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  • 6:05 PM » Don't Worry About the FDIC
    Published Thu, Sep 25 2008 6:05 PM by Seeking Alpha
    submits: is quoted in a today about the FDIC. But he's no fan of the story, or any which implies that there's any chance at all the FDIC could run out of money. He emails: In the chaos of the last few days, a lot of erroneous press reports are coming out about the FDIC and the deposit insurance fund. It is important for people to understand that the deposit insurance fund, like all federal trust funds, is simply an accounting entry with the US Treasury. There is no separate fund.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 6:04 PM » HSBC: Which bank is it buying today? Press 1 for no comment
    Published Thu, Sep 25 2008 6:04 PM by Market Watch
    LONDON (MarketWatch) -- It is a small comfort to many banks, their shares beaten black and blue, that helpful traders more than likely will name them as acquisition targets of HSBC Holdings PLC . Without ranking the following according how deep into the quicksand they've sunk in the credit crisis, Washington Mutual Inc. , Morgan Stanley , Lehman Brothers Holdings Inc., Citigroup Inc.
  • 6:03 PM » Fannie, Freddie shares jump as shorts book profits
    Published Thu, Sep 25 2008 6:03 PM by Washington Post
    NEW YORK/CHICAGO (Reuters) - Fannie Mae and Freddie Mac shares jumped almost 50 percent on Thursday as Congress neared an agreement on a $700 billion bailout plan that would help the two mortgage finance companies, forcing some investors to reverse bets the stocks would fall.
    Click Here to Read the Full Article

    Source: Washington Post
  • 6:02 PM » BB&T chief exec slams bailout plan
    Published Thu, Sep 25 2008 6:02 PM by feeds.bizjournals.com
    A significant and immediate tax credit for financial institutions to purchase homes would be a more effective solution for the financial crisis than the proposed $700 billion federal bailout, says BB&T Chief Executive John Allison. (GS) (MS) (BBT)
    Click Here to Read the Full Article

    Source: feeds.bizjournals.com
  • 6:01 PM » "A Bailout We Don't Need"
    Published Thu, Sep 25 2008 6:01 PM by feeds.feedburner.com
    As James Galbraith points out in (hat tip reader Marshall), the Paulson bailout plan wasn't necessary, and any rescue could have been handled by expanding existing programs: Now that all five big investment banks -- Bear Stearns, Merrill Lynch, Lehman Brothers, Goldman Sachs and Morgan Stanley -- have disappeared or morphed into regular banks, a question arises. The point of the bailout is to buy assets that are illiquid but not worthless. But regular banks hold assets like that all the time. They're called "loans." With banks, runs occur only when depositors panic, because they fear the loan book is bad. Deposit insurance takes care of that. So why not eliminate the pointless $100,000 cap on federal deposit insurance and go take inventory? If a bank is solvent, money market funds would flow in, eliminating the need to insure those separately. If it isn't, the FDIC has the bridge bank facility to take care of that. Next, put half a trillion dollars into the Federal Deposit Insurance Corp. fund -- a cosmetic gesture -- and as much money into that agency and the FBI as is needed for examiners, auditors and investigators. Keep $200 billion or more in reserve, so the Treasury can recapitalize banks by buying preferred shares if necessary -- as Warren Buffett did this week with Goldman Sachs. Review the situation in three months, when Congress comes back. Hedge funds should be left on their own. You can't save everyone, and those investors aren't poor. With this solution, the systemic financial threat should go away. Does that mean the economy would quickly recover? No. Sadly, it does not. Two vast economic problems will confront the next president immediately. First, the underlying housing crisis....The second great crisis is in state and local government. Of course, such a straightforward program would have eliminated the opportunity to further enrich Wall Street by paying fees to various advisors and subcontractors for buying assets from financial...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 6:01 PM » More Clarification of Bailout Details (Updated)
    Published Thu, Sep 25 2008 6:01 PM by feeds.feedburner.com
    From : House Financial Services Committee Chairman Barney Frank (D-Mass.) said the bailout deal reached by key lawmakers calls for dividing the $700 billion pricetag into three parts: Paulson would receive $250 billion immediately and another $100 billion upon White House certification of its necessity. The final $350 billion could be dispersed without additional Congressional approval, but Congress would be given 30 days to object. The agreement also includes a strong oversight board for the bailout program, a ban on golden parachutes and other excessive compensation for executives at participating firms and protections for taxpayers, including a provision that would require participating companies to give taxpayers equity in their firms. It also includes relief for community banks that own now worthless stock in mortgage finance giants Fannie Mae and Freddie Mac, which were taken over by the government. The main point of contention between Democrats and Republicans, Frank said, is a proposal to give bankruptcy judges new power to modify mortgages for homeowners, an idea that is widely viewed as a bargaining chip. Democratic presidential candidate Barack Obama (D-Ill.) has said the measure, which is fiercely opposed by the banking industry, should not be in the bill. Meanwhile, House Democrats were still considering a plan to increase taxes to pay for a portion of the bailout, possibly by taxing stock transfers or levying a "surtax" on millionaires. As I read this, the mods in bankruptcy is still in play. The Wall Street Journal Economics Blog provided this text outline of principles: 1. Taxpayer Protection a. Requires Treasury Secretary to set standards to prevent excessive or inappropriate executive compensation for participating companies b. To minimize risk to the American taxpayer, requires that any transaction include equity sharing c. Requires most profits to be used to reduce the national debt 2. Oversight and Transparency a. Treasury Secretary is...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 6:01 PM » Goal of Paulson Plan: Restore Mark-to-Myth Accounting
    Published Thu, Sep 25 2008 6:01 PM by feeds.feedburner.com
    While we have focused on the fact that the Treasury bailout plan, which with some tweaks, is moving towards approval. is a covert and inefficient recapitalization of the banking system, other observers see another goal for the plan. The contend that it's main purpose is to circumvent mark-to-market accounting. The belief is that mark to market accounting has worsened the credit mess, since in a stressed market, those prices will be less than fundamental value. With arcane paper that is hard to value even in a good market, where prices of liquid instruments are volatile, and the underlying credit quality is deteriorating, I'm not certain that view is correct. The consensus at the time of the Bear Stearns deal was the the Fed's $29 billion subsidy was a huge coup for Morgan and left it well compensated. Yet proving how hard it is to estimate values correctly, Jamie Dimon is now apparently saying often that he wishes he had not done the deal. Admittedly, Bear had a big portfolio that JP Morgan could not inspect in detail, but the general principle holds. So rather than follow the course of action that has been shown to work in Sweden and to a lesser degree in the US S&L crisis, namely, let asset prices fall, strip out bad assets and sell them, combine and recapitalize the good pieces, and sell those to the public too, we have clearly decided to go down the Japan path, of maintaining phony asset prices to keep institutions that would otherwise fail alive. The Japan approach proved to be vastly more costly than taking the short-term (considerable) economic pain, but we don't do pain in the US. And perhaps more important, since no one is fooled by this ruse, expect whatever benefits this plan delivers to be short-lived, How comfortable will investors be with buying stock and bonds of banks if they know the accounts are rubbish? From James Saft at Reuters, "": Paulson and Bernanke's 'Hold-to-Maturity' plan is really just the new 'Mark...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 5:13 PM » Reaction to Bailout Proposal Runs the Gamut
    Published Thu, Sep 25 2008 5:13 PM by feeds.feedburner.com
    As Congressional leaders continued to hash out details of a financial and mortgage market bailout on Thursday, it’s pretty clear that response to the bailout proposal has been all over the map. Some say the proposal marks the end of American capitalism; others suggest that large-scale intervention is needed to preserve it. But nearly everyone [...]
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 4:41 PM » FDIC Takes On Bloomberg Over Deposit Fund
    Published Thu, Sep 25 2008 4:41 PM by feeds.feedburner.com
    In a rare move for any government agency, the Federal Deposit Insurance Corp. on Thursday launched a media offensive against a Bloomberg News report that FDIC public affairs director Andrew Gray called “a serious disservice” to readers. The Bloomberg story in question suggested that “it won’t take many more failures before the FDIC itself runs [...]
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 4:24 PM » Despite Credit Crisis, Some REITs Are Doing Well
    Published Thu, Sep 25 2008 4:24 PM by Seeking Alpha
    submits: US Real Estate Investment Trusts seem to be faring quite well in the current credit crisis, a new report from Fitch Ratings indicates.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 3:04 PM » Industry Vets Launch Mortgage Due Diligence Firm
    Published Thu, Sep 25 2008 3:04 PM by feeds.feedburner.com
    Two credit risk and securities surveillance veterans said Thursday they’d launched a new venture, Allon Financial, to provide third-party due diligence services to whole loan and mortgage bond investors. The Denver-based company takes the name of its founder, Sue Allon, who founded credit risk management specialist The Murrayhill Company in the 1990s. To kick-start the new [...]
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 2:49 PM » Clinton: Resurrect the HOLC, and Buy Up Bad Mortgages
    Published Thu, Sep 25 2008 2:49 PM by feeds.feedburner.com
    Former Democratic presidential candidate and New York senator Hillary Rodham Clinton pushed Thursday for a wide-spread government purchase and modification of troubled mortgages in the name of protecting borrowers and restoring credit markets, according to an op-ed published in the Wall Street Journal. Clinton, who along with most Deomcrats has long advocated so-called “affordability modifications,” said [...]
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 2:36 PM » The New Face of Equity Derivatives
    Published Thu, Sep 25 2008 2:36 PM by www.minyanville.com
    It's currently a most challenging time for an equity derivatives desk.As Todd can attest (he helped introduce me to Wall Street) I started my career at a large bank and moved up the ranks to equity derivatives. I have worked on the derivatives desk at two large banks in my career and this seems like one of the most demanding times for my former colleagues. The derivative business has taken off since the proliferation of thousands of hedge funds (long/short credit and volatility funds) and approximately $20 billion has gone into buy-write products which has created a boon in the business.However ...
    Click Here to Read the Full Article

    Source: www.minyanville.com
  • 2:19 PM » Hedge Funds Hoard $600 Billion in Cash
    Published Thu, Sep 25 2008 2:19 PM by www.minyanville.com
    While they’re not deviously plotting the demise of the worlds’ most powerful financial institutions hedge funds are loading up on another popular trade: Cash.According to the Financial Times Citigroup estimates hedge funds have recently squirreled away as much as $600 billion in cash of which $100 billion is held in money market funds -those same money market funds Washington so graciously propped up last week.With good risk-reward investment opportunities in short supply hedge funds -- paid handsomely to manage risk -- are relying heavily on the safety of cash to ride out recent market turmoil. It’s telling that for ...
    Click Here to Read the Full Article

    Source: www.minyanville.com
  • 2:18 PM » Era of U.S. financial dominance at an end: Germany
    Published Thu, Sep 25 2008 2:18 PM by Washington Post
    BERLIN (Reuters) - Germany blamed the United States on Thursday for spawning the global financial crisis with a blind drive for higher profits and said it must now accept more market regulation and a loss of its financial superpower status.
    Click Here to Read the Full Article

    Source: Washington Post
  • 2:18 PM » Lawmakers: Financial bailout agreement reached
    Published Thu, Sep 25 2008 2:18 PM by Washington Post
    WASHINGTON -- Warned of a possible financial panic, key Republicans and Democrats reported agreement in principle Thursday on a $700 billion bailout of the financial industry and said they would present it to the Bush administration in hopes of a vote within days.
    Click Here to Read the Full Article

    Source: Washington Post
  • 2:18 PM » Deal in place?
    Published Thu, Sep 25 2008 2:18 PM by feeds.feedburner.com
    Sen. Chris Dodd’s (D-CT) remarks that a deal on the financial bailout is in place have sent stocks soaring; the Dow soaring [[^DJI]].
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 12:26 PM » Option Arm Class Action Lawsuit Rejected
    Published Thu, Sep 25 2008 12:26 PM by www.thetruthaboutmortgage.com
    An option-arm lawsuit involving 8,000 borrowers was rejected by the Seventh Circuit Court of Appeals, reversing an earlier ruling by a federal judge in Wisconsin, Reuters reported. The federal appeals-court panel ruled Wednesday 2-1 against the borrowers who had tried to get the loans rescinded, claiming rescissions under the Truth in Lending Act are a “purely [...]
    Click Here to Read the Full Article

    Source: www.thetruthaboutmortgage.com
  • 12:02 PM » FHFA Releases New 'Mortgage Metrics Report'
    Published Thu, Sep 25 2008 12:02 PM by www.ofheo.gov
    The Federal Housing Finance Agency (FHFA) released its first Mortgage Metrics Report today. The report presents key performance data on 30.4 million first lien residential mortgages with outstanding balances totaling $4.4 trillion serviced on behalf of Fannie Mae and Freddie Mac from 2007 through the first quarter of 2008. The report focuses on the delinquencies, loss mitigation actions, and foreclosure data reported by more than 3,000 approved servicers.
    Click Here to Read the Full Article

    Source: www.ofheo.gov
  • 11:35 AM » Pick Me! Pick Me!
    Published Thu, Sep 25 2008 11:35 AM by www.portfolio.com
    Has anyone wanted a job as desperately as Bill Gross wants the job of managing the $700 billion bailout fund? Here was the founder of bond giant PIMCO : "We have interest in managing this giant pool of assets, and we expect to be called." In case Hank Paulson missed that plea, Gross went to the editorial pages of Paulson's hometown paper, the Washington Post, with ever written to a potential employer. Gross followed that up with another CNBC appearance where he announced his willingness to waive his fee if he was manager of what will be the biggest distressed asset fund in the world. He also to the New York Times. “We have a large and brilliant staff that can analyze and has analyzed subprime mortgages that can help the Treasury out,” he said. We get it, Gross. You want the job, even though it hasn't even been created yet. Now, it's not as if Gross isn't qualified. For more than a year, he has been sounding alarm bells about the potential catastrophe from the subprime mortgage crisis. He's surely profited from it, too. On the day the federal government bailed out Fannie Mae and Freddie Mac, Gross made a cool $1.7 billion for his PIMCO Total Return Fund. But Gross would probably be better off letting those qualifications speak for themselves. He manages the largest bond fund in the country, for goodness sake. It's not as if Treasury officials have never heard of him. Instead, by using the media to openly beg for the job, Gross is opening himself up to criticism that might not otherwise come until after he had secured the job. Felix Salmon that Gross is conflicted. "He has a strong incentive to maximize, rather than minimize, the amount paid [for the assets] -- especially if he doesn't get any kind of performance fee for running the fund." Indeed, even his friends have doubts. “They should start with somebody who doesn’t have a conflict,” Luis Maizel, senior managing director of LM Capital Group, told the New York Times....
    Click Here to Read the Full Article

    Source: www.portfolio.com
  • 11:28 AM » Plan’s Basic Mystery: What’s All This Stuff Worth?
    Published Thu, Sep 25 2008 11:28 AM by dealbook.blogs.nytimes.com
    What would you pay, sight unseen, for a house that nobody wants, on a hard-luck street where no houses are selling? That question is easy compared to the one confronting the Treasury Department as Washington works toward a vast bailout of financial institutions, The New York Times’s Vikas Bajaj writes. Treasury Secretary Henry M. Paulson Jr. [...]
    Click Here to Read the Full Article

    Source: dealbook.blogs.nytimes.com
  • 11:27 AM » Banking System Will Need Another $500 Billion: Gross
    Published Thu, Sep 25 2008 11:27 AM by CNBC
    The banking system needs another $500 billion to survive beyond the $700 billion rescue plan, Pimco founder Bill Gross told CNBC.
  • 11:26 AM » Financial Bailout Is Nearly 'Done Deal': Key Democrat
    Published Thu, Sep 25 2008 11:26 AM by CNBC
    The $700 billion financial bailout bill is "almost a done deal," a key member of the House Financial Service Committee, Paul Kanjorski, told CNBC.
  • 11:25 AM » Chadwick: Bring Back the Uptick Rule!
    Published Thu, Sep 25 2008 11:25 AM by CNBC
  • 11:24 AM » US 'will lose financial superpower status'
    Published Thu, Sep 25 2008 11:24 AM by www.ft.com
    The US is poised to lose its role as a global financial 'superpower' in the wake of the financial crisis, Peer Steinbrück, German finance minister, said as he called for a regulatory crackdown on financial markets
  • 11:24 AM » Treasury's McCormick says "Now is the Time to Act Quickly"
    Published Thu, Sep 25 2008 11:24 AM by www.mortgagenewsdaily.com
    Treasury Under Secretary David McCormick , speaking at a investor's Forum in Hong Kong, said the seeds of the current crisis were sown many years ago and that the U.S. government is taking the appropriate measures to restore stability to the markets. "The seeds of the significant challenges we face today were sown many years ago, beginning with a gradual weakening of lending practices by banks and financial institutions, and by greater willingness by borrowers to take out mortgages they couldn't afford ," said McCormick.
    Click Here to Read the Full Article

    Source: www.mortgagenewsdaily.com
  • 11:19 AM » Schwarzman on how we got here from there
    Published Thu, Sep 25 2008 11:19 AM by feeds.feedburner.com
    Via the Wall Street Journal, Blackstone chairman Stephen Schwarzman put out perhaps the single most-succint description of a complex mess we’ve seen yet: It’s a perfect storm. It started with Congress encouraging lending to lower-income people. You went from subprime loans being 2% of total loans in 2002 to 30% of total [...]
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 11:16 AM » Latest Bailout Plan Spin: Its a Money Maker!
    Published Thu, Sep 25 2008 11:16 AM by The Big Picture
    Most people are unfamiliar with the evolution of financial management over the years. It began as a clubby old boys network, who you knew mattered more than what you knew. It evolved over time. Starting in the late 1970s, retail stock brokerage became a telemarketing sales business. Although that model is clearly changing, there is still trillions of assets under management today that got that way via the cold call. The cold calling sales approach was developed and refined at Lehman Brothers (perhaps their collapse was Karma). It was encapsulated by a man named Martin D. Shafiroff, who wrote up, refined and perfected various phone techniques. These include the straight line, the first trade, the trust close. All of his various techniques were published in the book "" and subsequent editions ('90s, etc.) Having worked on the Sell side for the first decade of my Wall Street career, I am intimately familiar with the various pitches the retail world uses to obtain clients and assets. There is not a single retail broker of my acquaintance that does not have Shafiroff's how-to on his bookshelf. The reason I bring this up today is due to the latest sales pitch from various people, aggressively pushing the bailout plan. The newest spin on the massively expensive plan is "Hey, its a jumbo money maker!" The spin reminds me of the classic retail stock jockey. The guy has buried his clients in a series of bad trades, bad judgment, poor risk management -- all motivated by his self-interested, commission-generating trades. The only way out of the money losing mess, pitches the broker, is a big, Hail Mary trade. Sound familiar? This technique is one of the last ones in the the Shafiroff book. Once an aggressive retail broker is upside down, the plea goes out for raising more money from the mark client. "Believe me, I hate being under water more than you. I pulled in some favors, this is the trade that makes it all back for us and then some. I could...
    Click Here to Read the Full Article

    Source: The Big Picture
  • 11:15 AM » Re-Invigorate Main Street, Instead of Bailing Out Wall Street
    Published Thu, Sep 25 2008 11:15 AM by Seeking Alpha
    submits: Needless to say, Messrs. Paulson and Bernanke's $700 billion rescue package has ruffled a few feathers on Wall Street, Main Street, and the Legislative and Executive branches of the U.S. Government. say "Do it now or else we'll have financial calamity." say "$700 billion to bail out Wall Street? They're the ones that got us into this mess in the first place." Emotions are running high and, I'm afraid, many people are losing sight of the main point: frozen credit markets inhibit small and large businesses from borrowing money, people of all economic strata from buying apartments and houses, and those in financial distress owing to inappropriate mortgages from refinancing. Commerce has slowed due to massive uncertainty and the ripple effects of the credit crisis throughout the U.S. economy. This is not (or, more properly stated, SHOULD not be) about Wall Street, it is about Main Street, and the average, hard-working citizen's ability to live their life without economic fear not of their own doing.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 11:14 AM » Bernanke & Paulson Need to Create a Mortgage Specialist Fund
    Published Thu, Sep 25 2008 11:14 AM by Seeking Alpha
    submits: Mortgage securities have grown into a $14 trillion asset class. We have painfully learned how dependent our stock market is upon these illiquid debt obligations. Many, including myself, have voiced the solution to temporarily eliminate mark-to-market accounting requirements in order to give these securities time to recover alongside their real estate collateral. We all know that this is a cyclical downturn in housing that will eventually turn, and we also know that the hastiness of mark-to-market valuations should never have been allowed to destroy so many reputable financial institutions. However, I now have a better idea. We need a more permanent solution than a suspension of accounting regulations or a bailout. If we don't solve this, it will happen again. The solution is the same solution that is used in other investable asset classes; Ben Bernanke and Hank Paulson need to create a mortgage specialist fund to buy securities when no buyers exist. The specialist acts as the market maker to facilitate normal trading conditions during abnormal circumstances. Just as every stock should have a specialist who is ready to step in and buy or sell as many shares as needed to ensure a fair and orderly market, so too should mortgage securities.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 11:13 AM » "Asia Needs Deal to Prevent Panic Selling of U.S. Debt"
    Published Thu, Sep 25 2008 11:13 AM by feeds.feedburner.com
    It has been conventional wisdom that China, Japan, and other countries that run trade surpluses with the US, which means they fund our overconsumption by buying assets like US Treauries, would never restrict the flow of credit to us because it would lower their exports and hurt their growth. We've long been leery of the idea that unsustainable trends will have a life eternal, and Brad Setser has a simple reason why this process is self-limiting. Our foreign funding sources aren't just lending us money to buy their goods; they are also providing the funding for interest on the loans extended for past imports . At a certain point, the interest payments become so large relative to the value of the exports that the deal no longer makes sense. The day of reckoning may be approaching well before Setser's tipping point. And the trigger is much simpler. We look like a lousy risk. The Freddie/Fannie conservatorship, the Lehman bankrutpcy, and the rescue of fallen Asian powerhouse AIG has, not surprisingly, lead to a reassessment of the US's creditworthiness. Yu Yongding, who has advised China's central bank, urges Japan, China, and Korea to forge an agreement not to dump US bonds. Yu says in no uncertain terms that the Chinese are worried about their US holdings and see a US default as a real possibility. We've said before that the US is in the same position as Indonesia and Thailand circa 1996, except we have the reserve currency and nukes. The precariousness of our position is now evident to all, save perhaps the average American citizen. From (hat tip reader a): Japan, China and other holders of U.S. government debt must quickly reach an agreement to prevent panic sales leading to a global financial collapse, said Yu Yongding.... ``We are in the same boat, we must cooperate,'' Yu said in an interview in Beijing on Sept. 23. ``If there's no selling in a panicked way, then China willingly can continue to provide our financial support by continuing...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 11:12 AM » The New York Times Spreads Disinformation About the Paulson Plan
    Published Thu, Sep 25 2008 11:12 AM by feeds.feedburner.com
    Vikas Bajaj of the New York Times is an able reporter and I have often enjoyed his work. I was therefore taken aback when I read his article, "" since it misleads readers as to the intent and thrust of the so-called Troubled Asset Relief Program. This is part of a disturbing pattern in the mainstream media as far as the plan is concerned. Despite the considerable diversity of opinion and political orientation among economists, the criticism of the plan among economists has been widespread, verging on unanimity (with Alan Blinder a notable outlier). Yet the press has treated the plan with vastly more deference than it deserves. How did this come about? Perhaps select members of the media got a version of the scary talk that Paulson gave to the Congressional leadership behind closed doors. But that still does not explain the obfuscation of how the plan will work. In a nutshell, the article seeks to explain why a lot of the assets likely to be bought by the program are hard to value, and does a good job on that front. Fair enough. But get a load of the premise: A big concern in Washington — and among many ordinary Americans — is that the difficulty in valuing these assets could result in the government’s buying them for more than they will ever be worth, a step that would benefit financial institutions at taxpayers’ expense.... A big challenge for Treasury officials will be deciding whether to buy the troubled investments near the values at which the banks hold them on their books. That would help minimize losses for financial institutions. Driving a hard bargain, however, would protect taxpayers. Huh? How can Bajaj not understand what this program is about? First, it is going to pay above, in fact considerably above, current market prices for the illiquid (frankly, often dud) assets. There is no point to this exercise otherwise. The banks are free to sell now at market price, but they aren't willing to. Hence the government is stepping in, paying over the...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 11:11 AM » Explaining the financial crisis to a nation of third graders
    Published Thu, Sep 25 2008 11:11 AM by themessthatgreenspanmade.blogspot.com
    They're sure talking about "root cause" a lot these days in Washington, though, with only a few exceptions such as Ron Paul (R-Texas) and maybe Tom Feeney (R-Florida), they're really not even getting close to the source of the current problems. Aside from a few hearty souls, the Bush Administration and nearly all of Congress are still avoiding the underlying questions that, come to think of it, they may not even be asking themselves in private, which, come to think of it, is an even more disturbing thought. That is, whether or not the U.S. financial system is so fundamentally flawed - based on a credit expansion which mustn't stop but which can proceed no further - that it can no longer survive even with a trillion dollars of government money to plug all the known leaks. To hear the discussion dumbed-down so third graders might be able to make some sense of it just makes the situation more surreal. To wit, tonight's address by Pesident Bush: Most importantly, my administration is working with Congress to address the root cause behind much of the instability in our markets. Financial assets related to home mortgages have lost value during the house decline , and the banks holding these assets have restricted credit. As a result, our entire economy is in danger. ... Unfortunately, there were also some serious negative consequences, particularly in the housing market. Easy credit, combined with the faulty assumption that home values would continue to rise, led to excesses and bad decisions. Many mortgage lenders approved loans for borrowers without carefully examining their ability to pay. Many borrowers took out loans larger than they could afford, assuming that they could sell or refinance their homes at a higher price later on. Optimism about housing values also led to a boom in home construction. Eventually, the number of new houses exceeded the number of people willing to buy them. And with supply exceeding demand, housing prices fell, and...
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    Source: themessthatgreenspanmade.blogspot.com
  • 11:10 AM » Marc Faber Calls the Fed a "Liquidity Drug Dealer"
    Published Thu, Sep 25 2008 11:10 AM by feeds.feedburner.com
    Anyone nicknamed Dr. Doom is likely to be a man after my own heart, and Marc Faber is no exception. The Swiss investor has a good record of market calls (for instance, he was a staunch commodities bull till late in the spring, when he reversed his view) and perhaps as important, has a broader historical perspective than most of his peers and a propensity to be blunt. His l are no exception (hat tip reader Dean): The Federal Reserve, which has encouraged excessive borrowing, is to blame for the credit crunch that has gripped world markets for more than a year, Marc Faber, the author of the Gloom Boom & Doom Report, told CNBC on Tuesday. "About 15 percent of U.S. households have negative equity. Who supplied the leverage into the system? It's called the Federal Reserve Board," Faber said. "If I'm the drug dealer I'm not responsible that everybody takes drugs, but I facilitate it, especially if I give it out free of charge, I can enlarge the market share, and that's what the Fed has done." Liquidity will dry up even more, volatility will stay high and financial assets are going to suffer as the crisis continues to unfold. The bailout plan is unlikely to work and the global economy will take the hit, he predicted. "People rely on the people in Congress, at the Fed, at the Treasury, people that brought us into this trouble, to take us out of trouble. I don't think they will succeed," Faber said. "We can have recovery rallies but a new high on the S&P is practically out of the question for a very long time. In real terms, equities are still very high and economically, I think the world will go into a slump." The main provider of global liquidity was the U.S. current account deficit, which increased at a fast pace over the past 10 years, but this will no longer be the case. "Next year, if the economy in the U.S. is as weak as I think it would be, the trade and the current account deficit will continue...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 11:09 AM » Bloomberg: Blame the Ratings Agencies (Part I)
    Published Thu, Sep 25 2008 11:09 AM by The Big Picture
    Huge special investigation in two parts from Bloomberg -- its a must read: Frank Raiter says his former employer, Standard & Poor's, placed a "For Sale'' sign on its reputation on March 20, 2001. That day, a member of an S&P executive committee ordered him, the company's top mortgage official, to grade a real estate investment he'd never reviewed. S&P was competing for fees on a $484 million deal called Pinstripe I CDO Ltd., Raiter says. Pinstripe was one of the new structured-finance products driving Wall Street's growth. It would buy mortgage securities that only an S&P competitor had analyzed; piggybacking on the rating violated company policy, according to internal e-mails reviewed by Bloomberg. "I refused to go along with some of this stuff, and how they got around it, I don't know,'' says Raiter, 61, a former S&P managing director whose business unit rated 85 percent of all residential mortgage deals at the time. "They thought they had discovered a machine for making money that would spread the risks so far that nobody would ever get hurt.'' Relying on a competitor's analysis was one of a series of shortcuts that undermined credit grades issued by S&P and rival Moody's Corp., according to Raiter. Flawed AAA ratings on mortgage-backed securities that turned to junk now lie at the root of the world financial system's biggest crisis since the Great Depression, according to Raiter and more than 50 former ratings professionals, investment bankers, academics and consultants. "I view the ratings agencies as one of the key culprits,'' says Joseph Stiglitz, 65, the Nobel laureate economist at Columbia University in New York. "They were the party that performed that alchemy that converted the securities from F- rated to A-rated. The banks could not have done what they did without the complicity of the ratings agencies.'' Gold Standard Driven by competition...
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    Source: The Big Picture
  • 11:09 AM » HSBC not in talks about UBS buy: source
    Published Thu, Sep 25 2008 11:09 AM by Reuters
    ZURICH/LONDON (Reuters) - HSBC is not in talks to buy UBS, a person familiar with the matter said after renewed speculation about interest from Europe's largest bank lifted the Swiss bank's shares more than 5 percent on Thursday.
  • 11:09 AM » Bush meeting with McCain, Obama on rescue
    Published Thu, Sep 25 2008 11:09 AM by Market Watch
    As Wall Street, taxpayers and world markets watch for signs of progress on the massive rescue plan in Washington, U.S. leaders are meeting to continue working out their differences.
  • 11:08 AM » Mortgage Bailout Could be Finalized Within Days
    Published Thu, Sep 25 2008 11:08 AM by www.thetruthaboutmortgage.com
    The monumental $700 billion mortgage bailout is said to be making headway, the AP reported this morning. President Bush has invited presidential candidates Barack Obama and John McCain to Washington to take part in the negotiations, calling for bipartisan support to get the deal completed within the next few days. A number of obstacles found in the [...]
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    Source: www.thetruthaboutmortgage.com
  • 10:57 AM » Opinion: Reflections on a Bailout
    Published Thu, Sep 25 2008 10:57 AM by feeds.feedburner.com
    As Congressional leaders debate the merits of a historic bailout proposal being pushed by the Bush administration, and Democrats look to tack their own social agenda to the back end of the proposal – free homes for everybody! – perhaps it’s time for all of us to admit something: this is a complex mess. As someone [...]
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    Source: feeds.feedburner.com
  • 10:39 AM » Is Paulson's TARP a TRAP?
    Published Thu, Sep 25 2008 10:39 AM by Seeking Alpha
    submits: For the second day in a row, yesterday Federal Reserve Chairman Ben Bernanke and US Treasury Secretary Paulson pleaded to the power players of Washington to pass their request for $700 Billion to implement their Troubled Asset Relief Program [TARP]. However if we move the letters around a bit, TARP becomes TRAP and that is exactly how many investment managers, economists, politicians and average Americans view the plan. They are afraid that this is a trap for US taxpayers because they may be paying for a bailout that benefits the private and not public sector. Bernanke argues that a failure of the private sector would have “grave” consequences for the public sector, which is true and Paulson has finally agreed to accept limits on executive pay under the bailout plan. Yet, Wednesday’s price action in US stocks and the US dollar suggest that some investors are holding out the hope that Paulson’s TARP does not become the trap that keeps Americans still paying for bailout many years to come. LIBOR Rates Jump, TED Spread Widens Other investors on the other hand are more skeptical. Three month LIBOR rates jumped 26 basis points to 3.47 percent, which is the highest level since January. The TED spread, which measures the difference between the interest rates of the 3 month LIBOR and the 3 month Treasury bill hit an intraday high of 311 basis points. Not only is this only the second time in 2 decades that the TED spread has gone above 300bp, but the premium is far above its pre-credit crunch levels of 20 to 30 basis points. The greater the TED spread, the greater the degree of risk aversion and the fear of default in the market. Therefore the jump in the LIBOR and the widening of the TED spread suggests that investors are still hoarding their cash and they are skeptical of whether the government’s efforts will actually restore stability in the financial markets and improve risk appetite.
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    Source: Seeking Alpha
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