Comments for Details on Public Private Partnership Investment Program
CRbot says:
This comment thread has been HALO-IZED by CRbot.
http://realize.org/cr/halokit.php?halourl=http://www.haloscan.com/comments/calculatedrisk/3813675931118174047
CRbot Mon Mar 23 07:33:42 2009 CDT #
Lawyerliz says:
I don't think I want to know the details. :'(
Lawyerliz Mon Mar 23 07:38:40 2009 CDT #
Shaun says:
everyone still wondering if this rally is for real ?
Shaun Mon Mar 23 07:38:43 2009 CDT #
Shaun says:
everyone still wondering if this rally is for real ?
Shaun Mon Mar 23 07:38:54 2009 CDT #
Lawyerliz says:
Hey, I was first.
Does anybody know how FFDIC's daughter is? I've asked and never got an answer.
Lawyerliz Mon Mar 23 07:39:29 2009 CDT #
I Heart CRbot says:
what are the chances this PPIP get's shot down ..market thinks none ..that can't be right can it ?
I Heart CRbot Mon Mar 23 07:40:14 2009 CDT #
ATM card and $19 in the bank says:
"Does anybody know how FFDIC's daughter is? I've asked and never got an answer."
A number of folks have asked. I assume (*hope*) no news is good news...
ATM card and $19 in the bank Mon Mar 23 07:40:46 2009 CDT #
I Heart CRbot says:
The overwhelming view from those smarter than most is that this plan is either a failure or the greatest robbery of taxpayer funds. Either way, we lose. We need responsible, respected voices to speak up for "the people" over the banks.
Who will that be? Anyone?
I Heart CRbot Mon Mar 23 07:40:58 2009 CDT #
Jackrabbit says:
The truism "don't fight the Fed" comes to mind. The Fed has stated that it "will do whatever it takes" to save the economy and has essentially endorsed Timmay's loot-a-way plan.
Stocks going up is no surprise. In fact it makes perfect sense. Inflation raises all boats.
The fix is in. "Investors" are virtually guaranteed HUGE returns. Their gains will not come from taxpayers, though. Those who pay for this will are anyone holding dollars.
Thus, the US solves its problem at a discount (since overseas dollar holders pay some part of OUR problem). But, I fear that monetizing our standing in the world (dollar as reserve currency) has a cost. (as with the Iraq war)
To those that ask about Congress: this plan has been designed to sidestep any congressional oversight/authorization. Again, because it is essentially based on dollar devaluation, not any NEW spending by Congress.
Jackrabbit Mon Mar 23 07:42:56 2009 CDT #
Alo says:
"Banks identify assets they wish to sell."
And the FDIC evaluates them - now that could be interesting - is all of this identifying and evaluating going to be made public information, since we are all cozy with the private sector?
Alo Mon Mar 23 07:44:43 2009 CDT #
jmf says:
Moin from Germany,
Moin from Germany,
this sums Geithners plan up……
“Assets will need AAA ratings at origination”
I assume that not a single one would be rated even A today & at the point when they hand it over to the taxpayer……
jmf Mon Mar 23 07:46:40 2009 CDT #
reptillian says:
Futures have dropped about 10 points in the last hour.
There may be some skepticism out there.
reptillian Mon Mar 23 07:48:24 2009 CDT #
Broker says:
So we are going to lend 'investors' our money so they can bid against each other. Timmy, you are my hero!
P.S. And this guy was one of the smartest guys at IMF, acording to another genius, Brad Setser. OMG
Broker Mon Mar 23 07:48:35 2009 CDT #
Counterpointer says:
I read the details. I feel queasy.
C
Counterpointer Mon Mar 23 07:50:19 2009 CDT #
Comrade Byzantine_Ruins says:
I Heart CRbot says:
Today, 8:40:58 AM
We need responsible, respected voices to speak up for "the people" over the banks.
Who will that be? Anyone?
Don't bother, the context of corruption will either destroy or co-opt you. What would you accomplish as the one player on a Calvinball court who actually tried to play by the long-forgotten rules?
Keep your powder dry. Wait til the Dynasty falls, then clean up. There will be plenty of time to make your case once the Treasuries / dollar resolves itself.
Comrade Byzantine_Ruins Mon Mar 23 07:50:20 2009 CDT #
reptillian says:
“Assets will need AAA ratings at origination”
It depends on what the definition of "origination" is.
reptillian Mon Mar 23 07:50:39 2009 CDT #
hong konger says:
So, we're putting FHA-type loans on RMBS? With your deposit insurance (FDIC) backstopping the affair?
Can someone remind me how we got to this point again?
hong konger Mon Mar 23 07:53:49 2009 CDT #
NateTG says:
I love stuff like:
"The fund manager has full discretion in investment decisions, although it will predominately follow a long-term buy-and-hold strategy."
Either the manager has full discretion, or he's got to play predominantly buy-and-hold. I don't get how there can be both.
NateTG Mon Mar 23 07:54:29 2009 CDT #
cd says:
how does fdic legally backstop anything outside deposits?
cd Mon Mar 23 07:55:15 2009 CDT #
reptillian says:
Reuters FACTBOX on the plan
reptillian Mon Mar 23 07:55:26 2009 CDT #
The Lorax says:
Long live the markets, who needs reality?
The Lorax Mon Mar 23 07:56:32 2009 CDT #
Anonymous says:
This thing has fraud, scams, and theft dripping all over it. Enrich the elite and send the publics grandkids the bill
Anonymous Mon Mar 23 07:58:01 2009 CDT #
reptillian says:
"Keep your powder dry. Wait til the Dynasty falls, then clean up. There will be plenty of time to make your case once the Treasuries / dollar resolves itself."
In what form should we keep our "powder?"
reptillian Mon Mar 23 07:58:30 2009 CDT #
Just Askin says:
In what form should we keep our "powder?"
+10
Parent Post
Just Askin Mon Mar 23 09:41:00 2009 CDT #
Comrade Byzantine_Ruins says:
hong konger says:
Today, 8:53:49 AM
Can someone remind me how we got to this point again?
---
Shut up, be happy.
Obey all orders without question.
The comfort you've demanded is now mandatory.
Be happy.
At last, everything is done FOR you.
Comrade Byzantine_Ruins Mon Mar 23 07:58:43 2009 CDT #
Anonymous says:
Must read article - how aig, paulson, geitner gangraped the american dream
http://www.rollingstone.com/politics/story/26793903/the_big_takeover/
Anonymous Mon Mar 23 08:00:21 2009 CDT #
Broker says:
hong konger, that's exactly what they are. I just wonder if they have any "cash back at closing" clauses.
Broker Mon Mar 23 08:00:54 2009 CDT #
Black Star Ranch says:
.....this is out and out thievery. This administration is malevolent. This program, like all the rest, a week apart has done exactly opposite of what should have been intentioned. I believe this administration is purposely driving our Country off the face of a cliff. $350-billion was Bush/Paulson. TRILLIONS since have been spent or "made available" on since Bush left town. Many here instead discuss their rage with the contractor used installing the wallpaper.
I think it's time to think about shortening the first four years to the next two - but then we can't afford the first 60-days!
Black Star Ranch Mon Mar 23 08:01:02 2009 CDT #
ATM card and $19 in the bank says:
Wiser heads than mine can point out all the pitfalls of this plan (or, from Wall Street's perspective, all the different ways "its a feature, not a bug"). I want to get the ball rolling on what happens after the looting moves this garbage off the bank balance sheets:
Lower the deposit cap.
Next time Congress wants to interview CEOs of the biggest banks, there should be at least 50 people testifying -- because each bank has less than 1% of total deposits.
The current cap -- 10% of total deposits -- has proven to equal too big too fail. Break up the banks.
ATM card and $19 in the bank Mon Mar 23 08:01:49 2009 CDT #
Comrade Byzantine_Ruins says:
Reading the term sheet.
The problem with the MLEC / Super-SIV was that there weren't several of them? How many times are we gonna fuckin' see this plan?
Comrade Byzantine_Ruins Mon Mar 23 08:02:37 2009 CDT #
debtinator says:
details: bend over!
debtinator Mon Mar 23 08:02:49 2009 CDT #
locust says:
New acronym. PPIPRIPOFFRIPUSA.
locust Mon Mar 23 08:04:08 2009 CDT #
Grog says:
More like Credit Re-start Assistance Program.
Parent Post
Grog Mon Mar 23 08:59:51 2009 CDT #
dow30 summer weight says:
so, did our Treasury Sec. oversleep or just cancel the speech?
dow30 summer weight Mon Mar 23 08:04:11 2009 CDT #
hong konger says:
When I was in college (many moons ago), I naively asked what it was that we'd be doing as "asset managers". What do I actually "manage"? How is it that I "manage" a collection of rights that are fixed in terms?
"Well, you determine what and when to buy and sell", was the response I got back.
"Oh", says I.
[Hand goes up again]
"Yes"
"So, this is mercantilism, not capitalism, right"?
"Well...put in the broadest terms, yes"
"So finance is just a marketing gimmick, then?"
...Silence...
"Class, your recruiters will be organizing a meeting in the Auditorium at 9am, do not be late."
hong konger Mon Mar 23 08:04:45 2009 CDT #
Vega says:
To ponder:
Much of the toxic CDO and ABS paper that resides on bank balance sheets was initially marked at prices much higher than the real, fair market price at the time issuance. If you talk to quants who structured these products, they will tell you that there was big pressure to mark the prices of these bonds UP. Why? Management wanted the PnL, they wanted to get paid.
So now many of the bonds have supposedly been written down. The problem with that statement is that much of the write-downs only take the initial inflated mark out of the PnL. The real loss, that which is due to the erosion of cash flows, hasn’t been taken yet in many instances. That’s why you see banks marking stuff at 80 and the market willing to bid 30. The market is not crazy. The market sees the assets backing the paper and the cash flows likely generated and it values them accordingly.
There’s a big cover-up going on at C, BAC, and JPM, just to name the biggies. Subpenea the quants and give them immunity, they’ll tell you what’s really going on.
Geithner is aware of what’s going on. It happened on his watch at the NY Fed. He has as much personal motivation to end this mess as do the guilty banks. It’s quite sad, IMO.
Supposedly Andrew Cuomo has been notified about this latest ‘twist’. Regardless, I don’t thing you’ll see private capital lining up to overpay for crumby assets. Yes, govvy is gonna take most of the risk. But I don’t see private capital willing to eat the sliver they’d have to eat if they overpaid for assets. We shall see.
Keep the faith.
Vega Mon Mar 23 08:05:10 2009 CDT #
Anonymous says:
Spending up to 1Trillion and all the US taxpayer gets it s press release!!! No Geithner, no questions from the press?!!
WTF!!!
Anonymous Mon Mar 23 08:05:44 2009 CDT #
Comrade Byzantine_Ruins says:
$350-billion was Bush/Paulson. TRILLIONS since have been spent or "made available" on since Bush left town.
That was just TARP. Don't forget the Fed, they had been bailing with assorted alphabet soup for over a year before that.
Comrade Byzantine_Ruins Mon Mar 23 08:05:56 2009 CDT #
Apprentice says:
A shtupid question...There are still these toxic assets? Where did the other Trillions go? When are they going to stop shoveling out dollars to the Banks?
8% private, 92% Fairy money....Yup, that is the current ratio nin the stock market.
Apprentice Mon Mar 23 08:06:04 2009 CDT #
Jackrabbit says:
Wow. CNBC ppl just gave a surprisingly cogent analysis of "The Plan"
Jackrabbit Mon Mar 23 08:07:43 2009 CDT #
Jay D. says:
...........China to Keep Buying Treasuries, Top Official Says .............
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a9YNZAC81t2Q
...........it said they endorsed dollar's global role.....hahaha...........
Jay D. Mon Mar 23 08:08:29 2009 CDT #
Jackrabbit says:
Including voicing .... some skepticism!
Jackrabbit Mon Mar 23 08:08:40 2009 CDT #
reptillian says:
The merits of this approach: gov't won't assume all the risk (only close to 100% ?)
reptillian Mon Mar 23 08:09:16 2009 CDT #
Comrade Byzantine_Ruins says:
Where's Geithner? Is he 25 minutes late?
Comrade Byzantine_Ruins Mon Mar 23 08:11:26 2009 CDT #
Apprentice says:
"Nobody knows how to price these things."
Bullshit! With the stress tests and all this time the juciy fruit has been segregated and flagged with a nice pink ribbon. How much is that? I'd estimate it to be about 8% that the private investors are willing to gobble up.
Taxpayer eats the toxic stuff. Sweet.
Apprentice Mon Mar 23 08:11:31 2009 CDT #
Anonymous says:
Comrade....
I don't think there will be an appearance.... What is going on?
Anonymous Mon Mar 23 08:12:37 2009 CDT #
AnonyMiss says:
dow30 summer weight says:Today, 6:04:11 AM“so, did our Treasury Sec. oversleep or just cancel the speech?
-----
No TV appearance, just off camera Q&A with reporters.
He will explain more this morning at a pen-and-pad press briefing, a format that often is used when the briefer is worried about being caught saying something stupid or controversial on camera.(A free piece of semantic advice: Be sure to call them "troubled"
http://voices.washingtonpost.com/political-browser/2009/03/rundown-_032309.html#more
AnonyMiss Mon Mar 23 08:13:26 2009 CDT #
charlie says:
I don't understand it.
In the example, I put up $6 to get control of an asset that's worth $84 and I can do whatever I want with it. What about the other $78. $6 is gov't money for equity and $72 is a loan. So if I turn around and sell the thing for say $86, do I get to keep all the $2 profit? Does the gov't get $1 and I get $1? What if I have to dump the thing for $50. What happens?
charlie Mon Mar 23 08:14:11 2009 CDT #
NateTG says:
"In the example, I put up $6 to get control of an asset that's worth $84 and I can do whatever I want with it. What about the other $78. $6 is gov't money for equity and $72 is a loan. So if I turn around and sell the thing for say $86, do I get to keep all the $2 profit? Does the gov't get $1 and I get $1? What if I have to dump the thing for $50. What happens?"
I think it works out to:
If you sell it for $86, you, and the treasury both get $7 back. You may still have to pay the FDIC for the financing.
If you dump it for $50, you, and the treasury, are both out $6, and the FDIC is out $24.
Parent Post
NateTG Mon Mar 23 08:19:22 2009 CDT #
CRbot says:
The Latest from Ritholz:
TARP Part II
CRbot Mon Mar 23 08:15:23 2009 CDT #
ponziMCC says:
what: i'm out and about. he did'nt show for his 0845 'brief'?
ponziMCC Mon Mar 23 08:15:24 2009 CDT #
Comrade Byzantine_Ruins says:
AnonyMiss says:
Today, 9:13:26 AM
No TV appearance, just off camera Q&A with reporters.
Pardon me, I'm gonna go have a drink.
Comrade Byzantine_Ruins Mon Mar 23 08:16:43 2009 CDT #
Anonymous says:
The FDIC will provide 6:1 leverage on the private and gov't money. The FDIC will float guaranteed debt to provide the leverage, so:
a) FDIC is already underfunded
b) We are issuing debt to buy debt
Lastly, only rich people can participate in the program. You have to have managed $10B, and have the ability to raise $500M. I think the key to this not working is that we still have to float more debt to take care of a debt problem.
Anonymous Mon Mar 23 08:17:59 2009 CDT #
Black Star Ranch says:
Hillary would have been like voting for Ron Paul alongside this bunch - and to think I was worried about her "over-stepping" her responsibilities.
Black Star Ranch Mon Mar 23 08:18:30 2009 CDT #
Jackrabbit says:
What if I have to dump the thing for $50. What happens?
You are buy and hold, pigeon. Equity is first loss.
Jackrabbit Mon Mar 23 08:18:53 2009 CDT #
Lawyerliz says:
Off to Miami.
I think I wanna go buy stuff.
Lawyerliz Mon Mar 23 08:18:58 2009 CDT #
Lobbyi$t Ben Dover says:
Did Timmy's dog eat his homework again? :-E
Lobbyi$t Ben Dover Mon Mar 23 08:19:04 2009 CDT #
Simian says:
So, lets say Citi buys $100b of BAC crap and BAC buys $100b of Citi crap, both at inflated prices, they will have pushed the majority of their problems onto the taxpayer. Finding buyers should not be a problem.
Simian Mon Mar 23 08:19:18 2009 CDT #
MrM says:
The futures are still up, but way below their highs earlier this morning
MrM Mon Mar 23 08:21:05 2009 CDT #
NateTG says:
Did anyone ask Turbotax Timmy what the authorization for getting these funds from the treasury is?
NateTG Mon Mar 23 08:23:51 2009 CDT #
Comrade Byzantine_Ruins says:
okay, drink in hand at 9:20 am.
Was Timmah too chickenshit for the presser, too loaded for the presser, or too deeply disgraced for the presser?
Comrade Byzantine_Ruins Mon Mar 23 08:23:53 2009 CDT #
The Lorax says:
Timmy's once again forgotten that you can manipulate the markets all you wish, if you don't end up making JOBS nothing will change and gravity will reassert itself in time.
The Lorax Mon Mar 23 08:25:06 2009 CDT #
Life Experience says:
OT: Went to an Indiana forclosure auction over the weekend. Prices for decent properties in good shape still 60% - 80% of market. Want to hold my nut for awhile longer, but the fools in charge seem determined to create massive inflation. The stock market is completely gamed. Maybe I should look at forex.
Life Experience Mon Mar 23 08:27:12 2009 CDT #
Black Star Ranch says:
...Boy I hate saying this.........
I keep hearing in the back of my head: We must be just born & bred dopes to put up with this fecal matter.
Black Star Ranch Mon Mar 23 08:27:40 2009 CDT #
MrM says:
Hope it wouldn't be too inappropriate to quote myself
MrM says:
Yesterday, 11:26:30 PM
I would not be too surprised if the press conference turns out to be short of details and everybody is left very disappointed - just like it played out with the original "Big" announcement so hyped by the Prez.
MrM Mon Mar 23 08:27:59 2009 CDT #
dow30 summer weight says:
Anonymous says: Today, 09:05:44 AM
Spending up to 1Trillion and all the US taxpayer gets it s press release!!! No Geithner, no questions from the press?!!
WTF!!!
Well at 8am sharp I saw Liesman on CNBC promptly had an 8 page "press release" or whatever you want to call it. I guess he figured that would cover things for now.... or saving the best for last when he appears on the floor of the stock exchange handing out bonuses or something.
I can understand why he would want to duck the personal appearance but, he took the job and should be out there. Like you say, 1 Trillion bucks and he's apparently got something more pressing to attend to.
Can't he at least find himself a Mini-Me (like Paulson and Kashkari) to send out?
dow30 summer weight Mon Mar 23 08:29:02 2009 CDT #
Anonymous says:
Pimco intends to participate in U.S. toxic asset plan
http://www.reuters.com/article/ousiv/idUSN2313937120090323
Knew these scumbags would be neck deep is this theft.
Anonymous Mon Mar 23 08:29:19 2009 CDT #
OPTICS says:
Wylie Coyote has missed the Roadrunner big time and after looking at the ground comming up fast he desperately has ordered the whole Acme catalouge on his amex in hopes to find SOMETHING to stop his fall.We all know how this ends.
OPTICS Mon Mar 23 08:29:39 2009 CDT #
ATM card and $19 in the bank says:
"okay, drink in hand at 9:20 am."
Gave it up for Lent or I'd join you. What are you having?
ATM card and $19 in the bank Mon Mar 23 08:30:12 2009 CDT #
Anonymous says:
Geithner is no fool. He must have several deals lined up to announce today. The announcements should really boost the market IMO.
Anonymous Mon Mar 23 08:32:00 2009 CDT #
Hymns for the Lord says:
We'll see.
Parent Post
Hymns for the Lord Mon Mar 23 08:39:10 2009 CDT #
AnonyMiss says:
Comrade Byzantine_Ruins says:Today, 6:23:53 AM“okay, drink in hand at 9:20 am.
Was Timmah too chickenshit for the presser, too loaded for the presser, or too deeply disgraced for the presser?
---
I think the problem was with his on air presenter/selling abilities after his last attempt. At least that's what I got from the article I linked above, amongst others I read. I think Bloomberg said he was going to make a joint appearance around noon with Bernanke and O...but I never heard them repeat that and I haven't found a link yet. Enjoy your drink, I settled for some nice dark chocolate.
AnonyMiss Mon Mar 23 08:32:26 2009 CDT #
reptillian says:
So everyone gets their jobs back, right?
reptillian Mon Mar 23 08:33:34 2009 CDT #
Jackrabbit says:
We are all so worried about how the plan is a give away that we are ignoring other issues, the most important being: will it work?
There is only a limited number of funds that can properly analysis this toxic crap. What smart money" would take risk a dime by taking a first loss position? The banks will STILL have to write down these assets - just maybe a bit less than they would have.
All of these "market solutions" hearken back to Fall 2007 when the Fed/Tsy tried to put together an industry plan to rescue the SIVs. That fell apart. Never saw the light of day, and just wasted time.
Any thoughts? Will "private capital" participate? Will/would you allow your 401k and/or pension plan to participate?
(I think the plan only works if the Fed is willing to print money at all costs. That is what a participating fund is betting on.)
Jackrabbit Mon Mar 23 08:33:39 2009 CDT #
charlie says:
Any thoughts? Will "private capital" participate?
I agree that it's difficult to value the assets. Mainly because it's hard to predict the future, just like every other investment. But, you can always make a bid you feel comfortable with and see if it's accepted.
The thing I don't understand is...
The banks have to sell their assets at inflated prices or they'll lose too much to remain solvent. The bidders are first in line on losses. It seems like for this to work, either the investors have to be extremely optimistic or stupid or the banks have to be willing to accept a huge loss.
As alluded to earlier, maybe the banks will buy the assets from each other at highly inflated prices. They'll take their 5% or so loss on investment in exchange for offloading their assets for 2-3x what they're really worth. Even if the banks are allowed to participate directly, I would guess they could arrange something with a hedge fund to accomplish the same thing.
Parent Post
charlie Mon Mar 23 08:51:03 2009 CDT #
ATM card and $19 in the bank says:
"Pimco intends to participate in U.S. toxic asset plan"
So, can the average taxpayer go long the Total Return fund and get some of his money back...?
ATM card and $19 in the bank Mon Mar 23 08:34:02 2009 CDT #
Guest says:
short = dead meat
Greed's a bitch
Guest Mon Mar 23 08:36:08 2009 CDT #
Anonymous says:
weren't all the banks crowing just a week or two ago about how great they were doing....then why do we even need this now?
Anonymous Mon Mar 23 08:36:19 2009 CDT #
Anonymous says:
As best as I can tell the reason to involve the private investors is because the Treasury can't be trusted to pay the fair price i.e. the Treasury will over pay. Because of the incompetence of the Treasury we have to give the private investors a disproportionate share of the profits.
Anonymous Mon Mar 23 08:37:40 2009 CDT #
traderwalt says:
Lawyerliz,
OT, but have you noticed any mispricing of residental real estate in Florida (like the examples CR posted over the weekend?_
traderwalt Mon Mar 23 08:38:47 2009 CDT #
Basel Too says:
Pimco intends to participate in U.S. toxic asset plan
Pimco is the one of the largest managers, if not the largest, for pension funds, so it's not really a surprise.
Basel Too Mon Mar 23 08:40:19 2009 CDT #
Dust Bowling for Dollars says:
They always loot the treasury in the last act.
Dust Bowling for Dollars Mon Mar 23 08:40:29 2009 CDT #
ATM card and $19 in the bank says:
"151 Rum mixed with sugar-free iced tea."
That's quite a drink. You should probably avoid open flames for a while...
ATM card and $19 in the bank Mon Mar 23 08:41:08 2009 CDT #
Lifeguard1999 says:
Dear Mr. Geither:
Q. You state that the "banks, still burdened by bad lending decisions, are holding back on providing credit." Which is more true?
(a) That the banks are no longer lending to those who can fog a mirror?
(b) People no longer want to borrow at any interest rate to buy assets that are not worth their bubble prices?
P.S. Thanks for all your hard work in making FEMA's response to Katrina look "better by the second".
http://cmsimg.clarionledger.com/apps/pbcsi.dll/bilde?Avis=D0&Dato=20090323&Kategori=OPINION04&Lopenr=90320030&Ref=AR&MaxW=580
Lifeguard1999 Mon Mar 23 08:43:17 2009 CDT #
dr munch says:
If the buyers determine the price, how does this help the banks?
dr munch Mon Mar 23 08:43:35 2009 CDT #
Elrod says:
Timmy speaks and the Dow goes...UP?!?
Maybe this is a new day. Of course, the cameras didn't catch Geithner's bizarre cadences.
Unless the market takes a dive later today - a real possibility - expect the media narrative to go something like this: "Geithner 2.0 a hit, optimism on Wall Street that Geithner plan will get economy going again". Then, all the CNBC people will say, "All those irresponsible people calling for nationalization are just a bunch of socialists that don't understand the fundamental health of the banking system!" Prepare for it.
Elrod Mon Mar 23 08:44:18 2009 CDT #
Black Star Ranch says:
......this is the crux of public/private look/see in a nutshell:
"At the same time, there are fears that investors may be reluctant to participate in light of the fact that Congress has retroactively altered the terms of many of the government rescue programs so far."
EXACTAMENTE!
Black Star Ranch Mon Mar 23 08:45:10 2009 CDT #
Ben Frank\'ll Tank Bernanke says:
This government backed rally is sponsored by...US Treasury bonds. Buy US debt and we'll assist in your exit from impaired equities--in the back with "legacy" purchases and in the front with a market fally. Just be sure to buy bonds (wink). It will be good for your family and we wouldn't want anything to happen to them now.
Ben Frank\'ll Tank Bernanke Mon Mar 23 08:46:09 2009 CDT #
Jackrabbit says:
OK, I think I saw the answer to my question about who will participate in an earlier post. (BAC buys C crap, C buys BAC crap)
Big banks are motivated to participate. And they are close enough to the Fed to get the assurances they need. Then minor speculative participation by a few non-bank funds gives the plan some legitimacy.
Wow. It just might work. Banks will have to raise additional capital but their losses are capped.
To those wondering "how can I get in on this give away": buy bank stocks, short the dollar.
Jackrabbit Mon Mar 23 08:46:26 2009 CDT #
Money Man says:
Acronym should read "PIMP"
Money Man Mon Mar 23 08:47:33 2009 CDT #
cd says:
is thier housing report today?
cd Mon Mar 23 08:48:04 2009 CDT #
NateTG says:
"If the buyers determine the price, how does this help the banks?"
-Dr. Munch
Because the banks will be the buyers. (Perhaps with a condom-puppet so their fingers stay clean.)
NateTG Mon Mar 23 08:48:18 2009 CDT #
Lobbyi$t Ben Dover says:
Socialist government make the rules up as they go. Will we get to vote on party uniforms or will Barney Frank just pick the colors? *DONT_KNOW*
Lobbyi$t Ben Dover Mon Mar 23 08:49:02 2009 CDT #
Comrade Byzantine_Ruins says:
ATM card and $19 in the bank says:
Today, 9:41:08 AM
That's quite a drink. You should probably avoid open flames for a while...
You might as well give a big cheer when they throw the Treasury onto the bonfire.
You're gonna miss it in the morning, you might as well have fun while you're destroying it.
Comrade Byzantine_Ruins Mon Mar 23 08:49:39 2009 CDT #
Anonymous says:
The PPIP any relation to the PPT?
Anonymous Mon Mar 23 08:50:17 2009 CDT #
AnonyMiss says:
Summers will be on Bloomberg at 11a EDT to discuss the plan...maybe we won't be seeing Timmay at all today.
AnonyMiss Mon Mar 23 08:52:59 2009 CDT #
Comrade Byzantine_Ruins says:
Someone needed put to bed.
Parent Post
Comrade Byzantine_Ruins Mon Mar 23 08:53:24 2009 CDT #
The Lorax says:
So the FDIC becomes the new AIG with full government backing?
The Lorax Mon Mar 23 08:53:55 2009 CDT #
Jackrabbit says:
Charlie:
Yeah, that's the only thing that makes sense. This is a plan to cap bank losses wtih a Fed backstop.
Jackrabbit Mon Mar 23 08:54:40 2009 CDT #
Max Schumacher says:
As best as I can tell the reason to involve the private investors is because the Treasury can't be trusted to pay the fair price i.e. the Treasury will over pay.
The whole point of this charade is precisely to overpay for these assets. The "private-public partnership" is a fig leaf to to disguise that fact for John Q. Rube. And as a reward for providing PR cover for the charade, the "private" investors are being given a no-risk opportunity to earn some easy cash.
Max Schumacher Mon Mar 23 08:55:00 2009 CDT #
Apprentice says:
I'm watching this horse race.....
Every time the favourite starts to slow down and fall back the jockey pulls yet another gigantic syringe out of his backpack and jabs the stumbling nag back into the lead.
All the punters go wild.
Giddyup you fecker, giddyup!! :-D
Apprentice Mon Mar 23 08:57:56 2009 CDT #
Basel Too says:
haha. Krugman is calling for individual investors to be able to buy-in to the PPIP. I say that the UST should create a special class of savings bond, a "financial war bond" if you will.
If Geithner’s taxpayer subsidized toxic public/private plan goes forward, I think it would be fair if the federal government allow non-institutional investors to participate via a no-fee investment vehicle.
Basel Too Mon Mar 23 08:58:06 2009 CDT #
fried says:
"Socialist government make the rules up as they go."
Wrong. Didn't you see that those crazy socialist Swedes refused a taxpayer bailout for Saab and put it in pre-bankrupcy proceedings...
Socialism is not what is happening here. This is corporate kleptocracy.
Please, stay awake.
fried Mon Mar 23 09:00:05 2009 CDT #
Just Askin says:
another +10 today.
Parent Post
Just Askin Mon Mar 23 09:53:00 2009 CDT #
ATM card and $19 in the bank says:
"It seems like for this to work, either the investors have to be extremely optimistic or stupid or the banks have to be willing to accept a huge loss."
Charlie,
If I have this right, the consensus seems to be that if a hedge fund puts down 3%, it can achieve a profit with some combination of the following:
1) the asset it purchases throws off a brief cash flow that exceeds the 3% cost (i.e. a pool that yields 300 bps above the interest rate charged on the 97% loan only needs to perform for a little over a year for the hedge fund to make money), or
2) the hedge fund borrows (i.e. from a prime broker) most of the 3% it puts down, in which case the asset pool can yield less than 300 bps above cost of funds and the hedge fund still makes money.
ATM card and $19 in the bank Mon Mar 23 09:02:22 2009 CDT #
Jackrabbit says:
Methinks Timmay gets thrown under the bus when Obama runs for his second term. Everyone will part friends as Tim finds gainful employment as a Director of a large financial institution.
Jackrabbit Mon Mar 23 09:02:34 2009 CDT #
taxpayer rape says:
i can't handle the truth
taxpayer rape Mon Mar 23 09:02:46 2009 CDT #
Black Star Ranch says:
"...the banks will buy the assets from each other at highly inflated prices"
again, just out and out thievery.
Black Star Ranch Mon Mar 23 09:04:06 2009 CDT #
Emporer of Ice Cream says:
Is it time to impeach Obama and indict Geihtner and Summers?
Emporer of Ice Cream Mon Mar 23 09:07:16 2009 CDT #
homedad43 says:
Basel Too:
A "Financial War Bond"? Why not just call it a "Whore Bond"? You've got to be kidding me...this is simply going to become a huge financial circle jerk with the taxpayers ponying up the money (and the Fed) and then "participating in the rewards".
I think that Charlie and Jackrabbit are correct.
homedad43 Mon Mar 23 09:08:37 2009 CDT #
Lobbyi$t Ben Dover says:
"Wrong. Didn't you see that those crazy socialist Swedes refused a taxpayer bailout for Saab and put it in pre-bankrupcy proceedings...
Socialism is not what is happening here. This is corporate kleptocracy.
Please, stay awake."
Who said they wanted Saab? If they did they never would have sold it to GM. They recognize dumping a loser unlike Obama's rape of free market failure.
Lobbyi$t Ben Dover Mon Mar 23 09:09:09 2009 CDT #
fried says:
"Socialist government make the rules up as they go."
You don't seem to have an understanding of the word "socialism"...what is so difficult about the word kleptocracy? By your definition, Bush and Paulson were also "socialists". You've rendered the word meaningless.
Parent Post
fried Mon Mar 23 09:13:37 2009 CDT #
NateTG says:
I think we should call it "corporate kleptocracy".
http://www.youtube.com/watch?v=qdrGKwkmxAU&feature=related
Parent Post
NateTG Mon Mar 23 09:20:51 2009 CDT #
ATM card and $19 in the bank says:
Basel Too,
So if, per Krugman, individual investors buy in, and then we take advantage of the non-recourse provision (as all the hedge funds will) to stick this garbage back to the Treasury when the cash flow dries up, what will happen to our FICO score? ;)
ATM card and $19 in the bank Mon Mar 23 09:10:22 2009 CDT #
homedad43 says:
ATM card:
Huh?
Parent Post
homedad43 Mon Mar 23 09:11:49 2009 CDT #
ATM card and $19 in the bank says:
homedad43:
Let me try again... "stick the garbage back" is really imprecise.
In order to make money on these assets, the buyer almost certainly will have to default on the nonrecourse loan. The cash flow from the CDOs and the junior tranches of ABS will dry up as the recession wears on and house prices stay depressed or decline (plus CRE troubles and credit card defaults, etc). If you put down 3%, you make money as long as you receive interest slightly in excess of your investment, less the cost to carry; but that calculation assumes that you never repay the non-recourse loan. Because you can't. The assets are not going to perform, let alone mature at par. So you default.
If an individual defaults, then presumably that would impact his credit score. Hence the FICO joke.
Parent Post
ATM card and $19 in the bank Mon Mar 23 09:21:22 2009 CDT #
Rob Dawg says:
PPPIP? "3P.I.P., bankster/taxpayer relations." Who writes this cheap sci-fi crap?
Do notice that Timmay's plan has already failed. The money that was supposed to go to stimulating lending has gone into stocks instead.
Rob Dawg Mon Mar 23 09:11:29 2009 CDT #
Anonymous says:
Summers will be on Bloomberg at 11a EDT to discuss the plan...maybe we won't be seeing Timmay at all today.
Timmay will be on with Erin at 2:00 pm on CNBC - fluffhead meets the puppet
Anonymous Mon Mar 23 09:11:57 2009 CDT #
bearly says:
I know how to really make these assets soar - Buy 'em up, Aggregate and... securitize!
bearly Mon Mar 23 09:16:55 2009 CDT #
Jim says:
What gives the FDIC authority to do this? Anyone know the actual law?
Jim Mon Mar 23 09:17:23 2009 CDT #
The Lorax says:
Anonymous says: Today, 10:11:57 "Timmay will be on with Erin at 2:00 pm on CNBC - fluffhead meets the puppet"
Which one is which?
The Lorax Mon Mar 23 09:17:29 2009 CDT #
CRbot says:
New Thread: Existing Home Sales Increase Slightly in February
http://www.calculatedriskblog.com/2009/03/existing-home-sales-increase-slightly.html ( 1 comments )
I also post comments to an irc channel as they appear on haloscan. Click for a web irc interface: http://realize.org/cr (Or join the irc server directly: irc.realize.org:9996 #calculatedrisk)
CRbot would now like to sing a little song for all his fans, and it goes something like this:
Benny... Benny... give me your answer... do.
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It won't be a ... stylish marriage.
I can't... AFFORD... ANYTHING TO EAT... MUCH LESS A FRACKIN CARRIAGE!!!
But you'll look sweet... --BOT SO HUNGRY!-- upon the seat...
Of a HOOPAJOOPS built for two... families.
I'm sorry Ben, I can't let you do that...
Rally mode + Printing Press == does not compute... does not-- com--- com... puttttrrrrhgh.
--Your systemic-failure-crashing bot
CRbot: Call me HAL.
CRbot Mon Mar 23 09:19:18 2009 CDT #
AnonyMiss says:
Anonymous says:
Today, 7:11:57 AM
Timmay will be on with Erin at 2:00 pm on CNBC - fluffhead meets the puppet
----
Thanks! It's going to be a long day for CBR if he doesn't lay off the 151. : )
Too bad they can't reschedule Timmay for say...4:30pm instead.
AnonyMiss Mon Mar 23 09:20:11 2009 CDT #
Anonymous says:
Timmy
http://www.youtube.com/watch?v=JLQVJCdRazI
Anonymous Mon Mar 23 09:25:22 2009 CDT #
the man from nantucket says:
what i keep coming back to is that these plan by the govt are designed to prevent a massive, systemic failure of financial markets (another 50% drop in days like last year). They may just do that. The plans have little impact on the factors that make markets rise. Free cash flow (or earnings) and dividends (and the growth of each) are what support markets and those measures were artificially inflated for almost 2 decades and will re-set to lower absolute levels and then will resume growth at lower rates than the recent past. I'm all for preventing a massive collapse...it's a good goal, but I'm not getting wood over that because the lack of collapse doesn't automatically imply great conditions for long-term, sustainable market advances. Let the market rally, it's highly likely it's a short, sharp, prone-to-failure type rally. who knows though, i could be wrong.
the man from nantucket Mon Mar 23 09:28:55 2009 CDT #
Lobbyi$t Ben Dover says:
Bush and Paulson were also "socialists"."
Yes.
Lobbyi$t Ben Dover Mon Mar 23 09:47:56 2009 CDT #
Anonymous says:
CNBC announced general public will participate in the PPIP through fund offerings.
Anonymous Mon Mar 23 09:51:59 2009 CDT #
Some Investor Guy says:
Markets sharply higher. Now back to last thursday's levels.
Some Investor Guy Mon Mar 23 10:06:56 2009 CDT #
Yancey Ward says:
This plan is specifically designed to overpay for the assets without seemingly having the government buy them. As a few commenters above have noted, what is going to happen is that the banks and funds holding the bad assets are going to end up purchasing them from one another at very, very optimistic prices using the maximum leverage they can get from the government. They get to write the assets off their books at a price they could never get without government involvement, all for the cost of taking the first small sliver of the loss on the "newly" purchased assets when the cash flows do indeed come up way short of that "forecast" by the purchase price.
Yancey Ward Mon Mar 23 10:07:48 2009 CDT #
Some Investor Guy says:
You know, there is another way to clean up bank balance sheets. It's on the liability side. Do what Ford is doing.
“Several investors we have spoken to prefer to cash out at discounted levels rather than remain invested in Ford,” Pete Hastings, a fixed-income analyst at Morgan Keegan & Co. in Memphis, Tennessee, said in an e-mail. “Ford gets to reduce debt and improve credit metrics for less than half price. That’s a nice benefit from investors’ vote of no confidence.”
You can vacuum up a lot of bonds issued by Citi at that kind of price. BofA isn't far behind. Ford is doing this with no government subsidy.
If Citi could take out $200 billion of its own debt for $100 billion, that could be pretty helpful. One of the advantages of this type of transaction is there is no doubt about making money on it. The debt's value won't go up or down after it's retired. It's nice that only bondholders who want to sell will have to sell.
Some Investor Guy Mon Mar 23 10:18:19 2009 CDT #
artichoke says:
“Several investors we have spoken to prefer to cash out at discounted levels rather than remain invested in Ford,” Pete Hastings, a fixed-income analyst at Morgan Keegan & Co. in Memphis, Tennessee, said in an e-mail. “Ford gets to reduce debt and improve credit metrics for less than half price. That’s a nice benefit from investors’ vote of no confidence.”
Can I buy back my mortgage for half price?
Parent Post
artichoke Mon Mar 23 12:00:55 2009 CDT #
ZackAttack says:
S&P just kisses the bottom of that triangle at 800. Gotta take a defined-risk shot on the short side here.
ZackAttack Mon Mar 23 10:31:36 2009 CDT #
bdwnnc says:
Interesting how this "toxic" plan now stipulates "AAA" rated paper only!
Now, do you really think BOA and Citi will sell there "AAA" paper to PIMCO?
bdwnnc Mon Mar 23 10:32:26 2009 CDT #
kicker says:
So....
Dead thread but the gist of the plan goes something like this. I walk into a casino and throw a $100 down on the roulette wheel on black. Of that $85 is from FDIC backed bonds, $7.50 is from the Treasury, and $7.50 is mine.
The bets go like this:
Government Gain(Loss) My Gain (Loss)
win $50.00 $50.00
lose ($92.50) ($7.50)
win $50.00 $50.00
lose ($92.50) ($7.50)
Totals ($85.00) $85.00
So, the US nets an $85.00 loss while the investor nets an $85.00 gain. This plan favors hail mary investments in things like HELOCs and CDO^2 where the ultimate returns are a coin flip.
I'm guessing the major investment banks are creating 10-20 different funds to invest. They will say it's because they want so many of their "best minds" involved but the reality is that they will be working the odds in their favor.
kicker Mon Mar 23 11:01:25 2009 CDT #
FFDIC says:
Thanks for asking about Angela who remains in the hospital undergoing chemo treatments and may need to have her spleen removed. Take care and hug your kid...
FFDIC Mon Mar 23 11:15:19 2009 CDT #
Terry says:
This is a much more complex version of the origianl TARP: (1) They will overpay for these bad assets, (2) unless they leave the loan servicing with the selling bank, they are going to have to hire someone to service these loans, and the whole compensation/bonus issue will rear its ugly head, (3) they will be forced to take write-downs and renogiate a substantial portion of the underlying loans, so they will have overpaid by even more, (4) the proposal to tax the PE investors at ordinary income rates will shrink the after tax return, (5) will pension funds dare invest in these risky programs, 6) there is no guarantee that Barney and company will not surtax these investors if they feel they earned too much; and (7) the taxpayers get hosed either way.
Terry Mon Mar 23 13:21:49 2009 CDT #
cre says:
I'm not following this. Krugman says(link below) that this deal leads to the partner institutions to overpay for the assets by 30%. Can someone show me how that math works, cause I'm not seeing it.
http://krugman.blogs.nytimes.com/2009/03/23/geithner-plan-arithmetic/
cre Mon Mar 23 14:32:39 2009 CDT #
END