It was the market that cause the failures

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Originally Posted By: javacontour


Everyone cannot own MBO's. Some do, and are heavy into them. I understand this.

But not everyone owns MBO's. So to say, or to even hint that all the money in the market is tied up in MBO's is silly.



Where did I say or even hint that EVERYONE will or does own MBOs? Oh, that's right, I DIDN'T.
 
Originally Posted By: PandaBear
Originally Posted By: Drew99GT

OK, what is your solution then.
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We (the government) take over a few more institutes' and frauds' (fraud loan initiators, loan initiators that intentionally divert people into sub prime loan, banks with over leverage, fraud credit rating agencies, etc) assets AIG style.


Ummmmmmm, again, that is basically what they are proposing to do! (ie taking over the bad assets).

I'll let Tempest discuss with you the merits of completely taking over institutions....ie socializing the entire banking and financial industry to begin a new deal type of federal reconstruction of our country.
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Well, the impression I had was there was no one out there buy these MBO's but Uncle Sam.

If others are not willing to part with their treasure to buy the MBOs that are going on the market at discount prices, then Uncle Sam shouldn't be buying at that price.

If these are going to be such good investments down the road, I'm sure there will be no trouble finding private money to buy as much as the government is saying they will buy.

That's all I'm asking for.

You said

Quote:

I understand your point, but there is no private institution that is big enough to be able to "prime the pump" (oh lord, I sound like Hank Paulson...) enough - ie suck the bad debt out of the system long enough for the housing market to bottom and hopefully come back. Private investors (in a macro sense) are the ones currently holding the bad MBOs and there is literally no buyers for them.


That tells me they are STILL priced too high, if private investors are not selling other holdings to buy these issues.

So if that's the case, Uncle Sam should not buy until a price is established that encourages private investors to trade into these funds.

Once that price is established, let the government match the buys until the package is used up.

My fear is that even "deeply discounted" the government will overpay. After all, we are talking about the same outfit that buys $600 toilet seats, hammers and manages FEMA trailers. I don't really trust them to buy these MBO's smartly given their track record.
 
Originally Posted By: Gary Allan
I'm sure if you placed me under some microscope ..you could trace its origins to all kinds of things ..under achievement, sexual frustration..not being nursed as an infant ..what have you.
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I bow down to your brutal honesty. Not much I can say to that
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Originally Posted By: javacontour

But the only buyer that we seem to have is Uncle Sam.


Actually there are some private funds buying them right now for about 28c for the dollar (that's before Lehman, AIG, Fannie, Freddy, Morgan Stanley, Goldman Sach, and etc fails), right now they probably have to sell for 10c for the dollar.

Warren Buffet seems to be happy buying at the right price, if no one else is buying that means the price isn't right, regardless of the current discount value.
 
The bailout could be done so as to make money for the taxpayers. Wall Street is broke and has no bargaining power. The screws should be put to them, and put to them hard. They understand that - they do it to each other and everybody else as often and as hard as possible. That's capitalism.

It won't happen that way, unfortunately.

The rush to get the bailout done means business as usual. The assets sold to the Feds will be overvalued to minimize further credit defaults at the selling institutions. The Fed will not have the political guts to kick the people in the assets that won't pay to the gutter. A whole new expensive problem will be created bailing out the people that the Community Reinvestment Act put in property, that shouldn't have been. The Fed can't manage this stuff. They will either have to create a new bureacracy to do it or hire (who else?) the buffoons that
created the mess to manage and sell the assets, for a fee, of course. The Fed's demand for absolute discretion in implementing all of this probably means no meaningful criminal prosecutions will ever occur.

The more I ponder this, the more I would rather take the hit now, and be done with it. Letting the people that caused it go out of business WILL fix the problem. A bailout will probably just postpone the final day of reckoning.

Bankruptcy court is the best place to resolve this. Fed to Wall Street: FO. Reinstate short selling immediately. Wall Street's innate greed and death binge of profit taking will drive the weaklings into bankruptcy within days, if not hours. Their assets can be liquidated and sold at auction. Bankruptcy courts do this all the time, they're pretty good at it. The stock market will take a hit, it won't go to zero. Money markets will take a hit, they won't go to zero. Real Estate prices will take a hit for a while. A lot of new property will be available for cheap, a good opportunity for investment.

The world won't collapse, it will just go on. People will have to save more and use credit less, banks will pay decent interest to get deposits to loan back out. Life will return to mostly normal.
 
Originally Posted By: Win
The Fed will not have the political guts to kick the people in the assets that won't pay to the gutter. A whole new expensive problem will be created bailing out the people that the Community Reinvestment Act put in property, that shouldn't have been. The Fed can't manage this stuff. They will either have to create a new bureaucracy to do it or hire (who else?) the buffoons that created the mess

I think you have it pretty much right.
 
Quote:
That tells me they are STILL priced too high, if private investors are not selling other holdings to buy these issues.


How about an auction? Much like 30 year bond sales? The price starts @ 100% (or whatever) and buys down the bad paper until the speculation can't be contained. Then mass droves of investors will flock in ..like they always do ...
 
We'll now take a pause in this ongoing debate to allow office bound employees to complete their commute home ...and for station identification.
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Originally Posted By: javacontour
I think an auction would be a great idea. Maybe you wouldn't even need the government to step in :)



Fed: you guys are over leveraged, start selling assets to get more cash
Banks: I'm trying, but I can't sell it for the book value.
Fed: Ok, I will buy it from you for 50% off book value.
Banks: Ok.
Fed: Now you are short again, start selling more asset.
Banks: I just did, you bought them.
Fed: That's 10 mins ago, you are now short by even more.


That's not going to work, let's try again:

Fed: you guys are over leveraged, start selling assets to get more cash
Banks: I'm trying, but I can't sell it for the book value. Can you help me out?
Fed: ok, I will buy them for book value
Banks: Here it is.
Fed: Any one want to buy the loans for 20% off?
Banks: Nah, I'll fold, and take a vacation, see ya.
Fed: Any one want to buy the loans for 50% off?
Banks: Nah, I think it is only worth 70% off.
Fed: Any one want to buy the loans for 70% off?
Banks: Nah, I think I can only afford 80% off.
Fed: OK, here it is.
 
FM and FM must go away in any deal to solve any future problems, but they probably won't. If they stay around, this is doomed to be repeated.
 
Originally Posted By: Tempest
FM and FM must go away in any deal to solve any future problems, but they probably won't. If they stay around, this is doomed to be repeated.


As long as there is CRA, ACORN, "community activists", et al, all putting pressure on lenders with the Uncle Sam cash machine it will repeat....
 
I don't know this, but I speculate that most of the bad paper was on new construction that was higher priced, not lower dwellers buying existing homes. How much can the efforts of "community activists" (WINK:WINK) really have to do with this (please don't cite alleged socialist origins ..cite REAL numbers of "others" being big players here in terms of bad paper written).
 
[quote/]In a sense, it's true. Keep in mind that the US attracts the best minds in technology, engineering, entrepreneurship, business and finance exactly because opportunities, and hence pay, are limitless compared to other countries. [/quote]

If these were the best financial minds that developed these derivatives, etc., then they knew what they were foisting on the consumers and should have some jail time coming. If they were all just inept, then let it be known I'm just as inept (if not more) and I'll do one of those CEO or CFO jobs for half the normal salary (and perks...corporate prop plane instead of corporate jet for starters).
 
Originally Posted By: PandaBear
Originally Posted By: javacontour
I think an auction would be a great idea. Maybe you wouldn't even need the government to step in :)



Fed: you guys are over leveraged, start selling assets to get more cash
Banks: I'm trying, but I can't sell it for the book value.
Fed: Ok, I will buy it from you for 50% off book value.
Banks: Ok.
Fed: Now you are short again, start selling more asset.
Banks: I just did, you bought them.
Fed: That's 10 mins ago, you are now short by even more.


That's not going to work, let's try again:

Fed: you guys are over leveraged, start selling assets to get more cash
Banks: I'm trying, but I can't sell it for the book value. Can you help me out?
Fed: ok, I will buy them for book value
Banks: Here it is.
Fed: Any one want to buy the loans for 20% off?
Banks: Nah, I'll fold, and take a vacation, see ya.
Fed: Any one want to buy the loans for 50% off?
Banks: Nah, I think it is only worth 70% off.
Fed: Any one want to buy the loans for 70% off?
Banks: Nah, I think I can only afford 80% off.
Fed: OK, here it is.


Let's try it this way

Fed: How much will you pay?
A Bank: 80% off ..and we'll take all we can get
B Bank I'll give you 21% on the dollar
C Bank I'll give you 22% on the dollar
D Bank no wait, I'll go 23% on the dollar
etc..etc.

OTOH, just leave it at 0% on the dollar and call it good
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There won't be a run on the banks, because most people no longer use paper money. You can't run out of electronic money. Just the interest rates will rise if people suddenly start trying to hoard up on stuff. But then the increased demand for stuff will quickly stimulate economic growth... problem solved.

I heard the tape of the Prez threatening the nation with doom if you don't fork over 3/4 trillion dollars last night. Sickening.

A good leader does NOT threaten doom and gloom to an entire nation if they do not pay up.
 
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