non-partisan feelings on bailout

#101
#101
vol_freak said:
Some feel the long term consequences of the plan as written would be worse than what we may experience otherwise.



But at what cost? Putting the treasury and the fed above the law? Giving more power and control to the government? Allowing them to take the proceeds that they stand to make from this and use it to fund socialist programs?

I'm not claiming to begin to understand all of this but to me, there are bigger issues at hand here. I'm interested to hear thoughts of the details on this.
Click to expand...
the bottom line is that the gov't might never make a dime, but the are taking the remainder of the overhang off the lenders' heads so they have freed up capital to make loans again. The amounts already written down have simply been absorbed by the equity holders of the lending institutions. The gov't is taking the risk on the remainder. It's very, very similar to the workout from the SNL crisis, if not the same thing.

I misspoke. The gov't is unlikely to make money, but is unlikely to shoulder the loss that is being tossed about today. They are essentially buying a mountain of bad debt for $700 billion. Whatever they recover reduces that burden. Whatever they lose, is our burden as a country.

I think the gov't should very have to eat the vast majority of this garbage for allowing Fannie and Freddie to get us in this mess. The implicit gov't guarantee in all of the MBS portfolios is what allowed the problem to get to this magnitude. The gov't is complicit here IMO.
 
#103
#103
I think there is a reasonable chance as well, but not after swallowing the Fannie Freddie expense too.

Bottom line is that we're calling a fix for the Fannie / Freddie disaster a Wall St and Banks bailout, which it isn't in the least. The gov't is covering Fannie's rear.
 
#104
#104
BigPapaVol said:
I think there is a reasonable chance as well, but not after swallowing the Fannie Freddie expense too.

Bottom line is that we're calling a fix for the Fannie / Freddie disaster a Wall St and Banks bailout, which it isn't in the least. The gov't is covering Fannie's rear.
Click to expand...

Spot on..That's is what this all comes down to.
 
#105
#105
I'm hearing a lot of talk of a "great depression" type of event of nothing is passed, i.e. Jim Cramer. How many believe that would be the case?
 
#107
#107
oklavol said:
I'm hearing a lot of talk of a "great depression" type of event of nothing is passed, i.e. Jim Cramer. How many believe that would be the case?
Click to expand...

I think it would be bad but isn't the market correcting the error that was made?

This is a great lesson for every one about spending beyond your means......

I know someone is going to blast me for being too simple about it, but in the long run, I think falling on our faces is probably the best thing that can happen to this generation.
 
#108
#108
OrangeEmpire said:
I think it would be bad but isn't the market correcting the error that was made?

This is a great lesson for every one about spending beyond your means......

I know someone is going to blast me for being too simple about it, but in the long run, I think falling on our faces is probably the best thing that can happen to this generation.
Click to expand...

And those that follow.
 
#110
#110
oklavol said:
I'm hearing a lot of talk of a "great depression" type of event of nothing is passed, i.e. Jim Cramer. How many believe that would be the case?
Click to expand...

if they do nothing? 1 in 4 chance maybe? but a long recession would be inevitable IMO>
 
#112
#112
TheDeeble said:
And for those of us that haven't?
Click to expand...

You and I will go down with everyone else. In a sense we all have spent beyond our means through our government. We allowed them to spend and we must all pay the price.
 
#114
#114
droski said:
you get to pay for everyone else. welcome to our govt.
Click to expand...

I'm wondering what to expect. I'm kinda clueless about all of this and am wondering about my savings. It's not a massive amount of $$$, but it's a lot to me. It's not invested. Been sitting in a FDIC insured savings account drawing 1.2% interest.
 
#115
#115
OrangeEmpire said:
Like it or not, as citizens we have ownership of the country.

It is our problem......
Click to expand...

I realize it sucks for everyone involved.

I guess the lesson for those of us that didn't spend beyond our means is to smack the folks that are from now on.
 
#116
#116
TheDeeble said:
I'm wondering what to expect. I'm kinda clueless about all of this and am wondering about my savings. It's not a massive amount of $$$, but it's a lot to me. It's not invested. Been sitting in a FDIC insured savings account drawing 1.2% interest.
Click to expand...

Then your money is safe, however your bills are going to go up and your job may be in jeopardy.
 
#119
#119
TheDeeble said:
I'm wondering what to expect. I'm kinda clueless about all of this and am wondering about my savings. It's not a massive amount of $$$, but it's a lot to me. It's not invested. Been sitting in a FDIC insured savings account drawing 1.2% interest.
Click to expand...

it depends on what job you have and what industry. if we create a floor here, everything should be fine. if you are a money manager like me, just make sure you don't get fired. :dance2:
 
#120
#120
droski said:
you are buying these bonds at 65 cents on the dollar. insuring them would cost trillions more.
Click to expand...

I disagree unless you are assuming that ALL of the mortgages are going to default. You are comparing .65 cents on the dollar of all mortgages to insuring only ones that would default.

I don't understand, if treasuries are in such demand at 4% because they are guaranteed, wouldn't government insured mortgages be that same thing?

I just can't convince myself that they need to actually purchase all of the MBS on the market.
 
#121
#121
vol_freak said:
I disagree unless you are assuming that ALL of the mortgages are going to default. You are comparing .65 cents on the dollar of all mortgages to insuring only ones that would default.

I don't understand, if treasuries are in such demand at 4% because they are guaranteed, wouldn't government insured mortgages be that same thing?

I just can't convince myself that they need to actually purchase all of the MBS on the market.
Click to expand...
But the .65 is asset backed and would likely only result in some small loss.

Insuring only defaulted ones is problematic because you set up a system where default is a very good option for the lender. If he's getting his cash, he will default if at all possible, rather than manage the assets.

How does one provide insurance of this nature. Sort of a Statue of Liberty style statement about bring me your poor...... I just see the insurance route as a future fix and impossible to manage, when the market needs a fix today to clean off balance sheets.

The positive in funding the notes is that they're immediately identified and not some catch all for any defaults and the market knows how each lender has improved its capital position.
 
#122
#122
I have a question. What happened to the roadblock in place that if the market dropped below a certain amount it stopped trading for the day?
 
#125
#125
BigPapaVol said:
But the .65 is asset backed and would likely only result in some small loss.

Insuring only defaulted ones is problematic because you set up a system where default is a very good option for the lender. If he's getting his cash, he will default if at all possible, rather than manage the assets.

How does one provide insurance of this nature. Sort of a Statue of Liberty style statement about bring me your poor...... I just see the insurance route as a future fix and impossible to manage, when the market needs a fix today to clean off balance sheets.

The positive in funding the notes is that they're immediately identified and not some catch all for any defaults and the market knows how each lender has improved its capital position.
Click to expand...

The insurance would be asset backed. If they had to insure the default, they would take ownership of the asset just as if they purchased it.

I don't think it makes it easier for the lender to default. I think the same basic guidelines apply as to what they are doing now. The guidelines would require the borrower to be delinquent a certain number of days, and it could also require that certain steps be taken to work with the customer as most lenders are doing now.

The market does need a fix now, which to me doesn't mean selling assets to the government at greatly reduced prices. The fix is in the guarantee by the government. That doesn't necessarily mean they actually have to purchase all of the MBS on the market.

Selling all MBS (good and bad) at .65 on the dollar or whatever that number turns out to be, doesn't seem like it's the best idea. If the government is willing to buy them at .65 on the dollar doesn't that imply worth? What happens if those are now valued on the books at .65 instead of 0. Does that change anything? (Just thinking out loud)

I'm not sure how the insurance would work or even if it's possible. It's just a thought process as to another solution.
 
New posts
You must log in or register to reply here.

VN Store



Back
Top