patrick.net

“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.

whoa, whoa,whoaaaaa, wait just a minute, I take from the tone of this thread that the BA isn't paved with gold bricks and you can't really get rich from borrowing money and that the system is gamed for the gain of 0.000014% of the population? Come on now, why the fuck do you hate Amerika?

No new paradigm?

McCain said, “Carly Fiorina is a role model to millions of American women,” pointing out that she rose from working as a part-time secretary to heading HP. He added: “I’m proud of her record.”

I am gonna puke, Fiorina's dad was the dean of UT Austin Law School and a federal judge, and she was touted as a self-made business executive working her way up. Grandpa McCain, get a brain scan will ya?

Lucent was a fraud, and HP at that time was being too PC in search for an outsider and/or female CEO, so Carly was hired. She is also very strange, once on Bill Maher show I saw her kept trying to lecture people while making really bad arguments for her points. I had to puke when she said we need more H-1B's because we are not graduating enough engineers, coming from someone with a medieval studies major. The bodyguard and GulfStream IV just added to her "mystique".

NewToBA Says:
Great article in the Asia Times. even they see the writing on the wall.

Asia Times Online has seen the writing on the wall about FOUR years ago. In fact, it was one of the earliest places where I found a series of articles Henry CK Liu that woke me up to the magnitude of this scam.

Yes, not only do they see the writing on the wall, they saw it long, long ago when the US media was still lapping up Greenspan's drool.

Henry CK Liu is the son of a prominent Chinese communist founder, also a big power broker in the last century. I believe that CK Liu deflected after the Tiananmen Massacre.

The Original Bankster Says:
what will happen when all these CDS/CDOs collapse? Does that just mean no more Credit Cards? No more student loans? are these derivatives representing all consumer debt in all forms?

Don't be afraid - that is just Hank Paulscam's way of scaring a bunch of congresspeople into making him Führer of the Treasury.

Consumer debt (at much more sane levels) existed for centuries before CDS and CDO and other derivatives showed up.

If this system goes under, another credit system will start growing literally the next day. All this talk about "credit being frozen" is just code for "banks don't want to mark to market". If they drop prices, there is a market - just like housing, heh.

“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.”

I say, I just had a capital idea. Let us force the SOB to default on debt to China. The day after that, I will be happy to buy the knob-gobbler a one-way ticket to China, so he can go stutter an explanation in Beijing as to exactly why he was unable to do their bidding.

I hear the Chinese government has a rather charming way of dealing with fuckers who stiff them.

By the way, in a perfect world, this would all happen _after_ Hank catches syphilis from his dog.

SP,

you are mistaken. The Chinese government has carried out "extermination" missions overseas, mostly in surrounding countries in Asia and South America. Maybe they will make an exception for Paulson.

This should really make TOB's day. Try not to get spooge on the keyboard while you're reading this, will ya?

CEO murdered by mob of sacked Indian workers
Corporate India is in shock after a mob of workers bludgeoned to death the chief executive who sacked them from a factory in a suburb of Delhi.

Other executives said that they were lucky to escape with their lives. “I locked my door from inside and prayed they would not break in. See, my hands are trembling even three hours later,” one Italian consultant told reporters.

I wonder what they would do to someone like Hanky-Panky Paulson. Say what you will about the Indians, TOB, they seem to know how to deal with CEOs. Gotta respeck dat.

My favorite word of the moment: "Bludgeoned"

What a nice, unambiguous word.

OO Says:
McCain said: “Carly Fiorina is a role model to millions of American women”

Someone tell the senile old bastard that statement is an insult to American women on so many levels. As far as I know, most American women don't aspire to make a career out of colossal fuck-ups.

Hope she catches syphilis from Paulson (who I am still hoping will get it from his dog)

SP Says : Hope she catches syphilis from Paulson (who I am still hoping will get it from his dog)

If Fiorina catches it , i guess mccain would catch it too ?

SP says :

"CEO murdered by mob of sacked Indian workers
Corporate India is in shock after a mob of workers bludgeoned to death the chief executive who sacked them from a factory in a suburb of Delhi."

If american people do the same, they will fix the moral hazard issue we are facing now :-)

letter from Economists to congress:
http://faculty.chicagogsb.edu/john.cochrane/research/Papers/mortgage_protest.htm

The Original Bankster Says:
India to be what it is… a barbaric backward culture

Coming from someone like you, that is rather hilarious. Lets not get carried away here.

They bludgeoned a dirtbag who screwed over his workers - given a chance, how many of you have wanted to do the same to your boomer-fuckwad CEOs? The law recognizes three kinds of homicide - criminal, excusable and justifiable. They should add a fourth kind - "highly recommended". :-)