you have to admit this was one wild week on Wall Street. First, congrats to any of you who took the plunge (bad pun) and bought stocks, specifically financials late Wednesday. Sometimes the best time to buy is when there is blood in the street.
I won't predict that the wild ride is over, but obviously Paulson and Bernanke scared the living shit out of Congress. All members (Repubs and Dems) were at a loss for words on the dire consequences for a potential global impact.
I am not here to be partisan, and in fact, as a free market capitalist, I am not thrilled at the various Fed bailouts. Nevertheless, it was necessary. Not sure if I would have temporarily suspended shorting on financials, but I would have at least reinstated the uptick rule.
Now we are all going to hear about all the various Fed bailouts that the taxpayers will have to foot. Granted this is true, but remember the Federal government loaned Chrysler money back in the 1980s. The Fed was paid back and made money. The Fed created the Resolution Trust Corp during the S&L crisis, and guess what, the government actually got all its money plus some profit. Re AIG, the Feds are acquiring warrants and loaning AIG $85B at an interest rate of 12%. I don't even think Vinnie the Snake can get 12% these days. AIG is aggressively selling assets, and has already paid back $18B of the loan. Looks the Fed will make money.
The current bailout is projected anywhere from $500B to $1T. The Feds will get Mortgage Backed Securities (MBS), albeit poor quality. They will pay anywhere from $.10 to $.65 on the dollar. Assuming they create an RTC like organization, the housing market stabilizes, in 5 to 7 years, the Fed will get paid back, and most likely with a small profit. But that won't make any headlines.
I have absolutely no idea if McCain or Obama benefits from this week's events. At least for today they didn't attack each other, probably because they saw the potential shit on the wall. Appears this weekend the Repubs and Dems will work together to review and approve today's announcements for an RTC like entity. For an independent/centrist like myself, it's nice to see.
Now, where did I put that bottle of Jack?
Good post on the bailouts. They were nowhere nearly as costly as originally announced but probably not as rosy a scenario as you paint. There were significant costs to taxpayers in engineering and executing the bailouts and the costs in terms of letting the goobers responsible off the hook can't be quantified.
My big question about the mess is this; If we know that unregulated markets lead to this kind of bubble and consequent collapse and then the government will be required to step in and regulate the market with a bailout, why not regulate in the first place?
plus I think my wife is horny, and I am trying to watch Sports Center on ESPN. I don't think I am lucid enough to give a decent reply tonight. I'll try tomorrow.
S.P.I.C.
Three years ago John McCain, THE NEXT POTUS, wanted to regulate the rogue out of control Fannie Mae but NOOOOO!!!!! Barney Frank (AKA SpitsWhenTalking), Chris Dodd (AKA Grandmama Dodd) and hundreds of other vile disgusting dem congressmen wanted to keep the gravy money train flowing into their filthy dem pockets.
RESULT?!?!?!!! Every deadbeat in the country got a mortgage BECAUSE THAT'S WHAT THE VILE DISGUSTING DEM CONGRESSMEN WANTED!!!!!
So----Here's what we must do---and what the dems must do to redeem themselves!!!!!!
Everyone must vote----GOP up and down the ticket!!!
Yes!!!! Vote for freedom!!! VOTE---GOP
Yes!!! Vote for prosperity!!! Vote GOP
And if you still plan to vote dem, vote on Wednesday.
political candidates. Yes they were mainly Democrats but make no mistake the Republicans were quility as well. However, Sen. McCain is able to say it straight, we have moral failures and it's time to clean up.
I trust McCain not necessarily because he is a Republican but because of his military background with his family and himself being a graduate from Anapolis. A lifelong Navy man is much less likely than a Harvard man to be beholding to people from the IVY Leaguers who got us in this Financial mess in the first place.
Robert Rubin, Raines, Johnson from Fannie Mae are all from IVY League and I won't trust any of those bastards to give me a glass of water. I will always trust the Vietnam Veteran over an IVY Leaguer any day. The Vietnam Vet has NEVER let me down.
'We' DON'T know nor accept that the problem is a lack of regulations. The problem is a lack of integrity and a failure of management.
Ask yourself why the Dems in Congress are running away from this as fast as they can.
that hte absence of reasonable regulation leads to this shit, then you're unbelievable ignorant. Read a little history and get back to us.
of financial institutions during the Clinton Administration. BEFORE President Clinton tapped Robert Rubin to be Secretary of Treasury he worked at Goldman Sach's and designed the loan packages i.e. bad loans to Mexico and the IMF. Then when he became Secretary of Treasury he bailed out Goldman Sach's. During his tenure he bailed out Brazil, Russia and a host of Asian countries so numerous I can't keep track.
After he finished helping out Citigroup recover losses from bad loans to Brazil et al, he quit his government job to work for Citigroup. Please read a letter that Ralph Nader wrote to Secretary Rubin in 1997.
Buddy, the financial industry has been seeking and receiving handouts from the Federal Government for decades and frankly I am tired of it and apparently the people are finally waking up. WE must be honest about this fiasco, and be careful not to divide ourselves along partisan lines. Our economy is in trouble. I will say this though, seeing Robert Rubin at Sen. Obama's side today while he addressed the public did not give me warm and fuzzy feelings.
The best Secretary of Treasury we had was Paul O'Neill. However, the Bush Adminstration understood quickly O'Neill would not play along with this system of bailouts and was forced to resign. If I was McCain I send Phil Gramm to dig fence posts at the Mexican border and have Paul O'Neill at his side.
If you see O'Neill at Obama's side I lean toward voting for the Obama/Biden ticket. THat is how much I trust him.
Question for St. Croix
Forgive me for asking what might be a foolish question. You are obviously well versed in the intricacies of economics, so maybe you can explain. When you refer to the Fed, are you referring to the Federal Reserve? If so, when the Federal Reserve “was paid back and made money” from Chrysler (per your example); how does this benefit the federal government? You seem to imply that the federal government and the Fed are one in the same. It is my understanding that the Federal Reserve is a private institution separate from our federal government. Is the Federal Reserve a private bank?
Thanks in advance for your reply.
I should have been more specific in using the words Federal Reserve and Treasury Dept to distinguish between the two. Re your definition, I would use the words quasi-public to describe the Federal Reserve.
Believe me I am not that well versed. Just a couple of micro and macro economy theory classes in college, plus an addiction to CNBC.
The loan to Chrysler (loan guarantees in the amount of $1.5B in 1979) was through the Federal Government, i.e. Treasury. As I understand, Chrysler paid back the loan in 1983, and the Treasury/taxpayers made $350M.
They all rose by Friday. You could have made some extra cash and hobbied. I did.
In your own little way you injected liquidity (real bad pun) into the marketplace.
Federal reserve is the central bank of the country and as such it is a quasi government organization, i.e, its high ranking officers are appointed by the government but it carries out its work independently of the government control or influence.
Now back to bailouts. If the Federal Reserve didn't step in, the economy would have spun into a depression. Many jobs would have been lost, many retirees would have become penniless depending more on social security check which the government would not be able to pay. Deficits will go up. Government borrowing will go up, interest rates will go up along with it. It is the ripple effect Federal Reserve is trying to control.
There is a time to punish and it is coming once the immediate emergency is taken care of.
AIG is loan at 8.5% and Federal Reserve owns 79%.
The trust Federal Reserve is setting up is similar to Resolution trust but not exactly. Before the trust take over the bad paper, the institution wishing to do so must pay a subscription to do so. Federal Reserve can invest the money as they decide what to do with all the bad paper.
Overall, they Paulson and Bernake did good job this time, whether you are a partisan or not.
Big picture was disastrous. Unfortunately partisans are unable to see the big picture.
I love it when these "free market capitalists" have to eat crow when the government does an important job by stepping in and cleaning up a pile of free market shit.
Any other time, these free market capitalists thumb their nose at government regulation/interference and argue ad nauseum about how the government only gets in their way.
What a joke.
puts you above 95% of the posters here.
I have mixed feeling about bailouts. I am generally against them, but in the case of Freddie Mac and Fannie Mae there really was no choice.
I agree with you on suspending short selling, I hope it is very temporary, shorts are a very neccesary part of the market and I hate to see the government meddle with the fundamental of the market. Reinstating the uptick rule would not be a bad idea however.
Letting a little air out of the housing bubble is not neccesarily such a bad thing. Bubbles are created and subsequently burst routinely through history. The housing correction is nothing new and nowhere near the type of speculative bubble we experienced with NASDAQ 5000. As you said a few years will go by things bo back to normal. In the meantime calming the markets was a postive.