Posted on 09/21/2008 7:31:49 AM PDT by Brian S. Fitzgerald
In a change from the original proposal sent to Capitol Hill, foreign-based banks with big U.S. operations could qualify for the Treasury Department’s mortgage bailout, according to the fine print of an administration statement Saturday night.
(Excerpt) Read more at news.yahoo.com ...
Please continue posting on this. Your perspective is valuable and welcome.
BTW, are the junk and low grade bond markets in bad shape too? Will it be a ‘buying opportunity’ for these?
I ask because my shares in DYN Dynegy and some other leveraged energy companies took a shellacking. I heard that the spreads are pretty high.
But even if AIG is a GTZ company (which I dont think it is),
the Govt $80 billion is senior to other creditors and the AIG empire has over $150 billion in good assets (from memory from reading, dont have exact numbers), *and* the loan is 12%, making AIG very eager to repay it pronto.
I get the sense that this is the kind of thing that if you had $100 billion around, you’d get in on as a private investor.
This deal reminds me of Warren Buffet’s deal to save Williams in 2002, an energy concern that also was ‘one day from bankruptcy’ and was saved in a shotgun rescue package. He gave them a one-year loan an it worked out to something like 30% ROE for him.
If Paulson has $700 billion line of taxpayer credit and does it RIGHT, we’d have a not-bad exposure - pick up assets cheap resell them higher later. The govt made money on the Chrysler bailout, so its not an impossibility to actually have no taxpayer exposure. Maybe too much to hope for though.
It depends on your risk tolerance. Basically, Lehman's entire fixed income book and possibly the prime brokerage assets at Lehman International are being liquidated by a bunch of PWC accountants. All sorts of offers from European repo desks, some are being hit 20 points below where they were a week ago (on a 100 point bond basis). Problem is, nobody knows where it ends as a lot of funds could now get margin calls and be forced sellers as well. There are a lot of fundamentally good companies with cash whose bonds are getting smoked, but as of right now there are very few buyers and there could be enormous supply flooding the market going forward.
Is his name Hank or Henry?
I’ve heard both!
Is that Levin? LOL
Thanks for your post. It helps put some needed perspective on the chaos.
If I may ask I’d like your opinion on where a person invests his cash at a time like this.
PING for a great post.
“The intent of these federal bailouts is to calm the sense of panic in the markets so institutions will extend each other the credit they need in order to do daily business, just as they’ve been doing for decades.”
Also ...
“We ought put our anger and efforts in preventing this from happening again.”
-
Pretty good racket. Own the printing presses. Make all the rules. Screw everybody over. Extract flesh.
I understand your discomfort and I wish it hadn't come to this. As this is where we stand, however, the way I look at it is the government is acting as the investor of last resort and it is investing MY MONEY in AIG. As such, I want to at the very least have as much upside in the deal as possible if things work out for the positive. Thus, I think Paulson is acting in the American public's interest in taking this pound of flesh from AIG.
That said, there are many, many ways this could go very wrong. I do think its the best of a lot of terrible options.
Read the fine print - not necessarily
Let me put it this way:
I’ve got cash to invest as a long-term investor.
As an investor/speculator, I have often taken advantage of arbitrage situations where things are out of whack and just wait for them to get back to normal.
Questions I am asking:
Are the spreads well above historical norms in certain bond markets, and which areas?
Is this a buying opportunity in the muni market? bond market? which areas/segments?
“a distinction without a difference to the American people”
Uh, speak for YOURSELF, Mr. Secretary. I care and there is a distinction because you are giving them MY MONEY, knucklehead.
Well where do the $1,000,000,000,000 dollars go? How can companies lose one TRILLION dollars, or get that far in debt?
Now that you mention it Levin does look a little like Bernanke. :-)
Levin would do a better job in that position lol.
I was thinking the same thing.
The cheering, waving and all that suddenly seem so distant.
And how might they do that? Your tax money is taken out of your paycheck by your employer. What percentage of Americans have control over the amount of tax is withheld and sent to the government?
Not that many.
Besides the problem is that the Fed and the Treasury can simply print more money if there is a tax deficit. They ca print enough money to higher your starving neighbor to come and take you out of your house and throw you in one of the camps for Tax Chiselers they set up to deal with the crisis.
It's not lost, it was never money to begin with. Our hedgie friend may have different lines of business, but a lot of these securities are based on nothing, no money, no assets, no income streams. Paulson is putting emphasis on MBS, but those aren't the real problem, these are:
http://www.financialsense.com/fsu/editorials/amerman/2008/0917.html
It seems to me that its bad enough that we give CEOs incentives to act recklessly knowing that they will make millions and have the American taxpayer to bail them out when things head south. But at least they are subject to our laws and regulations. Foreign banks though, may actually use this policy to do the same thing and their governments may use it to intentionally hurt us.
“But at least they are subject to our laws and regulations”
hahhahahah and when things turn sour, we can just pass new laws that render them guiltless and allow them to collect all their worthless paper profits in real government-printed money which they can take and deposit in some bank in the Caymans!
I bet the 8-year-CEO-of-Goldman-turned-Secretary-of-Treasury Paulson LOVES laws like that! At the end of his two-year dictatorship, he can go back to Goldman and collect his fee, which will be equivalent to the value of a small European country.
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