patrick.net

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.

TOB - btw loved the spin on the nigerian bank spam. Soooo appropriate!

TOB : why don't you fuc*ing go back to your holy land? or do you need some other arrangement ? Everybody knows you and your community's history. You have been kicked out of every corner of the planet for a "reason". Doing nothing productive and acting like a genius.

Why the heck you keep blogging 24/7. Do you have a Psychological disorder ? do you think you are in control of the world and making policy decision sitting in your underwear in your small rundown apartment.
Get out of your small world , meet people and live a real life !
or get some help from a doctor. I was amazed when i searched and found that you rant almost the whole day. something is wrong dude.

BTW, don't connect me to east indian's. i don't give a F*ck about them.

THEY WANT MAMA TO MAKE IT ALL BETTER! Rep Kapture

http://www.youtube.com/watch?v=mbD62gNi9WE

A bit off topic, but politics is getting involved in this mess.

Integrity is the biggest reason I will never vote for McCain. I thought I had decided to not vote for Obama because of my 2nd Amendment support.

After reading many things on the internet about the crap going down, I may change my mind and vote against McCain. I am tired of people not having to answer for their actions. I am tired of the "dog ate my homework" attitude of our leaders.

McCain was part of the Keating 5. Lack of integrity caused him to get involved in this. Even if he did not "mean to" , I hold him accountable because he did not choose his buddies better. If someone joined a gang and drove a getaway car from the scene of a murder/robbery, they would be charged with murder. The fact that they choose the $hit of the earth as friends is their fault. Why should it be any different for our leaders who should be held to higher standards?

McCain violated his oath of office to uphold and defend the Constitution against all enemies foreign and domestic several times. He should know the oath well because he had to make it as an officer and a senator! I have no faith in a man who can abdicate the consitutional authority of Congress to declare war (Article 1 section 8) to the president. Ignorance is no excuse, he saw Vietnam firsthand!

darn replace :) with 8. )

@ IR

I loved that video. I live in NW Ohio and she is my representative. I gave her office a call today in opposition to the bailout and was told she shared my views.

Despite our differences in views on the 2nd Amendment, I think I will now always vote for her. My GOD, hell is freezing over!

There is a small glimmer of hope that this ludicrous bailout plan will face significant hurdles. For a change the congress is showing that they have some backbone. We can only imagine what behind-the-scene deals get struck and whose son-in-law gets to become the "smart asset manager" on Paulson's team to purchase the sh1t from the banks.

But at least some in media are calling at as they see it.

http://krugman.blogs.nytimes.com/2008/09/23/good-ideas-and-lies/

“Real estate, gold, Persian rugs and Ming vases always increase in value”...???

Economist John Tuccillo, president of JTA Associates and former chief economist for the National Association of REALTORS®, told the packed crowd in the closing session of the IAR [Illinois Association of Realtors] Convention that the housing market is ahead of the rest of the economy.

Here's the link:
http://illinoisrealtor.wordpress.com/2008/09/19/housing-at-bottom-recovery-slowed-by-financial-turmoil/

As a former proud Republican it is embarrassing to have nothing to refute what any other time would be an outrageous statement. I've never considered this administration to be truly Republican, but then again, a lot of true Republicans that I know are now registered independent. So I'm thoroughly confused but so apathetic that I don't even care about the labels anymore.

FWIW, does anyone here have a counter-proposal to the Paulson Plan. Myself, I'm content to let them continue to "bury the bodies" at the Fed. At least there is the pretense that the toxic junk is not owned by "we the people" (just swapped out through the TSLF on 28 day terms). The only problem (which is probably why the Paulson Plan came about) is that the Fed is getting low on Treasuries (see the recent $50B "injection" by the Treasury).

I think the counter-proposal is rather easy.

First of all, $700B is a drop in the toxic waste bucket, and mark my words here, this is just the start of what they plan to grab. They can't possibly shock you with a $7T bill can you?

The total value of derivatives outstanding is pass a quadrillion (shit I lost count of the number of 0s), JUST JP Morgan alone has an outstanding CDO/CDS of $90T, there's a table of all the banks and their outstanding derivative exposure, I will post after I find it again.

So the point is, $700B is useless. They don't come ask for $700B, they just want to paper over this for the time being but the quadrillion stinking shit is a time bomb waiting to explode. Of course not the entire exposure if worthless, but you can pretty much assume 50% writeoff if you insist upon your unwavering optimism.

In summary, if we are going to do any sort of bailout that is remotely meaningful to the world economy, we are looking at $70T upwards, 100x of what is asked for.

Now, I am not entirely opposed to printing, I think certain printing could be very good for the society. If I were to spend at least $5K per head, I would spend it first on infrastructure to build railways or roads or whatever public transportation to prepare the US for oil shock. Let the finance people go bankrupt, the government only allows a fixed withdrawl of your 401K, Roth or pension every year but guarantees the face value. That alleviates lots of the pain, and why do the old folks need so much money anyway.

If you are going to drop $5-10K at first shot into the system, don't drop it on Wall Street and let it trickle down to Main Street, it won't. Drop it straight on Main Street. The derivatives? Let them explode? Who cares? This is really a conceptual block, derivatives make up the monetary claim on the real asset, but if they explode, the real asset pricing will adjust to reflect that. Who cares if a few bankers go starving, let them be.

http://bigpicture.typepad.com/comments/2008/08/us-bank-derivat.html

I saw the original document on a FDIC bank monitor document, but somehow couldn't find it. If someone can find the original document, please kindly post it so that I can keep record.

When I first saw the banks' exposure, I was thinking that there was a misprint of unit, it must have been 000s instead of millions.

So tell me how is $700B going to do ANYTHING, anything at all?

TOB,

Makes you wonder if we will ever have a "Federal Reserve Day" similar to July 14, 1789 ! I plenty of hard currencies like 62 and 125 grain cupernickle jacketed peices of lead. I will have no problem giving them all away one by one to the banksters.

*I have

TOB,

I meant no offense to you. I did use some strong language in my last post as a reply from you about looting in the streets. I want my government back. The neocon crap and stealth overlords are not part of my govenrment. My government was started on September 17, 1787 with the ratification of the United States Constitution. Thomas Jefferson is my national hero.

I could not care less about the problems on the ground across America. That will be resolved quickly and without the courts. My fear is that the criminals in NY will have a chance to make a run out of the country with their stolen loot. I don't want to allow this to occur. I want them to go to a criminal trial for what they did.

My current reps are doing a great job in Congress (Love you Kaptur). I want them to keep the government that I believe in in good working order long enough to deal with these crooks.

Congress holds the final power over our military. I hope that it is still clear that the Military is here to support congress and not the President or any other appointed political $hitbag in the executive branch. President only has the commander role over the troops to carry out the will of congress!

@OO

If the derivatives burst, would that mean the end of the global economy? Savers would be s*rewed and debts would be evaporated. Consequently, waiting to buy a house with our savings would be exactly the wrong thing to do.
Your thoughts?

Danville,

I don't think the world's government will tolerate a complete blowout because if that were to happen, buying a house - immobilier, as the french call it, would be the last on your mind. The lifestyle as we know it, will end. You should also try to make your asset as easily transferable across the border as possible, because there will be martial laws, border control, exchange and capital flight restrictions. Historically, real estate was always worth nothing in a very chaotic financial situation, why do you want to tie yourself down to an illiquid asset when an urgent need of fleeing may arise?

But, I think the most possible path is, we will print some, let it blow up some, then print some afterwards, and a home can be a good store of value if you
1) acquire a house at a reasonable value to your pay
2) can lock down long-term rates, and
3) have good job security

My biggest problem with buying now is, I think there are too many variables out there pushing different ways, and housing is such an illiquid, leveraged asset, so it doesn't seem prudent to commit yourself to a place which will certainly go through plenty of rough rides in the next decade or so.

BTW, Jumbo 30-yr is now above 9%, and HP just announced a big layoff. All things are pointing towards a much more corrected bay area housing price.

http://www.occ.treas.gov/ftp/release/2008-74a.pdf

Pg 24/25 listing the top 25 banks' toxic exposure, in the trillions.

Now, look at the bank asset, and look at their toxic waste exposure, some as high as 1:70 ratio, completely disgusting. If we are really serious about printing to help them fulfill these obligations, Zimbabwe, here we come.

Duke Says:
I swear that by putting the taxpayer behind the bond-holder [Paulson] is favoring Chinese banks over US tax-payers.

Not a surprise at all. Here is an excerpt from the motherfucker's Wikipedia entry:
"In July 2008 it was reported by The Daily Telegraph that: "Treasury Secretary Hank Paulson has intimate relations with the Chinese elite, dating from his days at Goldman Sachs when he visited the country more than 70 times."

Just whose side is the bastard batting for?

Here is hoping he catches syphilis from his dog.

OO :

even though they have exposure of trillions , you need to take in to account that its highly leveraged. You don't have to fix the leveraged part, you have to fix the underlying asset/mortgage and the leveraged part gets fixed automatically. The actual calculation of what the tax payer will ultimately pay should be something like this :

(Total value of US holdhold in 2005 peak - real value based on case schiller index) + what ever was extracted in all the financial institutions as bonuses , pay , dividends already paid to investors based on the peak home values.
I don't see where else the money went ? and why we need to pay it ?
All the other numbers we are talking are notional values
OO : correct me if i am wrong.I am just lookinf at big picture to figure out rather than use the same jargon that finance uses which got us in to this mess.

Well at least we are seeing some dissenting opinions from members of Congress. I hope they don't cave. Or is it all just choreography for the masses? Paulson's "No Banker Left Behind" initiative is pure insanity. So many on this blog are thinking in extreme terms..fighting in the streets, hyperinflation etc. I am too. Do we have something like the Batman motif light in the night sky to tell RandyH we could use the palliative effect of one of his posts? If we fire up the searchlight and cast giant "RH" on the night clouds over Gotham will RandyH help us out?

in other words,

The money which was burned during this bubble without actually creating real wealth :

(Total value of US holdhold in 2005 peak - real value based on case schiller index) + what ever was extracted in all the financial institutions as bonuses , pay , dividends already paid to investors based on the peak home values.

All the other money should still be in the system.

am i missing something here ?

"Treasury Secretary Hank Paulson has intimate relations with the Chinese elite, dating from his days at Goldman Sachs.."

@SP: Totally. Guess who one of Merrill's biggest bondholders was before it went on the Treasury's dole and swooned in the arms of BofA? Yes, the Chinese government.

snmr,

if all the banks of the world sit down at a table and nullify each other's derivative contracts in a balance sheet neutral way, I am sure we do not need to pay much, but that will involve many legal experts, inter-government negotiations etc. and I am not sure if they are doable in a very pressed time frame.

But the key is leverage. Since banks are so leveraged, any movement in the market asset price or interest rate is going to bankrupt one and bring down the rest, and that is the systemic collapse. And it is the systemic collapse that the government and the worldwide financial community is afraid of.

OO wrote : "But the key is leverage. Since banks are so leveraged, any movement in the market asset price or interest rate is going to bankrupt one and bring down the rest, and that is the systemic collapse. And it is the systemic collapse that the government and the worldwide financial community is afraid of."

so we need to stop the movement in the market asset price which in my opinion should not exceed the

(Total value of US holdhold in 2005 peak - real value based on case schiller index or whatever total mortgage the US economy can service)

snmr,

I do not know derivatives well enough to say how it unwinds vs the housing price. I don't think anyone knows, even Warren Buffet himself says he gave up after reading these derivative contracts (300+ pages) for many hours.

Another Goldman ex-co CEO currently teaching in China's Tsinghua University to strengthen his bonds with the elites.

http://en.wikipedia.org/wiki/John_L._Thornton

1) acquire a house at a reasonable value to your pay
2) can lock down long-term rates, and
3) have good job security

1) Find a boomer who does "get the led out" on Friday
2) Get a picture of Santa Claus buggering the Easter Bunny
3) have good job security

fuck. -does +does not

These are the numbers for the fake wealth we blew away and need to pay back.

housing bubble : 12 trillion

Internet bubble has 7 trillion.

I think if the fed and paulson manage this crisis well, we will get through it.
Ofcourse , we are borrowing too much from our future and creating bigger and bigger bubbles.
This should not be end of the world if managed well.

more data : http://harpers.org/archive/2008/02/0081908

700b will not fix it. Its just a way to buy on a revolving basis the bad paper.
once Govt aquires all the bad paper. the total losses would be aorund 12T.