Posted on 09/22/2008 3:22:38 PM PDT by politicket
Karl Denninger is no idiot. He saw all of this coming a year ago. He had solutions then. And he does offer a very good solution. This is not it. This is scandle. This is a power grab. This is simply a transfer of wealth from the tax payer to the banker. You may hold that everyone who opposes this is an idiot. While I hold that people that support it are sheeple. I suggest that you watch these two videos.
Can you dig and find out if the previous owner knew this was going to happen and that was why he sold? Seems that is your only recourse.
I am not a lawyer, but there are plenty of them here. Seems no solution would be quick, and probably would have no guaranteed outcome.
Oh Look at this...This is one of the main things that Denninger has been saying should be done for the last year. It is one of 3 main points in the video. If it were not for incompetent people running our government then we would not be in this mess.
“Credit Swaps Must Be Regulated Now, SEC’s Cox Says”
www.bloomberg.com/apps/news?pid=20601087&sid=au7NXXwW2wNc&refer=home
Of course what you will not hear is that CDS are fraudulent from the get go. They are insurance. Only if they called them insurance then they would of by law been regulated. So they called them “credit instruments” to get around that in a fraudulent way. And MR Cox looked the other way. Notice how Mr Cox calls them “Instruments”. These officials are lairs. They have been on the payroll of the bankers(Receiving “Contributions”). They cannot be trusted with blank checks.
Actually, the scenario I posted is hypothetical. I wanted to see if people were consistent in opposing the courts interfering, or if they were selective in their opposition based on the circumstances. However, I do think there are some similarities between the hypothetical I proposed and the situation many people find themselves in. They did their due diligence made the best deal they could, and now are in a position where they owe much more than the property is worth, based on circumstances outside of their control. You can understand why some would be tempted to just walk away under those conditions.
The Market doesn’t like this plan!
Nope. That's because the "plan" attempts to fix the fuse on the explosive - that being the derivatives market.
if these companies are getting bailed out, i want my huge mortage paid for as well. any chance 360000 dollars of those billions making it my way?
No, you're in the class that they want to get rid of - the Middle class.
I did the numbers and from my 12 month job, I’m actually working 3 months out of the year to pay taxes.. and that’s just after taxes net pay. It does not include all the other taxes local, state, etc. It is infuriating.
Some do walk away yes. But as I told my own sister a couple years ago, who bought a house with her husband. “You are insane to buy a house now with the market as high as it is!” Also warned her prices would eventually come down and she would owe more than the house was worth on the market. She didn’t listen, and is now in that very position. Many where I used to live did the same thing in the 80’s, and found themselves in the same boat.
If you know prices are high, and that they always come down, and buy anyway, you should not be bailed out. If it is, as in your scenereo, a case where full disclosure might not have been given, there are avenues. But failing that, freedom to buy always come with risk. All freedom comes with risk of sorts. You assume that risk when you buy.
US politicians on both sides of the isle looked the other way during the entire boom. Some probably couldn’t be bothered with the details, maybe some could, but all they could see was a booming economy that pumped up revenues and got incumbents automatically re-elected. The scum.
Sorry, I tend to hyperbole. I have only been aware of Denninger for about a month and I find he is no idiot.
That said, I am not aware of Denninger’s solution to the liquidity crisis. I don’t have time right now for the link but may this weekend.
Could you please outline Denninger’s plan to save the US financial system. As in, this week, not a long term solution to systemic regulatory and budgetary problems. We are about a month away (or less) from a complete freezing and crash of the bond market, which as you know is FAR larger than the stock market. So if Denninger has a solution to attempt to divert a complete crash of the bond market and the US financial system (world, actually), please do me a big favor and summarize it here.
I understand the principal behind the $700 billion plan. The principal is to soak up the bad loans and get them off the books of the banks, so they can stay solvent, so they can meet their reserve requirements and so they can start lending again. With the dead paper off the banks balance sheets there will be much less fear among them and they might lend money again — not throw it away on bad risks, but lend money in a responsible manner.
I continue to liken this crisis to a candy shop that has 10 boxes of poison candy. They can discount the candy to 10 cents a pound, but nobody is going to buy a box for fear it is one of the 10 that is poison. My understanding of the $700 billion plan is to buy the boxes of poison candy from the candy store so buyers can confidently buy the rest of the candy, being that none are poison.
What is Denninger’s plan to prevent world wide systemic financial collapse in the next month?
We’ve been in a recession all year that the fudged government numbers have hidden, and that includes the 2nd quarter when the government paid us $150 billion to go on a shopping binge with our “stimulus” checks.
I don’t trust anything that AP puts out.
No way I brlieve that the House and Senate have agreed to anyhing of the sort!
“Or should you still have to pay the full mortgage?”
Pay it or lose it!
Biting the bullet and forcing a depression now to rebuild from is certainly one option. If I was dead sure a depression is the inevitable result, (as I know Travis McGee and apolitickit are, while JasonC does not see it as a foregone conclusion), then I would be all up for taking the depression and not delaying it when the effects will likely be worse.
That said, I’m sorry, I’m just not willing to go down without a fight and let the world’s economy crash and burn. I’m just dying to see how well we distribute food to 350 million people during GD II, the Sequel ™, as leveraged farmers can’t get loans and go under. In GD I, a lot of people survived with what they produced on small farms. Try that in Manhattan, Philly, DC, Baltimore and all of the other densely populated metropolises in the USA.
I’m not willing to concede that depression, sorry. I am more than willing to make that $700 billion down payment on saving the world economy. I may be misguided and the plan may not work, but I think we will see in very short order that either the bond market is sound and lenders are lending again, or the bond market has crashed and lending is nill. I don’t think we will go through much of that $700 billion before we have a strong indication if the plan is working or if it is failing.
That said, this war with Iraq has already cost some $600 billion plus. Nobody seems to be complaining about that money. “Oh, but they kept us safe from terrorism.” Yes, it has helped to bust up Al-Qaeda. To be fair, could we not have simply vaporized Damascus or Kabul or Baghdad and then warned the ragheads that every new act of terrorism will be met the same way. Cheap solution. The world would hate us, for a while, but we would have saved $600 billion. Fuel-air explosives would have been a nice way to destroy a city as well. We did NOT have to go to war and I was completely opposed to the war at the time. I did enjoy seeing somebody go after the bastards, but at the same time I realized the chance of success was modest and the price would be very high.
So $700 billion is outrageous to save the world economy but $600 billion for a little war on terror is A-OK?
Furthermore, if we fall into a depression, what does it matter if we squander another Trillion dollars. With the economy dead, the nation will simply default on Social Security and Medicare anyway. They will say, if you are dirt poor or near death, here is what we will give you. Everybody else gets the shaft. That is on its way in any depression whether we squander a Trillion dollars additional debt or not.
So then you have the ideological angle. “But it is not right to bailout these greedy basters. It is unpatriotic and the bailout is socialist.” D’oh! So lets roundfile the world economy because, on top of all the socialist changes the idiotic American electorate has allowed since 1863 — earlier probably — we are going to hold the line here and destroy the world economy. Maybe we should just take up arms now and shoot all the bastards that put us in this mess along with all of the socialists who have destroyed our constitutional rights. If I’m going to be stuck in a depression made because people want freedom and capitalism, lets have it!
Or we could spend the $700 billion, attempt to save the world economy, and then let our collective anger clobber the socialists in government after we are back on solid financial ground.
Sorry, I can’t accept throwing our hands in the air and embracing a depression on ideological grounds on the basis that a bailout may not work. I’m sticking to my guns. We won’t have to wait anywhere near an expenditure of $700 billion in additional debt before we know if the plan is a complete and utter failure, the bond market crashes, short term paper is frozen and lending is dead.
“If you wnated folks to feel wealthy, paying off half their mortgage might really help a lot with that... They refinance, lower their monthly payments... Possibly restrict their ability to cash out equity if they agree to have their mortgage paid down...”
since my $1.2 milion home and my 320k condo are fully paid for I want a check for half their value and still keep full title just to be fair!
I really can’t say it better than he can. One of them was to regulate all the CDS. Guess what? Cox just came out today and asked to do that very thing. Another was to bring all the hidden level 3 debt out into the open so that the market did not have to guess at the true vaule of an institution and if there were hidden ticking time bombs in it. And then he said to force all these institutions to undo all there extreme leverage. You can either watch this video or read the pdf files linked below it.
http://www.tickerforum.org/cgi-ticker/akcs-www?post=61956
Placemark
Some of these were overt interventions like the PPT, many were indirect by lowering rates. The effect is always the same however, the government creates market inefficiencies and warps market incentives in the name of saving the market. Back when financial panics were more common, we had nonexistent inflation and rising equality. The system of moral hazard we have now promotes huge wealth disparities as the CDS debacle shows. There is no way to regulate loose money, it will flow into economically inefficient projects making everyone poorer.
I don't think there can be any compromise any more. Sooner or later the result of cheap money will be the destruction of the currency (Mises was right!) and the only benefit will have been postponing the depression. The best we will do with the bailout is japan-style off and on recession for a decade but with more inflation than they had.
Letting the credit bubble deflate will be strong medicine, but at 350% of GDP it is better than 400 or 500%. The credit bubble is the problem, and the solution is not preserving or adding to it.
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