patrick.net

Going wayy back to some of my posts of over a year ago. Two?

We have reached the point where the governement will start spending money on jobs projects. We will 'rebuild America' and it will be expensive.

We will begin moral suassion from the governement. We will get some high profile fraud cases to get people in line. It will be unpatriotic to not pay your mortgage. And soeciety will be asked to esnure everyone complies.

States will be under pressure and the Fed Govt simnply cannot sustain all people coiming to the window asking for help. We may see state bond defaults and/or modifications.

As unemployment rises we will see the usual: higher crime and civil unrest. We need to prepare to ramp up police forces/national guard.

Along with CDS (Credit Default Swaps) we will finally see bonds come under pressure. Many companies simply cannot sruvive this recession/depression. A weakened bond market will be another huge stressor.

I am tired of hearing that housing is the only card in this. The simple truth is that the majority of our banking was done by highly leveraged unregulated institutions and THAT deleveraging is too large even for gotesque "Trust Me" Paulson plan.

My 2 cents on the proper approach.

Let the business FAIL FIRST. THEN buy the MBS. Lending can be done by the govt until such time as the financial sector is fixed.

DO NOT PROP UP THE FINANCIAL SECTOR.

Fire Pualson.

Elect a wholly new Congress that is actually smart and thoughful and not just of sound bite clowns.

The Original Bankster Says:
SP, I can only imagine what the wreckage of this thing would look like. so theyre going to prop up the markets here in order for what to happen exactly?

This has nothing to do with housing or even the financial system anymore. Those are only politically-expedient excuses for a power grab that puts the bankster-in-chief at the treasury above the law to do dispense treasury funds to whomever he pleases via fraudulent transfer of their gambling losses.

Step 1. Treasury buys "assets" from Bank A at above-market fantasy prices. Bank A gets capital from treasury.

Step 2. Treasury marks to market and sells assets to Bank B (or even Bank A itself!) at low, low prices. Bank B acquires the asset at marked down price.

Step 3. Rinse, repeat, tumble dry. After 700 Billion has been laundered via step 1 and step 2, Treasury no longer has this on their books, so they can go do it all over again for another 700 Billion.

Effectively, the banks passed the dud loan off to the taxpayer, who graciously takes the markdown so that the banks don't have to do it themselves.

This money-laundering, in a nutshell, is what these fuckers are presenting as a "plan". Any normal American citizen who does this even with his _own_ money will face jail-time, possibly even Gitmo if he is unlucky. Hence the demand for blanket immunity from oversight and prosecution.

Duke said:
Fire Pualson.

If you mean with a firing squad, where do I sign up?

Sorry about the moderations. The word "socialist" contains the spam-word "cialis" and that's why some comments get blocked. Bad choice on my part to put socialist in the title of this post.

I'll see if I can unblock the word "cialis".

Patrick

Administrator Says:
Sorry about the moderations. The word “soc1alist” contains the spam-word

See, I told you it should have been spelled "sociopath" instead. :-)

However, I don't completely agree with the title - this issue is not about Republicans being one way or another. It is way bigger than that, and the Paulson Poison Plan (tm) will screw us all, regardless of which party's lies we choose to believe. A post that specifically targets Repubs (or Dems, for that matter) puts the target on the defensive rather than focus on the real problem which is a kleptocracy by the banksters - and it is on the cusp of turning into open fascism.

No matter how you cut it, this plan seems only to make American policy independence subordinate to trans-national bankers who are above the reach of local law - just like they have managed to do to many weaker nations in the 20th century.

Can someone explain why Morgan Stanley and Goldman Sachs want to become regular banks?

They already have access to all the various Federal eserve loan programs, so that argument does not fly.

Is it so that they can take deposits and be FDIC insured, is that the real reason? Or so that they can buy up troubled banks for pennies on the dollar? I just feel certain that there is a sleazy motive behind all this.

justme Says:

> Can someone explain why Morgan Stanley and
> Goldman Sachs want to become regular banks?

Paulson and his friends in the government want to make their friends at Goldman and Morgan even richer and when they are bank holding companies they will have access to more of the corporate welfare programs. Almost all of the first loss pieces of every MBS and CMBS are worthless and they way the bonds are structured they will never be worth a penny (or have any right to any money even if all US real estate doubles in price). The investment banks all held this high risk paper for years getting 20%+ returns (and big bonuses) and now that it is worthless they are going to "sell" it to the government and get more free money from their friend Paulson...

They (MS & GS) already have access to all the various Federal eserve loan programs, so that argument does not fly.
They did not have access to THE discount window, only PDCF, which is scheduled (ha!) to shutdown on January 30 (my understanding is that the terms of the PDCF are not as generous). Nevertheless, I think FAB once again came through with the truly frightening truth-behind-the-lies-behind-the-truth.

And while we are at it, who is driving up the price from ~$105 to $130 today? It is MS and GS trying to tell us, "bail us out, or else...."?

That was supposed to say "...the OIL price..."

Anyway, look at the oil stock. They are up only 2-3% whereas the oil price is up 25%. Clearly the market in stock knows that the market in oil is being manipulated.

Any further bailout should involve that the government gets preferred stock or warrants in all the bailed-out entities. Why is Paulson not saying that? He wants a carte blanche do swindle the taxpayer anyway he wants.

Here is another reason that the reported oil price runup is suspect:

WTI crude (presumably Cushing, Oklahoma) is at $120 now, up ~15%
Brent crude (North Sea) is at $106, only up 6%

This is per Bloomberg. If only supertankers went to Oklahoma, I think I'd rent one and do some arbitrage.

Hello comrades!

I tend to agree both parties are just as bad/good (depending on your point of view) on any serious issue. They reflect us after all.

However, a glimmer of hope. At least if something like this idea goes through - rather than a plain blank check - we'll be more China than USSR:

from reuters (still just a proposal, not a deal):

"...Under the Senate Democrats' proposal, Treasury could not buy, or commit to buy, any troubled assets unless it gets "contingent shares" in the asset-selling institution "equal in value to the purchase price of the assets to be purchased."

The contingent shares could be shares in the financial institution, its parent or holding company, or a related institution, according to the draft language.

If shares in the asset-selling company were not publicly traded, Treasury could take senior debt instead of shares.

If Treasury later disposed of the troubled assets and got less money for them than it paid initially, the contingent shares would help cover the loss, the language said...."

Ladies and gentlemen, we have just gone Through the Looking Glass-Steagall Act (don't worry, we've got the FDIC this time around).

Alice (MS & GS, too):
I wonder if I've been changed in the night? Let me think. Was I the same when I got up this morning? I almost think I can remember feeling a little different. But if I'm not the same, the next question is 'Who in the world am I?' Ah, that's the great puzzle!

The Duchess
If everybody minded their own business, the world would go around a great deal faster than it does.

The new bail-out terms are much, much better than the "I gotcha covered" Pualson plan.

BUT

To use on of my favorite metaphors.

A better looking pig is still a pig

The bail-out will simply not work. The issues is not liquidity. The market is over leveraged and nothing, but nothing is going to stop the de-leveraging. We can shovel money into that pit all day long.

The only way we can get outta this is to let the firms that took bad bets fail, have vulture firms buy up the distressed assets which they can sell in the future.
And yes, there is going to be massive job loss because in this kind of recession/depression that will occur, even good companies get hurt. The sheer number of bad companies out there is staggering. As debt costs rise they will go under.
The governement can spend that vaunted $700b on a works program. Hey, I've always wante to build a bridge!
And after 5-10 years we may have an economy we are proud of again.

In the short term, the dollar will fall exceptionally, until other economies realise how tied they are to the US. When their exports dry up and they realize their own socialistic systems are expensive they will go into larger and deeper depressions than the us.

The contraction will be staggering.

To keep this relvant to housing, I will repeat:

If you have a great cash position you will be able to buy up homes cheaply in the years to come. Find a way to keep your current job. Homes and debt are NOT stores of value. Being glued to a recent home purchase, then not making the payments or losing your job means youve wiped out your 20% down AND now you will find it hard to buy FOOD!

Good lord, how can anyone think NOW is a good time to buy, with all the risk in the financial world

I seldom post comments here, or anywhere else for that matter. I preffer to read the comments left by people that know more about finance and economics than I do. But watching the events unfold over the last few weeks has got me so pissed off that I realy need to vent. I'm an aircraft mechanic, not a financial guy, but when my wife and I went looking for our first house back in 2005 I knew right away that something was seriously wrong with home prices. That led me to an internet search of the term "housing bubble" which in turn led me to this site. Patrick laid it all out in plain english so that anyone that bothered to read could understand where we were and where we were headed with home prices. And how many times have I read discussions on this very blog, of the potential economic fallout that a major price correction would cause? Since that has been a favorite topic for many posters here over the years I'm sure it's a significant number. And still we have to listen to these f@#ing financial geniuses on Wall Street, CNBC and Capitol Hill whine and complain that nobody saw this coming so therefore we need a bailout. Bull shit!

My wife and I have been living in our tiny little inexpensive Burbank apartment for years, trying to save a down payment for a house. We don't buy expensive toys, we don't blow our money on cruises or expensive vacations and our cars are old and paid for. And now that prices are starting to come down, my own damn government is doing everything they can to prop them back up and keep me shut out. It seems that the goal is not affordable houses but rather affordable mortgages. That way we can all be debt slaves for the rest of our lives. Well no f@#ing thank you! I'll pass!

As a corporate aircraft mechanic I am well aware that a major stock market correction could mean unemployment for me, but I say bring it on! Thanks to Patrick's advice I've now got more that two years of after tax pay saved up. I'll be just fine!

In one of my CNBC inspired moments of anger I put this together. It was born out of frustration but I hope you find some humor in it. And I apologize in advance if it sucks.

Bend Over Ben the Bankers Bitch

Bend over Ben the bankers bitch
The lying scheming sack of shit
His banker friends just keep on winning
As Ben Bernanke does their bidding
They took the risks but won’t get burned
For recently we have all learned
Bend over Ben will save the day
And make hard working people pay
Save the markets, screw the people
And we all take it, we’re just sheeple

The talking heads on CNBC
Don’t give a damn about you and me
No interest rate can be to low
If it saves their stock portfolios.
And of this group there’s no one lamer
Than the loud mouth foolish clown, Jim Cramer!
Crying out for Ben to cut rates now!
Do it quick! Save the DOW!
Screw the lowly peasant saver!
Wake up Ben! We need this favor!

What happened to the good old days
When people worked to earn their pay?
Too many now have built their dreams
On get rich quick financial schemes
And Wall Street is the worst of these
They’re all infected with this disease
The time has come for all to shout
We don’t want your damn bail out!
The cure demands financial pain
Or they’ll just do it all again!

Why not let the bastards fail!
Let them cry and weep and wail!
As they finally go down to defeat
And pay the price for their deceit
Banks must fail and heads must roll
Before we’ll ever be made whole.
Instead the talking heads come out
And speak from both sides of their mouth
They feign concern for you and me
As they pine for lost home equity,
And desperately seeking reelection
Demand more government intervention

We call for justice to no avail
None of these crooks will go to jail
And thus we march towards our demise
But still it could be otherwise
If our nation had some honest leaders
Instead of gutless bloodsucking bottom feeders

Dave, you kick ass. Well said. I feel your emotion.

TOB, I'm taking some classes right now and your right-the girls do look like porn stars. :) Also, I feel very comfortable saying that 50% of the kids are just f-ing off and hookin' up. Yesterday was the last day to withdraw without a "W" on your transcript and today I swear the student body was down by a third. It's so sad. However, the ones that are going to be something someday stand out like a sore thumb. These kids will eat their young. I do have some hope for the future.

USMint.gov is selling 1oz American Eagle Proof and uncirculated gold coins for $1200.

Gold is a little over $900, but how can I buy American Eagles near spot price and how do I know it's real? I live on the SF peninsula.

I invested in GLD about 1.5 years ago but I want physical gold.

I think it's time for a repost of good ol' Warren Buffet's advice on trade deficits and IOUs to foreign countries (a.k.a. Treasury bonds). Much like binging on credit, importing more than you export is a downwards spiral. Once you pass a certain point, you push into positive feedback and the problem just runs away from you. Eventually foreigners end up owning your productive assets. Is that really what we want?

http://www.berkshirehathaway.com/letters/growing.pdf

Dunno about Obama, but Fiorina + McCain is certainly toxic.

You judge people by association. At least Obama gets Volcker's endorsement, and McCain recruited a proven public failure. I don't think this country is really up for another experiment.

Nothing against McCain and I think he has done a lot for this country, but people of his judgment (reflected by his association) and his AGE belong to a retirement home, not the white house.

jonintc,

bars have much lower fabrication cost than coins.

To be honest, I have always wanted McCain to be the next Hoover. Too bad that he picked Fiorina so we may end up with the next Hitler.

For pure spine-tingling terror, even Hillary herself has nothing on Carli Fiorna. I say that knowing a lot of ex-HP folks who still have friends within HP. And having owned Lucent stock, I know all about her idiotic strategies with vendor-financed credit. She should be permanently banned from managing anything larger than a convinience store.

In my paranoid nightmare, the financial meltdown was planned by international central bankers and the ultimate goal is the economic rape and enslavement of America. In this nightmare, Bernanke and Paulson got their marching orders from the true owners of our (non)Federal Reserve. Their names are not found in the public lexicon. They live in places like Frankfurt and London. Paulson is merely the messenger, who delivers the message from the cabal to key members of Congress. Their orders? Make a pretense of debate, then pass the bill. Can you find any real debate on the bailout on any major network? Why are ALL the media working overtime telling me Paulson's plan is the only choice? The media treatment alone is suspicious. Not that I'm paranoid or anything.

Investment banks are pretty useless in the United States anyway, since the dollar and Sarbanes-Oxley have pretty much transferred the crown of the capitol of capital to London anyway. Is that what you mean by paranoid?

Here is my letter sent to all representatives in various formats:

Honorable ...,

PLEASE - TELL THE BANKERS ENOUGH!!!! NO MORE STEALING FROM THE AMERICAN CITIZENRY / TAXPAYER. ENOUGH, ENOUGH, ENOUGH!!! NO MORE BAILOUTS FOR THE BANKSTERS. PLEASE!!!!!

Help us - stop this madness. Is congress really going to give almost $1,000,000,000,000.00 uncontrolled to the people that caused this economic collapse??????

Please, please I beg for you to defend the Republic. This is the same Republic I pledged elegance to through my school years. The same Republic that so many veterans have died and sacrificed for over the centuries. Please do not let them take it all away. Enough!!!

Respectfully yours,

@ Unalloyed,

http://en.wikipedia.org/wiki/Trilateral_commision
(isn't that the symbol for recycling started in the 70's on the right side of the page?) hmmm!

or

http://en.wikipedia.org/wiki/Rothchilds

Moderation for 2 links or is it what they linked to?

The problem with being a NWO illuminati is that you end up with a lot of free time, and eventually you get addicted to blogging. Or did something else happen to Casey Serin...

:o

For the paranoid poster...

Back before this started, I remember hearing a snippet of an interview in which a man in a financial policymaking role explained that housing was too affordable, and that we should not have let it get so easy to buy a house, food, etc. It was a weird little interview, and I cannot place who it was being interviewed--I would not have recognized the name at the time. It stood out, though, because it was a weird thing to say. That's when I started to pay attention.

George W. Bush,

Fire Paulson and Bernanke. All will be forgiven.

This is your final chance to do something about your legacy. Otherwise you will end your term as the biggest goat-felching idiot who became president of the united states of america. In the year 2400 A.D., people will still remember you as the goddam mutherfucker who fucked up the world 300 years ago.

I can't even bear to watch the fuckin' hearing on CNBC, that fuckin' Paulson is so arrogant, it's not even funny, his answers basically all starts with "you don't understand...".

The problem, Paulson, is that we DO understand, this time. And the democrats are finally showing some backbone and demanding the appropriate changes to the bailout bill.

Has anyone noticed the body- and positional language of Bernanke? You can see everywhere he goes that he is distancing himself from Paulson, Bush and Cox. It could not be more clear if he was holding his nose.

The Paulson bastard is trying to overtake Grrenspan as the most hated person on financial blogs. I almost like Bernanke at this point.

Paulson is stealing money from us at a gun point with a scornful attitude of doing us a favor.

Why don't they just give f*cking 100K-500K loan at 0% with no payments for next 10 years to every mortgage holder ? I might vote for that kind of bailout than this arrogant mother of all money grabbing schemes ?

The housing ponzi scheme was bigger than dot com mania. This Paulson plan has the potential to be even more damaging than the bubble that preceded it. Talk about cure being worse than the decease.

There are a great many sites that are now much more relvant to this one.

Mish.
Krugman and his blog.
C-Span and the actual debate.

This is THE item that will define most of your economic life. Wake up and do something. Write you reps. Call them. Do not sleep through this.

That $700b is just a start - and it will not solve the problem. The debasing of our currency as at the end of Paulson's rode.

I swear that by putting the taxpayer behind the bond-holder he is favoring Chinese banks over US tax-payers. Look, stocks AND BONDS imply risk. People believed the crap Godman Sachs was telling and they bought the bonds. The accepted risk. Now, break up GS, and only make bond-holders whole to the point of the real worth of the company.

In its place, use the many healthy banks that will survive.

As for housing. Cramer - noting the massive money coming its way from Congress - stated it looks pretty good to jump in now.

You make the call. If the bailout will work - buy RE.

If you think we will not have the bail-out OR it will not work - avoid RE like the plague.

2 more years will tell the tale. At that time we will know if we will have only gone down 30% or if we will going the way of the Great Depression. 30% unemployment and 90% loss of value of stocks.

You decide.

There is a intelligent community which is ancient and has been dealing with control of money for ages. They deal with lending and making money out of money and not actually producing anything.They have been asking for de-regulation of money control for thousands of years (just like a thug might want de-patroling by cops at night).
They created a bubble in germany and faced dire consequences. Now they are doing the same thing in USA. I hope there is no Mad man in US who gets too pissed off at them.
I request them to start doing other bussinesses and not repeat history.
Check the names of big guys in most of the wall street investment banks, comercial banks, FED ..etc . There is a reason they have been forced out of every place on earth. its not an accident. I hope they get out of this dirty money control bussiness and get in to things like farmng to save thier community.I don't blame them,I blame the dirty money control business. its better we have some diverse group doing that dirty job to avoid backlash.

TOB,

It just struck me what the real meaning of the word "liquidity" is:

Liquidity == the ability to sell or pawn an asset at face value, even if the underlying (market) value is less.

Great article in the Asia Times. even they see the writing on the wall. I have never thought about leaving this country, but now I am seriously considering it. I'll go somewhere where wise decision making and smart saving/spending is rewarded, not pissed on.

http://www.atimes.com/atimes/Global_Economy/JI24Dj03.html

I think Alan greenspan , Ben "Shalom" Bernanke ..etc should gracefully go back to israel or start farming . Somebody else needs to pick up money control.

Old habits die hard especially when its done for generations.

TOB : you might want to join them too.

TOB - chill man. If you criticize, criticize based on facts not insults. I personally am a big fan of East Indians. Most that I know are decent people - family loving, hard working, help-thy-neighbour types. In any case, that shouldn't matter either - people should be valued who they are, not where luck had them born.