Article

2008-09-21 Home Front Economy

Archived material is restricted to Rantburg regulars and members. If you need access email fred.pruitt=at=gmail.com with your nick to be added to the members list. There is no charge to join Rantburg as a member.

Posted by Bobby 2008-09-21 07:02|| || Front Page|| [10327 views ] Top

#1 I would absolutely love to own a business that couldn't fail, spend all you want, and when I'm broke, the Govt hands me cash to continue, WITH NO REPAYMENT EVER.

Posted by Redneck Jim">Redneck Jim 2008-09-21 07:38|| 2008-09-21 07:38|| Front Page Top

#2 That's called the Public School System, Red.

Posted by Procopius2k 2008-09-21 08:56|| 2008-09-21 08:56|| Front Page Top

#3 The solution is simple. Unwind all the debt that underlies real estate bonds, then revalue the bonds to their proper levels.

Financial institutions could start doing this tomorrow, but the folks running these institution won't permit that because frankly, they expect to get bailed out and they want to game this new system for their own profit.

If the government insists on buying bad debt, then taxpayers not only gets any future profits generated by these financial institutions they also get all executive bonuses over $1,000.

Additionally, the government reserves to sue every financial institution that made improper loans or failed to disclose all the details any financial transactions they made between 2000 and 2008, and recover any monies from anywhere.

Posted by badanov 2008-09-21 09:27|| http://www.freefirezone.org]">[http://www.freefirezone.org] 2008-09-21 09:27|| Front Page Top

#4 Fox Noise did an excellent how it happened this morninging. Sort of a Fannie and Freddie meltdown for Dummies, which I found quite helpful. Through banking de-regulation, appears we've gone back to the future with the mixing of bank loans and Stock Market gamblers. Same mess that helped bring on the Great Depression, hence the regulations put in place in the 1930's to keep banking deposits and loans OUT of the stock market. Fox emphasized that even though it showed Slick Willie signing the de-regulation legislation, there was quite enough blame to go around. Translation.... all of Washington and no one in Peoria was in on it.

Posted by Besoeker 2008-09-21 10:05|| 2008-09-21 10:05|| Front Page Top

#5 the solution is to re-value real estate so that you don't run multi billion dollar banks broke with loans to buy it.

Posted by Vespasian Ebbereting8800 2008-09-21 12:41|| 2008-09-21 12:41|| Front Page Top

#6 The suggested alternatives have problems of their own.

First, you can 'force' banks to issue new equity (that is, stock), but you can't force people to buy it. In an illiquid system, how do the other players come up with the tens of billions of dollars for each bank to raise its capital?

And if you have the government inject the equity by buying equity (stocks or warrants), you now have the government manipulating the banking system directly -- how long before President Obama puts Penny Pritzker in charge of naming all the new directors to the bank boards?

Sure, it's hard to figure out the value of bad loans -- that's what happens when loans go bad. But better to remove them from the books, let the economy recover, and sell the assets later when you can. The good part of the current plan is that it is self-limiting: as the Treasury Dept gets rid of the bad loans and assets it removes itself from the financial markets. Buy equity and you're in for the long haul.

Posted by Steve White 2008-09-21 12:38|| 2008-09-21 12:38|| Front Page Top

#7 Thanks for some balance, Doc. It's sooo rare, these days.

Posted by Bobby 2008-09-21 12:57|| 2008-09-21 12:57|| Front Page Top

#8 trolls smell funny

Posted by Frank G">Frank G 2008-09-21 14:38|| 2008-09-21 14:38|| Front Page Top

#9 Just like there are no self sustaining pure socialist economies. [Unless you classify Cuba and North Korea as 'sustaining'].

Posted by Procopius2k 2008-09-21 14:51|| 2008-09-21 14:51|| Front Page Top

#10 Morgenson in the NYT today has a relevant opinion piece on this, RTWT.
An excerpt:
"A.I.G. had written $441 billion in credit insurance on mortgage-related securities whose values have declined; if A.I.G. were to fail, all the institutions that bought the insurance would have been subject to enormous losses. The ripple effect could have turned into a tsunami.

So, the $85 billion loan to A.I.G. was really a bailout of the companys counterparties or trading partners.

Now, inquiring minds want to know, whom did we rescue? Which large, wealthy financial institutions counterparties to A.I.G.s derivatives contracts benefited from the taxpayers $85 billion loan? Were their representatives involved in the talks that resulted in the last-minute loan?

And did Lehman Brothers not get bailed out because those favored institutions were not on the hook if it failed?

Well probably never know the answers to these troubling questions. But by keeping taxpayers in the dark, regulators continue to earn our mistrust. As long as we are not told whom we have bailed out, we will be justified in suspecting that a favored few are making gains on our dimes. "
AND
"Which brings us to Item 2 for policy makers. Stop pretending that the $62 trillion market for credit default swaps does not need regulatory oversight." This is the real iceberg ahead for all of us, the feds have said nothing about this whatsoever.

Posted by Anguper Hupomosing9418 2008-09-21 15:17|| 2008-09-21 15:17|| Front Page Top

#11 Frank,you were not talking about Bobby, were you? Didn't recognize me when I was sincere?

Posted by Bobby 2008-09-21 16:55|| 2008-09-21 16:55|| Front Page Top

#12 no - the troll that was in front of my comment- was "disappeared" by the Mods

Posted by Frank G">Frank G 2008-09-21 17:02|| 2008-09-21 17:02|| Front Page Top

#13 you, Mr. Bobby, are one of my favs, I would never dis you like that

Posted by Frank G">Frank G 2008-09-21 17:04|| 2008-09-21 17:04|| Front Page Top

#14 One thing they should do, but never will, is impose accountability.

Every C-level exec and the entire boards of these companies immediately be forced from their job, no golden parachute, and force liquidation of their estates and confiscate the money for the benefit of the taxpayers. Give them 10% of their estate after debt is satisfied, or $100K, whichever is less, and we the taxpayers take the rest as a penalty. This makes the PERSONALLY accountable. And it will certainly get the attention of those who follow them.

They screwed up, we are holding the bag -- they should be put IN that bag and barred from all employment within the financial sector.

Make the bankers and others pay a price as a consequence of them blowing up things to where we the taxpayers had to step in.

Posted by OldSpook 2008-09-21 17:28|| 2008-09-21 17:28|| Front Page Top

#15 OldSpook, the name of the guy who needs to be punished most is revealed in the third paragraph of this 1999 NYT article:

"In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders."

"The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring."

"Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits."

http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&scp=1&sq=&st=nyt

Posted by Darrell 2008-09-21 18:22|| 2008-09-21 18:22|| Front Page Top

23:59 Verlaine
23:50 Cornsilk Blondie
23:46 KBK
23:42 Richard Aubrey
23:36 Old Patriot
23:34 Betty Grating2215
23:28 Betty Grating2215
23:14 Betty Grating2215
23:01 Milton Fandango
22:49 Milton Fandango
22:48 Mike N.
22:39 Anguper Hupomosing9418
22:35 Richard of Oregon
22:35 Milton Fandango
21:50 Parabellum
21:44 Old Patriot
21:39 trailing wife
21:18 Frank G
21:17 Frank G
21:00 Red Dawg
20:57 Red Dawg
20:34 Procopius2k
20:30 Frank G
20:26 Anonymoose