User 250718

Bill Ackman's Letter to Paulson On Restructuring Plan

Reported "rescue" plan from WSJ is the most, most stupid options for the policy makers to choose.
1. Regional banks' assets would be wiped out or devalued. And more trouble coming at a later time from these banks.
2. In the long run, when mortgages are all backed up by the government, the market mechanism doesn't work in the real estate market. Simply the market fails because of intervention.
3. More importantly, if gov't can take out private ownership to suit its political needs, it is a disaster for the stock market, real estate market as a whole.
In the short term,
4, I don't think China or Japan or any other foreign governments would be pleased by the reported plan. IF the US GOVERNMENT can take out private assets from their own PEOPLE, these foreign governments have trouble to believe the US won't do the same to them.
5. Wall Street won't be pleased by the plan(except maybe JPM), a huge sell-out would be on the way because the very

FUNDAMENTAL of a FREE-ENTERPRISE system

will be seriously damaged by the plan(if it is exactly what was reported by 09/05/08's WSJ).

And the world won't be pleased by the reported plan. Given the market's current technical indicators plus a "rescue" plan like this, it wouldn't be difficult to see DOW down 1000+ points in a few weeks.

And if the reported plan is executed, anyone won't be surprised that the world's financial center would be moved far away from the US in a few years time.

Bond Expert: Monday Wrap

An easy way out of the current mess

1.Fed call all of the hundreds of banks on FDIC's watching list
(should 90% of them be taken control by FDIC under normal
circumstance?), and lend these banks money in discount rates.

2.These banks buy FRE, FNM common and preferred stocks. FRE,FNM
would easily go back to $30 level. Banks now with paper gains to
offset their mortgage loses can go and raise capitals again.

3. FRE,FNM are saved. 80% of the banks on the watch list before
now have sufficient capitals to operate. Fed and Department of
finances merge FRE,FNM(maybe market evalute them around $50 each)
and do whatever they suppose to do a year later.


Both the financial world and the western civilization are saved. And
this is the cheapest rescue plan for tax payers.