Posted on 09/22/2008 4:54:27 PM PDT by Praxeologue
People keep forgetting that the guys on the other side of the table on this deal are professional traders. Suckering the other guy out of a few points or a few percent is what these guys do. IF they are offering you the deal of a lifetime, it is because it will be the deal of a lifetime - for them - if you take it.
If there was a profit to be made proportionate to the risk these guys would have their own money in it. They have already raked off the profit. This is just about passing on the business about patiently waiting to get some of your money back. That is what these guys do for a living.
Woah. You sound rich to me. Now you get to buy my house for me.
Its all invested in stable foreign bank stock, in banks where they actually ask borrowers to verify how much they earn per year before lending money out. Their stock is off about 10% but nothing as serious as most US banks who drank the liberal Kool Aid, ( instead of a lobster in every pot, it was a house in every pot).
“This is just about passing on the business about patiently waiting to get some of your money back. That is what these guys do for a living.”
It’s just like baseball and football team owners. If they can’t trick the state into building a stadium for them, they nonetheless magically gather up the money.
The bailout plan is socialism. Do we or do we not believe in conservatism? Seriously.
I see Paulson and his friends feeling so badly about this that they are writing checks and donating some of their own personal take from all of the runup to the Treasury. We are all in it together.
To me, it stretches credulity to suggest that Paulson is "panicking". Perhaps you are right, but ... as former head of Goldman, Paulson must have know how these pieces fit together and how they would react/interact in a crisis. Put another way, if Paulson didn't know, then it was all beyond human compehension.
I had a friend who had a venture capital group that used to put these kinds of deals together. I liked him personally, but my view of the immorality of this put a strain on the relationship.
We should buy the dodgy paper clean, no riders and no strings on any of it, liquidate the collateral ruthlessly on any portions not paying, repackage and resell the rest with all the non-performing loans stripped out, and move on.
“Bank failures alone can cause a depression, and a huge one.”
You mistake cause and effect. Depressions most often result from credit expansion (unless there’s a plague or something). Bank failure is a sign that credit is contracting, which itself is a sign of recovery.
Tie that present with an energy bill which allows everything with lease fees and taxes as usual—drilling everywhere, nuclear, refineries being built, natural gas for trucking, solar panels on public facilities like schools, etcetera—and you have a respectable fix.
NO BAIL OUT!
“No, I just know actual financial history and don’t buy your old line of Misesean bilgewater, is all.”
What do you think causes the business cycle, then? Underconsumption? The rythms of nature? Greed?
Mmmmm, bilgewater.
McCain couldn’t be more wrong on this issue. He needs to repudiate the bailout plan and get on the right side of this or he’s gonna lose fiscal conservatives.
Regular folks who take care of their finances, didn’t make or take any of this risky paper, and worry about the fiscal future of this country are not gonna vote for McCain if they don’t see a difference between the candidates.
And at the moment, on this issue, there is no difference.
Damn good question.
And in some cases, what is being bailed out, is no sort of asset, but merely derivates - bets placed which failed.
This bit of the article makes me mad:
It will restore liquidity to the secondary market for mortgage-backed securities. This will restore reasonable pricing. That in turn will lead to a stabilization of the vicious cycle that was leading to excessive write-offs at financial firms.
This will, quite appropriately, help earnings at financial firms.
Reasonable pricing? That is never attained by govt action, it is set by market forces - no matter how painfully. The pricing which set up this mess was never normal to start with, so cannot return. It was excessive because of a bubble, caused by lax lending and excessive liquidity.
A week ago Paulson was saying everything was `blue skies; today he says he’ll `buckle’ for the right of the Masters of the Universe (MOU) to their stock options, bonus pay, perqs, etc.
It’s good to know we have this informed & candid advocate fighting for us taxpayers....(Wow, Joy Behar is on larry King and I think she tried the brown acid!)
Bets placed to take more profit off the table than was on the table and stick someone else with the loss.
Well let me adjust my gerunds to account for your sensibilities and suggest that Paulson and Bernanke feel a sense of urgency in stepping out on this. Therefore, they are working hard to instill a sense of panic in everyone else to write him a blank check without taking the time to think through the deal. Remember, in Paulson we are dealing with the world's smartest trader, and he is going to do his best to keep as much on his side of the table as possible. He has only been doing this for 40 years so he ought to be a master at it.
That is the problem. Leveraged real estate debt seeking double digit appreciation became a self-fulfilling prophecy. My favorite indicator is the average housing prices in Scripps Ranch, San Diego. This is a good upper middle class neighborhood, nice area, but nothing extraordinary, hard working folks with some high end housing. In 2000 average price was about $240K, IIRC. At its peak it hit $700K. Of course incomes did not increase to pay for this. But there are mortgages let on the $700K, probably no down, liar loans on property that would probably have appreciated to $300K through "normal" appreciation, if that. So if we slide back to just reasonable prices someone is out $400K. The "owner" is out some rent checks and the postage stamp to send the keys to the bank
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