WHOMP....recession?

[Furiey]

Another UK bank/building society goes - The mortgage side of Bradford and Bingley has been nationalised, the rest will be sold to Santander, the Spanish bank that bought Abbey a few years ago.

Definitely crazy times. Just glad that I don't have an enormous mortgage.

[mauer]

Economy going to shiite? Glad I've got some acreage and a working tractor, that's right buddy it's working now.

[akots]

quote:Originally posted by mauer
Economy going to shiite?

It's not the economy, it is more of financial part which is making monies out of thin air does not work like it were any longer.

Russian stocks also going down heavily both due to banking crisis and to further drop in crude oil price. Putin gave $50 billion in no-interest loans to Russian banks to pay foreign credit loans. I'm wondering, what is this for.

[akots]

quote:Originally posted by mauer
Glad I've got some acreage and a working tractor, that's right buddy it's working now.

You need gas/diesel to power that up. If you wish to expand the sustenance, buy some solar panel and battery-powered machine of yours while praying it does not come to nukes since your solar panel would be quite useless in forthcoming nuclear winter.

[Shabbaman]

Or a cow and a plow. The cow can plow and give you milk. Ask whomp

[romeothemonk]

I am ridiculously happy that the bailout failed. I would like to see no bailout.
If/When a "depression" hits (With the double digit unemployment) then we can use the 700 billion to create electric grid infrastructure. I really doubt the depression will show up anyway. Buffet and Friends have oodles of cash on the sidelines, and are just waiting for stuff to get cheap enough.
If it is such a good idea, people without puplic pressure to hit quarterly reports will buy in when they think it is advantageous to them. Merrill sold 30 Bil face value for 6 Bil, and the investor overpaid, as right now they are "worth" a market of 3.5 bil. The big guys are just waiting to pounce for the cheapest value. The bailout is just begging the government to pay a 30-100% premium over what the private market would due.
Plus the US needs to get back to actually making stuff, not shuffling around imaginary money.

[Whomp]

The guys at Lone Star are making money hand over fist on those mortgages. Where do you get your information Romeo? The other thing is the $400 billion facility created for Fannie and Freddie? Hasn't been touched...they don't need it since it was never an issue of cash flow but the mark to market accounting that wiped them out.

The bonds the Treasury would buy would do the same and go a long way towards paying for the infratstructure.

[socralynnek]

Over here, the government has also stabilised some banks via guaranteeing for a certain sum. So far, that hasn't been toucehd as the main goal was to get the credit rating better s.t. in the end they don't need it. But they might and that's the risk...

Risk, that is the decisive point in here. Banks took a high risk to get their stocks up and to get nice bonuses at the end of the year. But high risk means high losses on failing. But as some banks are too big to fail, they shouldn't be allowed to fail anyway.

That is what was missing in that 700 billion program. Something to prevent that from happening again. I don't know exactly the details of the program, but in the end doing nothing might be even worse for the taxpayer. But I'd rather see the banks dealing with those credit papers themselves. There must be other ways of helping them. Or helping those people losing their houses.

[romeothemonk]

quote:Originally posted by Whomp

The guys at Lone Star are making money hand over fist on those mortgages. Where do you get your information Romeo? The other thing is the $400 billion facility created for Fannie and Freddie? Hasn't been touched...they don't need it since it was never an issue of cash flow but the mark to market accounting that wiped them out.

Whomp,
I am not saying that they are not profitable, I am sure that they are cash flowing nicely. My numbers come from the valuation of the WaMU similar assets, and are an approximation. Morgan wrote down at such a rate that they were estimated at between 15-17 cents on the dollar. I saw this on either Fortune or CNN, I can't remember which.
The reason that more private equity is not getting involved is precisely the ROI decision. It is great to cash flow nicely from something that cost $0.22 on the dollar, but if you can wait 3 months and get it for $0.15 on the dollar, you added a minimum of 20% to your ROI.
Very few people want to be first in the private market, as there should be some more significant fire sales if nothing else is done, or even if the bailout is passed.

[grahamiam]

quote:Originally posted by Whomp
This time around all we have to do is sell bonds.

But are these really bonds? Usually, everyone knows the value of a bond. Here, we are talking about overleveraged assets that the company is assigning a mark-to-model (or mark-to-guess) value. Who's to say their model is right when no one will actually buy it for that price and the company won't reveal the model calc? And if no one will buy it at that price, how do we know we are getting these at a bargain when we buy it at a lower price? 50% lower than model may actually be 100% over market value.

quote:"Accounting is a way of portioning economic results by time periods. It doesn’t affect the cash flows, but tries to allocate economic profits proportional to release from risk. If we were back in an era where the financial instruments were simple, then the old rules would work. But once you introduce derivatives, and securities that are called bonds, but are more akin to equity interests, you need to mark them to market."

From Dave Merkel

http://alephblog.com/2008/10/01/acco...ct-cash-flows/

If Lone Star is doing so good, why don't they and others that are doing well buy these bargains? Isn't it capitalism when shit companies fail and good ones take over? Why must it be the taxpayer? It makes me wonder if this actually is a good deal and not a fleecing of the treasury. I'm also afraid that the banking industry will turn into the airline industry, where they never got their shit straight and now constantly go back to the gov't for handouts.

I'll leave this post with choice quote from Paulson on how he came up with $700 billion dollars of revolving credit (helps explain my resistance):

quote:“We just wanted to choose a really large number.”

Fucking brilliant! And yes, he really wanted revolving credit if you read the original proposal (see Section 6). The latest one that the House rejected was 110 pages and I didn't get a chance to read it.