U.s. Banking Crisis: Capitalism "gone Wild"?

[LaoPo]

The sentence: "US citizens should not spending $700 Billion to bail out foreign investors. The actions of Treasury Secretary Paulson go far beyond disgusting, to outright betrayal of US citizens."..is overdone and a political move to have their voices heard.

Funny just today someone was mentioning to me how much of America is being bought up. She mention Russians & Chinese buying much midwest properties.

I remember seeing this article awhile back

Article

& this Article 2

Puts a different spin on it

You know where I live is US soil but it once was a Kingdom.

I wonder at times if maybe the Thai's have that part right?

Indeed; it's a nice article but in fact there's nothing new under the sun...nothing at all.

I remember exactly the same kind of news articles about Japan, buying up America, one to two decades ago. Now it's the Chinese, Middle Eastern Arabs, Russians etc. but as this excerpt says...they lose a lot of money also:

"Abu Dhabi’s main fund, the Abu Dhabi Investment Authority, or A.D.I.A., invested $7.9 billion in Citigroup last year when the stock was trading at $31. Now Citigroup trades at $17, and while the fund still has more than two years before its bond converts into stock, Citigroup’s troubles cast doubt on whether the investment will ever be profitable."

The world is revolving.....spinning and things will change, ownerships will change and shift...always.

Napoleon said it all: l' Histoire se répète or History repeats itself.

edit:

These articles are about foreigners/countries buying American assets........

Do we have the same articles about what 'America' has been buying abroad ?

LaoPo

Edited October 1, 2008 by LaoPo

[flying]

I remember exactly the same kind of news articles about Japan, buying up America, one to two decades ago.

All true & boy do I remember the Japanese!

They were buying this place where I grew up & they were doing it from the back seat of limos.

I swear they went through some residentioal areas & bought that way.

Some contractors joked that it would be fun to build hollywood sets.

You know just a false front of a mansion

The sad part was the next year many locals were forced to sell because property taxes went through the roof & the retired couldnt keep up.

There was no break in taxes based on your income.

[Naam]

You might be surprised to learn that not all people who disagree with your politics are "unworldly, ill educated, intellectually incurious".

Did I ever imply such a thing? Of course not. There are great intellects on the right wing side of things. It just so happens that the likes of Sarah Palin and GW Bush are not among them.

hats off Jingthing! you are *** the born diplomat.

edited to add ***"sometimes"

Edited October 2, 2008 by Naam

[Naam]

This incoherent rambling is the product of the brain of an uneducated, unqualified, non-thinking person. I wouldn't hire a scatterbrain like her for even the small town mayor she used to be, much less president. Scary times indeed.

but she got good (.)(.) and a nice (_!_)

[Naam]

Well, the court case the quote is drawn from is dubious at best, but the sentiments I tend to agree with for the American country at this time in it's evolution. I would not agree with it for other countries whose population may be more homogemous and whose "culture" is more longstanding. I do not agree with it as a destination, but as a waypoint in a countrys journey it will suffice. Frasnkly Dr. Naam, I'm a little scared for America. All it's strengths have become it's weaknesses. This legislation under discussion stinks and I can't help but feel more careful deliberation would be helpful in crafting a better solution. I'm less concerned about the economics of the matter, than I am with the sustained immorality of the matter. Previously, it was the populace that could provide the moral compass, but I feel they have been co-opted in this greedy, self destructive enterprise, which is all America has become.

let's be honest LRB and admit that what you described above applies nowadays not only to the U.S. but to most countries on this planet. all eyes are focussed on America and everybody forgets that other countries stand by do act likewise or have acted already.

[ray23]

Got the yes vote halfway to law.

[flying]

Got the yes vote halfway to law.

So how does this work now if just IF the House of reps say no tomorrow?

Just curious

Thanks

[BEENTHEREDONETHAT]

This incoherent rambling is the product of the brain of an uneducated, unqualified, non-thinking person. I wouldn't hire a scatterbrain like her for even the small town mayor she used to be, much less president. Scary times indeed.

but she got good (.)(.) and a nice (_!_)

Very well said Naam....

Agree with you on Sahra P Jingthing.

[Naam]

Got the yes vote halfway to law.

So how does this work now if just IF the House of reps say no tomorrow?

Just curious

Thanks

then it is NO.

[flying]

then it is NO.

hmmm could be interesting ....we will see

Thanks

[Jingthing]

If the measure fails in the US congress?

[Jingthing]

This incoherent rambling is the product of the brain of an uneducated, unqualified, non-thinking person. I wouldn't hire a scatterbrain like her for even the small town mayor she used to be, much less president. Scary times indeed.

but she got good (.)(.) and a nice (_!_)

Yeah, I suppose if you are into saucy Puritans. She is looking real presidential. Bimbo in chief?

And now for that new literary form that is all the rage, PPP (Palin Political Poetry) ...

"Befoulers of the Verbiage"

It was an unfair attack on the verbiage

That Senator McCain chose to use,

Because the fundamentals,

As he was having to explain afterwards,

He means our workforce.

He means the ingenuity of the American.

And of course that is strong,

And that is the foundation of our economy.

So that was an unfair attack there,

Again based on verbiage.

Edited October 2, 2008 by Jingthing

[LaoPo]

Got the yes vote halfway to law.

So how does this work now if just IF the House of reps say no tomorrow?

Just curious

Thanks

then it is NO.

The Senate approved the -revised- Bill with 74 to 25 votes

Senate approves $700 billion financial rescue plan

Revised bill includes increased bank insurance, tax breaks

"The measure now moves to the House, where a vote is expected on Friday."

Rest here:

http://www.marketwatch.com/news/story/sena...dist=TNMostRead

LaoPo

[lannarebirth]

If the measure fails in the US congress?

Buy the rumor, sell the news. Who'd of thunk it (besides me)?

[lannarebirth]

About your 90 percent beleiving in angels and astrology, it doesn't much reading between the lines to know how much respect that you have for the American people. I suppose that since they are such a bunch of backwards peasants they are just getting what they deserve.

How about people in general? .

Unfortunately the elitism that you are displaying has become the hallmark of what passes for "liberalism" in the USA. The people are just too ignorant to understand what is going on, if only they weren't so bitter, gun clinging, and God fearing we'd have a more just societry. Though we can't blame them for their ignorance, we can hope that one day they will be more like us, reject ignorance, and drink lattees.

Yes, we want unworldly, ill educated, intellectually incurious, shockingly non-elite people like Sarah Palin to run the country. Good luck with that.

BTW. the call pattern has shifted DRAMATICALLY to reflect the real sentiment out there, at least TRY to rescue the economy: washingtonpost.com

This fits with my perception that the public needed some time and reality therapy (stock market) to be persuaded to take their bitter medicine. If we didn't have a miserably failed lame duck president with the lowest popularity in polling history, the failed vote in congress wouldn't have even happened in the first place.

There was a widespread sense on Capitol Hill that Monday's vote had snapped the public to attention about the potential repercussions of Congress's failure to act. Last week, House and Senate offices were bombarded with calls from opponents who viewed the bill as a Wall Street boondoggle. That call pattern shifted sharply after Monday's vote, aides to lawmakers in both parties said. "It's completely in the other direction now," said Michael Steel, a spokesman for House Minority Leader John A. Boehner (R-Ohio).

A lot of people seem to be under the impression that being a "sophisticated investor" is a good thing. I was always under the impression that the definition of "sophisticated" is "unnatural".

Todays email from my friend Igor, a real American:

I'm sure, there are alot of unhappy "politically correct" investors out there.

Those in charge were saying that it's huge price of doing nothing.

So, with BILL passing senate, some guys might show them what really could happen if they do something.

My assumption, we are going deep down tommorow. And even if not: having short term spread, I'm selling all my long terms investements tommorow.

This is not the country I ran to from communists Russia.

And that's not the market I want to support anymore.

[Jingthing]

This is not the country I ran to from communists Russia.

And that's not the market I want to support anymore.

Another whining expat? Go back to Putin. We don't care.

Anyway, it takes many opinions to make a market.

The government isn't actually NATIONALIZING anything as far as I can tell, so reports of the USA going communist are premature.

Granted, we are probably in for a rough stretch of years, regardless of what congress does.

Edited October 2, 2008 by Jingthing

[lannarebirth]

This is not the country I ran to from communists Russia.

And that's not the market I want to support anymore.

Another whining expat? Go back to Putin. We don't care.

Anyway, it takes many opinions to make a market.

The government isn't actually NATIONALIZING anything as far as I can tell, so reports of the USA going communist are premature.

Granted, we are probably in for a rough stretch of years, regardless of what congress does.

I've got nothing against communists. If people were more enlightened and less greedy than they are it could be a good society. It's just that everywhere I've been where it's practiced there's one rule for the VIP/Elite and another for the proletariat. Sound familiar comrade?

[Jingthing]

The intent of the bailout package is not to temporarily prop up the stock market. Its intent is much more fundamental, and its implications are global. So if the congress passes it, and the market goes down 10 percent in one day, that does not prove it was a mistake. Maybe it would go down 30 percent in a week if they didn't pass it. The test is whether over the longer term this action and followup actions prevent a global meltdown, and also that the cost to prevent this turns out to not be painfully too high. History will tell. I am no comrade. I am no communist as I do not believe it works in practice. although I do favor more social programs in the US like universal health care access.

Edited October 2, 2008 by Jingthing

[lannarebirth]

Nouriel Roubini call notes from a friend of a friend:

He's a bit bearish:

> • Recession leading to increase in credit losses, NPLs, losses in

> corporates.

> • Even if this plan is implemented right it will not prevent a deep

> recession but it could prevent stagflation and avoid what Japan went

> through with a L shaped recession.

> • US recession will last 1.5 to 2 years. Inflation dependent on

> demand which is softening. Growing slack in labor markets will

> control wages. See another 10 to 20% fall in commodities.

> Inflation is going to be the last thing economies will worry about.

> Fed will cut rates even further.

> • Equity prices can fall another 10 to 20%. Dollar and risky assets

> in EM could fall much further.

> • Credit cycle is still unwinding. Exotic illiquid derivative

> instruments are not very transparent. Don’t know which counterparty

> holds which. This has exacerbated the problem. Because of

> regulartory arbitrage most of the intermediation has occurred in the

> shadow banking system. Shadow banking system was borrowing short,

> leveraging, and lending long. They also did not have the lender of

> last resort. SIVs and conduits were financing themselves with asset

> backed CP but that’s not there anymore.

> • The next run will be on Hedge Funds. Risk management has not been

> proper. Leverage occurs mostly through overnight repos and that is

> getting pulled back. Several hundred hedge funds will go out of

> business. Many LBOs should also have never occurred so Private

> Equity is at risk. Hedge funds is a sure shot to start strict

> regulation going forward or any institution that borrows short.

> • Housing market has still not bottomed. There is still excess

> inventory. Home prices will fall another 16% before they bottom out

> in late 09 or 10. Will be a cumulative 40% drop.

> • 2001 was a CapX recession. The US consumer is shoppeed out this

> time. Debt is 150% at households. Consumption growth is going to

> remain negative in the 2nd quarter of next year.

> • We have a subprime financial system, not just a subprime mortgage

> problem. Default rates peaked at 10% last recession. Still have

> barely budged.

> • Us consumer shopped out, sub prime financial system with 150 banks

> going to go bust, and worst housing crisis since the Great

> Depression. With negative supply side shocks in commodities, it

> will lead to a severe crisis. Real economy will now suffer and go

> through a negative feedback loop.

> • Q: what is going to occur to the large european banks who were

> 50x levered? 50% of US toxic paper was sold into Europe. UK/

> Ireland/Spain/France/Italy also seeing housing slowdown. Risks are

> high for many to go bust in Europe as well.

>

> Q: what happens to Morgan Stanley? If CDS spreads stay like this

> for another 2 weeks, morgan stanley is a goner.

[lannarebirth]

My 2cents

As distasteful as it may be as painful as is clear I believe this has to go ahead.

It is unfortunate that we have to use those who we believe to be the instigators of our misfortune. We need them to clean up there own mistakes; there are the best people to achieve this.

Liquidity breads liquidity they are the only ones to cure this problem.

Later those who are accountable can be brought to justice.

This I also believe will be less damaging to the tax payer.

Watch out for major cleaning houses.

Banks will take time to gain confidence loans will be tight.

Commodities look good for now.

Since you mentioned liquidity, maybe you can tell me why the Fed has drained over 100 bilion dollars of "liquidity" in the past week or so. Do you think they are trying to manufacture a crisis?

http://bullandbearwise.com/FOMOChart.asp

http://www.shadowstats.com/alternate_data

Edited October 2, 2008 by lannarebirth

[flying]

> • Q: what is going to occur to the large european banks who were

> 50x levered? 50% of US toxic paper was sold into Europe. UK/

> Ireland/Spain/France/Italy also seeing housing slowdown. Risks are

> high for many to go bust in Europe as well.

That is a pretty scary note all around.

But this one I have wondered about quite a bit. Especially after reading the other links you furnished about the German bank that couldn't foreclose.

On the one hand they did not take part in this paper out of the kindness of their hearts. They wanted to do business & make $$$

But those bundles of mortgages with no deeds!! That is like passing counterfeit in my mind.

[ace]

Since you mentioned liquidity, maybe you can tell me why the Fed has drained over 100 bilion dollars of "liquidity" in the past week or so. Do you think they are trying to manufacture a crisis?

http://bullandbearwise.com/FOMOChart.asp

http://www.shadowstats.com/alternate_data

Thanks for the Roubini notes. 4 weeks ago he was a polar bear, now, I think he sounds a little optimistic !!

As for the question, no idea. So I'll guess, if you owe a hel_l of a lot of money, bankruptcy can start to sound like a fun idea?

[Naam]

> • Q: what is going to occur to the large european banks who were

> 50x levered? 50% of US toxic paper was sold into Europe. UK/

> Ireland/Spain/France/Italy also seeing housing slowdown. Risks are

> high for many to go bust in Europe as well.

That is a pretty scary note all around.

But this one I have wondered about quite a bit. Especially after reading the other links you furnished about the German bank that couldn't foreclose.

On the one hand they did not take part in this paper out of the kindness of their hearts. They wanted to do business & make $$$

But those bundles of mortgages with no deeds!! That is like passing counterfeit in my mind.

the rating agencies put their AAA stamp on the crap!

[flying]

the rating agencies put their AAA stamp on the crap!

That is another thing! I wonder how they can rate a product that fluctuates in value as much as housing can?

I guess they are just rating the ability of the borrower to repay?

Edited October 2, 2008 by flying

[Naam]

the rating agencies put their AAA stamp on the crap!

That is another thing! I wonder how they can rate a product that fluctuates in value as much as housing can?

I guess they are just rating the ability of the borrower to repay?

normally debt on immobile property is indeed rated TripleA provided the mortgage covers only a reasonable portion of the market price, the borrower has come up with enough own money to cover price fluctuations and provided the ability of the borrower to repay exists.

sub-slime did not meet any of the three basic criteria!

[flying]

normally debt on immobile property is indeed rated TripleA provided the mortgage covers only a reasonable portion of the market price, the borrower has come up with enough own money to cover price fluctuations and provided the ability of the borrower to repay exists.

sub-slime did not meet any of the three basic criteria!

Ahhhhh I see. Yes that would make sense if enforced. Not these 100% of value loans.

[Naam]

normally debt on immobile property is indeed rated TripleA provided the mortgage covers only a reasonable portion of the market price, the borrower has come up with enough own money to cover price fluctuations and provided the ability of the borrower to repay exists.

sub-slime did not meet any of the three basic criteria!

Ahhhhh I see. Yes that would make sense if enforced. Not these 100% of value loans.

it's not only the 100% loans Flying! the real crux is that the "toxic" mortgages are ARMs (adjustable rate mortgages) based on prevailing market interest rates which kick in after a certain period. borrowers who locked in for 30 years when interest rates were at the bottom have nothing to fear.

[flying]

it's not only the 100% loans Flying! the real crux is that the "toxic" mortgages are ARMs (adjustable rate mortgages) based on prevailing market interest rates which kick in after a certain period. borrowers who locked in for 30 years when interest rates were at the bottom have nothing to fear.

Agreed & to top it off those ARMs were given to those who could not qualify for a

good/fair fixed 30 year mortgages right? How could anyone not see this snowball rolling

[lannarebirth]

0 = The number of times the Dow Jones Transportation Index has dropped 4% or more on a day when crude oil also drops 4% or more. Gold stocks . Something ain't right.

[siamamerican]

it's not only the 100% loans Flying! the real crux is that the "toxic" mortgages are ARMs (adjustable rate mortgages) based on prevailing market interest rates which kick in after a certain period. borrowers who locked in for 30 years when interest rates were at the bottom have nothing to fear.

Agreed & to top it off those ARMs were given to those who could not qualify for a

good/fair fixed 30 year mortgages right? How could anyone not see this snowball rolling

IMO the arms aren't the main culprit. Most of the borrowers that are defaulting on the arms are doing so well before the loan adjusts. The lax lending standards allowed lenders to loan money to borrowers that could barely make payments. The type of borrowers that are in arms are the ones that can't afford a fixed mtg with a higher payment. They opted for an arm to save money. These borrowers used equity in their homes to stay afloat by refinancing and taking out home equity loans.

The next round, if things don't improve, will be the overextended borrowers that took out 30 year fixed products with high loan to values. Most arms cap debt to income at 50%, but many of the 30 year mortgages out there cap borrowers at 65%. Still today you can get a 30 year fixed Fannie Mae mortgage with a 65% DEBT TO INCOME. Most borrowers with a 65% DTI aren't paying substantial taxes, but living cost easily eat-up the remaining 35% of income.

If home values don't level off soon, which is hard to imagine since real estate is still overvalued, this crisis is far from over.

Edited October 3, 2008 by siamamerican