Posted on 03/26/2009 11:13:07 PM PDT by CutePuppy
These assetts need to be sold before the full effects of Obama’s tax and regulation policies are seen , then even the holders of these securities will be glad to get $0.30 for them when the payments stop coming in.
We don't want folks trading CDS. They shouldn't even exist.
We "little people" don't want Geitner bailing out their asses. We want them tarred and feathered and their so-called banks sown under with salt.
PS the country is still head over heals in debt, at multiples of GNP that would have made your predecessor shills in 1929 mad with envy.
This is about the funniest piece of idiocy I have read all week long.
Short sellers in the market serve a purpose. They sniff out over valued stock and help prevent bubbles from being created. Generally, it is a good thing, when done legally.
What the author fails to explore here is illegal naked shorting. Traders selling shares that don't exist and that have no intention or ability to deliver. Trades that never settle. In effect, stealing shareholder value right in plain sight.
“banks believe these assets are extremely undervalued”
......That’s because they are......
The collateral is good, the paper is bad. The solution requires separating the assets from the broke holders of the paper. The banks need to be able to eliminate the middle guy holding title and directly own the asset.
The poor must go back to renting. The property must be forclosed or title given to the Bank and the former owner becomes a renter
What the author fails to explore here is illegal naked shorting. Traders selling shares that don't exist and that have no intention or ability to deliver. Trades that never settle. In effect, stealing shareholder value right in plain sight.
Correct. Any crook would love to be able to sell a non-existent item, receive payment for it, fail to produce it, and yet go unpunished for the act. This goes on thousands of times a day on Wall Street.
A short seller doesn't get paid anything until he delivers the stock.
Technically, the trade remains open. In fact, the naked short sellers are increasing the value of their already established short positions, and so each naked short sale that helps to depress the price of the stock pays off for the crook.
Only when they finally deliver the shares.
The market way to do all that is for operators with capital to buy up all tranches cheap, paying only cents for the subordinate ones to be sure, and then do deals with the senior class to recreate the original loan portfolio. Next step, triage that portfolio, all the performers repackaged and sold. All the non-performers go to workout people who can expedite all the collateral churn side of things, where right now the banks are swamped and securitization hair gums everything up.
If there were only one lender and the pols would stop monkeying with the foreclosure laws thinking they can make it all go away by just not letting anyone at the collateral, then it'd be RTC easy. But neither is true. That being the case, it may wind up that it has to be Fannie and Freddie doing the first step of the above, with public backing. Hopefully indirectly (Fed buying their debt etc).
At last.... a reasoned, succinct analysis that I can understand describing a solution.
.....The right thing is to first recreate whole loans....
Does this mean to separate out the individual loans from the tranches? Or, does it mean that the original loan has been somehow split and needs to be reassembled?
CEOs like Jeffrey Immelt like to blame market manipulators, in another era it would have been "the Jews", but the damning truth is that he used his shareholders' money to overpay for assets and assume risk for insufficient premiums. He is blaming speculators for his mismanagement, or worse.
What really happened was that over a decade, credit was extended and risks were assumed with other people's money without any underwriting standards, creating $10 trillion or so (that's everything) of unrecognized losses. Certain events exacerbated this, such as an extra trillion when Spitzer took Greenberg off the case so that Cassano could run wild.
There is nothing wrong with an unregulated CDS market. The root of the problem is other people's money. A case in point is that Wall Street firms somehow managed to survive, or morph, for a century or so until they went public. No sooner did that happen than somehow they became dens of bad underwriting and became supplicants to the public purse.
The market was exacting its own solution until government started to meddle. Stupid government action can be played by free market actors, and that is what is happening. No outrage here.
My solution? Let nature take its course. However, post Bear Stearns, post AIG, post reason, that is not going to happen. All we can do is nip at the heels of the demagogues.
SO I'm not sure now if we've made it to the 1932 moment or if the current gyrations are more like those of 1930-1931.
Also, while I agree that it is not YET anything like the Great Depression, I fear that Obummer and Co. are doing their level best to recreate the 1930s. They certainly are bringing the same big government we're the brightest and best attitude to the problem.
Um, not according to the Goldman Sachs report that flew across my desk few days ago. Banks are not carrying their debt on their balance sheets marked at 50. None of them.
Banks could still sell their toxics assets at 50 like you describe, but they won't. That would require them to take huge write-downs that they're not willing to suffer. They'll just sit on it instead - or buy their own debt and stiff the taxpayer throught the FDIC's non-recourse loan.
How would buying their own debt "stiff the taxpayer"?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.