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Is Purchasing $700 billion of Toxic Assets the Best Way to Recapitalize the Financial System? No! It is Rather a Disgrace and Rip-Off Benefitting only the Shareholders and Unsecured Creditors of Banks Nouriel Roubini | Sep 28, 2008 Whenever there is a systemic banking crisis there is a need to recapitalize the banking/financial system to avoid an excessive and destructive credit contraction. But purchasing toxic/illiquid assets of the financial system is not the most effective and efficient way to recapitalize the banking system. Such recapitalization – via the use of public resources – can occur in a number of alternative...

The financial system has just buckled before a financial marauder - Freddie and Fannie's huge debt - and to save the system, the U.S. government took over their $5-trillion (U.S.) of debt, annihilating its own balance sheet. It is just as the eight Roman legions that gave battle to Hannibal in Cannae in 216 BC also were annihilated. And, just as after Cannae the moneyless Roman state lay defenceless before Hannibal, so does the broke U.S. government now lie defenceless before the remaining debt - which is a hundred times bigger than F&F's. Yes, you read it correctly: A hundred...

Well now we have it - since this is a proposed bill (public) and in the interests of fair use, here you have it as reported by Fox: 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. (b) Necessary Actions.—The Secretary is authorized...

Watch that video. Watch it twice, three times if you have to. Go look at the other video, and the other Ticker referenced in there. Now understand that there is no solution to this fast and vicious destruction of America's financial markets and financial companies until and unless the lying stops. It has NOT stopped and in fact has gotten materially worse. Folks, this meltdown will not stop until either: * ALL financials mark everything to the market, ALL OTC derivatives are traded on an exchange or declared void, and ALL balance sheets are transparent so we can determine who...

Remember when I said that I believed that Asian Central Banks had threatened Paulson regarding Freddie and Fannie? Here 'ya go: "Concerns about the financial health of the biggest U.S. mortgage finance company had driven Fannie Mae's borrowing costs to the highest since March the previous week and its shares had tumbled 45 percent on the New York Stock Exchange. Investors in Asia, the biggest foreign owners of Fannie Mae's $3 trillion of bonds, were asking the Treasury to bolster the government- sponsored company and its smaller competitor, Freddie Mac, said three people with knowledge of the talks." Don't you...

Its name somewhat anachronistically means "assembly of old men." George Washington famously -- and, it must now be admitted, with excessive optimism -- characterized it as an institutional saucer intended to cool legislation passed in the intemperate heat of the moment. Its members demand, with entirely unwarranted self-approval, to be called, collectively, the World's Greatest Deliberative Body. Sober observers understand it to be the most corrupt legislative assembly in human history. To those characterizations of the United States Senate we must now add another, perhaps the final one: Gravedigger of the republic. With the Senate's passage of the Fannie Mae/Freddie...

Ok folks, its time for a long sit-down type of Ticker - the sort that I usually don't write. Let's start with Fannie and Freddie. As anyone who has been reading The Ticker knows, I have been saying for quite some time that Fannie and Freddie are in fact "short to zero" candidates for the common stock. This is simply due to the mathematics of their financial situation - they are levered up anywhere from 60 to more than 200:1, depending on what you include and exclude from "capital" and "credit book." I use the worst-case set of numbers, because...

The collection of ne'er do wells, clueless dolts, political hacks, and oh, let's just be blunt and call them what they are -- total Idiots -- expands into an ever larger circle. While the Republic burns due to the unsavory combination of incompetence, ideological rigidity, and crony capitalism, the fools and assclowns seem ever more determined to avoid any personal responsibility for the damages they have wrought. Instead, they flail about blindly, blaming everything and everyone -- except their own horrific negligence. This is financial incompetence writ on a scale far grander than anything seen for centuries. As a nation,...

The Idiot Parade Preview How do you spell "No Confidence"? I'd say that the futures market did a damn good job getting in front of Humphrey-Hawkins, wouldn't you? Down 18 handles at the peak at roughly 5:30 this morning. Hmmmm.... Why? Because all we have seen is more jawboning overnight. Ms. FDIC continues to chant "Banking deposits are overwhelmingly safe", instead of getting out in front of the actual issue and allowing us to see which banks hold crap (that is being intentionally mis-marked) and which are not. The truth must replace gum-flapping. Merideth Whitney apparently agrees - she said:...

The US Treasury Bond market can be confusing. Price inflation in the United States is intentionally made confusing. That keeps the public ignorant and poorly prepared to interrupt grand larceny and elite control of the printing press, the result of which has been a few decades of hidden confiscation of Middle Class work, wealth, and dreams. Long-term bond yields have many fundamental reasons why they should fall lower in the United States . They are interwoven and integrated. The US Economy is being killed by rising costs, in no way justifying higher borrowing costs. Yet amateurish opinions seem to coalesce...

I see nothing in the present situation that is either menacing or warrants pessimism. . . . I have every confidence that there will be a revival of activity in the spring and that during the coming year this country could make steady progress. --Andrew W. Mellon, U.S. Secretary of the Treasury, December 31, 1929 The bursting of every bubble is followed by statements suggesting that the worst is over and that the real economy will be unharmed. The weeks since mid-March have been such a period in the United States. The underlying problem--a bust in the residential real-estate market--has,...

The Debt Slave Act, better known as the Bankruptcy Reform Act of 2005 has at long last blown sky high. We will get to "how" in just a moment but first let's review some of the provisions of the bill. Lenders asked for and received everything on their wish list as follows: Wish List * A strict financial means test that may prohibit many debtors from filing a liquidation bankruptcy under Chapter 7; * A requirement that all debtors must receive a briefing from an approved credit counseling agency at least six months before they can file their bankruptcy case;...

[snip]In the United States, the producer price index increased 6.9% in the year to March, while that for crude goods increased more than 30%. Like a bowling ball swallowed by a python, that inflation will move through the economic system and eventually be reflected in consumer prices. Indeed, it may already be showing up there; the seasonally unadjusted consumer price index for March was up 0.9% (an annual rate of around 11%) and only a heroic seasonal adjustment of 0.6%, double the next-largest seasonal adjustment for any month in the last 10 years, brought the figure down to an acceptable...