It looks like the guy that tried to bring us the Super-SIV is getting close to a much bigger fiasco that some people are calling a new “RTC”. Sadly, a week ago while having lunch with a close friend I suggested that the government would likely set up a big bad bank entity and try to put all the crap from the financial industry into it in one fell swoop. I just got a bad feeling when I heard that Paulson was fixated on the good bank/bad bank concept as his solution for Lehman.
Why stop there? Why stop with just doing one investment bank at a time? Of course that never worked out with Lehman because no non-governmental entity wanted to touch the same stuff they helped create. So it is only the next evolutionary step for a socialist like Paulson to resolve that problem and replace the nonexistent buyer with the US government.
Does anyone get the sense that Paulson is just tired? Tired of having to work so hard every damn day, every damn weekend. He is probably worn down. And besides PIMCO pretty much ordered them to do it this morning. So just give in Hank. Just take all that crap that the investment banks innovated and securitized and made all kinds of profits on years ago and buy it. Buy it all. And while you are at it, with your unlimited blank check powers, just buy every bad mortgage or house or car loan or car or credit card ABCP or the crap they bought with the credit card. Buy it all. Buy, Buy, Buy!
Just lump all that shit onto the government’s books so that the IBs and then everyone else can go back to making a whole new bunch of crappy loans. Never mind what this will do to our country, our taxes and our currency. Reading through the Volcker, Brady, Ludwig summary, it all seems so simple. Just say, “desperate times call for desperate measures” over and over and over again and you will convince yourself it is not only necessary, it is beneficial. I have no idea how they are going to be able to price these assets at “fair market value” or how they are going to force the seller to sell. For the holdouts, those marks are going to be brutal. As a result, if this goes through, I fully expect the mark-to-market rules will be waived. If not, the losses that would have to be taken will devastate the banks as much as they would have been devastated with no intervention.
The Big Bad Bank appears to be a solution that politicians and regulators can get behind to show the public they are doing something. It doesn’t matter what I think of that something. Apparently it doesn’t matter what anyone that isn’t looking for a bailout thinks either.
This article has 16 comments:
"But there were few details on the idea. Getting such a company started would require approval from Congress."
Get it? "New" RTC require congressional approval.
Will worthless SEC investigate who was buying huge blocks of stocks hour before CNBC "news"?
You forgot to mention the coordinated effort to push the market higher and gold lower in the last 90 minutes of trading as though the announcement of such a senseless plan would make things better somehow. Anybody remember how many S&Ls went out of business to supply the old RTC with assets to sell? (Answer: Lots)
Long term expect the market to tank, gold to skyrocket, or both. Odds of neither happening are slim and none (and slim just bought a ticket out of town), depsite what the powers-that-be want us to believe.
Today's announcement is only a sign that politicians are getting desperate and grasping at straws. If they can't "fix" it they will try to fool us into believing they can to buy more time.
Pure & simple: This started with your Saint Reagan who founded the idea that ANY government regulation was somehow too much. That became the received wisdom of the Republican Party, unquestioned and the rock upon which all all actions by Repubs were built over the last 25 years. Culminated in Gramm-Leach-Bliley, and for those fact-challenged Repubs...the vote on that bill was 53 Repubs FOR; and 41 DEMS AGAINST
Being wrong is hard sometimes. ALL voters who pulled the lever for REPUBLICANS need to look in the mirror when searching for the culprits
Some very good comments here... This is a 165 TRILLION$ fuck-up and NO RTC can handle it. This is just a set up so all in wall street can high five and have a good weekend. Previous post ..Watch gold go parabolic . So all of you in stocks, cradle your nut's it's going to be a long ride down, lower than whale shit.
I used street language because I'm sick of seeing these idiots get away with it while hard working Americans get screwed over and over and over and over...............
Paulson does not have the authority to do this!
(see)
Housing and Economic Recovery Act of 2008
www.cbo.gov/ftpdocs/95...
Provide temporary authority to the Secretary of the Treasury to purchase any obligations and other securities in any amounts issued by the government-sponsored enterprises (GSEs) involved in the mortgage market. Those GSEs include the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal Home Loan Banks (FHLBs).
He would also need Congress' Approval which would seem unlikely!
www.cnbc.com/id/267790.../
So would a new RTC be intended to bail out the FDIC, and take over the loans of bankrupt banks? or would it be along the lines of what Cramer suggests - that they enter the market and buy the bad paper at market rates? Either would take an Act of Congress, but they would go along. The risk then is, since since they're replacing those loans with Treasury debt, will foreigners still buy Treasury debt? And will my yuan go up or down?
The individual S&Ls went bust or couldn't handle the foreclosure process in such numbers so Congress formed the RTC to reclaim and auction off the houses (at a loss on the loan amount).
It was hugely expensive because a) Like now houses were auctioning for prices less than 50% of original purchase price due to large numbers and "gotta sell" rules and b) it was run by a government agency so it cost at least 500% more than it should have and took twice as long.
Lots and lots of S&Ls went under and the FSLIC was folded into the FDIC (which is likely to go under this time around).
Things are going to get ugly in the not too distant future folks. This time it's much worse than the S&L crisis was.
Raise cash and have it on hand in case your bank is temporarily 'closed' for a few days (or weeks).