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Dyl Ulenspiegel
16-09-2008, 11:46:11
Ok, it's an econ thread, so spam away! :D

Just one thing that's seriously weird and where we might see a real panic:

http://www.bloomberg.com/apps/news?pid=20601087&sid=azlzSeGqHCcc&refer=home

"The cost of borrowing in dollars overnight more than doubled as banks hoarded cash amid speculation more financial institutions will fail.

The overnight dollar rate soared 333 basis points to 6.44 percent today, its biggest jump, according to the British Bankers' Association."

"The one-week euro rate jumped 7 basis points to 4.49 percent, the EBF said today, the highest level since Dec. 24. It was the biggest increase since July 3."

A 7 bp jump is quite hefty, but 333 bp is way, way off the scale.

Lurker the Second
16-09-2008, 14:28:16
Pity post.

I just don't have the energy for something like this, although watching everything unfold is fascinating. Unfortunately there seem to be way too many people who think it's a good thing, per se, to see wealth disappear.

King_Ghidra
16-09-2008, 15:56:12
is it wealth? i'm an ignoramus when it comes to economics, but i don't think real wealth just disappears.

if someone tells me something is worth a tenner but it only sells for a pound, have they lost nine pound's worth of wealth or just realised its true value?

Funko
16-09-2008, 16:00:36
Yeah, it's hard to shake the feeling that it's basically just numbers on a computer screen rather than anything real. No-one's vaporised a load of gold or rendered real estate unuseable or anything.

So it's just a load of made up numbers appearing and vanishing. Exactly like the scientists are doing at the Large Hadron Collider.

I reckon that should be enough to cause KrazyHorse to melt down.

Resource Consumer
16-09-2008, 16:04:50
I saw that - it shows that banks no longer trust eachother. I think Dyl is right and this is an indicator of worse to come.

MoSe
16-09-2008, 16:06:24
real wealth?
true value?

I don't understand
:clueless:

besides, we all know that capitalism is just a pyramid scheme based on the exploitation of 3rd world, and that sooner or later it will inevitably collapse by defiition

Venom
16-09-2008, 16:13:06
http://www.1truevalue.com/App_Images/header/TVSRSHlogo.gif

Dyl Ulenspiegel
16-09-2008, 20:40:45
It's not wealth disappearing. The likes of Lehman, Fannie etc have been insolvent for a long time. They just didn't know or admit it.

Drekkus
16-09-2008, 22:18:56
So you better start borrowing money fast now?

TCO
17-09-2008, 00:48:56
Let the bad debts get written down. Let insolvent entities go into receivership. Purge the rottenness. Trying to prop stuff up creates more of a loss, than just letting the market find the bottom. Oh...and government has NO business saying that the market is valueing things wrongly...and a really bad record at speculating versus markets. Just let this thing bottom out. If some guys at Goldman lose their jobs, couldn't happen to better guys. There will still be plenty of intermediaries around for financial transfers. But we probably don't need so many people in the financial sector anyway.

Sorry, Kitty. So much for selling your soul to the devil to build models that are probably full of shit anyhow.

TCO
17-09-2008, 00:50:05
Most of those fuckers are Lincoln bedroom sleeping in, Obama check writing to, Democrats anyhow.

TCO
17-09-2008, 00:51:37
http://globaleconomicanalysis.blogspot.com/2008/09/crime-in-buying-aig-time.html

TCO
17-09-2008, 00:54:54
Originally posted by Dyl Ulenspiegel
It's not wealth disappearing. The likes of Lehman, Fannie etc have been insolvent for a long time. They just didn't know or admit it.

Agreed. And this tw is a classic pattern of behavior. Nothing surprising. Just the lack of backbone from Paulson and Bernanke and Bush. I really wonder if they are in the tank. Could not imagine ONeil and Volker going for all these nationalizations and transfers of subordinate debt bonds to the US treasury (at face value...or at higher than market price.)

TCO
17-09-2008, 01:00:13
I really wish McCain would take a position against bailouts. I think there is growing public opposition to them and that this issue is shifting almost as fast as the drilling issue did in terms of public opinion. I don't trust Obama or Biden on this stuff. They are machine politicians and Fannie Freddie has machine Democratic stuff at its core...with a smattering of giving houses to bad risk poor people.

If I don't hear anything from McCain that is anti-bailout soon, I may have to switch from Palin to Barr. I don't care if he has to cross Bush. He should do it for the coutnry.

Dyl Ulenspiegel
17-09-2008, 12:50:00
The problem with the bailouts is simple: It's too late now.

Since 1998 at the latest, the US government has underwritten Wall Street. Be it Fannie/Freddie, LTCM, Y2K, Dotcomcrash etc. If you withdraw that put to let the system fall back to its normal state, it will collapse from that Megashock. But so, the aftermath will be like Japan's - zombie banks and slow adjustment.

Now what is annoying is that shareholders should have been wiped out in every case, that new regulation should be put in place and that the Fed has cut rates way too fast. We got a commodity bubble from that making things even more messy.

Lurker the Second
17-09-2008, 13:07:08
Aren't shareholders largely being wiped out or at least subordinated in the case of AIG? I can't remember now but didn't equity take the same kind of hit or worse for Freddie and Fannie?

I think a pretty good argument can be made for government intervention in certain cases and upon certain terms. That statement shouldn't be construed as support for what's happening in this case, but I don't believe in a knee-jerk "let them fail it's capitalism" approach.

Dyl Ulenspiegel
17-09-2008, 13:17:59
Without the specific details, my impression is that AIG shareholders are just diluted. That bailout is quite weird with a Fed loan to an institution that is not part of the FRS and not even federally regulated or chartered.

Lurker the Second
17-09-2008, 13:55:34
Yeah, perhaps unprecedented.

Reports I've read say the Fed will have warrants to take 79.9 % of the stock whenever it wants.

AIG might have a lot of exposure, but it also has a lot of value in subsidiaries. Maybe not $80 billion, but.......

All of this means the financial industry will have very little clout when Congress decides it's time to regulate. So now we'll get to see an overreaction and overregulation.

Dyl Ulenspiegel
17-09-2008, 14:05:44
Exactly, if the Fed takes ~80 %, the existing shareholders get diluted by that factor of ~5. AIG is trading at 2.40 now.

As for "clout", maybe it's backlash time soon, but so far Wall Street owns Washington.

Lurker the Second
17-09-2008, 14:08:23
Amen.

chagarra
17-09-2008, 23:16:21
As I've said before.....

America has the best politicians money can buy....

:vom:

ruGGed
17-09-2008, 23:38:19
down with the man.

KrazyHorse
18-09-2008, 01:11:14
Originally posted by TCO
Sorry, Kitty. So much for selling your soul to the devil to build models that are probably full of shit anyhow.

Why? They're still hiring. Goldman just hired a friend of mine...

KrazyHorse
18-09-2008, 01:15:39
And I agree that these bailouts shouldn't go through. Even though equity holders aren't being particularly protected.

People need to take counterparty risk more seriously and spread contracts around. The big investment banks were far too big, and the rumours are that they were very slow to react to this...

Smaller hedge funds are doing better...and perhaps not surprisingly had incentive structures (vis a vis ownership) which are more appropriate...

TCO
18-09-2008, 01:17:43
Goldman has a lot of bad paper. Tell him to keep the resume in hot standby.

Dyl: the bailouts do more damge then help. They paper over rotteness. Much better to let it all find a bottom. It won't stop the misallocation of funds that happened, but it is the cheapest, cleanest way to retunrn to reality.

KrazyHorse
18-09-2008, 01:23:06
Market's still valuing Goldman at more than their paper net worth (45 bln vs 39 bln)....which is surprising, since Merill's valued at lower than theirs, even with BoA offer at significant premium to net worth.

KrazyHorse
18-09-2008, 01:24:07
People need to be taught that "it's AIG" is not enough security when buying credit default swaps, f.e.

KrazyHorse
18-09-2008, 01:26:32
MS is also trading at a significant discount to book value...but that makes more sense since there have been a lot more rumours flying about them seriously needing cash flow in the near future.

KrazyHorse
18-09-2008, 01:30:26
Apparently, around 10 years ago, some Japanese bank was selling credit default swaps...on itself. And people were buying them.

TCO
18-09-2008, 01:30:59
Letting them take it in the ass as a counterparty would teach them real fast. Conversely, making them whole and fingerwagging...

KrazyHorse
18-09-2008, 05:48:33
I am not disagreeing with you.

KrazyHorse
18-09-2008, 05:54:47
On another note, I'm sick and tired of the word "gouging" being tossed around whenever gas prices go up when there's a supply disruption.

Fucking imbeciles.

Drake Tungsten
18-09-2008, 06:35:17
I often think that basic economics should be a required course in American high schools. Then again, most of our media and politicians presumably took econ and look how fucking clueless they are.

Dyl Ulenspiegel
18-09-2008, 12:11:44
The rate went sown to 3.84 % after massive CB intervention. TED spread above 300 bp. Oops.

I agree that the bailouts should include some haircut for debt holders, too, and that there should be a clear line what gets bailed out - and what gets bailed out, gets heavily regulated in return.

Letting things go ka-boom isn't really a good option at that stage. What Benny and Hank do is however way too improvised and too wall street friendly.

Dyl Ulenspiegel
18-09-2008, 12:51:47
Originally posted by KrazyHorse
Smaller hedge funds are doing better...and perhaps not surprisingly had incentive structures (vis a vis ownership) which are more appropriate...

I'm still not convinced that a hedge fund is more than a glorified lottery ticket.

KrazyHorse
18-09-2008, 13:21:28
Originally posted by Dyl Ulenspiegel
I'm still not convinced that a hedge fund is more than a glorified lottery ticket.

There is certainly lotteryishness about it...but most are small enough not to cause systemic risk...

Dyl Ulenspiegel
18-09-2008, 13:37:00
3-Month US T-bills yield 0.09 %. :lol:

Oerdin
18-09-2008, 16:56:25
Originally posted by KrazyHorse
Why? They're still hiring. Goldman just hired a friend of mine...

A friend of mine just got an offer from Citi Group as well for when he finishes MBA school. I imagine some of these offers will end up being resended though.

Dyl Ulenspiegel
18-09-2008, 17:00:52
Looking at the share price, it seems that GS is slowly getting sucked into the shitstorm. :D

Dyl Ulenspiegel
18-09-2008, 17:52:21
wtf??

http://www.ft.com/cms/s/0/16102460-85a0-11dd-a1ac-0000779fd18c.html?nclick_check=1

"Short-selling of financial stocks is to be banned in the United Kingdom from midnight on Thursday night under rules drawn up by the Financial Services Authority."

Now that's funny. "the current extreme circumstances have given rise to disorderly markets." Strange, that didn't matter on the upside....

Lurker the Second
18-09-2008, 18:48:43
Private profits and socialized debts. It's a good deal if you can get it.

Lazarus and the Gimp
18-09-2008, 20:37:22
Haven't been participating in this thread because I'm dealing with this crap all day at work. This has been the longest week of my life.

TCO
18-09-2008, 21:59:09
Letting things go kaboom is a great option.

Dyl Ulenspiegel
19-09-2008, 08:14:24
Laz, what's your business? Some pension fund related stuff?

Bob
19-09-2008, 08:27:15
Nah, he works at the suicide station of the local hospital

Dyl Ulenspiegel
19-09-2008, 08:29:15
Ah,ok.

Dyl Ulenspiegel
19-09-2008, 08:31:25
Btw, really nice pump job yesterday. I'm just waiting for the markets to realise that

1. killing the shorts means when you drop, you drop like a stone

2. the super-duper bailout announced by Benny and Hanky will force institutions to realise losses by selling to the government or by marking to market, unless they get a waiver for remotely serious accounting, too.

mr_B
19-09-2008, 08:50:57
doooooooooooooooooooooo di doooooooooooooo

Dyl Ulenspiegel
19-09-2008, 08:51:56
"killing the shorts" scared you, huh.

Bob
19-09-2008, 08:54:07
Originally posted by Dyl Ulenspiegel
Laz, what's your business? Some fun related stuff?

Dyl Ulenspiegel
19-09-2008, 08:57:34
pensioner fun?

mr_B
19-09-2008, 09:06:49
Originally posted by Dyl Ulenspiegel
"killing the shorts" scared you, huh. jesjes

Bob
19-09-2008, 09:09:35
"drop the shorts" scares me

Drekkus
19-09-2008, 09:18:12
Originally posted by Dyl Ulenspiegel
"killing the shorts" scared you, huh.
Comment, ca va,
comme ci comme ci comme ci, comme ca!!!!!

Dyl Ulenspiegel
19-09-2008, 09:22:07
comme ci, comme ca, comme tralalala

KrazyHorse
19-09-2008, 12:13:31
Originally posted by TCO
Letting things go kaboom is a great option.

I agree.

Lazarus and the Gimp
19-09-2008, 19:19:21
Originally posted by Dyl Ulenspiegel
Laz, what's your business? Some pension fund related stuff?


Yes.

For a company owned by HBOS.

TCO
20-09-2008, 00:28:16
Originally posted by KrazyHorse
I agree.

creditors are held at bbay just fine with a 11 filing.

Resource Consumer
20-09-2008, 16:03:01
Originally posted by Dyl Ulenspiegel
Btw, really nice pump job yesterday. I'm just waiting for the markets to realise that

1. killing the shorts means when you drop, you drop like a stone

2. the super-duper bailout announced by Benny and Hanky will force institutions to realise losses by selling to the government or by marking to market, unless they get a waiver for remotely serious accounting, too.

Yeah, agree on Pt 1.

Store up the bad news and all your Christmasses come together.

Pt 2.

Welcome to the new socialist world order. It seems that this will be used as an excuse for Government to grab as much of the economy as it can (don't matter where you live).

Prediction :

This all could have been prevented by Identity Cards.

Dyl Ulenspiegel
20-09-2008, 18:50:02
Now this is hilarious. The draft bailout bill.

http://calculatedrisk.blogspot.com/2008/09/bailout-proposal.html

Featuring such highlights as

"The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time"

"The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008."

"Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."

:lol:
Why not just write a 700 billion $ check to Goldman Sachs? Much easier...

TCO
20-09-2008, 19:18:01
Ley them fail.

Dyl Ulenspiegel
20-09-2008, 19:49:24
Originally posted by Resource Consumer

Welcome to the new socialist world order. It seems that this will be used as an excuse for Government to grab as much of the economy as it can (don't matter where you live).


Hmm... I wouldn't call it socialism, and the "grab" is done by parts of the private economy. Not that there is much distinction left between the US government and the US financial sector. Instead of the nationalisation of the banks, you could also call it the bankisation of government.

Still, it is the culmination of at least 10 years of crony capitalism and easy monetary policy, ie the much praised anglo-saxon model. The demise of this model may revive some older statist ideology, but it will also bury the inherant statism of that model - the support of the central bank and the banking on a bailout for speculators.

The role of the government in my corner of the world will be pretty much unaffected. I do not see any strong impetus for a change there.

RedFred
20-09-2008, 23:44:53
Over here it is now officially scary. Could be scary there too - so much of the world economy is still tied to the US economy.

I had a hellish week at work too. AIG's Canadian subsidiary is a niche player in some special risk group insurance products here. Although AIG was "saved", the confidence in the company remains poor. Not dead, not alive, kind of like a walking zombie.

I see this whole debacle that started back with the mass bundling of high risk loans for resale as more as the triumph of greed and poorly thought out regulation over common sense and competent regulation.

My prediction - either some US banks or hedge funds are next to go. My expectation was that it would be the hedge funds until the chaos on the Thursday overnight market. It almost seems like the banks are betting against themselves...

TCO
21-09-2008, 00:09:17
Just let them fail.

Oerdin
21-09-2008, 00:17:16
Even if that leads to a near total collapse of our Financial system? Glad you're not in charge.

Oerdin
21-09-2008, 00:19:49
Originally posted by RedFred

I see this whole debacle that started back with the mass bundling of high risk loans for resale as more as the triumph of greed and poorly thought out regulation over common sense and competent regulation.


It seems to be a near total lack of regulatory oversight rather then a case of poorly thought out regulations. It really is a case were there is a need for proper regulations which government officials didn't put in place because of ideological reasons.

TCO
21-09-2008, 01:11:09
"collapse of the financial system" is bullshit. Hard assets will continue to be hard assets. Long term debt will continue to not be immediately due. Over-leveraged short term debt might get hammered (as it should occassionaly) and loans on bad risk will get marked down to reality.

Oerdin
21-09-2008, 02:55:57
As those loans get marked down banks will have big trouble. They have to maintain a certain asset to debt ratio and much of their assets are exactly the items you're talking about marking down suddenly and all at once. As those items get marked down banks will suddenly find themselves pushed below the asset to debt ratio which means they'll end up failing and so their assets also must be sold off on the market pushing prices still lower which will cause still more banks to fail.

It's a classic downward spiral which causes all banks to stop lending and to hoard assets because they don't know how low their assets and financial holdings will go. Of course when the banks stop lending companies can't expand or even continue to carry on business with lines of credit so the economy goes down too which only reinforces the downward spiral and causes still more failures.

That's the classic 1930's liquidity crisis which is exactly what we're trying to avoid.

DaShi
21-09-2008, 02:58:15
I suggest everyone exchange their money into beany babies as I have done. Flash the Dolphin can buy you a house in New Mexico.

Lazarus and the Gimp
21-09-2008, 08:50:56
Originally posted by TCO
"collapse of the financial system" is bullshit. Hard assets will continue to be hard assets. Long term debt will continue to not be immediately due. Over-leveraged short term debt might get hammered (as it should occassionaly) and loans on bad risk will get marked down to reality.


Hope you've got all your savings hidden under the mattress.

Dyl Ulenspiegel
21-09-2008, 09:30:32
Originally posted by RedFred

I see this whole debacle that started back with the mass bundling of high risk loans for resale as more as the triumph of greed and poorly thought out regulation over common sense and competent regulation.


Normally, that should be self-regulating - who wants to be a bagholder? But after 20 years of Greenspan and Treasury interventions to prevent the downside, speculators could be pretty certain that the public would be the ultimate bagholder. That meant that risk premiums were way too low, which again incited more speculation. And voila, you have a huge Ponzi scheme.

The whole mess is at the core a repetition of the south sea and Mississippi bubble. Plus ca change....

Dyl Ulenspiegel
21-09-2008, 09:32:04
Originally posted by RedFred

My prediction - either some US banks or hedge funds are next to go. My expectation was that it would be the hedge funds until the chaos on the Thursday overnight market. It almost seems like the banks are betting against themselves...

A propos hedge funds.... I wonder what the ban on short selling financials will do to them. I assume many have been net short, many have been short something to hedge other positions.... with the usual leverage, the ban on shorting could wipe them out instantly.

Shining1
21-09-2008, 10:52:53
Is there like, some way, some how, that someone could go to jail legally for all this?

Much more drama and there will be very close to being a public lynch mob mentality start up. Until we're past the point that a jury won't convict someone for burning down the mansion of one of the bank or fund CEOs, it's really hard to watch all of this with the principles sheepishly shrugging and apologising for breaking capitalism.

RedFred
21-09-2008, 17:27:10
Originally posted by Dyl Ulenspiegel
A propos hedge funds.... I wonder what the ban on short selling financials will do to them. I assume many have been net short, many have been short something to hedge other positions.... with the usual leverage, the ban on shorting could wipe them out instantly.

That is one scenario. My bigger concern is with some of the financial firms they are betting against, rather than the hedge funds thenselves. Like a case of closing the barn doors when most of the cattle are already out in the field. Some countries are talking about a "list", but an all out short trading ban maybe a better approach than identifying certain firms that you cannot short. In this climate it very well could just freeze up the trading in regular stock in those companies - who would be willing to buy?

TCO
21-09-2008, 17:38:02
Laz: My investments are in safe areas. I am one of the US taxpayers getting raped to make whole risky speculators from all over the world.

mr_B
21-09-2008, 18:15:39
Originally posted by Bob
"drop the shorts" scares me :lol:

Dyl Ulenspiegel
21-09-2008, 18:19:48
Originally posted by TCO
I am one of the US taxpayers getting raped to make whole risky speculators from all over the world.

Yes... yes you are.

Dyl Ulenspiegel
21-09-2008, 18:21:53
Originally posted by RedFred
My bigger concern is with some of the financial firms they are betting against, rather than the hedge funds thenselves.

I doubt you can really separate that in the aggregate, because someone has to finance the hedge funds' leverage, and that may to a good extent be those financial institutions.

Pretty impressive job of hanging yourself on thin air.

TCO
21-09-2008, 19:12:21
Originally posted by Dyl Ulenspiegel
Yes... yes you are.

You're jizzing.

Oerdin
21-09-2008, 19:42:52
It seems Lehman Brothers UK operations were actually profitable and financially sound. To bad just hours before the parent company collapsed the Wall Street guys transferred 4.4 billion pounds from the UK operation to the US operation and now plan on using half of it as bonuses for the wankers who caused this whole mess.

Yep, they want to bankrupt the sound UK business to make sure they all get golden parachutes. The UK operation now says they have no money for payroll expenses because Wall St guys want to give themselves bonuses for destroying the company.

Dyl Ulenspiegel
21-09-2008, 20:57:48
Originally posted by TCO
You're jizzing.

Oh no. I'm just heartened by your newly found insight.

TCO
22-09-2008, 00:28:12
Originally posted by Oerdin
It seems Lehman Brothers UK operations were actually profitable and financially sound. To bad just hours before the parent company collapsed the Wall Street guys transferred 4.4 billion pounds from the UK operation to the US operation and now plan on using half of it as bonuses for the wankers who caused this whole mess.

Yep, they want to bankrupt the sound UK business to make sure they all get golden parachutes. The UK operation now says they have no money for payroll expenses because Wall St guys want to give themselves bonuses for destroying the company.

Well it's in Chapter 11 now. So those kinds of things can get reversed if justified.

Too bad all the fucked companies are not in Chapter 11. I have much more trust in those procedures than in the Fed running things ad hoc. Chapter 11 keeps creditors at bay and allows entities to function while things get liquidated.

Shining1
22-09-2008, 00:47:35
It seems Lehman Brothers UK operations were actually profitable and financially sound. To bad just hours before the parent company collapsed the Wall Street guys transferred 4.4 billion pounds from the UK operation to the US operation and now plan on using half of it as bonuses for the wankers who caused this whole mess.

Yep, they want to bankrupt the sound UK business to make sure they all get golden parachutes. The UK operation now says they have no money for payroll expenses because Wall St guys want to give themselves bonuses for destroying the company.

Maybe the cops should just shoot them first? Execution style?

Angry mobs tend to be messier.

Oerdin
22-09-2008, 07:54:59
Originally posted by TCO
Well it's in Chapter 11 now. So those kinds of things can get reversed if justified.

Too bad all the fucked companies are not in Chapter 11. I have much more trust in those procedures than in the Fed running things ad hoc. Chapter 11 keeps creditors at bay and allows entities to function while things get liquidated.

They literally drained every penny out of the UK operation which means they can't even pay payroll now. Getting this reversed 6-12 months from now won't do shit because everyone will have left by then. It basically has to be reversed right now in order to keep Lehman Brothers UK open. It's sad that they torpedoed a profitable operation just so they could enrich themselves with golden parachutes.

Lurker the Second
22-09-2008, 12:04:54
You read it on the internet so it must be true!

Dyl Ulenspiegel
22-09-2008, 12:41:57
The bailout bonanza looks increasingly weird.

So the US uses 700 billion $ or more to buy all kinds of credit instruments from whoever offers them.

If they pay market prices, the insolvency of financial institutions becomes obvious. So we get secrecy and lack of review to buy the instruments at inflated prices to recap the institutions.

Would be way simpler and less distorting to backstop failing institutions so that depositors (above depo insurance limit) and creditors take no or just a limited haircut.

This bailout will take money to use it in the least effective, most opaque, least equitable and least responsible way possible - yup, sounds like a Bushie plan.

KrazyHorse
22-09-2008, 13:00:49
If they pay market prices, the insolvency of financial institutions becomes obvious.

Don't know if that's necessarily true. The entrance of the Treasury into a specific sector of the securities market to the order of 700 bill means that the price for these instruments goes through the roof relative to where it is now (though almost certainly not to where it was before the shit hit the fan).

So maybe they don't look insolvent when the new "market price" is taken into account...

Dyl Ulenspiegel
22-09-2008, 13:04:36
Sure. I'd just not call that a "market price" even with quotation marks, but maybe the "bailout price".

I also wonder how they will do reverse auctions with things that are of largely unknown and usually different qualities. An apple for 60 vs orange for 40, or so.

KrazyHorse
22-09-2008, 15:52:55
That doesn't change the fact that your original point:

So we get secrecy and lack of review to buy the instruments at inflated prices to recap the institutions

does not stand. The Treasury can quite transparently run a reverse auction (as I think they plan to) and still shuttle funding to the banks due to the increase in the price of these assets brought about by the Treasury's participation.

Now, the key point here is that it may be proper for the Treasury/Fed to intervene when there is a problem in liquidity due to a mass outbreak of panic (because the assets which lost value are hard to price). It is certainly not proper (or efficient!) to increase the market price of these assets above the fair value which would come about if the overall market actually knew their expected return and risk profile...thus paying off people who overinvested in them.

Now, maybe the market panic really has driven down the price of these assets so far that even a 700 bill entrant into the market will not drive up prices to the "right" point...in which case the US taxpayer is going to make out like a bandit. But I don't know if even Paulson, Bernanke & co know that for a fact.

KrazyHorse
22-09-2008, 15:59:54
So, to reiterate:

1) Any intervention by gov't forces increases moral hazard

2) Insofar as the bailout simply increases liquidity in the distressed sector it may be a good idea (if you leave aside moral hazard)

3) Even if the bailout increases the price of the distressed assets (which it obviously will) it may be a good idea if the bailout does not increase the price past the "fair" point (i.e. past the point where the yield is identical to other, similarly risky assets)...unfortunately, nobody knows the fair point because the models the assets were based on were total shit. This is a recapitalization of banks, but it is much more similar to a "lender of last resort" function than it is to handouts. Also note that the US taxpayer makes money on the deal.

4) If the bailout pushes prices above the fair value (as described above...and noting again that we don't know what this value is) then there is an efficiency loss (even ignoring moral hazard) as well as a burden on taxpayers.

Dyl Ulenspiegel
22-09-2008, 16:54:35
That's all nice in theory, but as you say "unfortunately, nobody knows the fair point".

The rest is semantics. I consider the treasury bid as a means to inflate prices.

And I'm curious how you want to setup the auction. Are there enough akmost identical securities? Think underlying mortgages in different locations, different borrowers, different tranches, different clauses.......

KrazyHorse
22-09-2008, 17:36:05
I am under the impression that there are significant numbers of very similarly securitized mortgage packages to make auctioning reasonable. This is, however, just an outsider's impression.

KrazyHorse
22-09-2008, 17:37:22
Most of these mortgage packages were national, as far as I know. The real devil is in the tranching, since pricing this in would require pretty good knowledge of the scale of defaults/losses.

Dyl Ulenspiegel
22-09-2008, 18:06:28
Another devil may be the regional mix even in national packages - 18 or 22 % Cali, 10 or 12 % Florida - still the same thing? Then, the mix of prime, Alt-A, various ARM products (option, neg-am....). Maybe even seconds to varying degree mixed in, partly Helocs....

It's not so much that we don't know what the landscape looks like, it would have been nice to see the issue addressed as part of the bailout plan.

Dyl Ulenspiegel
22-09-2008, 18:48:33
Wohoooo!!!

Bailout plan working - oil up 24 $ in one day!

http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=ap_C9Au93tYg

Thanks a trillion, Comrade Paulson.

(ok, big short squeeze on expiration, but still about 10 $ up going forward if I see that correctly)

TCO
23-09-2008, 01:59:27
letthemfailletthemfailletthemfail!

Asher
23-09-2008, 02:04:25
Originally posted by TCO
creditors are held at bbay just fine with a 11 filing.
Is bbay like ebay?

Oerdin
23-09-2008, 02:04:57
Originally posted by Lurker the Second
You read it on the internet so it must be true!

The BBC has a generally good track record.

Oerdin
23-09-2008, 02:15:28
Originally posted by Dyl Ulenspiegel
Another devil may be the regional mix even in national packages - 18 or 22 % Cali, 10 or 12 % Florida - still the same thing? Then, the mix of prime, Alt-A, various ARM products (option, neg-am....). Maybe even seconds to varying degree mixed in, partly Helocs....

It's not so much that we don't know what the landscape looks like, it would have been nice to see the issue addressed as part of the bailout plan.

Wasn't that the whole point of mortgage backed securities. You take a whole bunch of mortgages from all over and toss in a pre determined number high, medium, and low grade mortgages and then repackage them so that the low of averages spreads risk around as wildly as possible so that no one is stuck holding the entire bag? Supposedly every security will have some defaults but more that perform so on average everyone makes money.

Of course that only works if the original packager really knew what was a high risk, a medium risk, and a low risk so if you screw that up at the beginning then you end up with some MBS which are much higher risk then originally advertised while others might be lower risk then advertised. That would mean not all MBS would be the same so we're back to trying to figure out what a fair price is for each one.

Lurker
23-09-2008, 03:21:34
Originally posted by Oerdin
The BBC has a generally good track record.

? Give me a link. And the concept doesn't even pass the smell test for anyone who has a clue.

TCO
23-09-2008, 03:31:28
Dear American:

I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.

I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.

I am working with Mr. Phil Gram, lobbyist for UBS, who will be my replacement as Ministry of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transactin is 100% safe.

This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.

Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to wallstreetbailout@treasury.gov so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.

Yours Faithfully Minister of Treasury Paulson

Oerdin
23-09-2008, 03:31:52
A fresh spotlight has been thrown on the culture of American investment banks after the administrator for Lehman Brothers' European business asked for the return of $8 billion (£4.4 billion) transferred from Europe to New York in the days before the bank's collapse.

Lehman's London staff are angry that the practice of withdrawing funds to New York at the end of each day left coffers at the European business empty.

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4799512.ece


Lehman Brothers administrators demand $8bn from New York HQ

Lehman Brothers European administrators are demanding $8 billion (£4.4 billion) to be returned from the US headquarters to London, they filed the court order in New York.

The UK administrators PricewaterhouseCoopers (PwC) said the money was needed to pay salaries, creditors, property bills and other day-to-day expenses. PwC are currently trying to find buyers for different departments of the failed investment bank Lehman Brothers Europe.

The BBC’s Joe Lyman said before Lehman Brothers went into administration on September 15 ’08 that the failed bank’s European arm transferred money on a regular basis from its London headquarters to its parent company in New York. “The money was usually kept overnight - earning interest - before being sent back to London.”

But on September 14 ’08 before Lehman filed for Chapter 11 bankruptcy protection the money did no get transferred, which left Lehman Europe $8 billion down, it was also reported that a formal request for the money to be transferred had been given earlier in the week.

http://www.100mortgages.org/20080921/lehman-brothers-administrators-demand-8bn-from-new-york-hq/

Still looking for the BBC article I read a few days ago. The report was largely the same as the ones above.

Oerdin
23-09-2008, 03:32:37
Fury at U.S. Lehman Brothers' staff who could net £1.4bn in bonuses as UK employees face bleak future

By Daily Mail Reporter
Last updated at 1:10 AM on 22nd September 2008

Lehman Brothers staff could enjoy bonuses worth more than a billion pounds despite the investment bank's collapse.

The rewards lined up for U.S. workers caused fury in London, where thousands of employees are facing a bleak future after Lehman filed for bankruptcy.

Administrators winding up Lehman's European business have discovered £4.4billion was transferred to New York just before the bank collapsed.

PricewaterhouseCoopers want the money to be returned - a call which was backed by Gordon Brown.

The blockbuster bonuses for U.S. staff were secured after UK lender Barclays snapped up Lehman's American operations and took on 10,000 employees.

As part of the deal, a $2.5billion (£1.4billion) bonus pot was ringfenced to reward the U.S. workers.

The agreement was greeted with incredulity on this side of the Atlantic given the disastrous consequences of Lehman's speculation on 'toxic' debt.

The failure of the investment bank caused stock markets to plunge and helped force the U.S. Treasury into its largest-ever financial bail-out.

The Prime Minister attacked the bonus system, which has been criticised for incentivising bankers to take huge risks.

'There has been a great deal of irresponsibility,' Mr Brown told Labour's annual conference.

http://www.mailonsunday.co.uk/news/article-1059234/Fury-U-S-Lehman-Brothers-staff-net-1-4bn-bonuses-UK-employees-face-bleak-future.html

Oerdin
23-09-2008, 03:33:56
Lehman administrators file court order for return of $8bn
Sunday, 21 Sep 2008 16:20

The European administrators of the failed US investment bank Lehman Brothers have filed a court order calling for $8 billion (£4.4 billion) to be returned to the UK.

The BBC quote a PricewaterhouseCoopers (PWC) spokesman as saying the money was needed for paying creditors, salaries, bills and day-to-day expenses.

The European headquarters of the failed bank is based in London's Canary Wharf.

Barclays are reportedly poised to put in an offer for part of Lehman Brothers' European business later on Sunday.

The British bank bought Lehman's core US broker-dealer business in a $1.75 billion (£0.95 billion) deal on Tuesday.End of story

http://www.inthenews.co.uk/news/finance/lehman-administrators-file-court-order-return-8bn-$1241682.htm

Oerdin
23-09-2008, 03:44:46
Brown pushes U.S. to help get Lehman to hand back £4.4bn moved from Europe before bank's collapse

By Daily Mail Reporter
Last updated at 8:12 AM on 22nd September 2008

Gordon Brown is pushing the United States to help return $4.4billion transferred from the European arm of fallen investment giant Lehman Brothers to its U.S. holding company hours before its collapse.

Administrators PricewaterhouseCoopers (PwC) are said to have made the original demand in a letter on Wednesday, three days after the bank folded when the US government refused to give its suitors the guarantees they were seeking.

There have been fears among Lehman's 4,500 staff in London they may not get their final pay packets

Lehman Brothers employees in London, pictured arriving at work yesterday, are said to angry that the bank's European coffers were empty at the time of its collapse

"We are asking and working with the American government to get that money back to pay salaries, not of high-flying financiers, but of cleaners and people who are computer operators who would otherwise be denied their money," Brown told delegates at the ruling Labour party's annual conference.

Brown also said he would visit the United States on Wednesday to meet financiers and global authorities to discuss the turmoil in financial markets.

He will also speak with the French, German, Italian and Indian governments to build support for an international financial watchdog.

The Financial Times said the demand would be welcomed by Lehman's 4,500 staff in London because many were angry that the bank's European operations had no cash in them when the parent company went into bankruptcy.

Tony Lomas, the PwC partner leading the administration, said the fact that more than $8billion had been transferred to New York in the days preceding the collapse was not suspicious.

But he said he was 'not ruling anything out'.

'Clearly the matter requires further inquiry because it is a large sum. But it is simplistic to say eight billion dollars was taken from London and put in New York,' he told the FT.

'The bank that (Lehman Europe) put its money into was the holding company. Clearly eight billion dollars of value has moved from London to New York. It is normal for us to make a claim.'

The written demand could be followed by formal legal action to reclaim the funds, although a Lehman source told the paper it was too early to establish whether money transferred from London to New York could be claimed back.

PwC have confirmed that all of Lehman's employees in Britain will be paid their wages for the last month at the end of September.

http://www.mailonsunday.co.uk/news/article-1058653/Brown-pushes-U-S-help-Lehman-hand-4-4bn-moved-Europe-banks-collapse.html

Lurker
23-09-2008, 03:48:52
Oh for chrissake just try to read that with a critical approach. That's just so fucking stupid it pisses me off.

Hell, I probably agree with you on a lot of stuff, but I swear you just act like a tool for the democrats. Think.

Drake Tungsten
23-09-2008, 04:30:33
but I swear you just act like a tool for the democrats.

It's no act.

KrazyHorse
23-09-2008, 04:31:42
Originally posted by Oerdin
Wasn't that the whole point of mortgage backed securities. You take a whole bunch of mortgages from all over and toss in a pre determined number high, medium, and low grade mortgages and then repackage them so that the low of averages spreads risk around as wildly as possible so that no one is stuck holding the entire bag?

This is not a problem. This is simply a really good idea.

The problem, insofar as it existed was that:

a) historical data on defaults on mortgages in different markets (geographic, time, creditworthiness) were used to estimate future default rates, future standard deviations of default rates and future correlations between default rates in the different markets, and these numbers were used to price the securitized loans

b) They tranched the securitized loans, effectively leveraging a large percentage of them quite strongly

c) They trusted the numbers they got out of (a) beyond all rationality...especially given that the new demand for supposedly high-quality tranches of securitized loans effectively dropped interest rates, increasing the rate of housing price increases...and thus changing the very environment they were modeling. Combine with (b) to wipe out the "equity" tranches and this leads the holders of supposed AAA senior tranches to realise that maybe the Moody ratings were total nonsense...and that they need to get these things off their books stat

KrazyHorse
23-09-2008, 04:36:34
Dyl's point is that different securitizations used slightly different geographic mixes and that there are therefore going to be apples-to-oranges problems in running an auction.

Since nobody knows what the fuck the default rates are going to look like (see the point above regarding the modelers themselves fucking up the thing they were modeling), I agree that pricing in such distinctions is difficult.

KrazyHorse
23-09-2008, 04:38:06
I still think that the tranching is going to be the real bitch. Especially in any of the equity/mezzanine tranches or in senior tranches of securitizations whose loss-sharing is at all complex.

Dyl Ulenspiegel
23-09-2008, 08:17:37
Originally posted by Lurker
? Give me a link. And the concept doesn't even pass the smell test for anyone who has a clue.

No idea what really happened, but what's the problem in principle? If you move assets around in a complex holding structure such problems may arise. Or dou you mean the "ringfenced" 2,5 billion? The term may be wrong and most likely exaggerated, but is there no preferred status for employee compensation in bankrupcy?

Oerdin
23-09-2008, 10:52:13
Originally posted by Lurker
Oh for chrissake just try to read that with a critical approach. That's just so fucking stupid it pisses me off.

Hell, I probably agree with you on a lot of stuff, but I swear you just act like a tool for the democrats. Think.

Wait... I'm quoting the UK press. So quoting them is being a tool for the Democrats? :confused:

Provost Harrison
23-09-2008, 11:40:37
Originally posted by Asher
Is bbay like ebay?

No, it's a mixed-up baby ;)

Funko
23-09-2008, 11:44:26
The Daily Mail is shit.

Bob
23-09-2008, 12:01:22
Sun rox

Dyl Ulenspiegel
23-09-2008, 12:07:45
Bob=Sun?

Lurker the Second
23-09-2008, 12:14:12
Originally posted by Dyl Ulenspiegel
No idea what really happened, but what's the problem in principle? If you move assets around in a complex holding structure such problems may arise. Or dou you mean the "ringfenced" 2,5 billion? The term may be wrong and most likely exaggerated, but is there no preferred status for employee compensation in bankrupcy?

I was mostly referring to this:

It's sad that they torpedoed a profitable operation just so they could enrich themselves with golden parachutes.

But the other part is, as you allude, that there isn't necessarily anything wrong with moving money around.

Employee compensation claims have certain priority in bankruptcy cases, but the priority part (for pre-petition claims) is capped in amount. I don't think it's more than a few thousand dollars, but I'd have to check the code to get the exact amount.

Asher
23-09-2008, 13:44:03
Lehman didn't give me an $8B bonus. :mad:

Dyl Ulenspiegel
23-09-2008, 13:47:58
TCO will be happy to pay his share for your bonus. It's just about 25 $ for every American.

TCO
24-09-2008, 02:48:50
I'm going to be paying more than the pro-rated amount.

Will be sending some of that money overseas as well. Sigh. Wish we could instead have let Fannie and Freddie go under and just said "implicit guarantee doesn't mean anthing. Ha ha."

Dyl Ulenspiegel
24-09-2008, 08:18:08
Now you know why someone once said Neither a borrower nor lender be.

Bob
24-09-2008, 08:28:42
Who said that?

Dyl Ulenspiegel
24-09-2008, 08:31:28
Willi Schüttelbier, I think.

Bob
24-09-2008, 08:33:24
And he was right?

Dyl Ulenspiegel
24-09-2008, 08:33:59
Very often.

Bob
24-09-2008, 08:35:20
Clever bastard he was

Dyl Ulenspiegel
24-09-2008, 08:36:25
very smartje, jesjes

Bob
24-09-2008, 08:37:05
wish he would post here

Dyl Ulenspiegel
24-09-2008, 08:40:51
you mean he's not MrB?

Willi
24-09-2008, 08:46:58
MrB is not a Willi

Willi
24-09-2008, 08:47:24
he's a B though

chagarra
24-09-2008, 09:18:33
Has anybody worked in the derivitives value on this..
From all the info I can find it appears to be over 13 trillion dollars world wide ..... hmmmm... 700billion won't buy much of that

Dyl Ulenspiegel
24-09-2008, 15:04:32
Now that's funy... Buffett on his GS investment: "If I didn't think the government was going to act I wouldn't have done anything."

Hmm... so Buffett expects to profit from the bailout. Does he need a bailout? If not, why should he profit from it? Oh, that's a reasonable question, not to be asked of the Bushists....

TCO
25-09-2008, 01:41:22
I've commented on several threads on JustOneMinute. Been beating the shit out of centrist Republicans that are for the bailout. Also some drunkposting and foul language. They call me a troll.

TCO
25-09-2008, 01:42:21
Buffet is rather wealthy. I'm all for fuckint him. Just like I was all for lietting Fannie and freddy fail.

Drake Tungsten
25-09-2008, 02:59:30
I've come around somewhat to the TCO position. A lot of people need to get fucked for this.

Oerdin
25-09-2008, 05:29:03
Originally posted by Dyl Ulenspiegel
Now that's funy... Buffett on his GS investment: "If I didn't think the government was going to act I wouldn't have done anything."

Hmm... so Buffett expects to profit from the bailout. Does he need a bailout? If not, why should he profit from it? Oh, that's a reasonable question, not to be asked of the Bushists....

I think it is more along the line of he knows the feeding trough is full so he's rushing in along with the other pigs.

Oerdin
25-09-2008, 05:29:52
Originally posted by TCO
They call me a troll.

Who would call you that? ;)

Dyl Ulenspiegel
25-09-2008, 08:54:22
Originally posted by TCO
Buffet is rather wealthy. I'm all for fuckint him. Just like I was all for lietting Fannie and freddy fail.

FUCK THE RICH!! Viva la revolucion!

Dyl Ulenspiegel
25-09-2008, 08:59:38
On a more serious note, I'm not sure what is really going on with that bailout plan. There are all kinds of theories around about cunning ripoffs etc.

But judging from the Iraq fiasco and earlier interventions in the financial crisis (Super Siv MLEC etc), I am more and more convinced that it is just a bunch of clueless dumbfucks making crap up as they go along listening just to some lobbyists and Paulson's pals from GS.

They can't even explain or agree on at what prices the government is supposed to buy the toxic stuff. I think the idea is as it was with MLEC: A little liquidity, a fancy new name, rearranging the financial deckchairs, and all is well on the Titanic. Just frickin' unbeliavable.

MOBIUS
25-09-2008, 09:22:52
Originally posted by Drake Tungsten
I've come around somewhat to the TCO position. A lot of people need to get fucked for this.

And they are - they're called the US taxpayers...

TCO
25-09-2008, 23:58:03
I want to fuck some foreign people too. Like the wealth transfer from Jap RE speculators in 1992.

TCO
25-09-2008, 23:59:14
Originally posted by Oerdin
Who would call you that? ;)


Just One Minute.

TCO
26-09-2008, 00:00:44
Originally posted by Dyl Ulenspiegel
On a more serious note, I'm not sure what is really going on with that bailout plan. There are all kinds of theories around about cunning ripoffs etc.

But judging from the Iraq fiasco and earlier interventions in the financial crisis (Super Siv MLEC etc), I am more and more convinced that it is just a bunch of clueless dumbfucks making crap up as they go along listening just to some lobbyists and Paulson's pals from GS.

They can't even explain or agree on at what prices the government is supposed to buy the toxic stuff. I think the idea is as it was with MLEC: A little liquidity, a fancy new name, rearranging the financial deckchairs, and all is well on the Titanic. Just frickin' unbeliavable.

well given that they could not predict what happened, why dhould we be pro intervention and believe horror stories. take it down like enron.

TCO
26-09-2008, 00:01:58
Originally posted by Drake Tungsten
I've come around somewhat to the TCO position. A lot of people need to get fucked for this.

You're alweays on my side. even with permabanning.

Oerdin
26-09-2008, 00:21:09
There are murmurs that J.P. Morgan Chase is to buy WaMu for an unspecified amount. It sounds like a distress sale.

RedFred
26-09-2008, 02:27:47
WaMu will go down. Just like Freddie and Fannie the name was just too silly.

Dyl Ulenspiegel
26-09-2008, 14:44:51
Washington Mutual.... well
Wachovia is way sillier.

Asher
26-09-2008, 17:18:34
I just finished a WaMu project also. I'm awesome. Die bitches.

Oerdin
26-09-2008, 17:36:38
Every company you do work for crashes. Stay away from my employer.

Drake Tungsten
26-09-2008, 17:55:25
Asher, please go work for the City of San Diego. Telecommute, if possible, so you don't have to actually move there.

Asher
26-09-2008, 18:00:53
There's no work to be had in San Diego for intelligent people.

Oerdin
26-09-2008, 18:23:05
Please don't come here.

Dyl Ulenspiegel
26-09-2008, 19:17:07
The Asher touch - instant bankruptcy.

Asher
26-09-2008, 19:26:50
Originally posted by Oerdin
Please don't come here.
I don't have to. I've killed Lehman and WaMu remotely, why not your shitfuckholepissspunkdisasterhipsterpathetic town.

Asher
26-09-2008, 19:27:36
I'm trying to get a job with the City of San Diego's new indy band and microbrew name generator website. Apparently the citizens use it to name-drop and pretend to be cool.

Drake Tungsten
26-09-2008, 20:16:57
Bring it down. :b:

TCO
26-09-2008, 22:49:30
I am now banned at JustOneMinute.

Dyl Ulenspiegel
27-09-2008, 09:55:06
our hero

Oerdin
27-09-2008, 09:58:06
How long before Wachovia goes down? Or National City Corp?

Dyl Ulenspiegel
29-09-2008, 09:47:47
Seems we're joining the fun: Hypo RealEstate and Fortis. Wonder what crap the retarded bankers have put on their sheet....

mr_B
29-09-2008, 10:14:14
i've got to take a dump but i am out of toiletpaper, now THAT'S A CRISIS

Bob
29-09-2008, 10:44:36
Take HRE shares! Cheaper than toilet paper today!

Dyl Ulenspiegel
29-09-2008, 10:51:29
jesjes
Bob is almost as smartje as an investment banker

Bob
29-09-2008, 10:54:06
Hypo Real Estate - Well, nobody says "o" anymore, the Real money is gone, the State is rotten. What's left?

Dyl Ulenspiegel
29-09-2008, 10:59:15
Toilet paper

Drekkus
29-09-2008, 11:44:45
Originally posted by Dyl Ulenspiegel
Seems we're joining the fun: Hypo RealEstate and Fortis. Wonder what crap the retarded bankers have put on their sheet.... So if the bank where I have my mortgage goes bankrupt, I no longer have to pay my mortgage, right? :cute:

mr_B
29-09-2008, 14:34:22
jesjes and you can live in a trailer, orrr maybe rent a room at uncle Pieter

Oerdin
29-09-2008, 19:12:40
The bailout bill failed to pass the house.

KrazyHorse
29-09-2008, 20:38:20
Major US stock indices off 7-8%...

JM^3
29-09-2008, 21:08:02
What is losing the most?

JM

MOBIUS
29-09-2008, 21:38:44
Oops!

MOBIUS
29-09-2008, 21:39:37
Seems like everyone got petty and childish over Pelosi's speech...

Wow.

TCO
30-09-2008, 03:50:31
Haha! Hold enough of a blowtorch to legislator buttholes and they actually do more what you want.

I actually wonder if I had an impact. My zip code is divided between two representatives. And I my liberal Democrat one to vote against the bill. And my conservative Republican (but part of the leadership) abstained. I think freeping their phones, email and political contributor sites actually might have had an impact. MWAHAHAHAHA!

JM^3
30-09-2008, 04:16:00
I got back this email:

" Thank you for contacting me to express your opposition to the Emergency Economic Stabilization Act of 2008, the so-called "bailout" for the financial industry. I appreciate you taking the time to share your thoughts with me on this issue. I value your views on the important issues facing our Commonwealth and the Nation.

The past several days have been historic ones for Congress and for the families and people of this great nation. We face significant challenges in our financial markets and I do not underestimate the serious nature of the decisions we face in dealing with the credit crisis. I realize that the current credit crisis could create problems for every American should the financial markets freeze and remain frozen. Throughout this debate it has been clear that action is necessary but the recovery bill considered in the House of Representatives today should not have been the only option.

In reviewing the plan and doing some deep soul searching I believe that it had significant problems. First is the government purchase and ownership of troubled private assets on a massive scale. The impact of this action would be a fundamental change in the role of government in the American free enterprise system. The obligations to offset Wall Street losses would have been placed on future generations. To authorize the Paulson plan would be to lessen the consequences of risky behavior and could lead to riskier behavior in the future. Furthermore it did not go far enough in holding accountable those at fault for the current crisis by failing to establish penalties for their past bad business practices.

There are free market mechanisms that should have been and still can be implemented to help ease the current crisis. While the recovery bill would have allowed community banks to write off losses on their holdings of Fannie Mae and Freddie Mac stock, it did not provide backing to assist banks in raising private capital. By providing incentives for private capital, the government could help troubled banks offset losses that keep them from lending while limiting government intervention and taxpayer risk.

I also have serious concerns with government overseeing the purchase and sale of these troubled private assets. I feared that the purchase and sale of the assets would not have been executed in the most efficient way possible under this proposal and taxpayers could lose. The potential existed for the government to pay too much and sell for too little.

In addition I had considerable reservations about increasing the national debt by 6.6% to $11.3 trillion dollars to finance the bailout. This equates to an additional $3,000 of debt for every man, woman and child in the U.S. on top of the $34,000 already owed by each American toward the national debt. We cannot continue to borrow and spend at this rate and expect a healthy future for our country.

In my deliberations, I sought to make a decision in the best interest of the taxpayers. Over the past week I've had calls, emails, letters and visits from over 2000 constituents of the First District with an overwhelming majority voicing opposition to this recovery plan. Many of you expressed a need for Congress to act, but felt that this plan was not the right course of action. With that in mind I have offered that Congress should not adjourn and should stay in Washington to get the right plan for economic recovery.

My two main priorities for any plan are to most wisely protect you as a taxpayer and to protect the value of your retirement, your home and your savings. There is no doubt that this crisis and resulting legislation would have had significant impact on our future. However, I believe that the proposed plan for recovery had substantial and avoidable flaws. The plan that was before us put $700 billion in taxpayer funding on the line to bail out Wall Street financial firms, would fundamentally alter free market decision making, let bad actors off the hook and create a massive new bureaucracy with no guarantee of success. For these reasons I could not vote in favor of this plan. The House of Representatives failed to pass H.R. 3997, the Emergency Economic Stabilization Act of 2008, today by a vote of 205-228."

JM

Asher
30-09-2008, 04:45:29
I emailed my MP and asked them to vote in favour of the bailout, with the condition that I get half of the money.

Oerdin
30-09-2008, 05:29:52
Originally posted by TCO
Haha! Hold enough of a blowtorch to legislator buttholes and they actually do more what you want.

I actually wonder if I had an impact. My zip code is divided between two representatives. And I my liberal Democrat one to vote against the bill. And my conservative Republican (but part of the leadership) abstained. I think freeping their phones, email and political contributor sites actually might have had an impact. MWAHAHAHAHA!

Freeping? As in Free Republic's freepers?

That's just a lame hackish site. Seriously, on par with Democratic Underground for the mindless psychophantism and troll like behavior.

TCO
30-09-2008, 05:45:03
the term is meant specifically in terms of clogging a poll. Has nothing to do with the site. I think there is some other term for doing it from the ledt

MDA
30-09-2008, 10:44:59
Originally posted by JM^3
In addition I had considerable reservations about increasing the national debt by 6.6% to $11.3 trillion dollars to finance the bailout. This equates to an additional $3,000 of debt for every man, woman and child in the U.S. on top of the $34,000 already owed by each American toward the national debt. We cannot continue to borrow and spend at this rate and expect a healthy future for our country.

Wait, I owe the government 34k? Interesting point of view our elected representatives have. :lol:

Why should I have to pay if they're the ones that suck?

JM^3
30-09-2008, 16:36:37
Yeah, I have always considered that bit as something just to make the debt real to the average american. Maybe I am wrong though and he actually believes that.

JM

Dyl Ulenspiegel
30-09-2008, 17:24:25
Originally posted by Drekkus
So if the bank where I have my mortgage goes bankrupt, I no longer have to pay my mortgage, right? :cute:

Yes, it's just as if your bridge is underwater.

Dyl Ulenspiegel
30-09-2008, 17:26:20
Originally posted by Oerdin
The bailout bill failed to pass the house.

Will be voted again, or a new draft.

Still, it looks like Hank's wet dream of a 700 billion $ blank cheque to feed his cronies didn't come true. What a shame.

There's still a basic problem with the buying-toxic-crap approach, though.

TCO
30-09-2008, 23:39:04
1. Wouldn't it have been cheaper to just give Paulson 5 bil or so? Or Goldman 50 bil or so? Not the bailout after bailout (WaMu was a bailout also, we took on liabilities instead of letting the bankruptcy screw the counterparties.

2. I think the whole thing is the continuation of the dotcom boom. not only in economics, but also in the rot of thinking...and the poor ethics.

3. I found out that Eric Cantor voted FOR the bailout. GRRR. I am seriously geared up for a Republican primary to challenge him. Looking for the right candidate to run. I think we could collect the scalp. Nothing like running to the right of a Republican in a primary. I am ready to figuratively (but oh so close to literally) geld the motherfucker.

KrazyHorse
01-10-2008, 00:06:11
They still haven't held Congressional primaries?

Or do you mean in 2 years?

TCO
01-10-2008, 03:49:07
2 yrs

Drekkus
01-10-2008, 07:17:35
geld?

Bob
01-10-2008, 07:37:47
yes please

Drekkus
01-10-2008, 08:10:51
How many Dutchmarks is that?

Bob
01-10-2008, 08:19:03
2 many

Funko
02-10-2008, 09:05:20
This thread continues to rule.

Dyl Ulenspiegel
02-10-2008, 09:30:26
Thanks to Bob!

Bob
02-10-2008, 10:29:24
No problem

MoSe
02-10-2008, 11:44:26
my former boss used to say:

No Problems = No Work


he left this spring for a better company. I assumed he meant one with more problems

Bob
02-10-2008, 11:47:04
No Work = no problem

Dyl Ulenspiegel
02-10-2008, 20:45:16
Seems Bernanke disagrees - no economy, big problem:

http://www.nytimes.com/2008/10/02/business/02crisis.html?_r=1&oref=slogin

“If we don’t do this,” Mr. Bernanke said, according to several participants, “we may not have an economy on Monday.”

Funny... until recently, everything was contained, fundamentally sound etc. Now that the big fat feeding trough is at risk, it's all panicky...

TCO
02-10-2008, 22:31:41
Why did we still have an economy last Monday then?

Dyl Ulenspiegel
03-10-2008, 08:15:59
I'm sure Bernanke has a cunning theory to explain that away.

Alternatively: Economy = Wall street where Benny was betting on a fat job after his stunt at the fed

Funko
03-10-2008, 08:16:26
I for one welcome our new Chinese overlords.

Dyl Ulenspiegel
03-10-2008, 08:17:17
China is the next bubble to pop.

Oerdin
03-10-2008, 09:17:55
No doubt after Wall St defaults on all those Chinese loans. ;)

MOBIUS
03-10-2008, 11:15:46
The new superpower in waiting...

Dubya is actually a Chinese android planted to destroy the US from within!

Dyl Ulenspiegel
03-10-2008, 17:26:11
Bailout bill passed.

Now it will be fun watching when they realise the bailout won't help much. That'll be real crisis time.

mr_B
03-10-2008, 18:29:39
Originally posted by King_Ghidra
is it wealth? i'm an ignoramus when it comes to economics, but i don't think real wealth just disappears.

if someone tells me something is worth a tenner but it only sells for a pound, have they lost nine pound's worth of wealth or just realised its true value? :beer:

Vincent
03-10-2008, 18:33:29
Economies is simple.

When I borrow you 5 EUR, I got 5 EUR (because you'll give it back) and you own 5 EUR (because I gave it to you) and so it's worth 10 EUR.

And no, I won't borrow you 5 EUR ...

Dyl Ulenspiegel
03-10-2008, 18:38:16
Vinnie discovers fractional reserve banking!

mr_B
03-10-2008, 19:08:34
we are schjmart

Bob
03-10-2008, 20:24:28
jj

mr_B
03-10-2008, 20:50:12
especially king bob the fuhrer

Japher
03-10-2008, 23:47:05
king boob is smarter

TCO
04-10-2008, 02:14:38
fuck me up the ass

Lazarus and the Gimp
04-10-2008, 07:43:58
Apparently this is the list of stuff that got added to get the bill through.

Sec. 101. Renewable energy credit.
Sec. 102. Production credit for electricity produced from marine renewables.
Sec. 103. Energy credit.
Sec. 104. Energy credit for small wind property.
Sec. 105. Energy credit for geothermal heat pump systems.
Sec. 106. Credit for residential energy efficient property.
Sec. 107. New clean renewable energy bonds.
Sec. 108. Credit for steel industry fuel.
Sec. 109. Special rule to implement FERC and State electric restructuring policy.
Sec. 111. Expansion and modification of advanced coal project investment credit.
Sec. 112. Expansion and modification of coal gasification investment credit.
Sec. 113. Temporary increase in coal excise tax; funding of Black Lung Disability Trust Fund.
Sec. 114. Special rules for refund of the coal excise tax to certain coal producers and exporters.
Sec. 115. Tax credit for carbon dioxide sequestration.
Sec. 116. Certain income and gains relating to industrial source carbon dioxide treated as qualifying income for publicly traded partnerships.
Sec. 117. Carbon audit of the tax code.
Sec. 201. Inclusion of cellulosic biofuel in bonus depreciation for biomass ethanol plant property.
Sec. 202. Credits for biodiesel and renewable diesel.
Sec. 203. Clarification that credits for fuel are designed to provide an incentive for United States production.
Sec. 204. Extension and modification of alternative fuel credit.
Sec. 205. Credit for new qualified plug-in electric drive motor vehicles.
Sec. 206. Exclusion from heavy truck tax for idling reduction units and advanced insulation.
Sec. 207. Alternative fuel vehicle refueling property credit.
Sec. 208. Certain income and gains relating to alcohol fuels and mixtures, biodiesel fuels and mixtures, and alternative fuels and mixtures treated as qualifying income for publicly traded partnerships.
Sec. 209. Extension and modification of election to expense certain refineries.
Sec. 210. Extension of suspension of taxable income limit on percentage depletion for oil and natural gas produced from marginal properties.
Sec. 211. Transportation fringe benefit to bicycle commuters.
Sec. 301. Qualified energy conservation bonds.
Sec. 302. Credit for nonbusiness energy property.
Sec. 303. Energy efficient commercial buildings deduction.
Sec. 304. New energy efficient home credit.
Sec. 305. Modifications of energy efficient appliance credit for appliances produced after 2007.
Other Tax Credits and Changes

Sec. 101. Extension of alternative minimum tax relief for nonrefundable personal credits.
Sec. 102. Extension of increased alternative minimum tax exemption amount.
Sec. 103. Increase of AMT refundable credit amount for individuals with longterm unused credits for prior year minimum tax liability, etc.
Sec. 201. Deduction for State and local sales taxes.
Sec. 202. Deduction of qualified tuition and related expenses.
Sec. 203. Deduction for certain expenses of elementary and secondary school teachers.
Sec. 204. Additional standard deduction for real property taxes for nonitemizers.
Sec. 205. Tax-free distributions from individual retirement plans for charitable purposes.
Sec. 206. Treatment of certain dividends of regulated investment companies.
Sec. 207. Stock in RIC for purposes of determining estates of nonresidents not citizens.
Sec. 208. Qualified investment entities.
Sec. 301. Extension and modification of research credit.
Sec. 302. New markets tax credit.
Sec. 303. Subpart F exception for active financing income.
Sec. 304. Extension of look-thru rule for related controlled foreign corporations.
Sec. 305. Extension of 15-year straight-line cost recovery for qualified leasehold improvements and qualified restaurant improvements; 15-year straight-line cost recovery for certain improvements to retail space.
Sec. 306. Modification of tax treatment of certain payments to controlling exempt organizations.
Sec. 307. Basis adjustment to stock of S corporations making charitable contributions of property.
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. 313. Qualified zone academy bonds.
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.
Sec. 402. Permanent authority for disclosure of information relating to terrorist activities.
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.
Sec. 504. Income averaging for amounts received in connection with the Exxon Valdez litigation.
Sec. 505. Certain farming business machinery and equipment treated as 5-year property.
Sec. 506. Modification of penalty on understatement of taxpayer’s liability by tax return preparer.
Sec. 512. Mental health parity.
Sec. 601. Secure rural schools and community self-determination program.
Sec. 602. Transfer to abandoned mine reclamation fund.
Sec. 702. Temporary tax relief for areas damaged by 2008 Midwestern severe storms, tornados, and flooding.
Sec. 703. Reporting requirements relating to disaster relief contributions.
Sec. 704. Temporary tax-exempt bond financing and low-income housing tax relief for areas damaged by Hurricane Ike.
Sec. 706. Losses attributable to federally declared disasters.
Sec. 707. Expensing of Qualified Disaster Expenses.
Sec. 708. Net operating losses attributable to federally declared disasters.
Sec. 709. Waiver of certain mortgage revenue bond requirements following federally declared disasters.
Sec. 710. Special depreciation allowance for qualified disaster property.
Sec. 711. Increased expensing for qualified disaster assistance property.
Sec. 712. Coordination with Heartland disaster relief.
Sec. 801. Nonqualified deferred compensation from certain tax indifferent parties.


I can particularly see the relevance of 317 to the credit crunch.

TCO
04-10-2008, 12:06:48
There's no "credit crunch". There's a reasonable reassessment of bad paper and bad practices. Local commercial banks are stuffed with money and making all kinds of loans (competing for them).

Shining1
04-10-2008, 12:45:25
Congress: We won't pass it.
Senate: We'll pass it but only if we get an extra 20% to spend on whatever we want.

20% is maybe a little low compared to some countries corruption ratings, but jeez. They're only trying to save the world here.

TCO
04-10-2008, 13:15:36
http://www.realclearmarkets.com/articles/2008/09/in_times_of_crisis_trust_capit.html

Dyl Ulenspiegel
06-10-2008, 14:17:58
Dow 10000. Partytime!

Resource Consumer
06-10-2008, 15:34:27
Credit Crisis Explained (http://www.willwatson.com/spd.pps)

TCO
07-10-2008, 00:54:36
There's no crisis! There is just a value correction. Let it happen.

KrazyHorse
07-10-2008, 04:20:57
There is an overcorrection. Whether or not you believe that the government can make it better or will only fuck things up more is open to interpretation, but the money multiplier and even the velocity of money have both dropped through the floor recently...

Dyl Ulenspiegel
07-10-2008, 13:14:30
The Fed announced they will buy commercial paper.

As the last bailout helped Wall Street for about a day, I wonder how long this pump hold....

Ah yes, that'll be some extra billions on TCO's tab...

Funko
07-10-2008, 13:18:45
Originally posted by Resource Consumer
Credit Crisis Explained (http://www.willwatson.com/spd.pps)

That's great.

TCO
08-10-2008, 02:26:14
Originally posted by KrazyHorse
There is an overcorrection. Whether or not you believe that the government can make it better or will only fuck things up more is open to interpretation, but the money multiplier and even the velocity of money have both dropped through the floor recently...

Show me the reasoning for how much is a correction and how much is an overcorrection.

TCO
08-10-2008, 02:31:28
Originally posted by Dyl Ulenspiegel
The Fed announced they will buy commercial paper.

As the last bailout helped Wall Street for about a day, I wonder how long this pump hold....

Ah yes, that'll be some extra billions on TCO's tab...

Did you authorize this SHIT?!

I wanted this to be like the early 90s, when USA was all freaking out about Japan buying all our capital assets and land...and we allowed them to buy it and run it up to big prices and then they fell out and had to sell back for less. Nifty value transfer.

Now with Feddie and Frannie and AIG and the like...I just wanted to let them go tits up. The more Long Island Obama contributing Goldman Sachs guys that took it in the ass the better. Oh...and all the foreign debt holders as well.

If we had commercial banks go tits up, we only would bail out deposists as required by law. (And some commercial banks are awash with money, doing normal lending...a lot of this "crisis" is just at Wall Street.

I don't even like the word crisis. Is it a crisis when a drunk has DTs (most extreme form of drug withdrawal) and wants some gin? No. And make the motherfucker go through it. Don't give him another nip of drug.

Dyl Ulenspiegel
08-10-2008, 07:52:15
Originally posted by TCO
Did you authorize this SHIT?!



SHIT is another Fed lending program? But yes, I authorize them. I'm really Ben. Just lost my helicopter.

Btw, the pump fell apart the same day. Slowly, slowly, reality is sinking in.

Btw2, you need foreigners to finance you. Selling inflated assets to them is one thing, defaulting on government debt (and Fannie, Freddie is government debt) is another thing. You'd get a few extra percentage points on borrowing costs, and that would kill the easy money junkie.

Resource Consumer
08-10-2008, 10:27:25
State
Helps
Insolvent
Twats

Dyl Ulenspiegel
08-10-2008, 11:00:47
Colossal
Rape
Arse
Program

Dyl Ulenspiegel
08-10-2008, 11:11:09
Ah, the new bump: Coordinated rate cuts.

MoSe
08-10-2008, 11:18:53
Coordinated rape cunts

Resource Consumer
08-10-2008, 11:39:30
1/2 pc co-ordinated rate cut - buying opportunity :D

Dyl Ulenspiegel
08-10-2008, 11:51:28
dumping opportunity

KrazyHorse
08-10-2008, 12:35:58
Originally posted by TCO
Show me the reasoning for how much is a correction and how much is an overcorrection.

It's a classic case of asymmetric information/market for lemons. The short term credit market is dysfunctional because of the self-fulfilling fear that only shitty companies need to borrow money.

In other words, it's tending towards the "bad equilibrium".

KrazyHorse
08-10-2008, 12:38:27
Originally posted by Dyl Ulenspiegel
(and Fannie, Freddie is government debt)

Not until recently it wasn't. Nowhere in law or in contract had the US gov't agreed to guarantee agency debt.

Implicit guarantees shouldn't have been worth the paper they weren't written on.

Resource Consumer
08-10-2008, 12:46:11
"bad equilibrium"

Nash equilibrium?

LoD
08-10-2008, 12:50:47
That's "badly explained equilibrium" (at least it was in "A Beautiful Mind").

TCO
08-10-2008, 12:55:53
Originally posted by Dyl Ulenspiegel
SHIT is another Fed lending program? But yes, I authorize them. I'm really Ben. Just lost my helicopter.

Btw, the pump fell apart the same day. Slowly, slowly, reality is sinking in.

Btw2, you need foreigners to finance you. Selling inflated assets to them is one thing, defaulting on government debt (and Fannie, Freddie is government debt) is another thing. You'd get a few extra percentage points on borrowing costs, and that would kill the easy money junkie.

No duh, it fell apart. Law of supply and demand beats temporary efforts to repeal it. They just waste pump money. What will we have now? wage and price controls? On Equities? On debt rates? :clueless:

Bernanke is a flubby moron. I wish Freidman were a alive to calibrate him. As long as you are not Paulson, you're ok. He incites violent fantasies with me (part me of course...:cute: )

LET IT CRASH! IF IT'S OK, TO GO UP, IT'S OK TO GO DOWN. We've had market declines before.

TCO
08-10-2008, 12:56:54
Originally posted by KrazyHorse
Not until recently it wasn't. Nowhere in law or in contract had the US gov't agreed to guarantee agency debt.

Implicit guarantees shouldn't have been worth the paper they weren't written on.

God, I completely agree. When someone comes up to you with hand out, that's the time to say, "it needs to be in black and white, sorry sucker, eat shit."

TCO
08-10-2008, 12:58:56
Originally posted by KrazyHorse
It's a classic case of asymmetric information/market for lemons. The short term credit market is dysfunctional because of the self-fulfilling fear that only shitty companies need to borrow money.

In other words, it's tending towards the "bad equilibrium".

Give me a metric. Give me an amount that is ok correction. Give me an ammount that is over correction.

Give me a rationale for why people would not buy the lemons, speculating on their worth? Also, isn't it just as possible that the information deficit is causing the lemons to be over-valued?

KrazyHorse
08-10-2008, 13:27:12
Originally posted by Resource Consumer
"bad equilibrium"

Nash equilibrium?

It's possible for there to be more than one.

MoSe
08-10-2008, 13:30:12
http://serc.carleton.edu/images/introgeo/models/Stability.jpg

Dyl Ulenspiegel
08-10-2008, 13:31:32
Ok, the "opportunity" lasted for about an hour. :D

Dyl Ulenspiegel
08-10-2008, 13:36:02
Originally posted by KrazyHorse
Not until recently it wasn't. Nowhere in law or in contract had the US gov't agreed to guarantee agency debt.

Implicit guarantees shouldn't have been worth the paper they weren't written on.

Legally correct, but irrelevant. Market perception has forced the US to make the guarantee explicit. Of course, legally unenforcable, but letting the GSEs go under would have come at a hefty price tag. These debts have been put on the US taxpayer for the last 10 years, just no one noticed.

KrazyHorse
08-10-2008, 13:38:27
Originally posted by TCO
Give me a rationale for why people would not buy the lemons, speculating on their worth? Also, isn't it just as possible that the information deficit is causing the lemons to be over-valued?

NO!!!!!

The sellers have more info than the buyers do.
If buyers cannot reasonably judge the worth then they bid based on average value of assets for sale. Assuming sellers know which are dogs and which are good, they only offer for sale those which are less-than-average in value. Buyers know this (or are taught this painfully) so offer based on the new average value of offered assets. And sellers stop offering even the less-doggy ones...and so on.

There is only one equilibrium in this case. Only the shittiest assets go on sale, liquidity drops through the floor, nobody can unload reasonable assets at a reasonable price because the only thing they can give buyers is their word that the assets are good.

This assumes that the assets being offered for sale by different entities are different enough that they are not close substitutes. When different sellers offer substitutes then buyers can allow them to bid each other down to fair price.

Dyl Ulenspiegel
08-10-2008, 13:38:51
Originally posted by TCO
No duh, it fell apart. Law of supply and demand beats temporary efforts to repeal it. They just waste pump money. What will we have now? wage and price controls? On Equities? On debt rates? :clueless:



Well, central banking operates as form of price control on short term credit. The Greenspan Fed has constantly underpriced credit, and now we see the correction.

Many business models can't survive under normal conditions. A lot of real estate business, the financial shitpeddlers on Wall street, some banks, maybe GE etc....

KrazyHorse
08-10-2008, 13:43:33
Originally posted by Dyl Ulenspiegel
Legally correct, but irrelevant. Market perception has forced the US to make the guarantee explicit. Of course, legally unenforcable, but letting the GSEs go under would have come at a hefty price tag

Why? It would simply have sent borrowing costs of agencies to what they would have without perception of guarantee. The US got free subsidies on borrowing costs to homeowners for decades. Only when they actually took on the debt did they pay for those subsidies.

Dyl Ulenspiegel
08-10-2008, 13:48:10
"borrowing costs of agencies to what they would have without perception of guarantee" would absolutely destroy what remains of the housing market. A default might also affect the Treasury market as it could be seen as a US default for those whoe percieved a gaurantee.

The "free subsidies" weren't really free. Otherwise you'd have discovered a free lunch.

Lurker the Second
08-10-2008, 13:58:59
Mmmmm, lunch.

MoSe
08-10-2008, 14:02:08
remember the CIV II Economics Advisor?

Let's Do Lunch!

KrazyHorse
08-10-2008, 15:09:55
Originally posted by Dyl Ulenspiegel
"borrowing costs of agencies to what they would have without perception of guarantee" would absolutely destroy what remains of the housing market. A default might also affect the Treasury market as it could be seen as a US default for those whoe percieved a gaurantee.

The "free subsidies" weren't really free. Otherwise you'd have discovered a free lunch.

I have discovered a free lunch (actually a free transfer from lenders to US borrowers).

When your counterparty operates under some sort of misconception then you get to rape them. That's how it works.

And I would love the "housing market" to tank. House prices are not net wealth. They represent the present value of obligations from housedwellers to houseowners.

Resource Consumer
08-10-2008, 15:14:32
Originally posted by Dyl Ulenspiegel
Ok, the "opportunity" lasted for about an hour. :D

You have to be fast

Resource Consumer
08-10-2008, 15:14:58
Originally posted by MoSe
remember the CIV II Economics Advisor?

Let's Do Lunch!

I think this calls for the Elvis impersonator

Lurker the Second
08-10-2008, 15:32:37
:lol: