madasiwannabe

GM, AIG, Fannie and Freddie: Bailouts in Common?

thedozer,
There was a piece of pork in last years federal budget that allotted 50 Billion to the automotive manufacturers so they could do R&D on alternate fueled vehicles. Funny part is they have dozens of models already being sold around the world that are not currently available in the US.

The money was not suppose to be given till next year but the lobbiests convinced the government to give them the money early. By the way, it's not a loan... it's a grant funded by our tax dollars.

It's All About Guaranteeing Counter-Party Risk [Housing Tracker]

The GSE's were better capitalized before conservatorship then they are now. The takeover was just a knee jerk move to treat the symptoms. The cure ended up being worse than the problem.

Buying troubled assets is another treatment for a symptom. The banks got themselves in trouble, and should be allowed to get themselves out. Buying equity stakes in the companies is a much better solution for the markets as well as the taxpayers. It doens't relieve the banks from their responsibility, but it does give them the capital they need to work through the issues, and in the end, the taxpayers will be rewarded.

Since the government takeover had nothing to do with insolvency, and had everything to do with restoring market confidence at the expense of the GSE's, the terms of the intervention are completely out of line with today's market reality. Only question now is will the treasury level the playing field by cancelling the warrants and instead take equity stakes in the GSE's equivelent to the capital they have injected?

Paulson in a State of Panic

AMEN!!! Conservatorship doesn't give Paulson the right to wipe out the GSE's to save the other mortgage holders. The laws are very specific about the charter of a conservator, and unless there's more to the purchases that secures the current company value, this goes against that charter.

We all know the takeover had nothing to do with the solvency of the GSE's. If it did, why haven't they used any of the 200 Billion to stabilize the GSE's. Paulson knew all along that at some point he would use the GSE's to buy up toxic assets to clean the books of his buddies. I find it interesting that every time Goldman Sachs or Morgan Stanley stocks take a dive, Paulson comes up with another plan. Time to get the FBI and supreme court involved to stop this madness.

What Happened to the Fed's $1.816 Trillion Lifeline?

The damage was already done to both of these guys months ago. The shorts were already bought into both WB and WM long before the ban. What finally brought them down was long selling due to lack of confidence and fear.

It wasn't a secret that both of these guys were bloated with loan portfolio's in the two hardest hit areas, Florida and California. Once WM fell, it was only a matter of time before WB followed.

FBI Investigates Victims of the Financial Fallout

apppro is correct about Pershing, but they were not alone. When the backstop was announced, the risk went to zero and rewards through the roof for another group; bond and securities brokers like PIMCO. Drive down credibility, drive down ratings, drive up returns. Pure Ponzi; get the markets addicted to credit and then milk them for all the interest they can get. Gross and Ackman announced they made $10 Billion when Paulson stepped in. The biggest one day profit for both companies.

The common thread is Greenspan. He created the mess through policy and then gets a job as a consultant with both Pershing and PIMCO. PIMCO sponsors CNBC programming and for their investment, they get all the airtime they want. Sounds like the perfect place for the FBI to start looking.

PIMCO is drooling right now because they know the bailout will adversly effect the government's ability to attract additional investors (someone has to buy the bonds to pay for the plan). That means even more money. Seen this coming from miles away.

FBI Investigates Victims of the Financial Fallout

The whole GSE takeover was a smoke screen to divert attention away from the other 50% of the mortgage market. The reason the banks are holding to maturity is because they couldn't get them past Fannie and Freddie screeners. That's why their default rates are 1/5th of the industry average. The whole MBS market is exactly what took down the S&L's. We learned nothing.

I'm sure the originators wrote BS contracts so they could get their commissions, but the banks are not totally victims either. They never took the time to look at the loans or provide any oversight to the LLC trusts that sprang up to get into the cash stream. Many of these guys are now gone and we the taxpayers are getting stiffed with the bill.

Too Big to Fail, or Too Metastatized?

GM painted themselves into a corner. They produced an inferior product for many years and failed to remain competitive. They were virtually shut out of the daily driver market and were more than content to rely on the truck and gas hog SUV market. Better option would have been listening to the market and learning from their competitors. GM also makes a slew of hybrid/electric/hydrog... vehicles that are not available in the US. Now they want the taxpayers to give them 25 Billion for research? Give me a break.

GM came up with creative incentive and financing programs over the years to get people behind the wheel. These same programs destroyed resale value, further chasing away the market. Now it has come to the point where they can't sell a vehicle without slashing the price. Not a liquidity issues; it's a stupidity issue.

The market is not crule, it's darwinian. If you fail to evolve or forget why your in business, prepare to become extinct.

Paulson/Bernanke: $700 Billion at 'Hold to Maturity' Pricing

Your not factoring in the quality of the mortgages the banks will be selling. Everyone knows they will do what they can to dump the trash and hang on to the performing loans.

Also not factoring in the Fannie, Freddie, FHA mortgage dump that's going to happen in conjuction with the buyouts. FHA has been refinanciing trash loans at a fevorish pace. New rules.... No minimum FICO, 3% down, OK if your behind on your current loan. All they are doing is cleaning up the banks books while kicking the forclosures down the road a few months.

Hank and Ben made it pretty clear, they want to pay near full face value for what they buy with no stipulations on the banks. There's no money to be made on this deal.

The Greatest Short Sale in History

All consiquences of the short sighted plans of Hank and Ben over the last 6 months. Backstop plan did nothing for market confidence and only set our course for where we are today.

The takeover of the GSE's will also cost the taxpayers Trillions as we move forward. The two lost 36 Billion in shareholder value alone for Hanks efforts. That's 11 Billion more than he told congress it would cost to fix them and they haven't even started.

Letting LEH fail and backstopping AIG really did a number on market confidence. Putting an 80% warrant on AIG's shareholders as well as payday loan rates on the short term loan also did nothing to calm investors.

Now Hank and Ben are proposing the ultimate plan, mortgages and credit swaps at a reverse auction garage sale. Guess which part of the portfolio will be offered up by the banks? What they can't buy they will stuff into Fannie, Freddie and FHA for full face value, just so they can clear the books of their banking buddies before they return to Wall St in February.

To add insult to injury, they want absolute power to do whatever they want without possibility of intervention or question from the American people. Something like Ceasar, Napoleon and Hitler did. This is what should be referred to as Moral Hazard and without question considered constitutionally illegal.

Causes and Opportunity Cost on the Ongoing Crisis

It's about time someone pointed out there were always limits on what the Financials can get away with and for some reason the limits were changed on Greenspan's watch. I've been hoping someone would put together Greenspan's relationship with PIMCO and Pershing Square... The two companies that racked up $10 billion when Hank took over Fannie and Freddie. All that bashing by the former Fed Chair really paid off big.

A few months ago I predicted that Hank would take over the GSE's and once in his control, he would use them to clean up the books of his friends before he left office. Last week Paulson mentioned using the GSE's as a clearing house for purchasing toxic mortgages. Is this really a plan to save the economy?

Feddie Pay: The Reality of the Bailout World

It was on Greenspans watch that all the bad decisions were made. You mentioned increased ratios, but no one is talking about the Fed lowering capital requirements for the banks and OFEHO lowering capital requirements and increasing portfolio limits for the GSE's. All of this just to make sure there was enough liquidity in the market to keep the housing boom rolling.

Greenspan should go to jail, not just for his role in setting up our current crisis while at the Fed, but his role in toppling the market while on the payroll of the two guys that made the most from it, Bill Gross and Bill Ackman.