ITH Poker Forum

[rocketplayer]

It appears they are making up some rules as they go along.

This is from MSN Money.

News of the plan was first reported by CNBC around 3 p.m., and stocks immediately shot higher. A At the close, the Dow Jones industrials were up 410 points, or 3.9%, to 11,020. The Standard & Poor's 500 Index was up 50 points, or 4.3%, to 1,206, and the Nasdaq Composite Index was up 100 points, or 4.8%, to 2,199.

The bank rescue concept, as reported by CNBC, would involve creating a federally-chartered company that would buy the bad assets of banks, investment banks and others. The financial institutions would then be able to raise new capital and lend money and finance new ventures.

I realize there is precedent for this in the Savings and Laon bailout, but it seems rather odd to be able to wave a magic wand and make the debt disappear. Wish I had one of those.

Cro

The rules are that the fed is not letting 1929 happen again. I have fielded more than 40 calls in past three days from clients worried if they should

1. Just withdraw their cash from the bank and keep it at home
2. Is their money safe (in cash) at major brokers like Schwab and Vanguard)
3. Should they buy T-bills (even though at one point yesterday they offerred a NEGATIVE yield)
4. Should they buy Swiss francs or euros because they are worried the US will lose its AAA rating

The market is someone yelling fire in a theatre right now. The Fed obviously knows more than we do and is using all stops to stop the insanity

Right now you can get 65% yield to maturity on 1/15/09 Morgan Stanley bonds

What does that tell you about what the bond market thinks about their survival chances?

[nsidestrate]

What does that tell you about what the bond market thinks about their survival chances?

Rather have those than common stock, I think.

[Piscivorous]

I've thought about this for a while prior to the recent disasters on Wall Street. I hate bail-outs. I'm a capitalist and believe in survival of the fittest. I do think the government [both state and federal] need to keep an eye open for monopolizing concerns, but dislike bailing out companies that are poorly run, no matter how big they are. No one worries about the local diner everyone loves going out of business because meat prices, rent or taxes go up. But stamp a Ford emblem on a truck and we can't let the venerable Ford go out of business? Here's what I'd rather see:

1. If you are concerned for the workers like I am, have the Fed [or state] government bail-out the worker's pensions and severance packages. Tell the CEOs and bureaucrats where to go denying them their golden parachutes. Let these idiots find new jobs. Perhaps they can get a job at a Wendy's or Burger King.

2. Make an example of these companies. I'm sick and tired of companies over-diversifying then claiming they need bankruptcy protection because they touch so many aspects of American's lives. Poppycock. You ran it into the ground and expect the taxpayers to save your worthless backsides, all the while leaving the now defunct bailed-out company with a $100M severance package. You need to go to jail.

3. Who cares if Merill Lynch, Ford or General Electric disappear from the roll-call of companies. Anyone shedding a tear for Oldsmobile, RKO Pictures, Woolworth's or Crown Books? Things change, eras come and go and well run companies stick around while others disappear. If you are so eager to save the brand name sell it to someone who can make quality products and do it right. If Ford disappeared tomorrow, I can almost assure you of two things happening. First, someone like Toyota, Nissan or maybe BMW would buy the brandname and start producing Ford trucks and cars. Second, if not, an existing company or new company would step in to fill the void.

4. I'm not an economist, but something has to happen with all of the financial companies and concerns. Regulation? Perhaps. Not allowing them to take on so much bad paper and short-selling? Definitely.

That's how an average tax-payer feels. Perhaps I miss the boat in some concepts and ideas. I'm just livid right now that these greedy SOBs get away with this.

[PizzaByNight]

Plenty of commentators are suggesting the days of independent investment banking (that is, investment banking organisations not backed by retail or commercial banking arms) may soon be at a permanent end. If so, further fun and games are to be expected at Goldman and Morgan Stanley (just about the only 2 remaining independents of any great size AIUI).

To me it was a sad day when Goldman chose to go public and leave behind the partnership culture that had made them unique among large firms. If they had remained private....

1. The level of partnership capital may have acted as a restraint on risky acitivities and inventories.
2. Scrutiny from partners in other departments might have had them making adjustments away from the CMO arena early in the game.
3. There would not be a stock price to abuse that would send unwanted signals to lenders to consider restricting credit lines to Goldman.

Any sympathy that might be felt for the distress the venerable firm has been experiencing in its stock price lately would tend to be dampened when considering the following two quotes from wiki:

Despite the 2007 subprime mortgage crisis, Goldman was able to profit from the collapse in subprime mortgage bonds in the summer of 2007 by selling subprime mortgage-backed securities short. Two Goldman traders, Michael Swenson and Josh Birnbaum, are credited with bearing responsibility for the firm's large profits during America's sub-prime mortgage crisis. The pair, who are part of Goldman's structured products group in New York, made a profit of $4bn by "betting" on a collapse in the sub-prime market, and shorting mortgage-related securities. By summer of 2007, they persuaded colleagues to see their point of view and talked around skeptical risk management executives. The firm initially avoided large subprime writedowns, and achieved a net profit due to significant losses on non-prime securitized loans being offset by gains on short mortgage positions.

According to the website ABAlert.com (Asset-backed Alert), Goldman Sachs was one of the top 10 sellers of Collateralized Mortgage Obligations (CMO's) and may have sold about $100 billion in CMO's over the last two and a half years. [44]
But, by the start of the third quarter this year, those securities were being downgraded by the credit ratings agencies faster than any other subprime lender. According to a Reuters report, Citigroup's research (22nd June, 2007), stated "portions of Goldman's GSAMP-issued bonds, which include subprime loans from a variety of lenders, have been downgraded a combined 69 times by Standard & Poor's and Moody's Investors Service in the year through June 15. Sixty of the GSAMP downgrades refer to classes from 2006 bonds," Citigroup added, and Allan Sloane in The Washington Post stated that one of Goldman's 2006 crop - the GSAMP Trust 2006- S3 - may actually be "the worst deal…floated by a top-tier firm." One in every six of the 8,274 mortgages bundled together in GSAMP Trust 2006-S3 was already in default 18 months later.

[janeg]

Reuters has a couple of good articles today: How AIG fell apart and Buffett's time bomb goes off on Wall Street

A big part of the problem world wide seems to be that know one knows how many CDS's are out there

CDS are largely over-the-counter instruments. That means they're not traded on an exchange. One bank just agrees with another bank to do a CDS deal. There's no reliable central repository of information. There's no way to know how exposed a bank is. Banks would have no way of knowing how badly other banks have been affected. Without any clarity, banks will likely simply stop lending to each other.

[CroMagnon]

Here is an article about HUD requiring Freddie and Fannie to buy a certain percentage of sub-prime loans. Though there was still some shoddy practices in underwriting. In addition the way they were buying these laons was in a bundle in which they were not directly doing the underwriting.

http://www.washingtonpost.com/wp-dyn/content/article/2008/06/09/AR2008060902626.html

Over regulation (or short sighted regualtion), deregualtion and greed are a toxic mixture.

And of course the news that the fed is going to buy all the bad mtg paper is everywhere. I suppose this is necessary, but it stinks.

Cro

[PauliF]

Karl Marx is dancin in his grave

this is socialism by neccesity.

the free market may well ecourage innovation and energy but it also encourages greed... and greed is where the "toxicity" comes from ..

what we need is a system that encourages creativity in humans... in all humans without destroying any one elses "humanity"... we need to iron out our communal madness and we need to recognise it first.

man these are interesting times.

although I suspect we are going to paper over the cracks and be back here again in 20 or 30 years

[rocketplayer]

What does that tell you about what the bond market thinks about their survival chances?

Rather have those than common stock, I think.

And my bet is up almost 90%.

I hate rewarding people who cheat, make brutal decisions, etc.

However, it is more than obvious that the government thought we were headed for a 1929 scenario and acted in a way they thought best.

[CroMagnon]

However, it is more than obvious that the government thought we were headed for a 1929 scenario and acted in a way they thought best.

In whose best interest? I do not have your faith in their analysis, nor their actions.

Cro

[Stew21]

So now that WaMu has been bought up by JPMorganChase what happens to the WaMu stock?

[niin]

I read this quote on msnbc:

"The seizure by the government means shareholders' equity in WaMu was wiped out. The deal leaves private equity investors including the firm TPG Capital, which led a $7 billion cash infusion in the bank this spring, on the sidelines empty handed."

[krazytxan]

Guess what the new WAMU CEO gets after less than 3 weeks of employment?

According to filings with the Securities and Exchange Commission, WaMu threw a $7.5 million bonus at Fishman when it hired him on Sept. 8, and guaranteed him an immediate cash severence of $11.6 million — both of which he gets to keep.

That is just not right.

[Stew21]

Guess what the new WAMU CEO gets after less than 3 weeks of employment?

According to filings with the Securities and Exchange Commission, WaMu threw a $7.5 million bonus at Fishman when it hired him on Sept. 8, and guaranteed him an immediate cash severence of $11.6 million — both of which he gets to keep.

That is just not right.

I understand getting bonuses for doing work thats "above and beyond".

But getting it when your company goes belly up?

And there are some people who wonder why theres a banking crisis.

[torch]

Here's the CEO bonus/salary problem - it's an incestuously perpetuated problem.

Who sits on the boards of major corporations? Other CEOs.
If a board full of CEOs decides this CEO doesn't deserve a 7-figure bonus, then they pretty much deny themselves that same bonus when their board has to decide.

So it's much easier for my wallet if I pad his wallet.

I'm not saying its right, I'm just presenting the situation...

[PauliF]

suddenly capitalism doesnt seem like such a good idea anymore does it?

ever wondered why its called a "free market" when its a system where EVERYTHING is priced

seems a bit like a sick joke doesnt it?