Posted on 09/21/2008 8:32:53 AM PDT by Flavius
Treasury Secretary Henry Paulson said Sunday that foreign banks will be able to unload bad financial assets under a $700 billion U.S. proposal aimed at restoring order during a devastating financial crisis.
"Yes, and they should. Because ... if a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets, they have the same impact on the American people as any other institution," Paulson said on ABC television's "This Week with George Stephanopolous."
(Excerpt) Read more at news.yahoo.com ...
This act is a de facto nationalization of all financial, insurance, and related industries. What's left to pretend about this?
well i would like to be ahead of a next snow job, so what is the next scam that follows this one
REIT’s,
S & L, 80’s, 70’s, 00 subprime, what other financial vehicle can these ivy league morons package so that i can get ahead of the ponzi scheme any ideas
Its sad that the Clinton financial legacy that let loose these dogs of financial ruin is being allowed to be “rescued” by the same Democratic party that created it. Paulson is a stand up guy to deal with it in as much of a non-partisan way as possible.
Didn’t the original draft say it was only open to US companies?
So start the hijinks.
Your math logic is faulty. If I sell a stock to you for $100 I first have the $100. If I buy it back for $30, which is probably its true value now, I have a $30 stock plus $70 of your money. Not too bad.
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WOW!! You are way off base. The investor paid out $100 cash for the security. It is now worth $30. If they sell it to the Feds they will only get $30 - a $70 loss!! Did you ever take an accounting course!!
This is going to be an auction entity of bad mortgage packages much like the RTC did with S/Ls which cost us almost nothing.
Banks will still lose...and lose a lot...espcially derivatives.
But this slows down the cliffdive and allows some order and time to restructure.
make no mistake, financials are still going to lose some serious capital
we are not just giving away a trillion dollars, we are providing a clearinghouse and allowing these failed banks to place their bad debt there to be bid upon eventually
granted though, this is fairly new charted waters so who knows precisely but this is not taxpayers are paying off the debt of these companies through grant remedies.
if these foreign banks are located here and have these US bundled exposures it would be sorta hard to block them from the same re-liquidity option granted to domestic banks.
this is how I heard Rupert Murdoch and Senator John Kyl explain it Friday...and neither of them are big entitlements proponents as a rule
If the opportunity to make money on these depressed assets is so great, then why don't cash rich players with long investment horizons, like sovereign wealth funds, university endowment funds, and the Buffetts of the world, swoop down and buy these up? Is Federal Government better at assessing these assets than the professionals?
The capital will get going again when the holders of mortgage backed assets lower the price to market clearing prices. E*Trade sold their portfolio for about 30 cents on the dollar late last year. Indymac sold theirs for 20-45 cents on the dollar in June. Other players will purchase these bonds, but the prices have to be low enough to compensate for risk. So far, banks have been unwilling to do so, because they've been valuing the debt way above market value in order to maintain capital ratios.
The only way for the government's plan to actually "save" the banks is for them to buy the assets at well above market value. And that's unlikely to be profitable for taxpayers.
Don't be so eager to drink the Kool-Aid. What is proposed is something that will be with us for at least a couple of decades.
An ounce of prevention...
I disagree.
If my neighbor bought that $100 stock and sold it to another neighbor for $30, and then held me responsible for that $30 with the promise of future return - I’m still out $30 buck.
Never mind that the neighbor that borrowed the $30 has a poor history of making profit or paying his debts.
Are you telling me that you won’t buy shares in my Alaska bridge and my scheme for a water powered car?
Sure. I'd buy anything with someone else's money.
hmm i see political future for you
A foreign investor bought insured AAA assets at say $100. They will now be selling them back to the US government for $30.
With all due respect, how the hell do you know this?
The so-called crisis supposedly stems from the fact that no one can determine the value of these assets.
If they were objectively worth $30, the bank would write them down to $30 (like every other business in America has to do with its bad debts) and life would go on.
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I used the $100/$30 as an example. How do I know this? Well, I am a CPA and CFA that follows the market. And, I have been reading many of the new articles on this for months, unlike many of the posters on this thread!!
As for the writedowns — most investors have already written these investments down to 30 cents. Are you aware of the accounting rules that require “marked to market??”
The reason governement intervention is needed is because no one trusts the market has hit bottom, even at 30 cents on the dollar, until there are sales of these securites. Everyone is panicked and doesn’t want to buy. That is why the government is stepping in as the buyer of last resort. We can get the market going again with the government purchase. They offer 30 cent. If another investor thinks there is more value they can bid higher.
Yes, it is not a pretty situation but there is one central question. Is a property that was sold for $100,000 three years ago now only worth $30,000?? If it is worth more, the government makes money. If not, IMO we have bigger issues!
This ball of wax reminds me of a Twilight Zone episode. The boy with awesome supernatural powers is peeing down our legs but we have to say, “That’s a good thing, Anthony...that’s a real good thing!” or we all get wished out to the cornfield.
How many cents on the dollar will they pay?
FTA: **This will protect the American taxpayer**. Well down is up and up is down. Instead of letting market forces work to purge failures, trillions of tax dollars are being appropriated by Herr Paulson and Herr Bernanke to resuscitate every stinking financial corpse including FNMA/FRMC. Which is going to make debtors out of the next three generations of American taxpayers. And to add more foreign mouths at the entitlement trough is going to—what?— protect the taxpayer? Paulson and Bernanke are out of control. And there is every likelihood de facto authorization of astronomic additions to the national debt by fiat is unconstitutional. Where the h-ll is Congress and where the h-ll is McCain/Palin? Where are our checks and balances? Did we the people have a say in authorizing these arrogant self-serving raids on the treasury to buttress and nationalize corroding institutions? Last week Rush told McCain/Palin they needed to jump on the FNMA/FRMC failure and attack it for what it was: a direct result of Democrat misfeasance, malfeasance and nonfeasance. But did McCain listen? No. Instead, McCain/Palin boarded the Democrat Let’s Attack Wall Street train. What did Wall Street have to do with the rotten market fruit borne of feel-good policies emanating from years of Democrat-controlled congresses forcing mortgage lenders at gunpoint to virtually throw overboard outdated underwriting standards (Charles Rangel, Chris Dodd anyone?). Under the subsequent Community Reinvestment Act mortgages were literally given away to every Tom, Rasheef, and Rosita who couldn’t qualify for one under preexisting underwriting criteria. Don’t look for any cause/effect analysis coming out of Washington. Or out of McCain/Palin. See, reason and causality are mean-spirited traits. By the way, the McCain/Palin sticker is coming off the pickup.
Because of these previous sales, most of the banks have been required to mark these down to 30 cents on the dollar. That is how accounting works!!
I am not sure where you are getting that the government will pay above market values for these securities. All the press has said they will be buying them at current market values. If you have facts that show otherwise I would love to see it!
Spreading panic.
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