patrick.net

Interesting highlights of the bail out :
- The bill would prevent courts from reviewing actions taken under its authority
- paulson says “not giving the execs their golden parachutes would be poisonous for the deal”
- new change suggests the inclusion of instruments such as car and student loans, credit-card debt and any other troubled asset.
- Paulson who wants absolute and unsupervised control of this bailout is not an elected official and is a former ceo of goldman sachs.

What do you guys think about buying brazilian bonds? You get 15% interest in an appreciating currency. Whatcha think?

They are not socialists, socialists, however misguided they are, believed in a common good for the public. These guys are only interested in lining the pockets of their cohorts in Wall Street and Defense contractors.

I dislike soc ialism too but what we have here is kleptocracy. Or Fascism if you will.

Um, has anyone noticed that Dodd and his Democrat buddies are the ones talking about purchasing stock in GSEs and otherwise bailing out Wall Street's richest participants? Not surprising, as NY is a huge blue state, but why complain only about the Republicans here? At least the Republicans are in favor of wiping out the shareholders, hedge funds and MBS holders.

I'm not really defending the Republicans, but the Democrats are also proposing very fishy things here. Which I suppose means that the U.S. is pretty severely screwed... but we knew that already, right?

Umm... I think you misspelled "Sociopaths".

Social1sts are not this crooked.

Hang Paulson!

Well, holy shit. Goldman Sachs and Morgan Stanley are both approved to become commercial banks. Their jurisdiction changes from the SEC to the FED, and they get access to the $700,000,000,000 credit line.

Pay no attention to the man behind the curtain!

I Like Ike.

B

O

OM

ER

People used to count on increased wages in five year's time, when figuring out how they could afford a house payment. Now incomes are declining. That certainly affects affordability, and that should be mentioned when discussing this mortgage mess. Now, people are lucky to have a job for five years. This is thanks to the same people who we are now bailiing out, who worked so dilligently to make sure that jobs were shipped jobs overseas.

They are not socia1ists. They are fear-mongers.

They pushed us into a war by scaring us about phantom weapons of mass destruction. Now they are scaring us again about financial weapons of mass destruction. And we are always supposed to give them blank checks and surrender any chance of oversight.

I am not a democrat and I never liked Clinton. But I will prefer Clinton screwing fat interns in the oval office over these shameless fraudsters who are gang raping the entire country.

And to those republicans who might feel offended by comments - remember, the current administration is hardly republican and definitely not conservative when it comes to fiscal policy.

The current administration is a nest of neocon vipers. Not republicans.

By the way, here is an account (source: http://tinyurl.com/4kjrte) from someone who purportedly was at the private conference call between Hank Paulson-of-a-bitch and the House Democratic leadership. If true, I hope they have the balls to impeach the bastard and hang him for treason.

"Behind closed doors, Paulson describes the plan differently. He explicitly says that it will buy assets at above market prices (although he still claims that they are undervalued) because the holders won't sell at market prices. Anna Eshoo pressed him on how the government can compel the holders to sell, and he basically dodged the question. I think that's because he didn't want to admit that the government would just keep offering more and more."

PDCF? Anyone? Anyone?
Close it down... Mission accomplished.

Home affordability improvement program on its way:
"We've been focused on homeowners for a long time, working to avoid foreclosure," he [Paulson] said. "It sure seems to me that, as we buy these mortgage-backed assets, we will have much more leverage in working on the kinds of programs we need to work on."

"The fact of the matter is the cause ... it isn't just an effect ... the cause of this problem is still the foreclosure crisis," Dodd said. "So it needs to be part of the solution. That's not to clog this up. We need to act quickly and deliberately, and we will."
Quotes courtesy of ABC News.

I beg to differ, Republicans are NOT socialists, the current crop are fascists.

let me repeast, FASCISTS.

Mueller here, the PDCF, uh, anything to do with Great Depression?

TOB,

communist Russia had free medicare for everyone.

It would be a compliment to the current admin if they could match communist Russian economic performance. No kidding.

It is not just about housing.

This country is manufacturing serfs, serfs who are tied to their jobs because of medical insurance, tied to their house because of mortgage and tied to their neighborhood because of schools.

Once our citizens lose our financial freedom because we are so indebted, lose our hobby because we are preoccupied with holding down a job, and lose our choice of neighborhoods because we have to give our kids a head start, what is there left for us? Upward social mobility? If you are burdened so much in your daily chores, what energy do you have left for striving to be better?

This is the American serf in the making. The first step of making a freeman a serf is to burden him with debt. Done. The second step is to strip him of all necessary infrastructure (including medical insurance, education, home) UNLESS he is readily complying with whatever the employer wants. Done.

What is the last step? Changing the school curriculum so that we really start to generate young serfs in a large scale, the parents are both working to pay off their mortgage and hold down the medical insurance for the family, and they are too busy to bother with what the schools are teaching.

America will change forever. We will change from having the largest middle class on earth to having the largest modern day serfs. We are walking the road to serfdom.

svcowboy,

gold is your insurance, do you trade your insurance day in day out?

Don't spend more than you can afford on gold, we know USD crisis is a matter of when not if, but we don't know when. Only put away the amount that you don't think you will use to get by daily living. The usual rule of thumb is 5-10%, but it is really up to your personal financial situation, I would air on the conservative side.

Buy physical. Futures will be worthless if your insurance pays off. If your insurance doesn't pay off, your 5% will still be worth something. When you buy physical bullion, stop looking at the daily fluctuation, do you look up the projected present value of the discounted cash flow of your insurance policy every day? Put your gold aside, and feel assured if the worst were to come, you would not lose everything. If the worst doesn't come, even better.

In the kid's movie "Cars" Paul Newman tells the race car, "If you're going hard enough to the right, you'll find yourself turning left."

Here's an excerpt of Martin Weiss's analysis of future potential bank failures:

"How many more? We believe a more accurate count comes from our analysis of: (a) the derivative risks assumed by major banks, (b) the mortgage holdings of the largest regional banks and (c) all banks and thrifts with TheStreet.com's financial strength rating of D+ (weak) or lower. Based on this analysis, we believe:

1,479 FDIC member banks are at risk of failure with total assets of $2.4 trillion.

In addition, 158 savings and loans are at risk with $756 billion in assets.

In sum, banks and S&Ls at risk have assets of $3.2 trillion, or over 36 times the assets of banks on the FDIC's watch list."

I don't know, does socialism sail on the Titanic?

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.