Bailout Nation: Freddie, Fannie, and more

[RedScare]

Damn that wasn't meant to be a thread killer, jeez!

Paragrahs are your friend.

[Subdude]

I'm going to do one of those annoying multiple reply things, but I thought there were a lot of points worth addressing.

Everyone is looking for blame and not for solutions.

True enough. I suppose it's human nature however.

there are primarily three primary perpetrators in this corruption, and they all should be held accountable for all their wicked ways. First and foremost, the lack of oversight by the SEC/Government or whatever you want to call it, was a primary cause, and they should be held accountable. Next, the lending institutions who abused the system should not be allowed to profit from its demise; they need to pay for their mistakes. And the mortgage buyers who speculated on higher housing prices at the expense of moderating risk are also to blame; they should not be given a pass for their mistakes either.

One argument is that the original lapse was by the Fed. By ignoring asset inflation and, especially after the dot-com bust (and yes, that was a recession ) letting real rates stay negative for too long, the Fed unleashed a flood of liquidity that ended up in real estate speculation. As long as funding was effectively free it made perfect sense for banks to lend and everyone else to lever up. This was even more the case since incentives up and down the mortgage lending and securitisation chain were all aligned to encourage more lending and higher real estate prices.

One thing I would say is certain to come out of the crisis, along with tighter regulation of financial institutions, is that the Fed will stop ignoring asset prices and focusing on "core" inflation. Under Mr. Bubble the Fed thought it was extremely successful in managing inflation, because Greenspan denied that asset prices were within the bank's inflation remit. If you look at the numbers for early in the decade inflation for finished goods was close to nil, but there were massive run-ups in housing, share and commodity prices that nobody chose to worry about and which we are unwinding now. In retrospect it is blindingly obvious; they aren't likely to make the same mistake again.

does not guarantee that banks will begin to lend to each other though, and that's because risks still exist.

Actually interbank lending has picked up quite nicely and spreads are very much lower than last fall. That said, they're not where they were before August 2007 and they appear to have stopped declining. The problem is that external lending is still constrained, which is why there is talk about the government requiring more lending as is happening in the UK. We are replaying what happened in Japan. The banks get loads of government funds, but they want to hoard it instead of lend it out. This is why the bailouts have appeared so ineffective.

Some Banks will fail, and they should be allowed to fail. The shareholders and bondholders of those banks will be impacted, and they should be. The good assets of the banks who fail will be absorbed into sound financial institutions and a more stable, reliable, and powerful banking system will come out of all of this.

Many banks have failed. So many in fact that the FDIC is about out of funds and will have to borrow from the Treasury. The big problem is that the too-big-to-fail banks will not be allowed to fail even though they are insolvent. After financial system's near-death experience after Lehman, no serious politician or regulator is going to allow another failure of that size. It is totally off the table. Full stop. The only question now is the best manner in which to keep them alive.

This means, specifically, taking control of government debt. Excessive debt by our Government has directly caused many individuals to feel that they too can incur excessive amounts of debt without concern. Reality hits hard, and it is hitting now. Take control of the debt burdens of the country.

I doubt many people borrow more because the government runs a deficit.

You're worried about government debt? My friend, you ain't seen nothing yet. The one consistent legacy of financial crises is that levels of government debt balloon, and stay there for a long time. If I recall the average increase is in the range of 85%. I have the numbers at work, I'll post them later.

I am prepared to face 1987 again, because that is where we are headed currently.

1987 was nothing compared to this. The proverbial walk in the park, a mere speed bump. The drop in markets so far is about twice that of 1987. That time it just happened fast, and they bounced back quickly.

[musicman]

Paragrahs are your friend.

So is a spell checker.

Edited March 7, 2009 by musicman

[Mark F. Barnes]

Now that's funny!

[Subdude]

So is a spell checker.

So is the shift key.

[TheNiche]

I doubt many people borrow more because the government runs a deficit.

True. Government borrowing crowds out private borrowing.

However much the government needs debt financing for, it just allows interest rates on Treasury debt to be bid up until the market clears, enticing investors away from riskier private debt. In order for a private entity seeking debt to secure it, they then must be willing to agree to a higher interest rate if they want to compete against the government. Not all borrowers can afford to borrow when interest rates go higher, though, so there ends up being demand destruction for debt the private sector.

[RedScare]

Since subdude divided up the post, I could read it, and saw two points that are commonly mistaken. One, as subdude said, banks are lending more between themselves, but there is little lending to business or consumers. This is blamed on the banks, but left unaddressed is the fact that no one is BORROWING. True, the lending standards have tightened, as they should. But, when consumer spending has dried up, the economy is contracting, and unemployment has hit 14.8% for unemployed plus under-employed, not many people or businesses are interested in taking on more debt. We are paying DOWN debt.

Two, related to one, no one is borrowing because they see the government spend money. No one is borrowing, period.

[Subdude]

Since subdude divided up the post, I could read it, and saw two points that are commonly mistaken. One, as subdude said, banks are lending more between themselves, but there is little lending to business or consumers. This is blamed on the banks, but left unaddressed is the fact that no one is BORROWING. True, the lending standards have tightened, as they should. But, when consumer spending has dried up, the economy is contracting, and unemployment has hit 14.8% for unemployed plus under-employed, not many people or businesses are interested in taking on more debt. We are paying DOWN debt.

Two, related to one, no one is borrowing because they see the government spend money. No one is borrowing, period.

What is worrying is that interest rates for borrowers have been creeping up, not declining as one would expect in the face of low demand and excess bank liquidity. Plus this isn't confined to low quality borrowers. Spreads between AAA and BBB rates have been relatively constant, meaning both are increasing at about the same rate.

[Mark F. Barnes]

I understand that John Q Public is not borrowing, however there are businesses that revolve on credit lines that are not able to do so at the present, be it tighter regulations or lack of cash, and those small businesses are the meat and potatoes of our economy. I for one operate on a cash basis, and have a 30 turn around on invoicing, my main customer ECA pays in 5 days. Pete Coors is a stickler about paying his bills ASAP. He's self insured and operates on cash also. Something I can certainly appreciate. But there are a lot of companies out their that cannot operate that way. Big Suppliers like NOV and Wilson, have tightened the amount of credit they will let out as far as supply goods goes. In the past you could string it along for 90 days to six months and was no big deal, now they are calling you in 20 days from invoice. It's all over.

And it has really nothing to due with the shape of your credit, they just aren't lending much, and are sitting on a lot of liquid. I am not really sure of that motivation either. There are qualified lenders out there, that are seeking loans, it's just tight all over.

Edited March 7, 2009 by Mark F. Barnes

[BryanS]

What is worrying is that interest rates for borrowers have been creeping up, not declining as one would expect in the face of low demand and excess bank liquidity. Plus this isn't confined to low quality borrowers. Spreads between AAA and BBB rates have been relatively constant, meaning both are increasing at about the same rate.

They sure have, haven't they? Why is that? Maybe because the lending institutions are trying desperately to cover their massive losses. I would not expect, at all, for rates to actually decline - based on fundamental low demand/excess supply. Nope. This is an attempt, by them, to rook the consumer, one last time, to cover for their mistakes and backfill the craters in their balance sheets.

I say drain the swamp. Make all their books public, including the Fed. Let's really see where all the money is going...

[Subdude]

After financial system's near-death experience after Lehman, no serious politician or regulator is going to allow another failure of that size. It is totally off the table. Full stop. The only question now is the best manner in which to keep them alive.

Well, if you're going to get called out as being totally, indisputably wrong, who could deny that the best strategy is to get out ahead of the thing, admit the error, make the mea culpas, perhaps hang the ol' bean or giggle apologetically, and then move on?

There I was, not 24 hours ago, mouthing off like Mr Know-it-all about how letting banks fail was off the table, and already comes the news story proving me wrong. Such is the penalty for hubris. I stand before you penitent.

G.O.P. Senators Say Some Big Banks Can Be Allowed to Fail

By J. DAVID GOODMAN and BRIAN KNOWLTON

Published: March 8, 2009

John McCain and Richard Shelby, two high-profile Republican senators, said on Sunday that the government should allow a number of the biggest American banks to fail.

[RedScare]

Yes, I suppose that as long as John McCain is still around to impress us with his wealth of knowledge of economic theory, you should always preface your statements with "should be off the table". However, in your defense, I must point out that you DID say, "no serious politician or regulator is going to allow another failure of that size". It is very much debatable whether either of these two politicians can be considered 'serious' when it comes to economic policy.

[Subdude]

Yeah, well, I somehow got it into my head that a mere six months after one bank panic, people would be hesitant about setting off another. Of course, what do I know?

One can't but remember Tallyrand's comment about the Bourbons: "They learn nothing, and they forget nothing."

[RedScare]

Yeah, well, I somehow got it into my head that a mere six months after one bank panic, people would be hesitant about setting off another. Of course, what do I know?

One can't but remember Tallyrand's comment about the Bourbons: "They learn nothing, and they forget nothing."

And, politically, it worked well for McCain. I can see why he would want to try that strategy again. He should go on a tirade about earmarks, too. That's a winner every time.

[TheNiche]

Well, if you're going to get called out as being totally, indisputably wrong, who could deny that the best strategy is to get out ahead of the thing, admit the error, make the mea culpas, perhaps hang the ol' bean or giggle apologetically, and then move on?

There I was, not 24 hours ago, mouthing off like Mr Know-it-all about how letting banks fail was off the table, and already comes the news story proving me wrong. Such is the penalty for hubris. I stand before you penitent.

No need for self-flagellation just yet. I don't think this is actually news. The GOP is playing the obstructionist card (there's a pattern here) only to try and exert leverage over what goes into the legislation. They'll get out of the way, but only once there are enough sweeteners to buy off the moderates.

[Mark F. Barnes]

[RedScare]

I'm a little slow on the draw. Could you explain what this has to do with Bailout Nation?

[Mark F. Barnes]

Oh I don't know, but the only way we are going to Bail out our nation is through our tax dollars, I am sure you'd agree. Then they go and they have this idiot sitting as Chair to the Committee of Ways and Means. I'm thinking his competence and ethics could have a lot to do with our Taxes, being the chair and all. And the fact maybe that he has not been run out of town on a rail, being that we are all changed now and going to do things the right way, "for the working middle class", and stop doing "the same business as usual politics", as our new president has so eloquently stated a few hundred times. Maybe he's to busy, "going line by line, through government spending weeding out all the corrupt spending", to have time to have Rangel ousted, or at the very least, dethroned from the Chair of the Committee of Ways and Means. Nothing's changed, it's the same ole crap as usual. Pelosi is already cranking up another stimulus package to be ready for the floor with in 60 days.

"Change will not come if we wait for some other person or some other time.

We are the ones we've been waiting for. We are the change that we seek."

"I don't care whether you're driving a hybrid or an SUV.

If you're headed for a cliff, you have to change direction."

"We need earmark reform, and when I'm President,

I will go line by line to make sure that we are not spending money unwisely."

"What do you think a stimulus is? It's spending - that's the whole point! Seriously."

[RedScare]

I still don't get it.

Another thread effectively derailed.

[Mark F. Barnes]

That sounds like the same thing that Obama said about McCain.

"It's not because John McCain doesn't care. It's because John McCain doesn't get it."

When in fact it's probably more closely along the title of a great Manfred Mann's Earth Band song, in your case Red.

[RedScare]

OK, I admit that since this thread started about a $700 BILLION bank bailout proposed and passed by Bush/Paulson, and it also talked about the $700 BILLION stimulus proposed and passed by Obama, $700 car notes by New York politicians may have slipped under my radar. So give me the Cliff Notes version. What am I supposed to be outraged about? Rangel should be taking the subway? Did he put spinners on the Caddy? It's gotta be something.

[Mark F. Barnes]

OK, I admit that since this thread started about a $700 BILLION bank bailout proposed and passed by Bush/Paulson, and it also talked about the $700 BILLION stimulus proposed and passed by Obama, $700 car notes by New York politicians may have slipped under my radar. So give me the Cliff Notes version. What am I supposed to be outraged about? Rangel should be taking the subway? Did he put spinners on the Caddy? It's gotta be something.

On September 24, 2008, the House Ethics Committee announced an investigation into Rangel's alleged failure to report rental income or pay taxes on a beach rental property in the Dominican Republic.

(Note: Rangel acknowledged that he had failed to declare $75,000 in rental income from his beachfront villa on his tax returns he owed back taxes for at least three years. Rangel is the chairman of the Ways and Means Committee, which writes the United States tax code). Does this guy really need to be the Chair of the committee that rights the very codes he can't seem to follow? Where's the change in that? Now he did write a check to the IRS for $10,800, to pay the back taxes he owes from rental income on his Dominican villa. He admitted he hadn't paid the taxes for three years. THREE YEARS!!!!

Okay Red, now let's look at this closely. Rangel owns "Casita No. 412" at the Puntacana Hotel for 20 years and claims he regularly rented it out to tourists for $500 to $1,100 a day, depending on the season. If you go to the Puntacana website and request that villa it's more like $1550.00 per day based on double occupancy, and it there is a waiting list. So his cut of that is probably around $1100.00 per day. However there is no off season there, it's tropical. Holiday rates are higher and vary upon request. According to IRS paperwork Rangel has only sporadically claimed any income on this property and claimed none for 2005-2008. The later recanted and said he only took in $75K in three years. Now Red you are an attorney and a smart fella, he failed to claim $75K and then only pays 14% in taxes, where's the penalties, late charges and the 28% he should be paying anyway? Now I have Rental Property, Some in this state, some in Colorado and a Condo in Dubai. I have to pay 27.8% tax on the rental income. And this man is in charge and can't remember to fill out his Schedule E? Give me a frigging break. First I guarantee he took in more than $75K in rental income in three years, that place stays booked up. He's not on some timeshare, he's owned it for 20 years, and is beyond the boundaries of straight line depreciation. We are talking about 1800 sq/ft villas, not a grass hut on Tortuga Bay. Furthermore, if the Post had not dug this crap up, he still wouldn't have paid it. You know good and well what it would have cost you and me. It would have cost us at least $100K in penalties, interest, and late fees.

[*]Allegedly living in multiple rent-subsidized apartments in New York City while claiming his Washington, DC home as his primary residence for tax purposes.

[*]Alleged use of congressional stationery to solicit donors for a public policy institute in his name at City College, and other alleged questionable activities.

[*]Allegedly Rangel frolics around in a Cadillac DeVille paid for by you and me, the taxpayer. What

[RedScare]

This is why I do not listen to talk radio. I read post #682, and I think, "This looks shady. Probably warrants some looking into." I see post #676, and I think, "Oh, great. Some douchebag from Brooklyn playing 'Gothca!' with a video camera." Now, Mark, maybe you're into douchebags from Brooklyn playing 'Gotcha!' with a video camera. Maybe you're into obese guys from Florida pontificating on the radio. Me, I got better things to do with my time. If Rangel is dirty, he should get the screws, just like all the other criminals in suits. But, I'm not making that call based on a YouTube of some douchebag from Brooklyn playing 'Gotcha!'.

Now, back to the Bailout.

[Mark F. Barnes]

Red I have never listened to Rush, and have never had one good thing to say about him, PERIOD. I actually saw that video clip on TV first, then looked it up on YouTube later to make sure I heard him correctly.

And Yes Rangel is a dirty SOB but I am willing to bet he gets a pass just like all the rest. I know first hand of a deal he took under the table with Nabors Drilling, to push the legislature through allowing them to roost in Bermuda, claiming to be an international based company, when they are HQ'd right here in Houston. When all they have in Bermuda is a two room office with two phones, that are forwarded to Houston constantly. They get out of billions in Taxes that way. I know all three bastards involved personally, and I know for a fact he is dirty. Don't get me wrong Red, I understand how the game is played. I incorporated in Delaware, because of the tax advantages, and technically I maintain an office there on paper. (a Wachovia bank account, a PO Box and a Virtual Phone Number.) But when that video of that arrogant pompous bastard aired, it brought back some personal memories of my own, involving that POS. I hope they Burn his butt at the stake personally, I will supply the Kerosene and the match.

I think Rangel, Reid, Pelosi, Geithner, Frank, all are directly relative to the Bail Out, or the possible lack there of, so to speak. Now Obama bowed down to these idiots and signed this latest $410 million dollar bill. Even after all the cheap talk about reform. The president earlier defended the bill, which he called "imperfect" but necessary. But get this, in the same breath he announced new reforms he said would prevent wasteful earmarks in the future. Are still going to keep defending his credibility, if this keeps up. He has done a complete 180

[RedScare]

I don't have any fundamental problem with the $410 Billion. Less than 1% of it was earmarks, and now, even John Culberson says that earmarks are efficient. So, if even Mr. Culberson ain't upset about it, I'm not sure why I should be.

[RedScare]

Now, here's an interesting article. It is a USA Today article from 2007. It talks about the number of earmarks from 2006, the last year that Republicans controlled Congress. You'll recall that Geirge W, Bush was president back then.

http://www.usatoday.com/news/washington/20...-earmarks_N.htm

And there is this crazy quote in the article...

Members of Congress, who tuck the money into massive spending bills, have directed more funding to their home states and districts each year, reaching $29 billion in 2006. That's 10 times the amount from 15 years ago, according to the non-partisan watchdog group Citizens Against Government Waste.

A breakdown in the 2007 budget process halted most such earmarks this year. Fewer than 3,000 projects were funded, down from 10,000 in 2006, because Republicans passed only the defense and homeland-security spending bills before Democrats took control of Congress and placed a moratorium on earmarks. A renewed focus on ethics in Congress has prompted Democratic leaders to project 2008 earmarks at roughly half the 2006 level.

The 2006 earmarks came in at almost SIX TIMES the size of the 2009 budget earmarks. Yet, here you are blowing a gasket about an 80% REDUCTION in earmarks! Why is that, Mark? Why is nothing a scandal until a Democrat does it at a fraction the rate that Republicans do it? Is it any wonder that Republicans are known as the party of hypocrites?

PS - For those that care, 2007 and 2008 budgets...signed by President Bush...came in at roughly $15 Billion. That's one half of 2006, but still TRIPLE the current budget that Mark is crying over.

Edited March 12, 2009 by RedScare

[Mark F. Barnes]

I don't have any fundamental problem with the $410 Billion. Less than 1% of it was earmarks, and now, even John Culberson says that earmarks are efficient. So, if even Mr. Culberson ain't upset about it, I'm not sure why I should be.

Red why is it anybody that agrees with it, says it's a number that's always less than what it actually is. Congress passed the $410 billion spending package that contained 8,570 disclosed earmarks worth $7.7 billion.

410 billion x .01 = 4.1 billion actually 1.9875%

That's a little over half of the actual numbers.

And I guess ole Johnny Boy would agree, he's got his share in there! Duh.........

Earmarks for 2009 fiscal from Rep. John Culberson, R-Houston:

Subcommittee on Agriculture:

Copy_of_Disclosed_Earmarks____Preliminary_Analysis_with_2008_numbers.pdf

Edited March 12, 2009 by Mark F. Barnes

[Mark F. Barnes]

Red, whether you want to admit it or not, I could really give a crap. This is the biggest bait and switch shell game in history. Even Ron Paul was on the tube yesterday, talking about how good ear marks are, and that they needed more of them. When that old screwball was running for the top spot, all he could do is cry about earmarks and spending. It's not a Republican thing or Democrat thing, it's a Politics in general thing. They are all a bunch of damn crooks. I am sure it's just a matter of time before my old friend Jeb Hensarling jumps in head first and gets in with the rest of them, or he'll be voted out of office and get someone in there that will.

[Mark F. Barnes]

Download an XL file here, that gives a line by line breakdown.

Download Here

Keep in mind now, this is only numbers for disclosed earmarks with a member

[Subdude]

AIG gonna get yet more govmint $$$$:

http://www.bloomberg.com/apps/news?pid=206...&refer=home

Oh Crunnncccchhh?

A.I.G. Planning Huge Bonuses After $170 Billion Bailout

By EDMUND L. ANDREWS and PETER BAKER

Published: March 14, 2009

WASHINGTON