Posted on 09/18/2008 12:38:31 PM PDT by politicket
NEW YORK (AP) -- Wall Street surged higher Thursday, with the Dow Jones industrials up more than 400 points after a report that the federal government is considering creation of a repository for banks' bad debt. CNBC said Treasury Secretary Henry Paulson is considering creation of an entity like the Resolution Trust Corp. that was formed after the failure of savings and loan banks in the 1980s.
(Excerpt) Read more at biz.yahoo.com ...
I would prefer seeing the Chineese take on more American equity than having the Federal Government taking over.
Top dog in many ecologies goes to the most ruthless dog, until some natural forces balance things out.
If a ruthless real estate investor were planning to make a killing on a bunch of properties in a town, they will first seek to slam the prices into the ground, by doing such things as self-dealing at below market prices, driving out other more honest investors, and scaring the locals into selling at any price.
Similarly, on the long side, they can drive prices up by self-dealing (selling the same property to their accomplices at increasingly inflated prices) and spreading much hype and marketing B.S.
Whomever plays that game the best, for the biggest bets, wins.
We are witness to such games being played out in the economy of human civilization. With the incredible expanse of a worldwide economy, industry, communication and shipping over the last century, a new world wide economic arena has opened up, like none known before to mankind. It's like any new frontier -- the thugs will have their successes, and it will take time (perhaps centuries) to civilize this new world. Likely, first, we will see periods of excess tyranny, world wide, before a balance respecting human freedom, prosperity and well being is found, in this global arena.
It's not that the thugs ever entirely control the flow of events; but they play off external events better, meaner, luckier than anyone else.
Human fear and greed, like any untamed animal spirit, will grow increasingly large and dangerous, until some larger force prevails.
We live in interesting times.
Could someone give a synopsis of how RTC functioned and whether or not it worked?
TAXPAYER = SQUEAL LIKE A PIG!!
I also hope thye just hand over Fannie and Freddie to the RTC and dissolve the entire thing.
I am big free enterprise guy but lets face it- Management in America is becoming more and more incompetent. In most industries who cares, that is the risk the investor takes if it is so lazy not to evaluate its executives. But in the financial industry, there is very little room for error. Think about it, only a small percentage of loans (single low digit) in just the mortgage portfolios are bad, and the whole damn world is in turmoil.
We need to get back to the late 1980's and 1990's when the FDIC, OCC, FED and the Banks were only taking the best talent. Clinton got in and turned good credit regulators into Community Reinvestment Auditor and they all left. Bank's kicked all their credit guys out and brought in Sales people who did not know a debit from a credit.
Congress allowed banks to get bigger and into non-banking activities. The idea was if they got big enough, they could not fail. Now it turns out they can fail and we can’t allow them to fail. Guess who gets to pay for that strategy?
Rush played a clip from the former AIG CEO who said that regulation is not a substitution for good management- I agree! Having a friend fairly high up at Citi can tell you they had no idea how exposed they were to sub prime mortgages.
Congress is constitutionally charged to maintain a stable currency. We need to get back to the days when bankers were respected members of the community and understood they played a role in the public trust of the economy.
Don't you think you are exaggerating just a bit? Or do I have to remind you that, the world over, we export movies from Hollywood with breathtaking car chase scenes, fabulous explosions and surgically perfected half-naked damsels screaming with glee in 79 different laguages. See? We still export something.
You’re missing my point.
Look, government caused the problem in the first place by
a) requiring lenders to lend to people with bad credit if they ever wanted to be able to merge or grow.
b) using Fannie and Freddie as a retirement pasture for unscrupulous Democrat hacks who had no where else to go, no understanding of the mortgage market, a desire to cook the books to increase their quarterly bonuses, and an ability pay off their titular overseers (like Dodd and Obambi) to look the other way.
None of this is pretty, but none of it is capitalism either.
My lib friends complain of “the privatization of profits and the socialization of debts.” But what we have here is the reverse: “the socialization of profits and the privatization of debts.”
Part of the government is stepping up to the plate and saying “look, this was our fault, we’ll deal with it.” Of course the other part of the government (I’ll let you guess which part) says “We had nothing to do with the problem.”
The world can’t muster enough collective liquidity to stave off the losses that are going to be claimed. The bubble parties are so over.
You forgot your sarcasm tag... ;-)
No one is going to let me give my debts to some government agency while I get to keep my profitable assets and my job.
The pigmen have to suck the small investors’s life savings out of them and into the market to profit them before the next massive sell-off. You know that! Got to transfer that wealth from the middle class simpletons to the rich and powerful elite.
What's more, we're stuck with these accounts because the goobermint demands we treat the po' folks just like anyone else (just like "community lending").
So where do we get in line to have the feds buy our receivables at, say. 85% of face value?
Maybe you will be able to pick up a house real cheap soon from the US Government!!
Good grief..can you believe this?
The arguments on both sides are compelling...but what’s right is right for Free Market capitalism and what’s wrong is wrong for Free Market capitalism.
This smells wrong and if the dems get in charge of all 3 branches of government in Nov. , we will go full bore ahead towards stealth marxism, socialism and nationalism!
bump
Fannie Mae and Freddie Mac are and were disastrous. Mortgage lenders no longer had to care about the credit-worthiness of the borrower. They would simply sell enough loans, and then sell them upstream to somebody else. They never cared if those loans were going to get repayed. Eventually, the loans worked their way up to Fannie and Freddie, got bundled, and were sold as AAA collateralized debt to bond holders - even though absolutely nobody knew if the note would ever be paid - or COULD ever be paid.
So, we agree that the government exacerbated the problem. But as I keep saying...this is all small potatoes compared to the problems in the derivatives market. The mortgate problem just lit the fuse. An RTC-style "solution" is going to cost the American taxpayer an absolutely enormous amount of money - and won't come anywhere close to solving the real problem.
Sorry politicket but if you let it happen there might not be anything left in the end. It would bring about a diaster that would make the Great Depression look like a boom period.
Like it or not we are past the days when people could operate in their own little world. There is a ponzi scheme element to the economic world. For instance, what would happen if suddenly everyone wanted gold to back up dollars and other currencies? There would just not be enough to go around.
I am a free market thinker and generally favor less government involvement but as someone with financial (and insurance) background I understand the interconnectedness of the economic system and know that “letting it happen” is the worst idea!!
p.s. Are you short the market??
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