Assetmgrsc

Nationalizing the U.S. Banking Sector: There's No Choice

Young Mr. Kellogg seems to simply be repeating what many of his more famous colleagues are saying. I think that the "talking heads" are just tired of talking about the same issues month after month and gravitate to this solution as an easy way out. If we were to follow this foolish advise then we would be committed to a posture of having our entire economic pie shrink with almost everyone being poorer as a result.
Remember when Merrill Lynch sold 13 Billion dollars of assets for twenty-two cents on the dollar and forced banks like Wachovia into virtual bankruptcy because their auditors forced them into the same mark down. Does any serious person believe that once admittedly overpriced houses are only worth 22% of what they once sold for? Is this what we want for our entire banking industry, so that a few eager vulture companies can make a "killing" buying distressed properties.
What the government should do is set a minimum floor of about 50% of original value and take them off the hands of any holder willing to sell at that price. Part of this process could give the banks a 50/50 stake in any future profits from the eventual sale of these houses, while at the same time forcing them to take on a 50/50 interest in any future losses. Once this was done, the vulture firms would know that the properties were in "strong hands" that did not have to sell and suddenly, I predict, they would be worth much more than 22% of original value. The banks would then have stronger balance sheets, with fresh capital to loan in order to help economic activity, instead of sitting on their hands, afraid to lend in order to protect their weakened capital structure.
So, if all this is true why doesn't the government adopt this policy and free up the system; because they are afraid of "Moral Hazard." What the heck does that mean, you ask? Well, it means that somehow government types do not want to benefit common share holders, even if it provides the most help for everyone. Somehow common shareholders are not "Taxpayers" that many are saying need to be protected, when in reality most of those "Taxpayers" don't pay nearly as much taxes as shareholders do.

AIG: How It Spent Your Tax Money

I am in sympathy with most of what you are saying, but the real crime is that what these guys did was legal. It is up to government to define legality. Therefore, it is the government that is most at fault for the excesses in this mess. What we all need to do is write our Congressmen and Senators and tell them that in the future, such actions ought to be illegal. The guys who did this do not want to break the law, they just want it written to suit them. When it constrains them, they will obey and look for another way to make money.

Government Statistics: Perfecting the Art of Mass Deception

I think that Mr. Blackman writes on an important subject and he is basically correct. What he doesn't touch on is the powerful reason why all the "people in the know" look the other way: which is that Congress passed unsupportable automatic increases in SS keyed to inflation. They knew that these increases were busting the budget after a couple of decades, but they did not have the courage to reduce the automatic pay raises that millions of SS retirees and the AARP would fight to defend. Millions more also key their requests to the same inflation numbers, so they took the easy way out. They changed the way inflation is calculated and eased the growth of SS and the pressure for wage increases to keep up -- all in one fell swoop, without any debate or any Congressmen loosing their jobs. As bad as Congress has been on this issue, it points out how spoiled and undisciplined the American voter is.

Fannie Mae - Or May Not

The writer of this article appears to be writing in a vacuum, as if FNM wasn't a creation of the government. They are obeying government wishes to help stabilize the housing market and they will not be allowed to fail.

China: What a Real Bear Market Looks Like

Articles like this can be useful to alert investors of possible problems, but they completely miss the mark for good journalism in that they do not even consider the justification for a markets rise. Question: have Chinese companies earnings increased 15% to 25% a year for the last six years? Does this earning increse justify higher stock prices; if so, how much? I don't know the answers to all of these questions, but before I write an article, presumably for pay, I would make some attempt to at least address the valuation question before just blasting away.

How Much Are Goldman's Level 3 Assets Worth?

Bombbastic BS seems to be the end thing among "would be Crammers" to day and this author is no exception. Kramer says that Sach's level III assests are "worthless", but clearly they are worth something. How much -- 60%, 75%, 90%. No one knows, he is right about that, but 75% is far from worthless. Another thing: is the Fed swapping them for the GS assigned value or some discount? If Kramer knows, then he doesn't make this clear in his article. Last, but not least, most of these assests are dixcounted right now. Someone might only pay 75% of face value for them now! But the Fed does not have to sell them now! Two, three or fout years from now, do you doubt that realestate will be more expensive than it is today.