Worst-case scenario is approaching rapidly (crisis growing at Warp 9)

Times of London ^ | 10/06/08 | David Wighton

[LomanBill]

[ If you think the greedy bankers and brokers are contemptible , you really ought to take a look at the legislatures crafting the legislation regulating these businesses and the judiciary that enforces those statutes.]

They go hand in hand of course.  Best government money can buy.

[No natural justice here - just positive law, the servant of ideology.]

A Republic is either characterized by the laws its citizens demand be enforced OR by the lawlessness that they allow.  The price of freedom is eternal vigilance;  and when less than 30% of the cats turn out to vote, the mice play - and eat the stuffing out of the framework of our Constitutional Furniture.

[The GD lawyers chasing bent bankers are not going to save the economy - they’re the GD commissars of American-style socialism.]

Below is a photo taken in the Information Services Lunch Room, on the 9th floor of Ameriquest's corporate HQ in Orange, CA.

 

Note the pretty rainbow colors on the blimp they were so proud of.

 

Natural Born Predators

 

 

Captain, the Enterprise has been hijacked by Predatory Rainbow Collectivists.

 

Get it?

[dalereed]

” Now they are set in reverse, and crisis are spreading at phenomenal speed.”

Like the getto kid street racing.

Isa put it in L for lunge then D for drag but when I put in R for race the whole thing blew up!

[dalereed]

When I had economics in college in the early 50s anything over 7-1 PE ratio was considered speculation.

[wafflehouse]

FICO scores? no. but they have managed to destroy the economy. i’d say that probably one-ups faking FICO scores. and then some

[JasonC]

Biblical fundamentalist Randians are round squares and a misunderstanding.

I was an investment advisor in the 1990s, but haven't worked in finance in 10 years. I moved to software before the crash - and had my clients in REITs and munis before I left the biz.

I know more about both economics and conservatism than you ever will.

You are entirely a creature of leftist poison directed at the rich, you are an programmed puppet of communists. That you are not aware of this is unsurprising since you aren't aware of anything, really.

[Arthur Wildfire! March]

Which O? The number, O, or the Obamessiah Zero?

[JasonC]

Honest people paying their bills didn't stick the banks with $1 trillion in loan losses. Deadbeats did. When you are prepared to admit that and think it through, we can talk again. Oh and the government takes $480 billion a year from the finance sector at gunpoint. Because it decides on things like taxes listening to populists of both parties who hate the rich.

Capitalists make this world function, and government is a parasite on the value they add. Half the country are parasites who use the government to rob the productive half. Every conservative used to know this. When did you forget?

[JasonC]

Commies have nothing but wild ad hominem smears, that are blind stabs. Yes, I am an American citizen, and a life long conservative republican, and a patriot, and a veteran. I am also an open book on FR, having posted here 60,000 times over eight years. You are simply incapable of facing the man in front of you, and flail blindly at straw men instead.

[JasonC]

That would make too much sense - actually trusting the treasury secretary to know what will work and won't in his own plan. They had to force him to include the warrant provision, remember. Then they've set 3 different tiers of reporting and oversight and review, by courts and the GAO and congressional committees, to pass on every decision he makes and second guess it. Making for wonderful certitude on the part of the bank counterparties on the deals they make (that's sarcasm).

The actual language in the bill requires, does not allow, the treasury to take warrants in any company from which the treasury buys more than $300 million of securities. It directs the secretary to set the exercise price with a view to the maximum benefit of the US treasury, no mention of any help to the banks allowed. Which means "zero" is the exercise price, unless the secretary wants to be sued and harassed by all the oversighters above.

The beauty of the illiterate "converts to senior debt" provision is it is meant to avoid any wipeout of the warrants in a bankruptcy, when the warrants themselves are call options without instrinsic value. They don't have any nominal value or liquidation preference to convert into. By definition, in a bankruptcy the common is at zero, so a right to buy common is worth zero. So what amount of senior debt are an unspecified and unmeasured quantity of warrants, supposed to convert to? Just make it up!

What solvant bank is going to accept these terms? Trading the $300 million and first dollar with the treasury is handing over a right to nationalize the bank for nothing, not only at the secretary's discretion beforehand and stated upfront in a contract, but reviewable and revisable after the fact by three bodies of unreachable, unknowable, and unaccountable goons, whose stated purpose is to take as much as possible for the taxpayer.

Only those otherwise facing bankruptcy will take those terms. Or it will simply be finessed using cut-out companies between the present owner of the securities and the Treasury. Which, no doubt, will still involve collosal risk that some committee just decides that means the Feds can take the rest of the bank for nothing anytime they feel like it, and maybe jail those involved to boot.

If this is supporting the banks, what would crucifying them look like?

[headsonpikes]

“Predatory Rainbow Collectivists”

I cannot argue with that image!

[marshmallow]

Honest people paying their bills didn't stick the banks with $1 trillion in loan losses. Deadbeats did.

So now the banks are victims? Which banks? Lehman Bros? Bear Stearns? WaMu? Mugged and beaten by nasty "populists" in circumstances over which they had no control?

When you are prepared to admit that and think it through, we can talk again. Oh and the government takes $480 billion a year from the finance sector at gunpoint. Because it decides on things like taxes listening to populists of both parties who hate the rich.

More emotive hyperbole. Your prose is littered with class war cliches.

So you'd like the government to butt out of the finance sector? Sounds good to me. Does that include the bailout, too? It cuts both ways, doesn't it? Keeping the government out in the good times when profits are flowing means not running to them in the bad times doesn't it? We need to be consistent don't we? No wait.... I'm confused. The nasty, deadbeat populace caused the crash so of course the finance sector can run to the government. They're victims,of course. It wasn't their fault.

Capitalists make this world function, and government is a parasite on the value they add. Half the country are parasites who use the government to rob the productive half. Every conservative used to know this. When did you forget?

And now you want to use the government to rob the "parasites" (read "taxpayers") in order to bail out the "productive half" who've fallen on hard times? Or do you?

That doesn't sound like capitalism to me. It sounds like socialism.

And what is it that the finance sector "produces" again? Credit Derivative Swaps? Mortgage Backed Securities? You call this "production"?

[JasonC]

Last line reveals all - another socialist who doesn't believe the earnings of capital are earnings, aka the labor theory of value, ur-doctrine of all socialists.

The government takes $480 billion a year from the financial sector, and you can either give all of it back with interest, or the government can work for the financial sector's interests from time to time, when it needs it. Your call.

And if you deny the financial sector produces and not only earns everything it keeps and everything the government robs from it (and everything deadbeats take from it and don't pay back, too) but huge additional externalities enjoyed by everyone else, then just try living for six months without it. You will be shooting each other for the last can of soup, and hailing your glorious armed goon masters.

[JasonC]

Extending remarks - why would any banker trust this government?

Bush means well and Bernanke is competent. Paulson sends financiers to the wall to appease populists but can recognize his mistakes after the fact. But the rest of them?

In a month's time, like as not Obama may be elected. In 3 months time, the counterparty on any deal with the government made today could be his Fannie cronies promoted to treasury secretary, and Barney Frank salavating over a new trillion plaything to use for sinecures and campaign contributions and pressured soft loans. You want to be the one sitting in front of those people reduced to sputtering "but I have a contract"?

The best thing they can do on the warrant issue, actually, is to comply with the letter in economically meaningful but not deal breaking amounts. Warrants to buy 1 million shares at $1, with a $25 million liquidation preference in bankruptcy. In black ink and signed. Maybe, *maybe*, a court will let that stand. But it will be a brave man or a desperate one who signs such a thing, before knowing who the next president is going to be.

The populace are proven deadbeats and the pols are notorious scoundrels. Why would any sane man with a choice trust them an inch?

[AngelesCrestHighway]

by Dr Joe Duarte
October 6, 2008

Fannie’s Fear Of Congress
The threat of “financial nationalism” is on the rise as European governments are moving toward guaranteeing all bank deposits in order to prevent the flight of capital from their banks. This is the latest development in what is becoming an increasingly dramatic crisis of confidence in the financial world.

Ireland and Greece were the first to do it a few days ago, but Germany and Denmark, over the weekend, also guaranteed all bank deposits, and the U.K. is starting to feel the pinch, so it’s looking for a way to guarantee all bank deposits. According to The U.K.’s Independent: “Gordon Brown is under intense pressure to guarantee all savings in British bank accounts after Germany and Denmark became the latest European countries to make the move.”

The Independent also reported that the U.K. government “ready to pump billions of pounds of taxpayers’ money into Britain’s banks” including the possibility of the governent “buying stakes in a host of banks.”

In other words, instead of being contained, the crisis is spreading as the $700 billion bailout plan in the U.S., passed Friday, is raising more doubts than adding a feeling of security and stability to the system. The bottom line is that investors are starting to flee countries that are not guaranteeing deposits or not being seen as making large enough commitments to the protection of investors.

What’s missing from the analysis provided by the mainstreammedia is the failure to connect investor fear and governments.

At the center of the whole crisis are two entities Fannie Mae and Freddie Mac, and their relationship to the mortgage markets.

To be sure, Fannie and Freddie are not the sole culprits of this situation. They had lots of help. But their role was central.

According to The New York Times, the decision made by one man, Fannie Mae CEO Daniel Mudd, under pressure from investors and politicians, led to a “tippping point” scenario which precipitated the initial events that got us where we are today.

The Times set the background of the story by noting: “Fannie, a government-sponsored company, had long helped Americans get cheaper home loans by serving as a powerful middleman, buying mortgages from lenders and banks and then holding or reselling them to Wall Street investors. This allowed banks to make even more loans — expanding the pool of homeowners and permitting Fannie to ring up handsome profits along the way.”

But by 2004, when Mr. Mudd took over, the company was in trouble, and “under siege” as:

“Competitors were snatching lucrative parts of its business.”

“Congress was demanding that Mr. Mudd help steer more loans to low-income borrowers,” and

“Lenders were threatening to sell directly to Wall Street unless Fannie bought a bigger chunk of their riskiest loans.

Under pressure, according to The New York Times “Mr. Mudd made a fateful choice. Disregarding warnings from his managers that lenders were making too many loans that would never be repaid, he steered Fannie into more treacherous corners of the mortgage market, according to executives.”

The net results, as the Times puts it, took some time to become clear as “that decision proved profitable.” Yet “in the end, it nearly destroyed the company and threatened to drag down the housing market and the economy,” while setting the current crisis in motion, given the central role that Fannie played in the mortgage market.

Based on “dozens of interviews most from people who requested anonymity to avoid legal repercussions,” The New York Times paints a picture of a man who took a gamble and who even now denies having taken any actions that could have led to the current situation.

Yet, despite his denials, the Times reports that “under pressure from Wall Street firms, Congress and company shareholders, (Mudd) took additional risks that pushed his company, and, in turn, a large part of the nation’s financial health, to the brink,” as “Between 2005 and 2008, Fannie purchased or guaranteed at least $270 billion in loans to risky borrowers — more than three times as much as in all its earlier years combined, according to company filings and industry data.”

One insider told the Times that Fannie Mae “didn’t really know” what it was buying, as the company was designed to buy “plain vanilla” loans but was tring to “push chocolate sundaes through the gears.”

Mudd told the Times that his decisions were based on the fact that ‘“Fannie Mae faced the danger that the market would pass us by. We were afraid that lenders would be selling products we weren’t buying and Congress would feel like we weren’t fulfilling our mission. The market was changing, and it’s our job to buy loans, so we had to change as well.”

Conclusion

In today’s first installment of “Financial Implosion: How We Got Here” we learned that Fannie Mae’s new CEO felt pressured to buy risky loans, despite some in his inner circle not “knowing” what it was that they were buying.

Indeed, it seems as if some of the same Congressmen and Congresswomen that led the fight for and against the bailout, playing politics, and pouring on the pork onto the “bailout” might have been responsible, at least partially for the current situation.

Yet, somehow, they have escaped the consequences of the mess that they contributed to. Certainly we won’t know until November, whether they will pay the price.

[LomanBill]

[You are simply incapable of facing the man in front of you, and]

LOL. That’s me LAUGHING at the alleged “man” in front of me.

You never answered my question - Who invaded Canada and implemented socialism there?

YOU are incapable of facing reality - as exemplified by your ridiculous claim that Socialism is always introduced militarily.

Your precious golden calf has been hijacked by rainbow collectivist Marxists. That’s another tidbit of Reality you’ve demonstrated “60,000 times” that you are unable to face.

As I said before, I hope your software is better engineered than your world view.

[marshmallow]

Last line reveals all - another socialist who doesn't believe the earnings of capital are earnings, aka the labor theory of value, ur-doctrine of all socialists.

Where have these "earnings" gone? If they're real, they should be someplace, no?

I'm a guy who earns his living in science and I believe in the law of conservation of mass/matter. I'd like to believe this law applies even to esoteric areas such as economics which often seem to obey their own rules. In other words, the mass of substances in a closed system should remain constant, no matter what processes are acting inside the system. It is a different way of stating that though matter may change form, it can be neither created nor destroyed.

So where are these "earnings"? Apparently they've just vanished. How does that happen? If the money is real money it should be physically definable, no? I see only two possibilities. The earnings have either been changed to another form or they never existed to begin with.

The government takes $480 billion a year from the financial sector, and you can either give all of it back with interest, or the government can work for the financial sector's interests from time to time, when it needs it. Your call.

I was right.

You don't really want the government to butt out of the financial sector. Only when it suits you.

And if you deny the financial sector produces and not only earns everything it keeps and everything the government robs from it (and everything deadbeats take from it and don't pay back, too) but huge additional externalities enjoyed by everyone else, then just try living for six months without it. You will be shooting each other for the last can of soup, and hailing your glorious armed goon masters.

More hyperbole and straw men.

The financial sector serves a very important purpose in a modern economy. It is not always beyond reproach, however. Is it possible to suggest to you that it has in the past acted irresponsibly and parts of it may also have done so recently? Criticism of the way parts of the finance sector have acted is not synonymous with wanting its destruction.

[LomanBill]

[I know more about both economics and conservatism than you ever will]

 

Delusion, comrade Jason - hang on tightly to those Delusions; because, as all your 1s turn into 0s your imaginary wealth will go "poof"; as will your immaginary  country club "friends" - who will caste you off like a leper.  Hang on to those delusions Jason - because they may soon be all you have.

 

[You are entirely a creature of leftist poison directed at the rich,]

 

See, there you go again confusing thieving criminals with folks who are wealthy. 

 

I've known a few wealthy folks.  Even a millionaire or two;  but you'd never know it by looking at them.  Hardly the country club snob wanna-bes you identify with. 

 

No, their wealth rests in the businesses, ranches, farms, and families they run; but more than that - their wealth is founded in their character. 

 

I get along just fine with those wealthy folks.  One of them recently served up a hell of an Elk stew; and also shares my derision for the criminal parasites who've infested Wall Street and other echelons of your collective hierarchy. 

[Biblical fundamentalist Randians are round squares]

 

And Secular Humanist Atheists - what shape are you chameleons morphing into these days?  Still the standard pyramid one?

 

Character, Jason, a man's Character is his true wealth.

 

Character being something, something that you, Jason, demonstrably lack.  It only takes a casual sampling of the "60,000" FR messages you're so proud of - to see what an empty, inconsistent, vociferous windbag you are.

[LomanBill]

[I was an investment advisor [sic] in the 1990s, but haven't worked in finance in 10 years.]

 

LOL.  Here's another guy who fit that description and called himself an "Investment Adviser" - in fact he ran the longest running pyramid scheme in U.S. history via a front business called "Financial Advisory Consultants"  oooh so official sounding.  He pranced around like a gelded rooster, clucking about his financial prowess and displaying his phony green plumage; had an office decorated with quite an impressive currency collection.  Money was clearly his god -  the thing he worshiped. 

 

But alas,  Jimmy was all hat, and had no cattle - except those belonging to other people. 

 

Ol' Jim a pal of yours?  Maybe you rubbed elbows with him at the "club"?

 

 

 

 

 

 

I got quite a chuckle hearing the arrogant jerk was arrested in his underwear before sunrise at a Houston Comfort Inn. 

 

Unfortunately, restitution to his "clients" is still WIP

http://www.facreceiver.com/

 - one of the first things auctioned off was his beloved collection of currency and coins.

 

Another phony country club wanna-be bytes the dust; now a guest of the Federal Prison System.

 

You think he's getting much golf in at Club Fed?

 

 

[GOPJ]

FDIC was supposed to be a safety net, not a cash cow.

You're right- I think Jason's smoking the wacky weed.