patrick.net

Paul - I cannot reach it either. In a way it is good because it means that a lot of people are interested in finding out the details instead of watching ESPN and playing XBox.

indianguy -

1) The $85B is not to cover the obligations, it is to provide liquidity so that AIG can meet the new reserve requirements which need more $$ because of LEH bankruptcy and overall downgrade of financial companies' bonds by Moodys/S&P. There is no freakin amount that can cover their obligations :)

2) They played at a huge leverage (1:30) so again, they'd go bankrupt now or later if the situation stays same or deteriorates. What can prevent the lights out is the mortgages that are bundled go up in value (to the 2006 levels) which seems impossbile to me. However, this 700B bailout and short sale ban seemed impossible to me too, but look what happened.

Here is the Bill in PDF form.

http://i.cdn.turner.com/cnn/2008/images/09/28/ayo08c04_xml.pdf

All you've got to do is get a margin account at Golden Sacks, and then leverage into GS stock.

Not investment advice.

http://i.cdn.turner.com/cnn/2008/images/09/28/ayo08c04_xml.pdf

This doesn't work either.

Wow, the discretion left to Paulson (aka. The Secretary of the Treasury) is staggering. There are holes in that document that you can sail a aircraft carrier and two battleships through.

Now I'm REALLY frightened.

For example (page 32 lines 10-22),

if (auction-based purchases) AND (the total is above $300M)

EVEN THEN

only entering into NEW golden parachute agreements is forbidden

AND

there is a 2-month window for making new golden parachutes anyway, because the secretary is not required to issue the order until 2 months after the transaction closes.

This is INSANE.

(I'm worried the indentation will not survive when I hit submit, but what else can I do).

CORRECTED:

For example (page 32 lines 10-22),

if (auction-based purchases) AND (the total is above $300M)

EVEN THEN

only entering into NEW golden parachute agreements is forbidden

AND

there is a 2-month window for making new golden parachutes anyway, because the secretary is not required to issue the order until 2 months after the law is enacted, and such law shall be effective upon issuance .

(I’m worried the indentation will not survive when I hit submit, but what else can I do).

Did you guys see the Ads by Google?

Learn To Be Rich

Gain Profits from Real Estate. Train in in San Francisco. Oct 14-16

They never learn.

justme, we all know that those executives will be spared. There is no question about that. The bailout is outrageous.

As I have said before, capitalism without failures is the worst form of socialism.

God help us.

Good article to read:

http://financialsense.com/stormwatch/geo/pastanalysis/2008/0926.html

It is the aversion to necessary depressions that caused the whole mess. Can we blame democratically-elected officials? Or should we blame democracy itself?

In any case, capitalism has not failed us. We have failed capitalism.

The whole point of recapitalizing the thieves at GS and MS is to enable them to buy assets on the cheap during the ensuing depression. This will be the new business model on Wall St.

The whole point of recapitalizing the thieves at GS and MS is to enable them to buy assets on the cheap during the ensuing depression.

As will cash rich foreigners.

If you are correct in your assessment, maybe those Americans who have savings can get in on the "cheap" asset buying as well.

Do remember though, that the gov is busting its butt to keep asset prices (stocks and houses) high. The recapitalization is intended to keep those prices high by enabling easy credit to continue. So it would be a betrayal of sorts for the "bailees" to hoard that money to buy assets, rather than use that money to enable loans.

Headset, the problem is that sovereign wealth funds (and Buffet) are purchasing preferred issues, meaning that the big money moves are way out of reach of us plebeians. And you've just got to know that there are a lot of insider moves here, because those guys have access to people and information way outside the public eye.

HeadSet,

Pelosi may think she is busting her butt to keep asset prices up, whereas in reality she may just be recapitalizing GS and MS so that they can participate in the for sale.

I'm not in favor of either one of the motivations.

for sale == fire sale

What the heck is going on?

Every link I find on the Internet to the draft bailout bill won't open with Adobe Reader. You get an error message about some kind of error.

Brand,

I did not mean to imply that middle class savers could compete with the big boys. Only that if we have a depression, savers may be able to pick up stocks and houses on the cheap with their ready cash. Stocks like Ford that may fall to $1 yet survive a depression (especially with a bailout) to pay a good return. Savers could also pick up depressed rental houses that could pay well after a recovery.

Justme,

We agree, you just said it better. I meant to infer that it is the gov who would be "betrayed" if the bailout funds were hoarded to buy firesale assets rather than enable loans.

The taxpayers were betrayed when the bailout bill was not killed.

Every link I find on the Internet to the draft bailout bill won’t open with Adobe Reader. You get an error message about some kind of error.

ME TOO!!

Media blackout anyone??

I can open the bill. The link I posted earlier is from cnn.com.

The bill did say that California assets are not elgible for the buy program because they caused 70% of this problem. Maybe only poeple in California can't read it because of the section throwing California under the bus ;)

http://www.nytimes.com/2008/09/21/business/21draftcnd.html

Text of Draft Proposal for Bailout Plan

Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

They were gonna throw Phoenix under the bus, but then Congress decided that the Bay Area is far more special.

Fortunately, Hank Paulson will have the power to determine what constitutes the Real Bay Area; I believe the CAR will be assisting in that endeavor.

snmr, it seems that the new Section 119 (Judicial Review) significantly alters Hanky Panky's wish for unlimited power.

Headset, I understand the sentiment, but ultimately any quality company that gets on the ropes is going to issue preferred shares, high-yield bonds or additional common shares to raise capital. Just wait to see what the banks buy once we purge the crap from their balance sheets... the survivors will be making some sweet, sweet deals.

Brand Says:
"Section 119 (Judicial Review) significantly alters Hanky Panky’s wish for unlimited power"

Thanks for the update.

If history is any guide, unlimited powers in one hand have always ended with regret.

Asia down, futures down - I cant wait to see the next bunny they pull from the hat to keep the markets propped up.

When asked whose children would be participants in the program he declined to comment.

Don't worry. No child will be left behind.

Neutron,

You are joking, right. There is no mention of any states or geographical areas in the bill
afaict.

I have read Patrick.com for a long time. This blog used to be a lot of fun for me. It was like warning about a tsunami that you know was going to come, and watching the idiots in denial. Frustrating, but there was a sense of being contrarian, and of knowing that they will get their come-uppance. Then house prices started to fall, and it was great fun.

But now the tsunami is really upon us, it's about 100 ft high, and everybody is in its path, including your children, and its not fun any more. For some of you perhaps, but not for me.

Now may people here, Taxpayers all, are pissed about the bailout package. Absolutely indignant. How dare they take MY money when I didn't have anything to do with this mess. But who are the "taxpayers"? Real-estate agents who made out like bandits are taxpayers. So are the lenders. And the house-builders. And the contractors who had many years of great business because lots of people got HELOCs to renovate their homes. Also the restaurant owners who made out since everyone felt rich. Even waitresses, bartenders. Cruise line workers. Disneyland new hires and high school summer workers. Bank Tellers. School janitors who got extra overtime because the district was flushed with property tax money. And I dare say many of the people who have posted here.

In short, MANY, EVEN MOST people had a good economic time over the last several years, not just the evil investment bankers and real estate speculators. Now these self-same people are joining the chorus of "Unfair, Unfair". But is it really unfair? You could have said at any time over those go-go years that this ain't right, this is blood money, renounced your citizenship and moved to a commune in say, Argentina, but you didn't. You chose to stay in the United States to partake in the mana, and in doing so you threw in your lot with the fate of everyone here. So now the tsunami is here. Is now the time the be screaming crap, crap, crap, what a crappy country, crappy government, and woe is me that I have to bear with such unfairness in my life? And I will call my Republican Congressman (who you never thought of calling before to warn about the shady practices you just knew were going on for years) and make sure that whatever they do (I don't really care) just don't get me involved or I'll vote you out of office?
Like I said, this blog is not fun anymore. The people that we laughed at before are gone. I have this awful feeling that the only people left to laugh about are ourselves.

You could have said at any time over those go-go years that this ain’t right, this is blood money, renounced your citizenship and moved to a commune in say, Argentina, but you didn’t. You chose to stay in the United States to partake in the mana,

Just because I didn't leave the country and not renounced my citizenship means I chose to partake in this mania.

You are a fuckin' idiot, Marina Prime.

Let me be FRANK fellow blogmates,

start planning your exit strategy. If you haven't started yet, get a plan now, if you have already had a plan, focus on the execution.

First of all, we are in a very lucky window that USD is propped up for a strange reason, lack of USD to cover the debt, so take advantage of the last window of the "strong dollar". We may head directly from strong dollar to a dead dollar. Either they print enough to cover the debt, or they cannot print fast enough and there will be a total collapse caused by capital flight. Lots of foreigners I talk to recently who have their money in the US capital markets are very eager to pull out. It is not just about the economy, they have lost trust in the system.

Second, at some point, this country will impose capital and exchange control. I have seen this done in desperate countries when every single penny is fleeing at the same time. This day will come. Get your money outside of the US jurisdiction, before others wake up. In the Argentine crisis, the government put a ban on foreign repatriation of funds (very painful for HSBC Argentina operation) and forced citizens to convert their USD to local currency at 1:1. If you have FXE, FXY, FXwhatever, they are crap, convert into real FX and put in an account sitting in a foreign land. It is ok to transfer fund around right now, but such an option may soon expire.

I will raid all my retirement accounts, bite the tax bullet and move them overseas, put in Swiss Franc or Euro. I won't retire in the US, and I believe the tax rate in the US has only one direction to go. If you are young and have no capital to preserve, start downloading immigration forms NOW, because you will be facing lots of competition in another 12 months, get your immigration papers, and you will have about a year to determine whether you want to land. All you lucky green cards out there, do NOT become US citizen, be happy with your green card that you can give up any time without any financial consequences.

Btw, out of all the countries that are said to be doing worse than us, I think UK is the only pathetic ass that can completely disappear and leave no impact to the overall well being of the human kind.

Finance is like 2/3 of UK's GDP, what kind of loser country is that? The only productive job for that friggin freezing island is pushing paper? I don't buy the propaganda that the rest of the world is doing worse than the US, but I do buy that UK is worse, that is one currency with a more deserving position in hell than us.

TOB,

they are smarter. Look at what we got, I cannot even leave the country to the banksters without paying a huge up front exit cost. It is worse than divorcing your wife.

TOB,

I agree with you on the retirement thing. I took a loan out paying no penalty and taxes to give the the remaining money I need to buy some land outright with cash. It is only 2 miles from a town and 6 miles from my work. I have no choice but to live in the country because they just do not build power plants near large cities.

I am not running away because I don't see another place to go. I would like Australia if they had nukes. Ohh well, I will be here for the long haul.

This Tsunami of debt is only the first wave. The second wave is always larger and it will be the "End of Cheap Oil" Tsunami. We will never run out of oil, but we will not have enough cheap supplies to go around. The unconventional oils will beable to make up the gap only if oil gets VERY expensive. These people in the SE bitching about there being no gas have no idea how good they have it now. When you have to pay $20/gallon of gas what are they going to do?

Hey Dennis - glad you are here. I have been worried about you.
As the anti-surfer X, I both hate swearing and am very worried about our retired boomers. I feel I can recover from this economic crises, but wiping out the savings of a lifetimes worth of work - wow! Are you starting back into law? Or have you found a way to safeguard the value of your savings?

Is DinOr around?

Nancy Pelosi.
I am not sure what to say about her.
EVERY SINGLE CONGREESMAN states their constituencies are overwhelmingl againstthe bailout, including Feinstein and Boxer. All of them state 75% are against and many/most state 99% against.

And then Nancy states 73% are pro-bailot in her constiuecy.

Well, her district is 4/5 of the city of San Francisco. And they do have a big financial district there. So, maybe?

But I suspect she is simply lying. Lying as easily as she breathes air.

What is the minimum elegibility requirement to be allowed to vote in her district? Can I rent a cardboard box, and claim I live in it so that I can vote/ Pelosi needs to go from Miss Speaker, to Miss Out-of-a-Job.

Fire Paulson.

Interesting to see that the Wachovia (WB) purchase by Citigroup is "aided" by a guarantee from the FDIC that partially covers losses on the WB loan portfolio. Note that the guarantee was given against $12B in preferred stock.

Was this a reasonable deal for the public? Did Paulson do the right thing on this one?

...and by the way, is this an unprecedented action by the FDIC, or has any similar guarantee occurred before?

TOB,

Don't forget rope and torches! With today's synthetic fibers, an angry mob can become very creative how they use the rope :)