago.”
rent (49)-
Hey, it’s election season.
And it’s now a perpetual campaign cycle.
If you’re a politician, there now exists no good time to ever level with anyone.
Tosh[39],
IMO, Deutsche. They are levered close to 50-1. Too big to fail, too big to save?
Europe is fcuked. My $ was always on Spain. However, there are many dogs in this race.
The problem with this country is that nobody takes responsibility for their own actions anymore. If kids do poorly in school, the blame seems to get placed completely on the education system. I never see/hear of parents being blamed for not teaching/disciplining their children to do better in school.
As for this $700b bailout plan….people are opposed to it b/c it is using taxpayer money. Let’s think about this. What exactly is the gov’t looking to buy from the banks? Worthless assets of bad mortgages? Who took out those mortgages? Taxpayers. How can these worthless assets find their value again? By having those borrowers (taxpayers) take some responsibility and pay their mortgage that they signed a contract to pay back. If borrowers actually took responsibility of their borrowing and paid back their obligations, we wouldn’t be in this mess.
Cindy (43)-
“Sequester Congress”
May I suggest Devil’s Island?
“average Americans lived beyond their means, housewives and paper boys became high rolling flippers & brokers overnight ”
Renting,
Mrs. Shore and I saw people we know, and others in the community, who were living in homes that put ours to shame, driving cars I only dreamt about, buying this that and the other thing and we looked at each other wondering — how on earth can they afford this stuff. The same held true for folks in less affluent communities, where folks were buying homes not nearly as nice as ours, for outsized amounts, and driving great cars and trucks, and we looked at each other wondering — how on earth can they afford this stuff.
Eventually, we got our answer — they couldn’t afford it. Whilst we were putting aside college money, stuffing cash into retirement accounts, and remaining debt free, they were living it up on debt. Shame on them, and on any politician who allows them to get away with it. Did anyone hear about Oprah Winfree’s mother filing suit against some clothing store; she was given something like $150,000 in credit for clothse, and cannot pay. She is suing them saying, that bad ol’ store took advantage of me, they never should have given me the credit to buy these clothes. Gimme a fu(king break.
“If borrowers actually took responsibility of their borrowing and paid back their obligations, we wouldn’t be in this mess.”
What freaking country are you from? Debt is good, haven’t you heard. Haven’t you heard the folks saying that people who pay off their mortgage are idiots, since they are “tying up money that could otherwise be used to invest.”
Debt is our master, um friend. Debt is our friend.
Debt is wealth.
3b, BC
“But there will be many who will not be able to save to consume, as much of their disposable income will be going to service existing debt.”
Do you think people are going to honor that debt in the middle of a depression??? perhaps a better question: Will the government back the people in repudiation of large amounts of debt or will the government back the credit card companies and attempt to force a settlement of said debts?
Stu,
Where are we jobless-wise with respect to when bu-sh took office. Also, where was the Dow the day he was sworn in? Anyone have public debt figures for the day he was sworn in and now, as well as budget debt figures (yes I know we were in balance).
Clot,
The more zeros the better, no.
oh, heating oil prices, natural gas prices, and gasoline prices would be interesting as well.
clothse? I really cannot type, sorry for every typo ever. Uggh.
vodka (62)-
“Will the government back the people in repudiation of large amounts of debt or will the government back the credit card companies and attempt to force a settlement of said debts?”
I’ll go one further: the gubmint will eventually repudiate its own debt, while simultaneously helping cc companies collect.
Perhaps folks who rack-up debt that they have no possible ability to pay should be considered criminals. This holds true for congress as well.
Actually the Senate Pork for Wooden Indian Arrow Heads makes sense. After the Great Depression, we will be hunting for our food with wooden arrows. Steel will not be available.
snip
We are beginning a painful process of deleveraging our debt-addicted economy, but that’s in many ways beneficial. Martin Wolf noted in The Financial Times that U.S. household indebtedness jumped from 50 percent of GDP in 1980 to 100 percent in 2007, while financial-sector debt increased from 21 percent of GDP to 116 percent over the same period. We have all been participants in this one, I’m afraid, and the appropriate, if painful, cure is to save a bit more and consume a bit less.
The potentially crippling problem is in the short-term credit markets, where financial institutions are hoarding cash in an effort to ride out the crisis. They don’t trust that borrowers will be able to repay loans.
This hoarding is creating a larger credit crisis that could begin to squeeze every business that needs money — from department stores financing inventory to credit card companies juggling millions of purchases every day. The spike in overnight lending rates is downright scary, with the measure known as LIBOR more than doubling to 6.87 percent Tuesday from 2.57 percent Monday.
snip
http://www.realclearpolitics.com/articles/2008/10/accounting_and_fdic_reform_bet.html
Perhaps folks who rack-up debt that they have no possible ability to pay should be considered criminals. This holds true for congress as well.
Hear! Hear! Holding pitchfork & torch
Clot,
A further problem….
Yes the US government will eventually repudiate its own debt. but in doing so will be powerless do demand repayment of private debt, if for no other reason then enough people will see the government repudiate its debt and do the same to their own. There is a critical mass where the gocernment cannot act as it would be acting against the majoirty and would endager its own legitimacy.
Then again i could be wrong. the current bailout debate and the incredibly insulting media portrayal of the stupid citizens holding back their elected representatives…. Apparently the government can act 100% against the people without threatening its legitimacy.
Who ever came up with the method for turning people into sheep is/was an F’ing genius. I hope they paid him well.
(58) Clot
….Devil’s Island?…
I’m sure Washington, DC feels like Devil’s Island about now to these guys.
Roubini seems to be saying the money could be used wisely but Congress is in too big of a hurry to figure it out and listen to the experts.
But more importantly, they went from a laissez-faire capitalism to the total extreme.
Less ideology – more pragmatism..
I’m a sucker for the “pragmatic” approach.
A protracted rise in LIBOR rates is coming just at a time when it is necessary for homeowners with Option ARMS and companies with floating rate debt will need their cash the most. Overstretched borrowers (corporate & personal) are going to be the fallout from this rise in rates. Beware the impending bankruptcies. Once these clear the system than maybe it is a time to buy.
I just talked myself into sticking to my renting position. Maybe I’ll go search for a larger rental somewhere to give the kids some room to run around. At least someone gets to be happy…
Hard Place,
Be sure to buy them some subsidized wooden arrows.
Rhyming, Shore
It was nice of Sovereign Bank to inform all their customers that they are about to fail and are under capitalized while being highly leveraged. Will they be on tomorrows Bank Failure Friday (BFF) list or next weeks?
Cindy,
I have seen suggestions that congress is pushing this bill through so fast because they are being strong armed by foreign bond investors. It has been suggested that they were told to push the bailout through or they would stop/reduce buying government bonds.
That is a tantamount threat to collapse the US dollar. And there are a group of countries that could do this. China could do it by itself.
Note that i am not pointing fingers at anyone and this is all conjecture.
Ket,
As Richard Nixon once said, “The American people have the right to know whether their president is a crook. Well, I am not.” (Working from memory, so I may be slightly off, but the essentials are there.”
The moment a woman insists she is a lady, she is surely not. When a bank insists they are not about to fail….
Kettle,
I am trying to decide if I should take my money out or go back to using checks.I think it would be better now to send them a check and a note saying don’t worry it’s FDIC insured, you’ll get the money.
KL
“It has been suggested that they were told to push the bailout through or they would stop/reduce buying government bonds.”
Ket,
I had a discussion recently about this very point with a senior economic aide to bu-sh. The point you made about foreigners buying bonds is right on. We cannot operate the USG without borrowing and we lack the domestic savings to do so from ourselves. Without foreing assistance, we cannot operate the government.
The USG has taken on the role of madam and the taxpayers must take on the role as, well, it is obvious.
Here’s what my guy, Rep. Devin Nunes, R-21st District CA, had to
say in the paper today:
“It’s garbage,” said Rep. Devin Nunes, “They’re trying to put more decorations on the Christmas tree, but the problem is the Christmas tree.”
I am FOR government money going to stabalize the banking system. I simply want it to be used wisely.
I do not feel the time and effort have yet gone into solving the problem.
If by some miracle of miracles the hope is to buy time so the triage can be done – the actual problem of insolvency addressed -then even this bailout is okay with me.
I would rather see a well thought out document. As John mentioned yesterday a virus has entered the system and infected banking worldwide.
When you have a virus on your computer – YOU TAKE IT TO THE TECH GUY – and he fixes it for you. You do not throw away the computer.
#80 Shore: He who owns yoru debt, owns you.
It is time Americans started to understand that, and to get away from the silly notion that we are still somehow excptional.
3b
But our founders were exceptional. And our grandparents saved the world, And, and, and.
Don’t we get to continue being great just by the simple fact that we have been great in the past? Are you asserting that great nations need to act in great ways?
Get a grip, man.
Okay, markets are dropping like stones this morning as everyone who thought they would sell into a rally (me) jumped without a rally.
I think there is fear that the new bill is simply gonna result in some more dems not backing the bill, so that the few reps it garners will be offset by blue dogs, and the bill tanks again.
At that point, Dow 8600 is a very real possiblity.
I don’t think SOV is now going the way of Washington Mutual or Wachovia as the institutional money has been flowing into the common stock driving it from 2 to over 4 a share in a matter of days. However, that was a 20+ stock a little over a year ago and they have been purging bad assets like a 73 Vega leaks oil for almost a year now. However with Banco Standar their largest shareholders along with activist shareholder relational management makes me doubt they will let their common stock investments get totally wiped out. However, they may force some type of $3-$5 a share deal where they get all the upside and the mom and pop investors who bought shares in their local savings bank get the shaft or told $4 bucks a share for Banco Standandar stock is better than nothing. Too bad the small people paid $20 a share. I guess they are still way ahead of Wachovia. Lehman and Wamu shareholders.
The whole thing hinges on the bail out and if savings banks can write off their pref fannie and freddie losses. IF and a HUGE IF we get 250K FDIC protection, 50bps, the bail out passed. SOV will be here for the long term. If that bail out does not pass it is 50/50 if they are toast or bought out. It is a shame that SOV had very little to do with any of this subprime stuff that the anti bail out folks are taking delight in putting thousands of housewifes and students who work as tellers in NY/NJ and PA out of work by Christmas.
[80] shore
Which is one reason I think that a small band of investors that fund an offshore company, which invests its idle capital in U.S. debt tax free thanks to the portfolio interest exemption, will make out nicely.
Of course, there is the small matter of repatriation and recognition of the income if said company is not properly structured (or Congress changes the law).
(77) Kettle1
Then let’s do this thing – appease whomever – and THEN let the tech guys fix the computer. If you listen to the Roubini radio interview – you will have a better understanding of where I am coming from.
School now – cards tonight –
I’ll have to catch you all tomorrow…
Enjoy!
sov up 15% in last 20 minutes.
Perhaps if this illconceived bill is killed in the House again, we can get a real bill adopted — after hearings and thoughtful testimony. If the plane is in trouble and will crash, as folks keep saying, I want to check to see if there is a working parachute in that backpack next to me, and not some kid’s algebra books, before I decide whether to bail or whether I should try to regain control, using differential power, for instance, to land.
vodka (72)-
I think this is a settled question:
“Apparently the government can act 100% against the people without threatening its legitimacy.”
I wrote my PAC checks and expressed my support for the bill. You guys have never been to DC if you think this failure will make for a better bill later. What was a simple 3 page document has morphed into hundreds of pages of pork and burocratic nonsense. A third try with just give us a bill as big as war and peace that will be a huge wast of money and won’t solve the problem.
The patent is in the emergency room shooting blood all over and you guys are ordering a cat scan and taking a coffee break.
John (85)-
How do you know that Santander might not be SOV’s biggest problem?
Clot there was like 200 people being paid by unions to stand on Broad street the other day to protest the bailout while hundreds of thousands of us who support it were quietly at work in the banks, REITS, BDs and Insurance companies. The 200 nuts with a bull horn pretended to speak for the millions. Well when it did not pass the quiet pencil pushers of the world revolted.
Clotpoll Says:
October 2nd, 2008 at 9:58 am
vodka (72)-
I think this is a settled question:
“Apparently the government can act 100% against the people without threatening its legitimacy.”
#90 clot: On the real estate front, how are things in you neck of the woods as we go into Oct?
In my area we seem to be at a complete stand still. A bank owned house (Sov Bank), just came on the market that I had been following, but listed at 440K, I do not see any value there. I had been hoping they would list it below 400K, which would have been an incentive for me to make a bid.
I guess many still have to be dragged kicking and screaming into the new reality.
John (91)-
“The patent is in the emergency room shooting blood all over and you guys are ordering a cat scan and taking a coffee break.”
Bad analogy. Here’s mine:
We asked the chef to turn cutter-grade meat into filet, medium rare. The waiter brought us a gray piece of steaming gristle. We sent it back, and now the waiter has reappeared with a giant tureen of roasted garbage.
#91 John: What makes you so convinced that this wil work?I am on the street too,and the general consensus is pass the bill, because that is what the market wants.
However none of us know if this thing will work. In fact I do not think Hank and Ben know either.
3b (94)-
Just utterly seized up. Since the new madness has begun, many contracted buyers are refusing to close title. We’ve had four breached contracts in the past 7 days.
On the closings we’ve had in the past 2 weeks, every single one has either closed dry or had big escrows held post-closing, to address serious problems not remedied by the seller.
The EU suffers from split personality disorder. It is investigating Germany for rescuing West LB with a 5bn euro bridge loan while some of its finance ministers are urging a bail out package. I’m betting the euro-pols will not be able to agree on a package (the fair share debate; who’s to blame, etc.) and it will be every central bank fending for their own.
Need a good, purging vomit?
Toll is on CNBC, working a pump-and-dump. Of course, nobody talking to him will call him on his recent massive sales of TOL.
ohn,
Until a sizable number of the members of the House can explain how the bill will improve the balance sheet of the banks, how it will free up the credit, and why it will not have assorted unintended consequences, I do not want the bill to pass. Vote for it or against it, but only if you really understand the issues involved.
Too many members (that term for them makes more and more sense the older I get) are working off of one-page summaries provided to them by other members who also do not understand the issues involved. Heck, if they had scheduled hearings last week and run them all weekend, instead of jumping in with both feet, they would have already gotten all the information they need to craft a good bill, and it might already be a PL by now.
More bad economic data:
August factory orders fell 4.0%, which follows an advance of 0.7% for the prior month. Economists, on average, expected factory orders to decline 3.0% in August.
“it will be every central bank fending for their own.”
The EU is only built for good times. Isuspect it cannot survive hard times.
TED now at 361 basis points.
John,
A Wall Street reform you can eagerly get behind: http://www.cnbc.com/id/26986570
Next, the women of njrereport, lol.
#104 – Good lord, Playboy is still being published? How quaint.
Tosh,
I read somewhere recently that Hef, yes he still seems to be alive too, recently had to lay off some of his house bunnies.
I don’t, but foreign companies are known to throw good money after bad money to save face. They put a huge amount of money into the common stock which would be a total loss plus they really want to have a presence in the US banking business. So if they let their shares go worthless they still have to go and get another US bank. They might throw in the towel. Heck we all had a used car at one point we made a ton of repairs to and then one day we get one more repair and we say that is it!!!! Even if it is a minor repair.
Clotpoll Says:
October 2nd, 2008 at 10:01 am
John (85)-
How do you know that Santander might not be SOV’s biggest problem?
Does the Fed hate the dollar?
“U.S. Federal Reserve officials are weighing further interest rate cuts, even if Congress approves a $700 billion financial industry bailout, because of a worsening economic outlook, the Wall Street Journal said on Thursday.”
snip
http://www.cnbc.com/id/26986621
I need to start billing in Au.
Well all I can say about today is it is too late to buy and too late to sell.
Duhh people are backing out of RE deals. They won’t buy a muni at 6%, GE bonds at 7% and are afraid of putting CDs in banks and you expect them to put 20% down which is a 500% leverage on an asset that every newspaper, person and TV show is blasting is going to fall in value till 2010 and beyond.
“Does the Fed hate the dollar?”
shore,
Bergabe has one giant brain cramp, deflation.
“Duhh people are backing out of RE deals.”
John,
I will be starting to bid soon. One disclaimer, bidding at marked to market not marked to maturity, nor marked to a sellers fantasy blackbox.
Why is the shiny stuff down today? Arent the Fed’s actions inflationary?
Leaving for Rome in the AM; back in the PM. Don’t let anything happen while I’m gone.
“Why is the shiny stuff down today? Arent the Fed’s actions inflationary?”
vic,
Deflation, rush to t-bills. Euro getting crushed.
Secondary Market Says:
October 2nd, 2008 at 8:06 am
@11 Shore:
Easy, reward points.
SM & Shore: yeah…I have paid for a hotel room for personal travel since maybe 1999, witha few exceptions. Some places I have stayed I would NEVER have forked over the coin either, but I got it comp-ed.
I think one of my favorites was staying at the St. Regis two blocks from the White House during the Anthrax scare. Not only did they give it away, the comped us up to the bulter floor and gave a corner room. We wanted coffee and this guy shows up with white gloves and a french press. I’m there scratching my a$$ in my boxers ;-)
have = HAVE NOT
cf @ 117,
The John version would have involved two underage call girls, an early 80s Datsun, and a dead bookie under the bed.
BC Bob, bid away, but any price that is above 10X rent roll or a single family that the monthly rent of a similar house does not cover the monthly total cost can kiss my bid goodbye and with that statement 98% of properties are overpriced.
“french press”
For the past 15 years,this is the only way we have brewed coffee. We are even geeky enough to travel with one.
BC Bob, bid away, but any price that is above 10X rent roll or a single family that the monthly rent of a similar house does not cover the monthly total cost can kiss my bid goodbye and with that statement 98% of properties are overpriced.
That calculation might serve well in a stable market, but I think we are in a transition period. Rents are going down. Housing surplus.
“St. Regis two blocks from the White House”
I also like the one in Ft. Lauderdale. Nice Biroche, especially on the veranda overlooking the beach.
Shore Guy,
I used a French press when I was in Paris – could never be sure if it was the method, the water, the coffee, or my willingness to believe everything tasted better in Paris, but I loved it.
I feel the need to duck as I post this missive from Henry Blodget but I am hoping someone can explain to me his theory about why the Hanke-Panke plan should include more relief for homeowners.
http://tinyurl.com/53xeob
“History of Bailouts: What Kinds Work; And Why Ours Won’t”
I still don’t understand why keeping people in homes they couldn’t afford would benefit the economy at large.
My scariest place was we went to Hunter Mountain Presidents weekend without a hotel room and it was zero degrees. Everything was sold out except one $400 a night place and one $29 a night place called the moose head in. Well we pull up around 4pom on Saturday after skiing on Presidents week and this guy straight out of pscho tells us all the rooms are available. He takes us to a room with electric heat that is turned off with no sheets and graffitti spraypainted and cig buts everywhere and broken windows taped over with plastic, well I really wanted to hit happy hour at the hunter village inn in a few minutes and did not want to drive home or spend 400 hundred bucks. So we say WTF drop off bags give the guy $15 each and the guy says the electric heat takes around two hours to kick in and he will put the sheets on the beds. We come back around 9pm drunk from happy hour and the beds are made and all our stuff is gone. We knock on the old dirty coots door and he says look in the nightstand and closet, he says he likes to go through people stuff and unpack and hang up their clothes. Well after ten drinks another WTF we took a sulfur/rust shower and went to Slopes who had a band, came back at 5am and ran out the door at nine am before he stabbed us to death.
“I still don’t understand why keeping people in homes they couldn’t afford would benefit the economy at large.”
– It will keep the value of the MBS high, and not force the banks to write them down.
OK FOLKS, lend a guy a hand:
I am supposed to meet with a member of the Democratic leadership, maybe later today. I do not have full command of all of the ways this bailout plan fails to fix the palance sheets of the banks and otherwise fails to do what is advertised. If those of you far brighter than I have some bullet points I might use when talking about why this member should vote against the bill this time and should encourage others to do so, even if they voted Yea last week, let ’em fly.
If they hold hearings to both define the problem and then draft legislation to address those identified problems, it will be far better than what they are doing now. I could use some help in pointing out what the leadership should be looking for.
127 Vic
…right, but in the same breathe Blodget says “Denial doesn’t help–so don’t eliminate mark-to-market. “
#113 BC Bob: I as well. However, assuming that the bail out bill is passed, and that it will give the government the ability to restructure mtgs for homeowners in or near default, this will alos factor into how much I bid and am willing to pay.
I may have to educate a few realtors in the process, but that is OK.
I believe you absolutely need an insurance premoium in the form of even lower prices, if you are going to buy in this market.
Ray C,
It is the process the coffee buyers use when evaluating coffee at the farm.
Off to earn some federal reserve notes.
3b heck with realtors, buy the paper on people on the edge and pay homeless people to pee on their lawn and to organize rent strikes. Have to make money the old fashioned way one broken leg at a time.
Seneca (129) –
“Denial doesn’t help–so don’t eliminate mark-to-market. “
– Exactly, Mark-to-Market is excellent on the way up. So, people do not default, then these guys can mark their balance sheets up!
Clotpoll Says:
October 2nd, 2008 at 9:14 am
Debt is wealth.
clot: you stole that from grim; please provide attribution….
is it currently legal to require payments for services in shiny metal?????
John [120],
Thanks for the advice. Funny, when I was running out, everybody told me to stop.
#127 Victorian: That is the theory, but not the reality.
Adjusting the interest rate and or lengthing the mtg will IMO do little to nothing to stem the rise in forclosures.
These people could not afford it in the first place. And if you put little to nothing down, many of these people have nothing to loose by defaulting, and no reason to kill themselves trying to stay in the house. It used to be shameful to be forced into foreclosure, not anymore.
Plus throw in a recession, and all the rest, and even people that are not yet having problems will.
Shore Guy Says:
October 2nd, 2008 at 9:48 am
3b But our founders were exceptional. And our grandparents saved the world, And, and, and.
Don’t we get to continue being great just by the simple fact that we have been great in the past? Are you asserting that great nations need to act in great ways? Get a grip, man.
Shore: Our founders, among other endeavors, helped to set up certain Ivy-League institutions. As a result, they are clearly snobs worthy of our derision.
3b (138)-
I completely agree. I was just pointing out the theory which drives these asinine proposals.
Shore,
I think i ave gotten to the point where the pols can do what they want. They have demonstrated this week that they will do so anyway, in blatant disregard for what the majority of their constituents want. It makes more sense to batten the hatches, buckle up and enjoy the show, because its going to be a spectacular display that you can tell all of your grand kids about.
At what point does it make sense for the US to stop playing the game, repudiate all foreign debts and start rebuilding (financially and socially?
John Says:
October 2nd, 2008 at 9:51 am
However, that was a 20+ stock a little over a year ago and they have been purging bad assets like a 73 Vega leaks oil for almost a year now.
JJ: My family’s first car was a 1974 Vega!! It was so low to the grounud that every bump on the Queens streets made the oil pan scrape the ground. The transmission was done at 24,000. It went forward in Neutral and D4 and sat still in all the other position. After the transmission went, it was really hard to parallel park.
Clotpoll Says:
October 2nd, 2008 at 10:05 am
We asked the chef to turn cutter-grade meat into filet, medium rare.
clot: I thought filet was supposed to be done well, and porterhouse medium rare?
#139 chgof:Our founders, among other endeavors, helped to set up certain Ivy-League institutions. As a result, they are clearly snobs worthy of our derision.
I would like to believe our founders perhaps had the noble idea that these Ivy League institutions might actually strive to endeavor for the common good as a whole, not bring the country to it’s knees,and than cry for a bailout.
And before you beat me up, I work on the street, and have for a long time, and I completely understand that we will have to have this bailout because the market demands it.
However it does not make it right, however necessary it might be.
Perhaps the best and the brightest from our Ivy Leagues going forward will undestand that they can still be quite successful and wealthy without bringing the country to it’s knees.
shore guy,
My absolute favorite for coffee!!! I have a stainless steel one that is insulated.. got sick of broken glass and cold coffee.
I am as addicted to coffee as Clot is to explosive stuff and John is to underage… oh… well, you know…
sl
“Senate Vote Gives Bailout Plan New Life”
Didn’t the credit markets/stock market get the memo?
chi (43)-
Filet? Rare to med-rare. No fat; tends to overcook in a flash.
#128 Shore.
Put it in terms they can understand. Take them back to the 70’s Oil way up, high inflation/stagfaltion, manufactruing/Quality in the toilet. Crime in major cities on the rise and an unpopular war coming to an end. It needs Volker to come in with high rates to get back on track.
LIBOR is the best indication of the problem. Banks won’t even lend to themselves. Even if you pump in the 700Bil to releive their balance sheets, they will hoard cash and not lend. The bailout is a token to buy some time. Unfortunately the banks have painted them into a corner where they have to pass it.
Buffet is cherry picking. He is using his cash to bend GS/GE over a barrel and they are happy to take it. The gvmt should be just as tough.
People and the gvmt need to get away from debt and credit and start savings. Start by balancing the budget.
Wars cost. If we don’t get into them, we won’t have to pay for them. Let NATO/UN take the lead for a while. Lets sit on the bench and be part of a team. We can’t carry the game on our own.
Time to pump money back into the country. Start by going back to Eisenhower and pay the country to rebuild the Infrastructure.
Too Big To Fail
Before you throw this letter into the proverbial round file, let’s be clear: this is the first time I have ever asked for a bailout from the Federal Reserve. I know what you’re thinking. Why do I deserve your largesse, and I do mean largesse, since I’m asking for five million big ones? The answer is simple.
Like many of our nation’s financial institutions, I am simply too big to fail. If investors were allowed to witness the collapse of Freddie, Fannie, and then Andy, I can’t begin to describe what havoc it would wreak on their already frayed nerves. Actually, I can describe it: global financial calamity. I think we can both agree that, to dodge this bullet, ten million dollars is a small price to pay. (I know that I originally asked for five, but since I started writing this letter my financial situation has deteriorated in grave and unexpected ways.)
Why am I too big to fail? It’s important to grasp the critical role that I play in a wide-ranging but fragile web of economic relationships. If I go belly-up, I will no longer be able to tip my doorman when he gets me a taxi. This is not a hypothetical situation. I have studiously avoided tipping him for a solid month now. Consequently, he no longer has cash to spend at the liquor store after work, and the liquor-store owner no longer has money to spend on Internet pron.
Given that Internet pron is the only fundamentally sound engine of the American economy, we’re playing with fire here. If that stalwart industry is allowed to fail, Asian pron companies will rush to fill the void, offering pron that is both cheaper to produce and way hotter than ours. What will it take to keep this from happening? There are no guarantees, but sending me a check for twenty million dollars would buy us all valuable time.
How did I find myself in this hole? Like most financial crises, mine had its origins on a slippery slope. First of all, I made the mistake of logging on to iTunes when I was high and downloading every Electric Light Orchestra song ever recorded. Second, I created my own e-commerce site, the ill-fated DressYourBadger.com.
I mistakenly believed that a Web site for people who kept badgers as pets and wanted cute outfits to dress them up in would work as a subscription-based service, especially if I charged subscribers a thousand dollars a month. When there were no takers, I switched to an all-advertising model, not realizing that I was plunging headlong into the jaws of an epically weak advertising market, particularly for products relating to pet badgers.
I have never borrowed money from anyone before, and, if you don’t believe me, ask any of my friends. Only don’t ask Bo. You should not ask Bo for two reasons. First, Bo is under the impression that I did borrow money from him, when all I actually did was let him pay for a pitcher of Stella when it was my turn to pay, and then ran out of the bar before he figured it out.
The other reason you should not ask Bo is that Bo is a ginormous dick. In fact, if Bo writes to you looking for a bailout, i.e., he wants to be made whole for that pitcher of Stella, please feed his letter to the nearest high-speed shredder. I promise you, no investor on the planet will give a rat’s ass if Bo goes under.
By now, I’m fairly confident you’ve already decided to give me that bailout, but, just in case you haven’t, here’s one more good reason: there’s a better than fifty-fifty chance that at some point in the next ten years I’ll be elected Vice-President of the United States. I wouldn’t have guessed that a few months ago, but apparently now they’re letting anybody run. How is this significant for you?
In addition to presiding over the Senate and attending state funerals, one of the Vice-President’s duties (as I see it) is to badmouth the Chairman of the Federal Reserve to the President. This is a situation that could get, shall we say, rather awkward for you. But why even contemplate such a scenario when it could all be avoided by sending me a check? It’ll be the best billion dollars you ever spent.
http://www.newyorker.com/humor/2008/09/29/080929sh_shouts_borowitz
Just because an asset is being offered/sold for significantly less than it’e previous value, does not mean it is undervalued.
Clot, 147
Filet? Rare to med-rare. No fat; tends to overcook in a flash.
Yes! But it won’t overcook if you wrap it in bacon first! :-)
sl
Just me Says:
October 2nd, 2008 at 8:25 am
NO BAILOUT but that’s Just me!
Take all bonuses’s back from CEOS for last 2 years and no bailout will be needed!
Done. As long as anyone who made money selling a house from 2003-2007 that was bought with a subprime mortgage throws their gains back into the pot, too.
Tom [130],
Very true. You may buy an asset 20% off its high and be stuck holding the bag. The true value, based on the underlying fundamentals, may be 50% off its high.
Shore Guy Says:
October 2nd, 2008 at 10:56 am
I am supposed to meet with a member of the Democratic leadership, maybe later today. I do not have full command of all of the ways this bailout plan fails to fix the palance sheets of the banks and otherwise fails to do what is advertised.
Shore: they should not vote against the bill; that said, I would suggest that they be prepared to return in 2009 with regulating this space at the top of their agenda. The focus is to remove the latitude companies have to manipulate disclosures on their financial statements. There needs to be a central clearinghouse or market for securities of this type that can be clearly accessed by third parties.
You understand the references to “shadow banking system” etc.? Much of the CDO/MBS universe was conducted soley based on contracts between two parties. As a result, the only these counterparties, or several counterparties, have any idea of the terms.
In a lot of way, this entire situation is going to self correct within the next 12-48 months. As a result, it is not so much solving today’s problems as much as creating a road map for the future.
Clotpoll Says:
October 2nd, 2008 at 11:24 am
chi (43)- Filet? Rare to med-rare. No fat; tends to overcook in a flash.
filet…does not equal…filet mignon?
southpaw [152],
What if you sold a house to a prime buyer, 50% down, 5.25 fixed?
# Tom Says:
October 2nd, 2008 at 11:28 am
“Just because an asset is being offered/sold for significantly less than it’e previous value, does not mean it is undervalued.”
Exactly.. it’s ‘clearance table’ mentality..
Picture a gallon of milk. Usual price $3.75 per gallon. Convenience store price $8.00 per gallon
But on sale today at $5.00 per gallon.
Sounds like a deal but it’s not. In fact, it’s actually a ripoff.
Now substitute HOUSE for milk, BUBBLE for convenience store and add 5 zeros to the price.
sl
The 74 Vega is the perfect example of 70s manufacturing quality. But it doesn’t hold a candle to the Ford Pinto.
http://www.fordpinto.com/blowup.htm
In for a moment:
“is it currently legal to require payments for services in shiny metal?????”
i do not believe it is. If I recall correctly, if one refuses the nation’s legal tender, the debt is eliminated. Of course, on can offer terms that mak it attractive for another party to pay in metals. Kind of like the idea of 2/10 net 30.
I watched the Senate debates last night and it was just about the most sickening thing I have seen on TV in quite a while.
Thats alot comming from me because I like to watch those medical shows where they cut people and show you their insides.
I watched a Senator from California get onto the floor and state that she had received 93,000$ emails from constiuents and 87,000$ were against the bill. She stated that the reason why she was elected for 6 year terms was to insulate her from the politics, enabling her to vote for the bill.
93.5% of your voting base asks you to throw down this bill and you vote in the opposite direction. This goes far beyond political insulation and heads into sheer stupidity.
There is a very specific reason why the President and Congress have very low approval rates. They are no longer responding to the will of the people.
I wonder, should someone start tracking the reelection results of these senators and congressmen?
Shore Guy Says:
October 2nd, 2008 at 10:48 am
“St. Regis two blocks from the White House”
I also like the one in Ft. Lauderdale. Nice Biroche, especially on the veranda overlooking the beach.
RayC Says:
October 2nd, 2008 at 10:50 am
Shore Guy, I used a French press when I was in Paris – could never be sure if it was the method, the water, the coffee, or my willingness to believe everything tasted better in Paris, but I loved it.
Shore/Ray: Probably my best comp scam ever was getting the butler floor for here for a week in April 2002, back when the Euro had only recently been introduced, and had sold off against the USD. I think it was Euro 1.15 to USD 1. My wife was an art history major at Bryn Mawr, so it was a tiring week.
I had two free days from stays. You had an extra day free for booking 4 days AND they had discounted the point cost 50% as a promotion. So we stayed 7 days for the point price of 2.
http://www.starwoodhotels.com/luxury/property/overview/index.html?propertyID=250
Speaking of coffee. I used to order from Cafe Britt which is a Costa Rican outfit which sells absolutely fresh (a little bitter) potent and organic beans, but they got really pricey. Recently decided to splurge and found a great supplier of Kona. For those who have not yet drank fresh pure Kona coffee, there is absolutely nothing that compares. It’s like crack for me and the Gator in the morning. These beans are so damn smooth. I found a place where it works out to $18.25 a pound (shipping included) which is really really cheap for Kona. It seems extravagant, but you use slightly more than half as many beans than you would typically use when brewing all other varieties. Plus, it’ll brew 50 to 60 cups. Compared to about 5 large Starbucks coffees or 8 Dunkin Donut’s brews, it’s a steal and so very much better!
http://www.shop.sweetokolecoffeecompany.com/category.sc?categoryId=4
Never had it in a French press, but I bet it would knock you out!
whoops…I put dollar signs on emails
“Bryn Mawr”
One of the little Shores love Bryn Mawr, although all the guys we know who went to ‘Nove advise against it. Apparently it has a reputation of being stocked full of, umm, how to say, very open students. As a parent, that is a bit of a drawback.
“Kona coffee”
Mrs. Shore has a colleague who has a couple of places in Hawaii (because SFO is just such a rat race) and often works from there. From time to time he sends us Kona, and it is wonderful.
Shore Guy Says:
October 2nd, 2008 at 11:47 am
Apparently it has a reputation of being stocked full of, umm, how to say, very open students. As a parent, that is a bit of a drawback.
Shore: The “Mawrters” are a unique breed. All the Seven Sister schools have the same reputation to whihc you allude. What I will say is that it is a very serious student population that is focused on academics. From what Linda has told me, it is very liberating not to have to deal with all the external social nonsense that a typical collge campus provides. There are some very strong minded people that came from there. I don’t know how pleased Katherine Hepburn was about her college experience, but she is a classic Mawrter regardless. Don’t mess with my wife; she will kick your a%%.
Time to plan a European vacation for next summer?
http://www.cnbc.com/id/26986243
Ireland’s decision to guarantee all bank deposits will contribute to the demise of the single European currency, because it will erode the euro’s credibility if it’s allowed to go ahead, Hugh Hendry, chief investment officer and Partner at Eclectica Fund, told CNBC on Thursday.
The plan pledges to guarantee the liabilities of six Irish-owned banks totaling some 400 billion euros ($565 billion), more than twice the country’s annual gross domestic product.
snip
“Katherine Hepburn ”
She could afford to be a free spirit, being an heiress to the Corning fortune.
BC (156)
No issues there.
My point is that everyone is so quick to blame Wall Street for the losses.
The fundamantal problem is that people drastically overpaid for an asset they could not afford using a ton of leverage. Did Wall Street enable them? Yes, to the extent that a hardware store enables a suicide by selling rope to its customers. The primary blame lies with people buying these assets and obligating themselves to the loan terms.
So, while everyone is so anxious to ‘take back the bonuses’ let’s not forget the part of the population that benefitted from these instruments as well.
One of our founding fathers Alexander Hamilton created a back door deal to give him a monopoly on Banking and founded the Bank of New York. Arron Burr hated Alexander Hamilton and wanted a bank too but that was illegal so he started a water company and got a monopoly no that too even though running water in houses were one hundred years away, he even put down some wooden pipes over by stone and bridge streets. He threw into his water pipe monopoly bill that he had the right to take a cash deposit to cover the cost of pipes and he would pay interest on that deposit. Hence back door style taking deposits and paying interest is a bank. That bank was accuired before you grandparents and is now Chase. For you wall street folks a DTC number that starts wtih a nine is a bank, the next digits are assigned in numerical order based on age. BONY is DTC bank 901 and Chase is DTC bank 902, they hated each other 200 years ago and they still hate each other for good reason. The head of BONY Alexander Hamilton Killed Arron Burr the founding father of Chase in a Duel. In the basement of 1CMP in an employee area they have a little exhibit the history of Chase and they have one of the wooden Arron Burr pipes.
For you guys to even suggest our founding fathers would be upset at us bailing out the banks would be crazy. Heck back then the secretary of treasury Alexander Hamilion had a bank. He would be bailing out himself.
Because he has been so right in recent years? Puh-leeze. Maybe he meant “sooner OR later, just like Japan”:
Oct. 2 (Bloomberg) — Former Federal Reserve Chairman Alan Greenspan said financial markets and the economy will recover “sooner rather than later” from the worst turmoil in seven decades.
“Trust will eventually reemerge as investors dip hesitantly back into the marketplace,” Greenspan said today in a speech at Georgetown University’s law school in Washington. “From that point, history tells us, financial and economic revival sets in. I suspect it will be sooner rather than later.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=ax1QCC1nFsjM&refer=home
Tell you what the little guys can have all the 2006-2008 unvested restricted stock bonuses you want from any failed bank if the bills pass. They are as valuable as a used Friendly’s placemat
Ireland is a money laundering heaven. They have loosey goosey AML/KYC and home country tax reporting rules. If the money ain’t safe all the foreigners will do a big run on the bank. They need to do something.
major props to Mort Zuckerman of US News & World Report, who is on CNBC right now blasting this bill as a joke.
Ripped Merrill and the Banks
great job
“At least the losses will be borne by the shareholders and not the public.”
Read the quote below. This quote describes the exact problem. private banks have gained the power to create inflation/deflation and a private cartel controls the issuance of US currency. The current situation and end result of this should not a surprise to anyone. We were warned of this 200 years ago.
“The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered. ”
Thomas Jefferson
“Alexander Hamilton Killed Arron Burr”
John,
It didn’t happen. And after Burr killed Hamilton, he ended up forming his short-lived republic out by NOLA.
back to the grindstone.
Oh well, history is not my strong point, but the point was our founding fathers were all about propping up banking
Shore Guy Says:
October 2nd, 2008 at 12:12 pm
“Alexander Hamilton Killed Arron Burr”
John,
It didn’t happen. And after Burr killed Hamilton, he ended up forming his short-lived republic out by NOLA.
50% of country are shareholders.
“The primary blame lies with people buying these assets and obligating themselves to the loan terms.”
leftie,
I agree. WS was the pusher, the fed the enabler and the buyer the addict.
“50% of country are shareholders.”
John,
What’s your point?
point is that they keep saying the shareholders will be punished and not the american people. But 50% of american people are shareholders. So half the country is screwed either way.
“50% of country are shareholders.”
John,
70% are home owners or underwater with a home.
160 nicholas and others…I believe if the constituents want someone out of office (congress or senate), they can petition and hold a vote. If the majority of the votes basically impeach that person, they are out.
Am I wrong about this?
I agree. WS was the pusher, the fed the enabler and the buyer the addict.
Bc,
You left out Washington. Did I understand you right above that you are putting on your boots.
“So half the country is screwed either way.”
John,
They’ll have to deal with it. They got through Nasquack.
Re 184, NJ is dependent on Wall Street to float its widely overpriced homes and your high taxes make it an AMT nightmare. I am pretty sure most of BC is for it.
make [185],
The fed is DC.
I am getting ready. The fear factor is permeating thru main st.
“I am pretty sure most of BC is for it.”
John,
BC have just been renamed; EP [Elvis Patterson]
Interesting headlines…..
A shattering moment in America’s fall from power
The global financial crisis will see the US falter in the same way the Soviet Union did when the Berlin Wall came down. The era of American dominance is over
http://www.guardian.co.uk/commentisfree/2008/sep/28/usforeignpolicy.useconomicgrowth
I wonder Erin Brockovich’s opinions on this…..
WASHINGTON – Here, little piggies!
Congressional deal-brookers yesterday slopped a mess of pork into the $700 billion financial rescue bill passed by the Senate last night – including a tax break for makers of kids’ wooden arrows – in a bid to lure reluctant lawmakers into voting for the package
Stuffed into the 451- page bill are more than $1.7 billion worth of targeted tax breaks to be doled out for a sty full of eyebrow-raising purposes over the next decade.
The special provisions include tax breaks for:
Another measure inserted into the bill appears to be a bald-faced bid aimed at winning the support of Rep. Don Young (R-Alaska), who voted against the original version when it went down in flames in the House on Monday.
That provision – a $223 million package of tax benefits for fishermen and others whose livelihoods suffered as a result of the 1989 Exxon Valdez oil spill – has been the subject of fervent lobbying by Alaska’s congressional delegation.
chi,
No tax breaks for horse breeders in Kentucky?
Recall elections in the United States
Along with the initiative, the referendum, and the direct primary, the recall election was one of the major electoral reforms advocated by leaders of the Progressive movement in the United States during the late 19th and early 20th centuries, although it was initially proposed in William S. U’Ren’s Oregon newspaper. Recall elections are currently prohibited in the federal system. The majority of states allow recall elections in local jurisdictions, but only fifteen states permit recall elections to remove state officials. [1]
Only two governors have ever been successfully recalled. In 1921, Lynn J. Frazier, Governor of North Dakota, was recalled during a dispute about state-owned industries, and in 2003, Governor Gray Davis of California was recalled over mismanagement of the state budget.
In Alaska, Georgia, Kansas, Minnesota, Montana, Rhode Island, and Washington, specific grounds are required for a recall. Some form of malfeasance or misconduct while in office must be identified by the petitioners. The target may choose to dispute the validity of the grounds in court, and a court then judges whether the allegations in the petition rise to a level where a recall is necessary. In the other eleven states that permit state-wide recall, no grounds are required and recall petitions may be circulated for any reason. However, the target is permitted to submit responses to the stated reasons for recall.
The minimum number of signatures and the time limit to qualify a recall vary between states. In addition, the handling of recalls once they qualify differs. In some states, a recall triggers a simultaneous special election, where the vote on the recall, as well as the vote on the replacement if the recall succeeds, are on the same ballot. In the 2003 California recall election, over 100 candidates appeared on the replacement portion of the ballot. In other states, a separate special election is held after the target is recalled, or a replacement is appointed by the Governor or some other state authority.
http://en.wikipedia.org/wiki/Recall_election
Shore (176)-
I challenge Klink and/or Bergabe to a duel with pistols.
I am getting ready. The fear factor is permeating thru main st.
make them cry at closing.
make (195)-
They don’t cry. They go at each other across the table.
An attorney and I had to separate some people last week.
Good thing I tended bar in college. I cannot fight worth a damn, but I am excellent at breaking them up.
They don’t cry. They go at each other across the table.
Clot,
after all teh yelling and screaming did the sellers sign?
Bc,
Bring a guido with slick back hair and a shiny suit to the closing and a spare pen.
grim, there’s money to be made in blogs: Bankaholic sold for $15 million
http://www.paidcontent.org/entry/419-bankrate-acquires-bankaholic-for-up-to-15/
#196 clot: What is the typical profile of a purchaser today in this housing market? Do they have any idea what is transpiring, is money no object, are they well qualified? Thanks as always.
For those that aren’t regular readers of nakedcapitalism.com go check it out now. There is a lot of really great commentary on the bailout, which Euro bank will go, alternate proposals, etc.
The posts are intelligent and try to limit hyperbole.
Also, gold taking a plunge today.
With all the bailout stuff, I was slow in putting up the Bergen County foreclosure results on my site for last week.
I was surprised, one condo in fort lee went above judgment but less than 2004 price.
3b (199)
All the players right now are idiots. That’s why you see 11th hour breaches of contract and people who want to have fistfights at the closing table.
I’m beginning to think I’m an idiot, too…just for subjecting myself to this stuff day after day.
boy those foreign curriencies that are tanking … i sure it’s not the same ones a few guys were talking about on here in the last two weeks …
Yes! California congressman saying that hes voting no again for the bailout, and that very little has changed.
CNBC doing its best to try and convince the guy otherwise.
The odd transaction now features a moneyed-up buyer who has beaten the seller into a pretty good discount, thereby building a little “insurance” into the deal.
As I say, though, this is only a handful of the deals.
laughy (203)-
Just wait till some of the currency geeks start worrying about Swiss francs.
I guarantee you this will happen.
#187 John: Except there is going to be alot less of those Wall St types left to pay those high BC prices, and as such BC is in deep,deep trouble.
Forget about bonus money this year, from top to bottom, oh and next year too.
tosh (200)-
Deflationary credit crisis.
Learn to love it!
#205 clot: thanks.
make (197)-
No, nobody signed.
Believe it or not, even though the buyer refused to close and walked out, both the buyer and the seller have issued Time is of the Essence letters against each other.
Funny thing is, I know for a fact that neither the buyer nor the seller actually want to close now.
This is the RE equivalent of drinking 28 beers, then plaiyng chicken with Formula 1 cars.
[161] chi
Still use a french press, and I prefer it, even though I have a fancy Queasynart coffeemaker that grinds your beans (damn thing has 7 parts to clean). I have four so one is always at the ready.
As for 7 sisters, I frequented MHC and Smith. Talk about a target-rich environment. Was at MHC so much, I am in the 1984 yearbook.
Or 1983. Can’t be sure.
don’t know if anyone is watching CNBC … this california guy is brilliant. i wish i had written his name down. he knows this isn’t going to fix the underlying problem.
sadly, CNBC doesn’t even say, ‘right on’ or ‘good point’ to anything he says … the guy from Cali came out and said, ‘we should only give money to help FDIC banks, but we’re giving money to the royal Saudi family and China … we’re going to end up back here in a few months talking about this again if this bailout happens, and it is going to be even more dire.’
then, the other congressman (also against it), opined that the bill would pass.
:(
and that is four french presses, not Cuisinarts.
My shiny stuff is getting beat up today. good thing I own the physical and don’t have to worry about some guy named margin.
My income has gone down severy though since I don’t earn interest anymore. My wife and I actually stopped ordering wine by the bottle and my wife drinks house cabernet.Times are tough. No desserts either. Waiter is conviced that we ar ewatching our figure. Go figure.
grim, #216 got kicked into moderation
Popular quote doing rounds post Lehman, AIG, Merrill fiasco…
There are two sides to a Balance Sheet.
Left & the Right (Liabilities and Assets respectively).
On the Left side there is nothing right.
On the Right side there is nothing left.
#196 clot: What is the typical profile of a purchaser today in this housing market? Do they have any idea what is transpiring, is money no object, are they well qualified? Thanks as always.
I’m in the process of buying right now.
We’ve always said that we would buy when we found a place we liked for a price we were comfortable with. For us it wasn’t about finding the absolute bottom. It’s a place to live. The payments are well within our budget and we really like the place.
We found a seller who listed below market. They bought another house and were anxious to get out fast. They got what they felt was a good deal on a purchase and they were in their current place for a long time, so they didn’t “need” to hit a certain number on the sale.
We were actually outbid by 2 other buyers. We refused a bidding war and they accepted the high offer. Financing fell through and they called us and the other bidder a week later asking us for a rebid. We came back with out original offer but the other buyer significantly upped their offer. We, however, showed a 20% cash down payment and told them we had excellent credit, so they went with us rather than risk another deal falling through.
Louisiana, Chicago Suffer as Bond Market Shut, Projects Delayed
Oct. 1 (Bloomberg) — Rising borrowing costs are starting to pinch states, cities and towns across the country, forcing municipalities to cut back on everything from road improvements to maintenance on schools.
Louisiana postponed plans to sell $500 million of bonds this month, while in Chicago, school officials will have to decide which improvements will go forward after delaying a similar offering.
Unprecedented turmoil in the credit markets is rippling across America. More than $12 billion in planned bond and note deals have been shelved.
Costs are rising with yields on 30-year AAA general obligation bonds climbing to a record 130 percent of those available on comparable-maturity U.S. government securities.
September was the worst month for tax-exempt bonds in at least two decades.
Sixty-four percent of cities are less able to meet their fiscal needs now than in 2007 because of rising operating costs, job losses and declining home values.
“The bottom line is that they will have to be funded with some other funding source,” said Kling. “The only other source is the general fund.”
In Chicago, school officials will have to decide which projects will go forward after postponing a $500 million bond sale to next year. “These are unprecedented times for us. We never imagined the market could affect local government like us.”
Why are we borrowing to pay for tomorrow’s goods? Why are the local governments dependent on cheap sources of credit?
Get it together America…it is well past the time you realized that you need to wait until the cash is in hand to start spending it.
rent (219)-
Congrats. That sounds like a good deal.
I have yet to hear of someone who is directly affected by the “credit crunch” in some way that could not have avoided this situation.
I hear about barbers that are making less then they were before. I hear about yoga teachers who have to learn to do more on less. I hear about florist who are feeling the pinch. These are the stories of main street, and these stories all say the same thing….recession.
Get used to it! Its a damn recession. I haven’t heard one worthwhile story of a buisness that is DIRECLTY affected by not being able to get credit. The credit is there, the consumers are not, end of story.
“Why are we borrowing to pay for tomorrow’s goods?”
Nicholas [221],
The whole house of cards is/was erected by borrowing short and lending long. The world is one big carry trade. That works, as long as the market cooperates.
I opened my credit card statement to discover that they recently reduced my interest rate.
I have a 5.6% interest rate on an unsecured line of credit.
I haven’t had access to cheaper credit in all my life.
GE CAPITAL INTERNOTES 4.75000% 05/15/2015 Price (Ask) 86.250
Yield to Worst (Ask) 7.387%
Triple AAA pushing 8% nuts
#205 Clot
hereby building a little “insurance” into the deal.
I think the insurance gets wiped out by the face the sale price sets the new comp price. Its like getting marked to market. If the comp price gets set today and prices keep falling, the only joy is that you are priced slightly closer to the bottom.
I know a lot of car dealerships near me went under just this month, and blamed that most people buy cars on loans and leases and the few sales they get the customer can’t get a loan and the deal falls apart.
John,
I have heard that before also.
So the consumer walks into the car dealership with his 630 FICO and wants to buy a new car. He is rejected for his auto loan because he poses too much risk.
Do you think this risk model has returned to normal along with the housing risk model?
I don’t see this as a dealership not being able to get a loan, this is the American consumer tapped out. If they walked in there with a 760 FICO and pockets full of cash, would they be rejected?
Americans are tapped, time for recession.
Wanna hear a fun fact. Banks have a new way of of tracking sales and comparing existing mortgages of like houses in the same area.
Lets use Levitown as an example since houses are all the same, lets say capes went for 600k at peak price and there is a short sale on your block for 350K. The computer model takes everyone on that block with a mortgage over 350k and starts cutting back on their credit lines and will deny them any refinancing, home equity or car loans. So you think you are sitting pretty well you aint.
This is kind of stuff Chase is now using to cut off credit even before you apply for it.
There’s a house, been on the market for 1.25 years.
We’re looking at it this weekend.
It is down 30% from its original list.
We intend to make an offer 20% below its current list.
Anyone think they’ll bite? Or at least counter?
We have impeccable credit, and our offer would be at approximately 50% down with a standard 30 year fixed mortgage.
WHICH IS IT? Is it NBA or NFL?
36 have been accused of spousal abuse
7 have been arrested for fraud
19 have been accused of writing bad checks
117 have directly or indirectly bankrupted at least 2 businesses
3 have done time for assault
71 I repeat… 71 cannot get a credit card due to bad credit
14 have been arrested on drug-related charges
8 have been arrested for shoplifting
21 currently are defendants in lawsuits,
and 84 have been arrested for drunk driving in the last year
Can you guess which organization this is? Give up yet? Scroll down:
NBA or NFL?
Neither. It’s the 435 members of the United States Congress!!!
The same group of Idiots that crank out hundreds of new laws each year designed to keep the rest of us in line. You gotta pass this one on!
regarding the Buffet video, best quote:
“beware of geeks with formulas”
words to live by.
Nom – In 1983, Gator was in the 4th grade ;)
Nicholas the Ford dealership in my town closed 9/30. Ford Focus customers are students starting out, Windstar and Explorer are middle class folks and crown vics are for the old folks, they aint exactly the type of folk with 25K in cash to buy a car.
Plus the other problem is Ford Motor Credit fronts cars for 30-60 days, if you are a Ford dealer you can buy an off lease car and don’t have to pay for 30 days, goal is to sell it in 30 days or if not flip at auction to pay back. Ford also records the sale to the dealer upon delivery but dealer has a few weeks to pay so they have time to sell car.
Ford Motor Credit is shrinking credit lines so dealer has less assess to credit to put cars on his showroom floor and customers have less assess to loans.
Also Ford Motor Credit used to do things like lease deals and cheap car loans when times were good. That is also cut off.
Oh, and the reason we’re taking a mortgage at all is to retain flexibility. We could buy in cash, but we’d have less of a cushion for taxes, etc. in the years ahead.
The Gator family is officially on vacation. We’ll be drowning our sorrows about the collapse of the free market economy over many cervezas and tequila on the Mexican Riviera.
Many of the fraud cries have been lodged at appraisers. Would banks use this information to double check an appraisal or even to discount the validity of one? I’m interested to hear comments.
http://www.snopes.com/politics/crime/congress.asp
238 comment was regarding 230
#223 Nicholas: Agreed. I wish no ill will on any one, but this idea that we have to avoid a recession, makes no sense to me. It has always been this way.
The bigger the party, the bigger the hangover, simple as that. Is this crisis bigger than those of the past? Yes, but at least part of the solution will be the same, and that is a recession, that yes could turn into some sort of depression.
However, the fear and the hysterics surrounding this whole situation is what I find troubling. Hank and Ben had well over a year to prepare Americans for what was coming down the road.
In fact in this week’s TIME magazine they quote Hank as saying they had been planning for just such a sceanrio for over a year, yet all the time telling the public that this crisis or situation is contained.
Again, I understand that there will be a bailout because the market demands it, whether it will help, who knows, but I do not see how it will, for all the reasons that have been discussed here.
But again some of this hyped up fear is troubling. I personally think at least some of it is driven by those who have never lived through tough times,and have known only the good.
Some of the same clowns who were cheering this now ended madness all along,are the same clowns now preaching armageddon. I forgive myself for being skeptical.
“Americans are tapped, time for recession.”
Nicholas,
This sums it all up. Nothing else to add.
#228 John: Maybe Americans will just have tok eep their cars longer. One of my 2 is coming up on 13 years old;still runs great.
I still take my 1975 to the station when I go late and I am sure to get scratched in a tight spot. A 1995 car still has that brand new smell. My brothers 1967 Firbird he bought used in 1981 runs great and is soon to be 42 years old.
My nephews great grand dads car a 1939 Ford that has been handed down three times also runs like a champ. Soon to be 70 years old.
I had my 1975 car up to 80 mph the other day and she did not blow up. The best part with all the holes in the floorboards is I got plenty of places to hid my beers from the cops.
Damm Jap cars you are lucky to get 25 years of service out of them before they fall apart.
3b,
Time to open a auto repair shop, auto parts store?
Hope the market is down 500 points + today those pinheads in DC need some motivation.
Gator/Stu,
Happy traveling. Enjoy LA and Mexico.
Funny you mention that the Meinkee dealer I go to says business has been terible the last few years as everyone leased cars and don’t go to repair shops, she said back in 1989-1994 when the average car was seven years old no one went to a dealer they all went to local repair shops as all cars were pretty much off warranty. She is predicting 2009 will be a good year for off warranty auto repair.
About congressional finance, take a look at the financial disclosure forms some day and focus on the amount of debt so many of them have. No wonder they run the country the way they do.
Heh, I’ve spoken to plenty of people in my building. They are all convinced you need to buy into the market right now because it’s low and it’s going up from here. Now we know where these bear market rallies come from. The Dow is hanging off a cliff with 1 finger holding on for life. Who the hell buys into this market?
#245 BC Bob:Everything old is new again. Seeing alot more people stopping by the coffee cart guy in the moring , and a lot less Starbucks cups in the elevators.
http://www.marketwatch.com/tools/etfs/html-profile.asp?symb=UYG&sid=2598691&dist=TQP_Nav_profile
roll the dice for fridays vote
CHEAPSKATE OCTOBER 2, 2008 Kitchen Confidential: You’re Toast
By NEAL TEMPLIN
How much does it cost to move a stove two feet?Try $50,000.
When we bought a house in New Jersey last month, my wife, Clarissa, told me flat out she hated the kitchen. If I wanted her to go along, I’d have to promise her a new kitchen.
So I did. What could it cost, anyway? Maybe $20,000 or $25,000, I remember thinking.
Boy, was I a dope.
I got a crash course when we visited a kitchen design studio in August, weeks before we’d even closed on the new house. The owner of the studio began running through the costs involved. New cabinets alone could run $15,000, $20,000, or even more.
An alarm bell immediately went off in my head. “We were hoping to do the whole kitchen for $25,000,” I told him.
The designer gave me this odd look as if I had suddenly begun speaking Aramaic. “Our average customer spends $50,000 on a kitchen,” he informed me. He went on to tell me that customers commonly spend $15,000 on appliances alone.
I have this quaint notion about kitchens: They’re for making food.
So when we bought our house, I didn’t pay a whole lot of attention to the kitchen. Sure, it had a weathered counter and an outdated gas stove. I figured a few thousand dollars could fix all that.
After all, we had some experience at cheap kitchen makeovers. In our previous house in Dallas, we put in granite countertops and a new tile floor, had a carpenter straighten out the cabinets and painted the kitchen. Total cost: under $5,000.
It was a similar story in the house we owned in New Jersey from 2001 to 2004. Labor costs are higher on the East Coast, so we spent roughly $7,000 on a stainless-steel counter and sink and a new floor.
Clarissa has a very different view. She does a lot of cooking, and she has very particular ideas on both the functionality and appearance of a kitchen. The one in our new house in New Jersey really annoys her.
It is long and narrow. It has limited counter and storage space. There’s an odd red accent line running through the tile on the wall. But the thing that really sets her off is the stove. It’s located just two inches from a door leading out to our deck. Clarissa thinks this looks awful and that it’s dangerous to have a gas flame right next to an exterior door.
Moving the stove, however, will be a Herculean endeavor. The stove is right next to the dishwasher, and there is no way to move it without moving the dishwasher to the other side of the sink. To do that, we’ll have to rip out our cabinets. By the time we’re done, we’ll end up gutting the whole kitchen.
Clarissa doesn’t think the new kitchen will cost $50,000. She doesn’t necessarily care about ultra-high-end appliances and thinks we can do the job for somewhat less. We don’t have nearly that much money set aside, and, with a new mortgage and a slowing economy, neither of us is anxious to take on more debt. That means we’ll have to wait until next year, when we should have enough money.
In the meantime, Clarissa has already made some quick improvements to the kitchen to make it workable. She went to Ikea and bought a wooden table that can serve as a breakfast nook but also has a storage area underneath for pots and pans. She bought a sort of chest of drawers on wheels to provide even more storage space. In all, she has spent about $500, and the kitchen is suddenly looking much better — at least to me.
I told her what a great job she’d done with the kitchen the other day. She gave me a dirty look.
After 27 years of marriage, both of us understand the unspoken subtext to our exchange. It goes like this:
Neal: Do we really need a new kitchen? Couldn’t you just get a new stove and countertop and call it quits?
Clarissa: No way, buddy. This kitchen drives me crazy, and I’m getting a new one. Like it or not, you’re spending the money.
So there we are. The first house we bought in suburban Detroit in 1991 cost only $79,900. Now we could spend more than half that much on the kitchen. Then again, a divorce would cost a lot more.
Let’s stick it to those Wall Street pieces of $hit….let them rot in hell and make them pay back their bonuses…..
FINANCING OCTOBER 2, 2008 Entrepreneurs Scramble for Financing
By KELLY K. SPORS and RAYMUND FLANDEZ
Small businesses are turning to angel investors, suppliers and personal credit cards as the financial crisis spreads to Main Street and access to commercial bank loans becomes more restricted.
After being rejected last month at two commercial banks, Education 4 Kids Inc. owner J.M. Ivler is back to financing his 5-year-old online retailer with personal credit cards. “I can’t get the banks to give me a loan,” complains Mr. Ivler, whose Las Vegas company is profitable and produced $350,000 in sales last year.
Brian Moran, president of magazine publisher Moran Media Group LLC, decided to sell $125,000 in accounts receivables and incur a 3%, 30-day rate on outstanding balances to finance his Paramus, N.J. company after a bank credit line wasn’t renewed. The bank told him it was cutting back on small business lending to minimize risk.
It is unclear how many commercial banks aren’t writing new small business loans. But reports from across the U.S. suggest that small businesses are chasing alternative financing more vigorously than a few weeks ago.
What money is available can carry high interest rates. Harold Bradley, chief investment officer for the Ewing Marion Kauffman Foundation, an entrepreneurial-research organization, says small businesses with variable-rate loans are “shell-shocked” by the jumping rates on those loans.
Shelly Karras, president of Fordham Financial Services Inc., an alternative financing company in Northbrook, Ill., says he now receives six to seven inquiries a day from banks trying to help customers line up alternative financing, up from just a handful a month last summer.
Mr. Moran had to dip into cash reserves to pay off an $80,000 balance when his local bank declined to renew a $350,000 credit line. Another regional bank turned him down for a $200,000 credit line, citing his personal credit score and the fact that his company didn’t have enough assets to secure the line.
Some businesses, meanwhile, are finding sympathetic suppliers will help get them over the financing hump. Jorge Marinez and his two partners went this route after getting turned down by seven banks over eight months.
“No one wanted to qualify us for a business loan,” says the 39-year-old Mr. Marinez, who with partners sought a $250,000 loan to open a steak and seafood restaurant in Burr Ridge, Ill. “They kind of complained to us that the way the economy is going right now, the banks don’t want to take a risk in the restaurant business.”
Mr. Marinez approached the property’s landlord, who agreed to finance the endeavor last month. The landlord was also getting hit hard by the economy and wasn’t finding any other renters for the site, Mr. Marinez says.
He hopes to open the restaurant, called Porterhouse, in late November.
NJGator Says:
October 2nd, 2008 at 2:04 pm
The Gator family is officially on vacation.
Gates: You guys always seem to be on vacation somewhere. Why don’t we have the baseline assumption that Stu and you are on vacation, and just inform us of the times you guys are at work.
Nice tounge in cheek
chicagofinance Says:
October 2nd, 2008 at 2:40 pm
Let’s stick it to those Wall Street pieces of $hit….let them rot in hell and make them pay back their bonuses…..
American’s rely too much upon debt and the best thing that can happen to ensure the long term survival of the nation is for us to overcome this debt addiction. If it takes a recession to accomplish this, so be it. This debt reliance is causing the American corpus to rot. I would rather the patient lose a toe or a foot than the see the gangrene spread and kill the entire organism. It may hurt, but it will be a necessary form of pain.
[250] Ben
Not me, I have capitulated. I made a very modest buy and moved some 401(k) $$ but most of it is on the sidelines, and the good news about my muni MMKT yields skyrocketing means it is staying there.
SG Says:
October 2nd, 2008 at 1:26 pm
Popular quote doing rounds post Lehman, AIG, Merrill fiasco…
There are two sides to a Balance Sheet.
Left & the Right (Liabilities and Assets respectively).
On the Left side there is nothing right.
On the Right side there is nothing left.
Shail: I haven’t heard this quote, but a couple of edits: Assets are on the left; and on the right, they are likely not referring to liabilities, but rather Shareholder’s Equity, and I would guess the Retained Earnings sub-account.
#253 cf.
We are in the middle of a kitchen remodel/repair in the REO. We went to the design shop and had the 50K quote. I laughed. I went to IKEA for some basic birch cabinets and plan to come out at around $10K. The funny part is that we went to Lowes to order some high end appliances. We had a choice of Stainless Steel that we could take home there and then or wait SIX WEEKS for the white to come in on back order. We decided to wait for the white as it will suit the kitchen better and its not as hard to keep clean with kids.
My last kitchen upgrade had custom full wood cabinets. The design flowed into a huge built in in the dining room for 10K 5K for granite, 3K for appliances. 2K for tile. $20K all in and it was beautiful. Its a shame we had to move.
Tell those Wall Street vermin that we have a mousetrap and The House of Representatives is the cat. Vote NO. Vote for our children. DO NOT LET OUR CHILDREN DOWN!
EDUCATION OCTOBER 2, 2008 Colleges Scramble as Fund Is Frozen
Some 1,000 Schools Find It May Take Years
To Recover Money Placed With Wachovia
By JOHN HECHINGER and CRAIG KARMINArticle
A fund that invests cash for about 1,000 colleges and private schools suddenly froze withdrawals this week, leaving school finance managers scrambling to make sure they have enough money for payroll and other bills.
For 34 years, colleges and schools parked cash in the now $9.3 billion fund, which offered returns slightly above U.S. Treasury bills.
That it now might take years for the institutions to get all of their money back shows how widely credit-market woes are reverberating beyond Wall Street.
Monday, Wachovia Corp., the fund’s trustee, said it was terminating the fund, liquidating its assets, distributing the proceeds and resigning as trustee, “to ensure that all investors would get equal treatment and that there would be orderly and equal distributions,” says Laura Fay, a Wachovia spokeswoman. That stunned some of the colleges, which had believed they could get immediate access to the money if needed.
Wachovia became concerned that there might be the equivalent of a run on the fund, given recent woes with other short-term debt funds, Ms. Fay says.
The Short Term Fund is offered by Commonfund, a Wilton, Conn., nonprofit that advises colleges and schools on money management. Verne O. Sedlacek, Commonfund’s chief executive, says 85% of the fund was in “high-quality” commercial paper from blue-chip issuers. The rest is largely in securities backed by assets like mortgages — the kind of investments that are being especially shunned in the credit crisis. He estimates those are selling for about 89 cents on the dollar.
The shutdown of the fund came just as the government facilitated a sale of the bulk of Wachovia to Citigroup Inc. Ms. Fay said that the decision on the fund didn’t have any connection to the Citi deal and that the part of Wachovia that handled the fund isn’t moving to Citigroup.
The fund’s fate shows how investors who stretched for a modestly better return by taking on what they thought was almost no additional risk have been burned. At first, colleges Monday were told they could redeem only 10% of their holdings, but the figure has since risen to 33%. Schools will be able to withdraw at least 57% of their money by year end and the rest in installments through 2011, Commonfund says.
In central Kansas, Bethany College, a Lutheran school with 600 students and a $12.5 million budget, has $700,000 parked in the fund. “Wall Street has hit Swensson Street,” says Edward F. Leonard III, Bethany’s president, referring to a street that runs through the campus.
Dr. Leonard says the school has four to six weeks to figure out whether it has enough cash for coming bills and, if not, to identify alternatives, such as securing bank lines of credit or tapping into the school’s $25 million endowment, which he says could amount to a “long-term hit” on the school’s finances.
Commonfund says none of the securities have defaulted, and the fund should be able to return the money to shareholders as the securities mature. The firm says it is working with clients to try to find them lines of credit.
Several Minnesota schools had money in the fund, including Macalester College. Spokeswoman Barbara Laskin said the school had a modest amount invested with the fund and the developments won’t affect day-to-day operations.
Grinnell College in Iowa had about $5 million in the fund, but the school also has a $1.5 billion endowment. Russell K. Osgood, Grinnell’s president, says the school established a variety of new accounts over the summer to make sure it was diversified and that no one fund could lead to a cash crunch.
Amy Falls, chief investment officer for the endowment of private high school Phillips Academy in Andover, Mass., pulled money out of the fund a year ago and put it in Treasurys, she says. “In times like this, you want cash.”
My old kitchen had leaky pipes, aluminin wiring, a beam that needed to be moved and I had to upgrade to 220 amp to run applicance and rip up concrete the prior dope put under cermanic tiles that cause them to crack. 50 year old kitchens are a nasty fix. I came out with 35K and I reused most appliances and nickled and dimed ever last penny
Gimme a freaking break:
“‘I don’t think people truly understand the gravity,’ she says in a phone interview. ‘Nobody in my generation and even the generation before me has seen hard times, and I don’t think it’s something they can possibly fathom. You go down to the local diner for lunch and everybody cries together.'”
excerpted from: http://www.cnbc.com/id/26990801
here’s a question for u guys. You seem to be very with it. Would it make more sense to buy a house now or wait a year and see if the prices fall more…My worry with waiting is that the mortgage interest rates will climb rapidly as well. Today I think they were at like 6.08%. I’d hate to wait for A price reduction would be good, but paying 12-14 % interest on a mortgage loan doesn’t sound good either?
http://strategerycapital.com/index.php?slug=contact
#263 Shore: And again all of these articles are written with the belief that all we have to do is approve the bailout,and credit will flow again,and all will be well.
woody,
wait
Its better to have a smaller principle and a higher rate then the reverse. You can always refinance to a lower rate at a later date, but cannot change the price of the principle.
thanks kettle…that’s kinda what I was thinking, but just wanted to double check
Off the desk…..
I assume you guys monitor the credit markets. Total disarray. Bank loans are down 10pts in high yield land. Obviously it is really bad. There is no bid for anything cash- loans, bonds, prefs, etc. Rumors of huge hedge fund blow ups, massive unwinding, marign calls, etc. Nothing I’m sure you have not heard.
I’m sure you know all this, but just trying to keep you up. If you need any color on anything, pls dont hesitate to ask.
Best,
Mike
“My worry with waiting is that the mortgage interest rates will climb rapidly as well.”
I woould rather pay a greater interest rate to finance than a higher price. Prices will fall, I believe. Thus, if one buys now, the asset they purchase will most likely be worth less next year than this year. Financing costs MAY go up and, even if they do, they will likely come down at some point allowing buyers to refi. The overpayment of price is forever, whilst the overpayment of interest is temporary.
Also, the extra savings one puts away over he next 12 months may more than pay for the higher financing costs. If it were I, I would wait, save, and pay the higher interest rate.
3b AND that life should be pain and risk free.
3b Says:
October 2nd, 2008 at 3:09 pm
#263 Shore: And again all of these articles are written with the belief that all we have to do is approve the bailout,and credit will flow again,and all will be well.
Shore: Also bear in mind that many of these article writers went to Ivy-League schools, so you know that they have a soft underbelly for anything that requires hard work, sacrifice, apple pie and the American Way.
Looks like Ket beat me to the punch.
It is at times like this that my experience growing up poor, struggling to get through school, graduating into a recession, working all manner of lowlife jobs to get by and get a graduate degree, again graduating into a recession, scraping, saving, even freezing from lack of heat at times, struggling to get fed twice a day, let alone 3 times, at times, and then being frugal and living with my means leaves me with very little sympathy for those who have 1) always had it easy or 2) failed to prudently plan for lean times.
you guys make sense to me thanks :)
#272 chgofinance: You sound a little sensitive.
Platinum Falls to Lowest in 32 Months as U.S. Auto Sales Plunge
Chifi,
I believe what you say about how bad things are getting. I heard the same things at the White House. The thing is that there are many people like me who have had it up to here with this nations failure to act financially prudently. Congress does not act prudently. Citizens do not act prudently. Banks do not act prudently. Wall Street does not act prudently. Enough is enough. It may be painful to endure but it is necessary to get ourselves back on track.
3b Says:
October 2nd, 2008 at 3:26 pm
#272 chgofinance: You sound a little sensitive.
I’ve seen people with similar attitudes to the ones you’ve displayed here go out of their way to (1) undermine and/or (2) destroy people’s careers, based on petty jealousy. If you have behaved in such a way at any point in time, I am your enemy.
Shore Guy Says:
October 2nd, 2008 at 3:33 pm
Chifi, It may be painful to endure but it is necessary to get ourselves back on track.
Shore: We don’t have to agree, just as long as there is (not you) no complaining in hindsight.
Chifi,
The people who will be complaining are those who have lived beyond their means and expect government to save them from themselves. If we don’t grow up and act in wasy befitting a greaqt nation, we will not be one in the future.
How does everyone like Buffet’s move. Invest a few billion then start preaching about how we need the bailout? Could see that one coming a mile away. How many people can he convince to vote yes? Probably enough.
I know he wins either way but am I jealous or envious?
I also wish someone was correcting these people on saying main street every time they use the term. No its a wall street bailout your just getting main street to pay for it.
Mc-Ca-in has pulled out of MI, I hear.
Billionaire Warren Buffett, the world’s preeminent stock picker, described the world’s largest economy yesterday as being “flat on the floor” after a cardiac arrest.
This Republican thinks that it is likely that BO wins 300-380 Electoral votes, unless Mc-Ca-in comes up with some incredible policy initiative that just knocks the socks off of the average voter, or appears at the third debate holding up Bin Laden’s head for the camera.
I smell a rate cut!!!!!!!
#279 CF:
You paint with an incredibly broad brush.
chi[280],
My only complaint, I can’t short.
Any hostilities? Only directed at the SEC. A bunch of incompetent, negligent fraudsters. Just asleep at the wheel. Their regulation centers upon building one’s pension and resorting to ill advised, tactics, once the barn has burnt down. Total bunch of jack#sses. That said, I have no idea where, nor do I care, they went to school.
Otherwise, it’s pretty much playing out close to what we have been discussing for the last 3 years. But then again, when I first arrived on this site I was called Mr Doom. That guy Richard even called me Roach [Stephen] like. Where is that guy Richard?
#286 I think I smell one too. I dont think they have much choice but to cut rates. They need to use ever means to try and get people buying and raising them will only damage values. Could be a decent cut to try and jump start things again. Bailout out low rates but with the unemployment rate are there any real buyers or just down sizers?
Mitchell,
“They need to use ever means to try and get people buying and raising them will only damage values”
????? what are people going to buy stuff with? a rate cut only delays the pain. Any bailout only delays the pain. The sooner rates are increased and we face up to having maxed out our credit cards, as individuals, as a nation, and as businesses, the sooner we can hopefully start saving again.
Time to pay the piper
How close is this to the financial problems of the 70’s? I was young but all i remember were the long lines to get gas
You can cut rate to zero [Japan]. Unfortunately, it does not cure insolvency.
just came across this, has this popped up yet???
“We now know that it was French finance minister Christine Lagarde who begged Mr Paulson to save the US insurer AIG last week. AIG had written $300 billion in credit protection for European banks, admitting that it was for “regulatory capital relief rather than risk mitigation”. In other words, it was underpinning a disguised extension of credit leverage. Its collapse would have set off a lending crunch across Europe as banking capital sank below water level.”
285, Comrade shore,
Was saying the same thing for the past week.
BTW, just practicing. We don’t have to start calling one another “comrade” for a few months yet. And we will have to put “former capitalist running dog” before each of our blog names.
#290 I agree with your kettle but the banks are sitting on a ton of dead weight if the rates are raised the homes are worth even less.
Were all aware of what needs to be done but they don’t have the guts to do it. We all know the government intervention will only lengthen the process.
former capitalist running dog_ Nom
When do they start serving the Borscht comrade?
for the purpose of having fun while watching the SP/JB debate tonight:
http://palinbingo.com
“That provision, which was not in the original plan but was reportedly inserted in response to lobbying by bankers around the world, gives French, British, Japanese, Chinese, or Swiss banks with subsidiaries in the U.S. the same access to taxpayer dollars to buy their bad loans as, say, Citigroup Inc., C 22.50, -0.50, -2.2%) or Commerce Bancshares Inc.,CBSH 49.24, -4.73, -8.8%) or community banks in Topeka, Kansas, and Norman, Oklahoma.”
“Assets now held in China and London can be sold to U.S. entities on Monday and then sold to the Treasury on Tuesday,”
http://www.marketwatch.com/news/story/bailout-bills-foreign-aid-program/story.aspx?guid=%7BA6967E51%2DFC1A%2D4BFC%2DBB93%2DE57327D873F6%7D
Shore – we said hello to Gate 74 for you.
Chifi – If it makes you feel any better, I don’t know if a 6 hr flight with a 3 yr old should be called a vacation or a suicide mission. In any event we will soon find out.
Mitch
“if the rates are raised the homes are worth even less.”
The completely ridiculous aspect of all of this is home prices are 100% guaranteed to fall and substantially. The entire bailout BS is based on getting banks to hand out credit and maintain home prices. Both of which are impossible to do on the scale needed to maintain the status quo.
Alas, Dont worry to much. It looks very much like europe is going to be the start of the avalanche downward. That way all of us proud americans can thump our chests and say it wasnt us who caused the collapse, we just got caught in it….
sarcasm off
kettle [293],
Another twist;
“In mid September, in between other dramatic failures including Lehman Bros., and the bailout of Fannie Mae and Freddie Mac, Paulson announced that the US Treasury, as agent for the United States Government, was to bailout the troubled AIG with a staggering $85 billion. The announcement came a day after Paulson announced the Government would let the 150-year old investment bank, Lehman Brothers, fail without Government aid. Why AIG and not Lehman?”
“What has since emerged are details of a meeting at the New York Federal Reserve bank chaired by Paulson, to discuss the risk of letting AIG fail. There was only one active Wall Street banker present at the meeting—Lloyd Blankfein, chairman of Paulson’s old firm, Goldman Sachs.”
“Blankfein later claimed he was present at the fateful meeting not to protect his firm’s interests but to ‘safeguard the entire financial system.’ His claim was put in doubt when it later emerged that Blankfein’s Goldman Sachs was AIG’s largest trading partner and stood to lose $20 billion in a bankruptcy of AIG. Were Goldman Sachs to go down with AIG, Secretary Paulson would have reportedly lost $700 million in Goldman Sachs stock options he had, an interesting fact.”
http://www.financialsense.com/editorials/engdahl/2008/1001.html
These are the types of stories that I’m talking about.
I don’t need some ancidotal news clipping about how some guy with bad credit cant get a loan for his buisness…YOU HAVE BAD CREDIT FOR A REASON.
“Another regional bank turned him down for a $200,000 credit line, citing his personal credit score and the fact that his company didn’t have enough assets to secure the line.”
Or about how some guy that doesn’t make or produce anything can’t find financing for his online store that has 350,000$ in sales. Being a middle-man doesn’t make you the soundest investment, consider yourself cut out.
“Education 4 Kids Inc. owner J.M. Ivler is back to financing his 5-year-old online retailer with personal credit cards. “I can’t get the banks to give me a loan,” complains Mr. Ivler, whose Las Vegas company is profitable and produced $350,000 in sales last year.”
Why in the world are schools sitting around with 9.3 BILLION in cash to invest? It is high time that education got cheaper and this is one prime reason. I get the distinct inpression now that these schools were fleecing their constituents.
“A fund that invests cash for about 1,000 colleges and private schools suddenly froze withdrawals this week, leaving school finance managers scrambling to make sure they have enough money for payroll and other bills.
For 34 years, colleges and schools parked cash in the now $9.3 billion fund, which offered returns slightly above U.S. Treasury bills. ”
Now I may be one of the biggest @holes for saying this but when people who made the right decisions start getting thown under the bus then I might change my attitude. I can’t shed tears for buisnesses with bad credit (due to irresponsibility) or lack of assets and sound buisness models, nor can I shed tears for educational institutions that invest payroll accounts in stocks and bonds.
The sheer magnitude of it all underwhelms me.
Chifi –
Do you think the plan in its current form will work?
BTW, I do agree that we do need to take some sort of action, but all the reputed economists have unanimously disagreed with it.
The main issues – no transparency, everything is at the discretion of the Treasury Secretary.
The only people supporting “this” plan are the talking heads on CNBC and Friends of Paulson.
#233 Chi
I love stories like this. Ive remodeled kitchens using high end appliances for 20,000 and under. The key is shopping for good quality discontinued or “end of the run” flooring, counter tops and doing about 50% of the labor yourself. And make sure you start shopping a month or two ahead of time, have everything at the ready so you aren’t forced to pay top retail.
Here is Stiglitz’s view on the plan –
“Moreover, the plan assumed that the fundamental problem was one of confidence. That is no doubt part of the problem; but the underlying problem is that financial markets made some very bad loans. There was a housing bubble, and loans were made on the basis of inflated prices.
That bubble has burst. House prices probably will fall further, so there will be more foreclosures, and no amount of talking up the market is going to change that. The bad loans, in turn, have created massive holes in banks’ balance sheets, which have to be repaired. Any government bail-out that pays fair value for these assets will do nothing to repair that hole. On the contrary, it would be like providing massive blood transfusions to a patient suffering from vast internal hemorrhaging.”
We could do more with less money. The holes in financial institutions’ balance sheets should be filled in a transparent way. The Scandinavian countries showed the way two decades ago. Warren Buffet showed another way, in providing equity to Goldman Sachs. By issuing preferred shares with warrants (options), one reduces the public’s downside risk and ensures that they participate in some of the upside potential.
http://www.guardian.co.uk/commentisfree/2008/sep/30/marketturmoil.wallstreet
Why isn’t Congress listening to these guys?
#233 in other words, I avoid the “designer showrooms” for purchases. I go to industrial parks where the tiles are actually made, counter tops actually fabricated and I ask “whadcha got?” then design around what is available.
BC bob
No conflict of interest here, nothing to see! move along please!
Gators
Enjoy the club, and the flight. TOo bad you will miss tonight’s entertainment. I am cringing already. Both for what I may see and that BO seems to be on his way to a landslide.
#300 Agree with you there too.
My thought is let it fail others will emerge to give proper home loans. More opportunities to the banks that know where to put a dollar and when to hold onto it.
With the unemployment rate on the rise there is no way to prevent the market from going down. But they don’t acknowledge that do they? Bailout only delays the inevitable or just adds more garbage to the pile.
The new September warning notices for NJ layoffs are finally posted (NJ Dept. of Labor site).
It looks like the Star Ledger may be closing as they warned a month or so ago.
A shame because it’s NJ’s main newspaper.
You people are nuts, the “bail-out” is not about home prices or saving broke folks. It is to get the credit markets flowing so we don’t have a string of bank failures and bond defaults resulting in FDIC going bankrupt, people losing their life savings and 10% unemployment. It ain’t so subprime Jose the Gardener can save his zero percent down peak priced house or for Uncle Tony to put some white shoes and matching belts on his already maxed out credit cards.
The Lehman, Bear, AIG, Wachovia, AHM, Indy Mac, Wamu folks have been crucified and most have lost their jobs, all have taken a huge beating in their net worth and the ones who still have jobs can kiss their 2009 bonuses and raises goodbye and they are are looking at a 50% paycut next year due to no bonus.
You want to crucify someone go find your local NAR agent and their crooked mortgage broker and appraiser friends and beat them to death with their multi million dollar sales thropies.
Tonights debate should have been a PayPerView. It probably would raise enough cash to save wall street.
Why the flight from Gold today?
Just a sampling of the 451 pages of slop. DC will solve our banking problems? Don’t hold your breath.
Sorry, no link.
Sec. 308: Increase in limit on cover over of rum excise tax to Puerto Rico and the Virgin Islands.
Sec. 309: Extension of economic development credit for American Samoa.
Sec. 310: Extension of mine rescue team training credit.
Sec. 311: Extension of election to expense advanced mine safety equipment.
Sec. 312: Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico.
Sec. 314: Indian employment credit.
Sec. 315: Accelerated depreciation for business property on Indian reservations.
Sec. 316: Railroad track maintenance.
Sec. 317: Seven-year cost recovery period for motorsports racing track facility.
Sec. 318: Expensing of environmental remediation costs.
Sec. 319: Extension of work opportunity tax credit for Hurricane Katrina employees.
Sec. 320: Extension of increased rehabilitation credit for structures in the Gulf Opportunity Zone.
Sec. 321: Enhanced deduction for qualified computer contributions.
Sec. 322: Tax incentives for investment in the District of Columbia.
Sec. 323: Enhanced charitable deductions for contributions of food inventory.
Sec. 324: Extension of enhanced charitable deduction for contributions of book inventory.
Sec. 325: Extension and modification of duty suspension on wool products; wool research fund; wool duty refunds.
Sec. 401: Permanent authority for undercover operations [as related to tax provisions].
Sec. 402: Permanent authority for disclosure of information relating to terrorist activities [as related to tax provisions].
Sec. 501: $8,500 income threshold used to calculate refundable portion of child tax credit.
Sec. 502: Provisions related to film and television productions.
Sec. 503: Exemption from excise tax for certain wooden arrows designed for use by children.
Real-estate tycoon trying to promote *Upper* Newark.
Newly RENAVATED !!
http://newjersey.craigslist.org/reo/861368380.html
310- John.
Why dont the banks give us the same deal as Buffet?
BTW what time is the vote Friday?
“Sec. 503: Exemption from excise tax for certain wooden arrows designed for use by children.”
– Congress is foresighted. They are already preparing our children to be hunter-gatherers.
Sec 503 relates to little arrows sold to the boyscouts of america that got lumped into a new tax on hunting arrows, it will expempt the little hunting arrows from the tax. Come on now that is peanuts.
Re 315 the banks are giving you the same deal. In fact NJ munis hit almost 6% today that is the equivalent of 10% after tax income and many blue chip company bonds are paying 10% which is better than Buffer at he only got Pref and bonds get paid first.
First thing in morning I am buying triple AAA bonds, muni or GE yields are at crazy highs. I am down to my last 100k in cash and am slowly putting it to work.
John,
Why should I care about someones 2009 bonuses when most of America doesn’t get them?
Sorry but I have no remorse to companies that back items based on Enron practices of paper estimated worth and try to force those who managed money properly to buy the worthless paper so they can have 2009 bonuses and jobs.
Bad loan companies could be gone or we can give them money to continue operating? No way.
Do you ask the bums for a return on the dollar you gave them last month you know they are going to buy a bottle of hooch on?
My Sister is a problem child and every time someone gives her a handout she manages to get into worse shape. This went on for years and finally when no one could afford to help her out it took a while but she started to get her act together.
The banks would behave better if they knew no one is going to bail them out. But if there is a bailout every time they make a mistake well then anything goes after all what is the risk.
#300 I still do not understand how putting an artifical price support under a MBS will stop house prices from falling?
Again I know we will have the bailout, because thr markets demand it, even though they have no idea whether it will work or not.
However, once we get the bailout, and if it does not work, than what? The End?
3b,
It’s not a bailout, it’s a rescue package. Now, who rescues the rescue package?
“Mc-Ca-in has pulled out of MI, I hear.”
He should just concede. What’s left of his campaign money can go to pay off the mortgages of close to 300 median american homes.
“ts not a bailout, its a rescue package.”
Officer, of course she is not a prostitute. She is a special street and cheap-motel tour guide.
Clot,
I’ve been wondering about this all day.
I can see buyers getting unnerved and pulling out right now.
But *why* are your buyers and sellers trying to slug one another?
At least one side of the deal should want to get the deal done.
Man Shoots Himself in Arm After Being Denied Sex
10 minutes ago
Man Arrested After Fireworks Ignite Inside Car
10 minutes ago
Man Gets Burned While Using Lighter to Siphon Gas
These really are “Latest Headlines” in NY Times. They fail to state that all 3 men were involved in drafting the bailout proposal.
It doesn’t make me feel good when all these people come on tv and make mistakes.
It’s mark to market not mark to mark. Heard that enough times. How are we supposed to know you understand what changing the rules regarding that when you can’t even say it.
Why don’t we mark to fantasy housing too so homeowners can refinance indefinately too. Lets make it completly rediculous.
Dubya said the FDIC increased limits will also help out credit unions. Credit unions are insured by NCUA.
Don’t know what the FDIC limits will do. Apparently it only represents 2% of deposits.
Why hasn’t anyone asked, if this was such a crisis, why didn’t the lenders work on participating in the foreclosure rescue program to keep money flowing rahter than going into foreclosure?
What assurances do we have that once the money is given out, that it will free up the credit markets and not just be hoarded?
I think $700bln can create and fund a lot of soup kitchens.
If its all about home ownership 700 billion buys a lot of low income housing.
Sure would pay for a lot of education as well and lets start saying a trillion because you know there is more to come and some that already has.
still (151): bacon goes with *everything*… i used to drape my roast chicken with the stuff…
Chi finance guy—Are you really that naive to believe that ure fax to your local representative is going to make a difference???
This whole bailout has been orchestrated! It’s a big joke. On Monday the House voted it down….it is so obvious they did it on purpose KNOWING they would come back on Thursday and pass it…they wanted US to believe that they actually cared about the American people and that they wer “doing the right thing”. Well guess what they are the enemy.
This Country is a mirage of freedom. We are not free, it just seems that way…see electoral college. The vote is a joke, the house is a joke, the senate is a joke. This is an Aristocratic Oligarchy through and through.
wake up
Ran across this blog post from a former GE employee I thought some of you guys might like.
It’s the type of stuff I suspect happens at most companies. Just like everyone became a house flipper with a 5 gallon bucket of paint and granite countertops, so was the mentality of putting lipstick on a pig at GE.
Looks like GE tapped into all their other businesses to put money into their credit business.
Wonder how that worked out.
shore- 164- bryn mawr
my mother (as a returning adult student) had a very very unpleasant experience there. the classics department is pretty misogynistic (or at least it was 6 years ago. i think some heads may have rolled soon after she left). otoh, the campus is aesthetically very pleasing.
Are “O” gets in, the ACORN Police will be everything in order.
[296] Comrade Kettle,
1/21/09, three months after the Glorious November Revolution, when the downtrodden proletariat throws off the yoke of the oppressive capitalist running dogs of the bourgeoise.
[331] alia
a misogynistic department at an all-women’s college????
[234] stu,
Good thing, otherwise I would have hit on her.
Enjoy the flight–got lots of diversions??? (like a portable DVD player?).
Remember to take potty break before boarding. No fun dealing with a toddler and an airplane lav. And don’t be shy about advocating for early seating b/c of your 3 y/o.
#321 BC BOB:Now, who rescues the rescue package?
Lots of pontificating by lot’s of people including some on this board who insist that they know best,and this must be passed.
I know it will be passed, there are just alot of legitimate questions, that in the haste to pass this thing, are not being addressed.
Other alternatives such as the Swedish model from the early 90’s are immediately dismissed.
And again, we do not even know if it will work, just a hope and a prayer.
I forgive myself for being skeptical.
While I am not ususally into conspiracy theory’s but….. I think that Mc wants to blow this election. He knows this bailout will patch things till November. This will be a landslide that will just keep sliding.
KL
“Looks like GE tapped into all their other businesses to put money into their credit business.”
Tom,
HMMM, sounds similar to AIG.
If the the 700B bailout goes through, we won’t be living long enough to see the money back much less see the Govt making a Profit. We simply have an over abundance of housing stock at elevated prices. As the US population grows in years to come and reach that critical mass which will spur a demand on the houses who will pay for these houses at current prices (plus lost interest on this 700B while waiting this to happen), this money is Gone. Maybe our kids will oneday see this 700B back in our hands.
There are 2 types of people in this world. The employer and the employee. The employer and all those people higher up in the food chain will demand for a bailout where as the employees and the people low down in the food chain have no choice but see this happen. We are both connected in the Hip.
scribe (324)-
It’d take more bandwidth than Grim has to explain it.
scribe (324)-
It’s just dumb people doing dumb things.
McCain is smart enough to recognize the “End of Days”. If he got elected he would have to try his best to stave it off. It’s in his nature. The “O” can be blissfully ignorant, till the End. His last act will be to appropriate all 401K & IRA money for ACORN. 2012 may be right.
BC Bob,
Yeah, like I said, a lot of companies did this. Merge/buy other companies to be able to put more money at risk.
See we don’t need deregulation. Eventually they’ll undermine themselves.
nom,
334: the irony is not lost on me.
Clot,
This may be an opportunity for a John-like narrative :)
http://www.thingspalincanname.com/
does it strike anyone else as embarrassing when a (vice)presidential debate has to be tightly formatted so that none of the candidates can embarrass themselves and forced to think on the fly?
Seriously, what happened to putting two people on a satge and letting them go at it with a moderator directing them? ( yes i already no the answer)
Debate Training – Biden learns what makes girls cry
http://www.236.com/news/2008/10/01/debate_training_biden_learns_w_1_9211.php
The Real Great Depression
The depression of 1929 is the wrong model for the current economic crisis
Article tools
By SCOTT REYNOLDS NELSON
As a historian who works on the 19th century, I have been reading my newspaper with a considerable sense of dread. While many commentators on the recent mortgage and banking crisis have drawn parallels to the Great Depression of 1929, that comparison is not particularly apt. Two years ago, I began research on the Panic of 1873, an event of some interest to my colleagues in American business and labor history but probably unknown to everyone else. But as I turn the crank on the microfilm reader, I have been hearing weird echoes of recent events.
When commentators invoke 1929, I am dubious. According to most historians and economists, that depression had more to do with overlarge factory inventories, a stock-market crash, and Germany’s inability to pay back war debts, which then led to continuing strain on British gold reserves. None of those factors is really an issue now. Contemporary industries have very sensitive controls for trimming production as consumption declines; our current stock-market dip followed bank problems that emerged more than a year ago; and there are no serious international problems with gold reserves, simply because banks no longer peg their lending to them.
In fact, the current economic woes look a lot like what my 96-year-old grandmother still calls “the real Great Depression.” She pinched pennies in the 1930s, but she says that times were not nearly so bad as the depression her grandparents went through. That crash came in 1873 and lasted more than four years. It looks much more like our current crisis.
The problems had emerged around 1870, starting in Europe. In the Austro-Hungarian Empire, formed in 1867, in the states unified by Prussia into the German empire, and in France, the emperors supported a flowering of new lending institutions that issued mortgages for municipal and residential construction, especially in the capitals of Vienna, Berlin, and Paris. Mortgages were easier to obtain than before, and a building boom commenced. Land values seemed to climb and climb; borrowers ravenously assumed more and more credit, using unbuilt or half-built houses as collateral. The most marvelous spots for sightseers in the three cities today are the magisterial buildings erected in the so-called founder period.
But the economic fundamentals were shaky. Wheat exporters from Russia and Central Europe faced a new international competitor who drastically undersold them. The 19th-century version of containers manufactured in China and bound for Wal-Mart consisted of produce from farmers in the American Midwest. They used grain elevators, conveyer belts, and massive steam ships to export trainloads of wheat to abroad. Britain, the biggest importer of wheat, shifted to the cheap stuff quite suddenly around 1871. By 1872 kerosene and manufactured food were rocketing out of America’s heartland, undermining rapeseed, flour, and beef prices. The crash came in Central Europe in May 1873, as it became clear that the region’s assumptions about continual economic growth were too optimistic. Europeans faced what they came to call the American Commercial Invasion. A new industrial superpower had arrived, one whose low costs threatened European trade and a European way of life.
As continental banks tumbled, British banks held back their capital, unsure of which institutions were most involved in the mortgage crisis. The cost to borrow money from another bank — the interbank lending rate — reached impossibly high rates. This banking crisis hit the United States in the fall of 1873. Railroad companies tumbled first. They had crafted complex financial instruments that promised a fixed return, though few understood the underlying object that was guaranteed to investors in case of default. (Answer: nothing). The bonds had sold well at first, but they had tumbled after 1871 as investors began to doubt their value, prices weakened, and many railroads took on short-term bank loans to continue laying track. Then, as short-term lending rates skyrocketed across the Atlantic in 1873, the railroads were in trouble. When the railroad financier Jay Cooke proved unable to pay off his debts, the stock market crashed in September, closing hundreds of banks over the next three years. The panic continued for more than four years in the United States and for nearly six years in Europe.
The long-term effects of the Panic of 1873 were perverse. For the largest manufacturing companies in the United States — those with guaranteed contracts and the ability to make rebate deals with the railroads — the Panic years were golden. Andrew Carnegie, Cyrus McCormick, and John D. Rockefeller had enough capital reserves to finance their own continuing growth. For smaller industrial firms that relied on seasonal demand and outside capital, the situation was dire. As capital reserves dried up, so did their industries. Carnegie and Rockefeller bought out their competitors at fire-sale prices. The Gilded Age in the United States, as far as industrial concentration was concerned, had begun.
As the panic deepened, ordinary Americans suffered terribly. A cigar maker named Samuel Gompers who was young in 1873 later recalled that with the panic, “economic organization crumbled with some primeval upheaval.” Between 1873 and 1877, as many smaller factories and workshops shuttered their doors, tens of thousands of workers — many former Civil War soldiers — became transients. The terms “tramp” and “bum,” both indirect references to former soldiers, became commonplace American terms. Relief rolls exploded in major cities, with 25-percent unemployment (100,000 workers) in New York City alone. Unemployed workers demonstrated in Boston, Chicago, and New York in the winter of 1873-74 demanding public work. In New York’s Tompkins Square in 1874, police entered the crowd with clubs and beat up thousands of men and women. The most violent strikes in American history followed the panic, including by the secret labor group known as the Molly Maguires in Pennsylvania’s coal fields in 1875, when masked workmen exchanged gunfire with the “Coal and Iron Police,” a private force commissioned by the state. A nationwide railroad strike followed in 1877, in which mobs destroyed railway hubs in Pittsburgh, Chicago, and Cumberland, Md.
In Central and Eastern Europe, times were even harder. Many political analysts blamed the crisis on a combination of foreign banks and Jews. Nationalistic political leaders (or agents of the Russian czar) embraced a new, sophisticated brand of anti-Semitism that proved appealing to thousands who had lost their livelihoods in the panic. Anti-Jewish pogroms followed in the 1880s, particularly in Russia and Ukraine. Heartland communities large and small had found a scapegoat: aliens in their own midst.
The echoes of the past in the current problems with residential mortgages trouble me. Loans after about 2001 were issued to first-time homebuyers who signed up for adjustablerate mortgages they could likely never pay off, even in the best of times. Real-estate speculators, hoping to flip properties, overextended themselves, assuming that home prices would keep climbing. Those debts were wrapped in complex securities that mortgage companies and other entrepreneurial banks then sold to other banks; concerned about the stability of those securities, banks then bought a kind of insurance policy called a credit-derivative swap, which risk managers imagined would protect their investments. More than two million foreclosure filings — default notices, auction-sale notices, and bank repossessions — were reported in 2007. By then trillions of dollars were already invested in this credit-derivative market. Were those new financial instruments resilient enough to cover all the risk? (Answer: no.) As in 1873, a complex financial pyramid rested on a pinhead. Banks are hoarding cash. Banks that hoard cash do not make short-term loans. Businesses large and small now face a potential dearth of short-term credit to buy raw materials, ship their products, and keep goods on shelves.
If there are lessons from 1873, they are different from those of 1929. Most important, when banks fall on Wall Street, they stop all the traffic on Main Street — for a very long time. The protracted reconstruction of banks in the United States and Europe created widespread unemployment. Unions (previously illegal in much of the world) flourished but were then destroyed by corporate institutions that learned to operate on the edge of the law. In Europe, politicians found their scapegoats in Jews, on the fringes of the economy. (Americans, on the other hand, mostly blamed themselves; many began to embrace what would later be called fundamentalist religion.)
The post-panic winners, even after the bailout, might be those firms — financial and otherwise — that have substantial cash reserves. A widespread consolidation of industries may be on the horizon, along with a nationalistic response of high tariff barriers, a decline in international trade, and scapegoating of immigrant competitors for scarce jobs. The failure in July of the World Trade Organization talks begun in Doha seven years ago suggests a new wave of protectionism may be on the way.
In the end, the Panic of 1873 demonstrated that the center of gravity for the world’s credit had shifted west — from Central Europe toward the United States. The current panic suggests a further shift — from the United States to China and India. Beyond that I would not hazard a guess.
347 Kettle
That was hysterical! Thanks~
AIG subsidiary parties in style in OC, two weeks after bailout
October 2nd, 2008, 7:00 am · 30 Comments · posted by Teri Sforza, Register staff writer
Financial crisis? What financial crisis?
Less than two weeks after Uncle Sam gave American International Group (AIG) an $85 billion loan – staving off financial collapse – execs from one of its insurance subsidiaries, AIG American General, gathered for a conference at the uber-swank St. Regis Monarch Beach Resort, billed as “California’s only Mobil Travel Guide Five-Star Resort,” where ocean-view rooms start at $565 a night and “world class luxury” is the rule.
On Friday, before the presidential debate got under way, caterers for the St. Regis were setting up dozens of tables on the grounds of Mission San Juan Capistrano for AIG American General’s sumptuous off-site dinner. Tables were draped with soft Tuscan-gold tablecloths that cascaded to the grass; elegant fresh flower centerpiece graced each table; and what appeared to be fine crystal stemware, at least from a distance, glistened in the fading light.
http://taxdollars.freedomblogging.com/2008/10/02/after-federal-bailout-aig-fetes-in-style-in-oc/
just found this…. Cant vouch for its integrity.
This from a friend in Atlanta with strong banking connections: “ Reliable word that Bank of America branch managers just received a letter or memo from the USFed instructing them to perhaps be ready for a one-week universal shut-down of the banking system , including access to checking accounts, savings accounts and credit cards. Reliable word has it that BofA bank branches received a shipment of signs last week, reading “WE’RE SORRY, BUT DUE TO CIRCUMSTANCES BEYOND OUR CONTROL, WE CANNOT BE OPEN AT THIS TIME.”
http://www.marketoracle.co.uk/Article6587.html
Also talked to a friend today who tried to withdraw 10K from BofA and was told he could not withdraw that amount and would have to schedule it with the branch manager. This was in boston, earlier today
Kettle [348],
Interesting. I have to brush up on 1873. Structured finance in its infancy. Brilliant, the underlying collateral, tied to the loan was a ghost. Hey, WS can sell anything. Come to think of it, they’ll also sell you a package of explosives if you want to blow up the world. Ah stupid me, been there.
“The first source of pressure is concern about solvency, and the ability of banks to withstand further losses. The unexpected rejection of the American bail-out plan on September 29th cast doubt on one obvious mechanism to remove the worst-performing assets from banks’ balance-sheets. But even if it is revived, as most expect, the cycle of losses will continue as the drumbeat of bad economic news intensifies. WaMu and Wachovia were undone not by mark-to-market losses, after all, but by the appalling quality of their loan books. It is the same story in many parts of Europe.”
http://www.economist.com/finance/displaystory.cfm?story_id=12342156
BC Bob,
2 things. 1st; who takes the place of the jews in 1873? The mexicans or the arabs? the mexicans are more visible in day to day life, but the arabs are the group that have the money. it could be both groups that get scape goated.
2nd: the center of credit shifted to the US because we were the leaders of the industrial revolution at that time. We are entering an energy crisis as the financial crisis begins. powerful financial systems require ready access to energy and at the moment it is questionable whether india or china will have that.
My prediction is that who ever shifts to a non-fossil fuel society first will become the next financial world leader. i could elaborate further as to why, but if you are interested e-mail me.
git yer popcorn ready!
here we go.
Oct. 3 (Bloomberg) — Toyota Motor Corp., the world’s second-largest carmaker, fell to a three-year low as it offered no-interest loans on 11 models in the U.S., the first time the company has used free financing across so many models.
just found this useful collection of links:
http://www.themoneymeltdown.com/
You guys are funny, what does the bail out have to do with home prices? If people have jobs they can afford to pay their overpriced mortgages on their peak priced houses. Hey the people who bought at the peak in 1988/1989 had to suck it up and be underwater for 8 years.
The bail out is to unfreeze the credit markets and get the banks to start lending. Not to make homeowners who bought overpriced homes they could not afford whole. Heck plenty of dopes took five year loans on Escalades in 2005-2008 am I supposed to pay their payment too.
Bonus money is juice for the economy. I save from every paycheck but every bonus time my wife extracts half for things, car, kitchen, fence, sidewalk etc. When bonus money is gone the big annual purchase is gone and goodbye small businessman. No bonus in 2002 and 2003 ment no project or purchase for me that year.
I hate to be a place doing holiday parties this year. Well my party is at the ritz carlton but I don’t do subprime stuff.
Above 10K have to file a SAR – suspecious activity report with Feds as part of AML rules, you need manager approval, need to state why you need money and the govt puts your name on the list.
kettle1 Says:
October 2nd, 2008 at 8:33 pm
Also talked to a friend today who tried to withdraw 10K from BofA and was told he could not withdraw that amount and would have to schedule it with the branch manager. This was in boston, earlier today
Mighty Toyota can’t sell cars. Well John maybe everyone heard the call to buy American. Only wish that was the case. Like any car is really made in the country the company is from.
Mike –
John just bought a BMW.
vic I know.
Palin not doing bad.Biden no f ups so far.
What do you know.
Oh My God. She is a total fu(king idiot. Why would someone this out of their league want this job? She should be turning beet red with embarrassment. Maybe she is but there’s so much makeup on her we can’t see it? Isn’t she terrified that she could be President? We are.
And Biden is a tool who is certain about everything. Certainly he’s also mostly wrong.
Doesn’t look like Palin’s family will face a “medical crisis” after all…. you can’t help but think she got away with partying hard in college because her cramming skills are amazing.
Drinking game “catch phrases” aside, not much SNL/Tina Fey material here.
these debates are nothing but WWF wrestling… there to make you think you really have a choice, as to what puppet you will elect, and the outcome has already been selected. (both parties are owned by the SAME corporate interests)
ha ha.. wake up suckers!
you’ve been had brother.
SAS
Back to the real estate market:
Offered 2.5% below asking.
Agent just came back, claiming we need to improve to full price all cash in order to beat competing full price offer.
OK, I give up, will be renting forever.
oh thats right…
there are WMDs in Iraq, there was a lone gunman in the depository, if one domino falls..they all will fall, who ever heard of planes into buildings, Bin Laden never worked for the CIA, and Gulf of Tonkin actaully happened!
hey, back to foosball game, and just call me Fat Albert!
SAS
I would love to get my hands around McNamara and ring his little pencil neck.
ok, back to RE.
SAS
dblko 368 Give it a year. Would not be buying right now anyway, they just did you a favor.
Biden chipped in that they will reduce the mortgage principal on people who hold under water mortgages. People with real down payments and real mortgages are exempt, as they failed to follow new ACORN rules.
#368 dblko: OK, I give up, will be renting forever.
No you won’t. Move on to the next one.The one you lost could very well come back.
#371 mike: Give it a year.
6 months or less.
http://new.gsmls.com/media/getImage.do?mlnum=2527008&res=highres&num=9
check out the new digs.
371 Mike, thanks, I know. It’s just not good for my blood-pressure every time I need to deal with this real estate clowns, or when I hear about having my tax money going to rescue the home owners.
3b In 6 months to a year it may not matter.
SAS (369)
Among other things I collect historical artifacts (these days probably the best investments I made in the last five years aside from some sterling left in a non-interest bearing acount, but that’s another story).
I have an interesting little piece of history – the actual printout of the ship to shore radio communications during the Gulf of Tonkin between the USS Maddox and the NCS Phillipines during the conflict. Over three hours (every entry is time stamped) of detail on hits taken and rounds fired (‘over 21 torpedoes’ ‘pt sunk’). Last entry, partially handwritten, and signed by the ship’s officer ‘clas review of action makes many reported contacts and torpedoes fired appear doubtful. freak weather effects on radar and over eager sonaren [sic] may have accounted for many reports.’ Ooops.
I purchased it to keep as a constant reminder of how governments can distort facts, particularly in times of crisis, to influence public opinion and use it as a basis to claim ever increasing powers.
Didn’t think it would become so relevant so soon.
db 376 That is why I am renting house in 375.
Surfacing for air a few mins of reading my favorite blog…
These credit markets are unreal. Every time I check in w/ FI managers it just seems to be getting worse.
No one wants to go out more than 2 days – how in the h*ll are businesses going to survive with commercial paper mkt shut down?
Bailout, no bailout. Will it matter? Sadly I doubt it. It might slow down the train wreck, or prolong it, but soon enough equities will be following credit into this abyss. I’m shocked it hasn’t happened already. $700b will be a footnote, followed by many more attempted govt footnotes I’m sure.
I have serious doubts as to whether, even if the taxpayer takes the full-on hit for the crap, whether banks will start lending again. Why would they – facing a recession, credit card defaults etc etc.? They’ll just hoard it.
Amateur-hour SEC to lift their short sale ban, 3 days after the supposed panacea? MS is going to have real problems. Bank or no, MS/GS don’t have those deposits as a buffer yet.
I wonder, before it’s all said and done, if the Fed will ultimately just have to bypass banks and lend directly. At least then we’d be sure credit gets extended.
Call me crazy – somehow these banks fall far short of inspiring confidence.
Looks like the NJ WARN notices are out for September. Almost 3000 jobs to be cut in the upcoming months most of which come from the Newark Morning Ledger. I didnt realize that a paper employs 1600 people.
http://lwd.dol.state.nj.us/labor/lwdhome/warn/2008/0908warn.html
I hope we have a record turnout at the polls on Nov 4.
I browsed gsmls during the debate. Nine out of ten homes in my searches had remarks like “pending bank approval, bank owned, sold “as is”, etc.
Mikeinwaiting, have they fixed the problem with the well water out there yet?
kettle1 Says:
October 2nd, 2008 at 8:58 pm
“BC Bob,
2 things. 1st; who takes the place of the jews in 1873? The mexicans or the arabs? the mexicans are more visible in day to day life, but the arabs are the group that have the money. it could be both groups that get scape goated.”
Nah. It’ll still be the Jews. We always get the blame, just read the “internets”.
I know an old lady who like reading that stuff when things are bad because as she says “at least I find out I secretly rule the world”.
dblko,
The towns I’ve been tracking the asking price are down at least 20% since Spring of 07. Don’t know how far down the sold price has dropped.
I’m looking from Warren (Somerset county) to Summit.
# Diane Says:
October 2nd, 2008 at 11:04 pm
“I browsed gsmls during the debate. Nine out of ten homes in my searches had remarks like “pending bank approval, bank owned, sold “as is”, etc.”
If the banks got off their b^tts and sold them at fair market value they’d find they would actually have some cash on hand.
Liquidity is good only at a fixed price.
leftwing,
bloke! if what you say is true. you need to type or copy that and distribute.
I would be interested for sure.
SAS
“I purchased it to keep as a constant reminder of how governments can distort facts, particularly in times of crisis”
I know to well.
what was going on in the Cam Lo, was totally different then what they were telling the public.
SAS
The document is mounted and framed. Can’t scan. I picked it up at auction, owner was a reputable dealer and it came from the family of the original owner. I’ll have to get the papers out that came with it, best recollection is the fellow that kept it was a radio operator or something and when the thing got filed on in a tray he pocketed it and kept it. Legit, the dealer tied the signature back to the officer assigned to that area at the time. Apparently there are copies kept on both the ship and in the naval communications center, this was one of the two. I believe there is something similar in the public archives, may be the second copy.
If Mccain were to be elected and somehow passed away in office we would be left with Frances McDormand from “Fargo” as our president. She would talk about Hockey and Soccer to heads of state. She would proudly proclaim that she is “Joe sixpack” to leaders of powerful nations. She would talk about “energy” a lot. and she would wink at the camera in her presidential press conferences. She would ANNOY the hell out of America with her AWFUL North Dakota/Alaskan infused accent. We would be the laughing stock of the world. The world is already chuckling at our political circus but I don’t know if I could take a full-out uprorious laugh.
Clott,
I think you finally got the coach of your dreams.
Warning, VERY strong language
http://www.guardian.co.uk/football/2008/oct/03/newcastleunited.premierleague
The Gators have landed on the left coast. Lil Gator is such a trooper.
Did we miss anything earth shattering in the debate?
Comrades Nom, Shore, Kettle have no fear. The Gator family will vouch for you with the Proletariot.
sorry to be a drag. but if you didn’t know already, and if your cholesterol level is high . . . (if you want more detail about the evils of french press coffee, go to sciencedaily)
For the millions of people who depend on coffee to jumpstart their day, cholesterol is probably the last thing on their mind as they wait for the morning jolt of caffeine to kick in. In the past few years, though, more and more evidence hints that coffee can increase cholesterol levels.
Experts say that the majority of coffee-drinking Americans do not need to worry about the impact of a cup of joe on cholesterol levels. That’s because most Americans drink filtered coffee, which is believed to have much less of an effect on cholesterol than unfiltered coffee. Filters seem to remove most of the cholesterol-boosting substances found in coffee.
But a cholesterol check may be in order for people who use a French press or percolator to make their coffee or who prefer espresso or other varieties of unfiltered coffee, according to Dr. Michael J. Klag, the vice dean for clinical investigation at Johns Hopkins University School of Medicine in Baltimore.
In 2001, Klag and his colleagues reviewed more than a dozen studies that looked at the relationship between coffee consumption and cholesterol levels. They found that drinking an average of six cups of coffee a day was associated with increased total cholesterol and LDL, the harmful type of cholesterol. Nearly all of the rise in cholesterol was linked to unfiltered coffee.
The coffee culprit
Although caffeine is often cast as a villain, the stimulant is not to blame for unfiltered coffee’s effect on cholesterol levels. According to Klag, the increase in cholesterol is believed to be caused by oils called terpenes that are found in coffee, but are mostly removed by filters.
“Persons who drink unfiltered coffee should get their cholesterol checked to make sure it is not elevated,” says Klag.
Although Klag advises his patients who drink unfiltered coffee to switch to filtered brew, he says that not everyone needs to be overly concerned about the effect of unfiltered coffee on cholesterol. He notes that cholesterol levels are a “combination of how you live, what you eat and what genes you inherit.” A healthy person with low cholesterol probably does not need to worry too much about the effect of coffee on cholesterol levels, he says.
Raspablo 382 I have not heard of any well problems. Each well is unique, I do know of people who have had problems but not any over all trend of wells going bad. Do you know something I don’t?
John (359)-
By December, I hope you can negotiate your way through the roving gangs and squatter camps to get to your party at the Ritz:
“Well my party is at the ritz carlton but I don’t do subprime stuff.”
Wells edges in on C and takes Wachovia!
Mikeinwaiting,
A friend of mine has been having a borehole stability problem related to using the wrong type of material (concrete,stone???) relative to the soil type…or something like that. It’s a relitively new well and she might have to abandon it all together. She is running through filters like a chain smokers cigarettes. Your place just looks like the same neighbourhood…hopefully it isn’t! Are you in Warren County?
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