madasiwannabe

Are Big Banks Too Big to Fail?

Fannie and Freddie were well regulated... The regulators were right there to ensure they had enough liquidity to take on mortgages as the bubble grew. When they ran low, the regulators reduced their capital requirements. When the banks were taking on too much risk with Sub-primes, the regulators had the GSE's drop their bar and take some of that paper off their books. When things went south, they were right there to place the blame. Now the same regulators that are legally responsible to protect the companies assets and return them to profitibility want to use them as toxic waste dumps to clean up the balance sheets of greedy banks.

We need more of these guys around to make sure things go hopelessly wrong next time.

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.

ARS Buybacks: Wachovia Follows the Herd

If the GSE's are sneezing, the banks have pneumonia. Billions worth of ARS buybacks added to the loss column of their balance sheets can't be a good thing. Many are already struggling with subprime bloated portfolio's and because the property values have fallen against an originated 125% LTV combined mortgage, the housing bill is not going to help. Rolling deliquency filings from 3 months to 12 only prolongs the inevitable.

Soon to add to the problem is the news that most are looking at the house of creditcards coming down. If I was going to pick a winning horse in the financials I would go with Freddie and Fannie. They seem like they are high risk, but truth is, if they collapse, a black hole will form and suck the rest down anyways.