non-partisan feelings on bailout

#127
#127
vol_freak said:
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.

they would, but how do I put a value on the package? If I identify the assets today and put a definitive value out there, I've essentially bought them anyway, so it's the same plan without the positive market impact of balance sheet clearing.

 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.

people are much more aggressive about assets they own. The gov't will incentivize the management companies in collecting payments. The lenders would go through the motions, but it would look different.

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.

The guarantee by the gov't already exists via Fannie, but it's not keeping the MBS' from being completely devalued. I just think the gov't guarantee is a future effect that the market won't take as well.

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)

It only implies liquidation value, but the gov't purchase allows the market to avoid the wholesale liquidation of assets, helping it to keep its value.

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.
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I actually don't think either solution is particularly different. It's essentially just semantics, but one does show an immediate tangible impact on the books of our lenders.

The bottom line is that the gov't is creating a vehicle to wipe out bad debt. The ultimate cost is going to be what it is, insurance or debt. I'm not really sure either road is better than another. In the end, we have federalized these losses and bought time to liquidate the assets in a more prudent fashion than what is available today.
 
#128
#128
they would, but how do I put a value on the package? If I identify the assets today and put a definitive value out there, I've essentially bought them anyway, so it's the same plan without the positive market impact of balance sheet clearing.
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But you are identifying the entire asset pool of all MBS. Any values are arbitrary at this point, on either solution. Where is this .65 number coming from? It can't be "a definitive worth", can it?

I think the market impact would be similar with either solution.

people are much more aggressive about assets they own. The gov't will incentivize the management companies in collecting payments. The lenders would go through the motions, but it would look different.
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I don't know, that seems speculative. Besides, couldn't the government assist with collection if they are insuring them as they could if they owned them?

The guarantee by the gov't already exists via Fannie, but it's not keeping the MBS' from being completely devalued. I just think the gov't guarantee is a future effect that the market won't take as well.
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I don't understand why this is? If this already exists how can they possibly be valued so low? I don't get it.
 
#129
#129
Thinking about it, I don't disagree that the insurance route could be managed to be effectively the same thing.

We're probably just playing semantics. If the gov't allows the banks to change their allocations for the problem assets, based solely upon the insurance plan, it's essentially the same thing.

The allocations are set so the FDIC can feel comfortable with its insurance position, so what's the difference? We'd still be talking in the same dollar figures and an oustized hand in the deal by the federal government, but the outcome would be the same, or pretty much so.

Again, I think we're talking sematics around a very similar solution.
 
#130
#130
BigPapaVol said:
Thinking about it, I don't disagree that the insurance route could be managed to be effectively the same thing.

We're probably just playing semantics. If the gov't allows the banks to change their allocations for the problem assets, based solely upon the insurance plan, it's essentially the same thing.

The allocations are set so the FDIC can feel comfortable with its insurance position, so what's the difference? We'd still be talking in the same dollar figures and an oustized hand in the deal by the federal government, but the outcome would be the same, or pretty much so.

Again, I think we're talking sematics around a very similar solution.
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Gotcha. Thanks for your insight on this BPV.
 
#131
#131
I for one am glad to see the bailout was voted down today. I hope it continues to be defeated every time it comes up. You can put as many bandaids on the problem as you want to, but until you address the utimate underlying problem (banks lending to people who have no business borrowing, or lending people too much) you are simply delaying the inevitable. The market needs to correct and government intervention simply puts that off.

What are they going to do? The Feds buy up all the trouble assets, banks go right back to lending to the same worthless borrowers they did before, and *poof* guess where we will be in another 10 years? I am happy to see that, at least for today, there are at least 227 people in the US House capable of seeing beyond the next election.
 
#132
#132
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.
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well first off they aren't purchasing anywhere near all the MBS on the market. more like 10%. if you are insuring all the mortgages on earth (trillions of $$$$) that means you owe money to the bond holder every time a mortgage defaults. that is money out the door. if you buy MBS at 65 cents on the dollar (where the defaults are already priced in) and they pay interest and mature you don't owe any money. you might even make money. one is a definete huge cost the other is a theoretical if the world ends. I'll roll the dice that the world isn't ending.
 
#133
#133
vol_freak said:
But you are identifying the entire asset pool of all MBS. Any values are arbitrary at this point, on either solution. Where is this .65 number coming from? It can't be "a definitive worth", can it?




I don't understand why this is? If this already exists how can they possibly be valued so low? I don't get it.
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the 65 cents is an estimate by bill gross and other bond experts as to what on average these MBS are worth assuming you hold them to maturity and assuming that the govt is paid a reasonable rate of return (10-15%) and assuming a reasonable drop in home prices and rise in defaults.

they are valued very low because the investments are illiquid. the banks have been forced to sell them because of capital ratios and there aren't enough buyers because this is a HUGE market.
 
#135
#135
MontereyVol said:
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?
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Trading curbs... They only come in when the market is down 10% (trading stops for an hour) 20% (two hour stop) 30% drop (market closes for the day)

We never triggered the curbs, came close
 
#138
#138
something's gonna pass and it's gonna look a lot like the original plan that Bernanke and Paulson devised.
 
#139
#139
Anyone know anything about the accounting rules that could be changed? I've seen it mentioned in various articles that they could rework some of the rules banks/lenders/someone has to work by and it would go a long way in alleviating the current panic.
 
#140
#140
TheDeeble said:
Anyone know anything about the accounting rules that could be changed? I've seen it mentioned in various articles that they could rework some of the rules banks/lenders/someone has to work by and it would go a long way in alleviating the current panic.
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It would essentially change the mark to market rules so that banks could carry investments (loans or securities) on their books at book value (purchase price less depreciation and amortization) rather than marking them to fair market value (liquidation value) every quarter.

I don't like the idea in that it wouldn't really allow for regulators and investors to understand the true capital position of a lender and problems would be seen at a much later date.

On the positive side, lenders wouldn't be drowning in the types of paper losses that are currently causing this loss of lender capital.
 
#141
#141
SEC is reported to be proposing that a company’s estimates should be used for fair value accounting when a market is nonexistent.
 
#142
#142
VolsNSkinsFan said:
SEC is reported to be proposing that a company’s estimates should be used for fair value accounting when a market is nonexistent.
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in a market void they should probably fall back to book value or rely upon third party estimates of value. Would spawn a cottage industry like appraisers.
 
#146
#146
it's disturbing that GE felt like it needed that type of arse raping from buffett. the terms of that deal are unbelievable.
 
#147
#147
they're huge players in non-recourse commercial real estate and those values have taken a beating with all other real estate.
 
#148
#148
So Buffett is either a true American by helping shore up these companies or he is trying to arse rape us all for his own personal gain? Hmmmmmm :question:
 
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