Showing posts with label credit crisis. Show all posts
Showing posts with label credit crisis. Show all posts
Monday, March 5, 2012
Thursday, October 20, 2011
Sunday, September 25, 2011
Quote of the day
"Italy's government debt is five times the size of Greece's and concerns about Italy's ability to meet its obligations could grow if Greece defaults." --Landon Thomas, Jr., The New York Times. Link to original story: http://www.nytimes.com/2011/09/20/business/global/as-greece-struggles-the-world-imagines-a-default.html.
Wednesday, September 7, 2011
Friday, October 10, 2008
Wanna know what's going on and how we got there?
Here's a great quote, to tell you where we are and how we got here on this crazy Friday:
"The crisis was caused by the largest leveraged asset bubble and credit bubble in the history of humanity where excessive leveraging and bubbles were not limited to housing in the US but also to housing in many other countries and excessive borrowing by financial institutions and some segments of the corporate sector and of the public sector in many and different economies: a housing bubble, a mortgage bubble, an equity bubble, a bond bubble, a credit bubble, a commodity bubble, a private equity bubble, a hedge funds bubble are all now bursting at once in the biggest real sector and financial sector deleveraging since the Great Depression.
And in a world where there is a glut and excess capacity of goods while aggregate demand is falling soon enough we will start to worry about deflation, debt deflation, liquidity traps and what monetary policy makers should do to fight deflation when policy rates get dangerously close to zero."
And now for where we're going, from the same article/blog:
"The US and advanced economies’ financial system is now headed towards a near-term systemic financial meltdown as day after day stock markets are in free fall, money markets have shut down while their spreads are skyrocketing, and credit spreads are surging through the roof. There is now the beginning of a generalized run on the banking system of these economies; a collapse of the shadow banking system, i.e. those non-banks (broker dealers, non-bank mortgage lenders, SIV and conduits, hedge funds, money market funds, private equity firms) that, like banks, borrow short and liquid, are highly leveraged and lend and invest long and illiquid and are thus at risk of a run on their short-term liabilities; and now a roll-off of the short term liabilities of the corporate sectors that may lead to widespread bankruptcies of solvent but illiquid financial and non-financial firms."
Thank God we have someone so capable as George Walker Bush at the helm of our state, right?
Happy Black Friday, everyone! We'll get through this. We have to.
Link to source of above quotes:
http://globaleconomicanalysis.blogspot.com/2008/10/roubini-discusses-double-ds-deflation.html
"The crisis was caused by the largest leveraged asset bubble and credit bubble in the history of humanity where excessive leveraging and bubbles were not limited to housing in the US but also to housing in many other countries and excessive borrowing by financial institutions and some segments of the corporate sector and of the public sector in many and different economies: a housing bubble, a mortgage bubble, an equity bubble, a bond bubble, a credit bubble, a commodity bubble, a private equity bubble, a hedge funds bubble are all now bursting at once in the biggest real sector and financial sector deleveraging since the Great Depression.
And in a world where there is a glut and excess capacity of goods while aggregate demand is falling soon enough we will start to worry about deflation, debt deflation, liquidity traps and what monetary policy makers should do to fight deflation when policy rates get dangerously close to zero."
And now for where we're going, from the same article/blog:
"The US and advanced economies’ financial system is now headed towards a near-term systemic financial meltdown as day after day stock markets are in free fall, money markets have shut down while their spreads are skyrocketing, and credit spreads are surging through the roof. There is now the beginning of a generalized run on the banking system of these economies; a collapse of the shadow banking system, i.e. those non-banks (broker dealers, non-bank mortgage lenders, SIV and conduits, hedge funds, money market funds, private equity firms) that, like banks, borrow short and liquid, are highly leveraged and lend and invest long and illiquid and are thus at risk of a run on their short-term liabilities; and now a roll-off of the short term liabilities of the corporate sectors that may lead to widespread bankruptcies of solvent but illiquid financial and non-financial firms."
Thank God we have someone so capable as George Walker Bush at the helm of our state, right?
Happy Black Friday, everyone! We'll get through this. We have to.
Link to source of above quotes:
http://globaleconomicanalysis.blogspot.com/2008/10/roubini-discusses-double-ds-deflation.html
Tuesday, October 7, 2008
Good question
From Interest Rate Roundup Blog by Mike Larson, yesterday, as Fed Chairman Bernanke spoke:
"If loaning Treasuries and cash against hundreds of billions of dollars in lousy commercial and residential mortgage securities and other paper hasn't worked ... if agreeing to buy an unlimited amount of commercial paper hasn't done much ... if lending tens of billion of dollars to AIG hasn't stopped the market from worrying about the health of other insurers ... and if cutting the funds rate ALREADY -- from 5.25% to 2% -- hasn't worked, you have to wonder what cutting the funds rate even further toward zero would accomplish."
Read the full entry here:
http://interestrateroundup.blogspot.com/2008/10/bernanke-speech-focuses-on-economic.html
What, exactly, is going to turn things around, if anything? What will calm the world's markets?
Who knows? All we can do is stay tuned--and hope.
___________________________________________________
To end today, a riddle:
What do the international economies and Senator John McCain have in common?
Answer:
They're both tanking. (One's bad.)
"If loaning Treasuries and cash against hundreds of billions of dollars in lousy commercial and residential mortgage securities and other paper hasn't worked ... if agreeing to buy an unlimited amount of commercial paper hasn't done much ... if lending tens of billion of dollars to AIG hasn't stopped the market from worrying about the health of other insurers ... and if cutting the funds rate ALREADY -- from 5.25% to 2% -- hasn't worked, you have to wonder what cutting the funds rate even further toward zero would accomplish."
Read the full entry here:
http://interestrateroundup.blogspot.com/2008/10/bernanke-speech-focuses-on-economic.html
What, exactly, is going to turn things around, if anything? What will calm the world's markets?
Who knows? All we can do is stay tuned--and hope.
___________________________________________________
To end today, a riddle:
What do the international economies and Senator John McCain have in common?
Answer:
They're both tanking. (One's bad.)
Three requests, some appreciation and a hope
Three simple requests, right off the bat;
1) Could we now make Hedge Funds of any sort illegal as soon as the rest of this financial crisis is cleaned up? They are huge, unregulated and dangerous to the US and world economies.
Hedge Funds, defined, from Wikipedia:
A hedge fund is a private investment fund open to a limited range of investors which is permitted by regulators to undertake a wider range of activities than other investment funds and which pays a performance fee to its investment manager. Although each fund will have its own strategy which determines the type of investments and the methods of investment it undertakes, hedge funds as a class invest in a broad range of investments, from shares, debt and commodities to works of art.
As the name implies, hedge funds often seek to offset potential losses in the principal markets they invest in by hedging their investments using a variety of methods, most notably short selling. However, the term "hedge fund" has come to be applied to many funds that do not actually hedge their investments, and in particular to funds using short selling and other "hedging" methods to increase rather than reduce risk, with the expectation of increasing return.
Hedge funds are typically open only to a limited range of professional or wealthy investors. This provides them with an exemption in many jurisdictions from regulations governing short selling, derivative contracts, leverage, fee structures and the liquidity of investments in the fund. A hedge fund will nevertheless voluntarily limit the scope of its activities via its contractual arrangements with its investors, in order to give the investors some certainty over what they are investing into.
The assets under management of a hedge fund can run into many billions of dollars, and this will usually be multiplied by leverage, meaning that their influence over markets is substantial. Hedge funds dominate certain specialty markets such as trading within derivatives with high-yield ratings and distressed debt.
(see the complete definition here: http://en.wikipedia.org/wiki/Hedge_funds)
Another word for Hedge Funds would be "highly profitable deck of cards for the ultra-wealthy", frankly.
2) Next could we make "credit swaps" illegal now and go back to having only regulated, financed insurance coverage, the way things ought to be?
Credit swaps are what companies used instead of using out and out insurance because--guess what?--insurance is regulated. These "credit swaps" were ridiculously profitable because they were grossly underfunded. So when times are good, the money rolled in fast and loose. When times are bad--now, of course--everyone's credit swaps collapse, causing everyone else's credit swaps to collapse, hence the global problem. One more facet of insanity to be dealt with, as financial ministers 'round the world try to fix the problems.
3) Could we regulate the trade of energy and oil markets again so there aren't people and organizations speculating--gambling, really--on the rise of these commodities?
Speculation on these markets virtually guarantees they'll go up and the entire world suffers--the poor, middle class, businesses, hell, even the wealthy pay what they ahouldn't have to (not that I'm suddenly an advocate for the wealthy, mind you, let me be clear).
We regulated them for 78 years, until 2000, thanks to the Enron clowns. Going back to it is the only sane thing to do, for all concerned--except greedhead speculators.
Next, I'd like to give a very public (but likely little-noticed) "thank you" to any and every government and private official, anywhere, who is trying to help avoid a collapse of any and every financial market, anywhere in the world.
There are a great deal of people working very hard right now--and they have been for some time and will continue to be, into the foreseeable future--and I, for one, am extremely grateful.
I wish it weren't necessary, of course.
These people wouldn't have to be working so feverishly now, if there had been far more regulatory oversight all along, the last decade. The world would be much more sane and safe now.
The only drawback is that there would be one small group of people--a small group of very wealthy investors--who would have less millions in dollars now. They'd still be millionaires or billionaires but they wouldn't have quite so much, overall.
Finally, hope that, for all of us, everywhere on the planet, that all these people are successful in their work, on all our behalf, on all these economies.
Heaven help us if they're not.
1) Could we now make Hedge Funds of any sort illegal as soon as the rest of this financial crisis is cleaned up? They are huge, unregulated and dangerous to the US and world economies.
Hedge Funds, defined, from Wikipedia:
A hedge fund is a private investment fund open to a limited range of investors which is permitted by regulators to undertake a wider range of activities than other investment funds and which pays a performance fee to its investment manager. Although each fund will have its own strategy which determines the type of investments and the methods of investment it undertakes, hedge funds as a class invest in a broad range of investments, from shares, debt and commodities to works of art.
As the name implies, hedge funds often seek to offset potential losses in the principal markets they invest in by hedging their investments using a variety of methods, most notably short selling. However, the term "hedge fund" has come to be applied to many funds that do not actually hedge their investments, and in particular to funds using short selling and other "hedging" methods to increase rather than reduce risk, with the expectation of increasing return.
Hedge funds are typically open only to a limited range of professional or wealthy investors. This provides them with an exemption in many jurisdictions from regulations governing short selling, derivative contracts, leverage, fee structures and the liquidity of investments in the fund. A hedge fund will nevertheless voluntarily limit the scope of its activities via its contractual arrangements with its investors, in order to give the investors some certainty over what they are investing into.
The assets under management of a hedge fund can run into many billions of dollars, and this will usually be multiplied by leverage, meaning that their influence over markets is substantial. Hedge funds dominate certain specialty markets such as trading within derivatives with high-yield ratings and distressed debt.
(see the complete definition here: http://en.wikipedia.org/wiki/Hedge_funds)
Another word for Hedge Funds would be "highly profitable deck of cards for the ultra-wealthy", frankly.
2) Next could we make "credit swaps" illegal now and go back to having only regulated, financed insurance coverage, the way things ought to be?
Credit swaps are what companies used instead of using out and out insurance because--guess what?--insurance is regulated. These "credit swaps" were ridiculously profitable because they were grossly underfunded. So when times are good, the money rolled in fast and loose. When times are bad--now, of course--everyone's credit swaps collapse, causing everyone else's credit swaps to collapse, hence the global problem. One more facet of insanity to be dealt with, as financial ministers 'round the world try to fix the problems.
3) Could we regulate the trade of energy and oil markets again so there aren't people and organizations speculating--gambling, really--on the rise of these commodities?
Speculation on these markets virtually guarantees they'll go up and the entire world suffers--the poor, middle class, businesses, hell, even the wealthy pay what they ahouldn't have to (not that I'm suddenly an advocate for the wealthy, mind you, let me be clear).
We regulated them for 78 years, until 2000, thanks to the Enron clowns. Going back to it is the only sane thing to do, for all concerned--except greedhead speculators.
Next, I'd like to give a very public (but likely little-noticed) "thank you" to any and every government and private official, anywhere, who is trying to help avoid a collapse of any and every financial market, anywhere in the world.
There are a great deal of people working very hard right now--and they have been for some time and will continue to be, into the foreseeable future--and I, for one, am extremely grateful.
I wish it weren't necessary, of course.
These people wouldn't have to be working so feverishly now, if there had been far more regulatory oversight all along, the last decade. The world would be much more sane and safe now.
The only drawback is that there would be one small group of people--a small group of very wealthy investors--who would have less millions in dollars now. They'd still be millionaires or billionaires but they wouldn't have quite so much, overall.
Finally, hope that, for all of us, everywhere on the planet, that all these people are successful in their work, on all our behalf, on all these economies.
Heaven help us if they're not.
Sunday, September 21, 2008
One small satisfaction
The one thing--the only thing--I can take any small comfort from out of all this financial mess we're now dealing with--and will continue to be dealing with, for weeks or months or years to come--is that, out of all the socialism and fascism that is and will continue to come out of it, was all brought to us by the Republican Party.
Oh, yeah, the Republicans.
It was Senators John McCain and his pal Phil ("The United States is a nation of whiners") Graham that wanted to--and did--deregulate the banking industry that we're paying for now and will continue to pay for.
President Adolf Bush and his sidekick, Vice President Goerring Cheney want their tightly controlled, ultra-secret government with its listened to and watched public. That's where the Fascism has come.
And the socialism, what with buying the mortgage markets first, and then the insurance conglomerate, AIG and now, did you hear this? The Congress wants to cover banks on our loans over in Europe and, I guess, around the world.
Not stopping there, Rep. Barney Frank (yeah, OUR guy) said aloud this weekend that maybe we should throw more good federal tax dollars at the credit card industry, too.
Holy cow. Where is this going to stop?
And when?
And how soon?
I like my idea of just buying up the healthcare industry and nationalizing the energy industries.
My plan would have been cheaper.
And had a lot more benefits.
Good luck to us, people.
We need it.
Oh, yeah, the Republicans.
It was Senators John McCain and his pal Phil ("The United States is a nation of whiners") Graham that wanted to--and did--deregulate the banking industry that we're paying for now and will continue to pay for.
President Adolf Bush and his sidekick, Vice President Goerring Cheney want their tightly controlled, ultra-secret government with its listened to and watched public. That's where the Fascism has come.
And the socialism, what with buying the mortgage markets first, and then the insurance conglomerate, AIG and now, did you hear this? The Congress wants to cover banks on our loans over in Europe and, I guess, around the world.
Not stopping there, Rep. Barney Frank (yeah, OUR guy) said aloud this weekend that maybe we should throw more good federal tax dollars at the credit card industry, too.
Holy cow. Where is this going to stop?
And when?
And how soon?
I like my idea of just buying up the healthcare industry and nationalizing the energy industries.
My plan would have been cheaper.
And had a lot more benefits.
Good luck to us, people.
We need it.
Wednesday, September 10, 2008
How far is this going?
And where do we say "stop!"?
Lehman Brothers' situation keeps getting worse and worse. They're going to start selling off portions of the company.
All well and good, right?
But I heard on the radio this morning (NPR, of course), that the government may have to go in and bail them out.
Sound familiar?
It seems we keep going through this again and again lately.
This on top of taking over 11 failed banks this year, so far, Fannie Mae and Freddie Mac and Bear Stearns.
So next is Lehman Brothers?
Sure glad we're a capitalistic system, aren't you?
In the same radio story, it told of both former car giants Ford and GM going to the Feds to ask for "low interest loans", to get them through their rough spots--which they created, of course.
Holy cow.
Where does it stop?
At what point are we either going to say "enough!" or just give up and admit we're a socialistic country?
If we're going to do socialism and the government is going to own business, let's have them buy the health care and energy systems (oil, in particular) and call it a day.
THAT we'd benefit from.
But not cars--not the auto industry.
What kind of system are we running here, exactly?
News flash: we can't afford all of this.
Lehman Brothers' situation keeps getting worse and worse. They're going to start selling off portions of the company.
All well and good, right?
But I heard on the radio this morning (NPR, of course), that the government may have to go in and bail them out.
Sound familiar?
It seems we keep going through this again and again lately.
This on top of taking over 11 failed banks this year, so far, Fannie Mae and Freddie Mac and Bear Stearns.
So next is Lehman Brothers?
Sure glad we're a capitalistic system, aren't you?
In the same radio story, it told of both former car giants Ford and GM going to the Feds to ask for "low interest loans", to get them through their rough spots--which they created, of course.
Holy cow.
Where does it stop?
At what point are we either going to say "enough!" or just give up and admit we're a socialistic country?
If we're going to do socialism and the government is going to own business, let's have them buy the health care and energy systems (oil, in particular) and call it a day.
THAT we'd benefit from.
But not cars--not the auto industry.
What kind of system are we running here, exactly?
News flash: we can't afford all of this.
Saturday, September 6, 2008
What's going on
So, yesterday, before breakfast--on our way to breakfast, really--we read in the newspaper (it wasn't on CNN, amazingly enough-- I guess no boobs were involved so it's not news) that Fannie Mae and Freddie Mac were being "seized" (scary, huh?) by the Federal Government and another bank failed. (see yesterday's entry).
Then, after breakfast, driving to a lesson on tile installation (for the kitchen, if you must know), we drove past one young man, with his car windows down, yelling into his car phone about how--"Oh, yeah?--well, I been cheatin' on your ass for a LONG time!"
Nice.
Then, a very short time later, in that same drive, a big, black SUV pulls up alongside our car at a stoplight, windows also down, radio blaring, so we could hear this person's preacher, at full voice, yelling of some outrage or another.
The point?
It seems that, with all the changes in our society--our falling financial and moral stature in the world (thank you, George W. Bush and everyone who voted Republican in the last 2 elections, along with anyone and everyone else at fault), we're sliding rather precipitously into a real 2nd-class world status, it seems.
With so many people either un- or under-insured, regarding healthcare, so many mortgages defaulting, so many in debt in so many ways--credit cards, more loans, etc., it's a lot to keep up with.
All this change is difficult to track and digest.
And you know how it is with changing societies.
In them, reactionary thoughts and feelings flood in. It's always been that way.
Everyone wants to go back to "the good ol' days".
It was true in Russia and the Soviet Union. Heck, it's still that way over there. They want a strong-armed dictator to tell everyone just how things are--and should be.
Trouble is, most people suffer from "going back".
Then, after breakfast, driving to a lesson on tile installation (for the kitchen, if you must know), we drove past one young man, with his car windows down, yelling into his car phone about how--"Oh, yeah?--well, I been cheatin' on your ass for a LONG time!"
Nice.
Then, a very short time later, in that same drive, a big, black SUV pulls up alongside our car at a stoplight, windows also down, radio blaring, so we could hear this person's preacher, at full voice, yelling of some outrage or another.
The point?
It seems that, with all the changes in our society--our falling financial and moral stature in the world (thank you, George W. Bush and everyone who voted Republican in the last 2 elections, along with anyone and everyone else at fault), we're sliding rather precipitously into a real 2nd-class world status, it seems.
With so many people either un- or under-insured, regarding healthcare, so many mortgages defaulting, so many in debt in so many ways--credit cards, more loans, etc., it's a lot to keep up with.
All this change is difficult to track and digest.
And you know how it is with changing societies.
In them, reactionary thoughts and feelings flood in. It's always been that way.
Everyone wants to go back to "the good ol' days".
It was true in Russia and the Soviet Union. Heck, it's still that way over there. They want a strong-armed dictator to tell everyone just how things are--and should be.
Trouble is, most people suffer from "going back".
Friday, August 8, 2008
A big Friday
So oil is down to $115.00/barrel today, the Dow is up, the dollar is up against the Euro and the British Pound--since they didn't raise their interest rates--and the Olympics starts today in Japan.
A big news day, to be sure.
The question for the banks--and the American people--is, will we witness and have to finance another bank failure in the next 24 hours? Will the FDIC have to march into yet another bank this evening and close it up because it's "upside down", financially.
Hopefully not, certainly.
If they don't have to, it would be nice to break the 3-week straight we've had on these things.
Hopefully it's a quiet, uneventful evening and weekend.
Enjoy, y'all.
A big news day, to be sure.
The question for the banks--and the American people--is, will we witness and have to finance another bank failure in the next 24 hours? Will the FDIC have to march into yet another bank this evening and close it up because it's "upside down", financially.
Hopefully not, certainly.
If they don't have to, it would be nice to break the 3-week straight we've had on these things.
Hopefully it's a quiet, uneventful evening and weekend.
Enjoy, y'all.
Sunday, July 13, 2008
This is how serious the situation is, folks
Paulson Seeks Authority to Shore Up Fannie, Freddie (Update3)
By Brendan Murray and Dawn Kopecki
July 13 (Bloomberg) -- Treasury Secretary Henry Paulson put the weight of the federal government behind Fannie Mae and Freddie Mac, the beleaguered companies that buy or finance almost half of the $12 trillion of U.S. mortgages.
Paulson, speaking on the steps of the Treasury facing the White House, asked Congress for authority to buy unlimited stakes in and lend to the companies, aiming to stem a collapse in confidence. The Federal Reserve separately authorized the firms to borrow directly from the central bank.
The announcements followed weekend talks between the firms, government officials, lawmakers and regulators, after Fannie Mae and Freddie Mac lost about half their value last week. Paulson and Fed Chairman Ben S. Bernanke are trying to prevent a collapse that would exacerbate the worst housing recession in 25 years and deepen the economic slowdown.
here's the orginal link:
http://www.bloomberg.com/apps/news?pid=20601068&sid=aSNZaHL2vs4A&refer=home
Pay attention, folks. This is huge news. These people NEVER get together on the weekends. They NEVER have meetings on Sundays, let alone announcements on the steps of the Treasury. Hell, they don't have to. Things are usually running smoothly.
Not now. Now, they're scrambling. This is big. This will be a big week in the markets.
"Officials from Treasury, the Fed and other regulators worked in close consultation throughout the weekend after growing investor fears about the companies' finances sent their shares and the overall market plummeting last week." (from Yahoo! link below).
Let's hope it all goes well.
The Fed. The FDIC. Fannie Mae and Freddie Mac, both. Hell, they're all engaged here.
"...some of Wall Street's biggest investors believe there was another message in the government's announcement — the rest of the financial sector seems unlikely to get a helping hand. Global banks and brokerages have already written down nearly $300 billion in soured mortgage investments — a number projected to ultimately reach $1 trillion." (http://news.yahoo.com/s/ap/20080714/ap_on_bi_ge/credit_crisis_new_phase)
"Former U.S. Treasury Secretary John Snow said that Fannie Mae and Freddie Mac have relied on leverage to fund their businesses in the same fashion as a hedge fund, and that the government should avoid taking them over."
"Congress ought to be embarrassed" for years of delays in passing legislation aimed at strengthening regulation of the two companies, Snow, now chairman of New York-based buyout fund Cerberus Capital Management LP, said in a telephone interview. He said he suggested when in office that "the business model they were using was really the model of a hedge fund." (from this link: http://globaleconomicanalysis.blogspot.com/)
"A critical test of confidence will come Monday morning, when Freddie Mac is slated to auction a combined $3 billion in three- and six-month securities."
From this link:
http://news.yahoo.com/s/ap/20080714/ap_on_bi_ge/mortgage_giants_crisis
You watch--Lehman Brothers is going down. Mark my words. And that's not the least of it, by a long shot.
Great question from Michael Sedlock at Mish's Global Economic Analysis:
"Since when in a supposedly capitalistic system should it be necessary for the Fed and Treasury to intervene in the markets on a day to day basis?"
More:
"To What Extent Did (Secretary of the Treasury) Paulson Lie?
Now we get to debate the meaning of the following:
"Keeping Fannie and Freddie in Current Form"
"There will be no nationalization of Fannie and Freddie"
"A government takeover will not be necessary"
It seems to me that an injection of $15 billion capital into Fannie Mae and Freddie Mac and creating a new class of Government Owned Securities is most emphatically NOT in agreement with the above ideas.
Paulson Is The Great Pretender
Hell, there is so much pretending going on it's hard to keep track. For starters, everyone is pretending Fannie and Freddie are solvent. If they were solvent there would be no need for a $15 billion injection. Secondly, the government directly owning a new class of shares is not keeping Fannie in its current form.
The big concern is "Where does it stop?" Opening up a $15 billion dollar window will be the first of 10 such operations. This is likely the start of a U.S. Taxpayer Bailout of China."
It's ugly, folks. And it's getting really, quite uglier. As I so frequently say, you'd better start paying attention.
I hope it's not too late.
By Brendan Murray and Dawn Kopecki
July 13 (Bloomberg) -- Treasury Secretary Henry Paulson put the weight of the federal government behind Fannie Mae and Freddie Mac, the beleaguered companies that buy or finance almost half of the $12 trillion of U.S. mortgages.
Paulson, speaking on the steps of the Treasury facing the White House, asked Congress for authority to buy unlimited stakes in and lend to the companies, aiming to stem a collapse in confidence. The Federal Reserve separately authorized the firms to borrow directly from the central bank.
The announcements followed weekend talks between the firms, government officials, lawmakers and regulators, after Fannie Mae and Freddie Mac lost about half their value last week. Paulson and Fed Chairman Ben S. Bernanke are trying to prevent a collapse that would exacerbate the worst housing recession in 25 years and deepen the economic slowdown.
here's the orginal link:
http://www.bloomberg.com/apps/news?pid=20601068&sid=aSNZaHL2vs4A&refer=home
Pay attention, folks. This is huge news. These people NEVER get together on the weekends. They NEVER have meetings on Sundays, let alone announcements on the steps of the Treasury. Hell, they don't have to. Things are usually running smoothly.
Not now. Now, they're scrambling. This is big. This will be a big week in the markets.
"Officials from Treasury, the Fed and other regulators worked in close consultation throughout the weekend after growing investor fears about the companies' finances sent their shares and the overall market plummeting last week." (from Yahoo! link below).
Let's hope it all goes well.
The Fed. The FDIC. Fannie Mae and Freddie Mac, both. Hell, they're all engaged here.
"...some of Wall Street's biggest investors believe there was another message in the government's announcement — the rest of the financial sector seems unlikely to get a helping hand. Global banks and brokerages have already written down nearly $300 billion in soured mortgage investments — a number projected to ultimately reach $1 trillion." (http://news.yahoo.com/s/ap/20080714/ap_on_bi_ge/credit_crisis_new_phase)
"Former U.S. Treasury Secretary John Snow said that Fannie Mae and Freddie Mac have relied on leverage to fund their businesses in the same fashion as a hedge fund, and that the government should avoid taking them over."
"Congress ought to be embarrassed" for years of delays in passing legislation aimed at strengthening regulation of the two companies, Snow, now chairman of New York-based buyout fund Cerberus Capital Management LP, said in a telephone interview. He said he suggested when in office that "the business model they were using was really the model of a hedge fund." (from this link: http://globaleconomicanalysis.blogspot.com/)
"A critical test of confidence will come Monday morning, when Freddie Mac is slated to auction a combined $3 billion in three- and six-month securities."
From this link:
http://news.yahoo.com/s/ap/20080714/ap_on_bi_ge/mortgage_giants_crisis
You watch--Lehman Brothers is going down. Mark my words. And that's not the least of it, by a long shot.
Great question from Michael Sedlock at Mish's Global Economic Analysis:
"Since when in a supposedly capitalistic system should it be necessary for the Fed and Treasury to intervene in the markets on a day to day basis?"
More:
"To What Extent Did (Secretary of the Treasury) Paulson Lie?
Now we get to debate the meaning of the following:
"Keeping Fannie and Freddie in Current Form"
"There will be no nationalization of Fannie and Freddie"
"A government takeover will not be necessary"
It seems to me that an injection of $15 billion capital into Fannie Mae and Freddie Mac and creating a new class of Government Owned Securities is most emphatically NOT in agreement with the above ideas.
Paulson Is The Great Pretender
Hell, there is so much pretending going on it's hard to keep track. For starters, everyone is pretending Fannie and Freddie are solvent. If they were solvent there would be no need for a $15 billion injection. Secondly, the government directly owning a new class of shares is not keeping Fannie in its current form.
The big concern is "Where does it stop?" Opening up a $15 billion dollar window will be the first of 10 such operations. This is likely the start of a U.S. Taxpayer Bailout of China."
It's ugly, folks. And it's getting really, quite uglier. As I so frequently say, you'd better start paying attention.
I hope it's not too late.
Saturday, June 21, 2008
Bad Moon Rising
More evidence that we all need to pay attention to what's going on. In the past, I've said politically. Now, financially--locally, nationally and internationally.
For several reasons, I do, indeed, think there is at least a "bad moon rising", if not out-and-out financial turmoil coming down the pike, unless I'm mistaken and/or unless we do things differently, and very soon. I usually say the same thing, too, and that is, I hope I'm wrong.
The several things that make me think this are the following:
1) High household debt, per household, here in the States. In fact, it's at record levels, as we've heard for years. (http://www.occ.treas.gov/qj/qj24-1/3-SpecialStudies.pdf)
2) High national debt of the United States: Right now it stands at approximately 9 trillion dollars, and rising fast (thank you, Mr. Bush)(http://brillig.com/debt_clock/);
3) High deficit spending in by the United States due to the Iraqi war and the wide expansion of government, mostly in the past 7 years (thanks again, Mr. Bush) (http://www.deficitsdomatter.org/);
4) The housing crunch in the United States (and really, the world), right now (http://www.seacoastonline.com/apps/pbcs.dll/article?AID=/20080102/BIZ/801020387&sfad=1);
5) The credit crunch (intertwined with the housing crunch) right now (http://globaleconomicanalysis.blogspot.com/;
6) Low household savings in the United States (http://www.frbsf.org/publications/economics/letter/2002/el2002-09.html):
7) All the "baby-boomers" about to retire--with all that debt and low savings rate--and the huge costs to the Social Security system on the United States (http://www.theatlantic.com/doc/200801/aging-boomers);
8) All those same "boomers" having crappy health care coverage, given the state of health care and how weak and nearly non-existent it is here in the States (http://www.hudson.org/index.cfm?fuseaction=publication_details&id=353);
9) The Medicare and Medicaid systems will both be tremendously burdened by these same "boomers" retiring in all their numbers (http://www.heritage.org/Research/HealthCare/wm875.cfm);
10) The huge expansion of troubles in the American auto industry right now, in part due to the housing and credit troubles but also due to the extremely high prices of oil and the lack of competitiveness of the American automakers (http://globaleconomicanalysis.blogspot.com/2008/06/gm-death-watch.html) and, finally,
11) The extremely high and really, explosive cost of oil internationally. This speaks for itself and drives up the cost of virtually everything, either in manufacturing and/or the delivery of those same goods (http://www.wtrg.com/prices.htm).
Given all these factors, it seems like, virtually, the "perfect storm" for financial calamity, frankly. Honestly, I don't think the Great Depression of the 30's and 40's had this much going for it's creation, so many years ago.
I hope I'm just getting old and crotchety and all these things aren't really such a big deal after all.
But I don't think it's just me. I think I'm right about all this and, again, hope I'm wrong.
(As a side note, for an important, brief but poignant article on another aspect of our collective futures, go to this link:
http://www.npr.org/templates/story/story.php?storyId=91681112. It also has the original audio interview it came from.)
For several reasons, I do, indeed, think there is at least a "bad moon rising", if not out-and-out financial turmoil coming down the pike, unless I'm mistaken and/or unless we do things differently, and very soon. I usually say the same thing, too, and that is, I hope I'm wrong.
The several things that make me think this are the following:
1) High household debt, per household, here in the States. In fact, it's at record levels, as we've heard for years. (http://www.occ.treas.gov/qj/qj24-1/3-SpecialStudies.pdf)
2) High national debt of the United States: Right now it stands at approximately 9 trillion dollars, and rising fast (thank you, Mr. Bush)(http://brillig.com/debt_clock/);
3) High deficit spending in by the United States due to the Iraqi war and the wide expansion of government, mostly in the past 7 years (thanks again, Mr. Bush) (http://www.deficitsdomatter.org/);
4) The housing crunch in the United States (and really, the world), right now (http://www.seacoastonline.com/apps/pbcs.dll/article?AID=/20080102/BIZ/801020387&sfad=1);
5) The credit crunch (intertwined with the housing crunch) right now (http://globaleconomicanalysis.blogspot.com/;
6) Low household savings in the United States (http://www.frbsf.org/publications/economics/letter/2002/el2002-09.html):
7) All the "baby-boomers" about to retire--with all that debt and low savings rate--and the huge costs to the Social Security system on the United States (http://www.theatlantic.com/doc/200801/aging-boomers);
8) All those same "boomers" having crappy health care coverage, given the state of health care and how weak and nearly non-existent it is here in the States (http://www.hudson.org/index.cfm?fuseaction=publication_details&id=353);
9) The Medicare and Medicaid systems will both be tremendously burdened by these same "boomers" retiring in all their numbers (http://www.heritage.org/Research/HealthCare/wm875.cfm);
10) The huge expansion of troubles in the American auto industry right now, in part due to the housing and credit troubles but also due to the extremely high prices of oil and the lack of competitiveness of the American automakers (http://globaleconomicanalysis.blogspot.com/2008/06/gm-death-watch.html) and, finally,
11) The extremely high and really, explosive cost of oil internationally. This speaks for itself and drives up the cost of virtually everything, either in manufacturing and/or the delivery of those same goods (http://www.wtrg.com/prices.htm).
Given all these factors, it seems like, virtually, the "perfect storm" for financial calamity, frankly. Honestly, I don't think the Great Depression of the 30's and 40's had this much going for it's creation, so many years ago.
I hope I'm just getting old and crotchety and all these things aren't really such a big deal after all.
But I don't think it's just me. I think I'm right about all this and, again, hope I'm wrong.
(As a side note, for an important, brief but poignant article on another aspect of our collective futures, go to this link:
http://www.npr.org/templates/story/story.php?storyId=91681112. It also has the original audio interview it came from.)
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