Comments on: US Steps In It – Professional Edition

By: Wall Avenue

Wall Avenue — Sat, 20 Sep 2008 00:21:44 +0000

There is a real gap between the face value of the bad debt and the market value of them.

For example, Merrill Lynch sold their CDOs for 27 cents on the dollar and Etrade sold their asset-backed securities for 22 cents, if I remember correctly.

Also, what about the $6 trillion U.S. credit swap market that these banks are so deeply involved with? Is the government going to bail out the banks out of the derivative obligations as well?

By: Edie Calhoun

Edie Calhoun — Fri, 19 Sep 2008 22:13:37 +0000

I dragged myself to work today feeling low over all this. I felt as though I had a great weight to carry. I guess that we all can truly say that we are carrying the weight of the [financial] world on our shoulders now.

You guys are really smart about these subjects; alas, I am not, but I try. What are the chances that we are moving into total currency destruction zones now? Will they just keep printing money and throwing it around until we all wake up one day and see that we have rough green toilet paper and nothing more?

By: Dave P

Dave P — Fri, 19 Sep 2008 20:52:36 +0000

#3, A big chunk of the high output you refer to is all the crap now blowing up. The “financial economy” don’t quite work no more. Real GDP is closer to 8tn than the 13 tn claimed after backing out the worthless paper.

From now on we going to have to make somethin’ other than paper if we want a paycheck. That’s won’t happen soon. Soup kitchens and cardboard boxes might be a good investment.

By: bdb

bdb — Fri, 19 Sep 2008 16:40:44 +0000

With all of that’s going on, are you guys ready to start doing daily podcasts yet? Only kidding (sort of), but I do enjoy listening to yours, Russ’ and Aaron’s commentary.

By: Stuart

Stuart — Fri, 19 Sep 2008 12:45:38 +0000

FED TO PURCHASE GSES DEBT FROM PRIMARY DEALERS
- The move will provide loans to purchase commercial paper from money market funds.
- The loans will be on non-recourse, at primary credit rate.
- Fed will provide loans to banks and institutions to help offset demands for money market funds.
- Fed will purchase agency discount notes form primary government bond dealers.
- Fed has not outlined the size in dollar terms of either program.

By: eah

eah — Fri, 19 Sep 2008 06:58:29 +0000

The US govt’s credit standing depends on its ability to coerce money from taxpayers, e.g. under threat of prison if they don’t pay. So I think that in combination with the (traditional) high output of the US economy and high productivity of US workers might be enough for the US as a nation to maintain its AAA rating. Sad as that is.

And disgust does not even begin to describe even the bare mention of this.

By: runn3r

runn3r — Fri, 19 Sep 2008 05:09:29 +0000

…this is yet another sleight of hand designed to look like a ‘rescue’ when it is really all about preventing market discovery of real price on trillions of dollars of ‘assets’…

…ie … ARTIFICIAL PRICE CONTROLS…

same thang as in 70′s but in reverse…instead of trying to keep prices down …the attempts have been to keep prices high on assets whose real prices are probably way below wht the ‘rescue fund’ will eventually pay for these ‘assets’ to re-liquify ailing institions…

the rescue fund will then ‘absorb’ the losses and then this is pread to the taxpayers worldwide to be paid over time …prob through increased consumption taxes and the like…

By: Stuart

Stuart — Fri, 19 Sep 2008 04:30:35 +0000

After I puked in disgust, pulled myself back up into my desk… a couple of questions… but 1st,…so phucking mad am pissing flames about this…

1. Since, unlike the 1st RTC disposing of assets from failed companies, this one would have first acquire those assets. I imagine like everything else, they’ll 1st try to borrow… just who has this kind of money.. where is this RTC going to get the funds from? Who would is going to jump up front as head of the league of the galactically stupid to loan funds to an outfit that is going to use them to buy failed assets at above market prices, let alone TRILLIONS worth?????? Jesus Murphy, I think I’m in the middle of a friggin’ sitcom here. Are they going to resort to true printing??? Afterall, Ben ran out of short term paper it seems as the Treasury had to scrounge some up for him… so he’s pretty much at the end of the rope unless he wants to dump some of the longer dated stuff and tank those markets. Where’s the money going to come from?

2. Alluded to above, are they going to acquire at true market prices or are they going to pay as listed on the bank’s balance sheet. Who are they going to stick the write-down too. The bank or Joe (I could not be more apathetic than shit) taxpayer. Stick it to the banks, kablooweee…. what’s the point, bank’s capital makes a hasty reteat and voila, adios bankos. Kinda makes one think Joe Taxpayer ..well, BOHICA.

3. The Real estate market is still collapsing and we haven’t even had the implosion in the commercial real estate market. Asset values will be falling in all likelihood for bloody years. Hardly a static valuation of a single point in time. So what are they going to do, keep an open tab as more assets keep failing over the coming years.

And to see the futures and the dollar up on this news, god damn, where’s that bucket again… the disgust in man tonight. I can’t believe it.