levin70

The Nationalization Debate: Confused by Surowiecki

To the OP

From what I remember reading of the footnotes, the definition of "risked based assetsl" in the FED stress tests was to exclude cash, soverign debt assets (us treasury securities and repos) and agency MBS's (since those now are in receivership, I assume the FED thinks that they are essentially the same as us treasury securities) as those are considered by the FED as "riskless"

Regards

Are CDS a Good Thing?

Definately one of the best discourses i have seen on SA in a long time. Definately applaud those above me for the discourse.

currently CDS are treated by market particpants more as financial instruments. The pricing of CDS contracts tells a lot, and has been mentioned by the OP as having maintained their liquidity well during even the darkest hours of these crises. Moving to an insurance model would kill this liquidty and the flow of information from the market would end. However, the questions of empty creditor and default manipulation would hopefully end. Question - where is the happy place between the sides?

Regards

GM's Tough Treatment Should Be a Model for Other Bailouts

Rick

Let me first preface this by saying that I actually think having the FDIC take over the banks and having the holding co's go into bk, but realize that at a policy level that might not be "financially correct" let alone "politically correct". My comments below discuss as such

One of the reasons why this hasn't happened is because of the fact that the banks have the cash to repay TARP. Would it be economically sound, no, but they could, and as a choice between being booted with no severance and paying back the TARP and being able to pay market salaries, they will chose paying back the TARP. There is no downside as worse case, would result in having to have the FDIC call the banks insolvent and the holding co's would go bk. The difference being is that a bk judge sets compensation for management, including offering very nice retention bonuses. Remember, the FED and treasury have said they want oversight and the ability wind down holding co's, but they don't have it yet. That means a nasty BK for the holding co level, which would trigger a lot of angst in the markets right now a la lehman bros.

I think the Treasury guys have already explained that they cannot play chicken yet with the banks as the banks management would actually receive higher compensation under bk then they would under TARP and that would be bad, very bad. Law of unintended consequences you know

Kind Regards

Why Capping Pay Is Likely to Work

Felix

I agree with you on the $500,000 is a lot of money. I disagree with you about the consequences.

I think most people tend to get worried about when congress says that "plan A" will only be "temporary". I think the real fear is that congress opens the floodgates to lasting wage controls. Maybe im just a little paranoid, but I have a lot of history on my side.

Regards

Paulson and Bernanke: A Conspiracy of Dunces

Michael. If you really think you can do better, please put your hat into the ring when the next administration comes looking for its next fed chairman. Lets see how well you do on the hotseat

Why Bail Out AIG's Bondholders?

felix, what is it about being the senior secured lender don't you understand? From the text of the fed announcement, the gov't is receiving a senior secured pledge of all the parent assets and the stock in the underlying insurance subs. The loan gets repaid first over the next 24 months and the bondholders will get what's left after that. Not only that but the gov't is getting libor plus 850 - not too shabby

Regards