The Latest Government Bailout of the Mortgage Industry

[JohnnyMack]

http://www.msnbc.msn.com/id/23573406/

So the Fed agrees to make $200 Billion available to banks and the banks can use bad debt (from the mortgage loans) as collateral. The banks can get the bad debt off their books and improve their balance sheets.

The goal is to get the (greedy ****s at the) banks to be more aggressive in their lending practices (didn't they already do that once to start this mess?) and help kickstart the economy a bit.

I guess my question is who's going to be left holding the bag for this bad debt? It seems like the banks and the Fed are just playing hot potato with the bad debt and it isn't really going anywhere.

[picasso]

it's going to Arkansas.

[NormanPride]

We can just bill the Future.

[sooneron]

I blame reggie bush's parents for all of this.

[JohnnyMack]

Does anyone other than Moe, Larry & Curly have anything to add?

[sooneron]

Nuk nuk!!

??

[Mixer!]

Light the Froze signal...

[sooneron]

Light the Froze signal...

Or a Faninama rant.

[colleyvillesooner]

Light the Froze signal...

http://img84.imageshack.us/img84/6672/alaskamoonsb1.jpg (http://imageshack.us)

[NormanPride]

So is this just printing money and giving it to banks so they don't go belly-up? And these are the smartest people around?

[r5TPsooner]

http://www.msnbc.msn.com/id/23573406/

So the Fed agrees to make $200 Billion available to banks and the banks can use bad debt (from the mortgage loans) as collateral. The banks can get the bad debt off their books and improve their balance sheets.

The goal is to get the (greedy ****s at the) banks to be more aggressive in their lending practices (didn't they already do that once to start this mess?) and help kickstart the economy a bit.

I guess my question is who's going to be left holding the bag for this bad debt? It seems like the banks and the Fed are just playing hot potato with the bad debt and it isn't really going anywhere.

Think tax increases across the board.

My question is this... no one made the buyer or the banks loan them the money or take the money. Why should good hard working folks who do pay there bills on time get punished for others stupidity?

I would have loved to have bought a house in Gaillardia (the golf course looks sweet) with zero down at about $1500/month but that wasn't gonna happen realistically without me getting drilled on the back end of the mortgage.

My neighbors are going thru the same thing. Our subdivision is about 4 years old and 60% full with houses still being built. We just started collecting HOA dues last year. My neighbors, who just happen to be very unpopular in the hood, have two liens on there home for not paying last years or this years HOA dues. Then the wife goes around bitching how the HOA has done nothing to improve the neighborhood.

She then tells us how they bought the home with the sellers realtor and have one of those three year ARM's. She then tells my wife that they are moving because the people in the neighborhood are boring and not buying more stuff to better the place. Yeah right but at least they're selling the house... I hope.

I just pray to God that the bank and county sheriff don't make a cameo appearance in the next month or so at there place. I also pray that I get some decent neighbors who take pride in there homes and want to be somewhat friendly and cordial.

[Ike]

This is a very interesting article to read...Long, but interesting nonetheless.

http://www.harpers.org/archive/2008/02/0081908

[achiro]

So does all this mean that I can go ahead and buy that house that I can't afford and actually get a loan for it?

[Frozen Sooner]

I got nothing. We weren't involved with this mess. All I can say is that some people over at FDIC need to lose their jobs over this.

[yermom]

hey Froz, what does it take to start a bank?

i'm in the wrong business.

it must be pretty sweet to have a gig that can't lose that takes advantage of idiots at the same time

it's like a casino with less risk

[Mixer!]

I had to pick my jaw up off the floor when my friend told me that the mortgage on the $107K house she was looking at would be roughly $800/month. WTH?

[yermom]

is that not counting the insurance/taxes escrow stuff? that sounds about normal for a standard 30 year mortgage, doesn't it?

[Frozen Sooner]

I had to pick my jaw up off the floor when my friend told me that the mortgage on the $107K house she was looking at would be roughly $800/month. WTH?

That's about right even with taxes and insurance on a 30-year note.

[Frozen Sooner]

hey Froz, what does it take to start a bank?

i'm in the wrong business.

it must be pretty sweet to have a gig that can't lose that takes advantage of idiots at the same time

it's like a casino with less risk

Well, let's see:

First, you need to be well-capitalized. So you'll need to have a wad of money on deposit with the Federal Reserve.

Second, you'll need to purchase deposit insurance through the FDIC.

Third, you'll need to get chartered either through FDIC or your state of operation.

That's all I can think of.

[Partial Qualifier]

Think tax increases across the board.

My question is this... no one made the buyer or the banks loan them the money or take the money. Why should good hard working folks who do pay there bills on time get punished for others stupidity?



Yeah that would be my question too. WTF.

I heard someone on NPR talking about the possibility of legislation that would basically force the banks to take a loss by re-estimating the foreclosure candidates' mortgage value down to something sensible.

I don't like the sound of that either, but hey. It Is what It Is. We need to Leverage our Resources, Align our Objectives and achieve Business Convergence.

[Vaevictis]

I guess my question is who's going to be left holding the bag for this bad debt? It seems like the banks and the Fed are just playing hot potato with the bad debt and it isn't really going anywhere.

We're the ones left holding the bag for the bad debt, whether it's on the Feds books or the lender's books. And frankly, I think it's probably better on the Fed's books. The Fed can absorb it by printing more money.

If the lenders absorb it, and they go bankrupt, our credit system could go kaput. That would be an incredibly bad outcome.

[yermom]

Well, let's see:

First, you need to be well-capitalized. So you'll need to have a wad of money on deposit with the Federal Reserve.

Second, you'll need to purchase deposit insurance through the FDIC.

Third, you'll need to get chartered either through FDIC or your state of operation.

That's all I can think of.

well, i'm about to get a nice tax refund. you want to run my bank for me?

[Sooner_Havok]

The Fed can absorb it by printing more money.

If the lenders absorb it, and they go bankrupt, our credit system could go kaput. That would be an incredibly bad outcome.

Yeah, and as they print more money, the stuff already in your wallet becomes more and more worthless.

If the lenders were forced to absorb the loss of their stupid mistakes, then the ones that remained might have learned something from the dead lenders mistakes. I think it is called "free market economics"

[JohnnyMack]

We're the ones left holding the bag for the bad debt, whether it's on the Feds books or the lender's books. And frankly, I think it's probably better on the Fed's books. The Fed can absorb it by printing more money.

If the lenders absorb it, and they go bankrupt, our credit system could go kaput. That would be an incredibly bad outcome.

And the Euro continues its climb.

[JohnnyMack]

DAMN YOU HAVOK!!!!!!!!!!!!!!

[Sooner_Havok]

DAMN YOU HAVOK!!!!!!!!!!!!!!

:D

[Frozen Sooner]

Yeah, and as they print more money, the stuff already in your wallet becomes more and more worthless.

If the lenders were forced to absorb the loss of their stupid mistakes, then the ones that remained might have learned something from the dead lenders mistakes. I think it is called "free market economics"

Lenders aren't particularly fond of inflation either. Deposit accounts reprice rather more quickly than loans do.

[Vaevictis]

Yeah, and as they print more money, the stuff already in your wallet becomes more and more worthless.

Wow, that comes at a complete shock to me. :D


If the lenders were forced to absorb the loss of their stupid mistakes, then the ones that remained might have learned something from the dead lenders mistakes. I think it is called "free market economics"

Yeah. And have you thought about the secondary effects of something like that?

[Sooner_Havok]

Lenders aren't particularly fond of inflation either. Deposit accounts reprice rather more quickly than loans do.

Then let the free market take care of the companies with the bad business plans.

[Sooner_Havok]

Wow, that comes at a complete shock to me. :D



Yeah. And have you thought about the secondary effects of something like that?

Yeah, a company with a horrible business plan goes under.

[Vaevictis]

Yeah, a company with a horrible business plan goes under.

And the number of people offering credit in the market shrinks. If too many go under, or the wrong ones go under, the market for credit becomes inefficient.

So, what do you think happens to the price of credit when this happens? And what do you think happens to the economy in general when the price of credit changes in this way?

Keep in mind that this is problem is believed to be pretty systemic and it'll likely be either "too many" or "the wrong ones", if not both.

[Frozen Sooner]

Havok, that's not going to happen.

The banks that were involved with this weren't just lenders-they were depository institutions as well. As in "institutions that hold deposits for people." The FDIC regulates those businesses and insures accounts from loss. Should the lender go tits-up, then the FDIC is going to have to step in and pay off all those accounts. I haven't looked at the numbers, but that's going to cost a ton of money. It's no use saying "Free market" over and over, the depository institutions have paid for insurance that's backed by the full faith and credit of the United States Government.

Beyond that, if the FDIC ever has to go in and pay massive claims like this would generate, it's going to shake consumer confidence in the US Banking industry. Needless to say, a run on the banking system is something that's wildly contrary to public policy.

The problem here was with the FDIC. The FDIC is supposed to step in and put a stop to stupid lending policies for this very reason. They failed in their job.

[Sooner_Havok]

And the number of people offering credit in the market shrinks. If too many go under, or the wrong ones go under, the market for credit becomes inefficient.

So, what do you think happens to the price of credit when this happens? And what do you think happens to the economy in general when the price of credit changes in this way?

Keep in mind that this is problem is believed to be pretty systemic and it'll likely be either "too many" or "the wrong ones", if not both.

So you are saying that these companies should just get a pass for what they did? They screwed up, huge. If they can't afford to absorb their loss, then they deserve to go under. The beauty of the free market system is that as one company fails because of its choices, and another with a better plan will emerge.

Does anyone else find it funny that I am the one preaching free market economics? :D

[Vaevictis]

So you are saying that these companies should just get a pass for what they did? They screwed up, huge. If they can't afford to absorb their loss, then they deserve to go under. The beauty of the free market system is that as one company fails because of its choices, and another with a better plan will emerge.

I agree that they deserve to go under. But it's probably not in our country's best interest for them to do so.

Dude, the Port Authority of New York was having to issue debt at 20% recently. 20%! And this is a AA- rated muni bond. And this is just because of FEAR in the market.

Imagine if it was based on more than just fear. How well do you think our economy would be doing if everybody was having to issue debt at 20% or more?

[Sooner_Havok]

Beyond that, if the FDIC ever has to go in and pay massive claims like this would generate, it's going to shake consumer confidence in the US Banking industry. Needless to say, a run on the banking system is something that's wildly contrary to public policy.

The problem here was with the FDIC. The FDIC is supposed to step in and put a stop to stupid lending policies for this very reason. They failed in their job.

I think this has already shaken consumer confidence pretty bad. They fact that our money is worthless, oil is at record highs, and predatory lenders get bailed out while their victims get the shaft...

I would say that consumer confidence has taken a pretty big hit.

And let's not pass the buck here. Yeah, FDIC is supposed to stop stupid lending policies, but that still doesn't free the lenders from their responsibility. They knew what they were doing was stupid, they did it anyways.

[Sooner_Havok]

I agree that they deserve to go under. But it's probably not in our country's best interest for them to do so.

Dude, the Port Authority of New York was having to issue debt at 20% recently. 20%! And this is a AA- rated muni bond. And this is just because of FEAR in the market.

Imagine if it was based on more than just fear. How well do you think our economy would be doing if everybody was having to issue debt at 20% or more?

Nothing is free man. We ****ed up pretty bad. There is no easy fix to this. One way or another this debt will be settled. The question has to become do we man up, take the hit now and try to rebuild, or do we put it off so our children have to deal with it. I think the current generation has already shoveled enough **** onto the next generation, maybe we can take care of this one on our own?

[NormanPride]

I hate the Wizard of Oz.

[Vaevictis]

Nothing is free man. We ****ed up pretty bad. There is no easy fix to this. One way or another this debt will be settled. The question has to become to we man up, take the hit now and try to rebuild, or do we put it off so our children have to deal with it. I think the current generation has already shoveled enough **** onto the next generation, maybe we can take care of this one on our own?

Heh, mate, I agree with the principle. I just don't think you quite get the ramifications of the credit market seizing up like everyone thinks it's in danger of doing.

In principle, I would rather see these fools suffer. In practice, I think it's better for everyone if they didn't. If you let the credit markets collapse, you're risking full-blown depression. I think that's something that is to be avoided at almost any cost.

[Sooner_Havok]

What is worse, $5 pounds and $4 Euros or a depression? Won't the continued fall of the dollar eventually lead to a depression? I just seems that we can deal with this economic depression now, or we can put it off for a few years so that the current generation in power doesn't have to deal with it.

[Vaevictis]

What is worse, $5 pounds and $4 Euros or a depression? Won't the continued fall of the dollar eventually lead to a depression? I just seems that we can deal with this economic depression now, or we can put it off for a few years so that the current generation in power doesn't have to deal with it.

It depends on how far it falls, and I just don't see it falling far enough for that to happen -- provided we can prevent it from dropping TOO rapidly.

See, eventually, the dollar will fall to a point where it'll be attractive for other countries to import manufactured goods from here again. Trust me -- that won't be the worst thing ever. At that point, it'll stabilize.

[StoopTroup]

Would a good stock market crash help things?

[Sooner_Havok]

It depends on how far it falls, and I just don't see it falling far enough for that to happen -- provided we can prevent it from dropping TOO rapidly.

See, eventually, the dollar will fall to a point where it'll be attractive for other countries to import manufactured goods from here again. Trust me -- that won't be the worst thing ever. At that point, it'll stabilize.

well, are we almost there then? With $2 pounds, $1.50 Euros, and $1+ loonies it seems that our currency is already pretty devalued. I doubt that this next round of printing $200 billion that we can't back up will do our currency any favors either. We are already at all time lows compared against every other major currency.

[Frozen Sooner]

I think this has already shaken consumer confidence pretty bad. They fact that our money is worthless, oil is at record highs, and predatory lenders get bailed out while their victims get the shaft...

I would say that consumer confidence has taken a pretty big hit.

And let's not pass the buck here. Yeah, FDIC is supposed to stop stupid lending policies, but that still doesn't free the lenders from their responsibility. They knew what they were doing was stupid, they did it anyways.

1. A major part of the FDIC's job is to monitor lending practices of member institutions to ensure solvency. It's not passing the buck to point out that they failed miserably. Sure, the lending practices were ill-conceived in the first place-but one way or another the government's going to have to pony up a lot of cash to clean up this mess, whether it's by propping up the lending side long enough for the lender to not bring the whole bank down or by paying off on deposit insurance.

2. Consumer confidence is shaken, but consumer confidence in the banking system is still high-or do you really think your deposits aren't safe right now? I haven't noticed any particularly long lines of people wanting to close their accounts.

[Chuck Bao]

I’m still trying to mentally process all of this.

Thank you everyone for your comments.

This is pretty much bizarro land because no news source I’m getting wants to directly talk about bank failure. So, I’m asking: is it basically like this?

1) Financial institutions don’t trust each other anymore because some will most certainly go belly up due to the unprecedented default on mortgage loans.
2) Liquidity in the debt securities market essentially dried up because of counterparty risks, the fear of dumping the good debt to cover the bad stuff and foreigners not buying in because of the sinking dollar.
3) The Fed opened a life line to the system by accepting mortgage-backed securities as collateral up to $200bn.
4) As many of these banks will still go down, the Fed will eventually be left holding the bag and take the loss.
5) The Fed opening its window to the financial system may restore some confidence in the system. It may help stop some banks from going down, well at least not immediately.
6) The Fed willingness to assume losses in the system is further deteriorating confidence in the dollar.
7) Meanwhile, the DJIA posts one of its biggest gains in history on this news.

In regard to the last point, and I’m trying to be truthful, I’ve completely given up on any idea of arguing based on long-term fundamentals. I’ve just gone to short-term trading opportunities on the latest news flows in my stock market comments.

I pity those people who have part of their hard-earned life savings in the capital markets. They face declining interest rates, higher inflation, weakening dollar and a very volatile stock market.

Nobody gets a free pass, but the burden is unfairly passed on. Like the Asian economic crisis 10 years ago, huge amount of wealth for entire nations were wiped out just like that and, in hindsight, that was pretty stupid. That’s like this case, I’m sure.

[Sooner_Havok]

Nobody gets a free pass, but the burden is unfairly passed on. Like the Asian economic crisis 10 years ago, huge amount of wealth for entire nations were wiped out just like that and, in hindsight, that was pretty stupid. That’s like this case, I’m sure.

See, that is what I think must people are missing. I had a history professor once who made it a point to tell us almost everyday that every generation in America had outdone what the previous one had done, and that my generation would be the first not to.

I am sure it is easy when the generation ahead of you has laid a good foundation for the upcoming generation to make progress. But what about when the generation ahead of you takes a jackhammer to the foundation and sells the rubble? Yeah, they did good for themselves, they tore down everything that was there and made some money doing it, but what about the people who show up next? They have to start from scratch.

[Chuck Bao]

1. A major part of the FDIC's job is to monitor lending practices of member institutions to ensure solvency. It's not passing the buck to point out that they failed miserably. Sure, the lending practices were ill-conceived in the first place-but one way or another the government's going to have to pony up a lot of cash to clean up this mess, whether it's by propping up the lending side long enough for the lender to not bring the whole bank down or by paying off on deposit insurance.

2. Consumer confidence is shaken, but consumer confidence in the banking system is still high-or do you really think your deposits aren't safe right now? I haven't noticed any particularly long lines of people wanting to close their accounts.

Bankers are whores. They have always been and will always be. Their job is to lend other people's money. The more the better.

Credit rating agencies of debt securities, on the other hand, should be objective and forward looking and actually do their job. Otherwise, what good are they?

[Frozen Sooner]

I think the market is all happy-pants because Spitzer is retiring from public life.

But yeah, I think you've got it. I mean, the banks are going to end up defaulting on a lot of those loans from the Fed, but I think the Fed is planning on forgiving the bank loans on them anyhow.

Look at it this way, which costs less. Mind you, these numbers are just being pulled out of my butt:

Countrywide Home Loans defaults on a $200B loan to the federal reserve that they've paid down to $160B. The Federal Reserve takes on $160B in non-performing mortgages, ends up foreclosing, and ends up with losses of $40B.

OR:

Countrywide Home Loans folds because of high default in the mortgage portfolio. Countrywide Bank is no longer able to meet interest commitments or deposit requirements. A run on Countrywide starts and the FDIC ends up having to pay out $100B in account insurance claims.

From a loss-mitigation standpoint, what the Fed is doing makes sense.

[Frozen Sooner]

Bankers are whores. They have always been and will always be. Their job is to lend other people's money. The more the better.

Credit rating agencies of debt securities, on the other hand, should be objective and forward looking and actually do their job. Otherwise, what good are they?

As opposed to traders, whose job it is to get rich off of other people's risk.

I don't think I've disputed that credit rating agencies should be subjective or non-forward looking.

[Sooner_Havok]

I think the market is all happy-pants because Spitzer is retiring from public life.

But yeah, I think you've got it. I mean, the banks are going to end up defaulting on a lot of those loans from the Fed, but I think the Fed is planning on forgiving the bank loans on them anyhow.

Look at it this way, which costs less. Mind you, these numbers are just being pulled out of my butt:

Countrywide Home Loans defaults on a $200B loan to the federal reserve that they've paid down to $160B. The Federal Reserve takes on $160B in non-performing mortgages, ends up foreclosing, and ends up with losses of $40B.

OR:

Countrywide Home Loans folds because of high default in the mortgage portfolio. Countrywide Bank is no longer able to meet interest commitments or deposit requirements. A run on Countrywide starts and the FDIC ends up having to pay out $100B in account insurance claims.

From a loss-mitigation standpoint, what the Fed is doing makes sense.

Fine. No really, fine them. If you are going to bail them out, take on there debt, and allow them to continue with their horrible business model, fine them. Or, better yet, hold them to the same standards as you would an individual claiming bankruptcy. I know that the CEOs of these companies have huge amounts of collateral, seize it along with anything the lender themselves might have.

[Frozen Sooner]

That's not really the way corporations work. So long as they were honestly disclosing earnings and such and were reserving for bad debt according to GAAP, I don't think there's much legally you can do to seize the private assets of a corporate officer.

Don't get me wrong: I don't like any of this, and if you think I'm defending extremely-high-LTV lending or ill-advised ARMs, I'm not. I've been fortunate to work at a place that didn't engage in those practices and our mortgage portfolio is in excellent shape. I think you're also laboring under a misconception if you think that the boardrooms and management of these institutions aren't about to see a major shakeup-FDIC has the power to remove an institution's management team if they find evidence of poor management (which this would qualify as) or even force a bank to merge with another.

[StoopTroup]

Why aren't the folks who run the hookers in trouble?

[Sooner_Havok]

That's not really the way corporations work. So long as they were honestly disclosing earnings and such and were reserving for bad debt according to GAAP, I don't think there's much legally you can do to seize the private assets of a corporate officer.

Don't get me wrong: I don't like any of this, and if you think I'm defending extremely-high-LTV lending or ill-advised ARMs, I'm not. I've been fortunate to work at a place that didn't engage in those practices and our mortgage portfolio is in excellent shape. I think you're also laboring under a misconception if you think that the boardrooms and management of these institutions aren't about to see a major shakeup-FDIC has the power to remove an institution's management team if they find evidence of poor management (which this would qualify as) or even force a bank to merge with another.

I don't think you are trying to defend this stuff, you are just trying to rationalize something to me that I refuse to rationalize. :D

I mean, at least a few folks in the Enron thing got some jail time, at least there company went down. I know it is probably what is best, but it isn't what is right.

http://images.businessweek.com/gen/map_of_misery.jpg

look at the areas where this was rampant, look where it wasn't. The people smart enough not to get mixed up in this are now going to have to pay for those ignorant enough to get caught up in it. People who just graduated college or are about to, they are the ones who will pay for the most of this though, just like they have to pay for the rest of their parents generations sins

[Chuck Bao]

I think the market is all happy-pants because Spitzer is retiring from public life.


I know from my daily fix on CNBC that the Spitzer dealio was quite market negative initially. I think before this whole prositution issue broke he was on their show and actively trying to broker the bank bail-out of the muni bond insurers. Afterwards, the rest of Wall Street probably was clearly so happy pants because what you want to dick around about? Prositution rings or recession?

[Frozen Sooner]

I don't think you are trying to defend this stuff, you are just trying to rationalize something to me that I refuse to rationalize. :D

I mean, at least a few folks in the Enron thing got some jail time, at least there company went down. I know it is probably what is best, but it isn't what is right.


look at the areas where this was rampant, look where it wasn't. The people smart enough not to get mixed up in this are now going to have to pay for those ignorant enough to get caught up in it. People who just graduated college or are about to, they are the ones who will pay for the most of this though, just like they have to pay for the rest of their parents generations sins

The facts of the Enron case are substantially different. For one, the Federal Government didn't have a commitment to honor Enron's obligations. For two, Enron involved straight-up deceit of people to whom they owed a fiduciary duty-that's not the case here.

I'm well-aware that I'm going to have to pay for part of this mess. In point of fact, I'm probably going to have to pay more than you are, as everyone in banking is pretty cautious about expansion right now and that limits my opportunities for advancement.

Your issue isn't really with the attempted solution, though, even though you feel outrage at a "bail-out." Your issue is with the facts of the situation. Those facts are ****ed. It's a baaad situation. The banks shouldn't have been lending the money. The borrowers shouldn't have bitten off more than they could chew. The FDIC was asleep at the switch. The Federal Reserve and the current administration tried to manage the economy with only monetary policy. Basically, it's a ****storm of epic proportions.

[Sooner_Havok]

I just threw the Enron thing out as an example of resolution, I know this is way different. But you are right about why I am upsett. I am ****ed as hell about the situation. You want to know the pity I feel for the people who took out these loans? None. But if they are going to go down, it would only be right that the people who started this mess went down with them.

Is it possible, no, probably not, but damn it, it is fair.

The banks are going to have some problems (understatement of the year?), but that still doesn't change the fact that, in the end, the idiots come out in better condition than the non-idiots in this one. And in my mind, that will never be fair or right.

[Mixer!]

is that not counting the insurance/taxes escrow stuff? that sounds about normal for a standard 30 year mortgage, doesn't it?


That's about right even with taxes and insurance on a 30-year note.
I checked with her, it is. I think I've fallen into the old-timers mindset (In MY day, a loaf of bread cost a nickel!) on this. I also just found out that half the houses in this town are rentals (which seems inordinately high to me, but is evidently about right for a college town). I have seen signs in yards where the owner is begging someone to take over the payments on their house/rental, and that they can just have it.







I think I need to get out more. :O

[Chuck Bao]

Heh! One of the guests on CNBC Asia broadcast just called the US Fed the Rocky and Bullwinkle show.

OMG! I wish I'd thought of that.

[jkjsooner]

Falling dollar, inflation, an $5/gal gasoline. We're all going to pay.

Corporate welfare at its best.

[Frozen Sooner]

And the hits keep on coming. The US is now the second largest economy in the world, behind the European zone.

:les: BUT THEY'RE ALL SOCIALISTS WITH ECONOMIES IN THE TERLET!

[Vaevictis]

It's okay. Let someone else be the boogeyman for awhile.

[jkjsooner]

and predatory lenders get bailed out while their victims get the shaft... .

I wouldn't call too many of them victims. Anyone who passed seventh grade math could determind that the mortgage payments were too good to be true. It's not hard to guess that housing prices tripling in a few years is not sustainable.

The real victims were those who can't afford to buy a ridiculously overpriced without getting a toxic mortgage.

[royalfan5]

Looks like I picked a fun year to start investment banking.

[Chuck Bao]

Truthfully, I pitched a total bitch fit Friday morning because some of my colleagues seemed to be buying into this whole set-up and it should be so apparent.

The Fed extending $200bn credit for mortgage backed securities and then the S&P announcement that financial institutions had already provided for the “bulk” ($150bn) of the necessary $285 billion in "write-downs," was such incredibly, wonderful news.

Yeah, the DJIA rallied like how much on Thursday and on this news?

I can see it being good news that the end is in sight sort of thing. But, not these number and really? Trust a credit rating agency and one that has been so far behind the curve and just raised its loss forecasts?

Then, the fact that the financial institutions are only halfway in making the provisions when some of them have already needed capital injections to make it so far can’t really be good news.

I liked that one guy that emailed all of his clients to say that if the US market is taking this as good news then we’ve already entered into the anteroom of Dante’s inferno. That very truthful email, although not really straight talking, is making the rounds.

The net of it is that some banks/investment banks/brokers/financial firms are likely going down and if they’re not, then their shareholders are.

That should have been very apparent with the announcements over the last several weeks.

Buyers beware!

[royalfan5]

Another thing that people need to be watching is the collapse of the Auction rate securities market. It is starting to put a serious crimp in the liquidity of plenty of companies and governments.

[Chuck Bao]

Looks like I picked a fun year to start investment banking.

I started posts to discourage you, royalfan, so many times and scrapped it an equal number of times. IB is a very tough, tough business. But, you are in a very good sector and I think you know it. And, your staight talking seems like a very good thing (although it could be bs, which could still be quite a positive factor).

This is what my previous posts would have said: I tell my analysts who want to skip over to IB that they need at least two of of four things: 1) extensive knowledge of the sector, 2) personal contacts with the major players, 3) extremely strong accounting and finance background and 4) an extremely high ability to talk bs.

I still think it is going very well for you, royalfan, and I still think your timing is good. Everyone wants into commodities, especially now.

[Chuck Bao]

Another thing that people need to be watching is the collapse of the Auction rate securities market. It is starting to put a serious crimp in the liquidity of plenty of companies and governments.

That is just it. The loss of confidence in counter-parties and this fear continues to spread. Nobody who is dealing in other people's money wants to take responsibilty in dealing with counter-party risk. Bear Stearns is...umm...was a blue chip broker handling billions of prime institutional client accounts.

There will be futher fallout of this crisis. Stay tuned.