Seeking Alpha

The Telegraph reports German and French officials working on a multitrillion-dollar "firebreak."...

The Telegraph reports German and French officials working on a multitrillion-dollar "firebreak." Among the steps is a bank recapitalization going well beyond the laughable €2.5B tagged by the EU stress tests (the IMF puts the figure at €200B, others say €1T). A bump in EFSF firepower to €2T and a "controlled" Greek default giving a 50% haircut to lenders are also in the mix.
Comments (182)
  • While many details must be worked out, I believe it is finally sinking into the thinking of European leaders that pervasive insolvency threatens both the union and zone.

     

    And when you are confronted by massive insolvency, the banks must be prepared for major hits as insolvent sovereigns must be allowed to default in conjunction with instituting reforms to avoid repeating past mistakes. Leaders must be listening to markets who enjoy more financial insight than politicians.

     

    They are recognizing the obvious and garnering the political will to address structural debt problems to avoid a complete financial collapse. Speeches have not proven to be effective.
    24 Sep 2011, 03:26 PM Reply Like
  • Seems like a very large plan, if $2 trillion is really the level they are considering. Still cannot see how that will resolve much. It still is more debt. And if recapitalizations, then shareholders and bondholders have to take some pretty big hits. Should be pretty bad news for certain shareholders and debt holders, but maybe good news for other shareholders and bondholders.

     

    It might though be a game changer in the short and medium term, as it might curtail panic and prevent much larger sell-offs.
    24 Sep 2011, 04:21 PM Reply Like
  • Multi-Trillion!!!!! Wow, it must be nice to be a big bank and have a "Sugar Daddy" willing to go to the printing press and pull out all the stops....Hey how about sending $500 million to my account 0046261142. That's the account number, just make the deposit, and I guarantee you I will make my local economy boom.

     

    IF YOU DIDN'T KNOW IT BEFORE....NOW YOU SHOULD KNOW. CENTRAL BANKS ARE THERE TO TAKE CARE OF THE "BROTHERHOOD OF THE BANKERS".

     

    Conspiracy Theory? Not !!!
    24 Sep 2011, 09:33 PM Reply Like
  • Bad for shareholders of European banks, but likely very good very everybody else. If it ends the contagion fear, than the US can trade on its own finally.

     

    When the DAX is down 25%+ and banks keep getting smashed, you'd think they'd finally get it that its not going away.
    24 Sep 2011, 09:54 PM Reply Like
  • Instead of limiting these issue´s to only Greece, the EU should include the PIIGS, and once for all reduce the debt for every nation.

     

    I will not shed any tears for those who bought PIIGS bonds after 2008, they took a risk, and now the risk didn't pay off.

     

    There has to be a sanction, against the PIIGS, Italy should leave G7 and China should take its place instead.
    25 Sep 2011, 06:35 AM Reply Like
  • "working on a plan" tells you all you need to know about how this is going to work itself out over the next few months.
    24 Sep 2011, 04:06 PM Reply Like
  • This is great. These government officials will learn the hard way that statements with no equal action to back it up will have less and less of the desired impact that they are hoping for. This is what you call a hail Mary. Let's not forget that the EFSF has not even been ratified in Germany yet!!! At this point, it's a hope and a wish. What happens to the EFSF when France gets downgraded? This whole charade is about to get nasty very quickly. They are losing control, and with these constant leaks, they know it. If this is indeed true, the Euro will get hammered, adding more fuel to the Dollar short squeeze, killing all levered assets in the process.

     

    Let Greece officially default, wind down the over leveraged banks firing management in the process and let the bond holders take the losses. Stop this b.s. already.
    24 Sep 2011, 10:33 PM Reply Like
  • Might be good for the markets in the short run, but will seal the doom of the Northern European countries. They cannot swim with their feet in buckets of concrete (i.e., the PIIGS).
    24 Sep 2011, 04:17 PM Reply Like
  • Sad, isn't it? "Short term" used to mean a year, now it's a week or two.
    24 Sep 2011, 07:45 PM Reply Like
  • Yes, and a billion dollars used to be a lot of money.
    24 Sep 2011, 08:04 PM Reply Like
  • How many of those billions will come from the Fed, I wonder?
    24 Sep 2011, 08:08 PM Reply Like
  • Ah....what's a few billion among the "Brotherhood"?
    24 Sep 2011, 09:34 PM Reply Like
  • how exactly would it seal the doom?
    25 Sep 2011, 12:19 AM Reply Like
  • Keeping financial institutions in an eternal zombie like state (life support) has never solved any long-term solution. Also, markets react to situations a lot faster than what policy makers can come up with so they are constantly behind the curb. I suppose if they don't buy themselves time, we will see a lot of short term pain but long term gain. Kicking the can down the road till there ain't no road is just going to drag us into a prolonged and painful depression as opposed to a quicker, more shallow depression and a faster recovery.
    24 Sep 2011, 04:20 PM Reply Like
  • Debt, on top of debt, on top of debt.

     

    Works in the short run, but is not going to work in the long run.

     

    Denial at its best.
    24 Sep 2011, 04:37 PM Reply Like
  • If they truly write off the debtors (Greece), but recapitalize banks, as necessary, then, I'd expect a rather massive rally in European shares and a healthy one here, too. There's a huge difference between giving money to the debtors endlessly and, instead, chucking them over the side, but refortifying the engines of future growth, the banks.

     

    Drawing a similar analogy here, we have already recapitalized the banks, placing us ahead of Europe, but, for the usual political and sob-story media reasons, we haven't adequately wiped out the debtors, which is a necessary ingredient to cleaning up the bank books and getting things moving forward once again. Ironically, if Europe does both simultaneously, they could leap-frog the U.S. and be ahead of us in cleaning up the respective messes.

     

    Of course, we have to see how these early rumors actually pan out. Any plan as incisive as rumored sure seems atypical for bureaucratic socialistic politicians, as are manifest in Europe.
    24 Sep 2011, 05:00 PM Reply Like
  • I agree. I saw this story this morning in The Telegraph, which I find to be a useful source, and hoped (some hope) it would go unnoticed by the world.

     

    It always seemed to me that what was reported about Geithner's visit to Europe last week was just a kind of head fake thing to cover up what was really afoot. The Telegraph seems to have good Conservative Party sources and this story seems to be sourced from "Whitehall officials", i.e. U.K. civil service sources which are centered in the Whitehall district of London. Also Jeff Miller here in SA is saying today that Geithner says there is 0% chance of a Greek default.

     

    Like you I believe this news is good for the markets on Monday and will conduct myself accordingly.
    24 Sep 2011, 05:24 PM Reply Like
  • "but refortifying the engines of future growth, the banks."

     

    You are a banker aren't you.

     

    The banks should be wiped out and replaced by competent organisations. Instead they are being rewarded.

     

    It's only when we have some competent as opposed to incompetent financial organisations that future growth will be possible. The history of the current muppets is that of decades of malinvestment... Why would that change in the future? It is this continuing malinvestment by the banks which is pushing the economy into a double dip recession. They have trillions in reserves... What do they do with them? Fund the government.
    24 Sep 2011, 05:54 PM Reply Like
  • css:

     

    No, I am a private investor with no current or previous tie to the banking or financial worlds. But, I'm also smart enough to know that all this media-induced rage to trash the banks would be a disaster for world economies for a very long time.

     

    You might redirect your vitriol about banks toward politicians, who caused 100% of the problem to begin with (everybody should own a house, even if you have no assets and can't pay) and are now, by their very own ZIRP policies, making it nearly unavoidable for banks to choose the safe bet of recycling money back to the very same big government that caused the problem initially and continues to be a parasite on productive society, starving the private sector of capital and incentive.
    24 Sep 2011, 06:08 PM Reply Like
  • CSS, wiping out the banks and replacing them with what? I have no sympathy for the greed that would have all but destroyed our banking system. Believe it or not, banks once operated prudently and conservatively and can do so again if properly regulated (yes, I know that's a dirty word nowadays). You don't kill the patient to get rid of the disease. What is needed is accountability by the individuals who all but brought down our economy and reaped billions which they still hold in their private accounts.

     

    As a former Citibank employee who sat enthralled while Walter Wriston spoke to a group of us on the importance of the repeal of Glass–Steagall Act and who saw that repeal take place seventeen years later, I can only hang my head in shame at having bought the thesis way back then. The results speak for themselves. We taxpayers bear the burden while the perps walk and nothing has really changed, but killing banks is the same as killing the economy and is something no one should wish for.
    24 Sep 2011, 07:02 PM Reply Like
  • Yes you are right. It will work financially, and economic theory dictate that is what must happen. But politically a very difficult sell to the populace of Germany and the rest of Northern Europe. The politicians will put themselves at political risk, if they do the right thing. Austerity must kick in in the PIIGS, and higher taxes, and delayed retirement for northerners.............. how do you think that will play out.
    24 Sep 2011, 07:34 PM Reply Like
  • "As a former Citibank employee who sat enthralled while Walter Wriston spoke to a group of us on the importance of the repeal of Glass–Steagall Act and who saw that repeal take place seventeen years later, I can only hang my head in shame at having bought the thesis way back then."

     

    Why should you? Back in those days banking was regarded as an honorable, profession like medicine or law. Bankers were respected and no one knew how they would irresponsibly abuse the freedoms they were granted.
    24 Sep 2011, 07:35 PM Reply Like
  • AGREED THAT IS THE REAL PROBLEM
    24 Sep 2011, 07:37 PM Reply Like
  • Thank you for an honest reply.
    24 Sep 2011, 07:38 PM Reply Like
  • Tack said: "engines of future growth, the banks"

     

    Fallacy. Banks make money by discounting customer assets and cash flows, provided that borrowers have ample and unencumbered collateral. The engine of growth has nothing to do with banking, although banks win when their customers prosper. Corporate funding is traditionally from retained earnings; household income pays the mortgage, car note, revolving credit purchases. Minus out growth in mining and manufacturing jobs, nothing works right.
    24 Sep 2011, 07:54 PM Reply Like
  • Bruce,
    Great to see a former banker acknowledge the folly of Glass-Steagall repeal. And great to see a voice advocating that holding those responsible for privatizing profits and socializing losses should be held accountable and prosecuted.
    24 Sep 2011, 08:26 PM Reply Like
  • Who cares what that idiot says...Do you really believe in anything that Geitner says.."The U.S has a 0% chance of being downgraded, its not possible." wrong
    24 Sep 2011, 08:47 PM Reply Like
  • So Bruce, how do you change the system when all they do is enable it? The banksters are so tied to the political machine now, that they have a perpetual access to manufactured liquidity and solvency (unless of course your bank happens to be on the s--t list). In the meantime, the gangsters in the banksters siphon off huge sums to reward themselves for their genetic association with the "Brotherhood." This is like drug addiction. You don't clean it up with another injection.
    24 Sep 2011, 09:41 PM Reply Like
  • Untrusting:

     

    The repeal of Glass-Steagall had almost nothing to do with the meltdown. The big problem wasn't in the commercial banks, but in the investment banks--Bear, Lehman and the rest. And their biggest problem (besides greed and stupidity, which are always present) was a lack of capital. They were levered almost 40 to one--a suicidal level but one the SEC approved in 2003 or so. Financial crises will always happen and over levered financial institutions will always be at risk of crumbling.

     

    What all financial institutions need is an extremely sturdy capital cushion. Letting commercial banks underwrite securities isn't what drives them under--too much leverage does that.
    24 Sep 2011, 10:08 PM Reply Like
  • Jeep,
    Yes that is certainly partly true. However regarding the meltdown, the commercial banks as well as the investment banks were actively involved in the whole fraudlent securitization schemes, as were numerous other participants as well.

     

    And yes, would certainly agree that leverage was yet another large part of the problem as well.

     

    Would further agree that the SEC is by and large a total joke and largely an industry puppet that essentially does the industry bidding.
    24 Sep 2011, 10:42 PM Reply Like
  • Nobody forced the banks to accept liar mortgages.
    24 Sep 2011, 11:11 PM Reply Like
  • css1971
    The banks should be wiped out and replaced by competent organisations (organizations). Instead they are being rewarded.
    ======================...
    Who are these competent organizations ?
    24 Sep 2011, 11:55 PM Reply Like
  • I guess the politicians forced unwilling and innocent lenders to make NINJA loans (no income, no jobs, no assets), then threatened the investment banks to bundle them into incomprehensible securities, tortured the grading agencies to make them rate these fraudulent securities AAA so the banks can sell this crap to folks in Dusseldorf. I get it now. It has been a big socialist conspiracy from the very beginning. The bankers are sweet babies with wide blue eyes. I want to hug them and give them my money.
    25 Sep 2011, 12:02 AM Reply Like
  • Who would replace them? What you don't understand is that the banks are being wiped out at least to an extent. Shareholders would be massively diluted and top execs will undoubtedly fall. It would be a new organization, but instead of crushing even the admins you actually keep the majority of people employed. Having a Arthur Anderson or Lehman Brothers situation destroys the lives of thousands of innocent people not to mention it would destroy the global economy. Don't understand why anybody wants that?

     

    People want to argue that 'too big too fail' encourages excessive risk. Really? Find me a BAC or C shareholder that agrees? So losing 90% of your money wouldn't stop you?
    25 Sep 2011, 12:03 AM Reply Like
  • Yeah, hopefully we get follow through. Liking that a lot of public pressure is coming out to resolved this in 6 weeks. Finally some sense of urgency that this has to be resolved NOW!

     

    Very much content that a Greece default and bank recapitalization would be similar to the Jobs retiring at Apple. It has been feared for so long that the market has already price it in. When the sun rose the next day at AAPL, the stock eventually rose to new all time highs.

     

    When Greece defaults and the world doesn't end, the markets will rejoice. All of a sudden that $100+ earnings in the SP500 becomes legit. Everybody knows what a normal valuation would be once the doubt exits stage left.
    25 Sep 2011, 12:46 AM Reply Like
  • Untrusting:

     

    Yes, I agree. The commercial banks certainly took part, as did Fannie and Freddie, the investment banks and a lot of other players. It wasn't all fraudulent, though. Some certainly was, but a lot that was done was just stupid and incompetent on the part of a vast array of private parties and governmental actors.

     

    My point was only that Glass Stegall repeal was not central to the meltdown. If the investment banks had had enough capital, we still would have had the whole mortgage/securitization mess, but I think the financial meltdown would have been far more limited. Indeed, if the IB's had been required to have adequate capital, they never could have underwritten nearly as much toxic paper as they did (since they invariably kept some on their books).
    25 Sep 2011, 08:50 AM Reply Like
  • And immoral actions should be aptly rewarded with prison time, when appropriate, not a bonus and golden parachute
    25 Sep 2011, 10:19 AM Reply Like
  • doesn't matter except for the shorts, the double dip is in progress as we speak.

     

    so use the rally to sell cyclicals and add shorts.

     

    USA, Japan, and Europe are comatose welfare states full of illegals, old people, parasitic banks, oil cos., politicians, insurance companies, all leeching off the system. If you want to do anything of any consequence move to Latin America, Asia (ex-Japan) or Africa.
    25 Sep 2011, 10:50 AM Reply Like
  • Or re-election.
    25 Sep 2011, 10:52 AM Reply Like
  • fx:

     

    You're falling victim to the "new think" that's always proven erroneous as soon as tested, i.e., the idea that "emerging markets" and third-world countries can and will prosper while the developed world stagnates or decays. Sorry, but as soon as the big boys suffer, the little guys get crushed.

     

    So, if you really want to prosper, live, etc. in the exciting less-developed places, then, you better be hoping that those major countries you think are "finished" aren't because if they are, the secondary and tertiary economies, stock markets, you-name-it, are kaput.
    25 Sep 2011, 11:25 AM Reply Like
  • I do not suffer from any "group" or "new" think. the macro outlook is only one part of the equation, obviously EMs will slow down in the near term of 1-3 years. It's what happens over the medium term 3-5 years that concerns me for career and growing a business.

     

    medium term the BRICs will grow strongly without the debt and demographic overhang that keeps USA/Japan/Europe locked in a comatose state. Lower costs, less regulation, less debt, more demand from the emerging middle class. That's why on any serious corrrection down to the S&P level 950 you can buy CMI MCD or SBUX for Asian growth alone, plus the ongoing US/European Ops.

     

    Another major difference is that Banks in Australia, NZ, South Africa and Asia (possible exception of China) are well run and credit growth is strictly limited.

     

    Does anybody really beleive that the next generations of endebtted graudates in USA/Europe/Japan will have anything but second rate careers and earnings prospects whilst paying for bank bailouts, wars, welfare for millions of retirees, uneducated minorities and illegals? At least in Africa/ developing Asia the locals are paid according to the value they create and receive little or no welfare.
    25 Sep 2011, 11:38 AM Reply Like
  • fx:

     

    Having a spent a career in international business, I tend to concur with your extended outlook, on a relative basis. I think, however, that respective stock markets will still be linked rather closely for the foreseeable future.

     

    So, one may be able to enjoy the fruits you mention by being there locally (as you are), but it may be more difficult to see investments in securites reflect the differences you suggest.

     

    We'll find out in a few years.
    25 Sep 2011, 11:44 AM Reply Like
  • I'm pretty sure the average South African, Australian, Kiwi, Thai, will enjoy a better standard of living over time, whilst Europe and USA decline slightly, with little or no gains in net worth. As we have discussed, it's Japan all over again, with the attendant consequences.

     

    Stock markets are an entire other story - EMs are already much lower and in bear market territory than the S&P, and are probably headed lower. Yet unemployment is basically zero in Asia, and the next generations will be even better educated, hardworking, and ready to steal the last remaining jobs from the USA/Europe, while USA/European sovereign debt grows and grows. So EM markets will be interesting some time in 2012.

     

    I'm anticipating end of quarter manipulation this week as a payoff for hedgie's and fundies' campaign contributions to set fees and bonuses, especially so close to year end. Then down to S&P 950 as Q3 earnings show the first signs of the double dip. By then Asian rainy season will be over, time to move back to Laos for the winter..
    25 Sep 2011, 11:57 AM Reply Like
  • More like the politicians forced the banks to lend the liar loans to ethnically blessed applicants with no jobs or be charged with redlining so the banks did what they did naturally to protect what they knew to be bunk. Namely, all the rest of the shit you listed in order to protect themselves. See how that works?

     

    It has been a big socialist conspiracy from the very beginning. We went from a chicken in every pot to a mansion on every lot.

     

    Don't worry, you'll get there. It takes time to face your true enemy. The 'banks' are a nice, relatively convenient intermediary that helps us sleep at night. Who really wants to believe that the US govt. is our worst civilian enemy, including its public unionized mouth-breathing mob(I mean tax-fueled payroll lard ass-sitters of the cubicle farm people classes).

     

    If we can scapegoat the banks, then we can at least keep Barney Frank out of Supermax, right? And that's the most important thing we can all do. Help Washington out. Washington is full of super neato people who want to help us. They'll 'fix' the banks for us, don't worry. We'll have 20% unemployment for as long as necessary if we can keep voting for these superheroes of government.

     

    Capitalism sucks. Its the cause of all the bad things in the scary places.
    25 Sep 2011, 12:15 PM Reply Like
  • heh heh

     

    I like the cyclicals on the way down, wherever 'down' is... or goes.

     

    On the way up, wherever 'up' is I begin to sell them.

     

    I'm not perfect, but that's how it works in my non-nostradamus world of not knowing the future.

     

    Rope the herd, but don't follow them off the cliff.
    25 Sep 2011, 12:26 PM Reply Like
  • I'm investing with the next Washington administration already in mind. Obama is in my portfolio's rear view mirror, even if it will take years to undo his clueless, fiscal diarrhea.

     

    That's how America moves between cycles, like a fat drunk suffering from amnesia, also blind, moving around the room trying to right itself by holding onto the walls, from its flirtations with socialism and soft marxist heavy petting to going back to supply siding freedom and low taxation. We veer right in the end. We tried the Obama stunt out of multicultural fealty. It was a one off novelty. Wheeeee. That was fun.

     

    Now, we will move back to hiring an adult... hopefully and then go about reforming the tax code and capping spending along with entitlement modification(we're too much of a puss to really rework the failed programs).

     

    Anyway. By the time most people wake up and realize America is a huge buy because of the political switchover, they will have lost the move.
    25 Sep 2011, 12:33 PM Reply Like
  • As fodder for discussion, here are some propositions I've been toying with:

     

    Commercial banks must at least continue to serve a public utility function of providing credit and liquidity to private actors in the real economy. It is better for them to do so as private entities rather than as nationalized public entities, if for no other reasons than: (i) even an emasculated profit motive seems more likely to result in a socially efficient allocation of capital and liquidity than political motives, and (ii) if both the regulated and the regulator are arms of the government, their powers will be even less effectively separated than they are now where there is a significant extent of regulatory capture by the private banking system, and the regulator will be an even less effective check upon the regulated. Regulations governing capitalization and the provision of credit must be stringent - as long as the investment instrument of a "demand deposit" exists, banks will be susceptible to panics notwithstanding the existence of the fed discount window and deposit insurance, and as such, panic-driven losses may end up being socialized in one form or another. Tight regulation of credit will tend to reduce the availability of credit to the less fortunate and will reduce the velocity of money, and may therefore constrain home ownership and entrepreneurship by poorer segments of society and on overall economic growth rates. But to the extent that tighter regulation of credit may also limit the downside volatility of the business cycle by limiting socialization of losses, those constraints may well be an acceptable trade-off.

     

    I agree with the commentators that find the SEC culpable of relaxing the net capital rule that could have been used to constrain the investment banks from taking on the leverage that led them to implode. The SEC should also spend more time and money prosecuting fraud than micro-managing the prospectus comment process, even in IPOs. They are no more adept at rooting out fraud ex ante than investors, so they should be vigorous in prosecuting it (criminally - not through wrist-slap C&D orders) ex post.

     

    Ultimately, perhaps a strict separation of commercial banks (provision of credit and liquidity), investment banks (securities underwriting and M&A advisory services) and hedge/mutual funds (the assumption of proprietary securities and derivative trading risks) - Glass Steagall and the Volcker Rule - is the right way to go.
    25 Sep 2011, 12:58 PM Reply Like
  • Romney would a boon for the market, especially the 0% tax on divys, 0% on repatriated profits, etc.
    25 Sep 2011, 01:11 PM Reply Like
  • Jeep,
    Would agree with everything you summarized and a very good overview at that. There is plenty of fault to go around at both the government and private sector level as well as at the regulatory level for the financial sector meltdown.

     

    And the same is very much true today for much of the US economic situation on multiple fronts. From healthcare, to energy policy, to the military-industrial complex,tax reform, etc, etc. Essentially very large structural issues facing the US economy on multiple fronts that neither the politicians, government, regulators, or the big vested interests in the private sector are willing to confront. Probably because they themselves are the primary beneficaries of the dysfunctional system and those who benefit the most are never willing to seek major change.
    25 Sep 2011, 01:52 PM Reply Like
  • well said, that's why i winter in asia and summer in africa.
    25 Sep 2011, 01:55 PM Reply Like
  • wrong

     

    The CRA act stated you must not deny credit etc etc

     

    if you go to the ftc website

     

    it also tells you

     

    that welfare counts as income

     

    everyone deserves a house is the socialist mantra ( yes, some gop /aka as rinos pushed it to)

     

    those are the facts

     

    I leave you to argue your opinions
    25 Sep 2011, 09:22 PM Reply Like
  • Seriously, citing the CRA as the origin of the bank shenanigans is such an exercise in revisionist history I can't believe it still pops up in intelligent discourse.

     

    Only folks nowhere near banks, mortgages, financing, and real estate proximate to the housing collapse cite it, and do so as a matter of political positioning and nothing more.
    25 Sep 2011, 09:28 PM Reply Like
  • More like the politicians forced the banks to lend the liar loans to ethnically blessed applicants with no jobs or be charged with redlining so the banks did what they did naturally to protect what they knew to be bunk. Namely, all the rest of the shit you listed in order to protect themselves. See how that works?

     

    banks were never forced into anything .....they did it for one simple reason......GREED.
    remember the original loans could have been manageable , it was the LEVERAGE that brought down the house of cards.
    25 Sep 2011, 10:28 PM Reply Like
  • Fannie set the bar that all mortgage lenders used. Now, old crappy hayseed banks out in the mid-west could continue on course with their conservative loan portfolios, but not in the blue urban puppy mills full of McMansions working off the unnatural leverage caused by suburbia's bubble. You simply don't know what you're talking about, but that's fine. A lot of folks don't. You're not alone.

     

    Subprime was mainstreamed. The big banks COULD NOT compete if they didn't engage in Fannie's new low lending bar since it opened up all the other banks exposing them to the same shit.

     

    Its similar to the blue laws. Remember those? Used to be not too long ago that you couldn't conduct business on a Sunday. Well, we got rid of those. Guess what happened. All the other stores had to now stay open if they wanted to survive in business. Pandora's box. It was the same with the banks. Once you change the standard, you have to change your standard also unless you want to lose marketshare. Yeah, well, shareholders don't like that.
    25 Sep 2011, 10:35 PM Reply Like
  • KMI:

     

    As applied by the government, the CRA did indeed force banks to make loans to subprime customers, because it was the only way to meet the government's demands. The idea then became that if one created a portfolio of mortgages, the risk in the subprime loans would be offset by the better loans. After that, various bankers discovered that one could create highly rated securities by slicing and dicing subprime mortgage streams.

     

    And, in fact that worked. Wall Street being Wall Street, however, a workable idea was taken too far, and then far too far, and then to absolutely ridiculous extremes. Fannie and Freddie, those Congressionally favored landmarks of crony capitalism, aided this as well.

     

    Wall Street greed certainly played a big role in the problem, but so did the CRA, Fannie and Freddie and the US Congress. There is blame aplenty.

     

    Jeep
    26 Sep 2011, 08:58 AM Reply Like
  • The CRA was designed to force banks to serve customers in the communities where they operate.

     

    At the time of its creation banks would open branches in poor areas, take the deposits, charge high fees, and lend the capital out in the rich areas of town.

     

    It worked initially but as time went on the US government made changes which diluted the bill.
    26 Sep 2011, 09:22 AM Reply Like
  • The CRA didn't require the lenders to lend to bad prospects it simply required, from wikipedia:

     

    " mandates that all banking institutions that receive Federal Deposit Insurance Corporation (FDIC) insurance be evaluated by Federal banking agencies to determine if the bank offers credit (in a manner consistent with safe and sound operation as per Section 802(b) and Section 804(1)) in all communities in which they are chartered to do business.[3] The law does not list specific criteria for evaluating the performance of financial institutions. Rather, it directs that the evaluation process should accommodate the situation and context of each individual institution.

     

    The law, however, emphasizes that an institution's CRA activities should be undertaken in a safe and sound manner, and does not require institutions to make high-risk loans that may bring losses to the institution.[3][4] An institution's CRA compliance record is taken into account by the banking regulatory agencies when the institution seeks to expand through merger, acquisition or branching. The law does not mandate any other penalties for non-compliance with the CRA.[6][9]"

     

    Underwriting standards that allowed dead people, no-doc, stated, recently bankrupt, etc folks to get loans were the BANK'S responsibility. I'm very much involved in the real estate industry, and loan brokers themselves were coming to me in 2007 incredulous at how little it took to get loans. I also have been involved with folks who were victims of mortgage fraud.

     

    Rent rolls on derelict properties showing outrageous income numbers were getting rubber stamped.

     

    A house purchased for 300k refi'd at 550k in two years? The CRA is responsible for that?

     

    Lenders failed to perform appropriate underwriting, rubber stamped their way through loans in order to close as many as possible, and failed at every step of the way.

     

    You folks need to stop blaming the government every time your business fails. I'm tired of the whining about how banks had their arms twisted to make liar loans to liars. No one thanks the government when it makes business viable, but when they fail its everyone's fault but their own. Give me a freaking break.
    26 Sep 2011, 09:29 AM Reply Like
  • KMI & David Urban:

     

    Take a look at the Chevy Chase Federal Savings and Fleet cases. If you do that you might want to reconsider your thoughts. Chevy Chase was sued by the government under the CRA not for having branches in minority neighborshoods and exporting the deposits, but for precisely the opposite reason--the government claimed it didn't have enough branches in minority neighborhoods. Fleet, like a lot of other banks, meanwhile was strong armed into setting aside a fund to provide mortgages to minority communities.

     

    Did the text of the CRA require these results? No. The government instead read the CRA in light of "disparate impact" analysis. Disparate impact assumed that minorities and whites would get credit in the same proportions. Of course, in the United States, the minority groups the government thought it was helping have lower incomes and substantially less wealth than the white population generally. Thus, disparate impact analysis essentially required banks to make CRA loans to subprime customers.

     

    Banks, of course, didn't want to be labled racists so they started making these loans. Since the government was requiring them to keep racial statistics, they were glad to do so so long as they could sell the loans to someone else. Yes, the CRA talks about "safe and sound" practices but in reality the government threw that out the window (although it could still point to that language to claim it wasn't at fault).

     

    Did that mean that the banks had to make "liars loans?" No--though much of the faullt there lay with mortgage brokers (and of course, customers). And many subprime loans were made to whites, and for the most part there was no government coercion involved in those loans. Like I said, there is plenty of blame to go around. But to deny the important role the CRA (or the disparate impact interpretation of the CRA, if you like) played in this mess is to ignore reality.

     

    Jeep
    26 Sep 2011, 11:28 AM Reply Like
  • The CRA is routinely touted as the original sin of the housing collapse in 2007. Regardless of whether or not piss poor underwriting was the underlying culprit or government mandates using the CRA as a stick with which to beat the banks into lending to low income and minority groups, this is not the case.

     

    I'll grant that there is indeed plenty of blame to go around. What I won't grant is the ludicrous assertion that without the CRA there would not have been a housing collapse in 2007.

     

    I'll tell you what. If I enter into a contract, and my due diligence is crap,and I lose money I blame myself, not the government. Even if my failure arose because of government restrictions on and ancillary to the deal with which I am working. Because I should have known better.

     

    And so should the banks.
    26 Sep 2011, 12:02 PM Reply Like
  • Kmi:

     

    Housing collapses happen. They always have and they always will. I have no idea whether there would have been a housing collapse in 2007 without the CRA, but I do know that the implementation of the CRA put extremely strong pressure on the banks to make bad loans, which were subsequently securitized.

     

    Bankers make enough bad loans by themselves. Government allocation of credit--whether directly through the CRA or indirectly through Fannie and Freddiw--almost always makes that problem worse, and it certainly did this time.

     

    Meanwhile, Fannie and Freddie still hold trillions of dollars of mortgages and securities, all propped up by trillions of dollars of loans and virtually no capital. If those positions are not unwound, we have another financial bust in the making.

     

    Jeep
    26 Sep 2011, 12:35 PM Reply Like
  • Fundamentally your position boils down to, government intervention in how the banks conducted business caused the banks to fail.

     

    Which is weak. Since the government regulates and gets involved to a far greater extent in other industries such as utilities, telecoms and airlines.

     

    If you consider this for a minute I think you'll find that banks had a lot of rope to play with, and they strangled themselves.

     

    Fannie and Freddie, by the way were solvent until they had to take on the crap banks gave them - poorly underwritten crap. And then they were used by the Fed and Treasury as a mechanism to protect and prop up the banks from the mess they had created.

     

    There were issues with the GSEs prior to the housing crisis, solvency wasn't one of them, and they didn't originate the failed loans until after banks stopped lending - and they became the lender of last resort.

     

    Every which way you cut it, banks failed.
    26 Sep 2011, 01:04 PM Reply Like
  • Kmi:

     

    Actually my position boils down to what I said above--government intervention (through the CRA and Fannie and Freddie) made things worse.

     

    I'm not sure when Fannie and Freddie became insolvent, but if you use the insolvency test of the amount of liabilities being greater than the value of assets, there is a pretty strong case that they were insolvent years before 2007 on a mark-to-market basis.

     

    As for Fannie and Freddie "having to take" the poorly underwritten mortgages, that is simply not correct. Fannie and Freddie both made choices to take riskier paper--they weren't forced to do so. And just like the bankers, they knew that low doc mortgages combined with small down payments was a road to disaster. The late 1980's and early 1990's had proved that.

     

    Nothing I said excuses fraudulent or negligent behavior on the part of bankers. There was some of the former and a lot of the latter. But the blame belongs in Washington as well.

     

    Did the banks fail? Yep. Did Washington fail? Yes again.

     

    Jeep
    26 Sep 2011, 02:32 PM Reply Like
  • I suspect we disagree only in the weight placed on different actors and actions involved.

     

    Just in case how the GSE's functioned isn't clear - Fannie and Freddie determine what 'conforming' is - basically they universally purchase loans that 'conform' to certain standards that they set. Such as, single family under $412k. "Jumbo' would actually be considered 'subprime' since the loan rates on 'jumbo' are higher, and that would apply to single family with a loan -higher- than the $412k limit set by the GSEs. Presumably, a house purchased by a rather well off borrower. And yet... subprime.

     

    As per 'having to take', if Fannie and Freddie accepted bank underwriting at face value, and that was their error. And fyi low doc low equity were not 'conforming'. Anyway, there's a lot going on there and I'm going to leave it at that, I don't disagree that there may have been an impact by the CRA, but I ascribe the bulk of the failure directly to the banks themselves who proved post crisis and pre, over and over again, that they rubber stamped their way to their own implosion.
    26 Sep 2011, 03:48 PM Reply Like
  • If this plan really is credible it should put behind us the worries about a cataclysmic debt meltdown in Europe. At least for a day or two.
    24 Sep 2011, 05:09 PM Reply Like
  • Where the public wants to understand but does not receive any official answers, there are rumors. Rumors are the black market of information.

     

    MARK SCHINDLER, Rumors in Financial Markets
    24 Sep 2011, 05:13 PM Reply Like
  • Such rumors are put out there to see if markets will accept them. Germans may not like the options, but it really is the only way to avoid a depression.

     

    -Greece needs to default and bondholders take a haircut. 50% seems excessive. Isn't that letting them off the hook?
    -Banks need to be recapitalized. Not sure they need it based off just losses in Greece but it would help put to rest the fears in the market.
    -EFSF needs to be expanded so that Italy and Spain bonds can be bought without limit. Neither country has any debt worries beyond what the US should have. The fund could make 5% on current bond purchases.

     

    Markets would soar. Remember market-to-market was the issue in the US. Once that rule was changed the markets soared. TARP was a big help though.
    25 Sep 2011, 12:29 AM Reply Like
  • It's the French who are truly fucked, Germans have been offloading Greek debt for the last year.
    25 Sep 2011, 11:11 AM Reply Like
  • Nothing better than Monopoly money. At least they will be able to pay for rent at Boardwalk's hotel one more time around.
    24 Sep 2011, 05:17 PM Reply Like
  • Amputation saves the patient. It's scary but necessary. And you adapt. Greece taking the haircut (along with the banks) is what we should have done. When you co-sign for someone and they start smoking crack (read welfare) you quit cold turkey. Here's another one...When your kid doesn't think they should cut the grass or do the most basic task when you ask them, start taking "stuff" away. Car, phone,allowance,freedo...
    24 Sep 2011, 05:29 PM Reply Like
  • Hey........you are acting like a grown up who takes responsibility. Nice if you can do it. First obama must go, he has no clue what to do, and is very divisive. Republicans will never agree with anything he says.
    24 Sep 2011, 07:41 PM Reply Like
  • Almost all politicians need to be flushed and a new crop needs a chance to work for "We the People." Until we send them the loudest message possible.....we'll be here again 10 years from now.

     

    Flush the Banksters by fundamentally dis-associating yourself, family, friends, businesses, etc. from any of the top 100 banks. Take your business local. Look at a Credit Union. Kill your major bank issued credit cards. Tell them to go fly a kite.
    24 Sep 2011, 09:45 PM Reply Like
  • LOL. The banks must be protected... Yet another TARP. Bet they get to keep their bonuses as well.

     

    Well I know how I'm going to trade.
    24 Sep 2011, 05:41 PM Reply Like
  • My problem is with the Greeks. They have been rewarded for not making structural changes to their economy which only kicks the can down the road.

     

    The recapitalization of the banks is good but signals the fragility of the banking system.

     

    It only buys time and the market is likely to rerate the debt even lower.

     

    Ireland is actually running positive growth numbers while the Greeks blow their budget out even larger.
    24 Sep 2011, 06:02 PM Reply Like
  • I don't think the Greek government and the Greeks CAN pay off the money that they owe any more than the US can.

     

    If, for example, they put into place extreme austerity measures like the reparations Germany had to pay after World War I, (or Haiti after independence, for that matter) it just won't work. Ultimately lots of Greeks will leave the country and go to work elsewhere in the EU, as they are entitled to do, just as many US blacks left the south after World War I and migrated to Chicago. Then they will send euros home to those family members left behind. The exodus will just shrink the economy more and make it less able to pay/

     

    Greece is a country that does not have much manufacturing industry or export capacity. It has shipping companies, but I suspect their revenues are somewhat offshored. Its main industry, like many southern nations, is tourism. Greece is a SUPERB tourism destination, probably one of the best in the world, so long as it is affordable.

     

    It has sunshine and dry heat all summer long, pavement restaurants, cheap alcohol, bouzouki music, somewhat indifferent beaches (mostly topless, some nude) and swimming, wonderful mountainous scenery, world class ancient monuments and museums, the Acropolis, etc. and is very popular with young northern Europeans who come from cold, gray countries like the UK, Netherlands, Germany, and Russia. It also has some scope as a winter or year round retirement destination.

     

    http://bit.ly/qehh3D
    24 Sep 2011, 06:23 PM Reply Like
  • I agree with your assessment.

     

    For me the real problem lies in the structure of the economy which makes government jobs for life, the 40+ gardeners working for a hospital which does not have a garden, tax collection through electrical bills because the tax collectors are not trusted.

     

    Without any significant structural changes to the economy we will revisit this scenario sooner than expected. The bond market will price the debt close to default levels after having gone through a default already.
    24 Sep 2011, 06:51 PM Reply Like
  • Yah.......and that is why the Germans want to buy the islands.
    24 Sep 2011, 07:43 PM Reply Like
  • but aren't the Greeks pushing through structural changes? My fear is that a 50% haircut would allow them to return back to their bad ways. A 20-30% cut gives them breathing room, but still requires that they move forward with austerity and tax reform.
    25 Sep 2011, 12:33 AM Reply Like
  • “The mischief springs from the power which the monied interest derives from a paper currency which they are able to control, from the multitude of corporations with exclusive privileges which they have succeeded in obtaining...and unless you become more watchful in your states and check this spirit of monopoly and thirst for exclusive privileges you will in the end find that the most important powers of government have been given or bartered away.....

     

    Andrew Jackson
    24 Sep 2011, 06:25 PM Reply Like
  • Where is Andy Jackson when we really need him? Americans might just elect someone like him now, who really understood the devil in the current economic system.
    24 Sep 2011, 06:34 PM Reply Like
  • We need both Andrew Jackson and Teddy Roosevelt!!!
    24 Sep 2011, 07:11 PM Reply Like
  • Andrew Jackson showed what it means to be president or may be he was just much much luckier by those pistols not going off. Who knows what JFK would have come up with had he lived. All the best presidents have been shot at, I wonder why.
    25 Sep 2011, 12:22 AM Reply Like
  • Its about time the bondholders take their losses. Its a shame that its going to happen in Europe instead of the USA. Bondholders take risks just like shareholders - they are just higher in the pecking order when it comes to liquidating assets.

     

    What should happen is that many of Greece's public entities be given to the creditors to sell as they see fit for whatever they can get.

     

    If only we had forced bondholders to take the losses instead of taxpayers and seized the banks that were insolvent instead of giving them money. Then we could have prosecuted the fraud, sold off assets to better managers, and protected taxpayers.

     

    A similar type thing needs to happen in the US in regards to our entitlement programs and our government employees. The bureaucrats salaries and benefits should be slashed by at least 25% and their pensions arbitrarily reworked to provide nothing more than basic social security like returns. Then we need to break the teachers' unions and forbid any public employees to have any unions at all!

     

    Its long past the time of playing pretend - whether its in Europe or in the USA - bureaucrats, politicians, and the financial elite are destroying our societies and they must be stopped and crushed.
    24 Sep 2011, 07:17 PM Reply Like
  • Doesn't work that way. Democracy = majority rule. More than 50% of the electorate want entitlements continued and expanded. Same thing with union teachers, cops, firefighters, bus drivers, SSA, TSA, EPA, FAA, military, social workers, Forest Service, Post Office pensions and health care. Game over.
    24 Sep 2011, 07:59 PM Reply Like
  • But you forgot the other 50% that want corporate welfare extended including the bankers, health insurers, corporate executives, defense contractors, lobbyists, and political hacks and Wall Street..
    24 Sep 2011, 09:12 PM Reply Like
  • Nothing so sacred to you as a contract, obviously.
    24 Sep 2011, 11:14 PM Reply Like
  • Not when the contract was obtained through bribery! I'll choose our children and grandchildren over the upper middle class lifestyles of public "servants".
    25 Sep 2011, 08:57 PM Reply Like
  • "The bureaucrats salaries and benefits should be slashed by at least 25% and their pensions arbitrarily reworked to provide nothing more than basic social security like returns."

     

    In fact they should be put in concentration camps when they are too old to work and given a basic diet and a daily vitamin pill. If they become sick, they should be euthanized and their corpses sold to pet food manufacturers to defray the cost. The camps could be run by private corporations without unions or pensions, and any employee who failed to perform could be sent into mandatory retirement. If we all work together, this dream can come true.
    24 Sep 2011, 07:48 PM Reply Like
  • You'll have to also change the contracts so that they work until they are too old to work - now they retire in their 40's in many professions and expect to collect high %'s of their salaries for the next 40 years.

     

    The dream is that government should only be involved in things that it is not realistic for an individual to be able to do. And that those that are bureaucrats are actually doing public service instead of enriching themselves. Public employees should earn LESS than the average person in their zip code. Don't like it, quit and start your own business!
    25 Sep 2011, 09:00 PM Reply Like
  • Amen to that. You should run for president.
    24 Sep 2011, 07:52 PM Reply Like
  • Public expansion contracts private expansion.

     

    Not quite conversely, private expansion if left unmolested by the public know-it-alls( ie, our legislators) ironically expands the public sector also as more people are ultimately employed by that very private sector itself for it is the only true fuel. And they are employed in real jobs doing real things, unlike the public sector.

     

    The real problem was never the debt. That is merely the symptom. The problem has always been the lie. Government is never the answer. It is always the problem, a net destroyer of capital. Government has no earnings, only takings. Sure, the people who 'work' in government call taxes 'revenue' but it is not an earning. It is a stealing. They did not create it. They stole it. Worse, the Fed then dilutes any further capital gains through inflation, then has the gall to tax that. A double tax. In bad times, a triple tax.

     

    And the real danger isn't even any of this. The real danger is that the people have become immune to all of this. Taxes are normative to them whereas they should incite revolt. But what is even worse than that is a growing number of people who believe government is actually required to "fix" the very system that provides them with real growth and actual earnings and scream for even higher taxes on the real earners(ie, the private sector), compounding the problem.

     

    In the end, the death of entrepreneurialism is the real problem. As government promises(lies) to the people that is is the solution to their troubles when it in fact has been the very stranglehold on growth. Sarbanes-Oxley is but one small example of the death of small business expansion. Frank-Dodd is another, and worse, at at time when we now actually need the banks. The retardation is severe.

     

    We are killing ourselves. The blind leading the blind.
    24 Sep 2011, 07:58 PM Reply Like
  • Here's the problem. Of course Greece can't pay off its debts--it's doubtful that it can pay the next interest coupon.

     

    But if the Greek government gets bailed out by the taxpayers of the other EU states why should any EU country be prudent? Why not borrow money like crazy to pay for votes, and when the time comes to pay the piper, tell the bondholders that, too bad, they only get 50 cents on the Euro, and if the bondholders are politically connected they get a TARP fund to bail them out?

     

    Now for the second problem. Is there any chance whatsoever that the US (through the Fed) isn't going to help finance this bail out? I figure that US taxpayers are going to be ultimately responsible for a nice portion of this bail out as well.

     

    For the most part, the bailouts only make things worse. The markets might like this in the short term, but in the long term we are going to create a situation in which the debt is piled so high that the eventual meltdown will be cause the mother of all depressions..
    24 Sep 2011, 08:01 PM Reply Like
  • Whose multi trillions of dollars are we talking about? I don't think the Germans have that much money. Certainly the IMF doesn't either, nor does the ECB. This would need to be a QE operation by the ECB. A really big QE. Is that politically feasible?
    24 Sep 2011, 08:10 PM Reply Like
  • Then gold should rocket higher. Right ?
    24 Sep 2011, 11:45 PM Reply Like
  • That, by itself, would be good for gold.

     

    But to the extent that people who were using gold as a safe haven until Europe got straightened out move out of gold and into stocks, that would have a dampening effect.
    25 Sep 2011, 11:03 AM Reply Like
  • "But if the Greek government gets bailed out by the taxpayers of the other EU states why should any EU country be prudent?"

     

    Why does every citizen of the US not make sure to make him or herself debt proof, have a homesteaded house that is paid for and a retirement home overseas, funnel every penny they have into retirement accounts, max out their HELOC and dump the funds into retirement accounts or a trust fund, hide gold coins under the bed, and then file for bankruptcy when it is time to retire?

     

    The answer, presumably, is that a society has a common sense of morality and how life is to be lived, and of what gains you respect and status in society, which may also be colored by religious beliefs and ethical traditions according to race and ethnicity.
    24 Sep 2011, 08:11 PM Reply Like
  • I would call this "Operation Panzerfaust" and not Bazooka as the Panzerfaust is the European equivalent to the Bazooka. Ugly, yes. Necessary, yes. Popular, no.

     

    All the concerns here are justified. However, the alternatives are just more ugly.
    24 Sep 2011, 08:12 PM Reply Like
  • More heroin is a bad idea. That's the path of social death, killing our children. In the US, unemployment and underemployment of recent college grads is over 40%. These kids are deferring marriage, living at home with their parents in increasing numbers -- and not by choice. Same thing with our elders, cashing in life policies, burial plots, etc.

     

    TARP did nothing except keep bad assets on the books and bad actors in business, rewarding failure. Fiscal stimulus was worse -- most of it funneled to states and localities to keep fake "public goods" in business, crowding out allocation of capital to private ventures. Look at the nonsense of Apple toys and Groupon games, a bubble of bullshit compared to stagnant oil, coal, steel, agriculture, electricity, transport. Government stands in the way of growth and free market "invisible hand" allocation. Subtract military spending and Boeing dies tomorrow.

     

    I have no doubt that the European politicians will bail out PIIGS and TBTF banks, backed by Fed swap lines, pouring concrete over the problem just like Chernobyl. There will be bread and circuses to amuse their unemployable, badly educated children another year or two. And then what? Higher taxes. Capital flight. Savings buried in the back yard, one gold or silver coin at a time, hoarded rather than spent. Every individual of my acquaintance is spending less and expecting less in the future. Sean Hannity speaks of it openly, that Social Security probably won't exist when he retires. It'll be means tested.

     

    The alternative is not ugly, it's rational and life giving. Mark to market. Liquidate. Privatize. Let people live in freedom. It's not complicated or unprecedented. Thatcher did it and saved Britain, 20 years ago.
    24 Sep 2011, 10:04 PM Reply Like
  • One point of view I guess but Thatcher saved Britain is a statement that I would not subscribe too and the industry on the island neither. Basically trade is all that is left (except some Pharma, residuals of the once mighty machine industry with RR, some hi-tech), the once important manufacturing is dead. Germany did not have a Thatcher and is doing MUCH better. Even "socialist" France is doing way better.
    24 Sep 2011, 10:34 PM Reply Like
  • Agreed on every point.

     

    There never was such a thing as a free lunch, but that's what government promises. Congress is a giant cafeteria. It hands out so-called 'free lunch'.

     

    The 'voters' slurp it up, those free lunches, like a wind tunnel, sucking all light into the vortex created by their mouths.

     

    The more free lunches promised, the more these people show up, waiting in line at the lunch counter.

     

    Pretty soon these people *ahem* I mean voters begin banging their lunch trays against the walls, demanding more, faster!

     

    They have been indoctrinated.

     

    This is the lie.

     

    We were(well at least some of us were) taught this in grade school in basic econ. There's no such thing as a free lunch. But now with public education, which relies on a free lunch itself, and gives the kids that go there, quite literally, free lunches every day, they ensure to never teach them that lesson ever again unless they figure it out and riot in the cafeteria.

     

    The lie is the problem. Politics is the problem. And their lawyers are the problem. In a word, corruption is the problem.

     

    The Constitution weeps.

     

    I guess it really is 'a living breathing document'.

     

    LOL.
    25 Sep 2011, 12:45 PM Reply Like
  • They may be doing nominally better, but Thatcher has been gone for quite some time and the bloated NHS as one example of many has only expanded at a record pace.

     

    The rapidity of social change unfortunately moves faster than most of us realize. A single generation of 40 years can obliterate a culture entirely. Wars can now be fought without firing a shot. You just immigrate, bring your host culture in, and have hundreds of thousands of babies, and their babies and pretty soon all their babies who all vote.

     

    I invest wherever I can find the spirit of Thatcher alive and well. Too bad Estonia doesn't have an ETF. They adopted a Milton Friedman economic/political system. I expect them to be richly rewarded. The Eastern blocs. They suffered under commie red for so long that they now want growth and along with it freedom, naturally. Who wouldn't? It never fails. Wealth is a by-product. I invest heavily in Chile who reformed its social safety nets to align with private property rights. I invest wherever business is allowed to grow freely without encumberence. I wish there were more nations than there are. Hopefully someday there will be.
    25 Sep 2011, 12:52 PM Reply Like
  • There is nothing in the US Constitution that blocks free lunch dole or any other harebrained idea. All it did was create rules for frequent and fair elections. Amendments came and went (Prohibition). Since 1933, US Sup Ct has held that Congress is final arbiter of general welfare free lunch (Helvering v Davis) and citizens/companies have no common law economic rights (Carolene Products case).

     

    That's why it matters who we elect. Unfortunately, there is a solid majority of cafeteria drug addicts in favor of free lunch. Game over.
    25 Sep 2011, 12:58 PM Reply Like
  • I am hopeful that Euro leadership is finally rising to the scale needed to address their issues.

     

    My guess is behind the scenes they are begging for US support which they will get. In some respects they are to be admired and in other respects they are totally unworthy and incapable of economic leadership.
    24 Sep 2011, 08:45 PM Reply Like
  • In what way do they need U.S. support? I know it's hard to accept that the U.S. doesn't have as much of a leadership role in the world anymore as it used to have, and it looks like some people still believe without the U.S. nothing would ever get accomplished anymore.

     

    Maybe one day you can understand how it was the U.S. and its housing debacle that pushed the world over the edge to begin with. The main culprit is actually the American ratings agencies. Had they actually understood what they were rating, none of this mess would have happened. Not even the housing bubble would have happened, because there would have been no investors lining up to hand out money to AAA rated deadbeats.
    24 Sep 2011, 09:05 PM Reply Like
  • Really the culprit was the securitization of mortgages, period.

     

    The idea of making home ownership available to more people is basically a conservative notion. Make people into home owners rather than renters and you give them a stake in the neighborhood and the community, plus a chance to build equity, and they are more likely to adopt more conservative values.

     

    This idea of a democracy of homeowners was the cornerstone of Mrs. Thatcher's policies in England in the 1980's and the Right To Buy policy made it possible for over a million people who rented social housing to become property owners. The key to the success of the program was that people were offered reasonable terms and a discount according to the length of their tenancy.

     

    Of course no program is completely without some kind of down side, but it worked reasonably well. Of course no one had the harebrained idea to bundle the mortgages and securitize them, so it didn't lead to a housing bubble.

     

    http://bit.ly/nH5UOB
    24 Sep 2011, 10:09 PM Reply Like
  • klarsolo: There is lots of blame to go around in the housing bust, but it did not cause the problem in Greece. Greece managed to create its mess on its own. Admittedly, we are doing our best to become Greece--for example if the current jobs bill actually works, it will manage to create 1.9 million jobs for $447 billion--or around $235,000 per job--but it will still take some more years before we are there.
    25 Sep 2011, 09:01 AM Reply Like
  • It's a bit like the mortgage thing in the US. Bankers sold lot of mortgages and got big bonuses and people took out mortgages, but then defaulted. (However I suspect that they defaulted because they were getting into negative equity rather than the other way around. Why would you default if the property was gaining in value? You would be throwing away money.)

     

    In the case of Greece, you have to ask of the bankers WHAT WERE THEY THINKING when they extended such vast lines of credit to Greece. Most likely they were thinking: "Wheeee! Look at my bonus for this loan to Greece. Way-hay! Another couple of years of this shit and I'm out of here."

     

    And what where the Greek politicians thinking? "Hey, this is easy money and the bankers keep on coming. I can buy another election. Way-hay! Another couple of years of this shit and I'm out of here."
    25 Sep 2011, 09:09 AM Reply Like
  • So now the Banks and EU are "Down the Road"

     

    Wonder is they are going to tee up another Can to kick.
    24 Sep 2011, 09:05 PM Reply Like
  • Stop injecting the markets with morphine and let them contract to where they can be self sustaining. We can't keep trying to sustain the unsustainable with hopium. A turd is a turd, just flush the toilette already.
    24 Sep 2011, 09:16 PM Reply Like
  • Uh, thats why they are talking about a 50% haircut for Greek. Also, do you think the execs at SocGen or other banks will last once shareholders are diluted to heck at low valuations?

     

    The bad actors will all be gone. This isn't morphine. Its resolving the problem.

     

    Our banking system is much better off from TARP. Ken Lewis is gone so is Countrywide and WaMu and a bunch of other bad actors. Bank of America is still around but that was a must, but shareholders aren't happy. The problem was resolved!
    25 Sep 2011, 12:41 AM Reply Like
  • I don't remember when the banks in US took a haircut on the bad debt. They were made whole. The debt is still out there on somebody's books and weighing down on the entire economy. We propped up the banks but the problem was never a banking problem; it was a debt problem and we have not dealt with it. Let's get European and cut all debts in the US by 50%. Let the Fed recapitalize the banks that will take the losses. What we need is to start over without debt. Propping up constantly the banks while leaving the debt out there hanging like a rock on the economy's neck does not solve the American problems, it solves the banks' problems only.
    25 Sep 2011, 07:42 AM Reply Like
  • Boom:

     

    It's not exactly as you portray.

     

    The Government did prop up the banks by buying preferred shares to raise their capital. Meanwhile, the banks have, in fact, been writing down and off debt, vast amounts, but there's still lots more. But, what has held up the show has been the arbitrary (one could say unlawful) convolution of contract law into what sounds "fair" by vote-seeking liberal politicians and sympathetic activist courts.

     

    When one borrows money with secured loans and cannot pay, one is stripped of one's collateral and often pays more in deficiency judgments. That's the harsh reality of debt. However, in the new through-the-looking-glass world, the lenders have been vilified, not the incapable and often dishonest borrowers, and every obstacle in the world has been thrown in their path to recover their secured collateral (i.e., foreclosure) and allow debts to be ameliorated, as far as possible, with the remainder being written off.

     

    The entire "cleansing" process you seek has been forestalled by pandering politicians with "programs" to help distressed borrowers. This has helped neither the economy nor the banks, which refuse to get aggressive about future expansion until they complete the accounting for the past.
    25 Sep 2011, 10:00 AM Reply Like
  • Right on, until this mess is cleaned up, no matter how painful, we cannot go forward. We are in Kondratif winter, and must deleverage. That is how capitalism works. Bad bets and investments must suffer the consequences, so that the people who have funds can invest them in growing enterprises. As of now, the people with the bad bets are being rewarded by politicians, and the people who worked hard and saved $$$ are being penalized, and made to pay the criminals, who should be in jail, not getting bonuses,and golden parachutes. In addition, I would confiscate all their earnings for the last 2 years. Or I to would go to jail for 2 years for fifty million $$$$$.
    Lastly, we cannot go forward until this administration is thrown out, as obama has no clue what to do.
    25 Sep 2011, 10:41 AM Reply Like
  • I know a couple who has been in their home without paying a monthly mortgage payment for almost two years now. They are in foreclosure, but the bank has decided to let them park in the REO until they can 'process' them whatever that means.

     

    Meanwhile, I have been consistent with my mortgage payments the entire time, thank God.

     

    However, there is a part of me that feels like I am being robbed and... I am.

     

    This is a transfer payment. My good mortgage is offsetting and paying for the free rent of others. This is obscene and perverse.
    25 Sep 2011, 01:00 PM Reply Like
  • No it is not, because you are building equity in a home and eventually you will own it free and clear. The interest rate you are paying is no higher because of their default, so how can you be losing out?

     

    Chances are the couple you know had negative equity in the home. I don't know what state you are in, but there is a chance that they could be sued for a deficit judgment if they both have good jobs and are just stashing the money they would have paid for a mortgage, or offshoring it. Even if there is no deficit judgment, fact is that the bank entered into a contract with the house used as security. "You make these payments, or we get the house." Now the bank does not like the deal it made so much. The bank should have, or perhaps it did, insist on mortgage insurance or a sufficiently large down payment to cover the possibility of default or depreciation of the secure asset.

     

    Banks are necessary, or useful, but they write all the language into these mortgage contracts and promissory notes and insist on all their rights according to the fine print, so there is no need to feel sorry for them. However it might be a good time to bring back mutual savings societies that issue mortgages to people who have shown a good record of saving before they apply for a loan.

     

    I am not a banker and it is not my job to teach bankers how to bank, but sheesh!

     

    In any case, your aquaintances will probably still be renting when you are living in your paid-for home.
    25 Sep 2011, 01:25 PM Reply Like
  • you are assuming stable or appreciating real estate prices,; a questionable assumption given lack of lending, declining incomes, lack of interest from gen x and gen y to enslave themselves to a pointless career, high taxes,possible loss of mortgage interest tax deduction, and a corrupt mortgage and banking industry.

     

    in many cases default is the smartest option, it made Trump a billionaire by keeping his winners and defaulting on his losing RE investments.
    25 Sep 2011, 01:30 PM Reply Like
  • WJ (and all USA taxpayers) are bailing out banks for their RE losses, so you are all losing as banks transfer their losses to taxpayers, evidenced by lack of actual lending at the "listed"rates.

     

    Quoted mortgage rates are basically a govt. sponsored false bid (quote stuffing). Where have I heard that before ?

     

    So you are indeed losing.
    25 Sep 2011, 01:34 PM Reply Like
  • It goes further than that--the federal government has a mortgage subisdisation program and is causing Freddie and Fannie to write down mortgages as well. Hence the bumper sticker: "Honk if I'm paying your mortgage."
    25 Sep 2011, 02:45 PM Reply Like
  • Greece's backup plan references a large wooden horse dropped off at the EFSF's door.
    24 Sep 2011, 09:28 PM Reply Like
  • So the answer is more bailouts and austerity, a 50% haircut, 2T in new euros, and Greece being locked into the currency union that's killing it... hmm, bullish for USD?
    24 Sep 2011, 09:30 PM Reply Like
  • Where is this money coming from?

     

    a printing press?

     

    its a joke

     

    sure the market will react to draw in peoples money but the reality is its ALL B S GARBAGE BUNK

     

    C R A P

     

    SOCIALISM DESTROYS AND ONLY THE WEAK AND THE GOVERNMENT AND GEORGE SOROS WANT THIS

     

    ANY ONE WHO WORKS NOT IN THE GOVERNMENT , THIS FAKE MONEY IS CRUSHING THEM

     

    THE POOR COULDNT CARE LESS AS THEY CONTINUE TO BOTH SOAK UP THE FREEBIES BUT YET STAY POOR

     

    EURO SHOULD CRASH!!!!!!!!!!!!!!!!!

     

    F THE SOCIALISTS
    24 Sep 2011, 11:12 PM Reply Like
  • Watch Fox News much?
    24 Sep 2011, 11:24 PM Reply Like
  • if done right, it will pull them back from the edge of the abyss..regardless, this will take years to turn around..
    25 Sep 2011, 12:02 AM Reply Like
  • last i checked the ecb doesnt have a printing press . the euro-bond was doa according to germany so where is this magical 2 trillion euros coming from ?

     

    sorry , no sale .
    25 Sep 2011, 12:48 AM Reply Like
  • I am quite amazed at times that the true problem of this situation gets mentioned by far too little. We are operating in a monetary system that is debt based, which means the government doesn't have a single dollar of its own, it has to borrow to have cash. When you have to borrow to have cash that means that whatever business you are in you have to make more money every year since there is a interest payment attached to every dollar. Remember it says "Federal Reserve Note" Not US government note on our money. We are stuck in a rats wheel. The economy grows when you have credit worthy participants "create money" by taking out loans BUT by taking out loans the interest payments on the overall debt rises which means that everybody who has taken a loan is forced to at least grow their business enough to pay back the principal AND the interest. That means the economy can only go one way and that is up. As soon as it stops going up the disasters kick in because debt can no longer be paid back.
    If we had US government dollars which are interest free and banks with 100% reserves than the economy could shrink in times as these and it wouldn't unleash a disaster of this scale.
    The Federal Reserve created the great depression of the 30's and it also created the depression we are facing now. If that is not easily visible because of the timeframe during which that has taken place than it should at least be very clear that the Federal Reserve created the housing bubble of the last decade.
    WHY ARE THOSE PEOPLE STILL IN CHARGE OF OUR MONEY??? Are we truly so dumb that we shut up everytime the disaster gets delayed even further?

     

    My only hope to all this is that the central banks are losing control over the situation, they are basically setting fire to the house on too large a scale. Once the most powerful nations of this planet are so in debt that even the printing presses won't print anymore and rating agencies will be in jail,then the pyramid scheme is up and the debt won't be nothing but a number, at which point some genius will eventually enter a big 0 into the accounts and erase the "debt". And hopefully that will be it. In that sense KEEP PRINTING, lets parteeee.
    25 Sep 2011, 12:48 AM Reply Like
  • IN MY 39 YEARS LIVING AND WORKING IN NEWYORK, I MUST SAY THAT I HAVE BEEN EXPECTING A MAJOR RECESSION TO HAPPEN .THIS IS JUST THE BEGINNING MY FRIENDS. I STRONGLY FEEL THAT THE TRUE UNEMPLOYMENT NUMBERS ARE MORE LIKE 16% .NOT 9.1% WE HELP SO MANY OTHER COUNTRIES THAT DON'T EVEN DESERVE ANY MONEY . NOW OUR PEOPLE HERE ARE POOR AND HUNGRY. WHERE IS OUR SUPPORT? YOU DONT SEE ANYBODY SENDING US A BIG FAT CHECK. OUR GOVERNMENT IS GETTING LARGER BY THE MINUTE AND "WE THE PEOPLE " HAVE DONE NOTHING ABOUT IT. HERE IS SOME ADVICE TO ALL,I WOULD STOCK AWAY LOTS OF SILVER NOW ESPECIALLY IT JUST PULLED BACK DOWN TO AROUND 31 DOLLARS PER OUNCE, ITS A GREAT PRICE. GOLD HAS ALSO PULLED BACK ABOUT 280 DOLLARS AN OUNCE WITHIN THE PAS FEW TRADING DAYS .I AM VERY BULLISH ON GOLD AS WELL AS SILVER. BUT BE CAREFUL IF YOU PAPER TRADE GOLD AND SILVER PUTS OR CALLS. THIS MARKET IS FAST AND FURIOUS.
    25 Sep 2011, 01:34 AM Reply Like
  • Why are you shouting?
    25 Sep 2011, 11:11 AM Reply Like
  • We have another decade of contraction -- and it will now gain steam since we have played all the games to extend it we know. We tried to treat this like a common recession -- but this is a Night-Cycle contraction/deflation, and it lasts 18 years. There is no way we can stall and wait for organic economic growth to pick up the slack and lead us back up.

     

    We have to destroy all the debt now. This is a Kondrateff Winter -- creative destruction means that we are going to default and go bankrupt. No preserving the old money that is desperate to keep things as they are.

     

    There will be civil wars, revolutions and wars. The turmoil has really just begun -- because we have been in the stage of denial now for about 10 years already.

     

    2019 we hit bottom. I've been writing about this and saying it for many years now.
    25 Sep 2011, 12:45 PM Reply Like
  • Joe, Typing in all CAPS is considered shouting in internet speak.

     

    It is also alot harder to read...
    25 Sep 2011, 05:37 PM Reply Like
  • Actually, this is the path of least resistance, with punishment for Greek debtors and creditors. The 50 percent haircut pushes them from the brink, but only cuts the debt to 60 to 80 percent of GDP, and if Greeks even sniff close to more fraud or go on spending sprees, market will be watching. Second the money is placed in hands of banks that need them, but I think problem banks will likely be folded. So, this is good for stabilization of the market and financial system.

     

    Where is the money going to come from? EuroTARP and equivalent printing of euros. What to me seems crazy is the size- 2 trillion euros- thats an insane amount and likely doubles or triples outstanding euros. I think this just adds to perception of fiat currencies.

     

    Short term winner - US dollar
    Long term winner - gold and commodities
    25 Sep 2011, 01:44 AM Reply Like
  • Where are they going to get the 2 trillion $$$$$$$$$, why not make it 10. Germany has already said no to a Euro bond, and more financing. I am fearful that we are on the hook, to bail them out. I PRAY, NOT,but where else are they getting the money from. They say, it is a back up in case they need it. Guess what! The market will test this assumption very soon.This is the start of the end, if it works, it kicks the problem down the road for a short period of time, if not all hell breaks lose
    25 Sep 2011, 10:53 AM Reply Like
  • Commodities are no good if we are heading in to the second leg of the Greatest Depression.

     

    Gold is the anti-currency -- so yes. But copper? Iron ore? If industry is going belly up? Even agricultural futures are going to continue being drubbed.
    25 Sep 2011, 01:34 PM Reply Like
  • The real problem is the (drug) addiction to debt and the miniscule interest rates that allow this to happen -- indeed, MAKE this happen -- and then the impossibility of raising rates, making higher rates a torpedo that will collapse the whole system.

     

    Money needs to be made more expensive.
    25 Sep 2011, 02:20 AM Reply Like
  • Raising interest rates would be insane at this point, the economy would collapse. Just stop the printing press and change our monetary system. Stabilize the banks by slowly switching from Federal Reserve Notes to 100% reserve US Government notes. Pay off government bond holders with US Government notes and tell the central banks that they are fired and the debt to them will be defaulted on. Its just a matter of time before that will happen anyways.
    25 Sep 2011, 03:13 AM Reply Like
  • The economy is going to collapse. Either get it over now with an honest understanding of what's wrong with our economy, or follow Japan into never-never land.

     

    We've been stalling. All our tactics are to stall until organic growth comes back to the economy. But organic growth cannot come back until we kill our debt, which is suffocating the garden, clogging our economy artieries.

     

    Raise rates and start the real creative destruction that we need to get back to sanity -- or pretend that lower interest rates -- the thing that has caused this crisis -- are magically going to heal us.

     

    There is no way back to the start again without the 'insane act' of debt destruction. People who argue that we can somehow get through this by doing the same thing that got us into this crisis -- lower and lower interest rates, encouraging people to take on MORE debt -- seem to be suggesting that obesity will be CURED by more calorie intake and less exercise. Now that, to me, is the INSANE act, and the INSANE understanding.

     

    The 'given' as I understand it is that the economy is going to collapse totally. We can do it now or do it later. The sooner we do it, the sooner we get to start rebuilding.

     

    (The illusion that we don't need higher interest rates stems from the lies of the CPI and inflation calculation. Once CPI formulae begins to consider asset inflation (stocks, commodities, housing, real estate AND, most importantly, DEBT -- which IS income --) as income then our inflation numbers show very clearly that we are drowning in worthless money. The only way out of such a flood of worthless money is to raise interest rates -- dry out the earth -- evaporate the worthless money, the floodwater.)
    25 Sep 2011, 01:11 PM Reply Like
  • Wow. MC, we agree.

     

    How... strange.
    25 Sep 2011, 01:21 PM Reply Like
  • Wyatt, what happened! We better check the water!
    26 Sep 2011, 09:14 AM Reply Like
  • The problem is brutal and simple. We kept our living standards high through debt. Now, no one has the cash flow or the assets to pay back the sovereign, bank and individual debts of Europe, the US and Japan. Our living standards will plummet. Moving the debt from individuals to banks to governments, or from small governments to large ones, does not create the cash flow or assets to pay those debts. It simply changes the timing and location of the defaults. What we can not change are the simple laws of accounting.

     

    Governments can recapitalize banks only if the governments have the assets and cash flow to do so. Otherwise, they ultimately increase their own debts, and in effect, have moved bad bank debt on to their own bond books.

     

    Time for honesty—the debts can not be paid. Time for courage. A few years of very, very rough times and we could get us back to prosperity. However, we need to stop fooling ourselves, and stop expecting broke governments to save the economy with more debt. I also believe that our governments should use what little money and goodwill they have left to provide minimum food and shelter and thereby prevent starvation and unrest. Otherwise, they should do nothing, and especially get out of the way of business formation.

     

    Thank you. Bill
    25 Sep 2011, 05:19 AM Reply Like
  • William,

     

    More or less the true state of affairs. Would agree with the "few rough years solution" but it just may not happen for lots of reasons such as the governments don't want it to happen (they will get tossed out) and governments and vested interests worldwide don't want to change that which benefits themselves.

     

    But you also need to consider that sovereign and even corporate debts don't truly need to be totally repaid and usually never will be. They simply have to be able to service the debt without undue strain to make the payments. The same is true or individuals making mortgage payments. Eventually the mortgage gets repaid, but the real issue is being able to make the mortgage payments. It is also true that the most astute borrowers don't over borrow or over mortgage and can meet the debt service payments easily.

     

    The real solutions are major structural changes such as healthcare reform, energy reform, military reform, tax reform, political reform, etc. But again the politicians and vested interests don't want that. They are the beneficiaries of the current dysfunctional system. And those getting the benefits never want to change, they want to increase their benefits.
    25 Sep 2011, 06:11 AM Reply Like
  • Okay, I give up. WTF is "energy reform"?
    25 Sep 2011, 09:56 AM Reply Like
  • It's the difference between ploughing fields with a horse drawn till and doing it more efficiently over larger acreages with a tractor, resulting in higher productivity at lower costs....

     

    Replacing inefficient energy with more efficient energy...
    25 Sep 2011, 11:50 AM Reply Like
  • Where is anyone using horsedrawn plows or horsedrawn anything?

     

    Still baffled what "energy reform" means in the modern context -- unless it's a hysterical communist campaign to rig the market, seize assets and put drillers and refiners out of business?
    25 Sep 2011, 12:31 PM Reply Like
  • "Where is anyone using horsedrawn plows or horsedrawn anything?"

     

    China, actually.

     

    In the modern context its the difference between your 5 year old computer sucking down 750watts and your late model computer using less than 100.

     

    And by the way the US exported $250,000,000,000 for energy last year, or about half the total trade deficit.

     

    Yeah its a lot of zeros.
    25 Sep 2011, 08:59 PM Reply Like
  • As always the problem is in the details and any changes to the ESEF must be approved by all member parliaments.
    25 Sep 2011, 09:35 AM Reply Like
  • The Euro is a poor construct................ to fail. Even if all this passes the populace will revolt
    25 Sep 2011, 10:55 AM Reply Like
  • The DAX finished 5% of it's lows on Friday. Smart money right there ... or is it ?
    25 Sep 2011, 09:44 AM Reply Like
  • At first sight I thought this move could be a deal breaker and help BUT after thinking a bit still not 1 or 2 trillion Euro , still is not enough!
    First , what that trillions mean? This is the continuation of the preparation for the defaults! BUT Euro now has decided to draw off the defense line to just defend Italy and Spain. It has been already decided that Greece, Portugal and Ireland should be spent money to save Euro zone! So They are already dead meat for the Euro leaders.
    Ok, let assume the defense line stands to defend Italy and Spain. How much debt does Italy has? The government debt is %109 of Italy's GDP , which is 2.2 Trillion USD.BUT there is private sector , house hold ...total debt is %336 of GDP. SO if you want to save Euro , you should spend much much more! And Germany , if really wants to save the Eurozone will be funding this, there is no any other option! And they should spend real good amount of money. This is clear as black and white , there is no grey for that!
    I am not mentioning the money for Spain, or restructuring of banks.
    Merkel, should decide now, they will save the Euro or they will save their asses! Hard choice but I sense they are not under real market pressure to accept to save the Euro!
    25 Sep 2011, 09:48 AM Reply Like
  • I think the smart money knew something was going on. I noticed on Friday frantic selling of inverse ETFs on high volume in the last 10 minutes of trading and buying of pro-ETFs.
    25 Sep 2011, 10:43 AM Reply Like
  • I think we are in on this deal as well.How else could they even imagine getting these funds, when they have trouble getting 10 billion $$$$$ from Germany. I would like to hear unequivocally that we have no hand in this deal
    25 Sep 2011, 11:00 AM Reply Like
  • Markets will be manipulated to ensure high fees and bonuses as usual at quarter end.

     

    cover shorts, use the rally to offload cyclicals and go short around S&P 1200/1250, R2K 700, Dax 5800.
    25 Sep 2011, 11:17 AM Reply Like
  • How can a bunch of these bureaucrats save the world?

     

    First of all, they are part of the ones the created this mess, and second, they are the cream of the bureaucrats who are able to worm up there on top of other bureaucrats.

     

    Talk about survival for the fittest and evolution.
    25 Sep 2011, 12:27 PM Reply Like
  • i still have not read where the 2 trillion euros are coming from ......they dont have a printing press like big ben .

     

    sorry but this story is a bs bluff . no sale .

     

    the euro-bond is DOA .....germans will never approve. so where does the 2 trillions come from ?
    25 Sep 2011, 12:41 PM Reply Like
  • I think the 2 Trillions will come from....America?

     

    Let's audit the Fed books and see how much American money has already been sunk in to the great EU experiment.
    25 Sep 2011, 01:17 PM Reply Like
  • obama sent millions to the swiss a month back or so and ANY TIME YOU HEAR THE IMF, THATS AMERICAN TAX MONEY
    26 Sep 2011, 09:29 PM Reply Like
  • Get of those pills please.
    26 Sep 2011, 10:18 PM Reply Like
  • It's not pills ... it's crack cocaine, meth, and pure heroine all together in a toxic mix. Very little brain power left there now and ebbing fast. Soon to be committed and of course paid for by taxpayers.
    26 Sep 2011, 10:23 PM Reply Like
  • My guess is that they are tired of having their butts kicked by the market and have finally decided to really do something!!!!!!! It is about time!!!!!!!! :-)
    25 Sep 2011, 01:17 PM Reply Like
  • They can't DO anything. This is a big bluff -- they are trying to buy time.
    25 Sep 2011, 01:32 PM Reply Like
  • The banks HAVE to take the hair-cut. That's how they learn not to give their money away, on bad loan prospects. If the government is going to bail them out -- and they understand this -- then what keeps them honest?
    25 Sep 2011, 01:30 PM Reply Like
  • From what I've read, the European banks sold most of their Greek debt long ago. So who owns it? No one really knows, but the ECB almost certainly has a large slug of it. If the Greeks actually make the next interest payments, my guess will be that accounts linked to Greeks with ruling party connections will prove to be holding a lot of it.

     

    This is one of those situations in which it is almost impossible to be too cynical.
    25 Sep 2011, 02:52 PM Reply Like
  • Leveraging of EFSF looks almost impossible after the statement by S&P: Larger Europe Bailout Fund Could Weigh on Ratings: S&P
    http://bit.ly/qMejKx

     

    Expecting big selloff and capitulation tomorrow.
    25 Sep 2011, 06:18 PM Reply Like
  • other way around mate; EFSF bailout means France avoids the well forecast downgrade.

     

    Futures looking up at 02:00 CET
    25 Sep 2011, 07:04 PM Reply Like
  • Too early for the futures to tell, just remember Friday.
    25 Sep 2011, 07:11 PM Reply Like
  • A bailout (EU TARP) means a tax for somebody that generally filters to the entire populace. It will be disguised, but ultimately it will diminish the capacity to consume at some point in the future. It would make sense then that a relief rally might set in, but as people have less capacity to consume, reality will kick in, and at some point earnings will be hurt. Therefore, a pull back down the road, say maybe six months down the road?
    25 Sep 2011, 08:01 PM Reply Like
  • Agree. France is the next weak link in the Euro zone.
    25 Sep 2011, 08:26 PM Reply Like
  • Yes, pullback, but there will be sharp rallies, which are characteristic for the bear market, which is like a rubber band. If a double dip has already started, then we hit 7000 on the Dow relatively soon, and retest March 2009 lows.
    26 Sep 2011, 01:23 AM Reply Like
  • BB and ECB actions of late seem to suggest a classic bank receivership situation. You set up the liquidity vehicles via monetary policy (dollar swap, pledge lines, etc), then you move in for the recap via fiscal policy (TARP). This part is the tricky part. With small banks you can get a capital injection from the tax payer via the FDIC in the form of a loss share. Still this can take a quarter more than anticipated because in bad situations the buyer wants alot and the FDIC of course doesn't want to pay alot, so there is alot of wrangling.

     

    In the case of the European banks, their size probably precludes a buyer in the form of another bank, thus you need a capital injection directly from the taxpayers - all of them. Thus the taxpayer becomes the capital injection mechanism, but the politicians need a mechanism to tax them so that the tax is not obvious. The signs seemed to be pointing to the upcoming quarter, but politics in Europe could string it out into next year.
    26 Sep 2011, 08:33 AM Reply Like
  • 6 weeks, more like. Once EUR/USD hits 1.4, S&P 1200/1250 you can start shorting S&P, DAX, R2K, EUR/USD with confidence.
    25 Sep 2011, 08:23 PM Reply Like
  • Depends on when that is. Don't forget earnings are coming and maybe stocks will behave more company value oriented. At least I hope the insanity stops at some point. If it is end of this week, you are right. If it is end of next week I would be careful.
    25 Sep 2011, 08:26 PM Reply Like
  • Works both ways. The double dip which has already started will show up in corporate outlooks. Even LULU was slightly bearish last earnings.
    25 Sep 2011, 08:31 PM Reply Like
  • Naw, we have already built in 20% decrease in earnings really at current stock price - too much. But we will see, both opinions have some justification I think and future will tell.

     

    Maven, what is your take on the oil service slump last week? 20-30% down, will it go further down or not?
    25 Sep 2011, 08:36 PM Reply Like
  • possible that oil trades down to $70. bullish though on SDRL, high dividend, strong order book in Asia. DO is also cheap, esp. if O-bumma gets kicked out of office and you Amis can start drilling in the Gulf again. Large short interest in DO, could be a short squeeze in the making.

     

    SLB is a good play, but -5%/-10% also possible. I'm most bullish on offshore drillers DO ESV MMR OII SDRL excluding RIG (overowned).
    25 Sep 2011, 08:44 PM Reply Like
  • No business that wants to make money and STAY IN BUSINESS WOULD LEND OUT TO THOSE WHO WERE NOT CREDIT WORTHY

     

    BUT WHEN THE GOVERNMENT SAYS TO DO SO YOU DO SO

     

    SAME WAY BUSINESS WILL HIRE PEOPLE NOT QUALIFIED BUT THE EOE/GOVERNMENT SAYS YOU MUST

     

    QUOTAS/ AFFIRMATIVE ACTION ETC

     

    CANT BELIEVE SOME OF YOU THINK YOU CAN GET AWAY WITH STATING WHAT YOU ARE STATING

     

    GLAD TO HAVE SET THE RECORD STRAIGHT
    25 Sep 2011, 09:24 PM Reply Like
  • Actually, business had a super-fix. The Wall Street geniuses had come up with a plan to neutralize bad debt by bundling it with good debt. Remember those mortgage bonds. It was going to make everyone rich and everyone happy.

     

    Business doesn't do what government says UNLESS it's going to make the superrich.

     

    You're ideology is a bit warped, Worriedwart. And please don't shout or everyone will start shouting back. Then we'll all begin to sound and look like Cramer and his idiotic friends on CNBC.

     

    Blow hard, Captain Ahab. The albatross was a liberal trick. And the great white whale is coming in to view.
    27 Sep 2011, 12:53 PM Reply Like
  • you wrote:

     

    Business doesn't do what government says UNLESS it's going to make the superrich.

     

    now look who for sure is "warped"

     

    gov has the guns and makes the laws

     

    business will do whatever they are told
    super rich or not
    27 Sep 2011, 05:47 PM Reply Like
  • Almost every war we have fought in this country has been fought for American business interests. Who runs the American government?

     

    Don't be naive, Worriedwart. Capitalism is the religion; and the US Army is the police force of Capitalism.
    27 Sep 2011, 11:09 PM Reply Like
  • 100% agree!
    27 Sep 2011, 11:11 PM Reply Like
  • CRA OR NO CRA people who want to do wrong will do wrong ( LIKE BAD UNDERWRITERS)

     

    THE DIFFERENCE IS:

     

    WHEN THE GOVERNMENT BECOMES PART OF THE BUSINESS ( AS IN THE CRA) THEY CAN NO LONGER PERFORM THEIR MANDATED FUNCTION TO SERVE as the 3rd party, to judge, since they now have a conflict of interest

     

    So it becomes good cop bad cop time

     

    with the banks as the suspect

     

    But we did what you asked in 1978-2000, cries the banker

     

    Well were cleaning that mess up right now, says the Obamabot

     

    But but but.... I dont want to go to jail

     

    Dont worry you wont have to we have some more regulations ( frank-dodd) that will keep the street people riled up but knowing we're comng down on you, says the Obamabot czar

     

    Oh, btw, did you get us our campaign $$$ yet?

     

    Of course says the banker, as he sulks out of his office

     

    and on it goes

     

    UNLESS WE GET FISCAL CONSERVATIVES IN POWER AND NOW
    26 Sep 2011, 09:26 PM Reply Like
  • the law by Sen. Dick Durbin (D-Ill.) will be allowed to stay in place, resulting in price controls on debit transactions. The Durbin amendment is already causing free checking to disappear and banks to add consumer fees for debit cards, and when it goes final it could devastate small banks and credit unions.
    Democrats who believe in big government arbitrarily re

     

    Read more: http://fxn.ws/rjaFIc
    26 Sep 2011, 10:01 PM Reply Like
  • Its all about trade-offs

     

    When obama and crew stopped banks etc from diversifying into other endevours and those banks lost that income, including the fees etc they have to have a way to get margins back because layoffs make the same politicians look bad

     

    so the idea is eventually the little guys will stop investing on his own and have to turn it all back over to the ( few) brokerage houses

     

    notice what they did to daytraders a few years back, "FOR THEIR OWN PROTECTION"

     

    if you violated the new "pattern rules" YOU COULD ONLY DAYTRADE IF YOU KEPT 25K IN THE ACCOUNT

     

    So now the little guy who maybe only has 10k but might have done good will never get that chance

     

    Thats ok if you're in the USSR but the USA was all about risk/reward and yes speculation

     

    If it were up to those do gooder leftists ( and yes that does include many rinos) THE GOLD RUSH OF THE 1800 WOULD HAVE NEVER OCCURED

     

    "TOO RISKY"

     

    this country wouldnt have been founded ( obamabots applaud)

     

    "TOO RISKY"

     

    Nanny states are for losers
    26 Sep 2011, 09:36 PM Reply Like
  • whoa!!
    talk about timing

     

    The FEDS ARE BANNING INHALERS

     

    THATS RIGHT INHALERS

     

    HERE IS THE TRADE-OFF I SPOKE OF:

     

    SINCE THE OBAMABOTS HAVE HURT doctors with the whole get less see more people under COMMIE OBAMACARE THE FDA/OBAMA THROWS THIS BONE TO THE DOCTORS:

     

    In lieu of Primatene Mist, the FDA has suggested users of the product get a prescription for sanctioned inhalers, such as those that use an "environmentally friendly" propellant known as HFA.
    But Abramson said thousands of people swear by the Primatene Mist inhalers, and he described the HFA-based inhalers as inferior.
    "They should have the right to have it, and now they don't," he said.

     

    Read more: http://fxn.ws/qdKD9q
    26 Sep 2011, 09:44 PM Reply Like
  • And the end goal is even more extreme. Robert McChesney, founder of Free Press, a group with deep ties to the Obama administration, the FCC, and the FTC has let slip where the plan leads:
    “At the moment, the battle over network neutrality is not to completely eliminate the telephone and cable companies. We are not at that point yet. But the ultimate goal is to get rid of the media capitalists in the phone and cable companies and to divest them from control

     

    Read more: http://fxn.ws/qFlFDE
    26 Sep 2011, 09:58 PM Reply Like
  • That's a great article sir, we love to read it, very informative although, and we hope you'll share more posts in future too. And thank you a lot for sharing your thoughts with us.

     

    Carpet Cleaning Miami Florida
    16 Dec 2011, 06:16 PM Reply Like
DJIA (DIA) S&P 500 (SPY)