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[quote=M29;142767]Here's a different take by Thomas Sowell:[/quote]Ah, yes -- the same Thomas Sowell who thinks Democrats, including specifically Barack Obama, aid and abet people who hate America, and that Obama has done so for "decades".
[URL]http://townhall.com/columnists/ThomasSowell/2008/06/05/obama_and_mccain[/URL] (BTW, I've seen Obama-smears (but no McCain-smears) posted to two separate [I]non-political[/I] mailing lists to which I subscribe; the latest quoted the article linked above.) - - - Hey, I heard a local right-wing radio talk show host give that same line earlier today: that the _real_ root of the current financial crisis was the bill passed in the Clinton administration that directed banks to stop redlining minority neighborhoods (my synopsis, not his). Guess he reads Sowell, too (not to mention not-mentioning which party controlled Congress, so could have killed that bill, at the time it was under consideration). - - - Anyone know how, exactly, Sowell thinks Democrats are responsible for any of the things Ernst listed? ... other than appointing Alan Greenspan (the first time, that is)? (But wait! Republicans had the Senate majority then, didn't they?) |
[QUOTE=cheesehead;142869]
... other than appointing Alan Greenspan (the first time, that is)? (But wait! Republicans had the Senate majority then, didn't they?)[/QUOTE] I thought Greenspan was appointed by Bush 41, with a Democratic congress... |
[url=http://en.wikipedia.org/wiki/Alan_Greenspan]Greenspan[/url] was initially appointed by Reagan in 1987, and subsequently reappointed by every succeeding president: Bush Sr, Clinton, Bush Jr. That was when his quasi-mystical "maestro" image was still intact. And yes, the policies that led to the dotcom bubble were put in place while Clinton was in in office, so there's plenty of blame to go around. But as I recall, Clinton wasn't running up colossal current-account deficits on top of it all.
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[QUOTE=ewmayer;142918]there's plenty of blame to go around[/QUOTE]
There sure is. IMO, most of the blame goes to the management of these banks, brokerages, insurance companies, and ratings agencies. Instead of doing their fiduciary duty of wisely managing companies, they leveraged themselves to the hilt, pushed mortgages and HELOCs on customers they knew couldn't afford it, and conspired with others to repackage the crap and sell it for a profit to unsuspecting suckers. After all, who cares if they drive a 150 year old company into the ground if they can get a few multi-million dollar bonus checks before it goes under. |
[QUOTE=Prime95;142922]There sure is. IMO, most of the blame goes to the management of these banks, brokerages, insurance companies, and ratings agencies.
Instead of doing their fiduciary duty of wisely managing companies, they leveraged themselves to the hilt, pushed mortgages and HELOCs on customers they knew couldn't afford it, and conspired with others to repackage the crap and sell it for a profit to unsuspecting suckers. After all, who cares if they drive a 150 year old company into the ground if they can get a few multi-million dollar bonus checks before it goes under.[/QUOTE] Greed is good. Greed works. Gordon Gecko These managers are in good company. |
On to today`s economic and market news - another history-making day unfolding. If I had to write a headline right now about recent events, it would probably read something like "2 Weeks that Reshaped the Global Financial Landscape". Make no mistake, what are witnessing here is every bit as big as 1929 was.
======================== As widely reported, the U.S. Federal Reserve and Treasury changed their minds last night and agreed to pump nearly $100 Billion [it will probably end up being more] to keep insurance giant AIG from outright collapse. While they effectively paid a hefty premium for their 80% stake in AIG [based on yesterday's market range], they drove a brutal bargain with respect to interest on the loan: [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aAKIaLPeVGf4&refer=news]AIG Slumps as U.S. Takeover Seen Wiping Out Investors' Stakes, Dividends[/url]: [i]American International Group Inc. fell 44 percent on speculation the government's takeover will ultimately wipe out shareholders.[/i] [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aXSfaQ5wyF2Y&refer=news]Stocks in U.S. Slide as Bank Lending Seizes Up Following Takeover of AIG[/url]: [i]U.S. stocks tumbled as bank lending seized up in the wake of the government's takeover of American International Group Inc., raising concern that more of the nation's biggest financial companies will fail.[/i] [quote] Sept. 17 (Bloomberg) -- U.S. stocks tumbled as bank lending seized up in the wake of the government's takeover of American International Group Inc., raising concern that more of the nation's biggest financial companies will fail. Goldman Sachs Group Inc. and Morgan Stanley, the two largest U.S. securities firms, plunged more than 20 percent after Oppenheimer & Co. analyst Meredith Whitney cut profit estimates. General Electric Co., the world's third-biggest company, fell 8 percent and U.S. Steel Corp. slid 14 percent. Yields on three-month bills sank to at least a 54-year low and a measure of corporate borrowing costs surged to the highest since the crash of 1987. ``It's ugly,'' said Michael Mullaney, a Boston-based money manager for Fiduciary Trust Co., which oversees $10 billion in stocks and bonds. ``It's about the worst I've seen it in 25 years. You have to have free-flowing credit to lubricate the system. That's not happening right now.'' ... About $2.8 trillion of market value was erased from global stocks this week, triggered by Lehman Brothers Holdings Inc.'s bankruptcy. Russia halted stock trading for a second day and poured $44 billion into its three biggest banks in a bid to halt the worst financial crisis in a decade.[/quote] [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=arhxN1lPfEfY&refer=news]Morgan Stanley, Goldman Shares Plunge Most Ever as Credit Crisis Deepens[/url]: [i]Goldman Sachs Group Inc. and Morgan Stanley, the two biggest U.S. securities firms, tumbled the most ever in New York after a government rescue plan for American International Group Inc. failed to ease the credit contraction.[/i] [url=http://money.cnn.com/2008/09/17/real_estate/housing_starts.ap/index.htm]New housing construction at 17-year low[/url] [quote]WASHINGTON (AP) -- Construction of new homes and apartments fell to its lowest level in 17 years last month, showing the country is still gripped by a severe housing downturn that has triggered billions of dollars of losses and is reshaping the structure of U.S. finance. The Commerce Department reported Wednesday that housing construction dropped a surprise 6.2% last month to a seasonally adjusted annual rate of 895,000 units. That's the slowest building pace since January 1991, another period when housing was going through a painful correction. The decline is larger than the 1.6% drop analysts expected and showed weakness in all the country except the West.[/quote] |
[QUOTE=ewmayer;142926]Morgan Stanley, Goldman Shares Plunge Most Ever as Credit Crisis Deepens[/url]: [i]Goldman Sachs Group Inc. and Morgan Stanley, the two biggest U.S. securities firms, tumbled the most ever in New York after a government rescue plan for American International Group Inc. failed to ease the credit contraction.[/i]
[url=http://money.cnn.com/2008/09/17/real_estate/housing_starts.ap/index.htm]New housing construction at 17-year low[/url][/QUOTE] So when will the indictments begin? What about stockholder lawsuits against these corporations and corporate execs responsible for the mess? What about Fidelity suing on behalf of its mutual fund holders? The basis for the lawsuit would be fraud, of course. And of course, we would need to sue S&P and Moody's for their fraudulent ratings....... Face it, anyone with an IRA is in deep kimchee. We should have let AIG go belly up, IMO. The Fed bailout certainly does not seem to have helped the many millions of people with IRAs. |
Reserve MM Fund Breaks $1 | Legality of AIG Action
[url=http://money.cnn.com/2008/09/17/pf/bc.apfn.investorrisk.fal.ap/index.htm]Reserve's Money Fund "Breaks the Buck"[/url]: [i]Reserve Primary Fund (RFIXX), the oldest US money-market fund, became the first in 14 years to break the buck after writing off $785 million of debt issued by bankrupt Lehman Brothers Holdings Inc.[/i]
[quote]BOSTON (AP) -- The assets of a money-market fund that held $62 billion three months ago have fallen below a safety benchmark intended to ensure investors who put money in can get it all back - just the second unsettling instance in which a fund has exposed investors to potential losses in the nearly four-decade history of money-market funds. Reserve Management Co.'s announcement that its Reserve Primary Fund had "broken the buck" after its assets fell sharply because of soured investments in Lehman Brothers Holdings Inc. marked the first such investor exposure to money-market losses since 1994. New York-based Reserve said the value of $785 million in debt securities issued by Lehman and held by the Primary Fund were written down to zero as of Tuesday afternoon - a consequence of Lehman's collapse and bankruptcy after the federal government failed to bail out the investment bank over the weekend. Money-market funds normally maintain assets of at least $1 for every dollar invested in funds, and are supposed to return interest to investors in the form of dividends. [b] Money funds not backed by FDIC [/b] Money funds are normally seen as among the safest investments after cash and bank deposits because they're required under federal regulations to invest only in low-risk securities. However, they lack the federal deposit insurance that other safe investments such as bank accounts offer. Consequently, money funds typically offer smaller returns than investments such as stocks, though they have become increasingly popular amid recent market turmoil, and enable investors to easily put money in and take it out when needed. Reserve said Tuesday night that "unprecedented market events of the past several days" had reduced the value of the fund's holdings to 97 cents for each $1 put in by investors -- an event known as "breaking the buck." ... Reserve said Tuesday night that effective immediately, investors redeeming cash from the fund will not receive their money until as long as seven days later -- the maximum allowed by law. ... In most instance in which a fund is in danger of breaking the buck, the fund's parent firm supplies cash from its own holdings or finds money elsewhere on the open market to maintain an adequate fund balance, said Peter Crane, president of Westborough, Mass.-based Crane Data, publisher of the money-market fund newsletter, Money Fund Intelligence.[/quote] [b]Note:[/b] That assumes that the parent firm can *afford* to bail out the money fund. I predict that this will not be last money fund to break the buck this year, and some of the haircuts are going to to be a lot worse than the relatively small [so far] 3% loss sustained by Reserve. [b]Mish Weighs In on the Legality of the AIG Takeover[/b] [url=http://globaleconomicanalysis.blogspot.com/2008/09/aig-bailout-fed-loophole-133.html]AIG Bailout: Fed Loophole 13.3[/url] [quote]In light of the Fed sponsorship of AIG to the tune of $85 billion or more at taxpayer risk (See [url=http://globaleconomicanalysis.blogspot.com/2008/09/nationalization-of-aig-treasury-to-get.html]Nationalization of AIG: Treasury to get 80% stake in return for $85 billion[/url]), inquiring minds just might be asking "By what authority can the Fed lend to insurance companies?" It`s a good question given that the Fed is widely thought to be authorized to lend only to banks. It turns out the Fed can lend to pizza parlors if it wants to, with a questionable interpretation of the Federal Reserve Act.[/quote] Basically, as long as the Fed board of governors can muster 5 votes for an "unusual and exigent circumstances" claim, they can do pretty much whatever the hell they want. It`s effectively the Federal Reserve analog of martial law. Which begs the question: if we are now seeing "unusual and exigent circumstances" on a nearly-daily basis, why does Treasury Secretary Paulson continue with the almost-daily "Our banking system is fundamentally sound" lie? Those two positions are mutually incompatible. |
[QUOTE=ewmayer;142941]Basically, as long as the Fed board of governors can muster 5 votes for an "unusual and exigent circumstances" claim, they can do pretty much whatever the hell they want. It`s effectively the Federal Reserve analog of martial law. Which begs the question: if we are now seeing "unusual and exigent circumstances" on a nearly-daily basis, why does Treasury Secretary Paulson continue with the almost-daily "Our banking system is fundamentally sound" lie? Those two positions are mutually incompatible.[/QUOTE]Good question; and one that ironically echos the much lampooned McCain quote that "the economy is fundamentally sound." Here is the history of legislation involved (2002): [URL="http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=3392"]Lender of More Than Last Resort[/URL][QUOTE]Section 13(b) is dead! Long live Section 13[3]!
Section 13(b) may be a memory, and a discomfiting one at that, but Section 13 paragraph 3 (that language originally found in a 1932 highway bill) is alive and well in the Federal Reserve Act. As we've seen from the above illustrations, this amendment allows, "in unusual and exigent circumstances," a Reserve bank to advance credit to individuals, partnerships and corporations that are not depository institutions. At least five members of the Federal Reserve Board must agree with the credit advance, and the Reserve bank must show that such credit was not available elsewhere. To some this lending legacy is likely a harmless anachronism, to others it's still a useful insurance policy, and to others it's a ticking time bomb of political chicanery. Doubtless, the discount window will continue to evolve.[/QUOTE]I got this link while reading WSJ blogs. I have been following the WSJ blogs more avidly lately because they had interesting and somewhat detailed dirt on the Fannie Mae/Freddie Mac action on the Friday before that weekend. |
[quote=cheesehead;142869]... other than appointing Alan Greenspan (the first time, that is)?[/quote]My bad. Gotta remember to look up that sort of thing. I recalled that Reagan didn't reappoint Volcker in 1987, but thought there was someone else who served between Volcker and Greenspan.
[quote](But wait! Republicans had the Senate majority then, didn't they?)[/quote]Wrong there, too -- 55 Democrats in 1987. ([URL]http://www.senate.gov/pagelayout/history/one_item_and_teasers/partydiv.htm[/URL]) |
New Treasury Program To Provide Cash To Fed
[url]http://www.ustreas.gov/press/releases/hp1144.htm[/url]
[QUOTE]September 17, 2008 HP-1144 Treasury Announces Supplementary Financing Program Washington- The Federal Reserve has announced a series of lending and liquidity initiatives during the past several quarters intended to address heightened liquidity pressures in the financial market, including enhancing its liquidity facilities this week. To manage the balance sheet impact of these efforts, the Federal Reserve has taken a number of actions, including redeeming and selling securities from the System Open Market Account portfolio. The Treasury Department announced today the initiation of a temporary Supplementary Financing Program at the request of the Federal Reserve. The program will consist of a series of Treasury bills, apart from Treasury's current borrowing program, which will provide cash for use in the Federal Reserve initiatives. Announcements of and participation in auctions conducted under the Supplementary Financing Program will be governed by existing Treasury auction rules. Treasury will provide as much advance notification as possible regarding the timing, size, and maturity of any bills auctioned for Supplementary Financing Program purposes.[/QUOTE] [URL="http://www.commercialpropertynews.com/cpn/content_display/industry-news/e3ib3e645d8b7680ce567073ec94b0c2afa"]Treasury Creates New Temporary Financing Program[/URL][QUOTE]According to an article by MarketWatch this afternoon, the Treasury Department issued $45 billion in 35-day cash management bills at a rate of 0.30 percent today. [/QUOTE][URL="http://news.morningstar.com/newsnet/printNews.aspx?article=/DJ/200809171107DOWJONESDJONLINE000714_univ.xml"]UPDATE: New Treasury Program Created To Provide Cash To Fed[/URL][QUOTE] The Fed was in dire need of a balance sheet boost, according to a statement by Miller Tabak & Co. L.L.C.'s chief bond-market strategist Tony Crescenzi, released earlier Wednesday. "If the Fed lends $85 billion to AIG, the Fed's Treasury holdings will be down to $195 billion" from close to $800 billion in Treasuries at the start of the year, he said. "The tally is so low that it is becoming imperative for the Fed to take actions to enlarge its balance sheet."[/QUOTE] |
Gentlemen!
The situation is stressfull, thus some entertainment may be in order. I'm going to quote an anonymous poster on one of the newsgroups I sometimes visit. [QUOTE] All hail the heroic proletarian leadership of Comrades Paulson and Bernanke! All hail the September Revolution! Their brilliant plan for reversing the historically absurd triumph of capitalism over the dialetical principles of Marx and Lenin has now achieved complete success. Think of it comrades: We have seized the commanding heights of the international capitalist financial system -- in a bloodless coup! Through our National Mortgage Soviet, we can control the US housing market for decades to come. With our new Global Insurance Soviet, we can throttle the lickspittle financiers and bring their decadent bourgouis derivatives markets to heel. By accepting common shares as collateral for loans from our People's Federal Reserve Bank, we can accumulate ownership stakes in the remaining White corporations, weakening their will to resist the inevitable victory of the party and the workers' state. Once Comrade Obama has been installed in the White House, fortified by the achievements of Comrades Paulson and Bernanke, supported by our Chamber of People's Deputies and our Supreme Soviet Senate, and ruthlessly exercising the dictatorial powers accumulated by Comrade Bush, final victory will be certain. If only Comrades Stalin and Mao were alive to see this glorious day. [/QUOTE] Thank you for your help. |
Very funny. Just substitute Comrade McCain for Comrade Obama. You cannot imagine that Bush, Paulson and Bernanke want Obama to win, can you? That assumption is just Kool-Aid.
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Mme de Rothschild calls Obama "elitist"
This probably belongs in the "New U.S. president" thread, but since it involves a member of the international bankster clique, it somehow struck me as fitting for this thread:
[url=http://opinionator.blogs.nytimes.com/2008/09/17/endorsements-of-the-rich-and-famous/?ref=opinion]NYTimes | the Opinionator | Endorsements of the Rich and Famous[/url] [quote]“Lynn Forester de Rothschild, a prominent Hillary Clinton supporter and member of the Democratic National Committee’s Platform Committee, will endorse John McCain for president on Wednesday,” according to CNN’s Mark Preston. “In an interview with CNN this summer, Forester did not hide her distaste for eventual Democratic presidential nominee Barack Obama. ‘This is a hard decision for me personally because frankly I don’t like him,’ she said of Obama in an interview with CNN’s Joe Johns. ‘I feel like he is an elitist. I feel like he has not given me reason to trust him.’ ” “Irony truly is dead as Lynn Forester de Rothschild endorses John McCain on anti-elitism grounds,” responds Matthew Yglesias, who implies that Lady de Rothschild, the wife of the London banking family heir, Sir Evelyn de Rothschild, might have less-than-ideological grounds for her decision.[/quote] Ooh, snap - the fact that such a hero of the working class such as Mme de R doesn't like the [i]halbschwarze[/i] "elitist" who somehow came out of nowhere to beat out her buddy Hillary, the heiress to the democratic throne, is sure to alienate the working and middle-class voters in the U.S., who have traditionally strongly identified with the wonderful and beneficent global Rothschild banking cabal. On to today's news: ======================= [url=http://globaleconomicanalysis.blogspot.com/2008/09/britain-bans-short-selling-citing.html]Britain Bans Short Selling of Financials, Citing "Extreme Pressure"[/url] [quote]LONDON (MarketWatch) -- Britain's Financial Services Authority on Thursday banned short-selling of financial stocks and prohibited any increase in new bearish positions in the sector. Also, disclosure will be required on all positions of more than 0.25% of a stock. The regulator said it may extend the bank to other sectors. The ban is due to remain in force until Jan. 16, but it will be reviewed in 30 days. "While we still regard short-selling as a legitimate investment technique in normal market conditions, the current extreme circumstances have given rise to disorderly markets. As a result, we have taken this decisive action, after careful consideration, to protect the fundamental integrity and quality of markets and to guard against further instability in the financial sector," said Hector Sants, chief executive of the FSA.[/quote] Mish Shedlock's commentary on this latest desperate act by the financial communists: [quote]"Banning short selling is an act of pure desperation guaranteed to fail. Short term, I do not know what the market will do, but if shorts are squeezed out an air pocket below will form just as happened in the US with share prices of Fannie Mae (FNM) Freddie Mac (FRE). The simple fact of the matter is that short sellers add liquidity to the market. Barring bankruptcy, shorts have to cover at some point. Also short selling is a necessary function of market makers."[/quote] [url=http://globaleconomicanalysis.blogspot.com/2008/09/china-russia-intervene-in-equity.html]China, Russia Intervene In Equity Markets[/url]: [i]On the heels of Central Banks announcing Global Coordinated Liquidity Measures, China and Russia have both announced plans to intervene directly in the equity markets.[/i] [quote]President Dmitry Medvedev pledged $20 billion to support the Russian stock market and cut oil taxes to stem the country's worst financial crisis in a decade. Medvedev ordered the government to "immediately" consider committing as much as 500 billion rubles to ensure "the stability of the stock market," which was closed after the Micex Index lost 25 percent over three days. Russian shares traded in London surged and the interbank lending rate plunged. The government will slash duties on oil after the decline in crude from a record hurt exporters and reduced revenue. The president's intervention followed a meeting with central bank Chairman Sergey Ignatiev and Finance Minister Alexei Kudrin. Ignatiev also relaxed reserve requirements for lenders because of the turmoil in global markets and an estimated capital flight of at least $35 billion following last month's conflict in Georgia.[/quote] Interesting that the financial markets, rather than the hapless European, American and Asian governments, are the ones punishing Russia for its Georgian adventure. [b] Another big money-market fund "breaks the buck": [/b] [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aNriOV.A5w1E&refer=news]BNY Mellon Cash Fund Declines Below $1 a Share, Hit by Lehman Debt Losses[/url]: [i]An institutional fund run by Bank of New York Mellon Corp. designed to work like a money-market account fell to less than $1 a share after losses on debt issued by bankrupt Lehman Brothers Holdings Inc.[/i] [b] Markets Rise on Massive Coordinated Liquidity Pump: [/b] [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=ajbscY6pBmlA&refer=news]U.S. Stocks Rise on Central Banks' Fund Injections; Energy Shares Advance[/url]: [i]U.S. stocks rose as the world's biggest central banks agreed to pump $247 billion into the financial system and Goldman Sachs Group Inc. predicted the bull market for commodities isn't over.[/i] One wonders "what happens when the pump runs dry?" Translation of Goldman's bullish prediction; "Folks, we are getting absolutely crushed in all our highly leveraged commodities plays. Please, please, bid them up so as to make our speculative bet go green." |
Brilliant piece on Bloomberg:
[url]http://www.bloomberg.com/apps/news?pid=20601039&sid=a9xtBHJoZTOw&refer=home[/url] [QUOTE]Remember when everyone believed in [URL="http://search.bloomberg.com/search?q=Alan+Greenspan&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1"]Alan Greenspan[/URL]? When [URL="http://search.bloomberg.com/search?q=John%0AMcCain&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1"]John McCain[/URL], running for president in 2000, said that if Greenspan died he'd have him stuffed and propped up against the wall at the Federal Reserve, where he'd remain chairman? [/QUOTE] [QUOTE]We've just witnessed the largest bankruptcy in U.S. history and we know neither the inciting incident (though there is speculation that sovereign wealth funds decided to stop lending to Lehman Brothers Holdings Inc.), nor the deep cause. But there's now a pile of [URL="http://www.bloomberg.com/apps/quote?ticker=LEH%3AUS"]assets and liabilities [/URL]smoldering in New York awaiting inspection. [/QUOTE] And lots of other bits. |
Financial Fascism at its Finest
One simply needs to read today's [i]Bloomberg[/i] headlines:
[url=http://www.bloomberg.com/apps/news?pid=20601103&sid=a7EEV_n9MyXw&refer=news]Paulson, Bernanke Seek to Rid Firms of Toxic Assets, Expanding U.S. Powers[/url]: [i]The U.S. government moved to cleanse banks of troubled assets and halt an exodus of investors from money markets in the biggest expansion of federal power over the financial system since the Great Depression.[/i] [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aIPswrxo1ZkQ&refer=news]Fed Will Help Banks Meet Money-Fund Redemptions, Buy Debt to Aid Liquidity[/url]: [i]The Federal Reserve said it will lend to banks to meet demands for redemptions from money-market mutual funds and plans to buy agency debt from primary dealers to aid financial-market liquidity.[/i] [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aQNitsHCydlk&refer=news]Treasuries Decline as Paulson, Bernanke Work On Solution to Banking Crisis[/url]: [i]U.S. two-year notes tumbled the most in 23 years as Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke announced a plan to help stem a collapse in financial-market confidence.[/i] [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aXLDb6qzgL4c&refer=news]Morgan Stanley, Goldman Lead Financial Shares Higher on Bank-Rescue Plan[/url]: [i]Morgan Stanley and Goldman Sachs Group Inc., the two biggest independent securities firms in the U.S., led financial shares higher after the government said it would take troubled assets off finance companies' balance sheets.[/i] [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aZXi_VcnlV6Y&refer=news]Short Sellers Come Under Fire in U.S., U.K. After Collapse of Lehman, AIG[/url]: [i]The Securities and Exchange Commission halted short selling of 799 financial companies, pressing an assault on speculators after the collapse of Lehman Brothers Holdings Inc. and American International Group Inc.[/i] Right...it wasn`t the financial firms` own greed and excessive speculative leverage that got them into trouble and made them a target for short sellers - it was the shorts themselves who forced the banks to accumulate trillions of dollars of toxic bad-mortgage-backed debt onto their balance sheets. Like I said, financial fascism at its finest. If you were one of the legal short sellers [who are an integral part of a healthy equities market, by providing liquidity and reining in irrational exuberance and excess speculative stock price appreciation - when they are allowed to trade freely, that is] who was scrambling to cover after yesterday's opening anti-shorting salvo by the SEC, this amounts to the government taking your money by decree, simply by saying "shorts are to blame" without providing a single shred of justification. Now that they`ve wiped out millions of short positions, they`re gonna go on a fishing expedition, find a few bad apples who were engaging in naked shorting [which was always illegal but to which the SEC famously turned a blind eye, at least while it was the big financials who were doing most of it and making big money doing so], say "see? We told you this was running rampant - economy would be in great shape except for the evil shorts", and provide a tidy post hoc justification for their illegal actions which the credulous mass media will swallow hook, line and sinker. I swear, if this stands, I will leave the U.S. at the next decent opportunity and never return. I will not live under a fascist government-and-corporate kleptocracy. [b] Some perspectives on today`s unprecedented market intervention: [/b] [url=http://blogs.wsj.com/marketbeat/2008/09/19/the-government-decrees-stocks-will-rally/?mod=yahoo_hs]WSJ Blogs | The Government Decrees Stocks Will Rally[/url] [url=http://globaleconomicanalysis.blogspot.com/2008/09/weep-for-free-market.html]Weep for the Free Market[/url] [quote]Government manipulation can never prevent financial Armageddon. In fact, government intervention and manipulation in the free markets eventually guarantees financial Armageddon. Armageddon was not prevented, only delayed, and at taxpayer expense.[/quote] And lastly, I think I just found the *real* reason the U.S. Congress appears so ready and willing to give the crooks running the Fed, Treasury and SEC a free hand to manipulate the markets [preferably upward]: [url=http://www.bloomberg.com/apps/news?pid=20601109&sid=aSEtGBXG0C0s&refer=news]Pelosi, Kerry Share Investor Pain as Lawmakers' AIG, Lehman Stakes Vanish[/url]: [i]The market storm that brought down Lehman Brothers Holdings Inc., American International Group Inc. and other pillars of U.S. finance may have also blown holes in the portfolios of House Speaker Nancy Pelosi, Senator John Kerry and more than 50 other members of Congress.[/i] |
Opt-in $1 floor for money market mutual funds
[URL="http://www.ustreas.gov/press/releases/hp1147.htm"]http://www.ustreas.gov/press/releases/hp1147.htm[/URL]
[QUOTE]September 19, 2008 hp-1147 Treasury Announces Guaranty Program for Money Market Funds Washington- The U.S. Treasury Department today announced the establishment of a temporary guaranty program for the U.S. money market mutual fund industry. [B]For the next year, the U.S. Treasury will insure the holdings of any publicly offered eligible money market mutual fund – both retail and institutional – that pays a fee to participate in the program.[/B] [B]President George W. Bush approved the use of existing authorities by Secretary Henry M. Paulson, Jr. to make available as necessary the assets of the Exchange Stabilization Fund for up to $50 billion[/B] to guarantee the payment in the circumstances described below. Money market funds play an important role as a savings and investment vehicle for many Americans; they are also a fundamental source of financing for our capital markets and financial institutions. Maintaining confidence in the money market fund industry is critical to protecting the integrity and stability of the global financial system. Concerns about the net asset value of money market funds falling below $1 have exacerbated global financial market turmoil and caused severe liquidity strains in world markets. In turn, these pressures have caused a spike in some short term interest and funding rates, and significantly heightened volatility in exchange markets. Absent the provision of such financing, there is a substantial risk of further heightened global instability. Maintenance of the standard $1 net asset value for money market mutual funds is important to investors. If the net asset value for a fund falls below $1, this undermines investor confidence. The program provides support to investors in funds that participate in the program and those funds will not "break the buck". This action should enhance market confidence and alleviate investors' concerns about the ability for money market mutual funds to absorb a loss. [B]Investors in money market mutual funds with a net asset value that falls below $1 would be notified that their fund triggered the [COLOR="Red"]insurance[/COLOR] program.[/B] The Exchange Stabilization Fund was established by the Gold Reserve Act of 1934. This Act authorizes the Secretary of the Treasury, with the approval of the President, "to deal in gold, foreign exchange, and other instruments of credit and securities" consistent with the obligations of the U.S. government in the International Monetary Fund to promote international financial stability. More information on the Exchange Stabilization Fund can be found at [url]http://www.treas.gov/offices/international-affairs/esf/[/url].[/QUOTE] |
[QUOTE=ewmayer;143182]
I swear, if this stands, I will leave the U.S. at the next decent opportunity and never return. I will not live under a fascist government-and-corporate kleptocracy. [/QUOTE] Whenever the world gets me pissed off, I go back to [url="http://www.paulgraham.com/hamming.html"]Richard Hamming's famous speech[/url]: [i]Now you are going to tell me that somebody has to change the system. I agree; somebody's has to. Which do you want to be? The person who changes the system or the person who does first-class science? Which person is it that you want to be? Be clear, when you fight the system and struggle with it, what you are doing, how far to go out of amusement, and how much to waste your effort fighting the system. My advice is to let somebody else do it and you get on with becoming a first-class scientist. Very few of you have the ability to both reform the system and become a first-class scientist. [/i] |
[QUOTE=jasonp;143189]Whenever the world gets me pissed off ...[/QUOTE]
Your attitude is sometimes refered to as [I]internal emigration[/I]. |
Exactly - I have no intention to "fight the system" because the system is fundamentally corrupt and even those allegedly in charge of it are slaves to the big-money players who have a massive vested interest in keeping history's greatest looting operation running.
However, I reserve the option to leave it - whether it will let me leave without stealing my hard-earned life's savings is however a pertinent and no longer tinfoil-hat-conspiratorial question. More commentary from Mish's blog: ====================== [url=http://globaleconomicanalysis.blogspot.com/2008/09/peak-insanity-sec-plans-to-temporarily.html]Peak Insanity: Government Targets Short Sellers[/url] [quote]Every time I think the height of insanity has been reached I have been proven wrong. My new official statement is: "There is no upward limit on insane actions by Congress, the SEC, the president, or for that matter anyone else." My friend "CS" emailed me this evening. [i] I am almost shaking as I write this for what is happening to the capital markets, this country, and the free world. The impact of the past two weeks` action in the financial markets, if not reversed by cooler heads, will have irreparably changed the world in a way that only terrorist attacks and acts of war have in the past. Nationalizing Fannie Mae and Freddie Mac, providing an emergency quasi-legal bridge loan to AIG, temporarily banning short-selling on all stocks in the US, and instituting an RTC-type entity to handle the toxic waste of the financial system is economic violence on a grand scale. The long-term cost of these actions to dollar holders will likely be in excess of $1 trillion. The basic premise of a free economy is one governed by laws and not men, where property rights are respected, where individuals are free to make contracts with each other, and where honesty and transparency exist in the marketplace. It`s questionable whether any of these currently exist in the economy of the United States. Before I continue let me provide a partial list of entities responsible for the financial mess we find ourselves in: * -Fractional-reserve banking, which is inherently unstable and entirely a confidence game * -Congress for passing the Federal Reserve Act and creating the Federal Reserve, the third central bank in the history of the US * -Woodrow Wilson for using the Fed to finance World War 1 * -Benjamin Strong, the President of the Federal Reserve Bank of New York from 1914-1928, for inflating the money supply in the `20s to help out Great Britain which led to the Great Depression * -Herbert Hoover for his economic intervention from 1929-1932. He was not laissez-faire by any means. * -John Maynard Keynes for laying the foundation of a miseducated public * -FDR for banning private ownership of gold, enacting the New Deal, creating Social Security and Fannie Mae, and exacerbating the Great Depression * -The FDIC for lulling the American public into a false sense of security regarding their bank deposits and training the public to unquestionably trust the financial system * -LBJ for the guns and butter of the `60s * -Nixon for severing all ties between the US dollar and gold * -Reagan`s intellectual duplicity, using free market, small government rhetoric while turning the US into a chronic debtor nation * -Alan Greenspan, one of the most duplicitous, arrogant, and incompetent individuals in the history of the United States. If I had to pin this crisis on any one man, it would be he. * -George W. Bush for cutting taxes while raising spending and his full embrace of Cheney`s doctrine of "deficits don`t matter" * -Ben Bernanke for following the Greenspan doctrine to its inevitable conclusion * -The heads of Fannie Mae and Freddie Mac for using artificially low borrowing costs to create systemically-dangerous housing institutions * -Christopher Dodd and Barney Frank for beating the socialist drum * -Christopher Cox for thinking a ban on short-selling will solve anything * -Hank Paulson for folding the hand he was dealt * -The ratings agencies for rubber stamping garbage assets as AAA * -The heads of the major banks and brokerages on Wall Street for turning a blind eye as their institutions were taking on massive leverage that threatens to take down the financial system * -The hedge funds that levered up structured finance to dangerous levels * -Generations of lawmakers for kicking the looming financial crisis can down the road * -Home buyers who lied about their income and creditworthiness * -Predatory lenders who put people into mortgages they could never afford Frankly, I don`t know where we go from here. Despite what government officials want, you cannot intervene your way to renewed credit and economic growth. The excesses of the past 25 years have come home to roost, and if we aren`t careful this country`s status as the hub of global capital markets and the holder of the world`s reserve currency will disappear. Freezing foreclosures, mandating artificially low mortgage rates, sweeping junk assets on bank balance sheets under a Level 3 rug, delaying the writedown of debt, pursuing a witch hunt against legitimate players in the capital markets, and having the government be the lender and borrower of last resort will do nothing other than recreate the mistakes of the 1930s. Short-selling isn`t taking down financial firms, overlevered balance sheets of bad assets is. This country has a lot of problems. We have made commitments, militarily and to future retirees, that we cannot keep. We have an aging infrastructure and a reliance on diminishing fossil fuels. And we have lost confidence in the principles that led to our rise as the beacon of the free world. But there is a lot to embrace as well. We have great traditions of freedom and entrepreneurship. We have an educated, skilled populace that wants to make a better world for our children. And we have an undying belief in the American Dream, that hard work and thrift make the rags to riches story a possibility. But if we are to thrive in the 21st century we must reject the failed ways of the recent and not so recent past and rediscover that which made those who came before us proud to be American. Thanks for reading, CS[/i][/quote] |
No matter whether the USofA system turns communist or fascist, I want to be the first on the record as genuflecting towards: Herr Primzahlenführer Woltman and Comrade Prime Secretary Kurowski.
|
One thing I haven't been paying attention to is the Credit Default Swap obligation market. I'm currently looking around to remedy my inattention. So far I don't like what I see:
[URL="http://www.reuters.com/article/newsOne/idUSN1837154020080918"]Buffett's "time bomb" goes off on Wall Street[/URL][QUOTE]As it grew -- according to the industry's trade group, the credit default market grew to $46 trillion by the first half of 2007 from $631 billion in 2000 -- all that changed. An over-the-counter market grew up and some of the most active players became asset managers, including hedge fund managers, who bought and sold the policies like any other investment. And in those deals, they sold protection as often as they bought it -- although they rarely set aside the reserves they would need if the obligation ever had to be paid.[/QUOTE] [URL="http://www.globalresearch.ca/index.php?context=va&aid=10265"]It's the Derivatives, Stupid! Why Fannie, Freddie, AIG had to be Bailed Out[/URL][QUOTE]We the taxpayers are on the hook for the Fed’s "enhanced liquidity facilities," meaning the loans it has been making to everyone in sight, bank or non-bank, exercising obscure provisions in the Federal Reserve Act that may or may not say they can do it. What’s going on here? Why not let the free market work? Bankruptcy courts know how to sort out assets and reorganize companies so they can operate again. Why the extraordinary measures for Fannie, Freddie and AIG? The answer may have less to do with saving the insurance business, the housing market, or the Chinese investors clamoring for a bailout than with the greatest Ponzi scheme in history, one that is holding up the entire private global banking system. What had to be saved at all costs was not housing or the dollar but the financial derivatives industry; and the precipice from which it had to be saved was an "event of default" that could have collapsed a quadrillion dollar derivatives bubble, a collapse that could take the entire global banking system down with it. [/QUOTE] |
Biggest 2-Day Rally Since 1970 | We Have a MotWee
[url=http://www.bloomberg.com/apps/news?pid=20601103&sid=ak8MMZSJ.gMQ&refer=news]Stocks Jump in U.S., Worldwide on Bank-Bailout Measures, Short-Sale Curbs[/url]: [i]U.S. stocks surged in the biggest two-day global rally in 38 years as the government announced plans to purge banks of bad assets and crack down on speculators who drove down shares of financial companies.[/i]
In the quotes within the article, we find our moron of the week: [quote]``For sentiment the worst could be over for financials,'' said Neil Dwane, chief investment officer for Europe at Allianz Global Investors' RCM unit, where he helps oversee $65 billion.[/quote] You moron - today was 100% a government-forced short-covering rally. NOTHING about the fundamentals has changed, except that the government is now ready and willing to use taxpayer money to buy unlimited amounts of the toxic assets held by banks. Consumers are still massively in debt, banks are still unwilling to lend to each other, foreign central banks are still dumping our agency paper, and the credit rating of the United States is now at risk - would you rate the colossal, practically-unpayable debt of a nation like ours, which is still busily digging itself into the debtor hole, AAA? I sure as hell wouldn't. Luckily, there are still enough non-morons out there to call bullshit on the "bull market is back!" pumptards: [quote]John Bogle, who created the $106 billion Vanguard 500 Index Fund in 1976, said the U.S. government is ``punch drunk'' given its proposals to rescue the financial system. ``We're playing a game of casino capitalism, interfering with the way the market is working,'' Bogle, 79, said in a telephone interview today from Valley Forge, Pennsylvania. ``The government seems punch drunk. It doesn't seem systematic.''[/quote] However, by eliminating the possibility for even the usual hedging-of-long-positions-using-shorts, the fascists making up the "new rules just out today!" financial markets rules as they go have removed an important shock-dampening mechanism from the markets. If financials resume their fall without any shorts to cushion the blow by covering their positions, things could get interesting very quickly indeed. By the way, the Bloomberg article didn't mention when the biggest 2-day rally of all time was, so let me tell you: October 1929. That one did not end well... [b] So shorts Are To Blame, Eh? SEC should Look In the Mirror Instead [/b] [url=http://www.nysun.com/business/ex-sec-official-blames-agency-for-blow-up/86130/]Ex-SEC Official Blames Agency for Blow-Up of Broker-Dealers[/url]: [i]'They constructed a mechanism that simply didn't work'[/i] [quote]The Securities and Exchange Commission can blame itself for the current crisis. That is the allegation being made by a former SEC official, Lee Pickard, who says a rule change in 2004 led to the failure of Lehman Brothers, Bear Stearns, and Merrill Lynch. The SEC allowed five firms — the three that have collapsed plus Goldman Sachs and Morgan Stanley — to more than double the leverage they were allowed to keep on their balance sheets and remove discounts that had been applied to the assets they had been required to keep to protect them from defaults. Making matters worse, according to Mr. Pickard, who helped write the original rule in 1975 as director of the SEC's trading and markets division, is a move by the SEC this month to further erode the restraints on surviving broker-dealers by withdrawing requirements that they maintain a certain level of rating from the ratings agencies. "They constructed a mechanism that simply didn't work," Mr. Pickard said. "The proof is in the pudding — three of the five broker-dealers have blown up."[/quote] |
[quote=jasonp;143189]Whenever the world gets me pissed off, I go back to [URL="http://www.paulgraham.com/hamming.html"]Richard Hamming's famous speech[/URL]:[/quote]WOW! Great speech! And I haven't even gotten to the part you quoted.
In fact, I'd recommend to everyone here that they start at the beginning and read the whole thing! |
Whodathunk? and a brief history of the uptick rule
Some nice commentary [not yet banned by government decree, but that could change at any moment] on the Naked Capitalism blog about the possible unintended consequences of the SEC's latest knee-jerk short-selling ban:
[url=http://www.nakedcapitalism.com/2008/09/ban-on-short-selling-will-hurt-rather.html]Ban on Short-Selling Will Hurt Rather Than Help Broker-Dealers[/url] [quote]One possible consequence is that hedge funds forced to exit positions by the SEC ban on short-selling might take losses big enough to lead to a run of the fund, forcing liquidation of positions. That rapid selling could produce distressed prices, and in a worst-case scenario, brokers could take losses if collateralized positions fell in value and hedge funds were unable to meet margin calls. Note Morgan Stanley and Goldman are far and away the biggest prime brokers. John Hempton sets forth another unintended consequence which is more certain to happen and broader in its impact and puts none to fine a point on it in his post title, "SEC Tries to Bankrupt Wall Street": [i] Last I looked when I was short a stock the broker borrowed the stock (yes, Virgina you do get a borrow) and sold it. They then had cash. That cash was not available to me - it was pledged to whoever provided the stock to remove or reduce the risk that the stock won't be returned. That means it is generally available to the broker (who will generally lend me the stock from their inventory or margin or prime broker clients). Now there are a few hundred billion of short-sales out there. Probably more than normal - but a lot in almost all markets. And those short sales produce cash balances of a few hundred billion, most of which are available to Wall Street brokers. If you ban short-selling those balances will taken away from Wall Street brokers. That would be rather unpleasant. Last I looked the debt market was skittish and was hardly going to replace that money. So I conclude that the SEC in their "infinite wisdom" are going to stick the knife into Wall Street and bankrupt the lot of them. For political optics. So they can be seen to be doing something about short-selling. [/i] The only reason the damage might not be as broad-scale as Hempton fears is that the "temporary" ban is on shorting financial stock. Oh wait, financial represented (until they started hitting the rocks) 40% of S&P earnings. And there is something far simpler that the SEC could do. Just re-implement the uptick rule (it means you can short only when the last sale price was above the immediately prior sale). That rule comported itself well for over 50 years but for some unfathomable reason (no doubt at the behest of Wall Street) was eliminated b the SEC. [/quote] One of the commentators adds a nice point reminding us [b]who it was that removed the uptick rule to begin with:[/b] [quote]Yes, it's a mistake to ban short selling outright. Yes, short sellers are unfairly maligned. What they should have done is to reinstitute the short uptick rule, which [SEC chairman] Cox repealed in summer 2007 after 70 years in force. This would eliminate a legitimate problem: bear raids on financial firms during a general market panic. These differ from regular short selling, in that you can actually destroy the business fundamentals just by moving the price, creating a self-fulfilling race to the exits. This is why the short uptick rule was originally created. It was an elegant, non-invasive way to slow coordinated short selling without banning it outright. We should listen to the listen to the lessons of the Great Depression, or be doomed to relearn them.[/quote] |
[QUOTE=jasonp;143189]Whenever the world gets me pissed off, I go back to [url="http://www.paulgraham.com/hamming.html"]Richard Hamming's famous speech[/url]:[/QUOTE]
[QUOTE=cheesehead;143226]WOW! Great speech! And I haven't even gotten to the part you quoted. In fact, I'd recommend to everyone here that they start at the beginning and read the whole thing![/QUOTE] Thank you for recommending it. I didn't realize that it was from [i]the[/i] Hamming and about Bell Labs too. It is beyond calming -- it is exciting and inspiring and deft and feels very wise. |
Senator Chris Dodd's top campaign contributors:
Top 5 Contributors, 2003-2008 Citigroup Inc $310,294 SAC Capital Partners $282,000 United Technologies $263,400 American International Group $224,678 Bear Stearns $205,600 Top 5 Industries, 2003-2008 Securities & Investment $4,245,796 Lawyers/Law Firms $1,976,063 Insurance $1,416,972 Real Estate $1,262,791 Commercial Banks $850,544 Senator Chuck Schumer's top contributors: Top 5 Contributors, 2003-2008 Citigroup Inc $80,800 UBS AG $79,750 Paul, Weiss et al $67,000 Kasowitz, Benson et al $64,250 MetLife Inc $59,000 Top 5 Industries, 2003-2008 Securities & Investment $1,370,339 Lawyers/Law Firms $1,203,868 Real Estate $751,551 Misc Finance $321,948 Commercial Banks $285,500 Rep. Barney Franks' top contributors Top 5 Contributors, 2007-2008 Brown Brothers Harriman & Co $29,300 Manulife Financial $15,000 American Bankers Assn $11,300 American Society of Appraisers $11,000 Bernstein, Litowitz et al $10,900 Top 5 Industries, 2007-2008 Real Estate $179,851 Securities & Investment $168,900 Lawyers/Law Firms $154,018 Insurance $126,298 Misc Finance $52,700 |
John McCain's Top 5 Contributors, 2003-2008
Merrill Lynch $293,010 Citigroup Inc $251,851 Goldman Sachs $223,995 Morgan Stanley $212,821 AT&T Inc $187,673 Barack Obama's Top 5 Contributors, 2003-2008 Goldman Sachs $689,280 University of California $531,070 JPMorgan Chase & Co $449,671 Citigroup Inc $411,504 Harvard University $407,452 |
Remember, folks, it is a [U]Republican[/U] administration that is doing all these communistic things, just as it was a [U]Republican[/U] administration that instituted our first [I]peacetime[/I] wage and price controls during the Nixon administration.
Remember that the next time you hear a Republican claim that their party wants "smaller government" or wants to "reduce government spending". And it's not a Republican administration that's just barely taken over from a preceding Democratic administration, so that key appointees were put in by the other party's president. This administration [U]has had over seven-and-a-half years to replace any presidential appointees that it didn't like[/U] who are proposing these unprecedented actions. And when Republicans protest that they're just doing what [U]is "necessary"[/U], just as the War on Terror was "necessary", remind them that in both cases the necessity was brought about by their previous willful inattention, during their administration, to threats (terrorism, greed) known, at least by the other side, to have caused trouble in the past. - - - But it's not enough to remember all that during the upcoming November election. Lots and lots of people will remember those things that long. What's important is that you make sure you, and your children, and your grandchildren and your great-grandchildren will remember these [I]lessons of history[/I] far into the future, and that they are, as far as possible, permanently added to what is taught about American history in schools. The current administration has made many of the same mistakes that past administrations, of both parties and even of other countries, made, and which could have been avoided if it were not so arrogant, ignorant, and ideological in its decisions. - - - And make very, very sure that _you_ do not think that "(y)our side" is incapable of ever making similar mistakes, though perhaps in different directions. We're [I]all[/I] human. Try, as hard as you can, to remind the upcoming probably-Democratic administration that swinging the pendulum to an opposite extreme is NOT a solution, but a perpetuation of the problem! |
Plan to Give Treasury Power Unchecked by Courts
[url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aDhH0TDoeFaY&refer=news]Bush's $700 Billion Rescue Plan Gives Treasury Power Unchecked by Courts[/url]: [i]The Bush administration asked Congress for unchecked power to buy $700 billion in bad mortgage investments from U.S. financial companies in what would be an unprecedented government intrusion into the markets.[/i]
[quote] Sept. 20 (Bloomberg) -- The Bush administration asked Congress for unchecked power to buy $700 billion in bad mortgage investments from U.S. financial companies in what would be an unprecedented government intrusion into the markets. The plan, designed by Treasury Secretary Henry Paulson, is aimed at averting a credit freeze that would bring the financial system and economic growth to a standstill. [b]The bill would bar courts from reviewing actions taken under its authority.[/b] ``It sounds like Paulson is asking to be a financial dictator, for a limited period of time,'' said historian John Steele Gordon, author of ``Hamilton's Blessing,'' a chronicle of the national debt. ``This is a much-needed declaration of power for the Treasury secretary. We can't wait until the next administration in January.'' The plan necessitates raising the ceiling for the national debt and [b]spends as much money as the combined annual budgets of the Departments of Defense, Education and Health and Human Services[/b]. Paulson is asking for the power to hire asset managers and award contracts to private companies. ... Democratic presidential nominee Barack Obama said in a radio address that he ``fully supports'' Paulson and Bernanke's efforts to stabilize the financial system. The plan, however, should benefit both main street and Wall Street, he said. Republican Presidential nominee John McCain ``looks forward'' to reviewing the proposal while focusing at least in part on ``minimizing the burden on the taxpayer,'' said Jill Hazelbaker, communications director for the McCain campaign. The ban on legal challenges of actions by Treasury is ``distasteful, it's unfortunate and it's bad precedent, but this is an emergency and you have to act,'' said Jerry Markham, a law professor at Florida State University and author of ``A Financial History of the United States.'' ``What you don't want happen is to have lawsuits that will slow things down and cause problems,'' he said. [/quote] Great Bill Moyers interview yesterday with Kevin Phillips - talks about how both of the major parties are deeply complicit in the financial deregulation and Wall-Street-run national looting operation of the past 25 years: [url=http://www.pbs.org/moyers/journal/09192008/watch2.html]Bill Moyers Journal - September 19, 2008[/url]: [i]Bill Moyers sits down with former Nixon White House strategist and political and economic critic Kevin Phillips, whose latest book BAD MONEY: RECKLESS FINANCE, FAILED POLITICS, AND THE GLOBAL CRISIS OF AMERICAN CAPITALISM explores the role that the crumbling financial sector played in the now-fragile American economy.[/i] |
WSJ - Shock Forced Paulson's Hand
[URL=http://online.wsj.com/article/SB122186563104158747.html?mod=yahoo_hs&ru=yahoo]Shock Forced Paulson's Hand[/url] - [i]A Black Wednesday on Credit Markets; 'Heaven Help Us All'[/i]
[quote]When government officials surveyed the flailing American financial system this week, they didn't see only a collapsed investment bank or the surrender of a giant insurance firm. They saw the circulatory system of the U.S. economy -- credit markets -- starting to fail. Huddled in his office Wednesday with top advisers, Treasury Secretary Henry Paulson watched his financial-data terminal with alarm as one market after another began go haywire. Investors were fleeing money-market mutual funds, long considered ultra-safe. The market froze for the short-term loans that banks rely on to fund their day-to-day business. Without such mechanisms, the economy would grind to a halt. Companies would be unable to fund their daily operations. Soon, consumers would panic. For at least a month, Mr. Paulson and Treasury officials had discussed the option of jump-starting markets by having the government absorb the rotten assets -- mainly financial instruments tied to subprime mortgages -- at the heart of the crisis. The concept, dubbed Balance Sheet Relief, was seen at Treasury as a blunt instrument, something to be used in only the direst of circumstances. One day later, Mr. Paulson and Federal Reserve Chairman Ben Bernanke sped to Congress to seek approval for the biggest government intervention in financial markets since the 1930s. In a private meeting with lawmakers, according to a person present, one asked what would happen if the bill failed. "If it doesn't pass, then heaven help us all," responded Mr. Paulson.[/quote] |
Statutory Debt Limit
$9,815 Billion 10,615 Billion July 30, 2008 11,315 Billion proposed currently [URL="http://blogs.wsj.com/economics/2008/09/20/treasurys-financial-bailout-proposal-to-congress/"]Treasury’s Financial-Bailout Proposal to Congress [/URL] WSJ's Real Time Economics Blog [QUOTE]Sec. 10. Increase in Statutory Limit on the Public Debt. Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.[/QUOTE] |
[quote][i]LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY TO PURCHASE MORTGAGE-RELATED ASSETS
... Sec. 8. Review. 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. [/i][/quote] fas·cism n. 1. often Fascism a. A system of government marked by centralization of authority under a dictator, stringent socioeconomic controls, suppression of the opposition through terror and censorship, and typically a policy of belligerent nationalism and racism. b. A political philosophy or movement based on or advocating such a system of government. 2. Oppressive, dictatorial control. |
[QUOTE=ewmayer;143307]fas·cism
n. 1. often Fascism a. A system of government marked by centralization of authority under a dictator, stringent socioeconomic controls, suppression of the opposition through terror and censorship, and typically a policy of belligerent nationalism and racism. b. A political philosophy or movement based on or advocating such a system of government. 2. Oppressive, dictatorial control.[/QUOTE] I'm reluctantly beginning to be persuaded. For those who are not sure what we are looking at, there is a copy/version of the "legislative proposal from Treasury Department for authority to buy mortgage-related assets" here: [URL="http://blogs.wsj.com/economics/2008/09/20/treasurys-financial-bailout-proposal-to-congress/"]http://blogs.wsj.com/economics/2008/09/20/treasurys-financial-bailout-proposal-to-congress/[/URL] The blog reader comments are edifying too. Several of them make points that I have not seen much in the media but have been creeping onto my radar. One is the shockingly monster sized derivatives market and the suggestion that the Mortgage Backed Security situation, while bad, isn't the correct target. But mortgages point to tangible property and it is easier to point a fist full of fingers there. This proposal is a sweeping grant of powers, possibly launched at the wrong target but would be grossly ineffectual if instead launched at the quadrillion dollar derivative mess. I wonder what will happen at the two year sunset of the powers. If the Treasury is still holding a lot of paper will the powers be extended? Or perhaps it will be convenient or politically dangerous not to extend them. |
[quote=only_human;143312]If the Treasury is still holding a lot of paper will the powers be extended? Or perhaps it will be convenient or politically dangerous not to extend them.[/quote]
If I'm not mistaken, this situation would be covered by Section 5, Paragraph d: [quote](d) Application of Sunset to Mortgage-Related Assets.–The authority of the Secretary [B]to hold any mortgage-related asset purchased under this Act [U]before[/U] the termination date[/B] in section 9, [B]or to purchase or fund the purchase of a mortgage-related asset under a commitment [U]entered into before[/U] the termination date[/B] in section 9, [B]is [U]not subject[/U] to the provisions of section 9[/B].[/quote]Which seems to say that even if the powers of the Secretary are not extended, the Government [spoiler]taxpayers[/spoiler] will still be holding the (potentially) bad (toxic) paper..... Of course, if we, the taxpayers, can buy the MBSes at a substantial discount and very many fewer homeowners than anticipated go into foreclosure on the homes backing the bonds, it could still turn out to be a net gain for us. I guess the guideline about the price we're going to pay looks to be determined by this paragraph:[quote]Sec. 11. Credit Reform. The costs of purchases of mortgage-related assets made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.[/quote]I'm going to have to do a little reading to see what that particular act provides for, but I'm betting that our fearless leaders are so vast in their wisdom that two Mersenne primes would be found out of sequence by GIMPS before they would do something stupid like, say, pay premium prices to help bail out the current holders of the MBSes. [SIZE="1"][COLOR="Red"]Oh, wait a minute..... [/COLOR][/SIZE] |
[QUOTE=schickel;143318]If I'm not mistaken, this situation would be covered by Section 5, Paragraph d: Which seems to say that even if the powers of the Secretary are not extended, the Government [spoiler]taxpayers[/spoiler] will still be holding the (potentially) bad (toxic) paper.....[/QUOTE]
Yes, I read that too....but the bad news of having of paper still on our hands creates the situation that compels extension. Chickens looking at each other: "How is the treasury going to unload this paper?" "What about the stuff the new Resolution Trust Corporation wouldn't touch?" "We better extend those treasury powers, just keep it all going." Bill Maher had a guest on this week named Naomi Klein who had interesting things to say about government actions during situations like this. I can't seem to get past the flash header on Bill Maher's site to see if they have transcripts but here is a quote about her book: [URL="http://www.naomiklein.org/shock-doctrine/the-book"]http://www.naomiklein.org/shock-doctrine/the-book[/URL] [QUOTE]The Shock Doctrine: The Rise of Disaster Capitalism In THE SHOCK DOCTRINE, Naomi Klein explodes the myth that the global free market triumphed democratically. Exposing the thinking, the money trail and the puppet strings behind the world-changing crises and wars of the last four decades, The Shock Doctrine is the gripping story of how America’s “free market” policies have come to dominate the world-- [B]through the exploitation of disaster-shocked people and countries[/B].[/QUOTE] How many other things like The Patriot Act are sitting in drawers waiting for just the right circumstances to be presented? |
Treasury bails out World + dog
[URL="http://www.reuters.com/articlePrint?articleId=USN2146972020080921"]UPDATE 2-Paulson: Foreign banks can use US rescue plan[/URL][QUOTE]foreign banks will be able to unload bad financial assets under a $700 billion U.S. proposal aimed at restoring order during a devastating financial crisis.
"Yes, and they should. Because ... if a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets, they have the same impact on the American people as any other institution," Paulson said on ABC television's "This Week with George Stephanopolous."[/QUOTE] [URL="http://www.bloomberg.com/apps/news?pid=20601087&sid=acVoMK3FiuqQ&refer=home"]Treasury Seeks Asset-Buying Power Unchecked by Courts (Update2)[/URL][QUOTE]As congressional aides and officials scrutinized the proposal, the Treasury late yesterday clarified the types of assets it would purchase. Paulson would have authority to buy home loans, mortgage-backed securities, commercial mortgage- related assets and, after consultation with the Federal Reserve chairman, ``other assets, as deemed necessary to effectively stabilize financial markets,'' the Treasury said in a statement. The Treasury would also have discretion, after discussions with the Fed, to make non-U.S. financial institutions eligible under the program. [/QUOTE] First and foremost I question how easily these foreign banks are being directly considered in this process. Obviously all this is interconnected and there are good reasons to do this with careful forethought and scrutiny. Mark me down as a bit skeptical of the final consequences. Here in California, some of us bitterly remember the gaming of deregulated electricity. [URL="http://en.wikipedia.org/wiki/California_electricity_crisis"]http://en.wikipedia.org/wiki/California_electricity_crisis[/URL][QUOTE]Megawatt laundering is the term, analogous to money laundering, coined to describe the process of obscuring the true origins of specific quantities of electricity being sold on the energy market. The California energy market allowed for energy companies to charge higher prices for electricity produced out-of-state. It was therefore advantageous to make it appear that electricity was being generated somewhere other than California.[/QUOTE]How much paper laundering will be done? "Hey kiddo, I swap this paper for that paper and my brother can sell it to his uncle, no problem...I'll give you 80 cents on the dollar, but some day I will come to you and ask a favor...." With dark pools of liquidity and crossing networks, perhaps it will even be easy. Why turn down easy money? |
Goldman Sachs, Morgan Stanley -> bank holding co's
[URL="http://www.federalreserve.gov/newsevents/press/bcreg/20080921a.htm"]http://www.federalreserve.gov/newsevents/press/bcreg/20080921a.htm[/URL][QUOTE]Release Date: September 21, 2008. For release at 9:30 p.m. EDT
The Federal Reserve Board on Sunday approved, pending a statutory five-day antitrust waiting period, the applications of Goldman Sachs and Morgan Stanley to become bank holding companies. To provide increased liquidity support to these firms as they transition to managing their funding within a bank holding company structure, the Federal Reserve Board authorized the Federal Reserve Bank of New York to extend credit to the U.S. broker-dealer subsidiaries of Goldman Sachs and Morgan Stanley against all types of collateral that may be pledged at the Federal Reserve's primary credit facility for depository institutions or at the existing Primary Dealer Credit Facility (PDCF); the Federal Reserve has also made these collateral arrangements available to the broker-dealer subsidiary of Merrill Lynch. In addition, [B]the Board also authorized the Federal Reserve Bank of New York to extend credit to the [COLOR="Red"]London-based[/COLOR] broker-dealer subsidiaries of Goldman Sachs, Morgan Stanley, and Merrill Lynch against collateral that would be eligible to be pledged at the PDCF.[/B][/QUOTE][I][SIZE="1"]emphasis added[/SIZE][/I] |
Write your local paper, senators and congressmen!
[url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aoDmO_d0IJSU&refer=news]Goldman Sachs, Morgan Stanley Become Banks, Ending an Era for Wall Street[/url]: [i]The Wall Street that shaped the financial world for two decades ended last night, when Goldman Sachs Group Inc. and Morgan Stanley concluded there is no future in remaining investment banks now that investors have determined the model is broken.[/i]
[url=http://www.bloomberg.com/apps/news?pid=20601109&sid=ay0Kkt47a3s4&refer=news]Fannie, Freddie Subprime Buying Spree May Add $100 Billion to Bailout Tab[/url]: [i]Freddie Mac Chief Executive Officer Richard Syron stood before investors at New York's Palace Hotel in May last year lauding his company's ``cautious'' avoidance of the subprime-mortgage crisis.[/i] [b]Write your local paper, senators and congressmen![/b] Last night, I sent the following letter to the San Jose Mercury News, California senators Barbara Boxer and Dianne Feinstein, and the members of the Senate Banking Committee: [quote][i]It was with utter disbelief that I read the "Legislative Proposal for Treasury Authority to Purchase Mortgage-Related Assets" (a.k.a. "The $700 Billion Bailout") submitted to the U.S. Congress by Treasury secretary Henry Paulson with the blessing of President Bush. Every American needs to READ and think about the import of this alarming piece of legislation. In Section 2 of the proposal it is proposed to give Mr. Paulson the authority to "...[enter] into contracts ... without regard to any other provision of law regarding public contracts". That means no competitive bidding, and opens the door to many of the same executives of the financial firms whose rapaciousness got us into this mess to now be asked to HELP FIX THE PROBLEM THEY CREATED, at taxpayer expense. That is like paying an arsonist to head the fire crew. Further, Mr. Paulson proposes he be given the authority to "[designate] financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them." As Karl Denninger puts it, "this is a de-facto nationalization of the entire banking, insurance, and related financial system ... every bank and other financial institution in the United States [will have] become a de-facto organ of the United States Government, if Hank Paulson thinks they should be, and he may order them to do virtually anything that he claims is in furtherance of this act. This might include things like demanding that a bank or other financial institution sell him its paper, even if it forces that firm to collapse and be assumed by the FDIC." There is more - much more - but absolutely the most frightening part of the bill is in Section 8, where we see "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." In effect, secretary Paulson is asking that his actions be above the law. This is plainly unconstitutional, and I find it shocking (yes, even after 7 years of post-9/11 trampling of the Constitution by the Bush administration) that a top official of the U.S. government would even consider asking for such flagrantly extralegal authority. I weep to see this once-great nation have fallen so far and succumbed so completely to the politics of perpetual "national emergency" that a credulous, browbeaten congress would even give serious consideration - not to mention the extreme haste with which it is doing so - to such a monstrous piece of legislation. If our founders were around to see it, they would surely weep as well. And somewhere, Osama Bin Laden must be chortling heartily to see us inflict more terror, ignominy and financial harm on ourselves than any international terrorist could ever in his wildest dreams hope to do. Ernst Mayer Cupertino, CA [/i][/quote] Please, if you care about the future of America, the rule of law, and the world your children and grandchildren will inherit, write to your local newspaper, and e-mail your state senators and representatives! Here are [url=http://globaleconomicanalysis.blogspot.com/2008/09/lies-from-paulson-keep-stacking-up-what.html]some useful guidelines[/url]. |
Oil skyrockets on bailout plan
[url=http://money.cnn.com/2008/09/22/markets/oil/index.htm]Oil Skyrockets on Bailout Plan[/url]: [i]Oil soars past $127 a barrel, up $23 in one day, its largest dollar-jump ever, as dollar swoons[/i]
[quote]"The biggest news is that people are looking at the $700 billion plan as supportive of demand, supportive of the economy," said Peter Beutel. "Everything we are looking at right now says demand has a chance to come back if the economy starts to strengthen."[/quote] Dream on, Mr. Oil Bull - the irony is that if oil again tends higher, gasoline and energy costs will follow, which will simply hammer strapped consumers, keep demand low, and delay any already-expected-to-be-very-slow economic recovery. In other words, (bailout ==> dollar devaluation) is guaranteed. But (bailout ==> quick economic recovery) is an extremely dubious proposition. A trio of New York Times op-ed writers [of varying political slants] weighs in on the Paulson coup d'Etat proposal: [url=http://www.nytimes.com/2008/09/22/opinion/22krugman.html?ref=opinion]NYT Blogs: Paul Krugman | Cash for Trash[/url]: [i]Henry Paulson is demanding extraordinary power for himself to deploy taxpayers’ money on behalf of a plan that, as far as I can see, doesn’t make sense.[/i] [quote]The Paulson plan calls for the federal government to buy up $700 billion worth of troubled assets, mainly mortgage-backed securities. How does this resolve the crisis? Well, it might — might — break the vicious circle of deleveraging, step 4 in my capsule description. Even that isn’t clear: the prices of many assets, not just those the Treasury proposes to buy, are under pressure. And even if the vicious circle is limited, the financial system will still be crippled by inadequate capital. Or rather, it will be crippled by inadequate capital unless the federal government hugely overpays for the assets it buys, giving financial firms — and their stockholders and executives — a giant windfall at taxpayer expense. Did I mention that I’m not happy with this plan? The logic of the crisis seems to call for an intervention, not at step 4, but at step 2: the financial system needs more capital. And if the government is going to provide capital to financial firms, it should get what people who provide capital are entitled to — a share in ownership, so that all the gains if the rescue plan works don’t go to the people who made the mess in the first place. That’s what happened in the savings and loan crisis: the feds took over ownership of the bad banks, not just their bad assets. It’s also what happened with Fannie and Freddie. (And by the way, that rescue has done what it was supposed to. Mortgage interest rates have come down sharply since the federal takeover.) But Mr. Paulson insists that he wants a “clean” plan. “Clean,” in this context, means a taxpayer-financed bailout with no strings attached — no quid pro quo on the part of those being bailed out. Why is that a good thing? Add to this the fact that Mr. Paulson is also demanding dictatorial authority, plus immunity from review “by any court of law or any administrative agency,” and this adds up to an unacceptable proposal. I’m aware that Congress is under enormous pressure to agree to the Paulson plan in the next few days, with at most a few modifications that make it slightly less bad. Basically, after having spent a year and a half telling everyone that things were under control, the Bush administration says that the sky is falling, and that to save the world we have to do exactly what it says now now now.[/quote] [url=http://www.nytimes.com/2008/09/22/opinion/22kristol.html?ref=opinion]NYT William Kristol | A Fine Mess[/url] [quote] A huge speculative housing bubble has collapsed. We’re going to have a recession. Unemployment will go up. Credit is going to be tighter. The challenge is to contain the damage to a “normal” recession — and to prevent a devastating series of bank runs, a collapse of the credit markets and a full-bore depression. Everyone seems to agree on the need for a big and comprehensive plan, and that the markets have to have some confidence that help is on the way. Funds need to be supplied, trading markets need to be stabilized, solvent institutions needs to be protected, and insolvent institutions need to be put on the path to a deliberate liquidation or reorganization. But is the administration’s proposal the right way to do this? It would enable the Treasury, without Congressionally approved guidelines as to pricing or procedure, to purchase hundreds of billions of dollars of financial assets, and hire private firms to manage and sell them, presumably at their discretion There are no provisions for — or even promises of — disclosure, accountability or transparency. Surely Congress can at least ask some hard questions about such an open-ended commitment. And I’ve been shocked by the number of (mostly conservative) experts I’ve spoken with who aren’t at all confident that the Bush administration has even the basics right — or who think that the plan, though it looks simple on paper, will prove to be a nightmare in practice. But will political leaders dare oppose it? Barack Obama called Sunday for more accountability, and I imagine he’ll support the efforts of the Democratic Congressional leadership to try to add to the legislation a host of liberal spending provisions. He probably won’t want to run the risk of actually opposing it, or even of raising big questions and causing significant delay — lest he be attacked for risking the possible meltdown of the global financial system. What about John McCain? He could play it safe, going along with whatever the Bush administration and the Congress are able to negotiate. If he wants to be critical, but concludes that Congress has to pass something quickly lest the markets fall apart again, and that he can’t reasonably insist that Congress come up with something fundamentally better, he could propose various amendments insisting on much more accountability and transparency in how Treasury handles this amazing grant of power. Comments by McCain on Sunday suggest he might propose an amendment along the lines of one I received in an e-mail message from a fellow semi-populist conservative: “Any institution selling securities under this legislation to the Treasury Department shall not be allowed to compensate any officer or employee with a higher salary next year than that paid the president of the United States.” This would punish overpaid Wall Streeters and, more important, limit participation in the bailout to institutions really in trouble. Or McCain — more of a gambler than Obama — could take a big risk. While assuring the public and the financial markets that his administration will act forcefully and swiftly to deal with the crisis, he could decide that he must oppose the bailout as the panicked product of a discredited administration, an irresponsible Congress, and a feckless financial establishment, all of which got us into this fine mess.[/quote] [url=http://www.nytimes.com/2008/09/22/opinion/22cohen.html?ref=opinion]The Fleecing of America[/url]: [i]World leaders converge on a battered New York this week for the United Nations General Assembly, my advice to them is: think Damien Hirst.[/i] Mish Shedlock [url=http://globaleconomicanalysis.blogspot.com/2008/09/open-letter-to-congress-on-700-billion.html]reminds his readers[/url] of his April 3 post in which he lays out his "Fed Uncertainty Principle", specifically FUP Corollary 2: [quote]The government/quasi-government body most responsible for creating this mess (the Fed), will attempt a big power grab, purportedly to fix whatever problems it creates. The bigger the mess it creates, the more power it will attempt to grab. Over time this leads to dangerously concentrated power into the hands of those who have already proven they do not know what they are doing.[/quote] And the saddest thing of all, except for possibly [and the odds are slim] restoring some slight amount of confidence in the broken financial system, the proposed bailout legislation DOES NOTHING WHATSOEVER to address the fundamentals of the problem, which is that reckless Greenspan-era Fed lending policies resulted in the biggest speculative asset bubble in the history of the world, a fake phase of "robust economic growth" fueled by an unprecedented explosion in consumer indebtedness, and that bubble WILL continue to deflate until fundamentals get somewhere close to long-term-sustainable. But that will require a massive paydown of consumer debt and many millions more mortgage defaults and bank-owned homes flooding the market. None of that [ultimately healthy] process can be "speeded along" by playing shell games with the debt, nor by sticking as much of it as possible to the fiscally prudent [which is ultimately what the bailout does], nor by illegal manipulation pf the equity markets in a misguided attempt to artificially prop up stock prices. |
Did we say $700B? Sorry... | Monday MotWee!
Spotted in the reader comments to a [url=http://bigpicture.typepad.com/comments/2008/09/chart-of-day-sh.html#comments]recent article[/url] in Barry Ritholz`s [i]The Big Picture[/i] blog:
[quote][b]The Evolution of a Used-Car Salesman[/b] August 1, 2007 BEIJING (Reuters) - "Treasury Secretary Henry Paulson said on Wednesday the repricing of credit risk was hitting financial markets, but U.S. subprime mortgage fallout remained largely contained due to the strongest global economy in decades." May 7, 2008 "In an interview with The Associated Press, Paulson said that the turmoil that has gripped Wall Street and took a turn for the worse yet again in March has eased somewhat. 'There`s progress,' he said. 'I think we`re closer to the end of this than the beginning.'" July 21, 2008 'Our banking system is a safe and a sound one,' Paulson insisted on CNN's "Late Edition." He had earlier told CBS, the list of troubled banks would grow. But 'this is a very manageable situation ... our regulators are focused on it.' Sept 21, 2008 "Only $700B and worth every penny. Trust me."[/quote] Oh, wait - did I say $700 Billion? My mistake - it`s actually $1.8 TRILLION [url=http://globaleconomicanalysis.blogspot.com/2008/09/how-congress-intends-to-waste-18.html]and counting[/url]. [url=http://www.ft.com/cms/s/0/d7ac8494-880f-11dd-b114-0000779fd18c.html?nclick_check=1]Financial Times: Hedge fund returns money[/url] [quote]The best-performing hedge fund manager of the past two years has closed down his funds and is returning money to investors after concluding that the danger of losing money from a bank collapse is too high. Andrew Lahde, founder of California’s Lahde Capital, told investors last week that further credit problems – the basis of his profits – were likely but the reliance of the bet on bank counterparties made it too risky. The move by Mr Lahde, who returned 870 per cent last year in one fund betting against subprime mortgages, and was at one point up more than 1,000 per cent, underscores the threat that is posed to hedge funds by bank failures.[/quote] [b]It's only Monday, and we already have our Moron of the Week:[/b] Multiple MotWee winner and Wall Street shill Paul LaMonica strikes again: [url=http://money.cnn.com/2008/09/22/markets/thebuzz/index.htm]Be ticked off - but get over it[/url]: [i]You should be angry about the $700 billion plan to save banks. But once the rage subsides, realize that doing nothing would be disastrous.[/i] [quote]NEW YORK (CNNMoney.com) -- Americans are very angry about the proposed bailout of the banking sector and Wall Street...and with good reason. There should be outrage. We should all be disgusted that the government was forced into this situation. I'm infuriated that it came to this. Of course, we should cap executive pay, which was obscene at many financial firms, immediately. And we should make sure that the CEOs, CFOs and other big wigs that drove their companies into near ruin with overleveraged bets on risky mortgages should not get big severance packages. But make no mistake. The alternative that many CNNMoney.com readers seem to be calling for - i.e. let all the banks and Wall Street crash and burn - is not viable. In fact, it's incredibly short-sighted. So once the blind rage subsides, people will hopefully take a long-hard look at what the government has proposed and come to the realization that doing nothing to rid the nation's banks of all the poisonous mortgage assets on their balance sheets would be far far worse. "Taxpayers have every right to be angry because we've gotten into this mess by a combination of irresponsible behavior and lax regulation," said Chris Probyn, chief economist with State Street Global Advisors in Boston. "However, if you look forward, [b]by letting those responsible pay the price, there will be a spillover effect and the economy could go into sharp and protracted recession[/b]." [/quote] As if "do nothing and simply let the financial markets collapse" and "buy up all of Wall Street's toxic paper at a hefty premium, reward the crooks who ran the whole Ponzi scheme by paying them to be on the 'Friends of Hank' RTC2 payroll, all without getting anything in return" are the only possible options. |
[QUOTE=ewmayer;143436]Oh, wait - did I say $700 Billion? My mistake - it`s actually $1.8 TRILLION [url=http://globaleconomicanalysis.blogspot.com/2008/09/how-congress-intends-to-waste-18.html]and counting[/url].
[...] As if "do nothing and simply let the financial markets collapse" and "buy up all of Wall Street's toxic paper at a hefty premium, reward the crooks who ran the whole Ponzi scheme by paying them to be on the 'Friends of Hank' RTC2 payroll, all without getting anything in return" are the only possible options.[/QUOTE] Since the statutory debt ceiling has been raised $1.5 Trillion this year this year, that extra headroom alone grossly the backs possibility that these figures are in the ballpark. Mish is quoting CNBC's Reuters wire feed and the numbers look ok. A subtext that we know but is worth mentioning occasionally is that most of the purchased securities have some value and that there will be some recovery of money spent -- with estimates varying from very little to making a profit. Of course, much depends on how much gaming and accommodation of special interests or friends occur. What will really tell me the fix is in is if we hear that this is a good time to totally revise paper currency and that existing currency will be devalued to help the the ongoing crisis. [I]Then[/I] I will be in full panic mode. PS Assuming 100 million working Americans:[LIST][*]$700 Billion = $7,000 per worker[*]$1.8 Trillion = $18,000 per worker[/LIST] |
London: Fury at $2.5bn bonus for Lehman's NY staff
[url=http://www.bloomberg.com/apps/news?pid=20601103&sid=a9rMT8i7Lyqs&refer=news]Morgan Stanley, Goldman Search for Deposits; Regional Banks May Be `Lunch'[/url]: [i]Morgan Stanley and Goldman Sachs Group Inc., the two largest remaining independent U.S. securities firms, may add to the $81 billion of financial services deals unveiled during the past week as they morph into banks.[/i]
The irony here is that the Fed and Treasury`s desperate measure of last Thursday to guarantee [generally high-yielding] money market funds without limit until further notice in an effort to keep that $3 Trillion market from collapsing will likely hasten [or outright casue] the demise of many struggling regional banks, by hurting their ability to attract new deposits. The fact that Paulson`s ex-firm Goldman will be one of the chief beneficiaries of this [as well of the evntual Mother of All bailouts] should be no surprise ... it`s good to be frined of Hank. [url=http://www.bloomberg.com/apps/news?pid=20601109&sid=atydz8zY7Psw&refer=news]Paulson, Bernanke May Find Painful Parallels in 1990s Nordic Bailout, Bust[/url]: [i]If Henry Paulson and Ben S. Bernanke want to know what happens when central banks and governments bail out financial institutions, they should be ``learning Swedish.''[/i] But hey, these are the same idiots who completely ignored the painful decades-=long lessons of the Japanese real estate bubble and subsequent bust ... the arrogant "our markets are much more dynamic", "subprime crisis is contained", "financial system is sound" crowd. To learn a lesson, you have to first be willing to learn, which requires you to admit that you don`t know everything .. and folks like Paulson and Bernanke don`t strike me as fitting that mold, certainly not at this stage of their careers. [url=http://www.independent.co.uk/news/business/news/fury-at-25bn-bonus-for-lehmans-new-york-staff-937560.html]The Independent | Fury at $2.5bn bonus for Lehman's New York staff[/url] [quote]Up to 10,000 staff at the New York office of the bankrupt investment bank Lehman Brothers will share a bonus pool set aside for them that is worth $2.5bn (£1.4bn), Barclays Bank, which is buying the business, confirmed last night. The revelation sparked fury among the workers' former colleagues, Lehman's 5,000 staff based in London, who currently have no idea how long they will go on receiving even their basic salaries, let alone any bonus payments. It also prompted a renewed backlash over the compensation culture in global finance, with critics claiming that many bankers receive pay and rewards that bore no relation to the job they had done. ... Many of Lehman's UK staff are particularly angry about the US payouts because it has emerged that in the days running up to the bankruptcy, some $8bn in cash was transferred out of the account of the bank's European business into accounts at the New York head office. There is no suggestion any of this cash was used to supplement the bonus fund, but partly as a result of the transfers, PricewaterhouseCoopers (PWC), the administrator to the European business, initially found it impossible to guarantee salaries would be paid. The September wages of thousands of European staff were only secured in the middle of last week, when PWC negotiated a £100m loan to fund the payments. PWC wrote to Lehman Brothers' head office in New York last week, requesting the repayment of the $8bn, but a spokesman said yesterday that the administrator had received no formal response.[/quote] |
Bernanke: Treasury should pay "above market" price
As the crooked banksters and their cronies in Washington like to tell us, unprecedented times call for unprecedented measures. In that spirit, I am awarding a second Moron of the Week [hell, I may have to award one each day this week] to "Uncle" Ben Bernanke:
[url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aqCh43qzoq5M&refer=news]Treasury Should Avoid Paying `Fire Sale' Prices for Assets, Bernanke Says[/url][quote]Federal Reserve Chairman Ben S. Bernanke signaled that [b]the government should buy devalued assets at above-market values[/b] to make its proposed $700 billion rescue package most effective in combating the financial crisis. ``Accounting rules require banks to value many assets at something close to a very low fire-sale price rather than the hold-to-maturity price,'' Bernanke said in testimony to the Senate Banking Committee today. ``If the Treasury bids for and then buys assets at a price close to the hold-to-maturity price, there will be substantial benefits.''[/quote] "Substantial benefits" to whom, exactly? Certainly not the taxpayer. [quote]Bernanke's remarks, an unusual departure from his prepared testimony, come as lawmakers and the Bush administration negotiate a rescue plan aimed at easing the worst financial crisis since the Great Depression. The Fed chief said paying prices higher than the bad assets would fetch in the open market would help ``unfreeze'' credit markets and aid the economy. Analysts said Bernanke is essentially advocating that government use a pricing model that assumes that the debt will be paid in full over a long period of time. That is different from the mark-to-market model used by investment banks that prices assets at what they are worth on a given day.[/quote] If that pricing model were remotely appropriate for the kind of debt we`re talking about, WE WOULDN`T BE IN THIS MESS TO BEGIN WITH. Hey Ben, you clueless fool [or complete "Tool of Wall Street" - take your pick], remember the other "pricing model" you and your mentor Greenspan were advocating for most of the past decade? The one about "historically speaking, housing prices will always go up"? [quote]The risk is that the model does not provide transparent pricing of the assets taxpayers are taking on, said Ann Rutledge, partner at R&R Consulting in New York, a firm that specializes in structured finance. Many of the securities ``are not going to pay at maturity,'' Rutledge said.[/quote] In slightly less politic language than used by Mr. Rutledge: Are you frickin' out of your mind? [url=http://www.spiegel.de/international/business/0,1518,579880,00.html]Der Spiegel | The World Shouldn't Have to Bear the Burden for America's Lapses[/url]: [i]The US government is buying bad debt for $700 billion. Now Washington is asking other countries to jump in and help, too, but the Germans are bowing out. Believing that the rescue package sends the wrong signal, experts from the country's leading economics think tanks argue it's the right call.[/i] |
[QUOTE=ewmayer;143558]As the crooked banksters and their cronies in Washington like to tell us, unprecedented times call for unprecedented measures. In that spirit, I am awarding a second Moron of the Week [hell, I may have to award one each day this week] to "Uncle" Ben Bernanke:
[url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aqCh43qzoq5M&refer=news]Treasury Should Avoid Paying `Fire Sale' Prices for Assets, Bernanke Says[/url] [QUOTE]Federal Reserve Chairman Ben S. Bernanke signaled that [B]the government should buy devalued assets at above-market values[/B] to make its proposed $700 billion rescue package most effective in combating the financial crisis. ``Accounting rules require banks to value many assets at something close to a very low fire-sale price rather than the hold-to-maturity price,'' Bernanke said in testimony to the Senate Banking Committee today. ``If the Treasury bids for and then buys assets at a price close to the hold-to-maturity price, there will be substantial benefits.''[/QUOTE]"Substantial benefits" to whom, exactly? Certainly not the taxpayer. If that pricing model were remotely appropriate for the kind of debt we`re talking about, WE WOULDN`T BE IN THIS MESS TO BEGIN WITH. Hey Ben, you clueless fool [or complete "Tool of Wall Street" - take your pick], remember the other "pricing model" you and your mentor Greenspan were advocating for most of the past decade? The one about "historically speaking, housing prices will always go up"?[/QUOTE]Perhaps "substantial benefits" refers to the trickle down theory. Something is trickling down alright and the people getting wet don't like it. So this is now the big conflation of two problems:[LIST][*] Wall Street is choking on toxic paper that strangles trade and economic growth[*] Wall Street has partied hard and is running out of cocaine and needs more cash [/LIST]Remember the last big conflation? Al Qaeda & Iraq If toxic paper is clogging the system, buying that at market prices supposedly would solve the problem. So the companies take a massive loss. So they are takeover candidates. At least the logjam would be gone. Seems to me that if the powers that be really want to bail out these companies they could do it cleanly in two separate stages:[LIST][*]buy the toxic paper at market prices[*]give them cash[/LIST]Then the people stuck with the bill could at least cleanly see where the money is going. The mortgage backed securities are toxic supposedly because of late payments, etc. How about a bailout of a month or two of payments there instead? Wouldn't that make the paper less toxic? Or bring back usury laws. 20% interest on a mortgage? The Fed has been giving cheap money to banks supposedly to help out the little guy and they in turn get credit card rates on mortgages? No Way No How No Bailout (on these terms) This way stinks. |
Humor: Short Selling Explained
[url]http://media.tumblr.com/h7M8Wzwmle62r3vm7GnsTTv3o1_400.jpg[/url]
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This *is* pretty scary:
[url]http://www.forbes.com/home/2008/09/23/bailout-paulson-congress-biz-beltway-cx_jz_bw_0923bailout.html[/url] [QUOTE] In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy. "It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number." [/QUOTE] ... |
I apologize for having termed recent Bush administration actions "communistic" at one time. I get it now: "Cronyistic".
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[QUOTE=ewmayer;143294][url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aDhH0TDoeFaY&refer=news]Bush's $700 Billion Rescue Plan Gives Treasury Power Unchecked by Courts[/url]: [i]The Bush administration asked Congress for unchecked power to buy $700 billion in bad mortgage investments from U.S. financial companies in what would be an unprecedented government intrusion into the markets.[/i][/QUOTE]
[QUOTE=Robert Holmes;143585]This *is* pretty scary: [url]http://www.forbes.com/home/2008/09/23/bailout-paulson-congress-biz-beltway-cx_jz_bw_0923bailout.html[/url] [QUOTE]In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy. "It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."[/QUOTE][/QUOTE]From the above quoted link:[QUOTE]He (Committee Chairman Chris Dodd, D-Conn) also points to one other concern: Paulson, the bill's chief architect, is scheduled to leave office in just four months. "I'm not about to give a $700 billion appropriation to a secretary I don't know yet," says Dodd. [/QUOTE] That is yet scarier -- unchecked power in a soon to be open position. By mentioning Godwin's Law, theoretically I can't self-invoke it but it would be nice to not have another surname or mustache grooming style effectively outlawed for near perpetuity. Bloomberg.com says that Warren Buffet's holding company (investing in [B]Goldman Sachs[/B]) is "buying $5 billion of perpetual preferred stock with a 10 percent dividend. Berkshire also gets warrants to buy $5 billion of common stock at $115 a share at any time in the next five years. The common stock closed yesterday at $125.05, providing Buffett with an instant paper profit of $437 million." Now I respect Warren Buffet, His holding company is cash rich at the moment and making strategic purchases with no funny business. Also he warned everyone about a possible meltdown quite some time back. [B]But[/B] remind me again why we are bailing out these companies when people are buying into them. |
Daddy Warrenbucks| Paulson's New Chairman Mao Suit
[QUOTE=only_human;143611]Bloomberg.com says that Warren Buffet's holding company (investing in [B]Goldman Sachs[/B]) is "buying $5 billion of perpetual preferred stock with a 10 percent dividend. Berkshire also gets warrants to buy $5 billion of common stock at $115 a share at any time in the next five years. The common stock closed yesterday at $125.05, providing Buffett with an instant paper profit of $437 million."
Now I respect Warren Buffet, His holding company is cash rich at the moment and making strategic purchases with no funny business.[/QUOTE] Maybe not by Buffett himself, but I noticed GS shares spike up by around $10 in the last half-hour of trading yesterday, so someone [likely quite a few people, courtesy of the Blackberrys which are ubiquitous on Wall Street] knew something and made a whole lot of money by piling in before the retail investors got the news. [url=http://money.cnn.com/2008/09/24/news/economy/bush_speech/index.htm]Bush may talk bailout on prime time[/url]: [i]The President might speak to the public about the proposed $700 billion bailout on TV as early as tonight to urge skeptical senators.[/i] Let me guess: Grave threats to our national economy ... bailout is bad, but alternative is worse ... must act NOW! NOW! NOW! ... Have full confidence in fellow liars Paulson and Bernanke ... Economy is fundamentally sound|strong|resilient|really-quite-sexy, but faces "unprecedented headwinds" ... American workers are the greatest on earth ... this is not a reward to Wall Street speculators, it`s a *bailout* of Wall Street speculators ... whole world is watching and waiting for us to act ... decisive action is required ... cannot delay ... you`re either for the bailout or a supporter of terrorists ... God bless the frickin` U. S. of A, y`all! [url=http://money.cnn.com/2008/09/23/news/companies/fbi_finance/index.htm]FBI probing bailout firms[/url]: [i]Investigators start search for fraud at Fannie Mae, Freddie Mac, Lehman Brothers and AIG, sources say.[/i] Uh, isn`t that kind of thing the SEC`s job? Oh wait, they`re run by an incompetent buffoon whose playbook reads "No overvalued stock left behind." [url=http://www.bloomberg.com/news/index.html]Buffett Calls Credit Crisis an "Economic Pearl Harbor," Backs Paulson Plan Billionaire investor[/url]: [i]Warren Buffett, likening the market turmoil to an ``economic Pearl Harbor,'' said his $5 billion investment in Goldman Sachs Group Inc. is a vote of confidence in the Treasury's $700 billion bank rescue plan.[/i] If the Credit Crisis is an "Economic Pearl Harbor," then Warren Buffett is the one scooping up damaged Hawaiian shipyards at a hefty discount and pressing President Roosevelt to "declare war without delay". Recalling the [i]Little Orphan Annie[/i] cartoons, maybe we should start calling him "Daddy Warrenbucks". [url=http://www.bloomberg.com/apps/news?pid=20601109&sid=aCl7bFUJzWRk&refer=news]China Shuns Paulson's Free Market Message as Financial Meltdown Burns U.S.[/url] [quote]Eighteen months ago, U.S. Treasury Secretary Henry Paulson told an audience at the Shanghai Futures Exchange that China risked trillions of dollars in lost economic potential unless it freed up its capital markets. [b] "An open, competitive, and liberalized financial market can effectively allocate scarce resources in a manner that promotes stability and prosperity far better than governmental intervention,"[/b] Paulson said.[/quote] LOL, how`s that whole "unfettered free market capitalism r00lz!" thing working out for ya, Hank? Hey, have you and Bennie tried on those new Mao suits Chairman Hu sent you last week? How`s the fit? And speaking of the role reversal betwixt the U.S. and the foreign capital markets... [b]Rumors about the influence of FCBs on the bailout proposal:[/b] I`m not normally a big conspiracy-theory buff, but there is enough evidence that foreign central banks put the squeeze on Paulson earlier this summer to bail out Fannie and Freddie so as to make their GSE bond bets go from bad to good that it seems not implausible that a similar thing is happening behind the scenes currently. Spotted on a Yahoo Finance message board: [quote]Who is really putting the squeeze on Paulson and the Fed? Large foreign bondholders and they have America by the balls. That's why the Fed and Treasury are pushing to include foreign firms in the bailout. This video lays out the story of who is really behind this latest situation and how it is likely to play out better than any explanation I have heard to date. Check out the vid: [url=http://www.youtube.com/watch?v=XBT052jHnmE&fmt=18]YouTube: The Empire Strikes Out[/url] Skip to 15:52 min if you don't care how we got here but do want to know what to expect next.[/quote] |
Faith-Based Currency | "Delusional Optimists R Us"
[url=http://www.nytimes.com/2008/09/24/opinion/24grant.html?ref=opinion]NYTimes Op-Ed | The Buck Stopped Then[/url]
[quote]By JAMES GRANT Published: September 23, 2008 CRITICS of the administration’s Wall Street bailout condemn the waste of taxpayer dollars. But the taxpayers aren’t the weightiest American financial constituency, even in this election year. The dollar is the world’s currency. And it is on the world’s opinion of the dollar that the Treasury’s plan ultimately hangs. It hangs by a thread, if Monday’s steep drop of the greenback against the euro is any indication. We Americans, constitutionally inattentive to developments in the foreign exchange markets, should be grateful for what we have. That a piece of paper of no intrinsic value should pass for good money the world over is nothing less than a secular miracle. We pay our bills with it. And our creditors not only accept it, they also obligingly invest it in American securities, including our slightly shop-soiled mortgage-backed securities. Every year but one since 1982, this country has consumed much more than it has produced, and it has managed to discharge its debts with the money that it alone can lawfully print. No other nation ever had it quite so good. Before the dollar, the pound sterling was the pre-eminent monetary brand. But when Britannia ruled the waves, the pound was backed by gold. You could exchange pound notes for gold coin, and vice versa, at the fixed statutory rate. Today’s dollar, in contrast, is faith-based. Since 1971, nothing has stood behind it except the world’s good opinion of the United States. And now, watching the largest American financial institutions quake, and the administration fly from one emergency stopgap to the next, the world is changing its mind...[url=http://www.nytimes.com/2008/09/24/opinion/24grant.html?ref=opinion][Full Story][/url][/quote] [url=http://www.nytimes.com/2008/09/24/opinion/24ehrenreich.html?ref=opinion]NYTimes Op-Ed | The Power of Negative Thinking[/url] [quote]By BARBARA EHRENREICH Published: September 23, 2008 GREED — and its crafty sibling, speculation — are the designated culprits for the financial crisis. But another, much admired, habit of mind should get its share of the blame: the delusional optimism of mainstream, all-American, positive thinking. As promoted by Oprah Winfrey, scores of megachurch pastors and an endless flow of self-help best sellers, the idea is to firmly believe that you will get what you want, not only because it will make you feel better to do so, but because “visualizing” something — ardently and with concentration — actually makes it happen. You will be able to pay that adjustable-rate mortgage or, at the other end of the transaction, turn thousands of bad mortgages into giga-profits if only you believe that you can. Positive thinking is endemic to American culture — from weight loss programs to cancer support groups — and in the last two decades it has put down deep roots in the corporate world as well. Everyone knows that you won’t get a job paying more than $15 an hour unless you’re a “positive person,” and no one becomes a chief executive by issuing warnings of possible disaster.[url=http://www.nytimes.com/2008/09/24/opinion/24ehrenreich.html?ref=opinion][Full Story][/url][/quote] [b] SEC declares automakers, IBM as "financial firms" [/b] The SEC`s list of short-sale-banned "financial companies" keeps expanding - a couple days ago they added the likes of Ford, GE and GM to the list. Today they added IBM and a bunch of REITs: [url=http://www.nyse.com/about/listed/1222078675703.html]NYSE-Listed Companies Added to the Short Sale List as of Wednesday Morning, Sept. 24, 2008[/url] Some interesting members of the latest list that caught my eye, along with my speculation as to the possible explanation for each: [url=http://finance.yahoo.com/q/pr?s=MHS][i]MHS Medco Health Solutions, Inc.[/i][/url] - "Medco Health Solutions, Inc. provides pharmacy benefit management services in the United States and Puerto Rico"; clearly this firm is vital to the national interest, and must be protected against market speculators [i]BEE Strategic Hotels & Resorts, Inc. [/i]- Their hotel-lobby slot machines are "too big too fail" and need protection from market turmoil [i]MHP The McGraw-Hill Companies, Inc[/i] - Allowing McGraw-Hill to remain a target of evil short sellers clearly puts their book publishing business and the broader U.S. economy at "systemic risk" [i]Moody's Corporation[/i] - Having Warren Buffett's holding company as your major institutional shareholder apparently has some benefits. And hey, why restrict ourselves to just U.S. Banks? Many foreign banks must not be allowed to have their share prices fall: Just check out the number of foreign banks on the ever-expanding list: [quote][i]Added evening of 22 Sept:[/i] 1. IVZ Invesco Ltd. 2. HBC HSBC Holdings P L C 3. MET Met Life, Inc. 4. PRS Primus Guaranty, Ltd 5. FNF Fidelity National Financial Inc. 6. BLK Blackrock, Inc. 7. AB Alliance Bernstein Holding L.P. 8. OB One Beacon Insurance Group 9. IBN ICICI Bank Limited 10. FBR Friedman, Billings, Ramsey Group Inc 11. DFR Deerfield Capital Corp 12. WBK Westpac Banking Corp 13. IDC Interactive Data Corp 14. CYN City National Corp 15. NNI Nelnet, Inc 16. NLY Annaly Capital Management, Inc 17. CSE CapitalSource Inc 18. AGM Federal Agricultural Mortgage Corporation 19. F Ford Motor Company 20. CT Capital Trust, Inc 21. UBB Uniao de Bancos Brasileiros S.A. 22. ITU Banco Itaú Holding Financeira S.A. 23. BMA Banco Macro S.A. 24. AMB AMB Property Corporation 25. MHP The McGraw-Hill Companies, Inc 26. PLD ProLogis 27. NRF NorthStar Realty Finance Corp 28. SLM SLM Corporation 29. RWT Redwood Trust, Inc 30. IX ORIX Corporation 31. STD Banco Santander S.A. 32. KB Kookmin Bank 33. NBG National Bank of Greece S.A. 34. AZ Allianz SE 35. BBD Banco Bradesco S.A. 36. BCH Banco de Chile 37. SAN Banco Santander - Chile 38. BFR BBVA Banco Frances S.A. 39. HDB HDFC Bank Limited 40. WF Woori Finance Holdings Co., Ltd [i]Added morning of 22 Sept:[/i] 1. GLG GLG Partners, Inc. 2. GE General Electric Co. 3. OCN Ocwen Financial Corporation 4. KBW KBW, Inc. 5. GFG Guaranty Financial Group Inc. 6. MFG Mizuho Financial Group, Inc. 7. FMR First Mercury Financial Corporation 8. STC Stewart Information Services Corporation 9. FCF First Commonwealth Financial Corporation 10. MTB M&T Bank Corporation 11. DFS Discover Financial Services 12. BMO Bank of Montreal 13. TD Toronto Dominion Bank 14. CM Canadian Imperial Bank of Commerce 15. FMD The First Marblehead Corporation 16. BBV Banco Bilbao Vizcaya SA 17. CIB BanColombia SA 18. LM Legg Mason, Inc. 19. NFP National Financial Partners Corp. 20. AXP American Express Company 21. CIT CIT Group Inc. 22. GM General Motors Corporation 23. HIG The Hartford Financial Services Group 24. ADS Alliance Data Systems Corporation 25. ALD Allied Capital Corporation 26. RAS RAIT Financial Trust 27. DRL Doral Financial Corporation 28. FSR Flagstone Reinsurance Holdings 29. MCO Moody's Corporation 30. COF Capital One Financial Corporation 31. CS Credit Suisse Group AG [/quote] What next - a blanket "this company makes financial transactions of some kind, hence it is a 'financial firm'" decree? The desperation is palpable... |
Chevy Chase Bank victory in predatory mortgage
From [URL="http://www.jsonline.com/story/index.aspx?id=799021"]this article:[/URL]
[quote]A Maryland bank scored a major victory in a mortgage lending case Wednesday when a federal appellate court rejected class-action status for a Cedarburg couple’s suit against Chevy Chase Bank. In a 2-1 decision, the 7th Circuit U.S. Court of Appeals in Chicago reversed a 2007 ruling by U.S. District Court Judge Lynn Adelman, who granted the suit class-action status — a certification that could have resulted in the rescission of more than 8,000 mortgages at a cost of more than $200 million to the giant Maryland bank. Left standing is Adelman’s ruling that the bank violated the Truth-in-Lending Act by not clearly disclosing the terms of the adjustable rate mortgage it wrote to Bryan and Susan Andrews in 2004. The Andrewses said they thought their interest rate was frozen at 1.95% for five years, when actually only their payments — not the rate — was fixed for that period. They can still pursue a rescission of their mortgage — having their loan revoked and all of their fees and interest payments returned. Other Chevy Chase clients in the same bind, however, cannot receive the same relief unless they file and win their own legal action. Had the suit retained its class-action status, all of the people who received adjustable rate mortgages from Chevy Chase between April 2004 and January 2007 and were given lending disclosure statements similar to those given to the Andrewses would be eligible for a loan rescission, plus attorney fees. The case was closely watched by national lending and consumer advocate groups because of the expectation that a victory by Andrews could open the floodgates to similar class-action lawsuits. “It was potentially a big-ticket item,” said Greg Taylor, an attorney for the American Bankers Association, one of six national trade groups to file friend of the court briefs in the case. “This was a significant decision.” The 15-page decision by former Wisconsin Supreme Court Justice Diane Sykes brought an unusually sharp retort from Kevin Demet, the Andrewses’ lawyer. “The opinion is a radical opinion written by a radical jurist,” he said in an interview. “This decision is a gift to certain members of the banking industry at the expense of the consumers who were misled,” he said in a statement. The Sykes opinion noted that although the law does not expressly prohibit using class-action suits in truth-in-lending cases, doing so in a rescission case would be unwieldy since each borrower’s situation is so different. Therefore, she reasoned, many of the class members would have to go to court to resolve their transactions, eliminating the efficiency that a class action is supposed to bring. Supporting Sykes was Judge Daniel Manion, who like Sykes was appointed by a Republican president. Judge Terence Evans, named to the bench by a Democrat, cast the dissenting vote. Jeffrey Sarles, Chevy Chase’s lawyer, argued the decision would benefit lenders and borrowers. A slew of class-actions suits could have cost lenders huge amounts of money, resulting in a further tightening of credit, he said.[/quote] Don't you just love the logic from Diane Sykes (appointed by GWB)? I read this as "we shouldn't punish a bank for predatory lending practices because we are in a recession". I doubt that the current financial crisis has anything to do with her decision. The continuing "let's bailout the banks to protect them" logic of the current administration is appalling. |
How Dire?
In the last three days, I have noticed that the rhetoric about the severity of this crisis has been ratcheted up - I have heard commentators say that if the bailout does not occur by the end of the week, we are going to have a Great Depression ("we're all screwed" - one local conservative AM radio commentator claimed). Is this just an attempt to sell the bailout plan?
Can anyone connect the dots for me? Things are bad on Wall Street and for any banks dealing with mortgages, but how does that lead to a Depression? And aren't we bypassing the "recession" stage? I am trying to stay informed (thanks Ernst, for all the links, commentary), but lately I feel like Dorothy in the Wizard of Oz. I can hear the Wizard's booming voice, but can't see behind the curtain... |
[QUOTE=rogue;143740]From [URL="http://www.jsonline.com/story/index.aspx?id=799021"]this article:[/URL]
[/QUOTE] More info [url="http://www.washingtonpost.com/wp-dyn/content/article/2007/02/05/AR2007020501415.html"]here[/url] |
[QUOTE=ewmayer;143680]
The SEC`s list of short-sale-banned "financial companies" keeps expanding - a couple days ago they added the likes of Ford, GE and GM to the list. Today they added IBM and a bunch of REITs: [url=http://www.nyse.com/about/listed/1222078675703.html]NYSE-Listed Companies Added to the Short Sale List as of Wednesday Morning, Sept. 24, 2008[/url] Some interesting members of the latest list that caught my eye, along with my speculation as to the possible explanation for each: kind, hence it is a 'financial firm'" decree? The desperation is palpable...[/QUOTE] Does anyone foresee the future lawsuits? Does the "equal protection" clause apply? Can Mom&Pop local store that went belly up sue the government because it too isn't getting a bailout? How can the U.S. govt. "selectively" bail out some companies but not others??? Does the 14th amendment apply? |
Alternative Rescue Plans | New Home Sales Dire
Great post this morning on Barry Ritholz` blog:
[url=http://bigpicture.typepad.com/comments/2008/09/alternative-ide.html]The Big Picture | Alternative Ideas for Rescue Plans[/url]: [i]"How is it that Warren Buffett can cut a better deal with the best-run financial company in America than the U.S. Treasury can ask from the worst-run financial companies in America?"[/i] [url=http://money.cnn.com/2008/09/25/news/economy/new_homes/index.htm]New home sales fall to 17-year low[/url]: [i]Sales pace of new homes lowest since January 1991 as prices hit a four-year low and inventory remains high.[/i] [quote]The rate of sales was down 34.5% from a year earlier. Sales were at their lowest pace since January 1991, when the first Gulf War started, and the economy was near the bottom of a recession and undergoing an oil price shock. Excluding that month, you'd have to go all the way back to August 1982 to find a rate of sales so low. "It's a stunning decline, but we're still going to be dealing with a tough market well into 2009 and maybe even 2010," said Mike Larson, an analyst with Weiss Research. "All indicators say we're heading into a recession, if we're not already in one." On a non-seasonally adjusted basis, the report showed only 39,000 new homes were sold in July, which marks the lowest level for that measure since December 1991. "It looks like we're in an absolute cliff dive, but we're coming down sharply from a very high level," Larson said. The sale pace has fallen 66.9% from its peak of 1.39 million homes set in July 2005.[/quote] [b]My Comment:[/b] If you adjust for the change in [url=http://en.wikipedia.org/wiki/Demographic_history_of_the_United_States]U.S. population[/url] since 1991 [roughly a 20% increase], you get a sense of just how bad the numbers are in per-capita terms. [url=http://money.cnn.com/2008/09/25/news/economy/durable_orders/index.htm]Durable goods orders fall 4.5%[/url]: [i]Greatest decline in orders of manufactured goods since January signals continued economic weakness.[/i] [b]My Comment:[/b] Not even the gubbermint`s mystical numerologists [sometimes, and incorrectly, referred to as "statisticians"] could put lipstick on this ... oh wait, musn`t use that horrifically misogynist expression. [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=a1wbEBXietIc&refer=news]GE Cuts Earnings Forecast, Suspends Buyback on Financial-Services Weakness[/url]: [i] General Electric Co. reduced its annual profit forecast for the second time this year and suspended its stock buyback as ``unprecedented weakness and volatility'' in credit markets hurt the company's finance arm.[/i] [b]My Comment:[/b] We pray this won`t lead to staff reductions amongst the army of paid stock pumpers at their wholly-owned subsidiary, CNBC. [url=http://globaleconomicanalysis.blogspot.com/2008/09/credit-stress-evident-in-taf-ted-spread.html]Credit Stress Evident In TAF, Ted Spread, Everywhere[/url]: [i]Credit dislocations continue to fester. Evidence can be found in corporate bonds, preferred shares, hybrids, the Ted Spread, and even in the most recent Term Auction Facility (TAF) auctions.[/i] [quote][i]The TED spread can be used as an indicator of credit risk. This is because U.S. T-bills are considered risk free while the LIBOR rate reflects the credit risk of lending to commercial banks. As the TED spread increases, the risk of default (also known as counterparty risk) is considered to be increasing, and investors will have a preference for safe investments.[/i] Professor Bennet Sedacca ha a few comments on Minyanville today in Credit Market Misery. [i] The credit market is getting eviscerated. Period. Whether it is corporates, preferreds or hybrids, spreads continue to blow out. The Goldman (GS) preferred I bought the other day at 11.5%? Gonzo. Thank you Warren. Don't let the stock market fool you. The credit market is imploding. The credit market has been a great leading indicator for stocks lately.[/i][/quote] Nice post by reader Bam_Man in the commentary section to Mish`s [url=http://globaleconomicanalysis.blogspot.com/2008/09/credit-stress-evident-in-taf-ted-spread.html]latest article[/url]: [quote]Most still seem totally baffled as to why this "bailout" is being rammed down the throat of the American people. As far as the US Treasury and Federal Reserve is concerned, there are 16 VERY good reasons why this "bailout" MUST go through ASAP. They are: BNP Paribas Securities Corp. Bank of America Securities LLC Barclays Capital Inc. Cantor Fitzgerald & Co. Citigroup Global Markets Inc. Credit Suisse Securities (USA) LLC Daiwa Securities America Inc. Deutsche Bank Securities Inc. Goldman, Sachs & Co. RBS Greenwich Capital HSBC Securities (USA) Inc. J. P. Morgan Securities Inc. Merrill Lynch Government Securities Inc. Mizuho Securities USA Inc. Morgan Stanley & Co. Incorporated UBS Securities LLC. These are the primary dealers in US Treasury securities. Between them, THEY PURCHASE THE VAST MAJORITY OF US GOVERNMENT SECURITIES SOLD AT AUCTION and then re-sell them to their foreign and domestic customers. When they have a problem (like hopelessly impaired balance sheets), the US Treasury has a problem. The impaired balance sheets of many of the primary dealers is starting to hinder their ability to participate in Treasury auctions. This could lead to failed Treasury auctions in the very near future. Anyone who is still puzzled as to the nature of the Wall St/Washington relationship needs look no further than this. This is the crux of the problem and the reason why the Treasury Department is forcing this bailout on the American people.[/quote] |
Holy Stop-loss cascade, Batman!
1 Attachment(s)
So I just happened to be watching the Fannie Mae ticker [FNM] in the past 10 minutes, to see how the "bailout bill imminent" news would affect it. Apparently some major holder got cold feet [or perhaps a hedge fund wanted to manipulate this thing down in order to pick up a bunch of shares on the cheap], because in A SPAN OF ROUGHLY 5 MINUTES, FNM plunged from ~$2.30 to under $1.20, and went right back up to $2.30 again. I guess a 35M share block sell will do that. What likely happened is that as soon as that big sell hit the wire, the price dropped enough to start taking out all the trailing stops set by the legion of hedgies and day traders that are speculating in this issue these days. That caused a flood of secondary sell orders, the so-called "stop loss cascade".
I couldn't believe my eyes watching the live ticker, but just as a pure day-trading "I want a piece of this action, too" gambling play I tried to scoop up a decent-sized chunk of shares at 1.20 or better. During the 30 seconds or so that I was putting in my limit buy order, the thing rocketed up 50 cents per share. Damn - that would've nicely covered the money the government is going to take from me [one way or another] to bail out the Wall Street gamblers. Here's a Yahoo chart [these are 15 mins delayed, so I had to wait for it to capture the stop-loss event] showing the event: |
Who got us into this mess with Freddie and Fanny?
[url]http://www.ibdeditorials.com/IBDArticles.aspx?id=307149667289804[/url] |
[QUOTE=Wacky;143794]Who got us into this mess with Freddie and Fanny?
[url]http://www.ibdeditorials.com/IBDArticles.aspx?id=307149667289804[/url][/QUOTE] Clinton also signed the Gramm-Leach-Bliley bill, which repealed the Depression-era Glass-Steagal Act. He is certainly not blameless in this matter - the reckless Fed interest-rate policies which helped inflate the first of the two Greenspanian asset bubbles [dotcom, followed by housing] also were on Clinton's watch. Plenty of blame to go around - but after dotcom imploded, people should certainly have known better. But Bush and Greenspan were so desperate to mitigate the aftereffects of the dotcom fiasco by any means necessary, they went stark raving nuts. Greenspan lowered interest rates to ~1% and kept them there for 5 YEARS, encouraged the explosion in "exotic" mortgages, and Bush irresponsibly cut taxes [especially on the wealthy] at the same time government spending on things like the Iraq war were shooting into the stratosphere. Whatever Clinton may have done, he didn't leave us with a trillion-dollar yearly account deficit. |
[quote=Wacky;143794]Who got us into this mess with Freddie and Fanny?
[URL]http://www.ibdeditorials.com/IBDArticles.aspx?id=307149667289804[/URL][/quote]... and [U]for six years the combination of [B]Republican[/B] president and [B]Republican[/B]-controlled Congress, [B]which could have ordered a change in Treasury rules, or passed legislation to overturn this supposed mistake by Clinton[/B], [I]did nothing[/I][/U]. It was within Republicans' power for [U]six years[/U] to rectify what Clinton did. We saw that they weren't shy about attacking Clinton. So why, oh, why didn't [U]Republicans[/U] do something to prevent this disaster [U]when it was completely within their power to do so[/U]? Obviously, it just wasn't important to them, like tax cuts were. So, spare us the GOP cries of "It's Clinton's fault!" If it was such a big mistake by Clinton, [I]why didn't we hear Republicans at least complaining about it long before now[/I], even if they didn't want to take action? (One may as well ask why George W. Bush -- after taking office from a president who had made it his administration's top priority to stop terrorist threats to the U.S. and had called FBI, CIA, and other department heads to the White House to "knock heads" together to find ways to coordinate their terrorism intelligence -- for seven-and-a-half months lowered the priority of terrorism intelligence while he made tax cuts for the wealthy his top priority.) Remember how Republicans were quick to give Reagan credit for stopping inflation, even though it was Carter who made the key change, while Reagan made no inflation-stopping move? Note that they were quick, there, to give an incoming president credit for something actually done by his successor. Now, why don't Republicans apply the same logic to responsibility for this subprime meltdown? The Republican Party no longer has the moral integrity it had, in part, in the Goldwater days, the integrity that I was taught it had when I was growing up. It has changed its core philosphy, to do anything for the sake of _power_ -- it will lie, cheat, steal from future generations, imperil our national security, contradict its claimed principles with its actions ... _anything_ to get the power to impose the conservative and fundamentalist worldviews on those who don't share them. Nixon's Watergate opened my eyes. Reagan puzzled me. Bush the Younger has educated me. The Republican turnaround that spans them disgusts me. |
Latest Shotgun Wedding: JP Morgan gets WaMu
[url=http://online.wsj.com/article/SB122238415586576687.html?mod=yahoo_hs&ru=yahoo]J.P. Morgan to Take Over Faltering WaMu[/url]: [i]U.S. Government Helps Broker a Deal to Dispose of Huge Thrift; Banking Giant Expected to Get Deposits, Branches[/i]
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CBO director distinguishes illiquidity, insolvency
[URL="http://cboblog.cbo.gov/?p=169"]Troubled Asset Relief Act and insolvencies[/URL] September 25th, 2008 [QUOTE]Finally, it seems worth emphasizing again a key point from yesterday’s testimony — that the [B]financial markets face two distinct, but related, problems[/B]. One problem is that the markets for some types of assets and transactions have essentially stopped functioning. To address that problem, the government could conceivably intervene as a “market maker,” by offering to purchase assets through a competitive process and thereby provide a price signal to other market participants. That type of intervention, if designed carefully to keep the government from overpaying, might not involve any significant subsidy from the government to financial institutions. The second problem involves the potential insolvency of specific financial institutions. Restoring solvency to insolvent institutions requires additional capital injections, and one possible source of such capital is the federal government. [B]Although the problems of illiquidity and insolvency are interrelated, they are at least conceptually distinct[/B]. Indeed, some policy proposals appear to be aimed primarily at the illiquidity of particular asset markets, and others appear to be aimed primarily at the potential insolvency of specific financial institutions. [B][COLOR="Red"]The Treasury proposal appears to be motivated primarily by concerns about illiquid markets. The more the government overpays for assets purchased under that act, however, the more the proposed program would instead provide a subsidy to specific financial institutions, in a manner that seems unlikely to be an efficient approach to addressing concerns about insolvency.[/COLOR][/B][/QUOTE]
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[QUOTE=masser;143759]In the last three days, I have noticed that the rhetoric about the severity of this crisis has been ratcheted up - I have heard commentators say that if the bailout does not occur by the end of the week, we are going to have a Great Depression ("we're all screwed" - one local conservative AM radio commentator claimed). Is this just an attempt to sell the bailout plan?
Can anyone connect the dots for me? Things are bad on Wall Street and for any banks dealing with mortgages, but how does that lead to a Depression? And aren't we bypassing the "recession" stage? I am trying to stay informed (thanks Ernst, for all the links, commentary), but lately I feel like Dorothy in the Wizard of Oz. I can hear the Wizard's booming voice, but can't see behind the curtain...[/QUOTE] masser, As it has been explained to me, people overseas are afraid of the situation, and will start withdrawing their money. If enough of their money withdraws, more banks/businesses collapse, and the global economy goes into recession. The recent speech by the President is actually pretty good on that front (i.e. explaining the cuurent thinking [on both sides of the isle] on the situation). |
[QUOTE=cheesehead;143806].
<snip><snip> .. Nixon's Watergate opened my eyes. Reagan puzzled me. Bush the Younger has educated me. The Republican turnaround that spans them disgusts me.[/QUOTE] This discussion has turned silly. While it might make people feel good to point the finger of blame at the party they dislike the most: i.e. republitards or demotwits , it does nothing to solve the problem. There is plenty of blame for everyone: both parties, several presidents, greedy banks, fed chairmen, homeowners who took loans they could not pay, the SEC, policies that allowed one company to take an unreasonable risk, then sell it off to another, banks that were forced by law to sell to bad risk customers, (i.e. no redlining), laws that allowed UNEMPLOYMENT COMPENSATION to count as "income" for loan purposes, etc. etc. etc. The blame game does not solve the problem. I don't like what has happened to the value of my IRA.... Let's fix the problem instead of trying to afix blame. |
Washington Mutual bit the dust tonight and J.P. Morgan just got bigger by swallowing the debris. Politicians are doing what politicians do best, arguing.
Get ready for the big one folks, this looks really BAD. DarJones |
[QUOTE=Fusion_power;143825]Washington Mutual bit the dust tonight and J.P. Morgan just got bigger by swallowing the debris. Politicians are doing what politicians do best, arguing.
Get ready for the big one folks, this looks really BAD. DarJones[/QUOTE]I agree. This week I listened to Senate and House sessions on C-SPAN. While not that enamored with the Treasury Secretary Paulson, I listened as He and FRB Chairman Bernake fielded tough questions. I was much more impressed listening to Congressional Budget Office Director Peter R. Orszag talking in session with the Senate and his careful, clear answers, varying from simple to complex as needed with straight responses and no squirming or evading. Basically the suggested compromise [URL="http://blogs.wsj.com/economics/2008/09/25/text-of-lawmakers-agreement-on-principles/"]Agreement on Principals[/URL] that emerged was possibly workable. My greatest remaining concern was the determination of prices to be paid for the toxic securities. There appeared to be commendable bipartisan effort despite all the pressures of time-line and upcoming campaigns. Then all the work seemed to fall apart. I hope Friday looks better. |
[QUOTE=ewmayer;143810][url=http://online.wsj.com/article/SB122238415586576687.html?mod=yahoo_hs&ru=yahoo]J.P. Morgan to Take Over Faltering WaMu[/url]: [i]U.S. Government Helps Broker a Deal to Dispose of Huge Thrift; Banking Giant Expected to Get Deposits, Branches[/i][/QUOTE][URL="http://www.nytimes.com/2008/09/26/business/26wamu.html?em"]Government Seizes WaMu and Sells Some Assets[/URL][QUOTE]But the seizure and the deal with JPMorgan came as a shock to Washington Mutual’s board, which was kept completely in the dark: the company’s new chief executive, Alan H. Fishman, was in midair, flying from New York to Seattle at the time the deal was finally brokered, according to people briefed on the situation. Mr. Fishman, who has been on the job for less than three weeks, is eligible for $11.6 million in cash severance and will get to keep his $7.5 million signing bonus, according to an analysis by James F. Reda and Associates.[/QUOTE]
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[QUOTE=R.D. Silverman;143819]This discussion has turned silly. While it might make people feel good
to point the finger of blame at the party they dislike the most: i.e. republitards or demotwits , it does nothing to solve the problem. There is plenty of blame for everyone: both parties, several presidents, greedy banks, fed chairmen, homeowners who took loans they could not pay, the SEC, policies that allowed one company to take an unreasonable risk, then sell it off to another, banks that were forced by law to sell to bad risk customers, (i.e. no redlining), laws that allowed UNEMPLOYMENT COMPENSATION to count as "income" for loan purposes, etc. etc. etc. The blame game does not solve the problem. I don't like what has happened to the value of my IRA.... Let's fix the problem instead of trying to afix blame.[/QUOTE]Hear hear! Paul |
Given that they're liquidating institutions which are too big to fail by consolidating them into larger institutions, I don't see how this does more than push the day of reckoning back a few months.
If several major brokers in treasuries seize up, and it really threatens the auctions, then that's grave. Beyond the obvious threat to further government borrowing, it might cramp the Fed's ability to create money by purchasing treasuries. The press is pushing this: from both local and national news outlets, there's no discussion of whether or not something should be done, but only pressing questions from every interviewer and anchor as to when something will be done. The media have assumed that doing nothing is out of the question. |
WaMu: Connect the dots, see a vulture
Forgot to post this yesterday morning [things were really quite busy here around SMMM Headquarters]:
[url=http://yellowroad.wallstreetexaminer.com/blogs/2008/09/24/221/]The Yellow Brick Road | Connect the dots, see a vulture[/url] [Click on original article to see inline story links] [quote]I want to play a kids game of connecting the dots on the list about the future of some of the troubled banks. The dots are: * GS and MS getting a banking license. I suppose if they planned to buy a bank they don’t need a license, as it will come automatically. You need a license if you plan to build a new bank from pieces * GS is raising $10, potentially $15 billion in a rush deal with Buffett and on the secondary market * GS is indicating that it plans to buy some banking assets at the open market * Both S&P and Fitch downgraded WaMu tonight * There is a bank run on the Bank of East Asia * Congress is voting to give Paulson $700 billion to purchase distressed financial assets and Buffett supports the plan What do I see from here is that there is an immediate plan to feed stronger banks with meat of failing banks and unload remaining assets to the new treasury fund. If I am right, nobody plans to bail-out WaMu. WaMu will be taken over by FDIC very soon, could be as soon as this weekend. The potential buyers of branches and deposits are most likely already negotiating with FDIC. The branches and deposits will be taken over by Monday, the rest of the assets will go to Treasury. If it plays nice, the whole procedure will be repeated 100 times. We have a lot of distressed banks.[/quote] And a similar "though this is madness, yet there be method in’t" sentiment is expressed by a [url=http://globaleconomicanalysis.blogspot.com/2008/09/take-back-america.html]leading economist[/url]: [quote]"I suspect that part of what we're seeing in the freezing up of lending markets is strategic behavior on the part of big financial players who stand to benefit from the bailout," said David K. Levine, an economist at Washington University in St. Louis, who studies liquidity constraints and game theory.[/quote] The Fed has also been actively draining huge amounts of liquidity from the banking system [by way of reverse repos] for most of this week. Which begs the question: If, as Bernanke so often claims, this is a crisis of liquidity, why would he drastically be reducing the Fed`s now-routine liquidity injections into the banking system? As Mish Shedlock notes in his commentary in the above article: [quote]Tonight Washington Mutual went under. There have been 7 bank failures announce this year, all of them on a Friday. This one is on a Thursday. Game playing to create a sense of urgency? You tell me. What I will tell you is there is no need to rush into a $700 billion package when 190 economists, a current Fed governor, and a former Fed Governor all perceive the bailout for what it is: A bailout of Wall Street that will cost at a bare minimum $2,000 for every man woman and child in the United States.[/quote] And [i]The Wall Street Examiner[/i]`s Russ Winter likes to use the analogy of the La Brea Tar Pits [La Brea is Spanish for "The tar", so the name "The La Brea Tar Pits" really amounts to "The the tar tar pits", which seems to suffer from a slight echo ... but I digress]: [url=http://wallstreetexaminer.com/blogs/winter/?p=1933]Tar Pit Operation at Work[/url] [quote]Friday, September 26th, 2008 at 7:38 AM "Teker kirilinca yol gosteren cok olur" - "Many will point the right way after the wheel is broken" - Turkish Proverb The JPM takeout of WAMU is significant and once again illustrates the “Tar Pit Operation”. Here are the details, and indicate (on its face) that no FDIC funds were involved. 1. Carrion is stuck in the Pit. 2. Saber Tooth (Friend of Hankenstein-FOH ) takes the Carrion in a government orchestrated “rescue” or “hand off”. Carrion shareholders and debt holders are completely wiped out. The FDIC gets brownie points for not taking a hit (or a small one), and can then point to the anti moral hazard lesson “to be learned”. 3. The assets and trashed securities of the Carrion are taken for a song. 4. A portion of the low cost basis trashed securities FOH (JPM in this instance) has taken are then marked up and profitably sold to the US Treasury’s deal making Leviathan. The next step to look for is the Leviathan arrangement with Congress to emerge. They may now need a Black Friday or Monday demonstration to act, but act they will. A few more big banks will likely fail over the weekend providing the political cover. As part of the “compromise” Hankenstein’s Leviathan will come as a tranche deal (say $200 billion at first) whereby Hankenstein initially gets a “trial stash” to work with. Once Hankenstein gets the first tranche he works a smoke and mirrors razzle dazzle whereby fixed “prices” are established. Since Fannie Mae and Freddie Mac have been seized as well, look for those and failed banks to be the center of the action. Securities Leviathan buys will also be flipped for small profits, and within weeks this will be revealed to the Public as part of a new found transparency propaganda machine. Leviathan will win brownie points for its early “wins” for the Taxpayers. Unfortunately more “failures” will emerge as the Tar Pit fills up. Hankenstein will ask for and receive more tranches from Congress, and his role as middle man (wholesaler) to facilitate the monster asset handoff to FOHs will accelerate as will the hidden cost to the taxpayer. Hundreds of billions of assets are wholesaled in back door razzle dazzle transactions before January 20, 2009. Then Hank’s Boyz rip up and take the bathroom toilets off the walls, and a steaming sack of turds is left at the front door of the White House as a welcome present to the next President.[/quote] |
[quote=R.D. Silverman;143819]While it might make people feel good to point the finger of blame at the party they dislike the most: i.e. republitards or demotwits , it does nothing to solve the problem.[/quote]You are correct, sir, in your response.
I apologize for intruding those unhelpful comments into this thread. |
"Name the Bailout" Contest | Strange Scenes in DC
Suggest a "name the bailout" contest - we can take a poll late next week to pick a winner. Pet names with amusing acronyms are of course de riguer.
Saw this one on a Yahoo message board: [i] "Federal Interventionary Acquisition of Subprime Certificates Organization" [/i] Admittedly not my best effort [very busy @work today], but I submit [i] "Federal Regulation to Acquire Undervalued Debt Securities" [/i] Submitted: Among recent independent presidential candidates, Ron Paul is to Ross Perot as Maria Sharapova is to Anna Kournikova among female tennis players [i.e. perhaps less memorable, but much more competent] - Discuss! [quote]Congressman Ron Paul Statement before the Joint Economic Committee “The Economic Outlook” September 24, 2008 Mr. Chairman, I believe that our economy faces a bleak future, particularly if the latest $700 billion bailout plan ends up passing. We risk committing the same errors that prolonged the misery of the Great Depression, namely keeping prices from falling. Instead of allowing overvalued financial assets to take a hit and trade on the market at a more realistic value, the government seeks to purchase overvalued or worthless assets and hold them in the unrealistic hope that at some point in the next few decades, someone might be willing to purchase them. One of the perverse effects of this bailout proposal is that the worst-performing firms, and those who interjected themselves most deeply into mortgage-backed securities, credit default swaps, and special investment vehicles will be those who benefit the most from this bailout. As with the bailout of airlines in the aftermath of 9/11, those businesses who were the least efficient, least productive, and least concerned with serving consumers are those who will be rewarded for their mismanagement with a government handout, rather than the failure of their company that is proper to the market. This creates a dangerous moral hazard, as the precedent of bailing out reckless lending will lead to even more reckless lending and irresponsible behavior on the part of financial firms in the future. This bailout is a slipshod proposal, slapped together haphazardly and forced on an unwilling Congress with the threat that not passing it will lead to the collapse of the financial system. Some of the proposed alternatives are no better, for instance those which propose a government equity share in bailed-out companies. That we have come to a point where outright purchases of private sector companies is not only proposed but accepted by many who claim to be defenders of free markets bodes ill for the future of American society. As with many other government proposals, the opportunity cost of this bailout goes unmentioned. $700 billion tied up in illiquid assets is $700 billion that is not put to productive use. That amount of money in the private sector could be used to research new technologies, start small business that create thousands of jobs, or upgrade vital infrastructure. Instead, that money will be siphoned off into unproductive assets which may burden the government for years to come. The great French economist Frederic Bastiat is famous for explaining the difference between what is seen and what is unseen. In this case the bailout's proponents see the alleged benefits, while they fail to see the jobs, businesses, and technologies not created due to this utter waste of money. The housing bubble has burst, unemployment is on the rise, and the dollar weakens every day. Unfortunately our leaders have failed to learn from the mistakes of previous generations and continue to lead us down the road toward economic ruin.[/quote] Apparently some interesting scenes were witnessed in the last 24 hours on capitol hill: Wonder why Paulson was asking Pelosi for a knighthood - seems a tad premature... [url=http://www.marketwatch.com/news/story/all-not-usual-washington-works/story.aspx?guid={79633BBC-9AB5-491A-B42B-BB4C95694ADB}]Marketwatch | All not as usual as Washington works on rescue[/url] [quote]WASHINGTON (MarketWatch) -- The Secretary of the Treasury on bended knee before the Speaker of the House. A shouting match at a White House meeting -- which included the two presidential candidates -- while the president looked on. All was not normal in Washington as lawmakers tried to hammer out the most expensive financial rescue package in American history. [/quote] |
[quote=ewmayer;143900]
Apparently some interesting scenes were witnessed in the last 24 hours on capitol hill: Wonder why Paulson was asking Pelosi for a knighthood - seems a tad premature...[/quote] That's a great analogy ewmayer. But, a Knighting may be preferable to a Coronation at this point. Who will replace Paulson in JAN? IMO, it's a damn[B] [U]Ponzi scheme[/U][/B] coming to it's end, except the promoters are the regulators!: The federal government, both parties, both branches, over the last 15 years have paved the way to where we are now. I have no answers, only questions at this point. But, I do have an extra BAG to hold if anyone is in need. |
Paulson ties taint bailout plan / Fortis Failing?
[url=http://www.guardian.co.uk/business/feedarticle/7831153]Paulson's banking ties taint Wall St bailout plan[/url]
[quote]Henry Paulson spent his life amassing a fortune on Wall Street. Now, as Treasury secretary, he is demanding unprecedented authority -- and $700 billion in cash -- to bail out the teetering U.S. banking sector.[/quote] [url=http://www.weeklystandard.com/Content/Public/Articles/000/000/015/636zbhel.asp]Fortis About To Fail?[/url] [quote]I've received phone calls in the last hour from two economists I respect, one of them Larry Lindsey, the other in a position where he'd prefer not to be named. Both have government experience, neither is alarmist by nature, and they say this: The huge European bank Fortis is apparently about to fail. The ripple effect on the American banking system could be disastrous, with bank runs, liquidity crises, and stock sell offs possible Monday. Wachovia may well fail next week. As Larry put it, this really will be 1933 soon if we don't move rapidly to stabilize the banking system. And here's the bad news: the current bailout bill, whatever its merits and likelihood of passage, does nothing to address this.[/quote] [url=http://www.nytimes.com/2008/09/27/business/27sec.html?_r=1&oref=slogin]S.E.C. Concedes Oversight Flaws Fueled Collapse[/url] [quote]WASHINGTON — The chairman of the Securities and Exchange Commission, a longtime proponent of deregulation, acknowledged on Friday that failures in a voluntary supervision program for Wall Street’s largest investment banks had contributed to the global financial crisis, and he abruptly shut the program down. The S.E.C.’s oversight responsibilities will largely shift to the Federal Reserve, though the commission will continue to oversee the brokerage units of investment banks. Also Friday, the S.E.C.’s inspector general released a report strongly criticizing the agency’s performance in monitoring Bear Stearns before it collapsed in March. Christopher Cox, the commission chairman, said he agreed that the oversight program was “fundamentally flawed from the beginning.” “The last six months have made it abundantly clear that voluntary regulation does not work,” he said in a statement. The program “was fundamentally flawed from the beginning, because investment banks could opt in or out of supervision voluntarily. The fact that investment bank holding companies could withdraw from this voluntary supervision at their discretion diminished the perceived mandate” of the program, and “weakened its effectiveness,” he added. Mr. Cox and other regulators, including Ben S. Bernanke, the Federal Reserve chairman, and Henry M. Paulson Jr., the Treasury secretary, have acknowledged general regulatory failures over the last year. Mr. Cox’s statement on Friday, however, went beyond that by blaming a specific program for the financial crisis — and then ending it. ... The program Mr. Cox abolished was unanimously approved in 2004 by the commission under his predecessor, William H. Donaldson. Known by the clumsy title of “consolidated supervised entities,” the program allowed the S.E.C. to monitor the parent companies of major Wall Street firms, even though technically the agency had authority over only the firms’ brokerage firm components. [b] The commission created the program after heavy lobbying for the plan from all five big investment banks. At the time, Mr. Paulson was the head of Goldman Sachs. He left two years later to become the Treasury secretary and has been the architect of the administration’s bailout plan. [/b] The investment banks favored the S.E.C. as their umbrella regulator because that let them avoid regulation of their fast-growing European operations by the European Union. [/quote] [url=http://online.wsj.com/article/SB122238812195977243.html?mod=googlenews_wsj]Short-Sale Ban Wallops Convertible-Bond Market[/url] [quote]The Securities and Exchange Commission's ban on short selling of financial stocks has effectively shut down much of the convertible-bond market, a crucial area of financing for struggling companies. ... "At least 75% of investors" in convertible securities hedge their positions, Elliot Bossen, chief investment officer of Chapel Hill, N.C., Silverback Asset Management, wrote in a letter to the SEC and lawmakers Wednesday. "This important source of capital will disappear entirely," if the rules remain in effect, he wrote, adding that the SEC's move "contributed to the seizing up of liquidity in the market for convertible securities."[/quote] |
Rumors are flying this evening.
I've heard one that Wachovia is desperately seeking a buyer, another that a major European bank is on the ropes, and a third that an english bank is to be taken over tonight. I'd rather have facts than rumors. |
Giant Fortis partially nationalized / The Bailout
[QUOTE=Fusion_power;144015]Rumors are flying this evening.
I've heard one that Wachovia is desperately seeking a buyer, another that a major European bank is on the ropes, and a third that an english bank is to be taken over tonight. I'd rather have facts than rumors.[/QUOTE] [url=http://money.cnn.com/2008/09/28/news/international/fortis_nationalized.ap/index.htm]Huge European bank fails[/url] - [i]European financial giant Fortis partially nationalized. Three governments to pour 11.2 billion euro ($16.4 billion) into the bank.[/i] [quote]BRUSSELS, Belgium (AP) -- Dutch-Belgian bank and insurance giant Fortis NV was given a 11.2 billion euro ($16.4 billion) lifeline to avert insolvency as part of a wider bailout plan agreed to by Belgium, the Netherlands and Luxembourg, officials said Sunday. Belgium's Prime Minister Yves Leterme said the bailout shows account holders and investors that Fortis will not be allowed to fall victim to the global credit crisis. Leterme announced the deal after weekend talks between the three countries, European Union and national banking officials. The deal will force the bank -- which has headquarters in both Brussels and the Dutch city of Utrecht -- to sell its stake in Dutch bank ABN Amro, which it partially took over last year. Fortis paid 24 billion euros for its share of ABN. Fortis Chairman Maurice Lippens will be forced to resign and will be replaced by a candidate from outside the company, Leterme said.[/quote] Perhaps the "British Bank" you referred to is just-nationalized UK Mortgage giant [url=http://www.guardian.co.uk/business/2008/sep/29/bradfordbingley.banking]Bradford & Bingley[/url]? ============================ [url=http://www.nakedcapitalism.com/2008/09/aig-bailout-saved-goldman.html]AIG Bailout Saved Goldman From Major Loss[/url] [quote]Gretchen Morgenson in the New York Times reports that Goldman and no other Wall Street firm was involved in the AIG rescue talks and an AIG failure would have created a hole as big as $20 billion in Goldman's balance sheet. This is special dealing, pure and simple. Even if AIG needed to be salvaged (there was considerable agreement on this point), having Goldman deeply involved in the process is cronyism. But that's been a staple of this Administration.[/quote] [url=http://money.cnn.com/2008/09/28/news/economy/Sunday_talks_bailout/index.htm]Rescue bill released[/url] - [i]Lawmakers unveil plan to enact historic bailout of nation's financial system.[/i] [quote]NEW YORK (CNNMoney.com) -- The federal government would provide as much as $700 billion in a far-reaching plan to rescue the nation's troubled financial system, according to a bill posted online by leading Democratic lawmakers on Sunday. House Speaker Nancy Pelosi said she hopes the House will take up the bill on Monday. Sen. Majority Leader Harry Reid, D-Nev., said he believes the Senate can move on the legislation as early as Wednesday. Pelosi said the provisions added by Democrats will protect taxpayers from having to pay for the bailout. "We sent a message to Wall Street - the party is over," she said at a press conference with Reid and other Democratic leaders from the House and Senate. The core of the bill is based on Treasury Secretary Henry Paulson's request for authority to purchase troubled assets from financial institutions so banks can resume lending and so the credit markets, now virtually frozen, can begin to operate more normally. But Democrats and Republicans - concerned about the potential taxpayer cost - have added several conditions and restrictions. Key negotiators for the financial rescue plan will be busy trying to line up votes on Capitol Hill on Sunday to support the accord they reached soon after midnight. Among the provisions of the draft bill: * The $700 billion would be disbursed in stages, with $250 billion made available immediately for the Treasury's use. * Curbs will be placed on the compensation of executives at companies that sell mortgage assets to Treasury. Among them, companies that participate will not be able to deduct the salary they pay to executives above $500,000. * An oversight board will be created. The board will include the Federal Reserve chairman, the Securities and Exchange Commission chairman, the Federal Home Finance Agency director and the Housing and Urban Development secretary. * Treasury is allowed the option to take ownership stakes in participating companies under certain circumstances. * Treasury may establish an insurance program - with risk-based premiums paid by the industry - to guarantee companies' troubled assets, including mortgage-backed securities, purchased before March 14, 2008. * One provision requires the president to propose legislation to recoup losses from the financial industry if the rescue plan results in net losses to taxpayers five years after the plan is enacted.[/quote] [b]My Comments:[/b] - I see a huge amount of taxpayer money thrown at a problem, with very uncertain prospects of anywhere close to a full return - the talk about "we may very well make money" is based on extremely optimistic economic-recovery and housing-market-bottom predictions. - "companies that participate will not be able to deduct the salary they pay to executives above $500,000" is meaningless if it does not include non-salary compensation. - The proposed oversight board sounds like the Fox guarding the Henhouse. - "Treasury is allowed the option to take ownership stakes in participating companies under certain circumstances" ... could you possibly put that even more vaguely? - "Treasury may establish an insurance program" ... maybe AIG could provide the insurance - after all they are now a division of the U.S. Treasury. - "propose legislation to recoup losses from the financial industry if the rescue plan results in net losses" ... again, this is oh-so deliciously vague. Even if it came to pass, the companies could just pull the "punishing still-fragile financial firms could send the economy back into recession" card. [url=http://money.cnn.com/2008/09/25/news/economy/sloan_crash.fortune/index.htm]Fortune - Beltway medicine men[/url] - [i]Don't be surprised if the cure conjured up by Washington fails to solve the market's woes.[/i] [quote]What I find especially disturbing is that the Fed's post-Bear-Stearns-collapse program to lend to investment banks didn't forestall runs on investment banks, and Paulson's guarantee of Fannie Mae and Freddie Mac debt didn't settle those markets, forcing the Treasury to take the companies over. I thought both those programs would work. It's going to take quite a while to see whether the debt markets' depression is lifted by the bailout - I wouldn't place much faith in early reports. And let's not forget that there's a long-term psychological cost to this fix: It has enraged ordinary taxpayers-and rightly so. Don't be surprised if they lose faith in the supposed miracle of free markets, and in the financial system, and in the Fed and Treasury, which - unlike Washington pols - have been generally revered. That loss, in fact, may be the bailout's biggest cost of all.[/quote] [url=http://money.cnn.com/2008/09/26/news/economy/easton_backlash.fortune/index.htm?postversion=2008092811]Main Street turns against Wall Street[/url]- [i]A populist backlash is changing America's political climate. And it could haunt business leaders for years to come.[/i] [quote]Despite the dire warnings of financial calamity from the White House and a few high-profile business leaders, much of Middle America wasn't buying the story that their own livelihoods were linked to the fate of the rescue package. Instead, average workers read the plan as the "big guys bailing out their friends," says former House Speaker Newt Gingrich, who commissioned a bipartisan survey on the subject. Gingrich's poll - conducted by Schoen and Republican Kellyanne Conway - found that a majority of Americans don't want Congress to use taxpayer dollars to bail out financial institutions, even if their collapse means a rocky ride for investors in the stock market. The White House was knocked off-balance by potent blowback over the plan - not from the expected (read: liberal) quarters but from shopping-mall America. Morning talk-show hosts like Regis and Kelly shook their heads in disgust. Constituents in rural southern Illinois - a Republican district - phoned in their opposition to Congressman John Shimkus in a ratio of 200 to 1. ... Gingrich argues that the rise in American populism is not a revolt against business alone but a revolt against all elites, including government and media elites. In his mind this is the age of the populist Andrew Jackson, not the socialist Eugene V. Debs. "We have a national establishment that talks to itself," he says, "an elite that is dramatically out of touch with the people in a way that is not sustainable." By this thinking, Wall Street veteran Paulson touched off a populist revolt not only in the substance of what he proposed, but also in the style in which he proposed it - massive Treasury spending with minimal congressional control and no judicial oversight, which critics condemned as a "power grab." There's much evidence to support the contention that Americans are disgusted with government officials as much as they are with business leaders. And, indeed, despite the tarnished reputation of corporate America, most people still tell pollsters they credit American business with being the backbone of the economy. So the American left shouldn't be lulled into thinking this is a revolt in favor of much bigger government. Still, the first fallout will be new laws to increase financial regulation. For the time being the bailouts have undermined the GOP argument that markets work best when left alone. Only last November, Dick Cheney told Fortune his main concern about the mortgage crisis was an overreaction by the government. "The fact is, the markets work, and they are working," he said. "We have to be careful not to have this set of developments lead us to significantly expand the role of government in ways that may do damage long-term for the economy." Ten months later the Vice President was forced to peddle the biggest government bailout in history to conservative friends on Capitol Hill. (The result was described by one participant as an "unmitigated disaster.") It will also be impossible - in the foreseeable future - for a Republican president to sell Congress any version of private accounts to augment Social Security.[/quote] |
[url]http://financialservices.house.gov/essa/final_bill_section-by-section.pdf[/url]
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[quote=ewmayer;144020][URL="http://money.cnn.com/2008/09/26/news/economy/easton_backlash.fortune/index.htm?postversion=2008092811"]Main Street turns against Wall Street[/URL]- [I]A populist backlash is changing America's political climate. And it could haunt business leaders for years to come.[/I][/quote]Notice how this is fitting in with the theory that Arthur Schlesinger Jr. wrote about in his book “The Cycles of American History" (and that I referred to while writing in the "New U.S. President" thread last March about the effects of differences in candidates' ages --[URL]http://mersenneforum.org/showpost.php?p=127816&postcount=223[/URL]), and also my own (but not exclusive to me) "pendulum" theory.
In a February 2008 article in [I]The Atlantic Times[/I], Josef Joffe wrote [quote=http://www.atlantic-times.com/archive_detail.php?recordID=1169] Schlesinger drafted a “law” that was both simple and compelling: American history, according to Schlesinger, is a succession of 30-year cycles. They oscillate between “public purpose” and “private interest,” between market forces being tamed and unleashed, between expanding and retreating government.[/quote] Schlesinger's theory had something to say about candidate age differences, but is much more relevant to [I]what our country's reaction to the current financial mess means for the next few decades in America[/I]. Joffe argued that the U.S. seemed to be ending one of the "private interest" cycles and starting a new "public purpose" cycle. I think this also ties in with my previously-expressed idea that conservatives have swung the national pendulum too far to the right, that we now will have a backlash (swingback, whatever ...) to the left, and that the magnitude of this next swing of the pendulum will be proportional to the excessive amount by which conservatives imposed, or tried to impose, their worldview on the nation instead of compromising with liberals to generate more middle-of-the-road policies and laws. That is, I've been arguing for about a decade that if conservatives were more content to reach political compromises with liberals instead of stretching things as far their way as they could, the result could be that, in the long run, they could see more of their wish-list continue to be implemented than they will now after being so extremist. IMO the current financial crisis is a glaring example of how the just-past three-decade period of reducing federal government regulation has overshot the most reasonable middle-of-the-road marks. Now the "populist backlash" will threaten (and probably succeed in) its own overshooting past the middling ideal too far onto the other, leftist side. Look at some of what Nina Easton wrote in that "Main Street turns against Wall Street" article Ernst linked above, besides what Ernst quoted: [quote]... A month of historic government interventions shows signs of triggering a political version of climate change - unleashing a new era of class fury that could hurt U.S. companies, business leaders, and wealthy investors for years. ... "A potential calamity," predicts Democratic pollster Doug Schoen. "If the reactions we're seeing hold, we could have real spasmodic anger directed at businesses and corporations." ... When the financial crisis does pass, its political legacy will remain. Resentment toward financial profiteers is reaching a fever pitch. ... Even before this populist eruption over the Wall Street rescue, Middle America was souring on the privileged class. There has been a growing sense in the U.S. that a stagnant tide has kept the 80-foot yachts afloat while beaching the family outboard. At the start of the presidential race, the Pew Research Center found that three-quarters of Americans agreed with the statement that the "rich are getting richer while the poor are getting poorer" - up 8 percentage points from five years earlier. Some 43% also agreed that America is divided into haves and have-nots, another big jump from past years. ... It will also be impossible - in the foreseeable future - for a Republican president to sell Congress any version of private accounts to augment Social Security. While consensus is widespread in both parties that there needs to be thicker capital buffers and more openness in the financial markets, many fear what Romney calls a draconian backlash in Congress that will choke off capital flows. "The greatest danger is that we do a Sarbanes-Oxley squared on the financial system," says Harvard professor Ken Rogoff, former chief economist at the International Monetary Fund. "That would cripple what - even after this disaster - has to be regarded as one of the most innovative, dynamic sectors in the economy. It's not all evil. There's some necessary regulation: We need higher capital requirements, more transparent markets. But goodness, we don't want to choke off the sector." ... [B]The collateral damage[/B] to the business agenda will be far more sweeping. Take trade. Even with a decent economy, Bush was unable to get major trade deals passed because a rising populist tide emboldened Democrats. Now it's going to be even harder. By contrast, an Obama agenda of aiding union-organizing efforts, raising taxes on capital gains, and imposing a windfall-profits tax on oil is looking more enticing. Rogoff is right: Not everyone in the financial market is "evil," and there's a risk in Washington of throwing out America's best innovations - best risk taking even - with the detritus that caused today's crisis. But politically speaking, corporate America - most of which has nothing to do with the Wall Street mess - has been summarily dethroned. And it will be a long slog back.[/quote]Will many conservatives remember all this when they next get into power? Almost certainly not, I'd bet. (But I'd love to lose this bet!! Surprise me, guys and gals of the Right!!) Will liberals learn from it, and moderate their own swing so as not to provoke such a strong counter-reaction three decades or so from now? (* sigh *) Probably not, either. I'll keep on pointing out lessons from history, because I'm basically an optimist. |
Wachovia goes under | Bank bailouts sweep Europe
[url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aN8cVWE5f4Xc&refer=news]Citigroup to Take Over Wachovia Bank Business, Absorb Losses With FDIC Aid[/url]: [i]Citigroup Inc., the biggest U.S. bank by assets, will acquire banking operations of Wachovia Corp. for about $1.6 billion after shares of the North Carolina lender collapsed under the weight of overdue mortgages.[/i]
[quote]Wachovia's stock, which finished last week at $10 on the New York Stock Exchange, traded for 95 cents at 9 a.m. in early transactions. It had lost 83 percent in the past two years as of last week. Trading today was halted during regular hours. Citigroup fell 1.4 percent to $19.86 as of 10:19 a.m. [/quote] [b]My Comment:[/b] If you check out the Yahoo Finance [url=http://messages.finance.yahoo.com/mb/WB]message board for Wachovia[/url], you'll still see plenty of posts from delusional WB shareholders who think that the fact that trading was halted shortly after open today and that their Scottrade [substitute name of any bargain-basement daytraders-R-us online brokerage here] shows a bid of [insert some bogus number > $1] is a good sign. For a classic example of this kind "delusional long or daytrading moron who deserves to lose his shirt", check out e.g. the post from user hankaaronstrikesout [or something starting with hankaaron] [url=http://messages.finance.yahoo.com/Stocks_(A_to_Z)/Stocks_W/threadview?m=te&bn=19722&tid=117892&mid=117892&tof=9&frt=2#117892]here[/url]. [url=http://money.cnn.com/2008/09/29/news/international/Europebanks_bailout.ap/index.htm]Bank bailouts sweep Europe[/url]: [i]European governments, including Belgium, Netherlands, Luxembourg and Britain, intervene to prop up weakened banks as crisis deepens.[/i] [quote]LONDON (AP) -- European governments had to step in with a flurry of major bank bailouts from Iceland to Germany as fear and turmoil from the U.S. credit crisis spread through the financial system. Even as U.S. lawmakers were preparing to vote on a massive $700 billion (€490 billion) rescue of their own banks, the governments of Belgium, the Netherlands and Luxembourg took partial control late Sunday of struggling bank Fortis NV (FORSY), while Britain seized control of mortgage lender Bradford & Bingley (BDBYF) early Monday. Germany organized a credit lifeline for blue-chip commercial real estate lender Hypo Real Estate Holding AG, while Iceland's government took over Glitnir bank, the country's third largest.[/quote] [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aPQXoCH.fIa0&refer=news]Lehman's `100% Principal Protection' Means Pennies on Dollar for Its Notes[/url]: [i]A brochure pitching $1.84 million of notes sold by Lehman Brothers Holdings Inc. in August, a month before the firm filed for bankruptcy, promised ``100 percent principal protection.''[/i] [url=http://money.cnn.com/2008/09/29/news/companies/Freddie_attorneyprobe.ap/index.htm]U.S. probes Fannie, Freddie accounting and disclosure issues[/url]: [i]U.S. Attorney's office issues subpoenas while the SEC orders the troubled housing giant to preserve documents.[/i] [url=http://www.reuters.com/article/marketsNews/idINN2630088120080928?rpc=44]Hedge funds grudgingly to reveal US short positions[/url] [quote] WASHINGTON/NEW YORK Sept 28 (Reuters) - Hedge fund managers are reluctantly preparing to disclose their short positions to U.S. regulators on Monday, a move set to give a rare public glimpse into their secretive trading strategies two weeks later. For shareholders who have blamed short sellers for driving down company stocks, it will be a chance to see who is targeting their firm. It is also an experiment by U.S. securities regulators, putting short sellers briefly on a similar footing to large investors who accumulate stocks and are required to regularly disclose their positions publicly. Under a temporary Securities and Exchange Commission order, big money managers will have to reveal the number and value of securities sold short each day last week. The disclosures are part of a series of measures the SEC has undertaken to crack down on market manipulation with an eye to calming markets rocked by a series of bank failures and fears the credit crisis will worsen.[/quote] [b]My Comment:[/b] I find the last sentence particulraly ironic, given that for the past year, the SEC, Fed and Treasury have been far and away the biggest market manipulators, and have put the taxpayer-funded propping up of [especially financial firms`] share prices ahead of all else. [url=http://www.bloomberg.com/apps/news?pid=20601109&sid=a9KxV2I_AtLc&refer=news]Buffett Wagers $5 Billion Goldman Won`t Turn Into Another Salomon Misstep[/url]: [i]Warren Buffett, the billionaire who decried Wall Street's ``casino'' mentality, is back at the table 11 years after making his last bet.[/i] [quote]The Salomon investment returned about 279 percent over the 14 years Buffett held his stake, said Martin, who has studied Buffett's investment history. Martin's pretax calculation includes dividends and returns from Travelers Group Inc., which acquired Salomon in 1997, and Citigroup Inc., which acquired Travelers in 1998. That's less than the fivefold return, including dividends, in the benchmark Standard & Poor's 500 Index over about the same span.[/quote] [b]My Comment:[/b] That's actually very mediocre, when you add the huge incentives Buffett got from Salomon for his purchase, and factor in the "Buffett Effect", whereby his merely taking a stake is usually enough to give the share price a big boost. It's nice to be able to move markets by your mere presence...of course that kind of reputation doesn't accrue to just anyone. |
[QUOTE=ewmayer;144064][b]My Comment:[/b] If you check out the Yahoo Finance [url=http://messages.finance.yahoo.com/mb/WB]message board for Wachovia[/url], you'll still see plenty of posts from delusional WB shareholders who think that the fact that trading was halted shortly after open today and that their Scottrade [substitute name of any bargain-basement daytraders-R-us online brokerage here] shows a bid of [insert some bogus number > $1] is a good sign.[/QUOTE]
There may actually be some value left in WB. At this point it is unclear just what assets and liabilities remain. As I understand it, the brokerage (AG Edwards) and investment management (Evergreen) businesses will remain as will the ~$1 of Citibank stock. Of course, you might be better off in having ZERO value because then you could just "write it off" without encountering the trading expense to dispose of a few shares of a penny stock. |
Breaking News: House Votes "NO"!
Just saw this atop the CNNMoney page - the writer was in such a hurry he didn't even have time to spellcheck it. More news to follow:
[quote]Dow plunges 700 points as votes in the House aganst the historic bailout plan mount. More soon.[/quote] [b]Update:[/b] Here's the story from [i]Bloomberg[/i]: [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aovs_9KFtWgA&refer=news]U.S. House Rejects $700 Billion Financial-Rescue Plan[/url] [quote] Sept. 29 (Bloomberg) -- The U.S. House rejected a $700 billion financial-rescue plan intended to restore confidence in the nation's banking system, dealing a blow to government efforts to contain a lending crisis. The House rejected by a vote of 228 to 205 the measure to authorize the biggest government intervention in the markets since the Great Depression. The Dow Jones Industrial Average fell 554 points, or almost 5 percent to 10,589, at 2:32 p.m. New York time. ``The American people rejected this bailout and now Congress did likewise,'' said Republican Representative Mike Pence of Indiana. The legislation would have given Treasury Secretary Henry Paulson broad authority to buy troubled assets from financial companies. ``I'm very disappointed,'' said House Financial Services Committee Chairman Barney Frank. ``The Republicans killed this.'' He said there would not be another vote on the issue today. President George W. Bush, who personally lobbied lawmakers to support the measure today, will consult with congressional leaders ``to determine the next step,'' said spokesman Tony Fratto.[/quote] [b]My Comment:[/b] If Dubya [by way of official White House spokestool Tony "The Weasel" Fratto] is "disappointed", it can't be all bad ... This will likely lead to some serious pain in the major stock market indices near-term, but those were only being propped up by wave after wave of unprecedented government intervention anyway. This is what free-marketeers [not to be confused with the fake ones who run most of Wall Street] refer to as "price discovery". As with housing, it may be painful but it is absolutely a necessary step in getting back toward reasonable valuations of just about everything. Apparently it was a revolt by house republicans against their own leadership [which had adopted an official "hold your nose and vote for it" stance] that did in the bill. Credit where credit is due. [Pun fully intended - "credit where credit is not due" of course being the root of the last decade's speculative excesses.]. This makes an already-very-interesting runup to the U.S. presidential election even more so, given that both Obama and McCain came out in support of the bill. Especially for McCain, how will he spin that fully 2/3 of his own party's representatives in the House voted against the bill? |
There are 6 phases to any project.
Enthusiasm - 1995 Disillusionment - 2007 Panic - 2008 Search for the guilty - 2009 Punishment of the innocent - 2009 Praise and honors for the non-participants - 2010 [url]http://wallstreetmarketnews.blogspot.com/[/url] The blame game will be played to the hilt by politicians because they don't know any other way to avoid being clobbered by this situation. It will be a finger pointing exercise to put all previous political fiascos to shame. DarJones |
[QUOTE=Fusion_power;144073]The blame game will be played to the hilt by politicians because they don't know any other way to avoid being clobbered by this situation. It will be a finger pointing exercise to put all previous political fiascos to shame.[/QUOTE]
If the finger-pointing actually keeps them from throwing unprecedented amounts of [borrowed] money at the problem in the guise of an ill-conceived quick fix which most likely would only delay the eventual day of reckoning, I'm all for it. Yes, "Something needs to be done" - but not this. And the REAL "something" must involve us as a nation [at the personal-financial, energy-use, and governmental levels] LEARNING TO LIVE WITHIN OUR MEANS. Anything that purports to be a way out of the mess which does not involve that fundamental back-to-sustainable-basics readjustment is just another false promise. Obviously, for a society so completely addicted to debt, learning to live within our collective means will entail a painful adjustment - the analogy to a heroin junkie suffering withdrawal is very apt. The best one can hope to do is to slightly palliate the pain. Another painful readjustment Americans will be facing - the loss of worldwide financial hegemony: [url=http://online.wsj.com/article/SB122262725903283485.html?mod=mktw]WSJ | Financial Troubles Humble U.S.[/url] [quote]The U.S. is turning to foreign governments and other overseas investors to buy a good chunk of what could total $700 billion in Treasury debt expected to finance the bailout. Foreign investors also are needed to shore up the depleted capital of the nation's financial institutions, seen in the plan by Japan's Mitsubishi UFJ Financial Group to buy a large stake in Morgan Stanley, which is weighed down by bad debt and market distrust. This is a bittersweet moment in U.S. economic history. In one sense, the growing importance of foreign cash represents the triumph of a half-century of U.S. proselytizing for a global financial system in which money flows from those who have it to those who need it. But it is also an unmistakable sign of U.S. economic decline. The global financial system the U.S. designed had anticipated that American banks and financial firms would be the world's financial lifeguards; now those institutions are like exhausted swimmers a stroke or two away from drowning. The financial crisis makes clear how much the interests of foreign lenders have become a top concern in Washington. A big reason the Fed and Treasury stepped in to rescue mortgage giants Fannie Mae and Freddie Mac, say U.S. financial officials, was to reassure foreign leaders including China, which holds roughly $1 trillion in U.S. debt, that U.S. securities were safe. "Superpowers do not normally ask their diplomats to reassure other nations on questions of credit-worthiness," says former U.S. Treasury Secretary Lawrence Summers. Foreign lenders have a great deal of sway. If they were to dump U.S. government debt -- or be unwilling to buy more -- the interest rates needed to attract buyers of Treasurys would soar. The already fragile U.S. economy would absorb yet another hit. China, Saudi Arabia and other big foreign holders are unlikely to take antidollar measures precisely because they own so much U.S. debt. To the extent the dollar declines, so does the value of those nations' holdings. Mr. Summers calls this situation "the financial balance of terror." But it is naive to assume that this so-called balance will protect U.S. interests indefinitely. Senior Chinese economists have voiced growing dismay about the outlook for the dollar, and the introduction of an additional $700 billion in debt might drive the currency's value down further, at least in the short term. "I think foreigners are being taken for a ride by the U.S. government," says Andy Xie, an independent economist in Shanghai. Sovereign-wealth funds -- huge government investment funds -- have largely sat on their hands rather than buy additional stakes in U.S. financial firms. China Investment Corp., for instance, has been wary of increasing its investment in Morgan Stanley after it was criticized sharply at home for taking equity stakes in U.S. financial companies that have nose-dived. Domestically, the reliance on foreign money means a loss of autonomy that Americans are simply going to have to get used to. Part of the accommodation is already occurring. The controversy over investments by sovereign-wealth funds has been reversed. Last year, lawmakers worried the funds would gain political influence by investments in U.S. companies; now U.S. policy makers are worried that they won't buy new stakes. Efforts to erect restrictions against foreign trade may also lose momentum. The U.S. needs the world's money more than it thought it would and won't want to rile potential lenders.[/quote] [b]My Comment:[/b] I believe the current crisis will end up marking the end of the global U.S.-dominated financial empire in very much the same way that WW2 marked the end of the British colonial empire. |
"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."
Thomas Jefferson, Letter to the Secretary of the Treasury Albert Gallatin (1802) 3rd president of US (1743 - 1826) |
House GOP to Wall Street: "No Soup for You!"
[url=http://money.cnn.com/2008/09/29/magazines/fortune/nobailout_easton.fortune/index.htm]Fortune | Why the bailout bombed[/url]: [i]Republicans might blame Pelosi's rhetoric, but the message that mattered was the one that came from voters back home.[/i]
[quote]WASHINGTON (Fortune) -- Barely containing his temper, Virginia's Eric Cantor, deputy whip for the House Republicans, stepped to the microphone this afternoon to blame the bailout defeat on House Speaker Nancy Pelosi's "failure to listen" and her charged partisan rhetoric in condemning President George Bush's "budgetary recklessness" and "anything-goes mentality." If only it were that simple. If only the failure of the White House to muster enough votes from its own party to avert what it calls looming financial disaster could be blamed on a few ill-chosen words uttered on the House floor by San Francisco's hyper-partisan speaker. In fact, Monday's surprise defeat of the $700 billion rescue package - meant to blunt a burgeoning financial crisis - can be traced to a failure on the part of the president and his treasury secretary, Henry Paulson, to fully appreciate the ferocity of the popular revolt they touched off nine days ago.[/quote] And speaking of soup, that was one of the few equity investments which didn't get hammered in today`s selloff: [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aFVo3p8GzeWk&refer=news]S&P 500 Falls Most Since 1987, Dow Has Worst Point Drop as Rescue Defeated[/url]: [i]U.S. stocks plunged and the Standard & Poor's 500 Index tumbled the most since the 1987 crash after the House of Representatives rejected a $700 billion plan to rescue the financial system. [/i] [quote]The S&P 500 sank to its lowest level since October 2004 as all 10 of its industry groups tumbled at least 4.2 percent. [b]Campbell Soup Co. was the only stock in the benchmark index for U.S. equities to advance.[/b][/quote] |
[QUOTE=ewmayer;144075][b]My Comment:[/b] I believe the current crisis will end up marking the end of the global U.S.-dominated financial empire in very much the same way that WW2 marked the end of the British colonial empire.[/QUOTE]I think you chose the wrong defining event for the latter. For a start, the British Empire is still alive and well and the sun still never sets on it. Admittedly, the largest colony by area is the Falklands and the largest by population is Bermuda, while there are only 37 minutes worst case between sunrise in the BIOT and sunset in Pitcairn. However, I'm quibbling in this particular respect. Important parts of the Empire were lost between 1948 and 1970, though (with the exception of India) the majority gained independence in the 18th, 19th and very early 20th centuries (almost all North America, much of Australasia, South Africa) --- long before WW2.
Of that which survived WW2, I personally believe that the end of the Empire became inevitable after the mid-1930s. WW1 and the Depression were, IMO, far more important triggers than WW2. Ireland was lost in large part because of WW1 and it was clear to everyone by 1935 that India would be independent within a decade or so. Indeed, one could argue that WW2 delayed the loss of the most important part of the Empire by a few years. Paul |
Record 16% drop in July home prices | Euro Update
[url=http://money.cnn.com/2008/09/30/real_estate/Prices_plunge.ap/index.htm]Record 16% drop in July home prices[/url]: [i]July home prices plunge 16.3% in 12 months, according to the Standard & Poor's/Case-Shiller 20-city housing index.[/i]
[quote]NEW YORK (AP) -- A closely watched index released Tuesday showed home prices tumbling by the sharpest annual rate ever in July, but the rate of monthly declines is slowing. The Standard & Poor's/Case-Shiller 20-city housing index fell a record 16.3% in July from a year earlier, the largest drop since its inception in 2000. The 10-city index plunged 17.5%, the biggest decline in its 21-year history. Prices in the 20-city index have plummeted nearly 20% since peaking in July 2006. The 10-city index has fallen more than 21% since its peak in June 2006. No city in the Case-Shiller 20-city index saw annual price gains in July, the fourth straight month that has happened. However, the pace of monthly declines is slowing, a possible silver lining. Between May and July, for example, home prices fell at a cumulative rate of 2.2% - less than half the cumulative rate experienced between February and April.[/quote] [b]My Comment:[/b] I think "silver lining" is a much too precious-metallic metaphor here - "rock bottom" would seem to fit the situation much more nicely. [Or perhaps "more gneissly"?] [url=http://money.cnn.com/2008/09/29/news/economy/personal_income_spending/index.htm]Consumer spending loses steam[/url]: [i]Government report shows American incomes rose 0.5% last month, but personal spending nearly ground to a halt.[/i] [quote]After adjusting for taxes and certain price changes, however, real disposable income contracted 0.9%, according to the report. [/quote] [b]My Comment:[/b] Since "real income" declined nearly 1% and spending stayed flast, it would seem we are still collectively spending more than we can afford to - that means the real belt-tightening [which likely will be roughly signaled by a huge wave of credit-card defaults in the coming 12 months] has not yet begun. [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=a.lG6SHwRN2o&refer=news]Stocks in U.S. Rally on Speculation Rescue Plan to Pass; JPMorgan Advances[/url]: [i]U.S. stocks rose as growing expectations that lawmakers will salvage a $700 billion bank- rescue package helped the Standard & Poor's 500 Index recover more than a third of yesterday's 8.8 percent plunge.[/i] [b]My Comment:[/b] This is completely typical of the past year: the only things propping the markets up have been [1] delusional hope, [2] government intervention, and [3] delusional hope of government intervention. [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=a2r99gEsqU3k&refer=news]Libor Rises Most on Record After U.S. Congress Rejects Bailout [/url] [quote] Sept. 30 (Bloomberg) -- The cost of borrowing in dollars overnight rose the most on record after the U.S. Congress rejected a $700 billion bank-rescue plan, putting an unprecedented squeeze on the global financial system. The London interbank offered rate, or Libor, that banks charge each other for such loans climbed 431 basis points to an all-time high of 6.88 percent today, the British Bankers' Association said. The euro interbank offered rate, or Euribor, for one-month loans jumped to a record 5.05 percent, the European Banking Federation said. The Libor-OIS spread, a gauge of the scarcity of cash, also increased to an all-time high. ``This is unheard of, the money markets should be the engine driving the financial system but they have broken down,'' said Kornelius Purps, a fixed-income strategist in Munich for UniCredit Markets and Investment Banking, a unit of Italy's largest lender. ``Any institution that hasn't completed its 2008 funding needs by now is going to be in very serious trouble. More banks are going to need to be bailed out.'' The seizure in the credit markets is tipping lenders toward insolvency, forcing U.S. and European governments to rescue five banks in the past two days, including Dexia SA, the world's biggest provider of loans to local governments, and Wachovia Corp. Money-market rates climbed even after the Federal Reserve yesterday more than doubled the size of its dollar-swap line with foreign central banks to $620 billion. In Europe, banks borrowed dollars from the ECB at almost six times the Fed's benchmark interest rate today.[/quote] [b]Eurozone Update:[/b] [url=http://www.bloomberg.com/apps/news?pid=20601109&sid=a3CjRgrLfAjE&refer=news]EU Nations May Get More Say on Their Banks' Foreign Units as Crisis Widens[/url]: [i]Regulators in individual European Union countries would get enhanced authority to police banks' foreign subsidiaries under a draft proposal before the EU.[/i] [url=http://www.bloomberg.com/apps/news?pid=20601109&sid=au8VlZ7ySFtw&refer=news]Bradford & Bingley Customers Wonder `What's Safe?' as British Banks Vanish[/url]: [i]June Dean stood outside a branch of Bradford & Bingley Plc in the northern London suburb of Finchley after taking out 10,000 pounds ($18,000) of her savings, and asked where her money will be safest.[/i] [url=http://www.bloomberg.com/apps/news?pid=20601109&sid=a69EMDoo_gzw&refer=news]Brown, Merkel May Swallow Criticism, Adopt Paulson-Style Bailout Package[/url]: [i]European politicians are discovering what cometh after pride.[/i] [url=http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=cc54fb7b-e31a-438a-8bc0-98aa591ba594]Irish Government Moves To Safeguard Banking System[/url]: [i]The Irish government Tuesday announced a surprise decision to safeguard the Irish banking system for two years, guaranteeing all deposits, covered bonds, senior debt and dated subordinated debt of the four main banks.[/i] This latter approach brings us full circle back to possible approaches to shoring up the U.S. financial system without putting too much taxpayer money into the hands of Wall Street: [url=http://globaleconomicanalysis.blogspot.com/]How To Stop A Run On The Banks[/url] [quote]Former Treasurer For A Large US Bank Chimes In Minyan Peter, a former treasurer for a large US bank has these thoughts. [i] Just Protect The Deposits What Ireland is fighting is the same thing that the Fed is trying to fight here (outflows from banks and money market funds into short term government debt.) Remember the problem is NOT mom and pop puling bank deposits, it is corporate treasurers and state treasurers whose jobs are on the line pulling deposits from weak banks and putting them into stronger ones. The fastest way for the US and other governments to solve this is to raise deposit insurance ceilings. And to me it is a no-brainer (especially versus ballooning the Fed's balance sheet more.) At the same time, I would highlight that fully guaranteed deposits would put the US government even more at the top of the capital structure of banks. Existing senior debt is all of a sudden now fully subordinated to a potentially unlimited amount of insured deposit debt. I would offer that the final solution to our crisis will require a combination of both. Honestly, I would much rather see $700 billion used that way, versus what is currently on the table in Washington.[/i][/quote] [b]My Comment:[/b] I see that of the 2 major-party presidential candidates, Obama is calling for something along these lines, but not [yet] nearly as comprehensive, and still in the context of a Paulson-style mega-bailout which is actually a tera-bailout at this point]: [url=http://money.cnn.com/2008/09/30/news/economy/Obama_FDIC/index.htm]Obama urges higher deposit insurance[/url]: [i]Democratic presidential candidate proposes raising FDIC limit from $100,000 to $250,000 in hope of gaining legislative support for $700B bailout[/i] |
[QUOTE=ewmayer;144130][[b]My Comment:[/b] I think "silver lining" is a much too precious-metallic metaphor here - "rock bottom" would seem to fit the situation much more nicely. [Or perhaps "more gneissly"?][/QUOTE]
I commend you for the "gneiss" way you put this, rather than simply saying that it's a load of "schist". Norm |
[QUOTE=Spherical Cow;144131]I commend you for the "gneiss" way you put this, rather than simply saying that it's a load of "schist".[/QUOTE]
Regular readers will know that, while they can take it for granite that I will endeavor to leave no pun left behind, they should always take my geologic plays on words with a grain of [ba]salt. |
Ernst, your punnitude rocks!
|
[QUOTE=jasonp;144152]Ernst, your punnitude rocks![/QUOTE]
Thank you for you most magma-nimous praise, sir! |
Caution Ahead- Falling Metamorphic Metaphors...
|
[QUOTE=Spherical Cow;144168]Caution Ahead- Falling Metamorphic Metaphors...[/QUOTE]
Mortgage Market Monster Metaphoric Metaphor Meltdown Madness. [QUOTE]Look what you've done! I'm melting! melting! Oh, what a world! What a world![/QUOTE] |
Attack of the Bulltards! EOY Predictions
Tonight`s "Special Guest Bulltard" on PBS` [i]Nightly Business Report[/i] was S&P Chief Market Pumper, erm, I mean "Strategist", Sam Stovall. He made a number of rosy predictions about how October has historically been a good month for the major indices, and that he expects the S&P500 to finish the year around 1250, i.e. roughly 10% above today`s close. He also suggested several equity categories he expects to lead the 4th-quarter recovery, including consumer discretionaries and technology companies.
Allow me to interject a noisy "WTF?" and make some slightly more bearish 4th-quarter predictions: - Consumer discretionaries will suck, because consumer discretionary spending is falling off a cliff; - Tech will suck, because exports will decline due to developing recessions in most of the rest of the world, and because tech leaders like Apple and Google are heavily dependent on consumer discretionary spending; - Historical average behavior can be thrown right out the window when it comes to what`s going on currently; - Major indices will have at least one halfway-decent rally, but will finish the year lower than currently: Dow < 10000, Nasdaq < 1800, S&P500 < 1000. |
Yes, bearish sentiment is growing.
I'm going to try timing, to jump in at the exact peak of bearish sentiment! :grin: None of that party-pooper dollar-averaging for me, nosirree! |
First, today's macroeconomic news headlines:
[url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aoP8qTrIF8Gs&refer=news]U.S. Stocks Drop as GE Estimates Cut, Manufacturing Index Trails Forecast[/url]: [i]U.S. stocks fell and the Standard & Poor's 500 Index extended its worst monthly drop in six years as General Electric Co.'s profit estimates were cut and an industry report showed manufacturing contracted more than forecast.[/i] What's bad for GE means "buying opportunity" for Warren Buffett: [url=http://money.cnn.com/2008/10/01/news/companies/buffett_ge/index.htm]Warren Buffett to invest in GE[/url]: [i]Conglomerate will raise $12B through stock sale, gives Buffett's Berkshire Hathaway option of investing $6B in firm.[/i] [url=http://money.cnn.com/2008/10/01/news/companies/autosales/index.htm]U.S. auto sales plunge[/url]: [i]Ford down 35%, Toyota down 32%, GM down 16%; auto makers say credit squeeze, customer worries led to sharp drops in sales.[/i] [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aRIb6cEbuI_I&refer=news]Ford Motor's September U.S. Auto Sales Tumble 35% as Truck Demand Slumps[/url]: [i]Ford Motor Co., the second-largest U.S. automaker, said its U.S. sales fell 35 percent in September, the 22nd decline in the past 23 months.[/i] [b]My Comment:[/b] Note that this is despite steadily falling oil prices, and with gasoline off roughly 20% from its midsummer high-water mark. [url=http://www.bloomberg.com/apps/news?pid=20601109&sid=adjHB.7sfLDA&refer=news]Lehman's Hedge-Fund Clients Left in Cold as Prime-Broker Assets Are Frozen[/url]: [i]Lehman Brothers Holdings Inc.'s bankruptcy probably means the end of hedge-fund manager Oak Group Inc. after 22 years in business.[/i] -------------------------- [b]Bailout Plan Update:[/b] [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=ab5vK0Qkm20Q&refer=news]Senate Votes Tonight on $700 Billion Bank Rescue With More FDIC Protection[/url]: [i]The U.S. Senate set a vote for tonight on a $700 billion financial-rescue plan, tying it to an increase in bank-deposit-insurance limits and tax breaks to win support from Republicans.[/i] [quote] Oct. 1 (Bloomberg) -- The U.S. Senate set a vote for tonight on a $700 billion financial-rescue plan, tying it to an increase in bank-deposit-insurance limits and tax breaks to win support from Republicans. The Senate agreed to vote on the legislation along with the measure temporarily raising the limit on federal deposit insurance to $250,000 from $100,000. That increase was proposed by Republicans critical of the plan authorizing Treasury Secretary Henry Paulson to buy troubled debt from lenders, which was rejected by the House two days ago. Also linked to the legislation is a two-year extension of tax breaks that will save individuals and corporations about $149 billion over the next decade, another move popular among House Republicans. Two-thirds of House Republicans and 40 percent of Democrats defeated the bailout plan on a 228-205 vote. President George W. Bush and Senate leaders vowed to revive the legislation. The Senate is expected to pass the bill, with most Democrats and Republicans behind it. There's also increased optimism the House will go along, as pressure mounts on lawmakers to help restore confidence in the banking system. European Central Bank President Jean-Claude Trichet said U.S. lawmakers must pass the measure to shore up confidence in the global financial system. European governments have helped rescue at least five banks since Sept. 28, with Trichet taking part in talks to save Belgium's Fortis over the weekend. ``It has to go, for the sake of the U.S. and for the sake of global finance,'' Trichet said in an interview in Frankfurt with Bloomberg Television late yesterday. ``I am confident, but of course it is the decision of the U.S. Congress.'' Sentiment Swings After a week-long torrent of calls and e-mails from angry voters opposing the rescue package, the tide turned after markets plunged on Sept. 29 in response to the House vote. ``Over $1 trillion worth of market value was wiped off the books by the stock market drop,'' said Senator Robert Bennett, a Utah Republican. ``It is ordinary people looking at ordinary pensions, with their ordinary Main Street kind of 401(k) plans, who lost that $1 trillion. And they lost it in a matter of minutes.'' Texas Republican Representative Joe Barton's office said constituent calls and e-mails swung to as much as 70 percent in favor of congressional action, after having been overwhelmingly against a taxpayer rescue of Wall Street.[/quote] [b]My Comment:[/b] So the Republicans are using this as leverage to get one of their pet ideologies into the bill, tax breaks for corporations who are already paying far less than their fair share of taxes. Trichet et al should put their money where their mouths are or STFU, as Europe had no small number of bubble housing markets themselves [UK, Spian, etc]. And it looks like Monday's market tantrum on Wall Street garnered the desired "fear" votes Bush, Paulson and Bernanke were hoping for. [b]A few lawmakers "get it", but I fear not enough:[/b] [url=http://globaleconomicanalysis.blogspot.com/2008/10/rep-brad-sherman-on-bailing-out-foreign.html]Rep. Brad Sherman on Bailing Out Foreign Investors[/url] [quote]Rep. Brad Sherman, D Californiai [i][Speaking to CNBC`s Larry kudlow][/i]: Larry I am glad you have a few seconds to talk to someone who voted against this bill. I am not changing my mind. I want to thank my colleagues who stood up to the purveyors of panic and voted against a very bad bill and voted with 400 eminent economists including three Nobel laureates who wrote to us and said don't panic, don't act hastily, hold hearings, work carefully. The fact is Larry if you read this bill, even you would have voted against it. It provides hundreds of billions of dollars of bailouts to foreign investors. It provides no real control of Paulson's power. There is a critique board but not really a board that can step in and change what he does. It's a $700 billion program run by a part-time temporary employee and there is no limit on million dollar a month salaries. Larry Kudlow: Let me just ask you one question. I think you are referring to foreign banks headquartered in the United States. I do not see how foreign investors get bailed out. Rep. Brad Sherman: Larry you have to read the bill. It's very clear. The Bank of Shanghai can transfer all of its toxic assets to the Bank of Shanghai of Los Angeles which can then sell them the next day to the Treasury. I had a provision to say if it wasn't owned by an American entity even a subsidiary, but at least an entity in the US, the Treasury can't buy it. It was rejected. [b] The bill is very clear. Assets now held in China and London can be sold to US entities on Monday and then sold to the Treasury on Tuesday. Paulson has made it clear he will recommend a veto of any bill that contained a clear provision that said if Americans did not own the asset on September 20th that it can't be sold to the Treasury. [/b] Hundreds of billions of dollars are going to bail out foreign investors. They know it, they demanded it and the bill has been carefully written to make sure that can happen.[/quote] |
[QUOTE=ewmayer;144224]
[url=http://www.bloomberg.com/apps/news?pid=20601103&sid=ab5vK0Qkm20Q&refer=news]Senate Votes Tonight on $700 Billion Bank Rescue With More FDIC Protection[/url]: [i]The U.S. Senate set a vote for tonight on a $700 billion financial-rescue plan, tying it to an increase in bank-deposit-insurance limits and tax breaks to win support from Republicans.[/i][QUOTE]Also linked to the legislation is a two-year extension of tax breaks that will save individuals and corporations about $149 billion over the next decade, another move popular among House Republicans.[/QUOTE] [b]My Comment:[/b] So the Republicans are using this as leverage to get one of their pet ideologies into the bill, tax breaks for corporations who are already paying far less than their fair share of taxes. Trichet et al should put their money where their mouths are or STFU, as Europe had no small number of bubble housing markets themselves [UK, Spian, etc]. And it looks like Monday's market tantrum on Wall Street garnered the desired "fear" votes Bush, Paulson and Bernanke were hoping for. [b]A few lawmakers "get it", but I fear not enough:[/b] [url=http://globaleconomicanalysis.blogspot.com/2008/10/rep-brad-sherman-on-bailing-out-foreign.html]Rep. Brad Sherman on Bailing Out Foreign Investors[/url][QUOTE]The bill is very clear. Assets now held in China and London can be sold to US entities on Monday and then sold to the Treasury on Tuesday. Paulson has made it clear he will recommend a veto of any bill that contained a clear provision that said if Americans did not own the asset on September 20th that it can't be sold to the Treasury.[/QUOTE][/QUOTE]I'm not sure that the assets even need be transferred to U.S. companies or onto U.S. soil. It looks like the Federal Reserve Bank and the U.S. Treasury are OK with applying money to foreign entities and branches of U.S. entities on foreign soil.[QUOTE=only_human;143353][URL="http://www.reuters.com/articlePrint?articleId=USN2146972020080921"]UPDATE 2-Paulson: Foreign banks can use US rescue plan[/URL][QUOTE]"... if a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets, they have the same impact on the American people as any other institution," Paulson said on ABC television's "This Week with George Stephanopolous."[/QUOTE] [QUOTE=only_human;143405][URL="http://www.federalreserve.gov/newsevents/press/bcreg/20080921a.htm"]http://www.federalreserve.gov/newsevents/press/bcreg/20080921a.htm[/URL][QUOTE]In addition, the Board also authorized the Federal Reserve Bank of New York to extend credit to the London-based broker-dealer subsidiaries of Goldman Sachs, Morgan Stanley, and Merrill Lynch against collateral that would be eligible to be pledged at the PDCF.[/QUOTE][/QUOTE][/QUOTE] This two-year extension of tax breaks could make things difficult at the least for Obama's platform as I believe that letting these tax breaks for corporations expire is part of how his proposals would be funded. |
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