tragicomix

The Bailout Plan: Did Bernanke Panic?

The Nov 10, Wall Street Journal story struck me as an attempt to dump all of the responsibility on Paulson. He has plenty to answer for, but others must also share in the blame -- if that is the agenda. Which includes Bernanke and Geithner and others including the decider-in-chief and Greenspan and ... the list is a long one.

The Really Scary Thing is the Debt Itself

Great. This passes off as economic analysis according to Mr. Hansen. The only thing it tells us that things have come to such a sorry, sorry pass that I am wasting time reading stuff such as this. Wasn't there a time that seekingalpha had some decent posts?

100% Yields on Ecuador Bonds: A Sign of the Times

And $2.8 trillion (official estimate) of sub-prime home loans plus another $1 trillion of credit card debt, a lot of it sub-prime and possibly other sub-prime loans masquerading as conforming loans backed by Fannie Mae and Freddie Mac --- all created plenty of GDP growth in the US. As did and does the expenditure on the Iraq war and salaries paid to government officials. To the best of my knowledge the public sector is largest in the EU, not in Lat America. So what is the new thing, if any, that are you trying to say?

Do U.S. Policymakers Have a Clue About the Economy?

Thinking over it, no, I do not think it is fair to say Hank Paulson is clueless. The truth probably is, he does not care – because he never believed that there was an effective way for Treasury or Fed or Congress to intervene and cut short the correction in the housing market which would otherwise take many years. So, if there was no way to deal with the mortgage problem, by extension same for the CDO and the rest of the stuff. The only thing that he/Fed could possibly do was to slash interest rates, which they did and then try and prevent big financial institutions from failing which would cause havoc in the financial system. However, that does not explain letting Lehman go and the botched first bailout of AIG.

Perhaps Paulson not only did not care and did not believe that the Treasury had a role, but was also cavalier in taking decisions. Or perhaps he thought he was very clever in throwing Lehman to the wolves – red meat for those who wanted to see blood on Wall Street.

Do U.S. Policymakers Have a Clue About the Economy?

Absolutely rue for Paulson, true for many others, but not quite so for the ECB.

Surely then markets did not have a clue when they pushing oil to $150/bbl and all other commodities sky high ... given that there was a whopper of a recession coming? If your argument is that Bernanke & Co were more prescient, then they were so farseeing that they cut interest rates so hard that it became that much easier to shove the liquidity onto commodities. And now the Fed does not have any room to cut. The effective fed rate is 0.3%, so what does it matter if he cuts the target rate to 0.5% or even 0.25% in December?

You also pass over the geniuses on Wall Street who manufactured this house of cards and their partners in DC who kept milimg the gift of mortgage ... or for that matter Chris Dodd who sure did not have a clue when he took subsidized mortgages thru "Friends of Angelo"

China's Hefty Stimulus Package - Bad for the Dollar?

China does not have to sell Fx reserves to finance its expenditure. It will either monetize the additional debt or borrow from the banks. Inflation is down to 4% and may drop to 1 or 2% in a year. Further, overall debt to GDP ratio is quite low. It parks its trade surpluse and capital surplus in US Treasuries. To the extent that its trade surplus may become smaller and capital flows from overseas Chinese reduces, China will have less funds to park in USD. It is a different matter whether the stimulus will yield the desired result: most probably only partially.

Ben Bernanke, Revisionist

Did they not know how tangled financial institutions were - as much with Lehman as with AIG ? Or was it nonchalance that comes with arrogance and well, plain stupidity.

Well, you can't blame Bernanke, if he does not want to admit the error, even if he realises it now. What credibility would he have. Better though he speaks less.

Settlement Auction for Lehman CDS: Surprises Behind

This is amazing !!!!

Bo Peng says that: "On Oct 21, somebody [group A] will have to pay somebody else [group B] billions in cash to settle Credit Default Swaps (CDS) on Lehman. Estimates on what this entails range from $100 billion to as much as $400 billion.".

Felix Salmon has $6 billion net pay out.

Michael Edwards is very satisfied that it all worked out right but does not say what the net pay out is.

The head of the German Financial Regulators said in a Reuters story today that "We're still licking the wounds of Lehman," said Jochen Sanio, president of the German Federal Financial Supervisory Authority, at an international banking conference. "It caused international damage of $300 billion outside the U.S."

Is the panic injection of equity by OECD member countries is based on the hard reality of a $300-400 bn cash payout (according to Bo Peng) or may be a misunderstanding (possible inference from Felix Salmon) ?

One thing is clear. Don't let rocket scientists anywhere close to where their bets co-mingle with normal fund flow ! Merriwether, Salomon, LTCM and now everybody has made the grievous error !

Lehman CDS Datapoint of the Day

This is amazing.

Bo Peng says that: "On Oct 21, somebody [group A] will have to pay somebody else [group B] billions in cash to settle Credit Default Swaps (CDS) on Lehman. Estimates on what this entails range from $100 billion to as much as $400 billion.".

Felix Salmon has $6 billion net pay out.

Michael Edwards is very satisfied that it all worked out right but does not say what the net pay out is according to him.

The head of the German Financial Regulators said in a Reuters story today that "We're still licking the wounds of Lehman," said Jochen Sanio, president of the German Federal Financial Supervisory Authority, at an international banking conference. "It caused international damage of $300 billion outside the U.S."

Is the panic injection of equity by OECD member countries is based on the hard reality of a $300-400 bn cash payout (according to Bo Peng) or may be a misunderstanding (possible inference from Felix Salmon) ?

One thing is clear. Don't let rocket scientists anywhere close to where their bets co-mingle with normal fund flow ! Merriwether, Salomon, LTCM and now everybody has made the grievous error !



I have never seen estimates that are that much in variance --- from $6 billion to $400 billion.

So what is the correct take on this.

The Bottom's Within Sight - Barron's

It WILL hit bottom --- and it won't be at zero and unfortunately it can be later than sooner. That said after dropping 40% the rate of decline has to slow down --- and if Paulson did something tomorrow instead of talking of in "a few weeks" it might be sooner than later and vice versa.

Look What We've Had All Along: The Paulson Plan to Purchase Bank Equities

Pauslon and Bernanke take equity stakes in banks and insurance and make them potentially arms of the government. Under the new Obama administration, political groups then find it easier to require that mandates are passed to extend x% of loans to formerly excluded sections. Insurance rates re-engineered to cross-subsidise weaker sections and charge higher rates from those who can afford it.

What chance this happens? If it does, what will the economy look like?