Wall Street - Faulty Risk Analysis?

[n_maher]

I'd say some of these asshats are due for some kneecap breakage.

[Iron_Dreamer]

I did hear something on the news last night that surprised me a bit. Something like 20-30% of all companies have to take out loans to make payroll. With the current freeze on lending how long before we start to see massive layoffs and closings?

So, in other words, not only has this obsession with leverage kept people spending who couldn't afford it, it's kept people in business who had no business being in business.

I say time for a serious correction. It might be painful for a while, but it will obliterate all these pathetic businesses that shouldn't exist. It will kick all these idiots out of houses they can't afford, rather than having disciplined taxpayers subsidize them. It will hopefully root out and ruin some of the Wall St. creeps. Why should the people who actually take responsibility for themselves have to take the burden for all those who didn't?

[Hopstretch]

Why should the people who actually take responsibility for themselves have to take the burden for all those who didn't?

The rain it raineth on the just

And also on the unjust fella.

But chiefly on the just,

Because the unjust steals the just's umbrella.

I agree with you in principle, but in practice a total collapse and subsequent depression will probably -- as ever -- most affect the people who had the least to do with this boondoggle.

[aerius]

Why should the people who actually take responsibility for themselves have to take the burden for all those who didn't?

Because they refused to stand up and say "cut this shit out now!" until it was far too late. Where are the protests? Where are the mass angry phone calls to government reps? Americans as a whole were too damn busy watching NFL Football and American Idol to educate themselves on the shit that's going on, and more importantly, get off the lazy asses and do something about it. If you don't stand up for yourself, the bullies will punch you in the face and take your lunch money every single time. Make your voice heard. Take action. Act now while there's still some hope.

[laxx]

I have to agree with Aerius on this one. It's the same situation as Asian people and voting. Stop complaining about who's in office if you don't vote. Majority of Asians in NYC that I grew up knowing don't vote, but bitch and moan about what's going on and how they hate this and that. Get off your ass and vote or shut up.

[iceman94]

Act now while there's still some hope.

We need a broken record smiley around here.

[tkam]

Get off your ass and vote or shut up.

Amen to that.

[Iron_Dreamer]

I agree with you in principle, but in practice a total collapse and subsequent depression will probably -- as ever -- most affect the people who had the least to do with this boondoggle.

I think that is mostly spin from politicians who (a) want to appear to be helping, just before an election, and ( are still in the pockets of Wall St. trying divert as much federal money as possible there.

I agree that there would likely be a more significant recession, but the idea that it would be a depression is just ridiculous, IMO, in this age of the global economy. A whole lot has changed since 1929.

Because they refused to stand up and say "cut this shit out now!" until it was far too late. Where are the protests? Where are the mass angry phone calls to government reps? Americans as a whole were too damn busy watching NFL Football and American Idol to educate themselves on the shit that's going on, and more importantly, get off the lazy asses and do something about it. If you don't stand up for yourself, the bullies will punch you in the face and take your lunch money every single time. Make your voice heard. Take action. Act now while there's still some hope.

Absolutely! The vast majority of humans are simply to stupid, lazy, and greedy to make a properly functioning democracy work.

[aerius]

Below is the bailout bill which was narrowly rejected by Congress yesterday. Pay special note to Section 2, 6, and 8. Section 2 means Treasury can take over ANY bank at will, it gives them the power to nationalize the entire US banking system overnight if they choose to. Section 3 means they have a $700 billion revolving slush fund, they can cycle MBS and other crap papers through it as many times as they please, and run up a total bill in the trillions. Section 8 means once it's passed, no one can do jack and shit about it, not the government, not the courts, completely above the law.

The bill is currently being revised and will be going in for a revote later this week. Sections 2, 6, and 8 remain essentially unchanged in the latest 110 page version of the bill I've seen.

If it's passed, the US is well and truly fucked. The stock market will do a moonshot in the short term, then once the MBS papers start getting billed to Treasury the bonds market will lock up and dislocate. When that happens, all loans & credit lines are effectively gone and everything goes down the shitter. Oh, and the US government loses its AAA credit rating. Speaking of which, did you know that McDonald's has a lower risk of credit default than the US government as expressed in credit default spreads?

LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY

TO PURCHASE MORTGAGE-RELATED ASSETS

Section 1. Short Title.

This Act may be cited as ____________________.

Sec. 2. Purchases of Mortgage-Related Assets.

(a) Authority to Purchase.--The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.

( Necessary Actions.--The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:

(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;

(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;

(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;

(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and

(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.

Sec. 3. Considerations.

In exercising the authorities granted in this Act, the Secretary shall take into consideration means for--

(1) providing stability or preventing disruption to the financial markets or banking system; and

(2) protecting the taxpayer.

Sec. 4. Reports to Congress.

Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.

Sec. 5. Rights; Management; Sale of Mortgage-Related Assets.

(a) Exercise of Rights.--The Secretary may, at any time, exercise any rights received in connection with mortgage-related assets purchased under this Act.

( Management of Mortgage-Related Assets.--The Secretary shall have authority to manage mortgage-related assets purchased under this Act, including revenues and portfolio risks therefrom.

© Sale of Mortgage-Related Assets.--The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.

(d) Application of Sunset to Mortgage-Related Assets.--The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.

Sec. 6. Maximum Amount of Authorized Purchases.

The Secretary

[catscratch]

I just read that. Holy shit. The power for abuse is absolutely amazing. What a nice legacy our current administration will leave - this, and the Patriot act.

I vote, but it seems that this by itself is not enough. What else can I do?

[hungrych]

Wow, it's even worse than I thought. Hooray the government!

[Beefy]

If it's passed, the US is well and truly fucked. The stock market will do a moonshot in the short term, then once the MBS papers start getting billed to Treasury the bonds market will lock up and dislocate. When that happens, all loans & credit lines are effectively gone and everything goes down the shitter. Oh, and the US government loses its AAA credit rating. Speaking of which, did you know that McDonald's has a lower risk of credit default than the US government as expressed in credit default spreads?

The extreme powers granted under this bill aside...... you are essentially agreeing that this is just a band-aid over a severed artery?

I'm not an economist, but the way I see it the stock market lost 1.2 trillion in a day - that is almost twice the value of this proposed bailout, suggesting that there is scope for even bigger losses. So if everyone is screwed either way, then let it crash quickly without injecting more money. The recovery comes sooner and the system can flush all the crap through more effectively.

[guzziguy]

As bad as this is (and it's really bad), it's nothing like the $3 trillion Iraq bail out.

[909]

i love the fear mongering, not to say things aren't fucked right now, but everyone must realize this is a great buying opportunity.

[Beefy]

As bad as this is (and it's really bad), it's nothing like the $3 trillion Iraq bail out.

Is that an accurate tally of how much it has cost? Bloody hell!

i love the fear mongering, not to say things aren't fucked up right now, but everyone must realize this is a great buying opportunity.

As soon as I confirm I have research funding for next year, and that the market has bottomed out, I'm in. Real estate, shares, don't care, whatever looks best at the time. I've been saving for an opportunity like this since I started my postdoc......

[Hopstretch]

i love the fear mongering, not to say things aren't fuck right now, but everyone must realize this is a great buying opportunity.

That's what some pretty smart people thought about WaMu at $8 a share and Bear at $35 and, maybe, Goldman at whatever Buffett just bought it at.

Picking a bottom is an inexact science. Even for scientists, Beefy.

[hungrych]

i love the fear mongering, not to say things aren't fucked right now, but everyone must realize this is a great buying opportunity.

Isn't that what everyone said a year ago?

[909]

of course, do your homework first, but historically the market always rebounds.

[hungrych]

Tell that to Lehman Bros.

[Grahame]

...but historically the market always rebounds.

"Past Performance is No Guarantee of Future Results"

[909]

don't put all your eggs in one basket -- diversification. without risk there is no reward.

[Grahame]

...but everyone must realize this is a great buying opportunity.

Falling Knife Investing | Investing in Falling Stocks | Falling Stocks

[909]

"Past Performance is No Guarantee of Future Results"

no shit

but we are taking about the entire US stock market -- not a specific individual holding.

[Grahame]

In times of crisis, there is often a flight to precious metals,

such as gold, silver, and copper-jacketed lead.

Can I interest you in some real estate?

Missile Bases :: 20th Century Castles, Unique underground properties.

[aerius]

i love the fear mongering, not to say things aren't fucked right now, but everyone must realize this is a great buying opportunity.

Yeah, it's a great buying opportunity for Put options, truly a once in a lifetime happening. Easiest money I've ever made in my life, give me another month of this market action and I could be retired and living it large by Christmas.