patrick.net

I wrote my senators several times over the last few years. I am sure I was labeled as a crank when I gave them this doom and gloom future we are facing if we didn't regulate the banks more.

I am convinced that the government showed nothing short of criminal negligence. I wonder who was paid off to deregulate the banks and how much they were paid. This is like the regulators allowing a small segment of the population to commit insurance fraud and doing nothing about it.

Bring Back GLASS-STEAGALL!

For ideas on who to write to, and what to say, check out Karl Denniger's blog. Go to March archives and check out the letter on March 8, 2008 to use as a template.

http://market-ticker.denninger.net/

We can overcome !

Danville Woman

With due respect, I'm hoping you might help clarify a post on the last thread. My intent was to let it slide by, but I simply cannot help myself.

You indicated that you had the "ass" to pull off verbal harassment of Monsanto at some Ag show. Was this meant to be "sass"?

I think either way is fine by me, just curious. Please help me out here. :-)

Thanks in advance!

@northernvirginiarenter

Perhaps you have me confused with someone else

Danville

Please accept my apology, in my laziness to go back and pull the post....it was Richmond's comment.

March 17th, 2008 at 8:16 pm
Every time I go to the World Ag Expo, I make it a point to go by the Monsanto booth and just be mean and rude, ask loud nasty questions to draw attention to the scam. I have the ass to back it up and I’ve never been arrested. The genetics, the rBST—nasty stuff.

Latest from across the pond, mildly alarming:

LONDON (Thomson Financial) - The Bank of England's governor Mervyn King has cancelled a working visit the West Midlands to "monitor events in London", a central bank spokesman said.

And possibly next shoe to drop, completely unregulated credit default swaps. Monkey business galore, my hands were sweating by the end.

Yikes.

Time Magazine CDO Story

Cramer just declared that we're at a bottom coz FRE and FNM can issue 100B more in mortgages, and "your house value will not go down any further".

but it says:
Under legislation unveiled by the lawmakers, the FHA would be permitted to offer $300 billion more in new guarantees to help refinance distressed mortgages that banks and mortgage holders have agreed to significantly write down.

if it's significantly written down, then perhaps it's not the worst that can happen. of course is depends on the meaning of "significantly"

It's not the worst that can happen, I agree. Much worse things probably will happen. Soon.

But as Jim Rogers points out in the interview I posted on the news links just now, financial institutions have been going bankrupt since the beginning of time. The US will recover -- but only if we let the irresponsible institutions fail. Otherwise, we are doomed because bad decisions will never have bad consequences for those who perpetrate them. Only bad consequences for savers and taxpayers.

but only if we let the irresponsible institutions fail.
I agree which is why I liked how Bear was 'put down'. I expect they will repeat the same with a few others.

Fox News local 6 here just announced "predatory lending, it fueled the mortgage mess. Now arrests are being made."

Like everything else, it's going to be the little guy who barely speaks English who gets to take the penalty for the real kingpins. It's just like the drug trade.

OT

For those who want to park physical gold at Perth Mint with depository services, a program that I recommended more than 6 months ago, the minimum investment limit has drastically risen for foreigners. When I started 8 months ago, they were only asking for US$100K per account to open. Now they are asking for US$250K. The requirement was, you needed to fund your account within 3 months for at least $100K to stay current.

If anyone is serious about holding PM at a Mint, he should hurry ASAP. I won't be surprised that the account requirements for all PM dealings will rise significantly given the rate of USD depreciation and soaring interest in alternative investment to hedge inflation.

Australia also charges no tax at all for PM holdings.

coretexity Says:
March 18th, 2008 at 7:09 pm
"Cramer just declared that we’re at a bottom coz FRE and FNM can issue 100B more in mortgages, and “your house value will not go down any further”."

Wow we should all run out and buy something cuz he said it was alright. Man I wish someone would shut that bag of air up. He is useless. How in the world does he still have a show?

Bear Stearns has essentially failed and the Fed is orchestrating an orderly continuation of their maket functions while allowing the owners/officers to lose nearly everything. Perhaps they should have lost 100% - but going from share price of more than $160 a year ago to a $2 fire sale is a huge loss that others like them will notice. Losing losing 99% is not much better than losing 100%.

So we will spare these reckless people 1% in order to reduce the potential for heightened panic in the financial system. Probably an ok trade-off.

So we will spare these reckless people 1% in order to reduce the potential for heightened panic in the financial system. Probably an ok trade-off.

Who pays for the 30 billion non-recourse loan?

cb :

You said it ! Zephyr is giving an incomplete picture. I have no problem is bailing out financial institutions if it's going to save the world from going down in flames. But the truth is the world will not go in flames even if a few major banks fail. We are so freaking afraid of any pain that we have lost our senses. These FUD tactics are disgusting.

So please educate me. Where is the Fed getting the money to sponsor the 30B loan gift they gave to JPM ?

We are so freaking afraid of any pain that we have lost our senses.

Pain? Think knee surgeries. Who are the main customers?

Where is the Fed getting the money to sponsor the 30B loan gift they gave to JPM ?

Ever heard of the Infinite Hotel?

In infinite series of "loans" can solve any liquidity problem without "actual" money creation. ;)

My comment relates to the 1% / $2 per share going to the current owners of Bear. It could be argued that they should get nothing. But they would never agree to that, and would instead insist on a bankruptcy filing to hope for $6 or $8 per share of salvage.

The 30B is another matter, and it is an additional risk taken on by the Fed. But it is a risk that would become much larger if Bear were allowed to go into banruptcy.

In the absence of a deal Bear was expected to file for bankruptcy, and that would have caused a run on the other similar firms. Such a run is still possible, but less likely for now. The damage from such a wider run would be would dramatically greater than the potential loss from Bear alone.

So the Fed is playing a strategy of damage control. There is no hope of having no costs from this mess.

Just like when a building is burning, and the fire department must respond. It will cost money to respond. And they will rescue everyone from the building, including the fools who started the fire.

To ignore the Bear meltdown would be like letting a building burn with no fire dept response. This may sound morally right as respects the negligent/reckless owners of the building who caused the fire. But what about the adjacent buildings, and the other tenants in the building?

Zephyr :

Completely wrong analogy. It's exactly these FUD tactics that I am against. It may be worth to bail out BSC, but this fire analogy is wrong. Bailing out corrupt, incompetent business is same as saving lives trapped in an accident ? This is bordering on intellectual trolling.

Whenever a business shuts down, it has -ve effects. People lose jobs, it create uncertainty in customers minds, may create a temporary deflation for the goods sold by that business or whatever. So what ? So f*cking what ?

What do you think this bailing out does to the premise of capitalism ? What damage does it do to risk assessment responsibilities ? What damage does it to the society when the currency is damaged ? Common, you know better.

There is this cost of bailing out as well. Not saying it outweighs or not. But ignoring it using FUD tactics is what I am pissed about.

Bear Stearns will cease to exist. Its sharholders will get $2 per share. If they were allowed to completely fail in the usual sense they would likely get more than that. They would be better off if the Fed did not "bail" them out. However, Bear Stearns is a clearing house for securities transactions. If they file for bankruptcy the entire clearinghouse system will freeze up as everyone becomes afraid to trust the other similar firms. The destructive implications of such a panic are what has brought the Fed in to this situation.

The Bear shareholders think they are getting screwed. If their firm would salvage for more than $2 per share then they are getting screwed. But they deserve it for being so reckless.

Every time I write Senator Feinstein she emails me a canned response bragging about her support of the stimulus package. Somehow, I don't think I'm making much headway.

The Fed action on Bear is hardly a bail out of Bear. It is a substantial but only partial protection to JPM for taking on the risk of buying Bear Stearns.

It is much like the forced merging of banks/S&Ls during the Bank/S&L crisis of the late 1980s, when failing banks/S&Ls were bought by stronger ones with government guarantees. These guarantees were needed because nobody would buy the failing firms otherwise. It was done to mitigate the expected losses.

I can see bailing out airlines,railroads (sort of) but to bail out the financiers for day trading leveraging currency manipulating 'clients'? Makes no sense except the people who are in charge of the bailout lockbox are in the same club of money/paper pushers.

why dont they bailout failed web 2.0 startups?! that I could really get behind! come on bay aryan techies, lets put together a start up bailout buyout lobby!

Surely the federal reserve could pay more for Yahoo than MSFT will. Such a low valuation of a dot com could cascade to other dot coms and destroy the entire webconomy - it must be stopped! Just look at GOOG,Apple shares lately hhheeelllppppppp tthhheeemmmmm.

I'm afraid that writing ones senators has an effect of exactly zero, unless one attaches a very fat check to the letter.

The main problem with US politics is a complete lack of meaningful competition, which in turn is a function of the two-party duopoly caused by our election system.

I agree with justme (March 19 @ 1:14 am). A well-healed lobbyist might spend $30 million bribing members of Congress to get a handout or tax break worth $300 million -- a 10-fold return on his/her investment. But the average cost to the rest of us is only about one dollar, which isn't enough to motivate many of us to complain.

Our only protection is the Constitution, which authorizes virtually none of what the lobbyists ask from Congress. Unfortunately, neither the President nor members of Congress pay any attention to the Constitution (Ron Paul is a noteworthy exception).

I fear that, until and unless we're prepared to arm ourselves and march on D.C., we will remain powerless to prevent the criminal acts of the White House, Congress and the Federal Reserve.

The maximum check allowed by law is $5,000. To get any real attention you must personally deliver checks from many people. It is nearly impossible for an individual person or firm to compete with the well-financed lobbyists in Washington.

To have any influence the argument usually has to be based on a good understanding of the situation. An ill-informed reactionary rant will not have influence unless the politician sees that a multitude of voters share the same incorrect beliefs. In which case he may pander to the public emotions and champion an unrealistic "solution" for the sake of gaining popularity.

Mgonsior and Zephyr (long time no see),

Indeed, but do you see the connection between the corruptibility of Washington and the election system that we follow?

The need for campaign funds make the politicians more receptive to well-financed lobbyists. Ultimately the politicians must answer to those who put them in power - the voters. However, if they were not elected they would answer only to other politicians, and would be far more corrupt.

Our system is corrupted by the size of the campaign budgets needed. The idea of being able to present your case to the senators and congressional reps is a good one. But with so many seeking their time, it is hard to get their attention without being a source of money or a source of expertise on a subject they are working on.

I have met with various congressmen and senators over the years to advocate certain issues in this manner. Being a CEO in the financial services industry, I am most interested in Senator Dodd. I never skip an opportunity to meet with him.

Dodd understands how the financial system works, and is sensitive to issues presented by industry experts. But he is a man of principle and is most concerned about the little guy. I think he is secure enough to not be corruptible.

justme: Yes, our election system has been completely corrupted. I am a strong proponent of repealing the 17th Amendment and eliminating popular presidential elections, as the founders intended (see Federalists 62, 63, and 68). This would break the power of the present duopoly. It also would eliminate the need for long, expensive campaigns (which, of course, the TV networks would hate because of all the advertising money they'd no longer receive).

Even so, no matter how they are elected, I don't know how we can make politicians respect their oaths to uphold and defend the Constitution. In theory the federal judiciary has the power to "say what the law is" and strike down unconstitutional acts of the Executive and Legislative branches (see Federalist 78 and Marbury v. Madison) -- but it's almost impossible for ordinary taxpayers to gain standing to sue in federal courts.

Zephyr: I hate to disagree, but Dodd is one of the biggest culprits. He and Barney Frank, among others, are doing all they can to keep the housing bubble from deflating.

Senator Dodd clrealy does care about the average working american. Here is a link for more info on how Senator Dodd views the current situation:

http://banking.senate.gov/

Msonsior, He is doing what he thinks is best for the average american. You and I might prefer a different course of action, but he is sincere in his beliefs and actions. And what he advocates probably would ease the pain for most people who are in difficulty. The question is at what price and who pays.

I am fairly confident that I am among those who will pay the most, no matter what solution the government will fund.

I would prefer to let the reckless business and foolish speculators go bust. Let Bear Stearns go bust, but protect the clearinghouse function because it affects so many other people. Lets the housing flippers choke on their upside down positions. Let the people who lied to get mortgages suffer the consequences of their foolish an immoral behaviour. Let MBS buyers lose some of their principal that they foolishly invested without proper due diligence. Let the overleveraged firms die from their folly.

But do all this with a contained burn, not a run away fire storm that engulfs the rest of us.

Zephyr: A lot of the so-called average working Americans bought houses they couldn't afford by exaggerating their incomes, figuring they'd be able to "flip" them for big profits before their mortgage interest rates reset higher. It's convenient for Dodd to claim he's looking out for ordinary home buyers, but the intended beneficiaries of his largesse are the lenders.

If lenders and borrowers want to voluntarily renegotiate their mortgage contracts, that's fine with me; but the government should have no involvement whatsoever. Nor should the Federal Reserve be rescuing anyone (indeed, the Federal Reserve should be abolished).

mgonsior,

So you are saying the president should be elected by congress, meaning in essence a parliamentary system? That would certainly help.