1 You lose Newt, you might as well call it in, fellas. Bailout = good, voluntary financial mass extinction = fucking stupid.

2 He oughta change his name to Inspector Suckup!

I keed, I keed.

However, it does seem that mark-to-market rules need to be reformed immediately, bailout or not. Why in God's name were they ever instituted in the first place?

3 "Inspector Suckup"

Christoph already has that title.

4 I am sooooo glad I ate pie for breakfast today.

5

Ace-

It is my understanding that mark-to-market accounting was for investment banks and not commercial banks.  With Goldman Sachs and Morgan Stanley converting to bank holding companies there are no stand alone investment banking firms left so mark-to-market accounting changes would do nothing.  On the other hand i see so many people in the know (congressional blowhards etc.) talking about the need to change mark-to-market accounting rules that this info may be wrong.  Have you found (or do any of the morons on this board know) whether my info is correct or not?

6 And speaking of assholes, I still can't get around the fact that the same assholes who got us into this mess are more or less the same assholes who want us to believe they can get us out.  I don't think so. I propose the following:

1. Every single U.S. representative and senator resign now and leave Washington DC.

2. We'll hold all-new elections.

3. No lawyers may run for the vacant seats.

This is what I think about when I'm in my bunk.

7 Is this where I collect my cult of personality?

8 Who do you think will at last start a campaign to urge President Bush to fire Secretary Paulson for his Chicken Little self-fulfilling prophecy panic and mishandling of the situation?

9 I was away from the computer for a while.

Is Congress doing anything?  Are they just dicking around?  Did Pelosi JUST FUCKING RECESS THE HOUSE FOR TWO DAYS!?

Also, I read the top item on Insty's list (another cleverer-than-thou lawyer expounding on the economy) and remember the all-too-true line:

First, kill all the lawyers.

10

Would saying "inspector sockpuppet" get me banned? Just fuckin' with you, Ace. After all, you have my IP. Still, we deserve a few days to lick our wounds. The Asian market will be shit tomorrow, but I'll be buying heavy. The market will be stable if not up dramatically.

11 "Christoph already has that title."

No, he's the Official Canadian Concern Troll of AoSHQ (tm).

12 I'm still not buying it.  I'm tired of playing by the rules and getting shat on.   I've watched politicos get filthy rich and my neighbors bulk up on material goods like the piper would never call.  I've got nothing to lose.  Anyway, I may end up being a czar or general in the breadlines or work camps.

13 >>>
However, it does seem that mark-to-market rules need to be reformed immediately, bailout or not. Why in God's name were they ever instituted in the first place?

TO PREVENT FRAUD,  of course.

Look, if I don't do this, then I can claim an asset is worth WHATEVER I want to say they're worth.

I can claim my company is worth eighty bazillion dollars.

it's the mark-to-market rule that keeps this stuff honest.... mostly.

The trouble is we have an artificial and temporary develeraging down to zero.

This is why I keep saying:  These assets are NOT worth zero!  On paper, due to rules, they're currently marked so, but they're not. 

And thus my computer analogy.  We have a glitch here.  We have misbehaving programs. They are causing the computer to become nonfuntional.

Do we intervene and fix the fucker or do we sit here saying, "The computer will work itself out"?

14 Short article on mark-to-market.

Pay attention to the date.

15 "It is my understanding that mark-to-market accounting was for investment banks and not commercial banks."

Thank Sarbanes-Oxley.

16

You distress me, padawan. You know this is what I do for a living and you do not trust my same opinions on this matter which I have posted here for weeks.

We have heard time and again that if the market price for these assets were higher then the market would be paying that price. NO. Don't let anybody even try to float that bullshit. Markets are always right in the long run. In the short run is where fortunes are made because markets are not always right in the short run.

I oppose government intervention but I know a great trade when I see one. Sometimes you have to swallow your principles and watch the money roll in. This is a no-brainer.

 

 

17 scoflaw,

I  don't know either way.  As I keep saying, just to be honest, I am scrambling to understand this myself, and my knowledge is extremely sketchy and incomplete.

18 The psychological reason you can't immediately rescind mark to market accounting rules is that if you change your accounting during a crisis, people will wonder whether or not you're just papering over a problem.

It needs to be changed, but let's not spook our overseas friends.  Fix the liquidity trap, then change the accounting.

19 Yeah! No more mark-to-market! My assets aren't worth what the market will bear. They're worth what I think they're worth!

That'll push the bullshit out of the economy!

20 Do we intervene and fix the fucker or do we sit here saying, "The computer will work itself out"?

This intervention isn't fixing it. It's more like applying a Windows patch and hoping the new software will fix the hardware later on.

You need to replace the hardware at the same time.

(I hate metaphors)

21

Stephanopoulos post at ABC:  "We calculate there are about 31 competitive House races divided between Democratic and Republican House members, and 24 of the 31 members in competitive districts voted against this package. "

Holy crap.  Their phones must have melted. 

22 sponge, refresh me, what are you saying?

To be honest I mostly address critics and skeptics. 

23 "it's the mark-to-market rule that keeps this stuff honest.... mostly."

What's wrong with appraisals?

24 BSOD!

25 So, what's the deal?  Is it simply a matter of re-writing accounting rules, or spending $700,000,000 to prop up the financial industry?

26 Oh, and mark-to-market is not the enemy here. Mark-to-market  + Sarbanes-Oxley, that's overkill. But mark-to-market, generally is good practice. Perhaps the Treasury should be able to suspend it, with warning and disclosure under certain circumstances (like these.)

27 Boortz has been going on about Mark-Market for some time...

28 #25  mrp

You left out some zeroes.

29

No. No. No.

Come on now.

Don't start that.

You may get excited sometimes, but you are NOT Andrew Sullivan. That's 2 'emails' you've posted now...

30 First, kill all the lawyers.

Posted by: someone at September 29, 2008 09:09 PM (2z2WN)

 

 

That's gonna be hard to do.......................................

 

 

 

 

..they breed faster than rats.

31 OK, I get it now - no problem is too big, nor too small, that it cannot be overcome with central planning.

32 "What's wrong with appraisals?"

An appraisal deals with the house, not the value of a mortgage.

Banks don't want houses, they want future streams of mortgage payments.

33 Thank Sarbanes-Oxley.

People keep saying this, but the only change SOX made was provide federal funding for the FASB (paid by public companies). The ivory tower dweebs in Norwalk bent over regularly for the SEC way before SOX, and I think we'd have probably had to deal with FAS 157 regardless.

34

14Short article on mark-to-market.
Pay attention to the date.

and Citigroup has 105 percent, according to Bloomberg.

The above is from Andy's link (Para. 5) -- what am I missing here?...Citi just got Wachovia today for the bargain price of $2B.  Andy -- was Citi able to dump (some of) their toxic debt; or, able to absorb more; or, were they misreported within the CFO article?

35 I wonder what's going to happen to all the just-in-time retailers when the credit crunch gets really bad. Just-in-time only works when credit is easy and fast. What happens to Wal-Mart or Home Depot or Dell Computer when the cost of credit goes way up?

36 Well, I'm not an accountant, but I am a financial analyst and have been since, well, let's just say I was on the trading floor of a major Wall Street firm for the crash of '87 (and it wasn't "take your kid to work day").

I think we are in a financial crisis. However I know that any proposal made by an investment banker is designed primarily to benefit investment bankers. It's what they do. It's all they do...

There are other approaches to addressing this problem. Loans are a less bad idea vs. the treasury trying to value illiquid assets (a stunningly bad idea, as in "Wham! reunion tour" bad, as in "Cop Rock remake" bad, that kind of bad). Over funding the FDIC is another less bad idea. Putting in place incentives to free up the CP market is another (lots of tax approaches to that, lots of capital waiting on the sidelines). And of course, get rid of "mark to market."

Beyond some short term benefits, the Paulson plan will likely make things worse. You want a credit crunch? I mean a real one? Suck $700 billion out of the economy with new federal borrowing and sink it into a pool of depreciating illiquid assets.

It's not socialist. It's just dumb.

Address the crisis, yes, but not with this plan, and not with any version of this plan.

37

I can't tell if FVM is used in all banks or only commercial banks unless it is defined on access to markets for valuation (if so, it depends). I've been reading the FASB exposure drafts back to 2005-2006 for FAS 157 but I'm not a banker, just an accountant. But for what I've read, the scope of it is for those entities  :

that both buys and sells in blocks as part of its regular, ongoing business activities

 So, if they "regularly" sell and buy blocks of securities, yeah, it applies. Which means that if such securities compromise a non-material amount of assets, they're fucked. There should have been a regularization over a set period of time applied to the valuation - as was discussed I think back in 2005 when they were working on this. But really, this situation wasn't directly contemplated as far as I can see.

38 Actually for you computer analogy a trojan horse would be better.  A bank gets infected with assets that have had their value forced to zero.  That valuation causes the problem to spread to other companies  that do business with the bank.  In a computer you would run adaware here we inject liquidity and after the credit lines open up again give the banks a 6 month window to revalue their assets.  If we want o be dicks about it we make the revaluation subject to an IRS audit to insure the assets are valued fairly.

39

Just my two cents to back up Inspector Asshole:

I retired from the IRS (left the dark side) 11 years ago.  The mark-to-market shit was out there for several years before I left, and IT WAS A MAJOR PROBLEM THEN.  It was to "properly" value securities.  It just created major work with little reward to do the "revaluation". 

These "bundled mortgages" are treated as securities (paper assets) WITHOUT REGARD TO THE UNDERLYING REAL ESTATE'S VALUE. (Mortgages are secured loans, secured by the real estate) 

So, mark-to-market is being applied to stuff it was NEVER DESIGNED TO APPLY TO.

But the buzzwords shore sound good, don' t they?????

 

40 Mark-to-market  + Sarbanes-Oxley, that's overkill.

Explain.

41 You left out some zeroes


That's why I'll never be a staffer on the House Ways And Means Committee

42 I just cut myself shaving. 

43 Suck $700 billion out of the economy with new federal borrowing and sink it into a pool of depreciating illiquid assets.

Well, sure, but those assets exist in the economy, no matter who actually holds them. The hit must be taken; the only question is will we take the hit all at once (as a market correction), or spread it out over time (as a government bailout). There's no way to make these assets simply disappear.

44 The psychological reason you can't immediately rescind mark to market accounting rules is that if you change your accounting during a crisis, people will wonder whether or not you're just papering over a problem.

Yeah, that's true... but the government has already made a couple moves along those lines in recent days.  As of Saturday you couldn't short 900 companies.  I haven't checked, but I'll bet every single dow stock was on that list.  If that's true "Teh Market", which is the Dow 30 to Joe Schmoe, is already being temporarily inflated because people can't make money on the downside.

I'm sure they could change mark to market and say "well, we're just going back to the old system to reduce volatility" or somesuch.

45 I wonder what's going to happen to all the just-in-time retailers when the credit crunch gets really bad. Just-in-time only works when credit is easy and fast. What happens to Wal-Mart or Home Depot or Dell Computer when the cost of credit goes way up?

It hits JIT manufacturers and distributors, too. Basically the entire supply chain these days.

46

If what Inspector Asshole was saying was all true and the root of the issue, it just makes the bail-out seem the most godawful stupid thing I've ever fucking heard.

We're spending $700B so we don't have to re-write accounting regulation?

47 The thing is, we know what the values are.  We've always known.  And this is how you solve the financial crisis.

Prior to the CRA and all the other bullshit regulations that started this mess, what did we value a mortgage debt?  Easy.  The 35% rule.  The mortgage a guy could be reasonably expected to pay was 35% of his income. 

So, you value these mortgages at that rate.  35% of the income of the guy holding the mortgage.  And what if that's nowhere near the full value of the mortgage itself?  Then you extend the maturity rate of the mortgage as far as you need to - 60 years, if that's what it takes - so that they can pay it off.  It'll take 'em a lot longer to pay it off, but they don't get foreclosed on, and the mortgage now has a real value.

This wouldn't solve it alone.  You'd also need to cut the insanely high rates that people got in paper on these things (like 8%) to something more reasonable like 6%.  They'd survive, and it was their greed and stupidity going for 8% on securitized mortgages fraudulently branded AAA that got 'em in that mess, so they don't have that much room to piss and moan.  (For those who don't realize, interest rates vary with the associated risk.  The higher the risk, the better the interest rate.  The fact that these guys were getting 8% on something marked AAA should've been a bloody clarion call that something was way wrong, but hey, they gambled, reducing that rate to 5% now would allow them to survive, it's just their payout isn't as huge as they expected.  Suck it up.

Do those two things, and you're not only taking the taxpayer off the hook and putting the irresponsible parties on the hook, but you also give all these valueless mortages a real standing value, and you're even avoiding foreclosures.

THAT is how you solve this financial crisis.  But I bet you've never even heard anyone suggest it.  That's cause no one can make a mint that way.

Qwinn

48

I only know about three things well: the look in a hobo' eyes as he confronts his mortality, low-carb dieting with Klonopin and distressed assets.

All our convert here is saying is what I've been commenting upon since this began. But who's going to listen to me? You, however, are the smart military blogger. Use your resources and maybe we convince this guy before today, when it's a little late.

I just want to be a resource, okay? I don't really have much of a life.

49 We seem to be missing an explanation of how this spreads from companies that are holding toxic waste to companies that aren't.

50

The psychological reason you can't immediately rescind mark to market accounting rules is that if you change your accounting during a crisis, people will wonder whether or not you're just papering over a problem.

So the solution is to.... paper over the problem...with money?!?

51 I was going to post another question about mark-to-market, using my house and the house across the street as hypotheticals, but codekeyguy just answered it for me, and explains why this doesn't make sense: mark-to-market is for securities, and now it's getting applied to hard assets. That's insane.

Also, if there was a Wham! reunion tour, I'd probably go.

52 As of Saturday you couldn't short 900 companies.  I haven't checked, but I'll bet every single dow stock was on that list.  If that's true "Teh Market", which is the Dow 30 to Joe Schmoe, is already being temporarily inflated because people can't make money on the downside.

If not for this rule, would some short covering today have cushioned the Dow's 777 point slide? Thanks to the brainiacs at the SEC, we'll never know.

53 Without Mark to Market there is no way for the bail out to work. IF the Treasury gets the approval to start buying this crap paper, they will effectively set the market. Having an effect on balance sheets throughout the financial sector.

54 please qwinn, with the mortgage stuff. you sound like a leftie arguing "if Bush the senior had finished the job in Iraq when  he was president, we wouldn't have to go in there now."

You're avoiding the question by postulating a frigging time machine.

YES, if we had done that IN THE PAST, we wouldn't be in this mess.  But we didn't. 

So what is your solution to the present crisis, absent a time machine?

>>>You'd also need to cut the insanely high rates that people got in paper on these things (like 8%) to something more reasonable like 6%.  They'd survive, and it was their greed and stupidity going for 8% on securitized mortgages fraudulently branded AAA that got 'em in that mess, so they don't have that much room to piss and moan.  (For those who don't realize, interest rates vary with the associated risk.

The government passes a law reducing the rate on a privately created security?

Huh?

How?

And how does that fix the toxic  assets currently paying zero?  the ones actually causing most of the problems in the credit market?

55 I still don't understand how these bundled mortgages can be valued at or near zero.  Doesn't that imply the potential buyers think every loan in the bundle will go 100% default?  What am I missing?

56 #30, Old Hippie Vet, yet the younger right-wing vet give you a piece of wisdom from our friends in the Klingon Empire:

"A thousand throats may be cut in one night by a running man."

I'm sure if we all work together on the problem we can deal with it effectively.

57

Obama's AG will sort this all out by indicting Republicans in perpetuity.

When do I get the chip for my neck?

58 Take a hypothetical minimum wage lifer - $6.65 / hour x 40 hours / week x 50 weeks / year x 50 years / useful working life = $665,000 / useful working life --OR-- 1.5 million working stiffs per $1 Trillion [DOLLARS!].

Suggest we go whole hog on central planning and make entering the States w/o clearing immigration a life sentence at hard labor - need only round up 10% (give or take) and we'll get 1:1 on this bail out...

... or we can embrace the suck...

... or we can kick the can to our sons and daughters (and grandchildren) and put them to work so we can enjoy our well deserved 401k... YEAH, that's the ticket!

59

Do those two things, and you're not only taking the taxpayer off the hook and putting the irresponsible parties on the hook, but you also give all these valueless mortages a real standing value, and you're even avoiding foreclosures.

THAT is how you solve this financial crisis.  But I bet you've never even heard anyone suggest it.  That's cause no one can make a mint that way

HOW THE HELL IS THIS BLOG POST SUPPOSED TO CONVINCE ANYONE?!?

Well I mean the way Ace wants, anyway...

It sure as fuck makes me adamantly opposed to this bailout, whereas before I was sarcastistic and detatched...

Is it really THIS goddamn stupid of a plan? 700B just and explicitly so they can continue with the shit that caused the problem?

60 >>>We seem to be missing an explanation of how this spreads from companies that are holding toxic waste to companies that aren't.

Credit is provided by the companies and banks holding these assets.

If they have no cash to lend,  your business cannot secure the routine bridge loans it takes out to make payroll once or twice a month.

61 Quinn,
We were discussing that very thing at the office today. I think we are way smarter than the idiots in charge. (I could be biased)

62 Can we use some of this bailout money to kill people in comas?

63 Just off topic, where has Obama been hiding? I didn't hear a peep from him today, or did the networks not show it? What is his plan?

64 Ace's liver, if they changed it the following way, it might work and not freak anyone out.

Proposed change:

If you agree to hold the mbs to maturity, then you are exempted from mark to market capitalization requirements.  Then, it's pretty easy to argue that you're dealing with an NPV type value calculation rather than a market type value calculation.

But, in the middle of a crisis, I don't know if it (psych-wise) flies to say both a) it's worth its discounted future cash flow and b) it's worth its market price.

65

Explain? A CEO has to account for the financial position of his company before he signs off on his audit. If I choose not to value my assets at market and they turn out to be shit I'm going to jail.

Now, I think they should be marked to market, don't misunderstand. But why should S-O require me to swear to thier value when MTM requires me to mark them down already? That part of S-O seems overkill to me.

If I had a well-capitalized company willing to hold an undervalued asset to its maturity I can't see why I'd need to be restrained by both S-O and MTM. But I'm willing to hear the other side of that.

Tomorrow.

66 Let's put it this way - think of the "credit drain" and bad things as a military force. The CRA loans to carnies and strippers with Tourette's Syndrome is like a company of infantry - pretty impressive. The problem with marking down to market prices is like giving each sonofabich a Davey Crockett nuclear howitzer.

I'm sorry, but I stopped reading here. Anyone who uses such retarded analogies has nothing intelligent to say.

67

Well, sure, but those assets exist in the economy, no matter who actually holds them. The hit must be taken; the only question is will we take the hit all at once (as a market correction), or spread it out over time (as a government bailout). There's no way to make these assets simply disappear.

What hit?! The post was claiming the assets were undervalued. The correction will send these companies books soaring, not faultering. What hit?

68

sigh.

i know i'm flipflopping here, and i was screaming moral hazard at the top of my lungs last week.

hell, still am. but it looks like (as someone else said) that this is the best of our one options.

 

69 sponge,

Open blog it.

Incidentally, the thing is, I know/knew about mark-to-market. I didn't learn it from Inspector Asshole.  I was just posting him as an example of someone  who dug into this and said, "Oh, shit, I see the problem."

It is true -- I know more than I can possibly blog.  I don't mean that  in a bragging way. Most people know far more than they can commit to writing. (Except for barack  obama, who pretty much got it all out there in two books.)

of 60 things I WANT to blog each day, I only get around to 25 or 30 of them.

And I keep linking and linking this shit and PEOPLE DON'T READ BECAUSE THEY'RE CERTAIN THEY ALREADY KNOW ENOUGH TO MAKE UP THEIR MINDS.  Which is infuriating.  Yes, I'm trying to  persuade people, but through actual information, and these  links get skipped over by people who've decided that Road to Serfdom pretty much covers everything and so there's no point reading anything more about this current crisis.


But let me know your thoughts and I'll main-thread them.

70 Ace:

What do you mean you need a "time machine"?  You don't need that.  I'm talking about the bad mortgages that are out there -now-, where people were allowed to take out such huge loans way way way above the 35% rule.  We bring them down to 35% -now-, by extending the maturity date as far as is necessary to allow the holder of the mortgage to pay it with 35% of his income.  Incidentally, you'd also need to set the bar so that if someone wanted to buy that house, they'd also have to meet the 35% of income criteria. 

As for the securitized mortgages and the 8% going down to 5%, well, this is done by correcting the ludicrous AAA rating that's on them.  They can accept the new interest rate based on the actual non-fraudulent rating and that would thus reflect something like true value, or they can reject it and hold onto something that's truly worthless cause no one would buy it.  Their choice.

Qwinn

71

Doesn't that imply the potential buyers think every loan in the bundle will go 100% default?  What am I missing?

That the market, for a variety of reason, a dearth of lending among them, cannot and will not pay you what the asset is worth. The "bailout" addresses that with authori-ty.

72 More bad news!!!

http://biz.yahoo.com/ap/080929/oil_prices.html

hs)

73 Pence is deeply, and destructively, in love with his own cleverness.

His flipping on amnesty should have taught y'all as much.

74 "So the solution is to.... "paper over the problem...with money?!?"

Entropy, if you'll take it down a notch or two, I'd be happy to give you my thoughts, for what they're worth.  But, you just keep taking such aggressive shots at Ace and being so hyperbolic in general, it doesn't seem fruitful.

75

Doesn't that imply the potential buyers think every loan in the bundle will go 100% default?  What am I missing?

That the market, for a variety of reason, a dearth of lending among them, cannot and will not pay you what the asset is worth.

Exactly.  Thanks to the credit crunch, they couldn't come up with the money even if they wanted to!

76 Kasper,

Futures markets. Global recession = lower fuel consumption.

77 Explain? A CEO has to account for the financial position of his company before he signs off on his audit.

Oh, o.k. That was a '34 Act requirement before the stupid Sarbanes-Oxley certifications they sign now, though. The SOX 302 and 906 certifications are about 99% form over substance.

78 Kasper,

They're pricing in the likelihood of a massive worldwide recession/depression and you're cheering?

79 62 Can we use some of this bailout money to kill people in comas?

You don't need money for that. Just go in their hospital rooms and flip some switches. Free and fun!

80

Look, if I don't do this, then I can claim an asset is worth WHATEVER I want to say they're worth.

There are other ways to value assets. Discounted cash flow is one.

.

 

81

So all you folk who saw all this coming down the pike, what did you do personally do as far as financial protection? And what do you advise for those who didn't know.?

We have four sons we need to send to college and as we watched the market we decided last spring to put everything into 'safe harbor' = goverment securities. Was that wrong?

And seriously, pretend I'm a 4 year old - which I cop to  - what is the actual fallout of this for the average suburbanite family and for the average American who owns a business/farm?

82 63 Just off topic, where has Obama been hiding? I didn't hear a peep from him today, or did the networks not show it? What is his plan?

He put out a press release today directly blaming Bush, McCain and the GOP in general for everything. Beyond that, he could coast and let the media do the work for him.

83

I consider myself a fairly somewhat intelligent guy with a basic, rudimentary grasp of basic economics, but reading these recent post and comments of those involved in finance, and trying to keep up, makes me feel a bit like Ralpie Wiggums.

"I'm... confused. My head hurts."  [/Wiggums]

I can only imagine those out there who don't bother to even keep up. Let's just say I'm glad I bought my house last year, and that my rate is fixed.

84 What I still don't understand about mark-to-market:

Why is a shitty mortgage is worthless under the rules? Because there are no cash flows from it in the form of payments?

Why isn't the value of the property considered? Wouldn't the holder have the right to the property if the borrower defaults? If the property has a market value, then shouldn't the shitty mortgage have a value as well? I'm obviously missing something here, but I'd like to know what.

85 That's about the third or fourth thread now where some commenter has mentioned oil dropping as a plus.

Oil dropping because supply is up = good.

Oil dropping because demand is going down = bad.

Guess which instance this is.

86

I appreciate that, Host. But Hunchy already made it clear that my thoughts are not fit for consumptiom here, that I need Tina Brown or even Hunchy herself to edit my coarse musings. 

And it is frustrating. Like I said earlier and JackStraw agreed, intellectual rigor and principles are fine and good until real money is on the line, and this is real money.

For now, I have little to offer going forward that I haven't bored the shit out of the collected morons with. That said, I do speak from authority on the subject but who would know that, right?

My nickname should have been Vulture Investor Who Will Pick Your Pocket Really Bad If You Don't Buy A Friggin' Clue Here.

 

87 The issues I have with a bailout (other than the philosophical ones I can set aside, assuming it works and prevents future crises) are the lack of guarantees.  Can we be reasonably sure it will do what is intended?  Are we sure the folks who created this mess can be trusted to correct it?  What are the alternatives - and not just "do something or prepare for the Armageddon" - but is there a less intrusive way to correct the market.

And the biggie, is this only going to delay the inevitable at the expense of eternal government interference with the markets?

I don't think anyone wants a total meltdown.  I admire the ideological  purity of those who say they do, but I can't see an upside.  I am, though, willing to accept a market correction over the short term if delaying a bill achieves something permanent with the lowest possible taxpayer liability.

Color me skeptical but hopeful.

Inspector Asshole's a cocksucker* for rolling over though.

*Used entirely for most profane conservative blogger purposes.

88 The real question here is should we all just stop making our mortgage payments if the government is just going to give us a better deal down the road?  I want to get in on all the fun too.

89 So, just to add more to the conversation, what's the word on Lowry's "Plan B" , which also seems to be Kudlow's "Plan B," if, as some suggest, a resurrected bail-out becomes a vehicle for total-left insanity?

It would seem to me that, if this is as serious as those supporting the bail-out say it is, that this ("Plan B") option should be exercised, regardless.

Anyhow, it beats the hell out of my personal "Plan B," which involved an investment of $1 in Powerball Futures last Friday, which apparently became so much worthless paper on Saturday night.

90 > Distribution networks would be among the first hit. I haven't gone further than that in my research. But right there, we're looking at some severe dislocation. Severe as in diabetics having to stock up on insulin.

> This does have the possibility of being retardedly bad - think what would happen if 1/3rd of the train and truck traffic ceased. Stopped without notice.

> The problem is systemic - not just to the credit market - it is systemic to how we do business between states. It is systemic as in "No Produce Scheduled Until Next Week" type signs in your Safeway.

> If it doesn't get fixed in 2 weeks, by January some communities will be isolated due to no diesel for the road crews. In New York.

This reminds me of a novel I read once. All the smartest people in America went and hid away at a ski resort and let the dumb people (mostly Democrat types) run it into the ground. Then came a bunch of stuff like those examples above. Finally the nation collapsed and the smart people all celebrated by smoking golden cigarettes.

There was more to it than that, but I think I got the salient points. It was a pretty good book, though I have to admit it seemed a little unrealistic at the time.

91 Oh, also sponge, don't think I'm defending SOX. I think it's about the biggest overreaction evah.

You want to talk about fucked up, try this one. FAS 123(R) requires companies to fair value employee stock options. Most companies use the Black-Scholes model to do this, but BS wasn't designed to cover some of the unique features of employee stock options (no active market, very long life, restricted exercise periods, etc.). The FASB basically says they know all this, but so what - just value the options, take the expense and STFU.

So under SOX, the CEO and CFO have personal liability for the accuracy of the financial statements but are required to apply an acknowledged broken model under an accounting standard to produce said statements. Come to think of it, this is a lot like mark-to-market.

92 #35
It's the company relying upon a bank overdraft to smooth out the liquidity bumps between Wal-mart paying it's 120 day account and their suppliers holding 30 day notes, who are most vulnerable in any credit squeeze.
Which means practically every small business.
And if the US is anything like Oz, 'small business' is the largest employer in the country.
Not Ford or IBM.

93 And seriously, pretend I'm a 4 year old - which I cop to  - what is the actual fallout of this for the average suburbanite family and for the average American who owns a business/farm?

First: consult a professional, don't ask morons on a moronblog. Seriously.

Second: Having said that, the watchword as always is diversify. As we have learned, traditional "safe havens" like money markets and T-bills aren't as safe as they were assumed to be. Every financial transaction contains a particle of risk. You have to gauge what your financial requirements are versus how much risk you're willing to take on. Bonds and money markets tend to be low-risk, but they're also low-yield (especially now). They're not going to appreciate much -- if at all -- over the next couple of years. And bonds aren't that liquid now, so if you need money on short notice, money markets and CDs are probably your best bet. If you have the money you might even want to invest in gold; even if everything else goes to shit, gold will retain at least some value.

But most important is to not freak out. Don't just lash out blindly because you're scared. Have a plan. Sit down with a financial planner or a banker you trust and set some goals.

94

Qwinn, @#70: As for the securitized mortgages and the 8% going down to 5%, well, this is done by correcting the ludicrous AAA rating that's on them.

That can't be done, because many companies who hold such debt require them to be AAA-rated.

95 Actually emotions play a large part in all of this,and sad to say anyone that has seen Nancy Pelosi's speech or John Kerry's performance on O'Reilly tonight will find it hard to support any sort of bail out.  They'll probabaly be wrong to decide that way, but anger makes people do things they normally wouldn't. I suspect this bill is dead barring some major financial pain between now and Thursday.  Of course, that's what Congress is counting on, I bet.  We'll see.

96 Monty: "Well, sure, but those assets exist in the economy, no matter who actually holds them. The hit must be taken; the only question is will we take the hit all at once (as a market correction), or spread it out over time (as a government bailout). There's no way to make these assets simply disappear."

The assets have already disappeared. And yes, they could very well be worth zero. These are not straight up bundles of mortgages, they are strips of mortgages with varying degrees of rights to the mortgage payment streams (and properties) underlying them. The ones lowest on the totem pole could be wiped out with a fairly modest default rate.

So now the government steps in, borrows $700 billion and pays too much for these assets (almost certainly) and gives the money to the banks. Will they lend the money out or will they just use it to shore up capital?

None of these government interventions are "great" but some are worse than others. The Paulson plan is among the worst. Needlessly complex, prone to disastrous mispricing of assets and fraud, sucks up a huge amount of available capital in a very short period of time, and offers the fewest protections for the taxpayer.

97 >>>The real question here is should we all just stop making our mortgage payments if the government is just going to give us a better deal down the road?  I want to get in on all the fun too.

The Paulsen plan has NOTHING to do with the mortgages themselves.

This is what gets me... this is a critical issue.  People have made up their minds without knowing the simplest basics here.

98

This thread is making my hair hurt.

But it's been beneficial pain.

99 I'm still a little confused on one point (not trying to stir shit, honestly confused): How is any of this discussion regarding M2M supposed to make us more pro-bailout? I still can't understand why it's not a screaming siren alarm that the M2M rules need to be temporarily relaxed/suspended/whatever. I mean, "toxic" or not, bad mortgage debts are not truly worth ZERO DOLLARS. They do have value, and if the investment firms aren't allowed to assign them any value whatsoever ... that's nuts, far more nuts than any bailout plan (or the failure of said plan) might be. And it would seem to be an unbelievably direct immediate cause of this crisis.

Shouldn't the very first move be to amend that rule, at least temporarily? And if not, why not?

100

Ace, I think that what you are missing here is a part strawman - there are people who are on the "anti-socialism" bandwagon but certainly not the majority opposed, not even among the commenters here.

Lots of people have doubts about this whole deal, not just commenters, not just Republicans, recall some 40% of the Democrats in the House couldn't/wouldn't vote for it, an overwhelming majority of the public doesn't support it, and they surely are not all members of the von Mises Institute or whatever the hell it is. 

I doubt that most of the people want ot "burn it all down."  I surely don't.  I agree that something must be done, I am not convinced this is the something.  Remember, 2 weeks ago the sky is falling people saw nothing wrong.  So why is it that we are to accept their perfect perspicacity now?  If our elected leaders thought this was as serious as all that, they would be serious.  Instead, they are pissing on each other and us.  They have more info about what this bailout is than you or the rest of us do, they seem to think its a joke. 

So why should we think any differently?  If this is going to all be great and we are going to be farting through silk once the actual values of these securities is realized, then how come Hank Paulson came out and said I need $700B of your dollars or else! 

I mean Barney Frank and the Black Caucus mau maued everyone into going along with this gig, and somehow it is my fucking fault that Speaker Pelosi is a twit? 

101

It is correct that if all the loans in the bundle were foreclosed on, there would still be more money than the what the bundles are currently valued at.  The loans are worth nothing, but even with depreciation the homes are worth something.  Thank you I.A. for pointing that out.  People need to realize that it isn't just the CRA and evil wall street/government entities that is suffering because of this- it is bleeding throughout the system.  It could be your pension, your bank, your paycheck that can't be met...

Qwinn,

You can't solve it by modifying mortgages.  A: the mortgage backed securities are valued for the scheduled payments, so if you put all the payments off they are still worth nothing.  Also, a big majority of foreclosures (even now) are caused by loss of income.  If someone loses their income or spouses income there isnt a modification possible - or if they get transfered and need to move, etc.  Please do not believe that everyone who is struggling is there because they are over 35% Debt to Income. 

102 >>>What do you mean you need a "time machine"?  You don't need that.  I'm talking about the bad mortgages that are out there -now-, where people were allowed to take out such huge loans way way way above the 35% rule.  We bring them down to 35% -now-, by extending the maturity date as far as is necessary to allow the holder of the mortgage to pay it with 35% of his income.  Incidentally, you'd also need to set the bar so that if someone wanted to buy that house, they'd also have to meet the 35% of income criteria.

I didn't get that, sorry.

103 Wait, correct me if I'm wrong, but the Paulson plan essentially gives the government the ability to buy up these toxic bundles of mortgages, and the power to renegotiate terms with borrowers who are about to default.  I know it is more complicated then that, but that is a feature no?

104

Interesting article, for those who can read.  (We've been talking about FAS 157 and associated problems for days now, but someone wasn't paying attention.)  This guy blames changes in Fed policy in the last few months for the TED climb.  Also notes the obvious, that Ben and Henry have been signalling bailout for some time, inclining holders of crap assets (Lehman Bros?) to keep on holdin'on, in the hope of a good price from gummint suckers.

http://tinyurl.com/3lrbbx

For the record: "Let the motherfucker burn."  We dodged a bullet today.

 

105

Newt Gingrich just said on Greta that tomorrow morning, the Bush Admin. should suspend mark to market and replace it with a three year rolling average.

He blames Sarbanes Oxley for the current mess.

106 Well go ahead you scaredy-cats and shiver all you want to, but Michael Moore is on my side:

http://tinyurl.com/5ydvnx

Got that? MICHAEL MOORE agrees with me!














I think I'm going to kill myself.

107 >>>Wait, correct me if I'm wrong, but the Paulson plan essentially gives the government the ability to buy up these toxic bundles of mortgages, and the power to renegotiate terms with borrowers who are about to default.  I know it is more complicated then that, but that is a feature no?

i don't think so.  the dems wanted to add a mortgage-readjustment feature but I believe it was stripped out. 

I oppose it because it's unnecessary.  These people can privately renegotiate.  If it's in the bank's interest to do so, they will. 

But this isn't anything like an important or permanent feature of any of these plans.  "The bailout" consists of buying the MBSs, not doing anything about the underlying mortgages.

108 The real question here is should we all just stop making our mortgage payments if the government is just going to give us a better deal down the road?  I want to get in on all the fun too.
Heh.  It's bad enough that those who wanted certain houses who couldn't afford them got them anyway. That irked me. What kills me is that these losers may own my kids' future monies and cheat them out of their due. I thought there were rewards for delayed gratification - I guess I was a sucker. Mad but till hopeful that enough Republicans can turn things right.

109 i don't think so.  the dems wanted to add a mortgage-readjustment feature but I believe it was stripped out. 

Nope. See section 109 of the bill, entitled "Foreclosure Mitigation Efforts."

You're thinking of the Donks' original bankruptcy cramdown proposal.

110 I tried to post along the lines of Planet Moron (96), but it got silently eaten because you can't create a fucking link on this moron blog any more.

My understanding of these assets is that they pool a bunch of mortgages and then split them into "tranches" based on risk.  An example on Wikipedia (tranche) splits them into four pieces.  The lowest one takes the first 25% of the loss, the highest takes the last.

The problem, it seems to me, is if you bundle all these junk mortgages together, the bottom tranche seems truly and thoroughly fucked.  You've got a high default rate and the properties are highly devalued relative to the mortgage.  You have additional "Socialism risk", as in the Dodd plan, where friendly bankruptcy judges mark down your assets for your benefit.  If you're truly last in line to get paid from out of this crap, your assets very likely ARE worth zero.

The only reasons it seems they wouldn't be worth zero:

* You expect the market to recover substantially.  (In the example above, the entire pool would have to recover to at least 75% before you got a penny).

* There's some other complexity where you get a stream of payments, even if your entire principal is eaten in the end.

* Somebody is willing to pay *something* for this shit, gambling on a broad market recovery.

It sounds like the Paulson plan would buy this shit for cheap, but sometimes you get what you pay for.

111

and the Asia markets are dropping in early trading.  HK down 6%.

112 "You can't solve it by modifying mortgages.  A: the mortgage backed securities are valued for the scheduled payments, so if you put all the payments off they are still worth nothing."

No one's talking about putting ALL the payments off.  You reduce them to what can be paid by 35% of the holder's income.  That's not worth nothing.  That's a real value that people -can- expect to be paid.  It's about the perception.  The bailout isn't going to suddenly give all these securities their full value either - under the most optimistic plans, the government will pay pennies on the dollar for them and then hopefully recapture it sometimes in the future, right?  Mine is also reducing their worth, but not to nothing.  They'll get a real value just as the government plan would, and without needing to actually get the government involved.

Qwinn

113 ArandomPerson, yeah, this is where it could get scary.

114 Nikkei's down about 6%. Shanghai composite down about 4% (although with the Chinese regulatory rules, who the hell knows what the real number is).  Hang Seng is down 6%. Commercial paper markets are moribund. Commodity futures markets are tanking, probably because everyone's expecting exports to take it in the shorts.

In short, every market indicator I've looked at today is going down like a two-dollar whore.

115 46

We're spending $700B so we don't have to re-write accounting regulation?

Sorta. But they can't apply it in time if it were changed tomorrow in order to make payroll/free up the markets. It's as if your dog, allowed to drink from your toilet for the last 10 months, got his head stuck in there. And you already flushed the toilet just a couple seconds ago without realising it. He's going to drown unless you do something and his head's swelled up too big to pull him out.

I have no opinion on whether you should use a hammer (Paulson Plan) or blow air up his asshole (Dodd Plan) or something else like bailing out the water.  I'm just an accountant.

All I wanted to figure out was "How bad can it go and what kind of screams will I hear as it gets going? What kind of concrete things will happen?"

I also couldn't figure out how carnies could take down our financial system.

I can just give you analogies. CRA is like the habit children have of wiping snot on their sleeves and sneezing in crowded places. The credit "crunch"/valuation problem combined at this point in time is pneumonic plague.

The "systemic crisis" is of everything that occurs - mail, food, diesel deliveries, medicine, electricity, paper, agriculture, tools, software, spot removers, radios, vitamins, well, you get the picture. Distribution networks (trucks, trains, potheads driving panel trucks, etc) get shit from one point to another. They live on short term loans for payroll, benefits, lights, fuel, and maintenance. They, like most businesses, bill their customers 10 net 30, so they often float commercial loans. They're healthy businesses that require credit to operate smoothly. They are also necessary for life. Not merely convenience.

There's a way to anticipate/predict what will go on once you understand the nut, and it is frightening when you realize how quickly this will resonate. It won't happen to you in a week or a day most likely, but will affect your life within a month, month and a half. And by January, a lot of you will be out of work, banks will be restricting withdrawals/transfers, and lots of suppliers will be shuttered at at best. Farmers will be saying "Fuck it" a lot more than ever. And that means starvation in some places outside of the US within 6 to 8 months.

Another analogy/metaphor. Pretend that getting a paycheck from a business (not government) is like turning on hot water in your bathtub. This credit issue is like a bunker-buster bomb went off at the water company's very first valve.You might get a bit for the next little while, but it ain't going to be a very long shower.

116

Where is Milton Friedman when we him?

He would ask us to think about the market and why this has occurred.  Look for the causes and fix them.  Patching them will only prolong the problem.  I use to teach Econ., this is not a short blog post, it will be many dissertations in the future.

Most of the artificial valuation of assets can be corrected.  Why are they in place?  Trust, or lack of it.  I suspect these rules where a results of the S&L problem years ago, but I don't know the history. 

Simply buying the assets will not fix the problem and creates many more.  Which asset do you buy and for how much?  We now want a master of the credit universe?  Does the next Treasury Sec start only buying assets from Democrat areas or banks?  What's to stop him.  What's to stop him from setting up Union home loans? This could become a cluster fuck.

Friedman would also see opportunity in all this.  Surely the assets of Wachovia once worth $57 a share didn't evaporate to $1 in a year.  Citi Bank stole the bank.

We can come up with a better plan, rushing it is not good or smart. 

Chill out, as Z would say.

Kemp

117 BTM,

Ah, I see I've been caught being an ignorant dick. Sorry.

Still, it's a smaller part of the thing.  Work-outs are going to be part of this, whether it's in a law or not, for the same reason people work with bankrupt companies or people.   It's probably better to work out something the payer can afford than to risk going to the market again for more.

118 I posted this on the wrong thread, I'm reposting here.  Appears we have some bright bulbs burning, perhaps we can shine some light.

I don't get what all the hand wringing is about.  Something is going to be done...hopefully something better than the crap that was put up for a vote.  The Dow had its 17th worst day in history... the 17th worst, not the first or the second. 

Look, if there was no market for sub prime loans, bankers wouldn't make them.  If you can't sell you don't make it.  The banker's aren't at fault, the CRA is not at fault, the people (institutions) that rated these loans as AAA and the fools that believed them are the ones at fault.  Somebody did not do their due diligence and consequently a bunch of bad paper is floating around and in all liklihood after the blood and dust settles it is probably worth about 40 cents on the dollar and it is sort of like musical chairs....whoever is holding it when the music stops takes the bite.

If I was made the "Financial Dictator" this would be my plan for straightening this mess up, without any taxpayer funds involved:

1.  Suspend the mark to market requirement.  Let the bankers (mostly investment banks anyway, no FDIC funds involved) value these securities as they want, not based on the current market.  So what if they end up with securities that are currently valued 20-40 percent over the existing market. 

2.  All capital gains on investments from this day forward for a period of three years will be taxed at the rate of 0%.  If what you want is a capital infusion and capital moving through the market, get it out of cash accounts and get it working.  A lot of risk can be taken when the tax bite on profits is nil.

3.  Remove the secondary market for non-conventional and/or sub prime loans.  If there is no market for them they will not be made.  No bank is going to originate and retain any substantial amount of loans as they are counted against their lending limits and capital requirements.

I haven't been in the banking business for some years but I did spend about 15 years in it, including being a bank consultant with PMM in the 70's.  One of the things we learned early on was that every loan underwritten was a risk; deviating from standard qualifications increased the risk, increased risk required increased rewards (higher returns), or higher security (more down payment or additional pledged security).

Perhaps others can add to my list of recommendations.  I know I'm not the brightest bulb in the chandelier, but I don't think you have to be to come up with some logical, realistic solutions without giving away the farm.

119 "We can come up with a better plan, rushing it is not good or smart. "

EXACTLY. Why are we trying to ram a bailout through that doesn't remedy the problems that caused this crisis in the first place? It. Makes. No. Sense. And to see all these politicians scurrying around makes me even more suspicious.

Better to do this right the first time I say.

120 Monty,

But you left out how well everyone is going to sleep tonight, tucked in under their blanket of ideological purity. So we've got that going for us.

121 You guys want to fix the root problems of the patient but aren't willing to stop him from bleeding out right now. Dumb.

122 How many days of trillion dollar losses before spending 250 billion in the first wave sounds like a good idea?

123 To add to Andy's observation, making modifications to the terms of residential mortgages is addressed in Sections 103, 109 and 110.

In fact, in Section 103 it is specifically identified as one of the goals the Secretary is expected to "maximize" under the legislation.

Fortunately, they're only talking about changing the interest rate, the principle amount and "similar modifications." You know, just some technical accounting stuff. Nothing to see here, move along...

124

Friedman would also see opportunity in all this.  Surely the assets of Wachovia once worth $57 a share didn't evaporate to $1 in a year.  Citi Bank stole the bank

Well, Wachovia is down 80% from just today, and they've been tanking lately in general.

Citi has also been tanking as of late and is down like 20% just today.

Out of these two, I am reasonable certain one of them got screwed.

The other is a mad profit ability.

Frankly they both may be. I think Wachovia got the raw end of the deal but maybe not THAT raw.

125 Monty @ 35,

I expect that's a rhetorical question.
But the short answer is WAF.
And not in a good way.

126

Qwinn,

I've worked in the industry for years.  The main problem is: You can't adjust the payment to 35% of income for someone who doesn't make any money.  And alot of people who have to move/get sick/get divorced/yada yada/ don't even want to do what you are saying.  Modification is something that already is being done - always has been done - for people in a bad situation with the means to pull themselves out in time. And something like 75% of modifications end in foreclosure.  Those modified loans also, as far as I know, can't stay in the MBS pools.  I guess you could try to force the investors to play along, but it isn't as secure as you are thinking. 

There are many many people paying their payments just fine at more than 35% of their income.  And some that are sending back the keys at much less debt ratio.  If what you are proposing was in the interest of the investors of MBS  it would have been done last September by the investors themselves.  At least that is my feeling.

127 "You guys want to fix the root problems of the patient but aren't willing to stop him from bleeding out right now. Dumb."

What good is a band-aid when what's needed is far more invasive and uncomfortable?

128 Eh, fair enough, it is a smaller part of it all.  Just thought since we are going to go down in flames, I might as well get something out of the deal.

129 And as for Moron Planet bitching about 700 billion tightening up the money supply? Once again, that would have been easier with that additional trillion dollars of economy, wouldn't it? But here's the thing, when the government spends that money, it will put liquidity (cold hard cash) in banks while removing toxic assets, which will lower their margin requirements, resulting in a much healthier institution.

130

One more point, about the Sec of Treasury picking which loans to buy and for how much.

Think that will lead to any contributions to the party in power?

Like Freddie and Fannys contributions to the Dems?

This will lead to pure bribe government, Chicago style, pay to play.  Want me to buy your loans?  Have you seen my boy The O? Just asking, maybe you can sleep over at the Lincoln bed room and I see if I can help you.

Sound familiar? 

Kemp

131 Look for the causes and fix them.

That's a pretty facile argument, particularly when both causes and effects are in so much contention right now. Some people argue that this isn't even a problem, but a built-in feature of the capitalist system (booms are inevitably followed by busts). I admire Friedman, but like many academics his models tended to underestimate the effects of...chaos. Of factorial combinations of inputs and outputs, of spontaneous complexity.

Remember that each "fix" introduces changes, with second and third-order effects that their creators often did not anticipate. Remember that SARBOX was itself a "fix" for the last financial debacle. Temporary "fixes" have a way of becoming permanent features of the landscape.

132 h2u, the ER stabilizes a patient before sending them surgery.

133 it will put liquidity (cold hard cash) in banks while removing toxic assets, which will lower their margin requirements, resulting in a much healthier institution.

Not to mention putting the brakes on the downhill slide in the economy, keeping people in their jobs and current on their mortgages.

134 "One more point, about the Sec of Treasury picking which loans to buy and for how much.

Think that will lead to any contributions to the party in power?"

As far as I''m concerned, that's the most salient argument against that I've yet seen offered.

This whole thing smells a bit too strongly of "Third Way" Clintonism to make me very comfortable.

135 "I guess you could try to force the investors to play along, but it isn't as secure as you are thinking."

And the bailout is secure?

Please don't compare my plan to a nirvana where everything is rosy.  We're screwed and things are gonna suck regardless.  I'm comparing it to the current plan, which is hardly "secure" either.  We don't even know if the bailout will accomplish much of anything.

Look.  The problem right now is that these mortgages and the securities based on them hold NO VALUE.  Zero.  That makes the balance books crumple.  All we need them to do is get -some- value, right?  Because the multipliers are so huge that even a small value is enough to keep them liquid.

What I'm suggesting -gives- them a value.  So will the bailout plan.  But the bailout plan will have some government flunky decide their worth, and use taxpayer money to pay for them.  Why is that necessary?  What I'm suggesting gives them a real value, one based on what the free market decided was the fair value of a mortgage - 35% of the holder's income - before the CRA, ACORN and the Democrats decided to regulate the crap out of it.

I'm not -saying- that everyone walks away happy and singing a song.  Is anyone suggesting that's what'll happen with the bailout?  No, there's going to be pain regardless.  The goal is survival.  Assign those mortgages and securities a real value that people can trust based on the 35% rule, with the holders actually remaining indebted to pay the value that the banks depended on (just spread out over a longer period of time), and the pain will be spread out and without -nationalizing- the entire housing industry.

Qwinn

136

I am really loving the shower analogy um, Inspector.  Please now go on TV to explain.

We can catch the bombers tomorrow, but we need hot water today.

137

Monty,

You make good points, that's why econ is so complex, so many things affect other things.

One thing about econ though, we are the only social science that has a score card. It's called money.  If we make a prediction or policy, if it doesn't work we know because MONEY is involved here, not thin air.  We are also pretty damn good now at making complex formulas to test our theories.  Only problem with them, is they always have damn assumptions, which can be total BS.  Give me my assumptions and I give you the outcome I want.

It can be done, with some serious work.

Kemp

138 "h2u, the ER stabilizes a patient before sending them surgery."

XBradTC, the bailout in its current form isn't going to stabilize a damn thing. The reforms need to be part of the bailout or it's simply a toothless joke. Trying to ram this monstrosity through congress obviously didn't work, so maybe -- just maybe -- congress should be focusing on getting it right the FIRST time.

For fuck's sake, guys, if this crisis is so damn critical why are we not fighting to do the best job we can instead of settling?

139 h2u, perfect plan later isn't nearly as attractive as good enough now.

It will stabilize the balance sheets and liquidity of banks. It will free up credit to flow. We can dance around all the perfect solutions (and I'd probably agree with a good many of them) but in the meantime, our economy is shedding a trillion dollars a day.

140 I know the answer!

JUST PRINT MORE MONEY!

141 Kasper, that is what the Fed has been doing for months now by messing with the Fed Funds rate.  Devalue the currency and print more money, fun time promised for all.

142

I also think Paulson is an investment banker, he only sees buying assets and then holding them and selling. I am surprised Bernake hasn't come up with a better plan, but he was at Princeton, NOT Chicago. 

What we need is to define what we want and try to get to it.

Do we want more of what we have now?  The bail out will only prolong what we have that has failed.

What do we want to replace what we have now?  And how do we get there?

We need to define our goals, we won't be able to get to them, if we don't know what they are.

Ace should start a thread on our ideal economic plan.  We could throw out ideas, for the morons who read this rag to think about, and we know at least one person on McC staff reads this shit.

So get it on, Ace.  We need to stay off the valu rite until we have saved the economy!

Kemp

143 Well, Kasper, they printed 630 billion today, good enuff?

144 "It will stabilize the balance sheets and liquidity of banks. It will free up credit to flow. We can dance around all the perfect solutions (and I'd probably agree with a good many of them) but in the meantime, our economy is shedding a trillion dollars a day."

ONE day, XBradTC, has passed and it didn't even break the top ten loss list. Our economy isn't some Latin American house of cards. Let's get this right instead of half-assing it. We aren't some weak-kneed, lilly-livered sissies! We're fuckin' Americans and we can handle tough times when necessary.

I'm never going to approve of a plan that simply kicks the can down the road. NEVER. It's just plain fucking stupid.

145 If we make a prediction or policy, if it doesn't work we know because MONEY is involved here, not thin air.

How much of your money actually exists as cash in your hand versus bits in some bank's computer? Most money is, in fact, little more than "thin air".

Money is really just a kind of battery, when you think about it. A way of storing energy for use in a later place or time. I work now, and my labor is repaid with currency which I may then spend at a later time for goods or services. Our main problem is debt -- spending labor we haven't performed yet, at a rate of exchange that may or may not be fair.

I often prefer to use the word wealth rather than money because I think it better encapsulates the concept. I can be wealthy without having much  money; I can have a lot of money without being wealthy.

146 Susanita,

As a follow up to the last post, in terms of your objection that people will still go broke/have no income due to some horrible fate, that's been happening since the beginning of time.  No plan is going to stop that from happening.  As you pointed out, -some- of those mortgage holders can and will be able to pay above the 35%.  I'm not saying make it mandatory for every one of those mortgage holders, just the ones in risk of foreclosure.  For those that truly fold, and have their income drop to 0, they were going to be foreclosed no matter what.  Those continuing to pay more than 35% will offset some of that.  It's still a better way to value these mortgages that a consumer could have real confidence in than an arbitrary price set by Paulson or some other flunky.

Qwinn

147

#145

Monty,

I taught Econ, not Philosophy.  Again monks can be wealthy in what they value, economist work with number and usually treat all assets cash or stock as money.  We can discount non liquid assets and do all the time

148

I'm buying some calls later this week.

This is all a huge market manipulation.

There'll be some kind of deal worked out this week; this one barely failed.

I agree with Rush - the timing of this is more than a little curious.

 

Stop all the fucking hysteria, already.

 

L'shana tova! (Happy Rosh Hashanah!)

149 Well, h2u, I guess when we lose the elections, our calls to the Democrat congress and President will make damn sure what little is left of the economy will get fixed right.

Tomorrow will be rough. And it ain't gonna get better if Congress doesn't act soon. Remember, the deeper into a credit crisis we get, the more cash it takes to get out.

150

Ace, you know the saying, there's nothing more dangerous than a little knowledge. I am not arguing against action, I agree totally that there is a major crisis. I am not one of those burn the house down on principle people. But I think you are wrong about the Paulson plan. Because the Paulson plan, as this guy explains very clearly, will simply not succeed in its stated goal of creating liquidity:

http://tinyurl.com/3wl9zm

PLEASE READ THAT LINK!!!

Do not let your disdain for the extremists and the ignorant rush you into support of a plan that will not work. Look, what do I know, I'm just a kid linking to his economics professor's website like a total goody-two-shoes nerd, but I thought I should at least put up my little knowledge to maybe try and expand yours (and thank you by the way, i read all the economics links you post, i really enjoy them).

151 Kemp, that's the problem with economists, too many think the market is numbers. It's psychology.

152 h2u - Our economy isn't some Latin American house of cards. Let's get this right instead of half-assing it. We aren't some weak-kneed, lilly-livered sissies! We're fuckin' Americans and we can handle tough times when necessary.
----------------------------------

As a country, we are bankrupt. Don't think about that, realize it. We have a negative national savings rate. We have a perpetual federal deficit. We are paying the interest on out debt with more debt. We are, as a nation, paying our mortgage with a credit card. Everyone talks about the ability of Americans to sacrifice, but when the rubber meets the road, the majority of citizens won't do, nor will the pols that feel at the trough of the American tax payer.

153 I taught Econ, not Philosophy.

They are related fields. How could it be otherwise?

I suppose it's the Calvinist in me coming out.

154 Some additional ideas to flesh out what I'm suggesting here:

Let me throw out some additional ideas, to strengthen the "real value" metric of these loans:

You enact a law, hopefully on an emergency basis, that -forbid- full foreclosure on a home.  Foreclosures simply aren't allowed anymore, period.  If the conditions leading to a foreclosure exist, the following goes into effect:

The mortgage holder keeps the home, but will have his wages garnished of 35% of his total income (pre-or-post income tax, haven't decided yet).  This garnishment -survives all bankruptcy filings-, and is given priority over all other debts.  You cannot chapter 11 your way out of it.  You keep your home (which bankruptcies already allow you to do), but you -are- on the hook for 35% of your income, and the maturity date on the mortgage is extended to make that 35% come out to the full value.  Possibly make it law where the creditor cannot adjust the rate based on such an extension.

You can always still get out of it by selling your home.  If you can find someone willing to take it off your hands in such a way that satisfies the mortgage.  You can't sell it without the original mortgage being satisfied in full, though, and new mortgages go back to non-CRA, sane standards with a minimum down payment, etc.

Do this, and no investor could deny that these mortgages and the securities on them have a real, solid value, and they'd be worth something again, keeping the banks liquid and the lending money flowing.

Qwinn

155 Hey Monty I somehow missed your post. Thanks for the advice. We do have a guy but appreciate your info.   Spent 2 hours today in a waiting room. It was a hematology/oncology office. All around me were older folk who wheezed and coughed and sighed and one wept. Most were bald from chemo and a few looked on deaths door. I became terrified wondering why my GP sent me here. I tried to read but it was hard to think things could possibly turn out okay. Turns out I  have Von Willebrands Syndrome and need to eat better, drink less and have a Flintstone vitamin along with some shots. Not even kidding - Flinstone vitamins! Pretty grateful considering what many who walk away have to deal with. I'm NOT dying. Just need some healthy adjustments and a priority check.   I'm just a moron who has nothing really to bring to the table except this little antidote.    

156 Here's another one for you, Ace!

Dear Ace,

I thought you were not excitable, like Andy.

I was wrong.

157

151, 153,

How can I argue that?  We do have  fudge factor assumptions in most formulas, where you can adjust certain factors like consumer confidence, etc. to see how it changes the outcome.

But it is a "dirty science" because there are so many variables, that why establishing our goals is what we usually do first, then we try to figure out how to get there.

Kemp

 

158 "I'm buying some calls later this week."

Wooh, I dunno, TexasJew.  You've got to have gigantic, elephant-sized cohones.  I'm drizzling in some long buys, but I'm as gay as Ace and Excitable Andy when it comes to options.  Maybe if there were 6 month calls...

No way.  Hats off to you.

159

The stock market plunge does not mean anything except the market was EXTREMELY overvalued coming into this week.  It was showing a forward P/E ratio of about 20, which is insane.

Today's fair value for the S&P 500 is somewhere around 1000 or so, and the sooner we get there, the better.  Next spring/summer's fair value for the S&P will probably be around 800-900, so don't be surprised to see us somewhere around that figure.

Banks not being able to lend and stock prices dropping another ten percent are apples and oranges.

I have tons of available credit and I'm not touching any of it.  The bozos on TV today were whining about McDonald's not being able to get a loan to sell coffee.  Bullshit.

McDonald's can do a stock offering of billions of dollars any day of the week.  McDonald's can tap pre-existing lines of credit large enough to choke a herd of horses the size of Jupiter any time it wants.

The credit "crisis" is nothing more than a temporary credit slowdown that will sort itself out in a few weeks, after banks realize they still have buttloads of equity and cash.

People are freaking out right now and guess what?  They are depositing mountains of cash into...  BANKS.

The Fed has been and will continue to inject tens (today it injected HUNDREDS) of billions of dollars directly into financial institutions.

Paulson is a world class dumbass who told us non-stop for two years there was NO FUCKING PROBLEM.  Then, all of a sudden, there's A FUCKING PROBLEM.  Bullshit.  The only problem is his lack of ability to do his GD JOB.

Benranke, thank the Lord, has been the only competent one of the whole bunch.  He set up several lending/re-finance institutions in the spring and summer of this year and it is through these mechanisms that he is injected more capital into our economy than you can imagine.

How is he doing that?  By BUYING THESE FUCKING MORTGAGES we have been talking about.

The bailout already exists.  It has been going on, in slow motion, for six fucking months.

And it will continue for the next year-plus, through the direction and management of the Fed.

In the next 12-18 months, stocks will continue to drop another 25-35%, and they will re-test the 2003 lows.  After that occurs (and it is time PLUS price, not just price), it will be time to go in and buy like you're Donald fricking Trump, because we will be past the bottom of the recession curve and all the bad news will be priced into the stock market.

Are we going to melt into chaos if we don't throw several hundred more billion dollars at Wall Street RIGHT FUCKING NOW?  Nope.

Remember, Wall Street is, without a doubt, the greediest place on Earth.  It has the highest cost of living anywhere, the highest salaries anywhere, the most expensive real estate anywhere and the most greed anywhere on the fucking planet.

Putting hundreds of billions of dollars of government (our) money anywhere near those fuckers is the WORST fucking thing we can do.  Why?  Because they SPECIALIZE in figuring out a way to put that money into their pockets.  They will lie about the cost of assets, they will sell the worst assets and lie about the quality of them, they will screw anyone they can and then they will brag about it six ways to Sunday.

Why?  Because that's what they fucking do.

I am proud to have the US House of Representatives as my government today.  I am proud they voted down this piece of shit.  And I hope they don't pass anything remotely resembling this.  Ever.

160 Qwinn - What happens if a person's overall lifestyle is what they can't afford. Some borrowers have housing debts that are lower than 35% of gross income(that is how borrowers are typically qualified, so it should be kept constant in modifications), but have another mortgage payment worth of revolving and term debt. How do you determine which creditors are senior? Do you screw the CC company out of $100,000 but let them keep the 360 Sea Ray?

161 h2u, the ER stabilizes a patient before sending them surgery.

Uh, not really. The ER will rush the patient to sx or icu so they die there and not screw up their stats. The OR will rush them to recovery so they die there and not screw up their stats. The recovery will rush them to ICU to die there and not screw up their stats. And if possible, the ICU will send them home to die at home so as to not screw up their stats.

162

Monty, @#114: Nikkei's down about 6%. Shanghai composite down about 4% (although with the Chinese regulatory rules, who the hell knows what the real number is).  Hang Seng is down 6%. Commercial paper markets are moribund. Commodity futures markets are tanking, probably because everyone's expecting exports to take it in the shorts.

In short, every market indicator I've looked at today is going down like a two-dollar whore.

 

In fairness, Asia's markets have been losing money — dare I say it? — diarrheatically for months now.

163 161, OK, booben, you have a point. But I think you get what I mean. They'll at least hang two units of OPOS and slap a bandage on 'em.

164 SomeDude:

You mean if someone has multiple mortgages?  Then their wages are garnished as a percentage of the total value... if one mortgage is $100,000 and the other is $250,000, then the first mortgage gets 10% of your wage garnishments and the other gets 25% of your wage garnishment.

I was thinking that if someone owns -multiple- homes, you can up it somewhat.  If you own two homes, 45% of your wages get garnished, and if you own 3 or more, it's 50%.  No more than 50% though.

I'm assuming your post was based on my post 153, btw, and not on earlier postings.

Qwinn

165

Regarding Asian markets- they are probably going down because we went down.  Are they leading us or are we leading them?  Hard to say.

US stock futures are up big time as we speak.

166 Qwinn - No. I'm talking about people with a $1500 mortgage, two $500 car payments and $500 in minimums on revolving debt. Its a lifestyle issue.

If you own more than one home and need a workout you sell the one that isn't your primary residence and pay the piper. You need a pretty compelling reason to maintain more than one residence in, what is essentially, a bankruptcy proceeding.

167 Maybe if there were 6 month calls...

There are.

168

And regarding mark-to-market, nothing MUST happen overnight.  It is easy to delay that kind of shit for weeks/months.  It is easy to slap a figure on that stuff higher than what you can justify, and then go back later and re-do it.

Dig?  The sky is not falling.  It's just numbers on a 10-K, and they get manipulated, adjusted and revised all the fucking time.  Seriously, all the fucking time.

169

If the accounting rules reflect the financial reality -- that is, those zero-value assets truly provide zero future discounted net cash flows -- then the accounting rules are not an issue, and no government fix will help in any but a cosmetic way; whereas the government suddenly borrowing hundreds of billions of dollars would hurt the economy in a non-cosmetic way.

However, if the asssets are expected to provide a significantly greater future financial benefit than zero, then fixing the accounting rules (or the regulations based upon them) should provide immediate relief.

Why am I wrong?

170 If the accounting rules reflect the financial reality...

Heh

171 Somedude:

"No. I'm talking about people with a $1500 mortgage, two $500 car payments and $500 in minimums on revolving debt. Its a lifestyle issue."

Well, right now, it's mortgages being perceived as having no values that's the problem.  I'm saying garnish 35% of wages to go towards paying mortgages rather than foreclosure.  That gives them a real value.  As far as I know, cars and other stuff can still be repo'd and resold fairly easily.  So yes, mortgages get priority, and that's what gets an actual garnishment, and hopefully only on an emergency basis.  They still have 65% of their income to satisfy their other debts.  But right now, it's the housing market that is collapsing, not the car loan industry.  So that's what gets priority.

Qwinn

172 Ken - Changing the rules in the middle of the game is what fucked Japan. If you change accounting rules and allow banks to dick with their balance sheets, in the midst of a banking crisis, then there will be even less confidence in the transparency and accuracy of data being presented for public consumption. Investors would flee because they would have no idea which firms had good books and which firms held shit. Its a CONfidence game.

173 150 Adrian.  Oh, yeah!  I read the Shimer post earlier and was going to link it, but I'd forgot where I'd read it.  Funny that Mankiw's defense of the Paulson plan was basically "Ben Bernanke is real, real smart, so I'm real scared."  Sounds like Mankiw would fit right in at AoS.

174 Some Dude,

That's a great point. These assets can't go from zero to two million or whatever on paper overnight and have any expectation that people can or will act on that new price.

Now, that problem (attaching a value) exists if the government buys them but the one thing the federal government can do that private equity investors can't do (even if they could raise the capital to buy in the first place) is hold these securities on their books for 2 or 3 years while the market gets reestablished.

Yes, it's a risk in many ways but the alternative is beyond shitty.

175 Adrian,

I read it.  He begins by saying in his preamble he will prove this rescue won't work.

When it gets time to prove that, he does no such thing.  He merely says "we are giving money to the people who fucked it up last time."  That is not a proof, and we all know that. That is an argument about *unfairness.*  Yes, it's unfair.  But he promised a proof that this unfair measure wouldn't work.

176 For fuck's sake, guys, if this crisis is so damn critical why are we not fighting to do the best job we can instead of settling?

Because the rest of the world, equipped with their very own Paulsons, sees that we have had a workable plan for more than a week. Now it looks like we're getting stuck on irrelevant details and lack the political will to implement it. Why should they hang around and watch their investments devalue even more when we aren't even interested in saving ourselves? Why should they risk getting inextricably caught up in this same cascade failure? The bus is speeding toward the cliff and we're staring in the rear-view mirror.

All the hyperventilating over this issue is getting old. I know it's a helluva lotta money, but this afternoon's Dow plunge ate up more market value than that in one single afternoon and there's no reason to think it's over. For heaven's sake, we're not suspending the freakin' Constitution here, we're passing a specific bill to fix a specific and well-defined problem. There will inevitably be a lot of worthless junk attached, since the last Republican temper-tantrum put the Democrats in charge, but we can deal with that later once the situation cools down a bit.

177

Ace, thanks for replying! His 'unfair' shtick comes at the end, it was lame, I know. I'm talking about the middle part, around the whole "This program does not solve the lemons problem. The government purchases a lot of lemons at an inflated price" thing.

As I understand his point, the newly repriced assets (through the treasury auction) will *still* be worthless and illiquid. They might have a non-zero price and thus appear to have some value again, but the ones with the highest newly determined price will actually be the most worthless. And people still won't want to buy them, because they will fear that this government-determined price still hides a worthless asset. So the whole auction thing won't work.

178

btw, this is probably really dumb, but here goes. two things we know in this great depression (assuming...) that we didn't know in the last one:

1) that our military is the most powerful the world has ever seen

2) that the only way we've ever successfully gotten out of a great depression before was through the stimulus brought about by a huge national war effort (that would put the iraqi war to shame)

So, if things get real bad, are we going to try and invade China or something?

179 "So, if things get real bad, are we going to try and invade China or something?"

We won't need to.  Give Iran two years to get nukes, then they will launch a conventional war, invading Kuwait and Saudi Arabia at least.  Their nukes (probably) won't get used, just serve as an umbrella to keep the war conventional as they set about to create a new Greater Persian Empire.

If for no other reason, the Iraq War was justified by giving us a strategic position by which to oppose it (some believe Saddam in place would have served to keep Iran from doing that, but I disagree strongly).

Anyways, we won't have to look for war.  War will come to us, unless we're willing to let 1939+ happen all over again without resistance.

Qwinn

180 Ace:

No worries on the "time machine" business, I kinda figured you just misread what I said.  Just wondering though - now that you understand what I'm saying, do you see any possible value in my proposal on how to give all this paper some value again?

Qwinn

181

Look for a relaxation of FAS 157 in the next few days.

http://tinyurl.com/4fef5k

And, btw, the Japanese didn't start dicking with their financial accounting rules until the economy had been in the toilet for years.

Next regulatory move could be a relaxation of capital requirements.  Arnold Kling suggests doing this "at the margin" -- ie let the additional capital to offset a new loan be set at half the applicable rate on old loans. 

 

182 Look.  The problem right now is that these mortgages and the securities based on them hold NO VALUE.  Zero.  That makes the balance books crumple.  All we need them to do is get -some- value, right?  Because the multipliers are so huge that even a small value is enough to keep them liquid.

As I understand it, and I could be entirely wrong about this, it's not that the securities have NO value but that no one is very sure what the actual value is. People aren't buying because they're not sure if what they're offering is a price that'll allow them to make an acceptable profit on their risk.

A securities market where the value of the securities is temporarily unknown is different than a market where the value is zero. Because, as I understand it, M2M requires that they put down some value, the value becomes zero for the same reason that a pitcher gets an ERA for pitching to three batters and getting none of them out. In baseball, like accounting, you need an actual number. The "inf" in the box score won't work.

It seems to be that what's needed is a little breathing room and some stability so that the market can establish the value of these securities. Again, I could be seeing this exactly wrong, but it looks like the biggest problem is that the institutions holding this paper are under the gun but if they could get a little time - a few months, perhaps - they could get a handle on their situations.

183 As an additional note, I still oppose the bailout plan because it not only doesn't dismantle the CRA that got us here in the first place, it actually strengthens it, and forces banks to accumulate even more bad debt.

Even if I didn't have another plan I thought was better, I'd still oppose it on that basis alone.  Look - we don't support Shamnesty because it's pointless to give all the current illegal immigrants sanctuary if you don't close the border.  This is exactly the same thing.  The bailout is pointless if we don't "secure the border" by dismantling the CRA first.

I noted the suggestion that we have to bailout FIRST and then we can dismantle the CRA -after-.  Heh-yah!  That'll happen.  I'm not buying that any more than I'm buying promises that if we just do an amnesty now, we'll close the border after.  C'mon.

Qwinn

184

First couple times through, this plan looks kinda cute.

http://tinyurl.com/3ww6o8

See, there's a ton of approaches to the liquidity crunch besides "gimme 700 large cubed or die." 

185 Most of the "worthless" of "toxic" assets involve real property mortgages bundled and soled as some sort of derivative.  They are supported by real cash flow and real estate.  Even if half the properties are in default and all are overvalued in terms of loan amount outstanding, there is still value.  And that value is likely in the range of 50% to 75% depending on the specifics of the security.  Some people will continue to pay, some will default.  For those that default, the property eventually gets sold.

The value of the underlying real estate may fall a lot but it is not going to zero.

186

"People/entities with these assets that have intrinsic value cannot label them on their balance sheets as what they paid for them - they must write that they are worthless."

That must be a governemt rule, since only the government could come up with something that insane.

187

So, umm...

change that silly fucking rule.

 

188 And that value is likely in the range of 50% to 75%...

While true, these pools of mortgages get sliced and diced into "tranches" (segments), apparently based on risk.  If the overall pool loses money, the lowest segments apparently get wiped out first.  The highest segments aren't particularly risky.  When assets gain value, the lowest segments get larger payouts since their holders assume much greater risk -- just like junk bonds.

This is part of the funny (but sad) "Subprime Explained" presentation, search for "subprime google docs".

Guess which tranches the asset holders want to get rid of?

189

But if the new SFAS that is causing this balance sheet problem is first effective this year, why not suspend its application and go back to the old method until the kinks are worked out? It's not like the FASB has never done smething like that before -- remember the income-tax accounting FUBAR in the 1990s? Year-to-year consistency would actually be better served by not using the new rule, would it not?

What we are considering here is an ad hoc after-the-fact stupid-business-decision insurance payout. Why won't this happen again in two or three more years? After all, we are determined to socialize all losses while privating all gains -- where is the incentive for prudence? Where is the risk to the investors?

Where is the free market? When did we suddenly start to believe that a central economic plan had a prayer of long-term success? Wasn't the government fixing one problem when they created this even bigger one? What even bigger problem will this solution bring us?

Has everybody simply lost their heads?

190 bitch ate my comment, again!

Asia's down, but not tanking

^AORD    All Ordinaries    4,631.30 2:12AM ET    Down 207.90 (4.30%)    Components, Chart, More
^SSEC    Shanghai Composite    2,293.78 Sep 26    Down 3.72 (0.16%)    Chart, More
^HSI    Hang Seng    17,447.66 2:17AM ET    Down 433.02 (2.42%)    Components, Chart, More
^BSESN    BSE 30    12,527.48 1:54AM ET    Down 68.27 (0.54%)    Chart, More
^JKSE    Jakarta Composite    1,832.51 Sep 29    Down 13.58 (0.74%)    Components, Chart, More
^KLSE    KLSE Composite    1,019.72 Sep 29    Down 0.81 (0.08%)    Components, Chart, More
^N225    Nikkei 225    11,259.86 2:00AM ET    Down 483.75 (4.12%)    Chart, More
^NZ50    NZSE 50    3,090.22 12:31AM ET    Down 98.32 (3.08%)    Components, Chart, More
^STI    Straits Times    2,311.60 2:17AM ET    Down 49.74 (2.11%)    Components, Chart, More
^KS11    Seoul Composite    1,448.06 2:02AM ET    Down 8.30 (0.57%)    Components, Chart, More
^TWII    Taiwan Weighted    5,719.28 1:46AM ET    Down 210.35 (3.55%)    Chart, Mor

191 I have a question...let's say Paulson buys all of the MBS...now, people are saying that "bails out" people who bought a house they could not afford.

But does it? I assume those folks will still get foreclosed, just maybe not right this second.

The MBS are related to individual mortgages but not exactly.

192 Why do we need to reform any "mark to market" accounting rules?  Why do we need to reduce our corporate taxes ... which are some of the highest in the world?  Why would we want to reduce Capital Gains to Zero like China?  Why would we want to repeal the CRA ... which got us here?  Why in the hell would we want to actually oil the gears of the capitalist machine when ...

We can simply fix this all by throwing $700 billion dollars and some Democratic party oversight and .. voila!  We're all going to be just dandy!!

The money would fix nothing.  Nothing.

193

"He oughta change his name to Inspector Suckup!"

No...I think he has the name just right.  What an asshole.

194 Good for Inspector Asshole to have realized what he has.

Now if only the preening morons in Congress would do the same. Only, I bet when they get a second chance to vote on it, they will now have to vote on something that includes money to ACORN and various other things designed specifically to elect Democrats.

This country needs a better class of morons.

195 Planet Moron:

"Address the crisis, yes, but not with this plan, and not with any version of this plan."

Please give us your idea for a plan that would:
1) Work, and
2) Be able to get through the Democrat controlled Congress and Senate.

Please pay particular attention to requirement number two, as it is just as important as requirement one. Violation of either requirement means failure.

196 Has anyone said ... Throwing $700 BILLION at this problem WILL prevent a recession?  No.  Has anyone said throwing this money to Wall Street WILL allow people to get loans?  No.

All of them say ... "HOPEFULLY ... wasting $700 billion will do these things"

"Hope"

The Audacity ... of "Hope".

Meanwhile Donald Trump says this is more difficult than flying a man to the moon.  No one knows that this $700 Billion will work.  It is simply the FIRST plan to be put on the table and many say it's not even a good plan.  Do something ... but do something that will WORK.

Enough with "Hope" ...

197

Let's all put aside the bickering for a moment to appreciate the gallows humor in this crisis. Namely, the unfortunate credibility-destroying sabotage of Ace's "I Was Wrong" converts' nicknames --- c'mon, having Ace to hang his hat on the words of "Inspector Asshole" is pretty funny stuff.

Now that that's out of the way, I must say that I, too, have had a change of heart on this crisis.

The sooner we realize that opposition to this bailout means the road to serfdom actually becomes a Superhighway to Marxist re-education Maoist saltmine killing fields with 5 year plans and the nationalization of Taggart Transcontinental, the sooner we can get started campaigning against and dismantling this travesty.

But only after the vote is successful, the markets are calmed and liquidity restored.

So, yes: I, too, was wrong.

{hangs head}

 

 

198 the stench of retard runs deep in these comments, but none moreso than qwinn's 35% plan. congrats buddy!

199 Oddly enough, I just finished reading a Robert B. Parker novel entitled "Bad Business" a couple of weeks ago wherein the World's Greatest Accountant actually explained mark-to-market in a way I could understand.  That probably says more about me and where I get info than anything, but a complete ecomonic nebbisch like me has to take where he finds it. 

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