interesting article on the housing mess.

#2
#2
It's a valid point of view, but would take forever in working itself through the system.

What we're talking about doing isn't without precedent. It has worked well in the past.

Large scale bankruptcy is asking all of the stockholders to write their positions to 0. That's a large pile of invested capital squandered. Much has been squandered to date, but nothing like this would cause.
 
#5
#5
VolsNSkinsFan said:
Nice and easy to fire off a commentary from the comfy confines of a professors office in Harvard. But when we are looking at the demise of entire counties, it takes a new meaning
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It seems to me that the professor has a pretty strong handle on the situation. Many proponents of the bailout deal prop it up by saying that the Fed will MAKE money on it... if that is the case, why not let the free market work that out, then?
 
#6
#6
rwemyss said:
It seems to me that the professor has a pretty strong handle on the situation. Many proponents of the bailout deal prop it up by saying that the Fed will MAKE money on it... if that is the case, why not let the free market work that out, then?
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because the free market doesn't have the time to get allow for anything but a blood bath.
 
#7
#7
Nobody has more expertise in the area of investing and finance then Warren Buffet. When he came out in favor of a bailout plan, that was enough for me. The differing viewpoints are interesting though, food for though.
 
#8
#8
oklavol said:
Nobody has more expertise in the area of investing and finance then Warren Buffet. When he came out in favor of a bailout plan, that was enough for me. The differing viewpoints are interesting though, food for though.
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I'm with Warren over most anyone, especially when his own capital is in the deal.
 
#9
#9
rwemyss said:
It seems to me that the professor has a pretty strong handle on the situation. Many proponents of the bailout deal prop it up by saying that the Fed will MAKE money on it... if that is the case, why not let the free market work that out, then?
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because a free market doesnt exist right now.

Its a bunch of sellers looking around for a buyer, but none exist
 
#10
#10
oklavol said:
Nobody has more expertise in the area of investing and finance then Warren Buffet. When he came out in favor of a bailout plan, that was enough for me. The differing viewpoints are interesting though, food for though.
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He said if he had the cash required to do the deal, he would
 
#11
#11
VolsNSkinsFan said:
because a free market doesnt exist right now.

Its a bunch of sellers looking around for a buyer, but none exist
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According to this professor, there are buyers, but they value the assets much lower. The potential sellers are holding onto those assets, hoping the Fed gov't will come up with this deal and give them a higher value.
 
#12
#12
rwemyss said:
According to this professor, there are buyers, but they value the assets much lower. The potential sellers are holding onto those assets, hoping the Fed gov't will come up with this deal and give them a higher value.
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which isn't ridiculous. It's not the gov't values are even remotely approaching market values.

The buyers out there today are bottom feeding funds who are bidding in the $0.30 and below range, looking to flip to another flipper for a quick 20% pop, including exorbitant fees.
 
#13
#13
BigPapaVol said:
which isn't ridiculous. It's not the gov't values are even remotely approaching market values.

The buyers out there today are bottom feeding funds who are bidding in the $0.30 and below range, looking to flip to another flipper for a quick 20% pop, including exorbitant fees.
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So what's wrong with that? The holders of these assets (money markets, banks, whoever) took this risk... I don't see why they shouldn't pay the piper on their failed risk... I've heard that it is like those risk takers are holding a grenade, and the rest of us are going to get hit by the shrapnel... but it seems that a bailout would reward the risk takers instead of penalize them for their failures. Which is a crock. It is like someone playing poker, losing all their chips, and getting paid millions anyway.
 
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#14
#14
rwemyss said:
So what's wrong with that? The holders of these assets (money markets, banks, whoever) took this risk... I don't see why they shouldn't pay the piper on their failed risk... I've heard that it is like those risk takers are holding a grenade, and the rest of us are going to get hit by the shrapnel... but it seems that a bailout would reward the risk takers instead of penalize them. Which is a crock.
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but again, the risk all originated with Fannie and Freddie. The misconception is that the guys holding the paper took the risks. They only did it based upon an implicit guarantee of the gov't. That's how underwriting went to absolute crap.
 
#15
#15
rwemyss said:
According to this professor, there are buyers, but they value the assets much lower. The potential sellers are holding onto those assets, hoping the Fed gov't will come up with this deal and give them a higher value.
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yeah a bunch of people have set up distressed mortgage funds. pimco and others. not nearly enough of these buyers to create a floor though.
 
#16
#16
BigPapaVol said:
but again, the risk all originated with Fannie and Freddie. The misconception is that the guys holding the paper took the risks. They only did it based upon an implicit guarantee of the gov't. That's how underwriting went to absolute crap.
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So your point is that the government created this garbage with bad legislation 40 and 30 years ago (respectively)... combined with how the creation of these gov't backed institution forced the free market lenders to do the same thing to be competitive... ???
 
#17
#17
rwemyss said:
So your point is that the government created this garbage with bad legislation 40 and 30 years ago (respectively)... combined with how the creation of these gov't backed institution forced the free market lenders to do the same thing to be competitive... ???
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Not exactly. I think the bad decisions happened throughout the 90s with a huge push toward moving masses into home ownership. It was clearly being driven by Fannie and Freddie and was a part of the agendo of the leaders of those outfits plus the oversight committees.

There was no forcing of other lenders. Lenders essentially lend the money using Fannie and Freddie underwriting standards, with the implicit agreement that Fannie and Freddie will make good on any note they've underwritten. That implied guarantee removes the underwriting from the process and these enormous CMBS pools are generated. Those pools become heavily traded bonds and all of the Wall St. make a market in them. As the bonds begin to perform worse and worse, due to defaults (which Fannie and Freddie to not make up for), the value of the securities drops to the floor. When those securities have no demand, they essentially have no value. Writing down the market value of those bonds has been what has murdered the capital of the finance industry
 
#18
#18
Jeff is a very smart man and a great economist. He has more knowledge on this matter than anyone the Congress is listening to. He is also a Milton Friedmanite the Greatest Capitolist and Economist to ever grace this planet. Jeff is spot on.
 
#19
#19
rwemyss said:
According to this professor, there are buyers, but they value the assets much lower. The potential sellers are holding onto those assets, hoping the Fed gov't will come up with this deal and give them a higher value.
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Exactly and that is what a free market is. Any product is only worth what the market says the product is worth. Now we have people trying to get the Government to set the value.
 
#20
#20
VolBeef88 said:
Jeff is a very smart man and a great economist. He has more knowledge on this matter than anyone the Congress is listening to. He is also a Milton Friedmanite the Greatest Capitolist and Economist to ever grace this planet. Jeff is spot on.
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The greatest Capitalist to ever grace this planet, is Warren Buffet. He started off with a newspaper route to become the wealthiest man in the world, completely self-made. Most of which he plans to donate to charity.

Jeff doesn't have more knowledge then Warren Buffet, I guarantee you that. Buffet has already came out publicly in favor of a bailout.
 
#21
#21
oklavol said:
The greatest Capitalist to ever grace this planet, is Warren Buffet. He started off with a newspaper route to become the wealthiest man in the world, completely self-made. Most of which he plans to donate to charity.

Jeff doesn't have more knowledge then Warren Buffet, I guarantee you that. Buffet has already came out publicly in favor of a bailout.
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What about Bill Gates? Don't confuse being very good at what you do as being all knowing about Capitalism and understanding economy of scale. WB is a brilliant business man but he is no Milton Freidman.

Also I find it funny that liberals hate successful businessmen until they need them to prove a point.
 
#22
#22
oklavol said:
The greatest Capitalist to ever grace this planet, is Warren Buffet. He started off with a newspaper route to become the wealthiest man in the world, completely self-made. Most of which he plans to donate to charity.

Jeff doesn't have more knowledge then Warren Buffet, I guarantee you that. Buffet has already came out publicly in favor of a bailout.
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If being wealthy is all the requirement. How about Chavez, The Sultan of Brunei or an Arab Prince or King? Or like I said Bill Gates. Not knocking WB but he is no Milton F.
 
#23
#23
VolBeef88 said:
What about Bill Gates? Don't confuse being very good at what you do as being all knowing about Capitalism and understanding economy of scale. WB is a brilliant business man but he is no Milton Freidman.

Also I find it funny that liberals hate successful businessmen until they need them to prove a point.
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Warren Buffet has a BS and MS in finance. He understand economics in theory and in practice. Bill Gates is a techonology/computer guru. Different hemispheres of expertise.

WB is a democrat. I guess in your mind he hates himself?
 
#24
#24
VolBeef88 said:
If being wealthy is all the requirement. How about Chavez, The Sultan of Brunei or an Arab Prince or King? Or like I said Bill Gates. Not knocking WB but he is no Milton F.
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Buffet is no Friedman. Macro econ ain't Buffet's focus, but to assume he's not stout there is probably foolhardy.
 
#25
#25
oklavol said:
Warren Buffet has a BS and MS in finance. He understand economics in theory and in practice. Bill Gates is a techonology/computer guru. Different hemispheres of expertise.

WB is a democrat. I guess in your mind he hates himself?
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To try and compare WB to MF proves a lot to me about your understanding of economics. Things are named after MF because he was brilliant. Things are named after WB because he donates money. WB has quite an ego but I think even he would agree that MF was the best ever.
 
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