Diane Ritter

Fear Goes Hand in Hand with Drama

Hooray!!! The people have spoken. I talked to a congressional aide. He said the calls and letters had been running about 100 to 1 against.

Global Stock Markets: The Deleveraging Process Continues

Call your Congressman and Senator's people, or reap the consequences. Rumor has it that the vote on the Bailout is going to be Monday in the House, and Wednesday in the Senate. You need to call now if you want to have any influence on their votes.

The Deal's Getting Done, But Will It Work?

David, I am confused by your statement "We are putting a lot of faith in the health of Citigroup, Bank of America, and JP Morgan. If one of them fails, the game is over. " Why is that so? When the FDIC closed down WaMu the loss was entirely to WaMu's stockholders and bondholders. As far as I know JPMorgan took over all of WaMu's derivative contracts as well as it's other assets. They didn't pay much, but WaMu's assets collectively were still worth Billions (after the write-down's). Are you saying that if the FDIC went in and closed down Citigroup, Bank of America, or JP Morgan their balance sheets would turn out to be in WORSE SHAPE THAN WASHINGTON MUTUAL'S!? That is pretty hard to believe.

3 Key Steps to Fix This Fiasco

You are absolutely right. We need to flood Congress with one simple message - "If you vote for this bill, I will vote against you in November. And I will lobby all of my friends, and neighbors, and family members to do the same."

Buffett's Big Bet: The Real Value of the Berkshire Investment in Goldman Sachs

Politically connected is right. Buffets no fool. He knows that Hank Paulson has $500 million dollars in Goldman Sachs options. And Hank's going to have exactly 4 months left in office after this Bailout passes to spray as much of that $700 Billion dollars as he can onto Goldman Sachs. I'm betting he can get the whole $700 Billion spent by his last day. Any takers?

Bailouts: Misunderstanding the Moral Hazard

You are absolutely correct! Close these institutions down. And we don't need any new programs or legislation to do it. This is the FDIC's job. The bankruptcy path of WaMu is exactly the approach that should be taken for the rest of these problem banks. The stockholders and the bondholders take a hit, maybe lose their investment entirely, and all the assets get sold at the REAL market clearing price. Which is the price someone is willing to pay for them on the open market. As soon as that happens, the crisis is over. Just like that.

Bailouts Are Painful - And Should Be

If the Bailout Plan doesn't work, someone other than Uncle Sam will buy this distressed debt at a discount from its current holders. The selling party will take a loss and that will be that. Where’s the danger to the American Economy? The only danger is to the owners of the distressed debt. This bailout isn't for you and me, or for the "American Economy". We won't be any better off or any worse off after it passes. Ah, but the current owners of this distressed debt. How very, very happy they will be. Every day we delay this is a day of victory folks, because the reason it is important to pass this bill NOW, NOW, NOW, NOW, NOW, is that at the end of January Hank Paulson will be out of office. He needs that money NOW NOW NOW NOW NOW to bailout his friends on Wall Stree, most notably Goldman Sachs. And that is the truth. What do you bet he can spend all $700Billion before the end of January. I would say 100%. It will be all spent by then. Funneled out to the rich, the powerful, the politically connected. And spending it won't change what's going to happen in the real economy one single bit. All it does is transfer the hit from the private sector to the US taxpayer.

Hoping Paulson's Plan Works Is Not a Plan

Does anyone know what happened to the CDS's on WaMu's books when the FDIC closed it down? Did JPMorgan take them as part of the deal? Or what?

Hoping Paulson's Plan Works Is Not a Plan

I agree with everything you said in your post, but I think you are going to have to punch up the opening a little bit if you want to get your Congressman's (or staffer's) attention. I would start with "If you vote for this Bailout Bill I will vote against you in the election", and then move onto the reasons why it is a bad bill.

Next Victim, Please!

Wachovia failing is good news. Bankruptcy isn't a symptom of the problem. Bankruptcy is the SOLUTION to the problem. If the FDIC would get the lead out and wade in there and close down the rest of the banks who's balance sheets smell to high heaven the whole crisis would evaporate. We don't need a mega dollar bailout. We need to CLOSE DOWN the rest of the problem banks and sell their assets to their competitors. Their healthy, well run, well managed competetors. And the sooner the better.

Time Not for a Bailout, But for Nationalization

How about "the WaMu option"? That seemed to work stunningly well. The stockholders and bondholders lost a lot of money, but everyone else came out smelling like a rose. All of the real assets of the bank were transferred unimpared to another bank. No lose there, in fact a clear gain, since they will now be managed by someone competent and prudent. No loss to the depositors, thanks to the FDIC. No loss to the economy, in fact, again, a clear gain, since JPMorgan's balance sheet is healthy enough that they are still making loans. No loss to the taxpayer. No loss to anyone at all than the stock holders and bond holders. They got left holding the bad, which is exactly who should have been left holding the bag. End of story.

Why shouldn't the exact same approach be used for all the other banks who balance sheets smell to high heaven? Why do we need a bailout and mega taxpayer funds to re-capitalize these banks? Let them die, and more prudent and competent managers will come in and pick up the pieces immediately. Just like magic the bad debt is no longer a problem. It isn't a problem because it has been repriced by the bankrupty right down to what someone is willing to pay for it.

All we need to do is to tell the FDIC to get the lead out, instead of waiting month after excruciating months for the problem banks to slowly, slowly die. Get it over with. As soon as they do, the economy will start to recover.

Or we can use the Japanese approach and spend ten years propping up these dying banks with larger and larger infusions of public money. We all know how well that worked out.

Why Friday Came Early

You're right Steve, the whole thing stinks to high heaven. About all we can do at this point is to write our Senators and Congressmen with an even more persuasive threat than Paulson's and Bush's: "Vote against this, or I will vote against you. Absolutely, positively, guaranteed."

Seems to me that the place where we can get the most traction against this thing is in the House of Representatives, not the Senate. Only 1/3 of the Senate are up for re-election. But each and every US Representative is going to be judged by his constituents in the voting booth in a few short weeks. Let them know, loud and clear, we can't vote against Paulson, and we can't vote against Bush, but we can sure vote against them. And if they pass this Bill, that is exactly what we should do.

We Stand at a Precipice

The best way to save our financial system isn't to pass this bill, or any variant of it, but to do to these wall street banks what the FDIC did to Washington Mutual. Fire the managers who caused the problem, let the equity holders and debt holders take the hit they deserve, and sell the assets to companies run by more prudent and capable managers. They last thing in the world we should do is to inject capital into these companies, and allow them to continue to be run by the fools and villians who caused the mess in place.

What $700 Billion Bailout? It’s Just $3,324 a Head!

Alas, your premise is flawed. We are being asked to give up a long weekend, not save our financial system, but to bail out a lot of rich, politically connection wall street bankers and brokers.

The best way to save our financial system is to do to these wall street banks what the FDIC did to Washington Mutual. Fire the managers who caused the problem, let the equity holders and debt holders take the hit they deserve, and sell the assets to companies run by more prudent and capable managers. They last thing in the world we should do is to inject capital into these companies, and allow them to continue to be run by the fools and villians who caused the mess in place.

What's Wrong with the AIG Bailout Model?

Steve, maybe you are being too pessimistic. I heard that the WM debt holders are going to be wiped out.