A bailout isn't what is needed, open books are what is needed

[MadHound]

Injecting hundreds of billions of dollars into the system is not what is needed. Banks have cash, in fact they've been hoarding billions on the sidelines for weeks now. What is needed are open books. The reason that banks aren't loaning money to each other is because they don't trust the entity that they're lending to. So rather than injecting unneeded cash that will raise inflation and destroy the US bond rating, we should forge a law requiring that banks and lending institutions open their books to each other. Require the entity looking for a loan to come clean on the balances. That way, confidence will be restored in those entities that have followed good business practices. Those who have been playing fast and loose won't be able to get money and will go under. After all, isn't that what capitalism is all about?

Injecting more money isn't going to increase banks' confidence in each other, all it will do is provide a quick fix. Opening books will restore much needed confidence in such a way that that is sane and sensible. Yes, some institutions will go under. But overall, this injection of confidence will do more good for our country than simply throwing more money at the problem.

[still_one]

1. So you are saying there is no liquidty problem? The Libor spikes mean nothing?

[girl gone mad]

2. Where did the OP say that? n/t

[still_one]

8. Read the OPs respose to my post /nt

[Karenina]

3. The "liqudity" problem is a result of a lack of transparency.

Make them ALL

OPEN THE BOOKS.

[MadHound]

4. Yup, it is a crisis in confidence, not liquidity

Restore confidence, you'll restore liquidity. Banks are hoarding their cash on the sidelines, afraid to lend it out to each other because they have no clue as to what that potential lendee has on their books. Therefore require those books to be fully open to the potential lender, that way the lender can see immediately which is a good risk and which is a bad risk. Sure, this sort of thing will tank some large, but rotten organizations, however those would most likely collapse anyway even if we did a bailout. But by opening the books you would restore confidence and restore liquidity.

Here's a couple of articles on banks hoarding their cash.
<http://www.denverpost.com/ci_10550992?source=rss>
<http://www.ft.com/cms/s/0/7d3e5ae4-88d4-11dd-a179-0000779fd18c.html?nclick_check=1>

[still_one]

9. You make a good point, and yes opening the books would definitely

tell us where we stand, but it still doesn't say there isn't a liquidity crisis. After they open their books, it might indicate the liquidty they hold isn't as much as thought

I absolutely agree with you that how bad things really are should be open to the public, and why that isn't required by Congress I don't know

[HamdenRice]

10. Question for you

Please see posts 5 and 7, and click on the link to Bank of America's Form 10-K. In what way do you think that the banks' books are not "open"?

[still_one]

12. Agreed. Then why do we keep hearing they do not know the extent of the

of the bad debts?

From my understanding, it was the financial institutions that wrote most of the Credit Default Swaps, which amount to something like 13 TRILLION dollars

What if the underlying debt that the credit default swap is suppossed to protect, cannot pay?

Is the buyer of the CDS out?

[HamdenRice]

13. There are lots and lots of "urban legends" parading as "analysis" right now

I think that the biggest problem with valuing mortgage backed securities isn't that there isn't enough information; it's that there is too much information, and not enough time to digest it. I wrote a post about this yesterday. I posted a link to a SEC disclosure document for a mortgage backed security with dozens of spread sheets down to the individual mortgage level. With the 10Ks and 10Qs of mortgage backed securities, the public literally has hundreds of balance sheets, detailed descriptions of assets and spread sheets. Here's a link to a disclosure document for one series of mbs:

http://www.secinfo.com/d1zj61.ue8.htm

But here is the practical problem as I explained in post yesterday

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4128501&mesg_id=4131912

This one filing has dozens of spread sheets like this that explain exactly what's in this mbs and how all the loans are peforming. The trustee has even more detailed spread sheets, down to the level of how each individual loan is performing and who the homeowner is.

The problem isn't that no one can know what it's worth; it's that no institutions have the time to pour through the online prospectuses, registration statements, and exhibits, or time to call up the trustee for even more detailed information, before trading an mbs to settle an inter-bank debt.

<next post>

Let's say you are a regional bank and at the end of the day, after tallying up settlement requirements, you owe a bank in the next town $500,000. You owe Citibank in New York $50,000. Chase owes you $45,000. The list goes on and on.

In the past, you've always transfered mbs to settle up. The mbs were treated like money. They all had identical ratings -- triple A, which they had to have, for you, a bank, to own them -- so you treated them all exactly the same. You traded them at exactly face value. You never looked at the prospectus after the first time you read it when you purchased them.

Now what do you do? You have 4 hours to settle. You never even made a distinction between mbs before. Who's going to go through hundreds of prospectuses of mbs you are offering and that are being offered to you <for settlement>.?

<end quote>

So to understand and value each mbs series, you need to read through a pile of documents perhaps 4 feet tall.

The information is there, but no one in the financial sector has the time to go through it. Last year, I thought the fed should have hired a small army of bright young accountants and lawyers to go through all this stuff and come up with a universal, publicly available data base that boiled all this stuff down to some number or index. If they had done that, we wouldn't be in the situation we are in.

[ProfessorGAC]

23. I Like Your Desciprtion

The problem is too much information. That's good. And when bought in giant bundles there was really no way for anyone to know the quality of the bundle. The information was there but by the time you did the analysis of all the mortgages bundles that backed the securities, the incoming cash would be done as the mortgages would be paid off!

Good one, Hamden.
GAC

[HamdenRice]

26. I wonder if a bailout could be avoided with an index

Something the Fed, Fannie, Freddie, Treasury, FDIC and Labor Statistics would put their heads together to compile. It would list every series and tranche of every mbs created in the last few years and simply state a number -- a discount number (eg .83 or .57) -- that aggregated and distilled all the information about what the underlying securities were worth currently in the opinion of the agencies.

[ProfessorGAC]

28. I'd Be Surprised If Someone Doesn't Already Do That

But, it might be proprietary. Let's face it; there are investors that actually bought at least participation in mbs bundles and didn't take a beating. Someone knows something.
The Professor

[HamdenRice]

30. Apparently, Goldman Sachs

They didn't lose money in mbs and got out before everyone else, according to the Times last week.

We could probably nationalize/expropriate their models for a few tens of millions and avoid the bailout altogether.

:rofl:

[still_one]

47. Thanks /nt

[girl gone mad]

42. Then we could separate the wheat from the chaff..

and money would flow in to the good banks.

Yes, the problem is bad, but they aren't *all* heavily exposed to the worst stuff.

[ProfessorGAC]

11. Exactly Correct Hound

All one has to do is look at the quarterly filings of the major banks that have yet to fail (and there's LOTS of them). Liquidity positions are still reasonably strong and the issue is one of confidence in the system.

But, bailing out the people who made gross errors in judgment won't restore confidence no matter what the vested interests say, because it does nothing to correct the systemic problems that led to the lack of confidence. It's a band-aid on a gaping chest wound.
The Professor

[HamdenRice]

15. "bailing out the people who made gross errors in judgment " -- question

I'm curious whether you think this is true for most holders of the mortgage backed securities that are at the heart of the crisis.

Almost all of them were sold as public offerings, pursuant to registration statements, prospectuses and ratings by ratings agencies. The Wall Street firms that created the problem by packaging the mortgages the way they did, by and large sold them onwards to other financial institutions, such as regional banks, thrifts, insurance companies and pension funds.

Many financials are required by law only to purchase "investment grade" securities with very high ratings, and most mbs achieved triple A investment grade ratings. The prospectuses drafted and distributed by the investment banks described them as such.

We now know that those ratings were unrealistic. But could you explain why, for example, a regional bank that now wants to exchange its mbs for treasuries should be deemed to have "made gross errors in judgment" if it read the prospectus and ratings that described the securities as triple A investment grade securities? Wasn't it the investment banks and ratings agencies that made the "gross errors in judgment"?

[ProfessorGAC]

16. Sure

One of the things that happened is as follows:

The banking industry was encouraged by the gov't to review their standards for mortgage lending for lower income folks.

Big parts of the lending industry chose NOT to review the threshhold level for what constituted a mortgage. (IOW, they didn't move the standard DOWN to call it a mortgage, from $70k to $40k for instance.) Rather, they altered the standards like FICO and debt/income ratio.

Then by making ARM sales on a commissioned basis they encouraged people to overbuy so they could then bundle huge amounts of mortgages each valued at potentially $150k, that would reprice in a few years to >7%.

Within these bundles was a myriad of various quality mortgages and the regulations were so lax that nobody really knew what the overall quality of the portfolios were. If you dump billions of liquidity into a investment that may or may not pay 7% and may or may not have a delinquency ratio of 0% or 10%, then i would suggest they were guilty of gross errors in judgment.

The people who used marketing to expand home ownership instead of simply lowering the amount that constitutes a first mortgage, the people who paid commissions on mortgage writing, the people who bought bundles of unknown quality, the people who relied on long term investing without knowing the the risk level were all execs at major financial institutions.

If those don't constitute gross errors in judgment, i can't imagine what would.

Take a look at the overview of the community banking and credit union segments. You will see that they did not take this approach. Rather, they lowered the amount that was a valid 1st mortgage. The delinquency ratios on those loans to lower income borrowers is statistically identical to the population of all mortgage borrowers. So, when sound judgment was applied portfolio size went up, yield was still good, and risk was not increased. These segments still made money and didn't get into trouble on these deal.

There is the comparison across an entire industrial segment basis. Good judgment vs. poor judgment. The data is pretty clear, Hamden.
GAC

[HamdenRice]

20. Those are originators, not investors

This is what seems to me a big conceptual mistake everyone is making. Do you see a necessary correlation between:

1. the people who originated bad mortgages

2. the people who packaged mortages into mbs

3. the people who hold mbs and would presumably be "bailed out."

Everything you wrote was about originators, many of whom were thinly capitalized mortgage companies who don't even have capital invested in mbs.

It seems to me that the idea that we are bailing out people who made bad judgments is kind of like saying that the people who bought exploding Pintos from Ford Motor company back in the 1970s were responsible for the quality of those cars, and therefore shouldn't have gotten relief for their injuries.

[ProfessorGAC]

25. No It Wasn't

The people who bought into mbs's without being able to discern the quality of the assets aren't originators. They are the investors who got into the deep water.

The poor judgement started with originators and percolated through the entire system. But, buying into bundles wherein the inherent risk was nearly impossible to gauge is horrific judgement.
The Professor

[HamdenRice]

27. To me it smacks a bit of collective punishment

The ratings agencies had generally not been wrong before on such a scale. Just like people purchased Pintos on Ford's reputation. It wasn't really a "crazy" decision at the time -- only in retrospect.

[ProfessorGAC]

29. I Suppose

Obviously i disagree, but i can understand why you think that. My main reason for disagreement is that not every investor in mbs bundles got creamed. Somebody knew enough to manage those risks that others didn't know how to do.
GAC

[Hannah Bell]

51. libor = 16 banks run by 16 people

[HamdenRice]

5. You have heard of the Securities Exchange Commission, right?

It requires any company with publicly traded stocks and bonds -- which means virtually every commercial bank, thrift and investment bank -- to file detailed registration statements before being permitted to sell stock.

Thereafter, such registrants are required by the Securities Act to file detailed quarterly reports on Form 10-Q and annual reports on Form 10-K.

These reports are available on line through the SEC's EDGAR electronic filing system, so anyone can look at anyone else's initial registration statements, 10-Ks and 10-Qs.

All of these filings include detailed financial statements.

Depository banks are further required to file detailed reporting to federal banking authorities.

Would you explain precisely what additional data you are asking for? I can imagine that it's possible to make the argument that current disclosure requirements are not rigorous enough, but just what additional data are you asking for?

You seem to be implying that they are not currently filing any of this information for public review. If that's what you're arguing, you're wrong.

[MadHound]

6. Currently, the way MBS' are bundled

Toxic paper can be disguised. Furthermore, if you ask any competent accountant, you will find a dozen ways to hide bad news on the books under the current laws. What is needed is full and complete openness in all borrowing institutions. The current laws don't provide for this, they're riddled with loopholes. Get rid of those and you'll restore both confidence and liquidity.

[HamdenRice]

7. Just how can "toxic paper be disguised"?

Check out this link:

http://investing.businessweek.com/research/stocks/financials/secfilings.asp?symbol=BAC

Click on the 10-K link. It is Bank of America's 10-K, filed in February 2008. Scroll through its very, very detailed financial statements, including detailed descriptions in footnotes of the kinds of assets it holds.

Just what additional information would you want them to disclose? A blanket statement that they don't disclose or that there are mysterious "loopholes" that "any competent accountant" can describe doesn't really cut it as an argument.

Most "competent accountants" who prepare these kinds of financials and who have to sign them when they are filed with the SEC are scared shitless of not disclosing, lest their firms, which are liable for mistatements, get taken down the way Enron's accountant were.

You seem to be making an argument that there is no disclosure. I think that the link to an actual disclosure document is very good evidence that you are wrong. Could you please explain precisely what is not being disclosed and what these alleged loopholes are?

Otherwise, I think you are making false statements that would tend mislead many readers about the cause of the crisis and the volume of information available.

On edit: If you go through BOA's 10K, you will realize that there is very detailed disclosure of the bank's holdings of mortgage backed securities (the "toxic paper"), including detailed information about defaults in the underlying mortgages and non-performing assets.

[MadHound]

33. Oh puhleeze Vulcan

If you honestly think that corporations are all sweetness and light, open and forthcoming about all of their financial dealings, I've got swamp land to sell you.

"Bank regulators told the National Housing Forum here yesterday that they have found major banks punting to investors questionable mortgages they could not legally keep in their own loan portfolios. Mr. Ranieri said brokers on Wall Street have raised the risks by repackaging the mortgages in deceptive and opaque ways so that the small investors and foreigners who buy them are unable to understand the risks.

"No securities market can stand if we do not have true disclosure, and we do not have true disclosure" of the growing risks of exotic mortgages whose payments can double overnight and force buyers into default, said Mr. Ranieri. "This stuff doesn't just get sold to money managers. It gets sold to the public and to foreign investors who don't have a clue what to look for." <http://www.mortgagenewswatch.com/newsviewer.php?ppa=%3Aqsvv_[klilljpXThew11rbfel>!] Note the date, 2006.

You really should educate yourself on how these mortgages were bundled, effectively mixing in good mortgages with bad, bundling them all together and because of the inability to look at each mortgage in the bundle, they were rated the same as the highest performing mortgage, thus allowing toxic paper into the system.

Funny you should mention Enron, who actually did fool the SEC, and everybody else for years and years, until their bubble got too big. It wasn't through the actions of the SEC oversight that brought down Enron, it was their own greed and stupidity.

Commentators and experts from all parts of the political spectrum have stated emphatically that one of the major causes of this problem is the lack of oversight and the lack of transparency. Go check out the New York Times or NPR for very recent examples. Yet here you are claiming the exact opposite. Hmmmm, who to believe, who to believe. :idea: I think I'll take the experts word on this one, thank you very much.

[HamdenRice]

37. Nothing you wrote, including the ad hom, was responsive

Just what further disclosure would you like to see? Did you look at the disclosure documents I linked to (as opposed to unsupported opinion spouted)?

And if the penalties are extremely severe both criminally and civilly for failure to disclose in SEC filings -- civilly up to all loses incurred by the market participants on trades on misleading information, plus in some cases punitive damages (in a word, billions) -- just what additional penalties would cause compliance? To what agency would this additional disclosure be made and in what form? If it already costs upwards of $1 million to issuers in accounting and legal costs to file an initial registration statement in the current disclosure regimes, which provides a massive amount of information, what would be the regulatory value added be of requiring a separate disclosure regime?

No one is saying corporations are sweetness and light -- that's obviously just red herring rhetoric.

But you say more disclosure is needed. I've demonstrated irrefutably that banks have to disclose detailed information about their income and assets and liabilities, and that mbs issuer trusts disclose massive detail of their mortgage portfolios down to individual mortgages. I've shown that that information is one click away for you to confirm or refute.

As for educating myself about how mortgages were bundled, I'm perfectly aware of how they are bundled, having spent several years (some years ago) designing asset backed securities, and having spent the last week looking through prospectuses and registration statements.

So just what is your argument?

hamdenSrice.blogspot.com

[MadHound]

41. You have yet to demonstrate anything irrefutably, other than your own bias and ignorance

The fact that you so casually dismiss the opinion of experts in the field, that you so casually ignore the realities of corporate finance and corporate accounting simply goes to show that you are driven not by reality, but rather by your own agenda. Let me ask you this, Obama and other Democratic leaders are calling for more transparency in corporate accounting just like I am. Do you disbelieve them too, discount what they have to say and their expertise? If so, why.

Sorry, but it sounds to me like all you are is simply another corporate shill, out there on the block trying to bring home that bailout bacon.

[HamdenRice]

45. Sometimes "lack of transparency" means "I don't understand"

First of all, while I have said repeatedly and firmly that you are wrong and are posting false information, thereby misleading readers about the nature of the problem, I'm sure you will recognize the difference in tone between our posts, and recognize that although I have pointed out that you are wrong, I have not used any insults toward you nor called you a shill, etc.

You still have not explained what financial information, in addition to the information in the SEC documents I've given you links for, you think these entities need to disclose.

No matter, I will continue to respond in this thread, because other people are reading this and becoming more informed, and hopefully not being misled by your rhetoric.

So why are mbs considered opaque, when each series must file so much detailed information with the SEC that is available to the public and purchasers of mbs with the click of a mouse?

Why are they opaque despite massive disclosure?

The following paragraphs taken from an mbs prospectus filed with the SEC describe the "cash waterfall" in a complex mbs; the "cash waterfall" is the system by which available money is paid first to the senior certificates, then to the next certificates, and so on, down to the most junior or subordinated certificates:

http://www.secinfo.com/d1zj61.ue8.htm#41ww

For each distribution date on or after the Stepdown Date, so long as a
Trigger Event is not in effect, from the Principal Distribution Amount
for such distribution date:

1. To the Class I-A-1 Certificates and the Class I-A-2 Certificates, on a pro rata basis in accordance with their respective Certificate Principal Balances, an amount equal to the Class I-A Principal
Distribution Amount until the Certificate Principal Balances of each
such class thereof are reduced to zero;

2. To the Class I-M-1 Certificates, from any remaining Principal Distribution Amount, the Class I-M-1 Principal Distribution Amount, until the Certificate Principal Balance thereof is reduced to zero;

3. To the Class I-M-2 Certificates, from any remaining Principal Distribution Amount, the Class I-M-2 Principal Distribution Amount, until the Certificate Principal Balance thereof is reduced to zero;

4. To the Class I-B-1 Certificates, from any remaining Principal Distribution Amount, the Class I-B-1 Principal Distribution Amount, until the Certificate Principal Balance thereof is reduced to zero;

<end quote>

It goes on and on from there.

In other words, all the information about the underlying mortgages has been disclosed; the system of payments is disclosed; the superordination/subordination is disclosed; etc.

But it's a complex, specialized field and most people would read this and not understand. It makes perfect sense to me because I used to draft this stuff. Other's would say it's not transparent; what they mean is they don't understand it.

An analogy would be if your doctor diagnosed you with a complex illness and tried to explain it in scientific medical terminology. He could be perfectly forthcoming, but most lay patients wouldn't understand.

The SEC and the securities industry has been discussing this for decades -- how to make disclosure comprehensible to investors. The problem is that securities are complex and require complex language to explain them. Every attempt at "plain language" disclosure has inevitably ended up creating language just as complicated. If you try to disclose in simple language, then you end up not disclosing what's happening and you get sued eventually for non-disclosure.

The other reason it doesn't appear to be transparent is that to understand how these securities perform, one needs both data and the economic models that show what will happen to them under various economic scenarios. They try to describe this also in the disclosure documents, but to fully describe this, they would have to distribute basically a computer program.

[MadHound]

58. And sometimes lack of transparency means just that, lack of transparency

Which is something which most experts agree is lacking in MBS'
<http://www.securitiesarbitration.com/subprime-investments.php>
<http://www.fdic.gov/regulations/examinations/supervisory/insights/sisum08/article01_transparency.html> This is an especially good one
Even the Chairman of the FDIC agrees that there is a lack of transparency throughout the system
<http://www.democraticunderground.com/discuss/duboard.php?az=post&forum=389&topic_id=4141423&mesg_id=4143376>

When you have major experts, both inside and outside of government agreeing that there is a lack of transparency, I tend to take their word over that of an anonymous, biased internet poster. Even though he does have some interesting lists. Speaking of which, nowhere in those lists did I see one word or figure concerning whether or not the borrower have the means to pay back those mortgages. Hmmm, looks a bit cloudy to me. In fact it seems like much more than that, that you are simply trying to overwhelm people with smoke and mirrors in an attempt to look like the expert. You're not, so please, drop the act. There are plenty of people out there who have much more experience and expertise in this field than you do.

And again, you complain of insults, that you're the wronged victim here of a sharp tongue. Well, first of all, as the DU rules state, grow a thick skin. Second of all, if you can't take it, don't dish it out. Your posts have been beyond condescending throughout our exchanges, your dismissal of anything that I post or link to that disagrees with your POV is accompanied by vitriol. Therefore, I respond in like kind. If you wish engage in a civil exchange, drop the attitude.

[HamdenRice]

61. Wow, you've completely mischaracterized the FDIC. It's saying EXACTLY what I've said

Let's quote exactly what the FDIC site says:

http://www.fdic.gov/regulations/examinations/supervisory/insights/sisum08/article01_transparency.html

In this paper we review the availability of information about some of these complex products. Our review supports the conclusion that lack of transparency of these products is a significant problem. The paper contains a number of recommendations that we believe policymakers should consider to improve the transparency of these products. We conclude with some reminders about existing supervisory guidance that is relevant to these issues.1

Inherent Opacity in the Securitization Process

Concerns about transparency in the securitization process are not new. Transparency concerns have existed and resurfaced on occasion since the securitization business model was introduced in 1985. These concerns first centered on the lack of standardized deal terms and documentation. Over time, a measure of standardization has been introduced, especially to more “plain vanilla” securitization products, such as mortgage-backed securities.2 However, standardization and transactional transparency for more exotic forms of securitization, such as structured investment vehicles (SIVs) and collateralized debt obligations (CDOs), remains inadequate.3

<end quote>

In other words the paper is about how mortgage backed securities have evolved into PLAIN VANILLA securitization products for which STANDARDIZATION OF DOCUMENTATION HAS BEEN INTRODUCED which means the documentation and disclosure is standardized and therefore easier to understand.

It is the CDOs that this paper is about -- and I have several posts up today about how CDOs are an exception, are a small part of the market and should not be included in the bailout.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4127627&mesg_id=4130576

(I hope I am having this debate with someone who knows the difference between mbs and a CDO!)

How on earth could you cite this paper as an example of the FDIC saying that PLAIN VANILLA mortgage backed securities lack transparency?

It then goes on to complain about the lack of documentation with respect to asset backed securities that are sold via PRIVATE PLACEMENTS. Of course you must know that private placements are sales of securities that are not registered with the SEC pursuant to the Securities Act and that therefore do not have prospectuses and registration statements available to investors through the SEC at the click of a mouse.

Your claims about our respective tones are as false and misleading as your claims about the FDIC saying mortgage backed securities lack transparency. Just because I am pointing out how you are posting false and misleading information over and over again, doesn't mean I am using vitriol. You seem to be complaining that facts that go against you are vitriol. Compare the number of insults you've hurled around in this thread at me and others compared to the number of insults (zero) I've hurled -- unless you think that displaying facts that prove your misleading assertions are wrong, is an insult.

I have a thick skin (that's why I can continue to counter nonsense with facts in this thread), but you should realize you don't win an argument by losing on the facts over and over and then throwing in a few insults. It doesn't work that way and it affects your reputation as a DU member and poster.

[MadHound]

62. Wow, you can take quotes out of context! Congratulations,

You too can become a newsreader at Faux with that sort of talent. Read the whole thing. Taken as a whole, it doesn't back your contention at all. You're choosing to focus on two words, "plain vanilla" when the truth of the matter is that MBS' come in many more flavors, CMBS, RMBS, etc. But hey, I understand, you keep seeing your simplistic arguments going down the drain, so you've got to do what you can.

As far as being civil, all I need to do is point downthread to your post concerning crickets, directed at me. Yeah, that's real adult. Whose rep is at danger here?

It is apparent that this discussion is going nowhere constructive, so I'm going to let it pass. So get you last childish shot in, that last precious word that you're dying to have. I'm going to move on, and I'm sure I'll catch you later, since you seem to follow me wherever I go.

[HamdenRice]

65. Sorry, but you've taken the entire FDIC report out of context

It's pretty clear that you simply didn't know what they were talking about or what argument they were making.

It is about how CDOs in contrast to mortgage backed securities were not transparent. It doesn't get any clearer than that.

[girl gone mad]

49. Read my post below. n/t

[HamdenRice]

14. What's that sound?

chirp *** chirp *** chirp *** chirp

Oh, crickets!

[2speak]

17. So do you think this

700 billion bailout will prevent the economy from collapsing now and for at least 1 year?

[2speak]

19. no crickets

just the sound of a pin dropping.

[HamdenRice]

21. I think there's a good chance that a bridge bailout till Jan 2009

could keep the economy from seizing up until the grownups take over.

This reminds me a lot of 1992, when a lot of people thought the country would collapse as a result of the size of the S&L problems and bailout (about half of the current proposed 700b). Within a few years, Clinton was racking up surpluses, unemployment was near zero and we were on track to pay off the entire federal debt.

I don't see why that's not possible now.

[2speak]

22. I would welcome

that scenario!

[MadHound]

34. Sorry to disappoint you there

I guess that you just hang on my every post, considering how much you follow me around. Impatient aren't you. Hate to tell you this pal, but most of us out here in the real world have jobs and other responsibilities and we can't wait on your whims hand and foot. Grow up and get used to it. I'll get back to you when I get back to you. Don't like that, tough shit.

[girl gone mad]

46. I think you're a bit confused.

Suppose a company has a mortgage-related derivative, we'll call it Asset X, whose value is recorded on the books as $100.

Because of the current economic decline, Asset X's real value has dropped to $50.

Except that the loss does not have to be recorded on the books until Asset X is sold.

Right now, there are no buyers for Asset X so it is still sitting on the books at face value.

What the OP is talking about is requiring the write-downs to happen now, so that investors have a true sense of what the banks have.

[HamdenRice]

50. The banks have been taking massive write downs without selling

They are required to do so. But it's difficult to know what those securities should be written down to.

But in neither case is it because information has not been disclosed to the public; it's because there's no market price for the assets.

[girl gone mad]

53. The market is not certain what these derivatives are worth..

because of the way they've been intertwined. Trading partners backed away from risks associated with opaque investments such as tranches of mortgage backed loans.

Full disclosure is not happening. Shining a brighter light on the books would help us start to untangle these big balls of yarn.

Banks also have been fighting their auditors on disclosure for several months now.

[HamdenRice]

54. I don't think that's true

That may be true of CDOs. They're very, very bad. I don't think it's possible to get a sense of what they're worth no matter how much disclosure is made. They are basically securities that hold mortgage backed securities rather than mortgages. There are even so called CDOs-squared -- CDOs whose assets are other CDOs -- and CDOs cubed.

But they were not generally registered with the SEC and couldn't be traded anyway and are not nearly as big a market as mbs.

What matters is first line mortgage backed securities. Again, they are actually quite transparent. What mortgages are in them and which are performing is basically a mouse click away.

What isn't known, and the reason they aren't trading, is what is going to happen to the mortgages underlying them in the future. No one knows how many more homes will go into foreclosure and therefore no one knows what the mbs is worth. That, and not the bundling, is what makes the value of mbs unknowable.

But the idea that mortgages were bundled in some mysterious way that makes what is going on with them unknowable is just an urban myth that has ricocheted around the lazy news media and blogosphere. The performance of the underlying assets in most mbs is -- and I can't stress this strongly enough -- basically a mouse click away.

[Ganja Ninja]

18. The government needs to start writing mortgages.

If they have to take all the failed ones off the hands of the banks then why not just loan directly to homeowners and let the banks compete with them for business? The government could take the profits and use them as general revenue and the banks will have to get by on commercial and consumer loans.

[chicagoexpat]

24. uninformed opinon had its say the other day w/ the RW talk shows & House vote

You should let the grownups decide thing if ur unable to unnerstan ekonomiks

[2speak]

31. You need some major

deprogramming.

[blm]

32. Open books should be ATTACHED to the rescue legislation. Every corporation that 'rescues' another

smaller company requires every book, document, memos and emails be turned over, too. A lot of forensic accounting is in order and should go back a few decades.

[MadHound]

35. Well, I certainly won't base my opinions on the mewlings of a barely coherent internet poster

However I do base my opinions on solid sound economic principles. After all, my wife is an economist, I work with several economists, I read scholarly works written by top economists of various stripes. What do you base your opinions on, the latest drivel coming out of the administration's mouth?

Oh, by the by, Kucinich, along with ninety four other Democratic reps voted against the bailout, calling it a bad deal. What, were they influenced by RW radio too:eyes:

What a tool.

[chicagoexpat]

36. Yes I can tell where uninformed opinions come from.. ignorance.. but don't drag us all down 2 ur lvl

[MadHound]

38. Cool then,

Can you tell be what happens when you inject 250 billion dollars worth of liquidity into the system? Can you also tell me what happens to a country's ability to sell it's debt when it takes on too much debt load? Can you explain these basic macroeconomic concepts concisely and succinctly? After all, since you're so damn smart in this area, these should be easy for you.

[chicagoexpat]

39. I can tell u to trust Obama & the Dem leaders, not right wing maggots -- hard choices, I know

They ain't no easy or painless fix, no matter how much you demand one

[MadHound]

40. In other words you have no basic grounding in economics

Therefore you're in no real position to judge whether or not this bailout is worthwhile or not on its purely economic merits. All you're doing is blindly following your leader:thumbsup: What about our other Democratic leaders, you know, like Kucinich and the other ninety four Democratic Congressmen who voted against the bailout? Do their informed opinions count with you, or do you just blindly follow Obama? Hate to tell you this, but Kucinich has been right on the issues a hell of lot more times, both amount and percentage, than Obama has.

So again, why should I take the advice of some anonymous internet poster who has no basic grounding in economics and is just marginally coherent?

[chicagoexpat]

43. LOL! Read a newspaper for gawd's sake

This is why scorn & derision is the only reasonable response to the uninformed opinion of the kiddies speaking up at the grown up table

[MadHound]

44. I read several, each and every day

And like I said, I have a solid grounding in economics, my own in house economics adviser(my wife) several colleagues who are economists that I consult with. What do you have? As long as we're comparing intelligence, education and experience, what do you bring to the table? Apparently nothing in the way of economics education, you punted on the two questions I asked above. You're sole reason for supporting the bailout seems to be your blind faith in Obama. Let me ask you this, if Obama said to bend over and take one for his campaign, would you?

So again, other than incoherence and insults, what do you bring to the table that would persuade me to follow your advice rather than the advice of reputable economists and politicians?

[HamdenRice]

48. "other than incoherence and insults"

You might want to click on "view all" and read through all the posts. After you do, who do you think is offering up the "insults"?

[chicagoexpat]

56. In a crisis, scorn and derision is the proper response to yahoos linking arms w/ RW maggotts against

etc., etc., etc.

[MadHound]

59. RW maggots like Kucinich

:rofl::rofl::rofl::rofl::rofl::rofl::rofl::rofl:

So again, you're refusing to ask the questions I put in front of you. Hmmm, I wonder why:think:

[chicagoexpat]

55. So does Palin, she says; so does a puppy dog getting house broken

Don't make them figger things out any better

If you won't give Obama, Warren Buffet, Pelosi, Reid, etc., a fair reading, why would I waste my time?

But, hey, you've PROVEN to me ur smarter than all them put together!

[MadHound]

60. What makes you think that I haven't given them a fair reading?

Just because I have given them a fair reading doesn't mean that I have to agree with them. After all, do you agree with Obama on his FISA bill vote? His stance on offshore drilling, or a myriad of other positions.

An intelligent man reads widely, takes in all viewpoints and makes up his own mind. You on the other hand are simply, blindly following the lead of one man. Time and again we've seen the danger of that path. Enjoy going over the cliff.

[yurbud]

52. freeze accounts of execs until all ''bonuses'' from subprime era returned

[chicagoexpat]

57. I note the brilliant OP still calls it "a bailout" when that isn't what it is

But, hey, why let facts get in the way of ur opinion?

[MadHound]

63. I notice that you've yet to answer any of my questions

But then again, I understand that it's hard to own up to the fact that all you have backing your happy ass up with is hot air.

[OakCliffDem]

64. Kicked and Recommended