Forum: pol
Page 3217
Subject: CDS's, "Financial Weapons of Mass Destruction"

  Posted by: Baldwin - [361056125] Wed, Nov 12, 2008, 16:59
Acording to Warren Buffet, these things, credit default swaps, are "financial weapons of mass destruction".

They figure deeply into AIG, Lehman Bros, Goldman Sach's problems and some of the bailout is actually to fix these things which only partially involve those institutions.

It's kinda mindmending stuff on first read but I think we gotta go there.

Check out this Nouriel Roubini video at 8:42 and onward. Poorly understood and unprecedented leverage involved. Hedges that are unlikely to be sound. It's like someone knocked out all the braces in the house of cards. There is even some deregulation of the CDS market mentioned for those looking to share the blame for this mess...maybe there's some Rep blame to be found finally in that.

This stuff is not transparent. Who made a killing as the props were kicked out? Send out a search party for Buzzy Krongard. Someone figure out how to trace who made what deals and who is responsible to police this stuff in the way the SEC watches the stock market for inside traders. Power elites made out like pirates in the S&L disaster [heck, their ancestors were pirates] and I am detecting a whiff of that here.

You guys more comfortable with this and better able to translate this stuff into something more accessable, please lend a hand.
 
1Baldwin
      ID: 361056125
      Wed, Nov 12, 2008, 17:42 		The thing...hedge funds bought CDS's to cover themselves in the case of a RE bubble bursting. The people covering those are in way over their heads now so both sides of those CDS's are in hot water.

 
2Baldwin
      ID: 361056125
      Wed, Nov 12, 2008, 17:59 		Further, if I grasp this correctly, speculation has driven the CDS market to a 50 or 60 trillion dollar level when the actual stock market is only @ 6 trillion. This is a clear tell that this is all speculation driven and not just about securing actual values. [curiously also a problem concurent with oil futures speculation run wild...is this how the power elite are tapping the system this time?]
Credit Default Swaps are unregulated and because they get traded so frequently there is uncertainty of who owns them and whether the holders can actually pay in the event of a negative credit event.

Credit Default Swaps and Credit Crisis
Some have suggested credit default swaps have exacerbated the financial crisis of 2008. E.g. When Lehman Brother went bankrupt, it meant alot of credit default guarantees would go unrewarded. E.g. Washington Mutual bought corporate bonds in 2005 and hedged their exposure by buying CDS protection from Lehman brothers. With Lehman brothers going bankrupt this CDS protection was nulified.

Others say that credit default is only an instrument reflecting changes in risk and are not the cause of the underlying liquidity problems.
But you tend not to loan to people you suspect might go bankrupt. Not being able to raise emergency funds or operating funds is what the credit crunch is and what causes that is the cause of the liquidity problem almost by definition.
 
3Razor
      ID: 181051618
      Wed, Nov 12, 2008, 18:06 		After a month of insisting that ARM's and the Democrats were to blame, you just now discovered credit default swaps' role in the financial crisis?

Well, here's a good primer for you
 
4Baldwin
      ID: 361056125
      Wed, Nov 12, 2008, 18:15 		Cribbing from other posters in financial forums...
Credit Default Swaps, defined for me by a Wall Street watcher as: Risk whatever you want, and we insure it; risk too much, taxpayers insure it. (forbes.com)
---------------------------------------
Buyers pay $10 billion and gets $100 billion from Insurance Company if Some Event Happens. Insurance Company goes bust. Buyer of lucrative insurance contract wants to get paid. Cries to DC. DC buys these contracts. THERE IS NO ASSET. THERE IS ONLY PAYING THE INSURANCE CONTRACT. The taxpayer gets NOTHING and pays to rich Insurance holder. The original $10 billion premium already paid the insurance companies CEO salary and lavish lifestyle.
So the bailout is mostly just covering gambling debts? The gamblers are only out a tenth what the taxpayer is being asked to make good?! - B

Exactly how does this help forestall a depression again?
 
5Baldwin
      ID: 361056125
      Wed, Nov 12, 2008, 18:16 		Razor

You explained this where at the time?
 
6Baldwin
      ID: 361056125
      Wed, Nov 12, 2008, 18:19 		I am estimating that the universe of people who have a firm grasp on what the credit default swap market is all about is rather small if even the government hardly can wrap their mind around it.
 
7biliruben on iffyone
      ID: 367402418
      Wed, Nov 12, 2008, 18:23 		I have been worried about this stuff for years.

2 xmases ago I tried to explain the mispricing of risk and the
coming perfect storm to my dad.


His response was that their are counterparties to every deal. I
couldn't quite get the point across that they are highly leveraged,
underfunded and unregulated- dominoes in other words.

Last Xmas he's looking for bargains in the finacial sector. He
didn't like "there are none" as an answer and called me a bear.


 
8Baldwin
      ID: 361056125
      Wed, Nov 12, 2008, 18:26 		The average congressman and his staffers didn't know credit default swaps from a hole in the ground a month ago and you fault me for just grasping it?
 
9biliruben
      Leader
      ID: 589301110
      Wed, Nov 12, 2008, 21:50 		No doubt, Baldwin. I'm not faulting you, just saying you're late to the party. Better late than never.

I've discussed these things on these boards in the past, but I understand they are pretty hard to grasp. I don't completely understand them myself.
 
10walk
      ID: 139332920
      Wed, Nov 12, 2008, 21:56 		True, 60 minutes did a bit on CDS about a month ago, and it's been sorta common IB knowledge for longer than that. Nice scoop!
 
11Building 7
      ID: 1103028
      Wed, Nov 12, 2008, 22:29 		Here you go Boldwin Jim Willie tells it like it is.
 
12Baldwin
      ID: 361056125
      Wed, Nov 12, 2008, 23:12 		Just amazing what you can find on the internet. Outstanding.
 
13Razor
      ID: 181051618
      Wed, Nov 12, 2008, 23:31 		I never brought CDS's up because I did not want to get involved in a debate about the financial crisis because it would be way too time consuming for me. I am, however, more than glad to point out that just discovering the devastating consequences of CDS's now seems to be in contradiction with you having professed to inspected the financial meltdown thoroughly and were able to deduce that Clinton, Obama and the Democrats were solely to blame.
 
14Building 7
      ID: 1103028
      Thu, Nov 13, 2008, 00:11 		I read Jim Willie every week. Click on his website, he has some more current articles.

He was fired by an investment bank or something for not toeing the line, moved to Costa Rica, and has a vendetta against those people, with connections still in the industry.

Anyways, you won't hear this stuff on CNBC or Big Media. Maybe after the fact.
 
15Baldwin
      ID: 361056125
      Thu, Nov 13, 2008, 04:19 		How many times did I say I was open to anyone showing me anything that could logically be laid at republican feet? Now of course you still need to do that. What were the appropriate congressional committees and executive officials who failed in this facet of the problem. If you want to prove this was republican deregulation at work prove it. From what I see this was a new kind of financial tool invented in 1995 and never was regulated one iota, not a victim of deregulation.

Who decided these derivatives would have no clearing houses like futures markets have? What similarities does this have to the failure at Enron where a brand new type of market proved to be not properly understood and regulated?

This fascile meme, that rich people are involved and rich people are republicans and so obviously greed and republicans were to blame, is so full of holes from end to end it isn't even plausible let alone to be assumed.

BTW this does not remotely mean Fannie Mae/Freddie Mac/Barney Frank/Chris Dodd/Obama/Acorn are any less to blame. If those bundles had been more sound they would have survived the RE bubble bursting. What is the figure you were throwing around...90% of these mortgages are still performing properly? Had these investments been less risky then the CDS's could have managed the risk as intended.
 
16CanadianHack
      ID: 747218
      Thu, Nov 13, 2008, 06:49 		Baldwin

You are trying to make a distinction where no difference exists. It doesn't matter if CDCs were deregulated or if they were created in an environment with so little oversight that they were never regulated.

I am not going to play your partisan game of trying to remove blame form Republicans and onto Democrats. Its childish (which is par for the course for you given your recent postings). The fact remains that the environment of deregulation and little oversight of the financial industry brought about the current ecnomic problems.
 
17Baldwin
      ID: 471049135
      Thu, Nov 13, 2008, 07:08 		Or you could just look at the appropriate congressional committee with oversight responsibilites and note which side was demanding loose regulation or no regulation. Until you have that you aren't proving any blame wrt the CDS market. We've already got Barney Frank and Chris Dodd vs Shays and McCain on video so we know who to blame in the case of FM/FM.
 
18Mith
      ID: 148402816
      Thu, Nov 13, 2008, 07:10 		You could always look at the aproporate congressional committee with oversight responsibilites and note which side had the authority to call for a committee vote on an oversight bill and then call for the bill to be marked up for a vote on the floor - AND DID NEITHER.

But that would require a shred of intellectual honesty.
 
19The Beezer
      ID: 31756616
      Thu, Nov 13, 2008, 07:20 		I'm in the same boat as Razor and bili here - this has been on my radar for quite a while. Here's a short list of parties that can be blamed:

The SEC and the executive branch
Congressional committees that oversee financial markets
The Federal Reserve
Company executives that allowed their employees to trade swaps
Hedge fund managers and other investors that took the outside returns initially generated without looking deeper at the risks of selling these products

Just in case, I would also recommend getting up to speed on letters of credit, the Baltic Dry Index, the possibility of a COMEX gold default, SIVs, CDO-squared and cubed, pro forma income and reserves on CRE loans, and the increasing size of the Fed's balance sheet. Plus all the stuff that's actually being reported in the normal news outlets. Lots of scary stuff out there.
 
20Baldwin
      ID: 471049135
      Thu, Nov 13, 2008, 07:43 		Re: CDS's...money quote: "...and most people on Wall Street have never heard of these things, that's how obscure they are...Very secret, no one really knows what's going on...if this market collapsed the entire world's financial system will go with it."



May 6, 2008

And yet as recently as yesterday they call me chicken little. Perhaps PD can scrutinize that video and discern a tin foil hat somewhere in the background.
 
21Baldwin
      ID: 471049135
      Thu, Nov 13, 2008, 07:47 		Beezer

I have a problem with placing some of that blame. Have you actually inspected the reserves backing the insurance you personally have purchased or do you just assume the insurance company with make you good? I mean besides checking S&P or A.M.Best if you even do that?
 
22Baldwin
      ID: 471049135
      Thu, Nov 13, 2008, 07:53 		In this case the insurance was backed by companies with tier 1 capital that was actually implicitly insured by the US government in the form of Fannie Mae prefered stocks. What more did you expect them to do? Keep a vault of gold bullion? That's just about what they thot they had.
 
23Baldwin
      ID: 471049135
      Thu, Nov 13, 2008, 08:21 		Money quotes, "Literally the mortgage market is being socialized, it's being nationalized, it's being completely taken over. In fact we are turning into a giant socialist state. And once you have that all free market mechanisms that correct things are gone." [goes on to explain, to me at least, why the FED won't reveal what they are doing with all the bailout money. They are secretly, using cutouts, buying risky bond offerings trying to create market demand for them and pump dead institutions back to life]

 
24Baldwin
      ID: 471049135
      Thu, Nov 13, 2008, 15:51 		This outstanding take on derivatives does not allow excerpting so I can only link, but my takeaway is that the world's governments are on the hook for many times the value of the actual wealth existing in the world. The popping of the derivative bubble by unacceptably high volitility was this guy's 'worst case scenario'.

From which I speculate that this makes an exceptional tool the power elite could/would use to eliminate individual national sovereignties. Something high on their stated wish-list.

Are we looking at the following scenario? - Power elite sets up the world structure for a fall, manage to get themselves bailed out of the positions they took to do so, by the nations of the world before the nations are driven out of business?

Clift Notes: Step out on this limb, hand me all your money, goodbye".

Heads back in sand. This is just me talking. Remember you don't believe me.
 
25Baldwin
      ID: 471049135
      Thu, Nov 13, 2008, 18:25 		I want to talk to PD about holding the copyright to that phrase in bold.
 
26Baldwin
      ID: 471049135
      Thu, Nov 13, 2008, 23:15 		Digging deeper it even gets worse. [is this the perfect storm or what?]

There is another field of mines out there. After the credit default swap dominoes fall and bailouts lead to massive inflation of the money supply and inflation period...

That will set off the next set of dominoes called Inflation Rate Swaps which are mostly over the counter, non clearing house, naked contracts with nothing behind them but hope that everything stays nearly normal.

And get this, the amount of these out there on the books are even greater than the Credit Default Swaps which themselves were multiple times greater value than all the wealth in the world.
 
27jedman
      Dude
      ID: 315192219
      Thu, Nov 13, 2008, 23:36 		Not sure if this has ever been posted. Kind of sums up the sub-prime mess.

Sub-prime Mess Clarified
 
28Baldwin
      ID: 471049135
      Fri, Nov 14, 2008, 03:01 		ROFL
 
29jedman
      Dude
      ID: 315192219
      Fri, Nov 14, 2008, 10:29 		What do you guys think, should the auto industry be bailed out?
Where does this end? I say let them go. I don't know enough
about the total ramifications of this, obviously lots of lost jobs, but
at some point companies have to pay the price for their failure,
don't they?

 
30boikin
      ID: 532592112
      Fri, Nov 14, 2008, 10:44 		It maybe too late to save them as it is...I have read several places that had they just let Chrysler go under in the early 80's the car industry would have been better off. As much i hate to say this It might be reasonable to bail out the strongest/progressive of the three out if all three go under, that will just be embarrassing.
 
31jedman
      ID: 552262217
      Fri, Nov 14, 2008, 11:33 		I heard another "so-called" expert on the industry advocating Chapter 11 and let them re-negotiate all the horrible contracts they have with the UAW. If they could cut all their labor and pension costs by a significant amount, would that even make a difference? I guess it would at least give them a chance and not take any government money. There is a huge domino effect here. All the auto parts suppliers are struggling. If say GM went down, would that be enough for these parts companies to go down and thus Ford and others because they can't get parts?
 
32Building 7
      ID: 471052128
      Fri, Nov 14, 2008, 13:57 		They are not banks, so the part-time employee Paulson, who is in charge of doleing out hundreds of billions, will not give them any.

Let them go chapter 11. I would not bail out any of them....banks, insurance companies, auto, cities, etc.
 
33Building 7
      ID: 1103028
      Sat, Nov 15, 2008, 22:35 		I think The Beezer's got it right in #19. I would add the external auditors and the rating companies to his list. I would be interested in any information on "the possibility of a COMEX gold default". From what I read it could happen as soon as December. And if it does the price of gold could double in days. Here's an article on the shenanigans in the silver market... link
 
34Boldwin
      ID: 2410291417
      Sun, Nov 16, 2008, 00:00 		Outstanding find, B7. How many more dominoes will we find? I am astonished at the number of landmines ahead.

While it is true that institutions were set in place after the great depression to make it more unlikely, it seems there are more moving parts or dominoes than the last time and the many props aren't functioning.

I wonder when we look back if we will see Enron as some sort of early warning sign we didn't fully grasp? Too many over the counter contract markets flying under the radar without oversight and blown way out of proportion by speculation.
 
35nerveclinic
      ID: 26107108
      Sun, Nov 16, 2008, 00:09

The average congressman and his staffers didn't know credit default swaps from a hole in the ground a month ago and you fault me for just grasping it?

It's been one of the main podcasts subjects on Bloomberg for months now, like front and center. It was at least part of the discussion much longer then that.

The 50-60 trillion number you mention sounds low. I heard much higher numbers on Bloomberg months ago.

 
36nerveclinic
      ID: 26107108
      Sun, Nov 16, 2008, 00:12
Outstanding find, B7. How many more dominoes will we find? I am astonished at the number of landmines ahead.

The most pessimistic economists I hear interviewed (And there's a lot of them) think we haven't heard even half the story yet and there are more big systemic shocks to come.

 
37Boldwin
      ID: 2410291417
      Sun, Nov 16, 2008, 01:23 		RE:35
The 50-60 trillion number you mention sounds low
Despite my wild-eyed image around here, I am actually conservative. 8]
 
38Madman
      ID: 43923621
      Mon, Nov 17, 2008, 22:24 		Some additional points to consider, Boldwin:

1) NYState decided to not regulate CDS's. This is where most of CDS's are traded. That decision doesn't play into the national partisan discussion.

2) Why did people buy CDS's? Because of really stupid regulations. There are two perspectives. One is that CDS's are false insurance by definition, and therefore cannot transform a B- security into a AAA security for risk based capital calculations. Another argument is that a properly diversified portfolio of B- securities may have a perfectly acceptable risk profile as good as a AAA security. Either way, our formulaic and archaic regulations created a market that doesn't provide a fundamental economic benefit. CDS's mainly exist because of "regulatory arbitrage".

Are we going to change that? No.
 
39Boldwin
      ID: 571021718
      Mon, Nov 17, 2008, 22:58 		I thot I had heard that NY was leaning towards regulating. Guess not then.

I am not aware of the regulations you refer to pushing them to CDS's. I do understand the incentive to add FM/FM to Tier 1 capital.

I think people don't understand derivatives when they think they aren't regulated because of republical anti-regulation sentiment. These things aren't regulated because they are too new a phenomenon to have attracted it or at least their blowing up to the size these markets have, is a new phenomenon. Enron is the perfect example.

FWIW my wife has written derivatives. Derivatives are just contracts that derive their value from some other security. IOW she doesn't sell or buy the house, she sells the option to sell or buy the house. At least I think that could be called a derivative. It's not seriously regulated because it's a rare type of transaction, not because the republicans are financially irresponsible. You can make any kind of crazy contract you want. Read some of the bizzare basket derivatives they can come up with and you'll understand why they escape regulation. Now how Credit Default Swaps and Interest Rate Swaps grew so much greater than the total wealth of the world, that is the $64 trillion dollar question.
 
40biliruben
      Leader
      ID: 589301110
      Tue, Nov 18, 2008, 09:35 		I think you are right, Baldwin.

But when you see their use balloon 10-fold on Bush's watch, they are no longer a rare event.

A case could be made that when they got to the size whereby they threaten the global economy when they start to unwind, you must, MUST start figuring out how to protect the taxpayer from the collateral damage.

Republican anti-reg sentiment could not even allow that discussion to begin, let alone find a solution.
 
41Boldwin
      ID: 571021718
      Tue, Nov 18, 2008, 11:04 		When you listen to that video of republican congressmen begging the committee to bring FM/FM under reasonable regulation, how can you say that, Bili?

As far as derivatives, that's a tuffer call. I don't think either you or I know if the SEC or OFHEO or which agency had the duty or was close enuff to a related market that they should have given a louder warning. Were these new unregulated markets lobbying hard to avoid regulation and that is largely the explanation? Reflexive scepticism doesn't really answer that. And if so who were they lobbying hardest?
 
42Boldwin
      ID: 571021718
      Tue, Nov 18, 2008, 11:11 		After all this time do we even have an indisputable villain detirmined in the failure to regulate Enron? I know we have everyone pointing in the other direction but do we have any solid convincing proof?
 
43biliruben on iffyone
      ID: 367402418
      Tue, Nov 18, 2008, 11:16 		you disagree, but GSEs were at worst a very minor part of the
problem. If anything, they were an island of rigorous standards
in comparison to the private segment, to the point that wall
street, chasing higher yields, was bypassing them and going
straight to the lenders.

 
45Boldwin
      ID: 571021718
      Tue, Nov 18, 2008, 11:25 		This is like confusing global warming with the ozone hole. Apples and oranges.

We have a problem of credit crunch caused by unreliable Tier 1 Capital and we have a problem of speculation leveraged [grotesquely blown up] derivatives markets collapsing due to unprecedented volativity.

Speculators were never the intended markets for Fannie Mae prefered stock. Those were almost custom made booby traps for financial institutions and the government whose neck was implicitly on the line behind them.
 
46Madman
      ID: 43923621
      Tue, Nov 18, 2008, 14:46 		If anything, they were an island of rigorous standards I'll assume this is some sort of sarcasm.

Bold 39 -- I thot I had heard that NY was leaning towards regulating. Guess not then. NOW they are. They declined to do that back in the 90s, however, when these issues first presented themselves. Regulators ride the same waves that the rest of us do.

I am not aware of the regulations you refer to pushing them to CDS's Any and all regs that refer to the rating of assets. Basel capital requirements, most predominantly.

CDS were a relatively cheap way to convert lower grade securities into higher grade securities. Why did they care about making a given investment appear to be a higher grade security? Remember, they paid big bucks for the privilege ... They did this to give the appearance of a beefed up balance sheet for the rating agencies and government bureaucrats.

I think CDS's are fundamentally flawed. However, you don't have to agree with me on that point, because the more salient problem is that the risk associated with the CDS's was woefully underpriced. This underpricing of risk was globe wide, however, which is why there has been a financial crisis in virtually every country ... the instigating forces may be different, but the root cause -- underpriced risk -- is the same. It happens from time to time, with this time being especially pernicious for a variety of reasons.

My position is that we shouldn't try to avoid these instances. Instead, we should try to minimize the damage caused when these incidents happen, and during times of calm establish rules that increase the flexibility of the system for when things go worse. Unfortunately, this view is totally unacceptable, politically, since it means accepting the existence of downturns.
 
47Boldwin
      ID: 4010491810
      Tue, Nov 18, 2008, 17:16 		Look into the lack of clearing houses. These leverage catastrophes always happen when a player in a market is not forced prove he can meet his obligation when worse comes to worse, and then he is not forced to actually meet the call.
 
48Madman
      ID: 43923621
      Thu, Nov 20, 2008, 10:31 		A good paper on the crisis. I'm not done, but notice the reference on page 8 to regulatory arbitrage. This is a very good primer.

link (forthcoming in the Journal of Economic Perspectives) This is a Princeton economist pointing in basically the same direction I was before. He tends to overweight lending standard decline ... that was story I also bought into for ahwile, but I've become more agnostic as research has come out casting some doubt on that particular contributor to the crisis.
 
49Boldwin
      ID: 1810312617
      Thu, Nov 27, 2008, 12:00 		Was the timing really just an accident?

What the financial crisis is realy about. How the socialist globalists intended all along to 'capitalize' on it. What are the amazingly suspicious connections in Henry Paulson's career and interests? What is the role of Joseph Stiglitz? Why, when we are bankrupt, are we bailing out foreign investors? What are the natural interests of Goldman Sachs, Obama's #1 bundler and China's advisor? Who is Eric Mindich? What role did George Soros, famous from profiting handsomely from insider trading in France for example [convicted], “The Man who broke the Bank of England”, who has countries accusing him of bankrupting them, what role did he play?
The Wall Street Journal in January had reported that hedge fund operator John Paulson received a visit from Soros, a public supporter of and contributor to the Obama campaign, after Paulson had made about $4 billion betting on a housing market collapse. Obviously, Soros wanted to know how he had done it. But Soros wouldn’t talk to the Journal about his meeting with Paulson...

Soros insists that one contributing factor to the crisis was the lack of financial regulation. But he takes advantage of the lack of those regulations. Back in 2005, one Soros company was a member of the Managed Funds Association, which describes itself as “the global voice for the hedge fund industry” and was actively fighting an SEC proposal to impose more regulation on hedge-fund managers.
There is a lot here in this treasure trove that those rigorous enuff to keep up, will need to dig into.
 
50Perm Dude
      ID: 610502616
      Thu, Nov 27, 2008, 14:02 		Soros! Of course! All evil flows from him--nothing is a coincidence.
 
51jedman
      Dude
      ID: 315192219
      Thu, Nov 27, 2008, 16:06 		I do think there is too much Goldman Sachs influence in key
positions to influence the recovery. Do I believe it is to the extent
of this article, no. Usually the truth lies somewhere in between.
So far I am pleased with the way Obama is picking his people. I
hope it continues and am cautiously optimistic that we can get
through this financial mess.
 
52Boldwin
      ID: 1810312617
      Fri, Nov 28, 2008, 11:07 		SOROS FORCE MAJEURE more likely.
 
53Pancho Villa
      ID: 51546319
      Fri, Nov 28, 2008, 12:42 		Soros force majeure?

He took advantage of a dysfunctional system where entities like Goldman Sachs and the Bank of England were selling gold not in their possession. It was, in actuality, a brilliant move in the purest form of capitalism. From one of the links in #52:

Basically, the Bank of England was thus offering by auction Soviet gold they did not own. When currency and gold pirate, George Soros, found out, he began an attack on the Bank of England, whereby gold shot up to almost 330 dollars per ounce. This was caused, in part, by Soros pressing for actual DELIVERY of the gold offered by the Bank of England, on paper, sold to Soros and others.

Thus using his inside knowledge, George Soros launched his attack thereby fingering and blackmailing the criminal operations of the Bank of England and an accomplice, Goldman Sachs brokerage. Realizing gold is the "killer metal", and his opponents were relying on stolen gold not in their possession, Soros apparently was using the two-faced Safra and Safra's reported precious metals assassins.

Entering into this picture was Alan Greenspan and his highly conspiratorial PRIVATE BANK called the Federal Reserve, used in efforts to rescue those caught in the short selling trap worked by Soros. Soros was demanding huge DELIVERY from Goldman Sachs, a major gold contract peddler. To force down the price of gold by criminal means, Goldman Sachs and others had sold short subject to DELIVERY, the equivalent of TEN YEARS OF GOLDMINE PRODUCTION worldwide.

This is fascinating stuff, and kudos to Baldwin for providing the links. However, it's impossible to paint Soros as the primary villian in this case, when he was basically following the American capitalist ideal of leveraged buyouts and hostile takeovers. It was the entities who were fradulently dealing in the gold commodities market who resorted to threats of Force Majeure to thwart Soros.

A default of a short selling contract results in the "long" buyer owning everything of the short seller. Soros was about to own Goldman Sachs and have an armlock on the Bank of England.


So Goldman Sachs reportedly was considering the invoking of a seldom-used contract provision, "force majeure", that an Act of God, horrendous storm, or such, made fulfilling the gold contract impossible. Of course, under the facts, this would be a ridiculous assertion by Goldman Sachs as aided by Greenspan.
 
54Boldwin
      ID: 1810312617
      Sat, Nov 29, 2008, 01:02 		Force majeure's can happen to countries as well. You don't want to be there, which doesn't mean you won't.
 
55Perm Dude
      ID: 591014290
      Sat, Nov 29, 2008, 09:47 		It can, but it is extremely rare and applies to clear acts of God, war, and that kind of thing. It doesn't include "a big assed lie" by one party in the contract.
 
56Boldwin
      ID: 1810312617
      Sat, Nov 29, 2008, 21:37 		The issue you guys are going on and on about is just a tiny tiny corner of Soros' machinations and not the corner you should be worried about.

This guy is nothing less than satan's banker and those who fail to learn from the past are doomed to repeat. Ruining nations is his business, it's what he does for fun and profit.
 
57Pancho Villa
      ID: 51546319
      Sat, Nov 29, 2008, 22:37 		The speculator was the Hungarian-born George Soros, who spent the war in Hungary under false papers working for the Nazi government, identifying and expropriating the property of wealthy fellow Jews. - from Baldwin's link

George Soros - born 8/12/30

When the war began, he was 8 years old.
When the war ended he was 14.

Working for the Nazi government?

To avoid his son's being apprehended by the Nazis, Soros's father paid a Ministry of Agriculture employee to have Soros spend the summer of 1944 living with him and posing as the godson. Young Soros had to hide his Jewishness even as the official was overseeing the confiscation of Jewish property.

More like doing what he could to stay alive, but the author(with Baldwin nodding in approval) makes it sound like Soros was the mastermind Nazi devil who volunteered to help seize Jewish property and send them to Auschwitz - at 14!

After this completely distorted characterization we're treated with numerous other distortions and innuendos.

In order to avoid U.S. government supervision of his financial activities, something normal U.S.-based investment funds must by law agree to in order to operate, Soros moved his legal headquarters to the Caribbean tax haven of Curacao. The Netherlands Antilles has repeatedly been cited by the Task Force on Money Laundering of the Organization for Economic Cooperation and Development (OECD) as one of the world's most important centers for laundering illegal proceeds of the Latin American cocaine and other drug traffic. It is a possession of the Netherlands.

Obviously, Soros = laundering illegal proceeds of the Latin American cocaine and other drug traffic. Who needs evidence or proof?

Fortunately though, the satan banker has a new adversary, another man conservatives love to hate,
Henry Waxman.
 
58Boldwin
      ID: 1810312617
      Sat, Nov 29, 2008, 23:33 		This must be what teaching special ed feels like.

 
59Pancho Villa
      ID: 51546319
      Sun, Nov 30, 2008, 00:53 		This must be what teaching special ed feels like.

Given your choice of materials, special ed is about all you're qualified to teach.
 
60Boldwin
      ID: 1810312617
      Sun, Nov 30, 2008, 01:28 		When the government declares force majeure get back to me on that.

 
61Boldwin
      ID: 1810312617
      Wed, Dec 03, 2008, 03:00 		Interesting...

Enemy of free market capitalism and world's most quoted economist Columbia professor Joseph E. Stiglitz:
Traditional neoclassical economics literature assumes that markets are always efficient except for some limited and well defined market failures; Stiglitz et al. more recent studies reverse that presumption: it is only under exceptional circumstances that markets are efficient...

Whenever there are “externalities” — markets will not work well. But recent research has shown that these externalities are pervasive, whenever there is imperfect information or imperfect risk markets—that is always.
So his project is to prove that government intervention makes for a more efficient economy. He wants to delegitimize the free market. He points to risk markets as a main chink in the armor.

Suddenly, risk markets are cracking the world economy.

Stiglitz is no small player...

  • He was, during the Clinton admin, Chairman of the Council of Economic Advisers, in which capacity he also served as a member of the cabinet.

  • served on the Intergovernmental Panel on Climate Change where he used his [*sarc]weatherman accumen [*/sarc] to help perpetrate the global warming hoax.

  • served as senior vice president for development policy and its chief economist for the World Bank [think shock treatment expert]

  • founded the Initiative for Policy Dialogue (IPD), with support of the Ford, Rockefeller, McArthur, and Mott Foundations and the Canadian and Swedish government

  • wrote the book, 'Making Globalization Work'

  • wrote the book, 'Whither Socialism?'

  • expert on how the IMF destroys nations.
 
62biliruben
      Leader
      ID: 589301110
      Wed, Dec 03, 2008, 06:49 		He's one of our greatest economic minds and the most notable absence from Obama's economic team.

And yes, he leans left, as I imagine anyone with a good understanding of economics eventually would.
 
63Boxman
      ID: 571114225
      Wed, Dec 03, 2008, 07:08 		And yes, he leans left, as I imagine anyone with a good understanding of economics eventually would.

Why is that?
 
64biliruben
      Leader
      ID: 589301110
      Wed, Dec 03, 2008, 07:21 		Look around you at what unfettered markets have wrought, and ask again.
 
65Boldwin
      ID: 1810312617
      Wed, Dec 03, 2008, 07:35 		I wouldn't call what happened at Fannie Mae/Freddie Mac, an unfettered market.

Deliberately fettered by socialists who were trying to force the market to provide socialized housing to everyone. I'd call it that.

Sabotaged. I'd call it that.


 
66biliruben
      Leader
      ID: 589301110
      Wed, Dec 03, 2008, 07:41 		I'd call the GSEs the last bastion of lending standards swept away by Bush's "Ownership Society" and free market insanity willing to lend to anyone with a pulse.

Insatiable, unregulated shadow-bankers packaging trash for insane fees, and foolish buyers, desperate for "safe" and an extra point or 3, easily lied to because they had no way of knowing what they were buying.
 
67biliruben
      Leader
      ID: 589301110
      Wed, Dec 03, 2008, 07:51 		After you have read Doris Dungey's complete compendium, come back and tell me it was all the GSEs fault with a straight face.
 
68biliruben
      Leader
      ID: 589301110
      Wed, Dec 03, 2008, 07:53 		Or if you don't like good writing, you can go straight to the meat: The compleat Ubernerd.
 
69Frick
      ID: 3410551012
      Wed, Dec 03, 2008, 08:57 		Bili, I don't think the mortgage mess was directly the GSE's fault, but they did play a part. The mortgage market was not a free market. It also isn't an efficient market, due to the fact that the information about each of the underlying securities (the actual mortgages) is scarce or inaccurate. Could that risk be lowered with a large sample, maybe. But as mortgage lenders started to loosen their restrictions, that information was available and should have been a notice that the risk was increasing.

I haven't read about Stiglitz, but I question his basic premise. If a free market doesn't have perfect information, where advantages can be had by the people willing to pay for the information. Is it reasonable to expect that a government would have better information? The possibility does exist that the lack of information is moot, due to the fact that individuals couldn't gain an advantage of it. I don't think that is true, personally. Especially not with world wide economy becoming more and more interlinked.

As for the statement that most economists will eventually start to lean towards the left. I think that is true if you are referring to academic economists, as you look to economists working in the markets, I would say the opposite is true.
 
70Boxman
      ID: 571114225
      Wed, Dec 03, 2008, 09:10 		Look around you at what unfettered markets have wrought, and ask again.

Sorry, but you're gonna have to prove this is ALL because of the Republicans.

IIRC, Boldwin has done significant research on this topic showing Democrats involvement in the destruction of Fannie and Freddie.

Try again.
 
71Boldwin
      ID: 1810312617
      Wed, Dec 03, 2008, 10:19 		come back and tell me it was all the GSEs fault with a straight face - Bili

Strawman. I never said it was the only factor. I doubt you'll find a more significant factor in the triggering of the current crisis however. You could say the RE bubble, but there again, the availability of undeserved credit from FM/FM helped inflate the bubble.
 
72biliruben
      Leader
      ID: 589301110
      Wed, Dec 03, 2008, 10:35 		Examine the Federal Housing Finance Reform act of 2005, and you will find a significant portion of your answer. The GSEs were corrupted for political purposes.

In general, I think you are right that the GSEs did play a minor role, but the true damage was done when the private market co-opted their conservative AUS and distorted for purposes for which it was unintended.

The best possible world would be for the GSEs to have never existed, and for every person to have actual eyes look at their own financial situation to determine of they deserve a mortgage.

I agree that the GSEs distort the mortgage market, but private brokers did a hundred times more damage in contributing to our current crises.
 
73Baldwin
      ID: 481125510
      Sat, Dec 06, 2008, 07:10 		but private brokers did a hundred times more damage in contributing to our current crises - Bili

Invented out of thin air. Mortgage brokers can't issue loans they can't resell. They can't resell a bad loan unless there is a market for bad paper. FM/FM was that market, congressionally mandated [and willing co-conspirators] to buy every bad loan that passed their desk.
 
74Baldwin
      ID: 481125510
      Sat, Dec 06, 2008, 07:16 		Bailout terms and ad hoc institutions:
It's gotten to the point where you can't tell the bailout programs without a scorecard, so here goes (with a nod to Fox's Brian Sullivan):

•TARP: Troubled Asset Relief Program. This is the Treasury's big $700 billion ($850B including pork) program that has been used to prop up financial institutions.

•TAF: Term Auction Facility (or TAFfy). Program by which the Fed auctions funds to financial institutions — allowing them to use their toxic assets for collateral.

•TALF: Term Asset-Backed Lending Facility (or "son of Taffy"). Recently announced Fed program designed to help the market for student, auto and other consumer loans.

•CPFF: Commercial Paper Funding Facility. Buys commercial paper directly from corporations.

•AMLF: Asset-Backed Money Fund Lending Facility. Fed program designed to buy short-term paper (including commercial paper) to prevent money market funds from "breaking the buck."

•TSLF: Term Securities Lending Facility. Fed program that lets banks swap bad mortgage and other debt from their books in exchange for Treasuries.

•SLF: Special Lending Facilities. Originally designed to loan money to fund JPMorgan's purchase of Bear Stearns in March. Also used to back AIG's balance sheet to avoid total collapse.

•PDCF: Primary Dealer Credit Facility. This is the Fed program that allowed broker/dealers and other non-banks to tap the Fed's discount window (back when there were independent broker/dealers).

- TechTicker via RGEmonitor, Roubini's blog

 
75biliruben
      Leader
      ID: 589301110
      Sat, Dec 06, 2008, 08:42 		"They can't resell a bad loan unless there is a market for bad paper. FM/FM was that market... "

This is simply incorrect. You clearly have not even pretended to get educated on this subject.

Read Tanta's "...we will add distinctiveness to your collective" and feel ashamed for ever writing such nonsense.

I'll give you a taste, but read the whole thing (and preferably every link she adds):

The history and development of AUS is fascinating (really, it is, my UberNerds). It is, however, beyond today’s scope. Let me just note that a few years ago, the general situation in the industry was that the systems of the GSEs (Freddie Mac’s Loan Prospector (LP) and Fannie Mae’s Desktop Underwriter (DU), both of which could also handle FHA loans via additional technology called FHA TOTAL Scorecard), were the gold standard for AUS in the conforming-balance prime loan world. But they were never designed to underwrite loans that are not eligible for delivery to the GSEs, including jumbos, no docs, subprime (outside of the A- stuff the agencies have special AUS capabilities for), and a lot of exotic product structures (like the Option ARM). So there was parallel development by large private investors of their own AUS, the two best-known and most reliable of which are Countrywide’s CLUES and GMAC-RFC’s AssetWise, both of which specialize in jumbo loan balances, Alt-A and subprime.
But while just about every lender, correspondent, and broker in the country could have access to LP or DU for very low cost, and needed to anyway for its GSE loans, you had to be a correspondent of Countrywide or RFC to get access to CLUES or AssetWise, and like anyone else >Countrywide and RFC tended to expect you to sell them the loan if you used their systems to underwrite it. Other buyers of jumbo and Alt-A whole loans might appeal to these smaller loan originators, but those other buyers didn’t offer an AUS, which are very expensive to develop. There became a habit of originators using the ones everyone had access to and were familiar with, LP and DU, to underwrite loans that neither system was designed to accommodate. What happened is that the whole-loan buyers would create an “overlay” of rules that a jumbo or Alt loan had to meet, in addition to approval of the loan by LP or DU. A very odd hybrid of traditional and automated underwriting was born; Star Trek fans are free to imagine Borg drones (half organic, half machine creatures) invading the mortgage world. Resistance sure seemed futile there for a while.



So until recently (probably around 2005), except for a small percentage of loans associated with their promoting of homeownership in low-income neighborhoods, GSEs were buying pretty much vanilla, conforming fixd-rate, full doc loans. Private companies like Countrywide and GMAC were buying up the real trash.

I recall a nice graph or two showing how the private companies had started to eat into the GSEs volumes pretty significantly, until the politicos got involved in 2005 and started browbeating the GSEs to lower their standards. I'll see if I can find it. Wall Street was bypassing the GSEs because their MBSs were too boring and low-yield (i.e. high quality). They had customers who wanted "AAA" that returned 8-10 pts, and for that they had to go to Countrywide and their ilk and buy their high-yield toxic waste.
 
76biliruben
      Leader
      ID: 589301110
      Sat, Dec 06, 2008, 09:41 		What happened to the first 2 bubble threads?
 
77Seattle Zen
      ID: 358591721
      Sat, Dec 06, 2008, 12:47 		What happened to the first 2 bubble threads?

They are in the attic.
 
78Baldwin
      ID: 481125510
      Sat, Dec 06, 2008, 15:44 		Roubini on proper form of auto bailout.
 
79Baldwin
      ID: 481125510
      Sat, Dec 06, 2008, 15:59 		Nice find Bili. You've come a long way since you were telling me FM/FM were originating loans. [they don't, (so as not to confuse the lurkers)]
until the politicos got involved in 2005 and started browbeating the GSEs to lower their standards.
I love how when it's Chris Dodd and Barney Frank doing it, we just blaim it on generic politicos, when we aren't directly lying and blaiming it on republicans and republican philosophies.

I'll spend some time digging to see if the relative volumes of bad loans lines up with your theory, Bili.

Offhand do you happen to know just who exactly was buying Countywide's trash?
 
80biliruben
      Leader
      ID: 589301110
      Sat, Dec 06, 2008, 16:06 		I always knew they don't originate. I simply didn't think the distinction was important in that circumstance. Careless with my words.
 
81biliruben
      Leader
      ID: 589301110
      Sat, Dec 06, 2008, 16:11 		Hedge funds, pension funds, villages in Norway. King County government, School districts, China, CALPERS. Everyone who wanted a "safe" investment with a few extra pts. yield.
 
82biliruben
      Leader
      ID: 589301110
      Sat, Dec 06, 2008, 16:19 		BTW if you delve further into Tanta's writing, you will discover a tasty treat. She regularly shredded one of the NYTs main reporters on the mortgage crisis, Gretchen Morgenson.

You're welcome.

Tanta died a few days ago, BTW. She was far worthier of your love than Nasty-Ann.
 
83Baldwin
      ID: 481125510
      Sat, Dec 06, 2008, 16:21 		I'm betting they went thru Lehman and Goldman Sachs first tho.
 
84biliruben
      Leader
      ID: 589301110
      Sat, Dec 06, 2008, 16:23 		They're what killed Bear. Sure, Lehman and Sachs were making mint in origination fees.
 
85Baldwin
      ID: 481125510
      Sat, Dec 06, 2008, 16:24 		If so, putting Paulson in charge of the henhouse is as backwards as it gets. In industry the executives who crashed everything have to go. In finance you get 'peter principled' up the ladder.
 
86biliruben
      Leader
      ID: 589301110
      Sat, Dec 06, 2008, 16:26 		No doubt.

You haven't noticed that Paulson's first instinct is pretty consistently bailing out Wall Street?
 
87Baldwin
      ID: 481125510
      Sat, Dec 06, 2008, 16:29 		I remember an anecdote of one executive of an investment bank calling up the head of FM browbeating him to show some cajones and speed up the supply of subprime loan packages for resale.
 
88Baldwin
      ID: 481125510
      Sat, Dec 06, 2008, 16:32 		I'd like to run into an explanation of why Lehman was let drown and the other giants including Paulson's GS were bailed out. Just timing? Lehman couldn't hold on till the bailouts started? The bailouts couldn't start till a giant toppled?
 
90biliruben
      Leader
      ID: 589301110
      Sat, Dec 06, 2008, 16:36 		I think Paulson simply under-estimated the full ramifications of the Lehman failure. I don't think he quite realized how badly the unwinding of all Lehman's bets around the world would effect the overall economy, and probably more importantly, the confidence of investors.

When it became clear the we weren't going to save everyone, investors started realizing that their investments could easily go to zero.
 
91Baldwin
      ID: 481125510
      Sat, Dec 06, 2008, 19:28 		You haven't noticed that Paulson's first instinct is pretty consistently bailing out Wall Street? - Bili

In your view what area should he be shoring up instead? You are divorcing investors from business with this statement?
 
92biliruben
      Leader
      ID: 589301110
      Sat, Dec 06, 2008, 22:41 		In general, unless there was fraud involved, investors are pretty much out of luck, imho, or should be.

If we decide to rescue a particular business due to fear of it's impact on the larger economy, the taxpayers should get a piece of the company.

The original Paulson plan of simply propping up Wall Street by vastly overpaying for subprime toxic waste was a non-starter in my mind.
 
93Boxman
      ID: 571114225
      Sun, Dec 07, 2008, 06:37 		I'd like to run into an explanation of why Lehman was let drown and the other giants including Paulson's GS were bailed out. Just timing? Lehman couldn't hold on till the bailouts started? The bailouts couldn't start till a giant toppled?

How about this? If the Secretary of the Treasury was the former CEO of GM instead of Goldman Sacs, the auto industry wouldn't have to walk into DC hat in hand to ask to for a paltry $30 billion compared to the banking industries $700 billion they got without the show trials.

If Congress paid as much attention to every $30 billion slice of our money as they are doing with the auto industry's we probably wouldn't have the fiscal crisis we incur annually.
 
94Baldwin
      ID: 481125510
      Sun, Dec 07, 2008, 18:23 		I really think the dems are just play acting regarding the auto bailout. They'd rather be stricken with leprosy than force the auto workers' unions' contracts to get stripped in bankruptcy. Since the bailouts are unpopular they have to spend some time posing as if there was a chance they would turn them down.
 
95Boxman
      ID: 571114225
      Sun, Dec 07, 2008, 20:34 		Good point. They probably may also want Obama to sign the auto bailout into law as opposed to Bush. This way they can still claim they are friendly to labor. Don't remind the UAW who was President when NAFTA passed though.
 
96Perm Dude
      ID: 5111279
      Mon, Dec 08, 2008, 00:57 		That's a red herring about the contracts. GM and the others can't (or won't) go into bankruptcy, even if the union contracts were able to be cancelled.

And it is time to stop blaming the unions for everything ill that befalls American companies. Other auto companies in the US are under the same union contracts and yet are doing well. The problem with the Big Three is (1) lack of innovation on the part of management and (2) a huge amount of overhead from pension and health care benefits of retirees from union contracts from decades ago.


Meanwhile, here's a nice overview of how Freddie Mac lobbied its way into deregulation. As is clear from the article, members of both parties were on both sides of this issue. Party affiliation doesn't matter so much then there appears to be money to be made.
 
97Frick
      ID: 3410551012
      Mon, Dec 08, 2008, 09:09 		And it is time to stop blaming the unions for everything ill that befalls American companies. Other auto companies in the US are under the same union contracts and yet are doing well. The problem with the Big Three is (1) lack of innovation on the part of management and (2) a huge amount of overhead from pension and health care benefits of retirees from union contracts from decades ago.

Aren't most of the foreign auto manufacturers in the US operating at plants that don't have unions? I could be wrong, but if so, can you list some examples? I have a number of family members that work for a non-union Toyota plant. The biggest difference is the flexibility in the work force, if a job needs to be done, a worker does it, the answer isn't that's not my job. And saying that the pension contracts are a problem, but not the union is a bit ironic isn't it? Why are the pensions and health care benefits so high?

I do agree that lack of innovation and poor management are equally at fault for the Big 3's current problems.


Our current government is a joke. 700B is being given away with virtually no guidelines and no accounting, but the 30B being requested by the Big3 has turned into a media circus. Are they just trying to get the public to ignore the nearly 1T they just spent?
 
98Perm Dude
      ID: 541149810
      Mon, Dec 08, 2008, 11:58 		Many of them are under union contracts, but some are not. But union contracts give some baseline salary and benefit numbers to workers even in non-union factories.

From a cost/car side, however, many foreign manufacturers (who aren't really so foreign--the Big Three own majority stakes in virtually all car manufacturing) haven't been around very long and therefore aren't under the weight of paying for a ton of retirees.
 
99Frick
      ID: 3410551012
      Mon, Dec 08, 2008, 20:32 		I know that the Toyota and Honda plants in Indiana are not union, the BMW plant in South Carolina isn't. I'm don't believe that the Honda plant in Marysville Ohio is union. I don't disagree that there are foreign plants under a union contract, but I think it is misleading to say most are and only some are not. Plus while union contracts might set a baseline, the local wages are going to set a different baseline. Toyota in southern Indiana pays more than pretty much any other manufacturer in the area, but it is less than the union rates 6 hours away in Michigan.
 
100biliruben
      Leader
      ID: 589301110
      Mon, Dec 08, 2008, 22:02 		Paying a living wage and providing health care is not the reason the auto-makers are uncompetitive.

Their products just plain suck.
 
101Boldwin
      ID: 71154815
      Mon, Dec 08, 2008, 23:29 		I don't mind if SZ, Bili, Barney Frank and Pelosi want to play auto designer as long as they are forced to buy the monstrosity they force Detroit to build.
 
102Perm Dude
      ID: 421134823
      Tue, Dec 09, 2008, 00:35 		I don't disagree with you Frick. Certainly those plants chose those places to build to keep costs down despite the slight increase in transportation costs. Lower labor costs, taxes, etc all keep their per-unit costs down.

I posted it somewhere (will dig it out) that what Detroit is undergoing is not only not new, but the companies are still spouting the same "We'll change this time. We promise!" lines from decades ago.

Last word I've heard is that Bush is supporting low-interest loans to the companies (not grants, and not buyouts). Obama is supporting the loans as a temporary measure. And yes, Pelosi, Frank and other scary liberals (when they aren't playing Parcheesi with the Obama kids) seem to be supporting it.
 
103Baldwin
      ID: 571134912
      Wed, Dec 10, 2008, 06:05
 
104Baldwin
      ID: 571134912
      Wed, Dec 10, 2008, 06:08
 
105Mith
      ID: 148402816
      Wed, Dec 10, 2008, 07:27 		You're gonna really piss off Boxman.
 
106biliruben
      Leader
      ID: 589301110
      Wed, Dec 10, 2008, 09:20 		At any other time, I'd tell the automakers to compete or die. Right now is not the time to wipe out hundreds of thousands of living wage jobs though.

Unless Baldwin Charities can keep 'em in socks and food and let them camp out in his "resort" in Central Illinois.

My feeling is that, after incompetent management, the main reason they are uncompetitive is that they have to pay healthcare costs of all the past, present and future workers, and the competition doesn't.

If we take that burden off of companies by nationalizing health care, that would be a big step forward. Right, Baldwin?
 
107Perm Dude
      ID: 41131911
      Wed, Dec 10, 2008, 10:00 		It is worth noting that the only bailout plan being floated right now involve loans to the companies (secured by stock), rather than a direct capital infusion.

The word "bailout" has been tossed around a lot lately, without much context.
 
108Baldwin
      ID: 351123109
      Wed, Dec 10, 2008, 17:30 		Bili

The correct remedy for big intrusive government sabotage is never socialism. That's what they want you to believe.

Diseases like marxism start vicous cycles that only lead to more disease. Break the vicious cycle.

 
109Perm Dude
      ID: 41131911
      Wed, Dec 10, 2008, 19:20 		Depends on what you mean by "socialism." Some of the most difficult economic downturns of the last century or so were made worse by a hands-off government policy (and others were lessened, and shortened, by prompt government action).

If you mean that government should stick to the military and delivering mail I'd say that would be awfully irresponsible of them. These are the kinds of times for which a government can actually do good across a wide swath of the country.

Whether they will or not remains to be seen. But calling government action on this crisis "socialism" misses the point badly.
 
110Madman
      ID: 81110118
      Thu, Dec 11, 2008, 09:11 		Some of the most difficult economic downturns of the last century or so were made worse by a hands-off government policy (and others were lessened, and shortened, by prompt government action)

I have no idea what you are talking about here. Care to elaborate?
 
111Perm Dude
      ID: 111113119
      Thu, Dec 11, 2008, 10:19 		Beddoes article in The Economist

But history teaches an important lesson: that big banking crises are ultimately solved by throwing in large dollops of public money, and that early and decisive government action, whether to recapitalise banks or take on troubled debts, can minimise the cost to the taxpayer and the damage to the economy. For example, Sweden quickly took over its failed banks after a property bust in the early 1990s and recovered relatively fast. By contrast, Japan took a decade to recover from a financial bust that ultimately cost its taxpayers a sum equivalent to 24% of GDP.

My bold.
 
112Baldwin
      ID: 1211491020
      Thu, Dec 11, 2008, 16:34 		We will obviously never agree on this. Socialists believe FDR resurected America from the pits of depression and capitalists look at the same evidence and say he prolonged it nearly ten years.
 
113Madman
      ID: 81110118
      Thu, Dec 11, 2008, 22:34 		Sweden: 3 years of negative GDP growth, cumulating to a gross 4-5% reduction in GDP, intevention raising budget deficits to 15%+ of GDP ... this is fast? Uh-huh. Granted, the banking intervention happened late in that cycle, but also understand that to fix Swedish banking, you have to talk to what, one family?

C'mon.

And the Great Depression saw massive government intervention from day #1. Hoover was the biggest pro-interventionist you ever did see, he just didn't like FDR's interventions.

We're in year 2 of this banking crisis. By opening up a new market -- the government bailout market -- I fail to see how recovery of our zombie financial institutions has been helped. Why not send Citi to bankruptcy and reconsistitute the assets? Explain to me how a $300b reinsurance deal for $7b in equity (that may be worthless) is a good deal for anyone or will help the economy recover. Also note the time and energy invested by companies to "become" banks eligible for bailout, etc. Personally, I'd rather see these guys figure out ways to start making legitimate money and boosting the economy, rather than be successful at writing grant applications. Obviously Bush and Obama disagree.
 
114Perm Dude
      ID: 411281122
      Thu, Dec 11, 2008, 23:28 		Personally, I'd rather see these guys figure out ways to start making legitimate money and boosting the economy, rather than be successful at writing grant applications

I don't disagree. But if the government intervenes in some way, we need to recognize that there is a smart way for the government to intervene and many not-so-smart ways. I very much agree with some of the hardcore free market Republicans on the issue (despite their role in deregulating things which contributed to the mess).

pd
 
115Razor
      ID: 181051618
      Fri, Dec 12, 2008, 00:59 		Also note the time and energy invested by companies to "become" banks eligible for bailout, etc. Personally, I'd rather see these guys figure out ways to start making legitimate money and boosting the economy, rather than be successful at writing grant applications.

This is akin to the ol' conservative argument that we should get rid of welfare and unemployment benefits because it encourages people to be deadbeats. Sure, there are some deadbeats, but baby, bathwater and all that.

There are plenty of people a lot smarter than me that back this form of government intervention. I am certain that there are elements of this deal that are crummy, but them's the breaks when you are dealing with an event of this magnitude.
 
116biliruben
      Leader
      ID: 589301110
      Fri, Dec 12, 2008, 01:49 		Madman lives in OKC or someplace. He already lives the post-apocalyptic nightmare we are trying to avoid. What does he care if he's wrong about letting Citi or the rest go belly-up. Things can't get worse for him. ;)
 
117biliruben
      Leader
      ID: 589301110
      Fri, Dec 12, 2008, 09:31
 
118Baldwin
      ID: 1211491020
      Fri, Dec 12, 2008, 14:26 		fail to see how recovery of our zombie financial institutions has been helped. Why not send Citi to bankruptcy and reconsistitute the assets? Explain to me how a $300b reinsurance deal for $7b in equity (that may be worthless) is a good deal for anyone or will help the economy recover. - Madman

That makes total sense from a free market business POV. As Roubini explains it however, bailing out those banks was not the point. Propping up the CDS security blanket was the point. Bailing out the investors was really the point [for better or worse]. I don't care about the investors so much as I care about stopping the CDS dominoes from freefall and then the intrest rate swaps dominoes that would follow.
 
119boikin
      ID: 532592112
      Fri, Dec 12, 2008, 15:36 		Propping up the CDS security blanket was the point. Bailing out the investors was really the point [for better or worse]. I don't care about the investors so much as I care about stopping the CDS dominoes from freefall and then the intrest rate swaps dominoes that would follow.

I am confused by something if we are propping someing up what is going to replace them? Are they going to fix them selves? Are acctaully doing anything but putting off the inevitable? Are they going to magically have value later on? I mean the real solution is just to keep thinking they have value and we will be fine.
 
120Perm Dude
      ID: 151134129
      Fri, Dec 12, 2008, 16:36 		A follow-up to #111:

How bad can it be if we do nothing?

Pretty bad, it looks like. Another star aligning in the "Obama is the new Reagan Universe."

[Specifically these guys are talking about economic markets. Not the auto bailout].
 
121Baldwin
      ID: 1211491020
      Fri, Dec 12, 2008, 16:37 		As I understand it, these credit default swaps were riskier than anticipated. These are insurance contracts against defaults and they expire. So if the economy can be strung along long enuff that these highly leveraged disasters waiting to happen, all expire, and I would assume they are not being replaced by more equally bad contacts, then we could escape out from under the black cloud. The fly in the ointment is that stringing along the economy involves printing a lot of money. This tends to trigger the toppling of another class of insurance contracts against interest rates exceding agreed upon volitility limits.

Both sets of derivatives are so highly leveraged that their implied value excedes the entire wealth of the earth by six times in each class of derivative. Damocles would be proud.
 
122Madman
      ID: 81110118
      Fri, Dec 12, 2008, 17:18 		PD 120 -- you going to trust models that didn't anticipate the problems to begin with?

The free market / intervention debate is a meaningless red herring I'm not interesting in participating in. Stupidity is stupidity, regardless. Propping up Citi with a totally unreasonable reinsurance agreement has nothing to do with "propping" up CDS's or whatever. It has everything to do with helping Citi equity owners. The side effect is increased zombification of our financial sector, and making Citi business policies directly subject to majority vote via rather a rather ignorant political class.

Ditto for an "auto bailout". It has nothing to do with protecting domestic industrial car production, which is heavily impacted by many firms that will not receive a bailout. Instead, we are asking our children to pony up money while we bury our heads and avoid the inevitable. If you desperately want government action, then I'd support a "car czar" led "reorganization" that was a real haircut akin to what would happen in bankruptcy. The "bipartisan" proposals out there at the moment, however, are little more than a multi-billion giveaway that will lengthen this recession and lower our standard of living.
 
123sarge33rd
      ID: 4511351216
      Fri, Dec 12, 2008, 18:30 		and what happens if the Big 3 go BK?

How many hundred of thousands do they employ directly?

How many dealership employees across the country?

How many affiliate supplier companies?

How many transport firms shipping cars/trucks etc across the country?

How many hundreds and hundreds of thousands of dollars in property taxes are paid by dealerships?

Utility expenses?

Advertising dollars and that revenue to local newspaper, TV etc?


You want a Depression inside of 30 days that will make the one of the 30s look easy? Shutdown the Big 3.
 
124jedman
      Dude
      ID: 315192219
      Fri, Dec 12, 2008, 20:30 		No question there is a huge trickle down, but at least in
bankruptcy, a reorganization could happen and the whole labor,
health care, retiree situation looked at. The "haircut" Madman
talked about has to happen.
Can anybody tell me where there is a market for a car like the Volt?
40 miles on a full charge? I think that is a joke.

 
125Razor
      ID: 181051618
      Fri, Dec 12, 2008, 21:05 		Can anybody tell me where there is a market for a car like the Volt?

There is a gas component to the Volt which allows it travel much, much farther. The electric engine is designed for short commutes to work. There are many people who it would be impractical for, but my commute right now, for example, is 6 miles roundtrip. 40 would be plenty even if I wanted to stop off at several places on the way home. And that's just before I started getting into the gas tank.
 
126jedman
      Dude
      ID: 315192219
      Fri, Dec 12, 2008, 21:29 		What is the price tag projected for the car? And more importantly,
what is the real demand for that car vs. a car that gets say 35 MPG
and may cost much less?

As I am listening to the news tonight, I have to ask myself, "If I'm
working for one of the Big 3, wouldn't my attitude be that I'll be
willing to do whatever is necessary to make the company
successful?" Where does the union think they have any bargaining
power at this point and should they have any?
 
127Perm Dude
      ID: 151134129
      Fri, Dec 12, 2008, 21:57 		Volt is a lot like the pre-Model T cars: Important transitional vehicles, which have the bonue os allowing car companies to claim they are working on all-electric cars (as mandated by some states).

On the union front, I'm reminded of Obama in Western PA during the primary, when speaking to some union workers at a factory and making the point that once they are under contract, their job is to make sure that their company makes money. Most (if not all) of the big unions (Service Employees, AFL/CIO, Teamsters, etc) have forgotten that part in the "got mine" rush.
 
128Madman
      ID: 81110118
      Fri, Dec 12, 2008, 23:19 		and what happens if the Big 3 go BK? Stockholders and bondholders get screwed. The rest is negotiable. Stiglitz:

The debate about whether or not to bail out the Big Three carmakers has been mischaracterised. It has been described as a package to help the undeserving dinosaurs of Detroit. In fact, a plan to bail out the carmakers would benefit shareholders and bondholders as much as anybody else. These are not the people that need help right now. In fact they contributed to the problem.... Financial Times, but registration is free.

Be under no illusions; the dealers are in trouble either way, and I know that directly affects you. It's not going to be easy, either way. The government would have to step in to provide bridge financial during Chapter 11 given the utter lack of credit in today's markets. But just as the airlines didn't stop flying when they filed for Chapter 11, GM doesn't have to stop producing cars. And, as I said, I'd even be open to a "car czar" that enforced the terms of a bankruptcy without using that language, in case GM wants to avoid the reputational hit Chapter 11 might provide.

But make no mistake about it. Bush and Obama are fighting for GM shareholders first, GM bondholders second, and UAW retirees third. Everyone else is apparently collateral damage.
 
129Madman
      ID: 81110118
      Fri, Dec 12, 2008, 23:34 		Re: Volt: Let's say you never use the gasoline engine (which, of course degrades and will clog your engine if you let it sit around) ... Let's say electricity is free. Let's say it comes in at $40,000 (before a possible $7,500 tax break that someone has to pay). Let's say the size and comfort is comparable to a $20k car that gets 35 mpg (whatever the 2010/2011 fleet gets). Finally, let's put gas at $5 per gallon.

That means you have to drive 140,000 miles before it breaks even. Not to mention the battery degradation and disposal. Some would do that. But how many, especially those that live within 20 miles of work? That's 40 miles per day, for 250 days per year, or 10,000 miles per year. That's 14 years of commuting. Right.
 
130Boxman
      ID: 571114225
      Sat, Dec 13, 2008, 08:19 		That's assuming the customer pays cash for it correct? I would imagine if you added in a constant financing rate, that margin would only grow as the interest on the Volt would be higher.
 
131nerveclinic
      ID: 26107108
      Sat, Dec 13, 2008, 09:18
Madman to your points about Citi and the car companies above, I'm not convinced at al they are trying to save the shareholders.

They are taking substantial equity stakes in all these bailouts. Speculation is citi shareholders may still get wiped out and the same holds true if a auto bailout includes equity concessions.

The dilution to the shareholder means at the very least it will be many years before a shareholder comes close to breaking even.

Look at AIG it's sitting at $1.80 a share and it was as high as 60.00. Citi isn't doing quite as badly...yet, but the citi bailout wasn't nearly as large as the AIG bailout. We won't know about Citi until we see how many shoes drop.

I do agree they are trying to save "the bank" and in AIG case I believe they saved the bond holder, but the holder of common shares was thrown under the bus.

To say they are doing this to "save the stock holder" is hard for me to wrap my head around.





 
132Madman
      ID: 81110118
      Sat, Dec 13, 2008, 14:16 		Nerve -- 11/21, Citi's trading at 3.77. Today it's 7.70, yeah, the announcement on over the weekend of 11/21-11/24 sure scared those guys off. And remember, without the bailout, the fair price would likely be zero.

Similarly for AIG. Most of that collapse was pre-bailout. Shares should be at zero, but as you note, are in the $1.80ish range.

The Democrats are bailing out the people that got them elected. Period.
 
133Razor
      ID: 181051618
      Sat, Dec 13, 2008, 15:24 		Henry Paulson is neither a Democrat, nor was he elected. The collapse of AIG would have had severe implications on not only our economy but globally as well.
 
134nerveclinic
      ID: 26107108
      Sat, Dec 13, 2008, 15:43

Madman

How is 1.80 a share bailing out a stock holder who held shares within the last 52 weeks at 60.00 a share?

It's inevitable that if they are going to save the institution, some of the share value will be retained but the main reason they are doing this is because the fall out would be so catastrophic. (Look what happened after the Lehman collapse)

Ok Citi is up at 7.70 but the amount of money they were given wasn't close to what AIG has been given. I think it remains to be seen what happens with Citi, there's likely more pain to come.

I'm not arguing the bailouts are all the right thing to do, I'm not smart enough to know that, but I don't think the "main reason" was to bail out the share holder.

If so why did they let WAMU share holders lose everything? Bear Sterns was being taken out at 2.00 a share and it wasn't until the share holders cried foul that is was raised to 10.00 a share. Lehman shareholders lost everything, that was one of the largest investment banks in the USA. Why was the AIG deal structured so aggressively that the share holders are left with a stock at 1.80 a share?

For the most part I think the share holders are being thrown under the bus.

If te main goal was to "save the share holders" they wouldn't be taking such large equity stakes in the companies they are bailing. I think they are applying a tourniquet to stop hemorrhaging as long as they can in hopes they prevent a complete wipe out of the USA financial system.

Again I am not arguing it's right. I just don't buy that the main reason is to "save the shareholder".








 
135nerveclinic
      ID: 26107108
      Sat, Dec 13, 2008, 16:00
Can anybody tell me where there is a market for a car like the Volt?

I don't get it. It runs on electricity. Where does the electricity come from? Either oil, gas or coal.

The only benefit I see, is reducing pollution in large metro areas by producing the energy in less populated areas. It still is using the oil or coal though when the energy is produced. It's still adding to the overall carbon footprint.

 
136Baldwin
      ID: 1211491020
      Sat, Dec 13, 2008, 16:20 		You don't see the benefit of lugging a thousand pounds of lead everywhere you go?
 
137Madman
      ID: 81110118
      Sun, Dec 14, 2008, 17:40 		Nerve -- the government can insure the risks or obligations, and thereby limiting the contagion, without also bothering to insure the institutions that wrote the risk.

The fact that the government is instead purposefully and explicitly protecting institutions and has, as of yet, still not bothered to directly address the risks, suggests to me that the main motivation for these interventions is to protect the institutions with the secondary goal being the recovery of the economy. Whether intentionally or not, the primary impact of those decisions is to protect equity and bondholders of those institutions, rather than letting them bear an even greater portion of the costs.

It is true that the government has not gone this route each and every time. But specifically with AIG and Citi, they have ... inexplicably, in my view. AIG bailout #1 was close enough to extortionary to not make much difference, but I can't explain the Citi reinsurance deal or AIG #2 without resorting to my thesis. The government is also using this model with GM and Chrysler.

Not coincidentally, this model interferes maximally with what has to happen for economic recovery. So we are definitely in interesting times. If this economy bounces back quickly, Bernanke, Paulson, Bush, Obama, Geithner (sp.?) will have been vindicated. I am skeptical.
 
138sarge33rd
      ID: 5011161410
      Sun, Dec 14, 2008, 19:16 		FTR, the market for the Volt is the in-town commuter. Market studies show some 80% of drivers, never drive beyond 80 miles/day in their cars. Household electricity, is cheaper than gasoline and in some cases is still hydro-electric in its origin. It can also, depending on the 'where', come from wind generators. The Volt, is a simple 'plug-n-drive' commuter car. It is NOT, the car for your family vacation. Besides which, the new technologies behind the car, have to 'start' somewhere. Given some degree of market acceptance, the technology can grow and improve. I mean really people, are you the type who would have questioned why buy a car in the first place when they first came out? There were no interstate highways, and gas stations every 6 miles. Or is it so simple that it comes from Detroit, therefore you find it necessary to lambast and ridicule the idea?
 
139jedman
      Dude
      ID: 315192219
      Sun, Dec 14, 2008, 20:02 		My question is the cost/benefit ratio. If it costs significantly more
than a car that can get 35 MPG, how long before it actually pays
off?
If you really want green, then my argument holds no weight. I am
just talking about how much you really are going to save if any.
When we bought my wife's Toyota Highlander, we looked at the
hybrid model also. IIRC, it was about $6-8 K more in price. When I
did the math, it didn't seem to make sense to pay that much more
for the amount she drives.
 
140sarge33rd
      ID: 5011161410
      Sun, Dec 14, 2008, 20:50 		the cost benefit isnt there for 1st generation thats true. But if the first generation doesnt achieve a measureable degree of market acceptance, do you honestly expect there to be an improved 2nd generation, or 3rd?

First generation autos/motorcycles, were less reliable than a donkey and a cart, slower (by virtue of mechanical failures and lack of infrastructure), and probably more costly to operate. Sure am glad SOME people decided to buy them anyway.
 
141jedman
      Dude
      ID: 315192219
      Sun, Dec 14, 2008, 21:02 		Agreed, it has to start someplace.
 
142nerveclinic
      ID: 26107108
      Mon, Dec 15, 2008, 00:23

in some cases is still hydro-electric in its origin. It can also, depending on the 'where', come from wind generators.

maybe 5% of all electricity?

I mean really people, are you the type who would have questioned why buy a car in the first place when they first came out?

Irrelevant argument, a fair minded person should be able to ask questions about a car that uses electricity, purportedly because it's green, when some haven't even stopped to consider the electricity has a carbon footprint.

Or is it so simple that it comes from Detroit, therefore you find it necessary to lambast and ridicule the idea?

Or is it Detroit so you have to pimp the idea... 8-]

I'm much more interested in technologies to convert cars to using natural gas. All ready widely in use in taxi fleets and bus fleets, 50% cleaner then oil, more abundant in supply in the USA then oil and cheaper then oil.

I would be interested in an electrical car only if it coincided with the production of many additional nuclear plants to generate the electricity.

By the way you left nuclear off you list and it is about 20% of our electricity and clean so that would have been a better counter arguement to my critisism then "hydro" electricity and wind.

 
143Baldwin
      ID: 1211491020
      Mon, Dec 15, 2008, 02:17 		Sarge

It's not like they are going to stop research on battery tech if I don't buy a Volt until the tech matures.
 
144sarge33rd
      ID: 2011191510
      Mon, Dec 15, 2008, 11:32 		My point was, and is...simply because this or that vehicle doesnt fit with y-o-u-r (generically) needs, certainly doesnt mean it doesnt have a legitimate place in the marketplace. A Suburban serves no purpose for me, but I recognize that gas hog that it is, for a family of 7 with something to tow, its actually a very efficient people mover. So it has its place. So too does the Volt.
 
145boikin
      ID: 532592112
      Mon, Dec 15, 2008, 12:19 		FTR, the market for the Volt is the in-town commuter. Market studies show some 80% of drivers, never drive beyond 80 miles/day in their cars. Household electricity, is cheaper than gasoline and in some cases is still hydro-electric in its origin. how does this work in the city where there is only city parking? I mean it seems ideal because you drive very little, but very unpractical from a recharging stand point.
 
146Boldwin
      ID: 5704850
      Mon, Jan 05, 2009, 08:52 		From Walk's NYT link in the Auto Bailout thread...
Whatever credit defaults are in theory, in practice they have become mainly side bets on whether some company, or some subprime mortgage-backed bond, some municipality, or even the United States government will go bust. In the extreme case, subprime mortgage bonds were created so that smart investors, using credit-default swaps, could bet against them.
I would like to see a complete list of the CDS counterparties rescued by the early Paulson moves and the AIG bailout.

This smells to me like the power elite having decided on crashing the system [or their finetuned timing of the ultimate October surprise] and figuring out how to make off like bandits in the process and with their insider understanding.

Don't tell me the insiders didn't spend the last year [when it was clear how serious the subprime mess was] positioning themselves to profit, as they rode that turkey downhill.
 
147Boxman
      ID: 337352111
      Mon, Jan 05, 2009, 09:41 		Don't tell me the insiders didn't spend the last year [when it was clear how serious the subprime mess was] positioning themselves to profit, as they rode that turkey downhill.

All they really had to do was short the DOW or the S&P or an ETF that follows a barrel of oil down. What I'd like to see in a year or so from now is a list of who the big buyers in residential real estate are; specifically undeveloped subdivision type lots where condo buildings can be put up. Just a hunch but I think there's more profit there.

You've got real estate experience right Boldwin? Where are the margins at?

I was looking for a recent article to post here on the Alt-A loans and when they reset. 60 Minutes had a feature about a month back that talked about if you thought the ARMs were bad, just wait for the Alt-As and the teaser rate ones to go. It was quoted in the story that a conservative estimate for a default rate was 50% and that they are already seeing significant defaults even though the borrower is still paying at the teaser rate.

 
148biliruben
      Leader
      ID: 589301110
      Mon, Jan 05, 2009, 09:53 		The question I have is how many are furiously refiing out of their Alt-As, now that 4.5% money is letting them off the hook. Definitely some, but I don't know if the number is significant. Probably many are stuck due to tightening standards and loss of equity.
 
149biliruben
      Leader
      ID: 589301110
      Mon, Jan 05, 2009, 09:55 		If you think it will be clear a year from now who the winners and losers are on the residential side, you are far too optimistic. That tells me we have a ways to go yet.

As soon as it's pretty much a universal consensus that residential RE is a dog of an investment, we will be at bottom.
 
150Boxman
      ID: 337352111
      Mon, Jan 05, 2009, 12:23 		Probably many are stuck due to tightening standards and loss of equity.

You nailed an important point. I would hope the lower LIBOR rates, which in turn causes credit spreads to relax, would have assisted with this problem. Even though, numerically, those numbers have calmed down that doesn't mean the banks have to do anything. I think it may be due to the fact that the banks are reserving higher amounts of cash than before to deal with the current torrent of foreclosures and don't foresee existing and forward cash flows to rebuild those reserves in anticipation of the next wave of foreclosures. That could be what is causing the residential lending to be increasing difficult.

I can see the banks point in this too because they are dealing with a situation that has a lot of delinquents, but the gov't and the economy at large wants them to lend en masse again. They may have neither the will nor the ability to do so because of what they are facing currently.
 
151Boxman
      ID: 337352111
      Mon, Jan 05, 2009, 12:25 		Then an additional problem to this is, if the banks do not lend how do they create new cash flows to build up their reserves? Are they going to just have a competition with rival banks for deposits? I haven't been following this, but I would imagine CD rates have been climbing.
 
152Perm Dude
      ID: 10558
      Mon, Jan 05, 2009, 12:33 		...and the economy at large wants them to lend en masse again....

I think this is a slight mistatement. The economy wants this lending freeze to end. We don't want a free-for-all lending situation.
 
153walk
      ID: 181472714
      Mon, Jan 05, 2009, 12:36 		End of the Financial World as We Know It

Article to which Boldwin references in #146, which I mistakenly put in the auto bailout thread. This article is a really good read on the situation.
 
154Biliruben
      ID: 101111315
      Mon, Jan 05, 2009, 17:04 		great article walk. I'd read liars poker years ago, and had
forgotten what a good writer lewis is.
 
155Building 7
      ID: 3111252013
      Mon, Jan 05, 2009, 18:40 		good article walk. 900 links to NYT articles, finally a good one. lq
 
156walk
      ID: 181472714
      Tue, Jan 06, 2009, 13:35 		LOL, B7!
 
157Biliruben via ifyone
      ID: 101111315
      Tue, Jan 06, 2009, 16:11 		The risk article in the mag is also very good.
 
158Boldwin
      ID: 5704850
      Wed, Jan 07, 2009, 13:18 		Wait till the credit crunch hits farmers trying to borrow for this year's seed.

Local small town banks are actually a bit more ready to lend right now [compared to the large commercial banks] but I still have a bad feeling about this.
 
159Biliruben via ifyone
      ID: 101111315
      Wed, Jan 07, 2009, 17:20 		What is going to get the small regionals is commercial RE loans.
They got shut out of residential, so they went whole-hog on
CRE.

That is just starting to collapse, and defaults are going to wipe
out dozens if not hundreds of smaller banks in 2009-10.

I want to say thousands, but I can't bring myself to be that
pessimistic.
 
160Boldwin
      ID: 5704850
      Wed, Jan 07, 2009, 21:02 		How did they get shut out of residential?
 
161biliruben
      Leader
      ID: 589301110
      Thu, Jan 08, 2009, 02:49 		Those loans were securitized.

Competition from securities markets has also affected smaller banks significantly, though less dramatically than larger banks. For example, the portfolio share of commercial real estate loans, which are not amenable to standardization and therefore are difficult to securitize, has increased markedly. Setting aside the 100 largest banks, the share of commercial real estate loans in bank loan portfolios nearly doubled over the past 10 years and is approaching 50 percent. The portfolio share at these banks of residential mortgage and other consumer loans, which are more readily securitized, fell by 20 percentage points over the same period.


Vice Chairman of the Fed Donold Kohn.
 
162Boldwin
      ID: 5704850
      Thu, Jan 08, 2009, 06:55 		Sounds to me like they weren't shut out, rather that they were stuck with comercial when they were only able to shop out the residential they originated.
 
163biliruben
      Leader
      ID: 589301110
      Thu, Jan 08, 2009, 07:31 		Yeah - they no longer could use them as bread and butter for their own portfolios.
 
164Boldwin
      ID: 5704850
      Thu, Jan 08, 2009, 08:29 		Well look on the bright side. Now is their chance to add bargain basement residential to their portfolio.
 
165biliruben
      Leader
      ID: 589301110
      Thu, Jan 08, 2009, 10:54 		The ones that survive, maybe.

 
166Baldwin
      ID: 00321417
      Thu, Jan 15, 2009, 05:01 		Courtesy the Patriot Room:



Fred Thomson

...who for some reason could not attract campaign donations.
 
167walk
      ID: 181472714
      Wed, Jan 21, 2009, 12:28 		Live Blogging Geithner Nomination

Interesting stuff.
 
168Building 7
      ID: 471052128
      Wed, Jan 21, 2009, 14:07 		He couldn't be worse than Paulson. Millions of eligible candidates and they have to nominate a tax cheat to head the IRS. I'm sure that's going to do wonders for enforcement.
 
169DWetzel at work
      ID: 49962710
      Wed, Jan 21, 2009, 15:38 		It takes a thief to catch a thief?
 
170biliruben
      Leader
      ID: 589301110
      Wed, Jan 21, 2009, 22:48 		I'm having trouble getting behind Geithner.

I suppose we need someone with experience, but you gotta find someone with a strong sense of ethics, no?
 
171jedman
      Dude
      ID: 315192219
      Wed, Jan 21, 2009, 23:03 		I agree. I do not believe that he did not know he was supposed to
pay those taxes. They gave him extra pay to cover the tax and I do
not believe that he was not given all the information he needed to
know what he was supposed to do. There is no way any of us get
off as easy in the same situation. Does anybody know if he had to
pay any interest and penalties? And he is going to lead the IRS?

 
172Mith
      ID: 2894309
      Thu, Jan 22, 2009, 09:44 		He paid interest but penalties were waived. No idea how often that happens with this particular issue. I noted that Neil Cavuto was interestingly very sympathetic while discussing this earlier in the week. He and his guest (Ben Stein I think?) agreed that this is a very common mistake and both suggested that it's preferable to have a Treasury Secretary who has had to deal with having the IRS on his case, giving him some familiarity with "how the rest of us feel when it happens to us."

That's certainly more generous than I'd have been but really I know very little about how common this particular offense is and how it is typically dealt with. I heard someplace that it was a good deal of time after the IRS contacted him before he finally paid up. If true, I have no idea whether there is a legitimate reason for such a delay, whether his accountants/attorneys could have been negotiating with auditors during that time or what have you.
 
173Perm Dude
      ID: 410112116
      Thu, Jan 22, 2009, 10:12 		I agree with Cavuto on this. The IRS agent typically would have wide latitude to waive or reduce penalties and/or interest. Penalties are typically waived in the case of an honest mistake (in the judgement of the Agent).
 
174biliruben
      Leader
      ID: 589301110
      Thu, Jan 22, 2009, 10:14 		My old boss's husband made this in error, completely innocently.

But this is either an ethical lapse or an intellectual one; something that should be in his wheel-house.

Either way, it makes him less qualified in my mind.
 
175Building 7
      ID: 471052128
      Thu, Jan 22, 2009, 11:01 		and both suggested that it's preferable to have a Treasury Secretary who has had to deal with having the IRS on his case, giving him some familiarity with "how the rest of us feel when it happens to us."

They must also think that it's preferable to have a District Attorney who has committed murder so he can have some familiarity with "how a murderer feels when it happens to them.

I could see maybe the Secretary of Transportation or something sliding on cheating on their taxes. But the Secretary of Treasury....Head of the IRS. Come on....we can do better.

He either knowingly cheated or he really didn't know the law. It doesen't matter. Either way, he has no business being the head of the IRS.
 
176Perm Dude
      ID: 410112116
      Thu, Jan 22, 2009, 11:26 		Actually, this is comparable to someone with a speeding ticket getting tapped to be Police Chief.

We need to stop looking for perfect people to run our government.
 
177Mith
      ID: 2894309
      Thu, Jan 22, 2009, 11:30 		He either knowingly cheated or he really didn't know the law. It doesen't matter. Either way, he has no business being the head of the IRS.

I tend to think that demanding the Treasury Secretary be a qualified expert on the entire tax code is a rather misplaced prerequisite.

I also think he likely had one or more accountants handling his taxes for him and that when tax issues come up with politicians it's never easy to know to what extent they were involved with the process. I'm pretty sure Geithner doesn't sit at his kitchen table every year with a calculator and the 1040 instruction manual.
 
178jedman on iPhone
      ID: 320442118
      Thu, Jan 22, 2009, 12:35 		PD made a point that I am coming to accept grudgingly.
Everybody in politics seems to have something shady in their
past. We seem to be left to choose the least offensive. A sad
commentary on our politicians. I really don't think he gets
through if he was a Bush appointee.
 
179Boldwin
      ID: 17042224
      Thu, Jan 22, 2009, 16:45 		Does this mean we all get the 'turbo tax screwed up' defense at least once?
 
180Perm Dude
      ID: 410112116
      Thu, Jan 22, 2009, 17:30 		File this under "Casting stones, Those Who Have Sinned Should Not Be"
 
181jedman
      ID: 552262217
      Thu, Jan 22, 2009, 18:46 		I agree on the one hand that he is not lily white in this. On the other, I think these are very different in that Geithner, at least from what I have read, prepared his own taxes using Turbo Tax, was given a letter from the IMF clearly stating that he was liable for the taxes, and still did not pay and did not pay the two unaudited years until he was being put up for the nomination.

Is it just impossible to find somebody that can be totally clean in the vetting process? This is what disillusions me so much with politics. It seems it is becoming a choice between the lesser of two evils, pick the least shady character. I know that is a generalization, but it sure seems to be the case most of the time. Maybe in this day and age it is impossible to rise in the political ranks and be completely above board.
 
182Building 7
      ID: 3111252013
      Thu, Jan 22, 2009, 19:02 		There are plenty of candidates that have not cheated on their taxes. Had Geithner not been nominated, the
taxes would likely remain unpaid. This is the best we can come up with for Secretary of Treasury.

 
183Boxman
      ID: 571114225
      Sat, Feb 21, 2009, 21:18
 
184Boxman
      ID: 571114225
      Sat, Feb 21, 2009, 21:25
 
185Perm Dude
      ID: 231262119
      Sat, Feb 21, 2009, 22:08 		Heh. Yes, Bush & McCain tried so hard for years to keep from having their brains taken over by the minority party. Their selfless dedication wasn't enough, however, and the godless ones went and did everything you see wrong today...
 
186Baldwin
      ID: 9123198
      Sat, Feb 21, 2009, 23:10 		You just can't process that video, can you PD?

The truth staring you in the face and it makes no impression.

What you couldn't socialize by getting it shoehorned into social security coverage, or imposed as unfunded mandates, you tried to do by blackmailing the mortgage industry into socialized housing only to crash the world's economy and you think you deserve a medal for it.
 
187Perm Dude
      ID: 231262119
      Sat, Feb 21, 2009, 23:45 		Wow, you really believe that, don't you? Honestly and truly believe that cherry-picked snippets taken out of context (read with squinty eyes) can get the GOP off the hook despite their gleeful chokehold on power for 8 years?

You don't deserve the reality-free bubble you've made for yourself.
 
188jedman
      Dude
      ID: 315192219
      Sun, Feb 22, 2009, 00:23 		Did I hear Barney Frank say "And even if there was a problem,
the federal government wouldn't bail them out."?

PD, what exactly is taken out of context? It seems clear to me
that Freddie and Fannie were being staunchly held up as
wonderful companies that were strong and not in any kind of
financial problems. It seems clear to me that more regulation of
them was being asked for and it was being said they didn't need
it.

I don't agree that they were the only problem out there, but how
can it be defended that they were not in the wrong and were
mismanaged?
 
189Perm Dude
      ID: 231262119
      Sun, Feb 22, 2009, 09:10 		I don't agree that they were the only problem out there, but how can it be defended that they were not in the wrong and were mismanaged?

That is the difference between you and much of the Right nowadays, who, in their attempts to blame everything on Democrats, refuse to believe that anything else was going on by those who were actually in charge at the time.

The problems at Fannie Mae and Freddie Mac have been wildly overblown by the Right in this regard. as well
 
190Mith
      Dude
      ID: 01629107
      Sun, Feb 22, 2009, 09:28 		It never ceases to amaze me how 8 chopped up minutes of video featuring 6 people from a 6 hour meeting that included 70 or 80 members of congress can make such gullible fools of the reactionary right.

Naked facts, people.
 
191jedman
      Dude
      ID: 315192219
      Sun, Feb 22, 2009, 10:25 		Good link MITH. I totally agree that sub-primes were not the
only problem that led to the housing and financial collapse, they
were a part of it. Blame is on all sides.

Despite that, to me the point of the video is that so many
Congressmen, and I won't just say Democrats, had their head in
the sand with regards to Fannie Mae and Freddie Mac. Whether
it was because they received large donations, or they were just
stupid, I don't know. It was all just common sense to me,
people making less than $50,000 could not afford a $400,000
house in a real world. People with $200,000 of inflated equity
in their homes could not afford to use that equity to purchase
multiple investment properties with artificially low payments and
negative cash flows when the real mortgage payment kicked in.

The sad thing is that many of the real perpetrators of this mess,
the predatory lenders and brokers have pocketed their money
and are gone. I wish there was a way to make some of them pay
for their unscrupulous practices. I have no sympathy for those
who were greedy and leveraged themselves to the max trying to
make a quick buck flipping houses. Unfortunately, many who
have just lost their jobs and can't afford their houses are caught
up in this and paying a steep price. But I'm not certain it is the
government's role to bail them out. There is a certain amount of
risk that goes with investing in anything, but if there is going to
be a bailout, I sure want it to be for people who put down a
reasonable amount of money and weren't way overextended in
the first place.
 
192jedman
      Dude
      ID: 315192219
      Sun, Feb 22, 2009, 10:28 		I am going to refer to my question above, in the first video did
Barney Frank say that we would not bail them out if there was a
problem? He is so hard to understand, I'm not sure if I heard it
correctly. I'd rather not plow through the transcript that MITH
linked to above.
 
193Mith
      Dude
      ID: 01629107
      Sun, Feb 22, 2009, 10:54 		Jedman

the point of the video is that so many
Congressmen, and I won't just say Democrats, had their head in
the sand with regards to Fannie Mae and Freddie Mac.

Well, the point of the video is to serve as propaganda designed to demonize Congressional Democrats. The video is titled, "Shocking Video Unearthed Democrats in their own words Covering up the Fannie Mae, Freddie Mac Scam that caused our Economic Crisis". Here's the video info provided by the Youtube subscriber, "NakedEmporerNews":
Democrats in their own words Covering up the Fannie Mae, Freddie Mac Scam that caused our Economic Crisis.

At a 2004 hearing see Democrat after Democrat covering up and attacking the regulations to protect Fannie Mae and Freddie Mac (their Cash Cows) that are now destroying our economy because the Democrats let them cheat.
I have no interest in defending what happened at FM/FM, or the fact that congress - including the majority party - was clearly not interested in addressing any issues there.

The only point in my response is that the Youtube subscriber who provided that video and those who propagate it aren't interested in what really happened. They just want a convenient tool to attatch blame for the calamity on their political opponents.
 
194jedman
      Dude
      ID: 315192219
      Sun, Feb 22, 2009, 11:13 		Agreed, I should have said the point I am getting from the video.

Since frequenting this forum, I have put up a lot more filters when
listening to talk radio. I have yelled at Hannity and Rush as much
as Ed Schultz and Mike Malloy. I only catch snippets of the shows
when I am in my car. They are entertainers, they don't let opposing
views get in a word without interruption and I hate the name-
calling. Let me throw Wilkow in there as well. They all bring up
good points defending their political persuasion, but I agree that
some points are taken out of context.
 
195Boldwin
      ID: 261126418
      Sat, Dec 04, 2010, 21:54 		Some lessons just never sink in. Hedge funds still selling CDS, as if they wouldn't crash and burn in the same crisis they insure against. Maybe the lesson they learned was this is the sector the government will rescue first.
 
196Boldwin
      ID: 481111221
      Sun, Dec 02, 2012, 22:48 		Routing around the coming derivatives safeguards.
U.S. banks such as Morgan Stanley and Goldman Sachs have been explaining to their foreign customers that they can for now avoid the new rules, due to take effect next month, by routing trades via the banks' overseas units, according to industry sources and presentation materials obtained by Reuters.

The rules, a result of Washington's Dodd-Frank reforms, aim to prevent financial catastrophes in the over-the-counter (OTC) market - a huge, opaque market which is partly blamed for felling Lehman Bros in 2008 and fuelling a global financial crisis.

They call for U.S. banks dealing in OTC instruments, such as interest-rate swaps and cross-currency options, to effectively set aside capital against the risk of trades turning sour, execute their trades on electronic platforms and report them to U.S. authorities - requirements that worry the banks' offshore clients and threaten to drive business away from Wall Street.