Posted on 09/20/2008 9:46:19 AM PDT by koraz
“The RTC’s cost for handling those failures was estimated at December 31, 1995, to be $87.5 billion, or about 22 percent of the assets at time of failure.” (page 25)
“The $87.5 billion in costs was almost twice the initial $50.1 billion FIRREA appropriation, but it was substantially less than the high end of the range that the U.S. Treasury predicted at the peak of the cycle in June 1991 of close to $130 billion in 1989 present value costs or $160 billion in absolute dollars.” (page 25)
“Another factor influencing the ultimate resolution costs for the RTC was inadequate or delayed funding. As previously discussed in this chapter, interruption of funding occurred before passage of each of the three funding bills.”
“Because of the large percentage of nonperforming assets, those institutions’ liquidity needs were funded through deposit liabilities. If those institutions had been resolved promptly, carrying costs would have been reduced because assets retained by the RTC were funded at RTC borrowing rates rather than at the higher insured deposit rates.”
(Excerpt) Read more at fdic.gov ...
You are kidding right? What is the purpose of laws again?
And to not hold accountable the Congress critters who pushed the Community Reinvestment Act of 1977(CRA), Financial Services Modernization Act of 1999, and then finally American Dream Downpayment Initiative(ADDI) of 2003, you think they should get a pass?
This was a monumental failure of touchy feely liberalism.
There are two different accountings of this, and you really need the facts to extend to 2001 when a huge amount of money was returned to the treasury, causing a actual surplus in that year. I think they took it on the 2000 books and the 2001 books which both parties claim to be their good work for the taxpayer and in reality it was a one time gain related to the RTC disposal of it's assets which had been transferred to another govt division in 1999 and do not show up as RTC assets.
You could piece this all together if you had the people in charge do it. It's really the only way you will get a answer because both parties in two administrations made sure that the money accounting was screwed up in their favor.
That's my take on it, and I think one could say accurately that the Fed actually made out pretty damn well, after it was all said and done, and the actual cost to the taxpayer was either negligible, or they made a small but important profit.
As someone involved in the licensing of CIMA's, I would say that I have a good handle on what exactly tranches are. Your are correct about tranches being graded from highest to lowest quality. We differ on what those "highest" quality tranches will contain.
I think you misunderstood my point about blame. You did not read the part about “unless it is part of the solution.” General rants about RATS are useless. Providing FACTS about those CEOs and Politicians that created the problem are helpful. Clearly we should work to get these people out of office and recover funds.
BUT, we have to stop the panic. Creating a government solution is the first step. Rather than general rants we should be providing our representatives with specific provisions that we want in this bailout.
Sorry, I would be hard pressed to come up with any problem the government "resolved". That's not what they do. The RTC was a joke full of corruption itself that cost the taxpayers incredible sums. Some of the same people who were making money through corruption with the old S&L's did the same thing in the mortgage industry. Their was virtually no accountability and no one took responsibility. This is what will happen again and we are just setting ourselves up for one more round of the same only, of course, bigger next time. As long as corrupt business people are considered heroes of capitalism for the hundreds of millions of dollars they were able to secure for themselves by playing the system, the game will remain the same. Our government is putting up huge incentives for the ordinary citizen to decide that to survive they must too get into the game and be as corrupt as those successful capitalists. To get the government bailout you must be corrupt. Be honest, work hard, be responsible for your own actions, and you are screwed.
The only real capitalism that still exists is in criminal enterprise and the black market. Our so called business model that is built on capitalism for profits but socialism for losses is a cruel joke. It cannot last.
Cold Heat, THANKS SO MUCH for this response. This is what I was looking for! I hope someone can get the real numbers. It did occur to me that the report was put out under Clinton and they probably didn’t want to show any gain.
It really is a shame that we can’t get simple facts, isn’t it?
LOL.
Honey, honey, I just saved you $5000
Great, what did you do?
Well I bought a fur coat that was $10,000 on sale for $5000!
Thanks, you're too good to me.
But on the other hand, how can you assign a value to our providing housing for an unfortunate family? /sarc
Sorry, I know you are trying to provide a serious explanation.
Please see post 22. I agree that government rarely resolves a problem but it looks like in this case they did.
All of this also reminds me of the old saying, “you can’t legislate morality.” In my opinion the root of the problem is the deterioration of morals in our society. That is a topic for another thread!
Please see post 22. It appears that the government did eventually make “real” money on this!
You seem to have missed the sarcasm in my post. Please see post 22. If you update the activity the government did make “real” money on this.
I suspected as much. There may actually be a silver lining in this Gov't plan.
I was with an accounting firm that was heavily involved in the S&L scandals. Same kind of attitude that’s reared it’s ugly head in Enron/Anderson and now this. Greed, politics, incompetence, and a look the other way attitude. Partners looking out for themselves and each other. To hell with everyone else.
Same thing will happen here. Taxpayers have to clean it all up, some will make a killing on the clean up, new regulations to try to stem future abuses.
Then another set of politically connected crooks will start another scandal on down the road.
Good. We are now at the root of the problem. The value of the good tranches is the key question. Rather than the general rants, we should be demanding more transparency so that we can assess these values. And, we need to recognize that that value will continue to deteriorate unless we stop the bleeding.
BTW, did you notice that real estate sales are INCREASING in California. Without outright panic, at some point prices drop to make the market attractive again.
I did notice that. Mainly in the Inland Empire and other non-coastal areas.
My whole contention all along is that the mortgage problem is not the main problem. It was the fuse. I contend that the derivatives market has grown to such a widespread corruption since the 1990's that it is going to explode. The mortgage problem has acted as the fuse.
I agree. There will always be greed. It is an unfortunate part of human nature. If you look at a history of the stock market it always seems to happen regardless of the government regulation.
My conclusion goes back to the old saying, “you can’t legislate morality.” We need to be teaching our children more about values and less about materialism. As an accountant (which I am as well), I am sure you understand that you can never design an internal control system that will completely eliminate all fraud. At some point, you need to rely on the value system of the people.
The “government” will only sell at fire sale prices if there is pressure by “we the people” to wind this up quickly. If we understand the economics of panic situations “we the people” are better served by allowing a slow orderly resolution to the situation.
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Cannot be stated too often. RTCII can buy us some time and diffuse the panic.
I agree that a breakdown in the derivatives market would result in a total meltdown. If we douse the fuse from the mortgage problem we can prevent that breakdown. We can then work on the problems in the derivative market in an orderly fashion.
The only panic I saw was the thieves about to be caught short and go broke.
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