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Wheee! (popcorn munching mode)
From the NYTimes, no less.
http://www.nytimes.com/2008/09/20/wa...9cnd-cong.html
From the NYTimes, no less.
http://www.nytimes.com/2008/09/20/wa...9cnd-cong.html
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Re: "were literally maybe days away from a complete meltdown of our financial system"
5 days ago I heard
Paulson: Banking system is 'sound'
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"We're working through a difficult period in our financial markets right now as we work off some of the past excesses," said Paulson in a press conference in Washington. "But the American people can remain confident in the soundness and the resilience of our financial system."
http://money.cnn.com/2008/09/15/news...ion=2008091514 -
Re: "were literally maybe days away from a complete meltdown of our financial system"
Why is Paulson in a hurry?
Oh.............Here's Why!
(from tbatst's "Timing" thread):
I was thinking more about the timing / Has anyone mentioned this yet??
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Under the new accounting regime, the banks have to report their figures every quarter, and ADJUST VALUATIONS TO MARKET.
This means: within 10 days, all the banks will have to examine the market price of all their security holdings.
With Lehman and others, active in the market AS SELLERS, prices were getting market down, and there was likely to be
the need for huge writedowns by virtually all their banks down to the new (lower) market values determined by Lehman's
selloffs.
Thus, the whole banking sector was in danger of a massively bad quarter, a bloodbath of red ink. And this was bound to
happen within days. The writedowns might have meant many hundreds of billions to be written off across the banking sector.
Very possibly, this was the spectre of risk that Paulson painted fro Congress to get them to act.
Here's another point: Paulson has managed tradera, and he must have a traders instinct too.
Many people have commented that securitised debt is very cheap now- probably below its realisable value when the securities
get redeemed (remember there is real security, and real debt repayments backing up these securities.) If they are truly
cheap, then this may prove a good trade, at least in the short run. Assuming they are massively oversold, and the Fed's
huge cross-the-board buying interest (or "put" protection, anyway) is acknowledged by the market, then prices will rise back
to long term realisable values. And the Fed may in fact need to take on very very of these securities, since the banks will
want to hold onto them.
This was the sort of tactic that Paulson attempted a year ago, with the so-called "SuperFund" - remember that? It didnt work,
because The Fed wasnt coming up with the money, just acting as a catalyst. This is the real deal, with government money
to be at risk. The more I think about it, the more I realise that the tactic may work now, with the lower prevailing market
values. If so, then look for the stock market rally to continue, as the market realises that the Fed's hundreds of billions may
not all be used.
The problem is in the long run. If the dollar weakens, and oil prices shoot up, then suburban home values will continue under
pressure, especially in the distant suburbs, requirin a long commute (I call them the "stranded suburbs") If prices there continue
their slide for years to come, then the debt that those homes secure will be under the risk of continuing downwards price
pressure. So the critics of this plan may be very right long term, even there is a sizeable bounce in the months to come.
MikeComment
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Re: "were literally maybe days away from a complete meltdown of our financial system"
Longest Mega post ever?Comment
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Re: "were literally maybe days away from a complete meltdown of our financial system"
Sorry, if it is from the NY Times, that means... NOT TRUE.Originally posted by blazespinnaker View Post
Bailout has come!
Lets live happy forever. Pay taxes and more economic rent to your master! Oh poor sheep.Comment
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Re: "were literally maybe days away from a complete meltdown of our financial system"
Ummmm, shearing time.Originally posted by LargoWinch View PostComment
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Re: "were literally maybe days away from a complete meltdown of our financial system"
The headline and opening paragraph of the article state...Originally posted by blazespinnaker View Post
Either the US Congress is even more clueless and illiterate than I'd suspected,or this is just another act in the unfolding Greek tragedy designed to prepare the audience [US taxpayers] emotionally in advance of the "hundreds of Billions" announcement that followed. No prize for the correct answer...;)Congressional Leaders Stunned by Warnings
WASHINGTON — It was a room full of people who rarely hold their tongues. But as the Fed chairman, Ben S. Bernanke, laid out the potentially devastating ramifications of the financial crisis before congressional leaders on Thursday night, there was a stunned silence at first...
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Re: "were literally maybe days away from a complete meltdown of our financial system"
Mega with a positive post! And to add, I agree with him. I'm still at a loss to project our future 6 months out. If this is to be, it would give me a ray of sunshine if the US gov. decided to socialize the profits from any realized gains and then cut a check to all tax paying souls to show ignorant americans how to make an honest buck without breaking the back!;)Comment
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Re: "were literally maybe days away from a complete meltdown of our financial system"
Thanks for a thought-provoking post. It may work out that way.
However, what happens when people realize that formerly uninsured money market funds are paying higher interest and are now fully insured with no cap? Similar thought processes extend to repaying loans and investment decisions. The moral degeneracy that began with Clinton's blow job and morphed into the greatest theft in world history will likely expand into mass noncompliance, disobediance, and outright fraud by the masses.
$500 billion doesn't cover the damage, as the Fed has already had to cover about $700 billion and has not scratched the surface.
The problem is not a 30% loss in home value and the consequences with mortgages, but the 90% loss in value in the securities that came from slicing, dicing, combining and repackaging loans, good and bad. The revenue stream from the good is decreasing, while the costs of unraveling and extracting just one loan from the securitized whole is not economically viable in terms of the sheer accounting and legal effort required to do it.
The difference in 30% losses and 90% losses is that the processing revenue was extracted in layered steps, is gone, and the remediation processing cost is much higher, hence the 60% greater loss will probably never be mitigated.Comment
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NYT:Congressional Leaders Stunned by Warnings
http://www.nytimes.com/2008/09/20/wa...gewanted=print
September 20, 2008
Congressional Leaders Stunned by Warnings
By DAVID M. HERSZENHORN
WASHINGTON — It was a room full of people who rarely hold their tongues. But as the Fed chairman, Ben S. Bernanke, laid out the potentially devastating ramifications of the financial crisis before congressional leaders on Thursday night, there was a stunned silence at first.
Mr. Bernanke and Treasury Secretary Henry M. Paulson Jr. had made an urgent and unusual evening visit to Capitol Hill, and they were gathered around a conference table in the offices of House Speaker Nancy Pelosi.
“When you listened to him describe it you gulped," said Senator Charles E. Schumer, Democrat of New York.
As Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the Banking, Housing and Urban Affairs Committee, put it Friday morning on the ABC program “Good Morning America,” the congressional leaders were told “that we’re literally maybe days away from a complete meltdown of our financial system, with all the implications here at home and globally.”
Mr. Schumer added, “History was sort of hanging over it, like this was a moment.”
When Mr. Schumer described the meeting as “somber,” Mr. Dodd cut in. “Somber doesn’t begin to justify the words,” he said. “We have never heard language like this.”
“What you heard last evening,” he added, “is one of those rare moments, certainly rare in my experience here, is Democrats and Republicans deciding we need to work together quickly.”
Although Mr. Schumer, Mr. Dodd and other participants declined to repeat precisely what they were told by Mr. Bernanke and Mr. Paulson, they said the two men described the financial system as effectively bound in a knot that was being pulled tighter and tighter by the day.
“You have the credit lines in America, which are the lifeblood of the economy, frozen.” Mr. Schumer said. “That hasn’t happened before. It’s a brave new world. You are in uncharted territory, but the one thing you do know is you can’t leave them frozen or the economy will just head south at a rapid rate.”
As he spoke, Mr. Schumer swooped his hand, to make the gesture of a plummeting bird. “You know we’d be lucky ...” he said as his voice trailed off. “Well, I’ll leave it at that.”
As officials at the Treasury Department raced on Friday to draft legislative language for an ambitious plan for the government to buy billions of dollars of illiquid debt from ailing American financial institutions, legislators on Capitol Hill said they planned to work through the weekend reviewing the proposal and making efforts to bring a package of measures to the floor of the House and Senate by the end of next week.
Lawmakers in both parties described the meeting in Ms. Pelosi’s office on Thursday night with Mr. Paulson and Mr. Bernanke as collaborative, and that they were prepared to put politics aside to address the needs of the American people.
While Democrats initially said after the meeting that they planned to use the administration’s proposal of a huge rescue effort to win support for an economic stimulus package, they pulled back slightly on Friday morning, saying that their top priority was to help put together the bailout package and stabilize the economy.
But it was clear they continued to examine ways to make clear that the government was stepping up not just to help the major financial firms but also to protect the interests of American taxpayers and families by safeguarding their pensions and college savings, and by preventing any further drying up of consumer credit.
In addition to potential stimulus measures, which could include an extension of unemployment benefits and spending on public infrastructure projects, Democrats said they intended to consider measures to help stem home foreclosures and stabilize real estate values.
Among the potential steps Congress can take include approving legislation to allow bankruptcy judges to modify the terms of primary mortgages — authority that the bankruptcy laws do not currently allow and that the banking industry has strenuously opposed.
But the Democrats said it was too soon to discuss such details, and that they were awaiting a draft of the proposal from the Treasury Department.
“We have got to deal with the foreclosure issue,” Mr. Dodd said. “You have got to stop that hemorrhaging..If you don’t, the problem doesn’t go away. Ben Bernanke has said it over and over again. Hank Paulson recognizes it. This problem began with bad lending practices. Those are his words, not mine, and so this plan must address that or I’ll be back here in front of a bank of microphones at some point explaining the next failure.”
Even before the drafting of the plan was complete, the Bush administration and the Fed began efforts to sell the idea of a huge rescue to potentially skeptical rank-and-file members of Congress. Mr. Paulson and Mr. Bernanke held a conference call with House Republicans to explain their thinking.
Senator Richard C. Shelby of Alabama, the senior Republican on the Senate banking committee, said in a television interview that cost to the government of purchasing bad debt could run to $1 trillion — a potential warning sign since Mr. Shelby is a longtime skeptic of government intervention in the private market.
Until Mr. Shelby was interviewed on Friday morning, officials on Capitol Hill had been careful not to discuss specific figures, though the rescue envisioned by the Treasury Department clearly entails a government appropriation of hundreds of billions of dollars.Comment
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Re: "were literally maybe days away from a complete meltdown of our financial system"
One of the duties of every administration of USA, Inc. is to maintain confidence in the system.Originally posted by D-Mack View PostComment
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Re: "were literally maybe days away from a complete meltdown of our financial system"
Which came first, the egg of incompetent crisis prevention or the chicken of incompetent crisis response?Originally posted by GRG55 View Post
They are preparing Congress for the next phase. They may also hope they might pull out of it, and know they don't have a chance without a blank check from Congress. But at some level they must know they have little chance anyway. Too many things have broken at the same time. This is why Bernanke has been out of sight. Paulson is a crisis-hardened executive, Bernanke an academic. He never learned how to manage and hide his fear. Fear is more contagious than a virus. He is kept out of the public eye.
America's enemies smell weakness. Open season on America has begun.
Next comes financial chaos where even the appearance of control is lost. The sheer speed and randomness of events will catch many by surprise, like a financial tornado.
After the financial tornado passes we will all stare in wonder at the strangeness of the scene, the red Lamborghini stuck upside down 40 feet off the ground in a last remaining branches of a leafless oak tree, at the man smiling who is glad to have survived unscathed in his underwear in the bathtub that was as all that remained of his home. Lives will be frozen in economic time, careers ended, ancient relationships cut off by economic irrelevance.
Next year, slowly we will stagger out of the economic wreckage and start to rebuild. But things will never be as they were, for our old reality was fantasy anyway, built on false beliefs. We have no more chance of recreating it than we have in the morning after waking from a lovely dream to fall asleep again back into it while the alarms are ringing.Comment
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Re: ``We are literally maybe days away from a complete meltdown of our financial system,'' NYTimes
who are "They" ? I would really like to know. May do bad things to them if i knew who they wereComment
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Re: ``We are literally maybe days away from a complete meltdown of our financial system,'' NYTimes
I ask if there is anything we can do?
Or Should do?
Raid the bank for saving?
Buy Gold?
?
MikeComment
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Re: ``We are literally maybe days away from a complete meltdown of our financial system,'' NYTimes
Let us hope the "New US" is a lot better than the old, i see that the US Navy is heading down to Brasil to steal their oil!
MikeComment
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