Posted on 09/20/2008 7:03:53 AM PDT by SE Mom
“Much of the 700B, and it may be more, will go to banks all over the country and globally who bought Fanny Mae securities in good faith,or CMO’s based on mortgages and because of severe write downs, are now unable to loan money to anyone.”
And? These individuals invested in financial instruments. There is always a risk of default with any security, including those issued by quasi-governmental agencies. Why should I and everyone else who pays taxes indemnify their poor investments?
“I have not even begun to list the numbers of things that the CMO’s are used for collateral to fund.”
Again. Why should I and other taxpayers fund the liquidity that the market temporarily will not? And let’s be clear. Liquidity hasn’t taken a permanent holiday regardless of whether the government intervenes. The banks and brokerages have a lot of trash securities on their books. Eventually they’ll need to be valued at what they’re really worth. This fraud being perpetuated on the taxpayers is simply a scheme to push those devalued assets onto the taxpayer at a higher price than they would ever garner on the market.
The threat that the banks and brokerages are using is that they’ll go out of business. So what? There’ll be someone to purchase the assets that are actually worth something. And perhaps those who take over will be more conservative in their investment strategy. In the mean time there will be a very painful correction. Perhaps even a panic. But it will correct itself.
You don't get the picture, and many don't, and frankly I pretty much expect that.
Here is some more for you to ponder.
Normally, markets do in fact, self correct. They do it all the time and they are very good and efficient at it. The difficulty here is that they have tried, multiple times and have failed to self correct which is why we have this problem and must do something.
For the past 18 months, the financial markets have tried to revalue these securities and get the system flowing again, but after each correction, it seized up again and again and again until this past week when it simply stopped trading in these securities and stock values began to not just tumble, they crashed over a period of days.
The reason was that nobody, be they buyer or seller could make a trade at ANY PRICE in realestate securities. All companies with the slightest exposure were crashing.
That froze all money that must flow between financial institutions, and to your local bank, who I am sure has investments in the system, and your money was used for these investments because all banks do this short term. They loan to each other.
Now, tell me again just how this is going to work it;s self out when money can't flow because securities that enable that flow cannot trade at ANY PRICE.
This happened once before and only once, and that was in 1929, but the scale today is larger by a factor of 50.
If Congress fails to act by tomorrow morning, mainstreet will look like wallstreet and the panic will spread globally as well. If they dick around and make this political, you will see it, feel it, taste it, and you won't be required to be a investor of any kind. You will only be required to be alive today and breathing.
No, that is what they thought about Lehman Brothers. Turned out, they would not buy it at ANY PRICE and it is currently being broken up and sold in pieces, with 25,000 people out of work and 600B in assets that are worthless except for the people and buildings.
How do you sell worthless things, much less borrow money for them when funds and assets are frozen. We don't keep money and assets in mattresses!
If you don't get the picture, that's OK. They did not get it in 1929 either. They said the same things you are saying. Exactly the same.
“You don’t get the picture, and many don’t, and frankly I pretty much expect that.”
Actually, I do get the picture. In color. And that’s the problem. Thievery is thievery whether it’s done by a member of MS-13 or political or economic leaders.
Your post notes that the reason underlying the “crisis” on Wall Street was that nobody, be they buyer or seller could make a trade at ANY PRICE in real estate securities. And I don’t argue with you. Have you considered, however, that nothing is not much less than a reasonable price for these securities, because that’s a fair estimation of their worth at this point? These are garbage securities that no one wants to own....precisely because they *are* garbage. The fraud runs deep and no prudent investor at this point would touch this stuff with a 10 foot pole unless they purchased it at a deep, deep discount.
The current owners of these garbage securities don’t want to accept the actual value of the securities which is probably pennies on the dollar. They’ve instead decided that it’s far smarter to push for a government bailout that will make them well. Why accept 10 cents on the dollar when the treasury will give you full face price or close to it? Therein lies the “freeze” of capital markets. Sellers who won’t sell at a market price and buyer who won’t pay a premium for junk.
That's one way to see it, but it is wrong. The securities are worth nothing because the markets that are supposed to value them is broken down by the shear weight of them and is in a panic.
The cost is in the tens of trillions, and there are tens of trillions globally depending on that.
The domino's are almost ready to fall, and if they do, you will not be able to stop it at any price or with any bill.
The meager and small 700B is only a pittance compared to the whole financial system, and that is what we will lose, plus the 700B if this fails to work or is too late.(Or more to the point, fails because it is too late!)
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