$700 Billion Proposal to buy bad mortgages

[I Missthe North]

Rescue plan seeks $700B to buy bad mortgages - Yahoo! News

Not really sure what to make of this. What do you all think? $700 billion seems like an outrageous amount of money they we do not have, but it may be necessary. I just worry what kind of control this would give our government over private companies. From what I understand, there was nothing in the proposal that specified what the government would receive in return for the $700 billion.

Thoughts?

 

[user_name_guest]

Bush is showing his compassionate side. How can anyone say he is a conservative (maybe social, but certainly not fiscal). He is an embarrassment. Now we see how these private companies campaign fund-raising can do. In time of need, they will bail you out.

 

[AVG-JOE]

The mortgage bail out sounds almost reasonable... after all, we are not just loaning money to corporate failures, we are buying hard assets. Mortgage deeds against real property are extremely valuable. If the treasury collects on the ones that it can, rents some out until sellable and sells at the right time for true market value, We, The People have an opportunity to actually make money.

Even 'insurance' can be a profitable gig - no one would deny that... We, The People have an opportunity here too.

The devil is in the details though... Hopefully Georgie won't let his buddies cherry pick through the paper and hand us all the crap while they keep the ones with current value. We should tell all of the investment banks that we'll buy their paper on an all or nothing basis only.

I am not optimistic.

If anyone can fuck this up it will be the lobbyists lap-dog congress currently in DC. Maybe we should demand that the details be worked out by the next administration and congress...

-Joe

 

[Toro]

Had to happen.

But we're all socialists now.

 

[DiveCon]

Bush is showing his compassionate side. How can anyone say he is a conservative (maybe social, but certainly not fiscal). He is an embarrassment. Now we see how these private companies campaign fund-raising can do. In time of need, they will bail you out.

Bush has never been a conservative
hes always been a moderate
he was just more conservative than the idiots he ran against

 

[Toro]

As I read more about this plan, the more horrified I am.

The SEC was egregious in allowing the brokers to take on more debt.

The Securities and Exchange Commission can blame itself for the current crisis. That is the allegation being made by a former SEC official, Lee Pickard, who says a rule change in 2004 led to the failure of Lehman Brothers, Bear Stearns, and Merrill Lynch.

Making matters worse, according to Mr. Pickard, who helped write the original rule in 1975 as director of the SEC's trading and markets division, is a move by the SEC this month to further erode the restraints on surviving broker-dealers by withdrawing requirements that they maintain a certain level of rating from the ratings agencies.

"They constructed a mechanism that simply didn't work," Mr. Pickard said. "The proof is in the pudding — three of the five broker-dealers have blown up."

The so-called net capital rule was created in 1975 to allow the SEC to oversee broker-dealers, or companies that trade securities for customers as well as their own accounts. It requires that firms value all of their tradable assets at market prices, and then it applies a haircut, or a discount, to account for the assets' market risk. So equities, for example, have a haircut of 15%, while a 30-year Treasury bill, because it is less risky, has a 6% haircut.

The net capital rule also requires that broker dealers limit their debt-to-net capital ratio to 12-to-1, although they must issue an early warning if they begin approaching this limit, and are forced to stop trading if they exceed it, so broker dealers often keep their debt-to-net capital ratios much lower.

Ex-SEC Official Blames Agency for Blow-Up of Broker-Dealers - September 18, 2008 - The New York Sun

I agree with this post.

First, let's focus on the aspect that should get the proposal dinged (or renegotiated) regardless of any possible merit, namely, that it gives the Treasury imperial power with respect to a simply huge amount of funds. $700 billion is comparable to the hard cost of the Iraq war, bigger than the annual Pentagon budget. And mind you, $700 billion is not the maximum that the Treasury may spend, it's the ceiling on the outstandings at any one time. It's a balance sheet number, not an expenditure limit.

But here is the truly offensive section of an overreaching piece of legislation:

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

This puts the Treasury's actions beyond the rule of law. This is a financial coup d'etat, with the only limitation the $700 billion balance sheet figure. The measure already gives the Treasury the authority not simply to buy dud mortgage paper but other assets as it deems fit. There is no accountability beyond a report (contents undefined) to Congress three months into the program and semiannually thereafter. The Treasury could via incompetence or venality grossly overpay for assets and advisory services, and fail to exclude consultants with conflicts of interest, and there would be no recourse. Given the truly appalling track record of this Administration in its outsourcing, this is not an idle worry.

But far worse is the precedent it sets. This Administration has worked hard to escape any constraints on its actions, not to pursue noble causes, but to curtail civil liberties: Guantanamo, rendition, torture, warrantless wiretaps. It has used the threat of unseen terrorists and a seemingly perpetual war on radical Muslim to justify gutting the Constitution. The Supreme Court, which has been supine on many fronts, has finally started to push back, but would it challenge a bill that sweeps aside judicial review? Informed readers are encouraged to speak up....

The Treasury has been using the formula that it will buy assets at "fair market prices". As we have noted, there is simply huge amounts of cash ready to bottom fish in housing-related assets (we saw an estimate of $400 billion a couple of months ago). The issue is not lack of willing buyers; it's that the prospective sellers are not willing to accept prices that reflect the weak and deteriorating prospects for housing. Meredith Whitney, the Oppenheimer bank analyst who has made the most accurate earnings and writedown calls of her peer group, has noted how the housing market price decline assumptions used by major banks fall short of where the market is likely to bottom, given traditional price to income ratios and expectations reflected in housing futures prices.

In addition to the factors that Whitney (and others) have cited, the duration of the 1988-1992 US housing bear market and major financial crises suggests that that a peak-to-trough decline of 35-40% is realistic (obviously, this average masks substantial variation across markets and housing types). We are thus only a bit more than halfway through, as measured by the fall in prices.

Yet as we discussed, the plan makes no sense unless the Orwellian "fair market prices" means "above market prices." The point is not to free up illiquid assets. Illiquid assets (private equity, even the now derided CDOs were never intended to be traded, but pose no problem if they do not need to be marked at a large loss and/or the institution is not at risk of a run). Confirmation of our view came from a reader by e-mail:

I worked at [Wall Street firm you've heard of], but now I handle financial services for [a Congressman], and I was on the conference call that Paulson, Bernanke and the House Democratic Leadership held for all the members yesterday afternoon. It's supposed to be members only, but there's no way to enforce that if it's a conference call, and you may have already heard from other staff who were listening in.

Anyway, I wanted to let you know that, behind closed doors, Paulson describes the plan differently. He explicitly says that it will buy assets at above market prices (although he still claims that they are undervalued) because the holders won't sell at market prices. [emphasis added] Anna Eshoo pressed him on how the government can compel the holders to sell, and he basically dodged the question. I think that's because he didn't want to admit that the government would just keep offering more and more.

naked capitalism: Why You Should Hate the Treasury Bailout Proposal

The proposed plan is an affront to both the markets and to democracy.

Paul Krugman has a good criticism

No deal - Paul Krugman - Op-Ed Columnist - New York Times Blog

 

[HoleInTheVoid]

ON any other day the liberals woud outright tax the working people and just give the money to those who cannot manage a mortgage payment.

Libs got their wish AND they get to try and put the blame of Bush (even though he tried to reform this mess in 2003).

 

[I Missthe North]

ON any other day the liberals woud outright tax the working people and just give the money to those who cannot manage a mortgage payment.

Libs got their wish AND they get to try and put the blame of Bush (even though he tried to reform this mess in 2003).

What wish is that? What reform do you speak of?

 

[Gunny]

Rescue plan seeks $700B to buy bad mortgages - Yahoo! News

Not really sure what to make of this. What do you all think? $700 billion seems like an outrageous amount of money they we do not have, but it may be necessary. I just worry what kind of control this would give our government over private companies. From what I understand, there was nothing in the proposal that specified what the government would receive in return for the $700 billion.

Thoughts?

Doesn't anyone see a problem with the Federal government owning all of our personal debts? They going ot turn them over that terrorist organization, the IRS, to collect?

 

[metaverse]

Not really sure what to make of this.

i'm wondering how this will affect my mortgage. will the government own my mortgage?

 

[sealybobo]

Rescue plan seeks $700B to buy bad mortgages - Yahoo! News

Not really sure what to make of this. What do you all think? $700 billion seems like an outrageous amount of money they we do not have, but it may be necessary. I just worry what kind of control this would give our government over private companies. From what I understand, there was nothing in the proposal that specified what the government would receive in return for the $700 billion.

Thoughts?

The govrnment, or rather you dumb ass voters are going to socialize all the losses and at the end of the day you will give all the good loans to the financial institutions, instead of letting the government recoup our losses.

Hence the title of your post, $700 in BAD loans.

and power will be consolidated into fewer hands.

This is desaster capitalism at its finest.

Could bush use the economic desaster as an excuse to postpone the election? King George. He did make up some emergency plan that made him dictator in case of a desaster. Look it up. Google it. I heard it from a credible source.

 

[I Missthe North]

I see a huge problem with it and that is why I do not really understand this proposal, especially since it is coming from the Bush Administration. Seems like one giant step towards a socialist state to me. I would really like to see some more details about this before I can feel remotely comfortable with it.

 

[sealybobo]

Bush has never been a conservative
hes always been a moderate
he was just more conservative than the idiots he ran against

How convienent you guys get to run bush and mccain even though neither of them are conservative. Why, because you are able to fool conservatives into thinking obama is liberal. I don't even know what conservative means anymore. Bush and mccain are deregulators, and that's conservative. Reagan spent a lot and so did both bushes.
they all said they were conservative.

I think conservative means don't spend money on america, give it to the top 10 percent and their agenda. trickle down.

Bush ran as a conservative. Oh, he meant a social conservative.

The dems are poised to steal the mantle of fiscally responsible party and religious people are waking up and realizing they are voting out of their tax brackets for a bunch of scum.

Each party has been corrupt in our american history, but then the parties clean house and move on. Evolve.

America, the democratic party is not corrupt. The new leadership really cares about americans. The gop is corrupt. Time to get rid of guys like boehner and mccain and palin can go be governor of alaska.

 

[DiveCon]

How convienent you guys get to run bush and mccain even though neither of them are conservative. Why, because you are able to fool conservatives into thinking obama is liberal. I don't even know what conservative means anymore. Bush and mccain are deregulators, and that's conservative. Reagan spent a lot and so did both bushes.
they all said they were conservative.

I think conservative means don't spend money on america, give it to the top 10 percent and their agenda. trickle down.

Bush ran as a conservative. Oh, he meant a social conservative.

The dems are poised to steal the mantle of fiscally responsible party and religious people are waking up and realizing they are voting out of their tax brackets for a bunch of scum.

Each party has been corrupt in our american history, but then the parties clean house and move on. Evolve.

America, the democratic party is not corrupt. The new leadership really cares about americans. The gop is corrupt. Time to get rid of guys like boehner and mccain and palin can go be governor of alaska.

ROFLMAO
Obama IS a liberal
there is no fooling needed


oh, and then there is this jewel

America, the democratic party is not corrupt. The new leadership really cares about americans. The gop is corrupt. Time to get rid of guys like boehner and mccain and palin can go be governor of alaska

are you fucking serious?
LOL
the dems are WORSE than the GOP
you are the one being fooled if you REALLY believe that line of donkeyshit(as i was so well corrected in another post)

 

[I Missthe North]

ROFLMAO
are you fucking serious?
LOL
the dems are WORSE than the GOP
you are the one being fooled if you REALLY believe that line of donkeyshit(as i was so well corrected in another post)

I think it would be foolish to claim that either party is not corrupt. A lot of politicians on both sides are corrupt. It is not just a problem of one party or the other. I don't know how you can say the Dems are worse then GOP though; I would like to see some evidence of that. American politicians in general are corrupt bastards and no one is willing to step up and do anything about it. It just going to get worse ladies and gentlemen. Be prepared.

 

[sealybobo]

ON any other day the liberals woud outright tax the working people and just give the money to those who cannot manage a mortgage payment.

Libs got their wish AND they get to try and put the blame of Bush (even though he tried to reform this mess in 2003).

You think bush and friends aren't smart enough to cover their asses? The devil is in the details of that 2003 bill.

Lets stop sugar coating things. The rich raped the mother fing treasury.

And they didn't cherry pick intelligence, they mother fucking lied us into war.

And if you don't think $20 mother fucking billion a month in iraq didn't have something to do with our economy, or the trillion in tax breaks given to the rich, then you are fucked in the head.

Libs got their wish. Do you have any idea how stupid you sound?

 

[HoleInTheVoid]

America, the democratic party is not corrupt. The new leadership really cares about americans. The gop is corrupt. Time to get rid of guys like boehner and mccain and palin can go be governor of alaska.

Promise me if Obama loses you'll post the video of you crying and cutting yourself on youtube and send me a link.

 

[HoleInTheVoid]

You think bush and friends aren't smart enough to cover their asses? The devil is in the details of that 2003 bill.

Lets stop sugar coating things. The rich raped the mother fing treasury.

And they didn't cherry pick intelligence, they mother fucking lied us into war.

And if you don't think $20 mother fucking billion a month in iraq didn't have something to do with our economy, or the trillion in tax breaks given to the rich, then you are fucked in the head.

Libs got their wish. Do you have any idea how stupid you sound?

I changed my mind.

Don't wait for the election, do it now.

Gawd, you are a simpering, maudlin twit who lives on fantasies.

 

[sealybobo]

Hole in the head is why politics are what they are. How do you negotiate with his mentality? Libs got their wish? Really? So if the gop are never wrong, EVER, then why are we in this situation?

Holeinthehead is not being intellectually honest.

And I don't fault the politicians. Thy don't come from another planet. They come from American homes, schools, churches, families. They are the best we have to offer. When you have a greedy ignorant society, you get greedy and ignorant politicians. Garbage in, garbage out. So maybe it isn't the politicians that suck. Maybe its the people. How's that for a campaign slogan?
People suck!

Thanks George Carlin. I will never forget how right you were.

 

[DiveCon]

I think it would be foolish to claim that either party is not corrupt. A lot of politicians on both sides are corrupt. It is not just a problem of one party or the other. I don't know how you can say the Dems are worse then GOP though; I would like to see some evidence of that. American politicians in general are corrupt bastards and no one is willing to step up and do anything about it. It just going to get worse ladies and gentlemen. Be prepared.

the reason i can say the dems are worse, is because when a corrupt repub is exposed they generally dont get re-elected
not so with the dems