Free Republic

So then why was it an appropriate action again ?

Those who are causing the problems are being rewarded and will certainly do it again.

I agree with you. The problem is that we are all so weary of all the misuse of taxpayer dollars for foreign aid, AIDS, bailouts, earmarks yada yada yada that at some point we all need to say Enough ! Just stop spending already ! No more to anything ! None of this is good use of taxpayer money.

Hello - Dimon sits ON THE FRICKIN BOARD of the NY Fed. If he didn’t know the window was open to Bear and the other IBs, then he’s a moron. Hindsight had nothing to do with it.

Tell me - when the negotiations were going on that weekend, which hat did Dimon wear - that of th Fed or that of JPM. Just a little conflict of interest, no ? Secondly, Bear was the counterparty to a lot of the crap JPM owns. Don’t you think JPM tool/were forced to take BSC BECAUSE it allowed JPM to stay solvent, and that’s why the 30B was a necessity ?

I thought NASA said the seas were cooling ?

We need a rule - no more Treasury Secretaries from Wall Street.

I vote for David Walker. Heck, let’s run him as President, then maybe we’d stop with the crony fascism.

You need to read post #222.

Jamie Dimon said JPM and everyone would have been just fine if BSC declared bankruptcy. Bernanke said it was to avert systemic meltdown.

So - do you believe Bernanke or Dimon testifying at the SAME HEARING ?

If Dimon was not lying, then the Fed did not need to step in, now did they ?

Good post, I hadn’t seen that yet.

Kinda puts paid to those who said raiding the taxpayers was justified because it “saved” us all.

So if joe taxpayer goes bankrupt and other joe taxpayers are asked to bail him out, you’re good with that ‘cause it’ll only cost you $5 and he gets to walk away with all his toys ?

Hello, socialism.

Your post is so useless. You like to act superior but you don’t post jack to support any statement.

All hat no cattle.

I realize that, but taking in the news that banks are recovering about 50% on most properties, there’s a huge backlog in the system where people who have not paid for 6 months are still living in the houses because they HAVEN’T EVEN BEEN CONTACTED by their lender, and a lot of people are trashing the houses on the way out, the actual % rate is hard to estimate.

I kinda fudged it because the actual current foreclosure rate is well over 2% and it will go a lot higher when the latest rate resetting of ARMS that occurred in March start getting delinquent.
http://activerain.com/blogsview/58601/FHA-vs-Subprime-default

Chapter and verse, please.

Put up or shut up.

Never said I was. So toddle off and find me that law, OK ? That’s a good boy.

Liar liar pants afire ! Unbelievable. Yet they put the Enron execs in jail over less.

I know WaMu has a large exposure and there’s been speculation about their solvency for a few months. It’s getting interesting in a not so good way.

Some discussion: http://www.tickerforum.org/cgi-ticker/akcs-www?post=38473

There is no “finding answers” because the point is

THERE IS NO FREAKING LAW OR REGULATION THAT AUTHORIZES SUCH A DEAL !

You can’t “find” a negative.

Why don’t YOU find the law that says this is legal.. OK ? Cite me the law and the section under which this is legal.

OK. Let’s assume that in 2006, residential real estate in this country was worth, collectively, 22 trillion, as Case-Shiller says. http://64.233.169.104/search?q=cache:6wSEMt16gasJ:www2.standardandpoors.com/spf/pdf/index/SP_CS_Home_Price_Indices_Factsheet.pdf+value+residential+real+estate+value+united+states&hl=en&ct=clnk&cd=3&gl=us&client=firefox-a

Let’s take a conservative number. If only 2% of the 22T goes into default/foreclosure, then that’s 440 billion of writedowns the banks will need to take. So far the banks have only written off less than 200 billion (I forget the actual number), and they are already out of reserves. They are existing on borrowed reserves from the Fed.

Add in HELOCs worth about 1 Trillion, CC debt, and the leverage on all that, and the number starts to look fairly staggering.

If you still think we aren’t in big trouble and that putting the taxpayer on the hook via the Fed is a good idea, then we will certainly disagree.

Why ? Have you found your mind yet ? Or are you a mindless apologist for the facists in government ? You need to stop parroting the party line and do some thinking of your own.

I ain’t the only one asking the question.

http://www.hussman.net/wmc/wmc.htm

Bear Stearns is trading at $6 instead of $2 because unelected bureaucrats went beyond their legal mandates, delivered a windfall to a single private company at public expense, entered agreements that violate the the public trust, and created a situation where even if the bureaucratic malfeasance stands, the shareholders of Bear Stearns will either reject the deal or be deprived of their right to determine the fate of the company they own. Very simply, Bear Stearns is still in play. Still, when all is said and done, my own impression is that the ultimate value of the stock will not be $2, but exactly zero.

In effect, the Federal Reserve decided last week to overstep its legal boundaries – going beyond providing liquidity to the banking system and attempting to ensure the solvency of a non-bank entity. Specifically, the Fed agreed to provide a $30 billion “non-recourse loan” to J.P. Morgan, secured only by the worst tranche of Bear Stearns’ mortgage debt. But the bank – J.P. Morgan – was in no financial trouble. Instead, it was effectively offered a subsidy by the Fed at public expense. Rick Santelli of CNBC is exactly right. If this is how the U.S. government is going to operate in a democratic, free-market society, “we might as well put a hammer and sickle on the flag.”

What is a “non-recourse loan”? Put simply, if the homeowners underlying that weak tranche of debt go into foreclosure, they will lose their homes, and the public will lose as well. But J.P. Morgan will not lose, nor will Bear Stearns’ bondholders. This will be an outrageous outcome if it is allowed to stand.

In my view, the deal would be palatable if J.P. Morgan was to remain fully responsible for any losses on the “collateral” provided to the Federal Reserve, assuming shareholders were to consent to the buyout. As it stands, Congress should quickly step in to bust the existing deal and demand an alternate resolution, by clearly insisting that the Fed’s action was not legal.

The Fed did not act to save a bank, but to enrich one. Congress has the power to appropriate resources for such a deal by the representative will of the people – the Fed does not, even under Depression era banking laws. The “loan” falls outside of Section 13-3 of the Federal Reserve Act, because it is not in fact a loan to either Bear Stearns or J.P. Morgan. Bear Stearns is no longer a business entity under this agreement. And if the fiction that this is a “loan” to J.P. Morgan was true, J.P. Morgan would be obligated to pay it back, period. The only point at which the value of the “collateral” would become an issue would be in the event that J.P. Morgan itself was to fail. No, this is not a loan. It is a put option granted by the Fed to J.P. Morgan on a basket of toxic securities. And it is not legal.

The deal was made under duress, to the benefit of a private company, on the basis of financial assurances that the bureaucrats involved had no business making. The Federal Reserve is going to put up public assets and accept default risk so that Bear Stearns’ own bondholders are effectively immunized?! That’s not sound monetary policy – it’s a picnic for insiders, bought and paid for through the abuse of public funds by government officials too unprincipled even to recognize the abuse. The only good thing about this deal is that it buys time while principled ways of busting and restructuring it can be settled.

This is not an issue of letting Bear Stearns “fail” on the claims of its customers and counterparties. Nobody wants that. The issue is the method by which it was rescued – who was protected, and who was not; why a consortium was not used instead of a single firm; why the claims of Bear’s bondholders should be secure while the public bears the risk of the toxic waste foisted upon us. This deal should, and I believe will, be restructured. J.P. Morgan will cry foul, but that will be like a child who found the Easter basket and is now forced to share the chocolate. Bear Stearns is worth more than zero in acquisition, provided that the bondholders take an appropriate loss.

http://www.aim.org/aim-column/bushs-big-bank-bailout/

One of the feeble explanations was the Journal’s Saturday page-one story about Bear Stearns receiving “emergency funding backed by the federal government.” The paper explained that “A 1932 provision of the Federal Reserve Act allows the Fed to lend to non-banks if at least five of its seven governors approve. That provision was last regularly used during the Great Depression. It is meant to underscore that the central bank should lend to non-banks only in extreme circumstances.”

But later, the article revealed, “The Fed, with two governors’ seats vacant and one governor overseas and unreachable, invoked a special legal clause to approve the loan with just four governors.”

What is the precise legal and constitutional basis for what the Federal Reserve has done? How is all of this possible under a democratic system where the peoples’ representatives in the Executive and Legislative branches are supposed to make the decisions?

I didn't mention the gold standard. I was discussing the value of the dollar over time since the Fed came along - regardless of the gold standard or not. It's quite interesting.

And for that matter, why do you call deflation "crushing" while inflation is not ?

Sorry, creating money is not magic - it's called leverage. Don't be sarcastic. And when deleveraging occurs... but of course you think that's magic too ?

Sorry, wrong figures - different bank. The BSC figures seem to be 13 trillion to, on the Wednesday before the firesale, about 12 billion in capital.

I think we should give individuals the same ability to write off losses as we do businesses. Why discriminate ?

How about if you lose money on your home, you can deduct it against prior years’ taxes, just like they’re proposing to allow the homebuilders to do ?

After all, don’t so many people say a home is an investment ?

Wouldn’t that be fair ?

So I guess “ridin dirty” is a new Biblical description of corruption ?

RE is continuing to fall in valuation, we haven’t even started to see the writedowns from underwater HELOCs and other consumer debt, 1Q 08 earnings reports are only starting to come in - no, we have a long way to go yet to get back to normalcy.

Whatever normalcy is anymore.