Comments for G20: Key is Value of Assets on Banks’ Balance Sheets
Comrade Short Bucky says:
Sounds like somebody is insolvent....
Comrade Short Bucky Sat Mar 14 13:44:42 2009 MST #
CRbot says:
This comment thread has been HALO-IZED by CRbot.
http://realize.org/cr/halokit.php?halourl=http://www.haloscan.com/comments/calculatedrisk/7977124497309339269
CRbot Sat Mar 14 13:44:48 2009 MST #
EvilHenryPaulson says:
o wow, check out this trailer for a topical horror movie
http://movies.yahoo.com/movie/1810029193/trailer
EvilHenryPaulson Sat Mar 14 13:46:26 2009 MST #
Lucifer says:
Toxic assets have no value.
But trying to understand reality when your job depends on ignoring it is kinda hard. ;)
Lucifer Sat Mar 14 13:49:51 2009 MST #
Anonymous says:
http://seattlepi.nwsource.com/money/403636_mutual14.html
"the money fund industry, which now holds about 40 percent of the total $9.4 trillion in all U.S. mutual fund assets."
Anonymous Sat Mar 14 13:53:58 2009 MST #
burnside says:
They really don't want to face this.
I never have been clear on one thing - do they understand that restoring trust in the credit markets may not result in a restored global economy? I always think they must and then am not quite sure.
burnside Sat Mar 14 13:55:11 2009 MST #
Counterpointer says:
Uh oh, somebody's missed a couple of crucial concepts, like solvency, and final demand.
Kaboom coming.
C
Counterpointer Sat Mar 14 13:58:10 2009 MST #
Rob Dawg says:
Warren Buffet knows exactly how to accurately value a group of assets. Sell 2%.
This isn't about correctly valuing assets. That's easy. Far harder is to incorrectly value an asset and make it stick.
Rob Dawg Sat Mar 14 14:01:21 2009 MST #
Andrew says:
Seems that everyone in the global financial leadership are still pushing the "the assets are undervalued and so we won't need to nationalize the insolvent banks if we can just get the market to value them correctly" meme. Wonder how long this will continue to go on for?
Andrew Sat Mar 14 14:01:24 2009 MST #
EvilHenryPaulson says:
Demand serves credit
By the government increasing credit, banks can earn their way out of the hole
By becoming solvent banks will lend more freely creating even more credit and more demand
fools!
EvilHenryPaulson Sat Mar 14 14:03:14 2009 MST #
burnside says:
But it's a joint statement. All concepts averaged and smoothed into bouillabaisse. So you won't see nationalization, depression or solvency oh, you know, out loud.
burnside Sat Mar 14 14:03:18 2009 MST #
Anonymous says:
"Key is Value of Assets on Banks’ Balance Sheets"
These central bankers have little to no capital markets experience. I have written both Bernanke and Geithner with the method to value these assets, which basically amounts to pre-selling the collateral then collapsing them. So far, I got a form letter thank you letter from Bernanke. To see what I proposed, see the links at the the bottom of
http://www.panix.com/~blumm/blumm.html
Anonymous Sat Mar 14 14:03:39 2009 MST #
Broker says:
Who would have thought that "Key is value of assets on banks' balance sheets"? O.M.G.
Broker Sat Mar 14 14:03:56 2009 MST #
ATM card and $19 in the bank says:
"Our key priority now is to restore lending by tackling, where needed, problems in the financial system head on..."
Like a helmet-to-helmet hit?
That usually turns out well. Maybe they intend for the financial crisis clock to be stopped a while as the injured banks lie on the ground...
ATM card and $19 in the bank Sat Mar 14 14:04:49 2009 MST #
sm_landlord says:
The "common framework" mentions "moral hazard" a few times, but I don't think they know what that term means.
sm_landlord Sat Mar 14 14:05:10 2009 MST #
fried says:
For those interested, Bernanke is giving a 60 Minutes interview this Sunday.
fried Sat Mar 14 14:06:05 2009 MST #
Comrade Byzantine_Ruins says:
Counterpointer says:
Today, 3:58:10 PM
Uh oh, somebody's missed a couple of crucial concepts, like solvency, and final demand.
Kaboom coming.
What he said.
Comrade Byzantine_Ruins Sat Mar 14 14:08:53 2009 MST #
EvilHenryPaulson says:
What Hu said? Wen?
(best names ever)
Parent Post
EvilHenryPaulson Wed Dec 31 18:00:00 1969 MST #
sm_landlord says:
It's nice to see that the G20 is mentioning the concept of exit strategies, but there are no details, of course. As I and other asked back when this started last year, exactly how do these governments plan to get *out* of the subsidy business? It's difficult to believe that trainwrecks like Citi will *ever* be able to buy their way out...
sm_landlord Sat Mar 14 14:11:08 2009 MST #
Broker says:
Is a dead horse an asset or a liability? That's the question!
Broker Sat Mar 14 14:11:29 2009 MST #
Lucifer says:
I have a bad feeling that arguing with banksters and other financial experts is akin to arguing with muslims who believe in jihad.
I don't think we can make them see reality. Their whole existence is based on denying it.
I think that anhilating them is the only viable option.
Lucifer Sat Mar 14 14:12:52 2009 MST #
sm_landlord says:
Lucifer writes;
"I think that anhilating them is the only viable option."
Well, I hear that there is space opening up at Guantanamo...
What sort of annihilation did you have in mind? Have you created a "special circle" of your domain to perform this task?
Parent Post
sm_landlord Wed Dec 31 18:00:00 1969 MST #
Counterpointer says:
Hell, this makes me weary. They've been saying the same crapola since mid-October.
There's nothing in this to douse the fuses. Still lit, still heading for the powderkegs.
Jeebus.
C
Counterpointer Sat Mar 14 14:13:49 2009 MST #
dr munch says:
G-20. Isn't that gatorade?
Seriously, this shindig sounds like a big, global "Hope Now". They should hold hands and sing Cum by Ya at the end.
dr munch Sat Mar 14 14:15:19 2009 MST #
FFDIC says:
http://www.treas.gov:80/press/releases/tg56.htm
Prepared Statement by Treasury Secretary Tim Geithner at the G-20 Finance Ministers and Central Bank Governors Meeting
FFDIC Sat Mar 14 14:15:31 2009 MST #
kuato says:
Their plan is to instill confidence in the system by jury-rigging the f@ck out of it. O:-)
kuato Sat Mar 14 14:17:06 2009 MST #
10,000 mosquitos says:
I'm considering a small gamble, buy some Citi common and wait for the next pump n dump bounce so I can recover some of my portion of their bailout
10,000 mosquitos Sat Mar 14 14:17:31 2009 MST #
Black Star Ranch says:
"Actions to achieve this may include where necessary:
# providing liquidity support, including through government guarantees to financial institutions’ liabilities; (DELETE)
# injecting capital into financial institutions; (DELETE)
# protecting savings and deposits; and,
# strengthening banks’ balance sheets, including through dealing with impaired assets. (DELETE)
Black Star Ranch Sat Mar 14 14:17:41 2009 MST #
central_scrutinizer says:
G20 eunuchs
Got nothing but promises
To do the needful
central_scrutinizer Sat Mar 14 14:18:34 2009 MST #
Lucifer says:
I wonder how that will turn out.
//Their plan is to instill confidence in the system by jury-rigging the f@ck out of it.// :-D
Lucifer Sat Mar 14 14:19:28 2009 MST #
sm_landlord says:
I thought Greenspend already did that jury-rigging back in the early 2000s... somehow it doesn't look like that's going to work this time.
Parent Post
sm_landlord Wed Dec 31 18:00:00 1969 MST #
Broward Horne says:
"Their plan is to instill confidence in the system by jury-rigging the f@ck out of it"
Thanks. Now I can skip that vitally important Bernanke interview and play pool instead.
Broward Horne Sat Mar 14 14:20:58 2009 MST #
Paradigm Lost says:
C: What did you expect from the gang that can't shoot straight. I remember the endless days of shuttle diplomacy over the Bosnian war. A lot of hand wringing, etc. But the negotiators had a lot of fine dining in Vienna while people were dying in the thousands.
Paradigm Lost Sat Mar 14 14:21:39 2009 MST #
Paradigm Lost says:
Dance of the Seven Bails...
Paradigm Lost Sat Mar 14 14:24:18 2009 MST #
Lucifer says:
sm landlord,
I think that those who insist in killing others because their "ideology" demands so do not deserve to be treated like human beings. I do not care if that group is muslims trying to convert through terror (because they are "special") or banksters trying to hold the world hostage because they believe they are"special"- both do not deserve to live.
Lucifer Sat Mar 14 14:25:32 2009 MST #
Black Star Ranch says:
"First, all institutions that are important to the stability of the financial system should come within a much STRONGER FRAMEWORK OF OVERSIGHT, with CLEARER RULES OF THE GAME THAT ARE ENFORCED MORE EVENLY and consistently across countries."
....what a hypocritical bunch of horseshit!
....
Black Star Ranch Sat Mar 14 14:28:21 2009 MST #
MrM says:
I actually like what I read in the Annex (and, yes, I will like it even more when I see it). First of all, the reform of the financial sector is put ahead of any calls for stimuli. Secondly, check this out:
---------------------------------
Risk transfer and burden sharing. If risk is to be transferred from the banking sector to governments, it should be at a fair price, including through fees, with appropriate risk sharing, to limit the cost to the government as well as prevent moral hazard, provide the right incentives to the participating institutions and maintain a level playing field across financial institutions, both nationally and internationally. Banks’ shareholders should be required to contribute to the maximum extent possible to loss or risk coverage prior to government intervention.
Valuation. While valuation methodologies may vary depending on the proposed asset resolution program, it is critical that those methodologies are applied transparently, objectively, consistently and in a cooperative way, in order to promote a level playing field across countries and financial institutions, and to advance prudential objectives while limiting the exposure of the state to potential losses. Supervisory authorities should have an important role in validating valuation processes. This will ensure that the risk is transferred from the banking sector to governments at a fair price, including through fees, with appropriate risk sharing, to limit the cost to the government, provide the right incentives to the participating institutions and minimise distortions.
Conditions. Government support is a privilege and must come with strong conditions, such as a commitment to continue providing credit to appropriately meet demands according to commercial criteria, improving governance, dividend policy restrictions and executive remuneration caps. It may
involve appropriate restructuring, including as necessary measures to limit competition distortions.
-----------------
Given the participation of the Germans, the Canadians and the French, I am hopeful they can actually enforce all these steps.
MrM Sat Mar 14 14:29:13 2009 MST #
popeye says:
Lucifer says:
I don't think we can make them see reality. Their whole existence is based on denying it.
I disagree. I think they see it clearly; they simply have no interest in either hearing our honest opinions or (more importantly) sharing theirs.
popeye Sat Mar 14 14:29:54 2009 MST #
Lucifer says:
popeye,
we are saying the same thing.. they cannot face reality because they do not want to face it. Facing reality implies doing something about it.. and we all know that playing the old charade was much more fun and profitable.
They know the consequences and thus they are trying to deny and delay the inevitable.
Lucifer Sat Mar 14 14:34:45 2009 MST #
Black Star Ranch says:
"Consistent with prudential considerations, there should be a full and transparent disclosure of the impairment of banks’ balance sheets."
..........unless we decide it's in your best interests NOT TO KNOW what we have decided regarding your fate and your childrens' fate ad infinitium......
Black Star Ranch Sat Mar 14 14:36:05 2009 MST #
Paradigm Lost says:
Geithner says that risk doesn't stop at a national border.
Then go after the tax havens.
Paradigm Lost Sat Mar 14 14:38:57 2009 MST #
Comrade De Chaos says:
by the way, EU based banks have much more freedom in moving their assets into the level III category (forever @ face values ).
In the long run it allows you to get more lucrative toxic stuff on the board, rip the short run advantage and hope for sunshine 24/7 or else ... (you are shrewed)
:-$
Comrade De Chaos Sat Mar 14 14:48:47 2009 MST #
MS says:
Geithner needs to shut the hell up on any issues that brings up any form of taxation. Absolutely ZERO credibility.
What wonderful news awaits us tomorrow when most of america is busy filling out brackets?....oh at about 6pm EST.
Ciao
MS
MS Sat Mar 14 14:50:43 2009 MST #
Comrade De Chaos says:
p.s. before the crunch, we were bound to implement EU rules giving more freedom when it comes to valuation (level 1,2 into level 3) within 2-3 years. 8-)
Comrade De Chaos Sat Mar 14 14:51:00 2009 MST #
Shine on you jamie dimon says:
All I can think of is Jim Carrey in Dumb and Dumber as he reads this headline. "No way. WE LANDED ON THE MOON!"
Shine on you jamie dimon Sat Mar 14 14:51:53 2009 MST #
Hawley Smoot says:
Suppose they simultaneously lowered the value of all toxic assets with a mutual agreement that disregards market pricing. They would have to bring the value down to a level in which bailouts will work (i.e., the bailout money paves over a hole in the dike, rather than our current plan of thropwing money into a black hole).
Even if they succeed, (a) it may be to late, or (b) fixing all toxic assets isn't enough.
Hawley Smoot Sat Mar 14 14:53:56 2009 MST #
Counterpointer says:
Wave of mutilation forecast: high probability.
But I don't think it'll be set to Goddard...
http://www.youtube.com/watch?v=o4ddpFDC63Y
C
Counterpointer Sat Mar 14 14:54:46 2009 MST #
warlock says:
As long as they think credit is the solution, and not the problem - we're all screwed.
warlock Sat Mar 14 14:56:15 2009 MST #
MrM says:
More interesting comments by the Canadian finance minister Jim Flaherty:
--------------------
Taking their cue from Canada, the finance ministers of the 20 largest industrialized countries agreed that their “key priority” was fixing the banks so they can start lending again and lubricate the economy. Mr. Flaherty has been relentless in his warnings that economic recovery is impossible unless the banks are fixed, which means ridding them of their toxic assets.
Mr. Flaherty seemed somewhat annoyed that the G20 countries have not moved more quickly on ridding their banks of toxic assets. “I'm satisfied the commitments are there [but] now we need to see the implementation,” he said.
Individual countries will almost certainly unveil plans on now they will deal with banks' toxic assets on April 2, at the G20 leaders summit in London. Mr. Flaherty hopes they will and expects the United States to flesh out its bank fix-it plan in the next couple of weeks. “I'm frustrated that we have banks with toxic assets in March 2009,” he said.
------------------------------
I am quite curious how it will play out along with the "stress tests" reported by US banks. Can Geithner report to the world with the straight face that all US banks passed the test? (Well, of course, he can - that's the unfortunate part)
MrM Sat Mar 14 14:59:40 2009 MST #
Cornholio says:
The Bank of Canada hinted on Saturday it could soon start printing money to create growth =-X
http://www.reuters.com/article/bondsNews/idUSLE65626020090314
Viagra
Cornholio Sat Mar 14 15:00:04 2009 MST #
graingod says:
M1 is increasing by 15-20% currently, Did it contract during the G Dep.?
graingod Sat Mar 14 15:01:31 2009 MST #
Lucifer says:
Epiphanies are in fashion. Everyone should get their own epiphany.
__________________________
Even Mr Welch argues that focusing solely on quarterly profit increases was “the dumbest idea in the world”. “Shareholder value is a result, not a strategy,” he says. “Your main constituencies are your employees, your customers and your products.”
Lucifer Sat Mar 14 15:05:32 2009 MST #
Question says:
Are there an older public educators in the house? This hysteria over education cuts..were there not adjustments made as student population dwindled before?
The mini boomers have all for the most part left the system, correct?
Question Sat Mar 14 15:07:48 2009 MST #
Lucifer says:
COMMENTARY
Published 11:49 PM, 13 Mar 2009
Last update 0:00 AM, 14 Mar 2009
Francesco Guerrera, Financial Times
The need to reconnect
In different times, the offer from the check-in attendant would have been accepted with alacrity. But in the midst of the worst economic downturn since the Great Depression, with an angry public, populist politicians and an aggressive press baying for a crackdown on Wall Street’s “excesses”, the senior banker paused for thought when he heard those usually welcome airline words: “Sir, you have been upgraded to first class. Please follow me.”
Finally replying, “I am fine in coach, thank you”, he gave up the better seat and opened another chink in the armour of beliefs and practices that corporate America had built and spread around the world over decades.
Once hailed as examples of an American dream that rewarded success with large pay cheques, lavish perks and popular admiration, executives and their companies have been caught in the grip of a storm that will revolutionise business. The deep freeze of capital markets, the implosion of financial groups and the resulting rise in governments’ sway over the private sector have called into question some of the foundations of Anglo-Saxon capitalism.
http://www.businessspectator.com.au/bs.nsf/Article/A-different-approach-$pd20090313-Q3TC7?OpenDocument&src=spb
Lucifer Sat Mar 14 15:08:35 2009 MST #
Fair Economist says:
The toxic assets are, for the most part, un-valuable, by which I mean not that they're worthless but that there's absolutely no way to know what they're worth. If you have a CDO of mezzanine tranches, slight changes in the underlying loan performance produces huge changes in the CDO value. The underlying loans, in turn, have no historical evidence to value them because the recent and current credit market is unprecedented. Any CDO value has 10x the uncertainty of the underlying loans, which in turn can be valued only by wild guesswork. The market gives *a* value, but it's a wrong value, because every investor bidding is equally clueless.
The only fair way to deal with the toxic assets is to convert the liabilities matching the toxic assets to equity and wait a few years for the final results to emerge. No current value could be fair - it would reflect only political power if determined by the government or the madness of crowds by mark-to-market.
Fair Economist Sat Mar 14 15:14:42 2009 MST #
Anonymous says:
Fair Economist wrote:
"The only fair way to deal with the toxic assets is to convert the liabilities matching the toxic assets to equity and wait a few years for the final results to emerge. No current value could be fair - it would reflect only political power if determined by the government or the madness of crowds by mark-to-market."
Wrong. What you're essentially saying is that Citi depositors should get Citi stock. Not necessary. Neither you nor anyone else it seems bothered to read the solution I offered in my previous post. Most of you are content to blabber. Once again, the fair value of toxic securitizations can be determined by finding out what the collateral is worth and collapsing the deals, paying off as many bonds as possible. It's easier to measure the value of home loans than it is to measure the value of bonds made out of securitized home loans. It's easier to measure the value of bonds made out of securitized home loans than it is to measure the value of CDOs. That approach will tell you what this stuff is worth. For my letters, visit http://www.panix.com/~blumm/blumm.html and follow the links at the bottom.
Parent Post
Anonymous Wed Dec 31 18:00:00 1969 MST #
Fair Economist says:
M1 is increasing by 15-20% currently, Did it contract during the G Dep.?
Yes, it dropped by about a third under Hoover and then increased rapidly to above prior levels under Roosevelt.
Fair Economist Sat Mar 14 15:17:25 2009 MST #
Counterpointer says:
G20 faces the Test. Will it end well?
http://www.youtube.com/watch?v=QDe6MZQjpho
C
Counterpointer Sat Mar 14 15:19:14 2009 MST #
Sue (Capital S) says:
OT, but this is "breaking" in the Washington Post:
"AIG Using Its $170B Federal Aid to Pay Millions in Bonuses"
http://www.washingtonpost.com/wp-dyn/content/article/2009/03/14/AR2009031401394.html?hpid=topnews
[BRING BACK HALOSCAN -CR-COMPANION MADE FORMATTING URLS AND BLOCK QUOTES EASY!!!]
These guys are asses, and I am infuriated. They don't get it. Yeah, "employee contracts ...." I have just watched all sorts of employee contracts get torn up where I work, and more is yet to come.
I'll bet the top management at AIG was only too happy to denounce auto worker contracts as "legacy costs." Well, all the banks receiving bailout money should consider their contracts as "legacy contracts" first and foremost, before anyone else.
I hate them.
Sue (Capital S) Sat Mar 14 15:24:53 2009 MST #
energyecon says:
The discussion on the Port of Los Angeles TEU volumes got me thinking (usually when the trouble starts)...here is a look at the YoY changes in the 3 month MA of total TEU volumes:
http://energyecon.blogspot.com/2009/03/port-of-los-angeles-teu-volumes-year.html
1. YoY volumes began declining before the start of the recession, have done so continuously since then, and recently moved sharply downwards
2. In the last recession in 2001, the YoY change in the 3 month MA never went negative
energyecon Sat Mar 14 15:25:31 2009 MST #
Hawley Smoot says:
Churches hit by the collapsing economy:
http://news.yahoo.com/s/ap/20090314/ap_on_bi_ge/rel_banking_on_faith
Hawley Smoot Sat Mar 14 15:25:44 2009 MST #
Noble says:
Sue - it is sickening. I am angry, very, very angry.
Noble.
Noble Sat Mar 14 15:27:15 2009 MST #
popeye says:
energyecon:
You might enjoy this site:
http://www.informare.it/news/review/2009/b260209.asp
popeye Sat Mar 14 15:32:03 2009 MST #
Mark2Madoff says:
The rest is general, but it keeps coming back to how to value the toxic assets on the banks' balance sheets.
just change the accounting rules to Mark to Make-Believe
Mark2Madoff Sat Mar 14 15:35:01 2009 MST #
Drunken Crystal Ball seer says:
Receivership of Chase/Citi/Wells/BOA+ GS. Well, Chase & GS might still be above water -put they are the pluses to the other minuses (which will include Fannie/Freddie/AIG). Plus GS has to pay on 2 counts -Counterparty to AIG & they created a large part of this mess.
Stockholders wipe out. Bondholder saved. All of the corporations once out of receivership - will become Mutual Corporations -they will become the Financial Utilities.
They will all become centrifuges to sort & cancel out CDS/MBS, etc.
Housing -all mortgages in trouble -one refinance attmept as per FDIC protocol -if not the short sale/ if not then foreclosure -with title transfer to HUD for residential and Commerce Dept for CRE. HUD will transfer title (for low/middle income rental housing with some with laddered selling allowance in 5-15 yrs) to local housing authorities & charities with strong supervision, some grant money & Line of Credit for supplies of purchase thru the General Services Administration (Fed Gov't Landlord agency). Same for Commerce Dept. - Using the CRE with the Small Bus Adm. & local authorities to create local/regional/small business incubators. -which the CRE can provide free/low cost start up physical presence -Think equivalent of subsidize housing for small business.)
Transfer of wealth back to the little guy - Financial Stabilization -> All of the banks - Lower all present loan percentage to single digits -based on risk. Pay more on savings accts. Create an account like are popular in Europe -Ing Direct has them here under the Electric Orange. Essentially an electronic payment acct with a line of credit. If your positive you earn interest & if negative you pay a very low/decent interest. Allow people to roll over the car loans/Line of Equity/Credit Cards/Mortgages into this account. Will required direct deposit of income & cancellation of loans/loan accts transfer into it, as well as new loans can only be taken out thru the bank & properly qualify - Or high penalties & expulsion from program apply. (think of a non-legal system way of modified bankruptcy, minus all the fees & high interest. If persons are compliant frees up capital for qualified people + does not penalize & put into a corner & in fact incetivise those that are in the margin.
Of course it would never happen - Because "the banking system once to have the cake and eat it too" & our legilsators are sold out. No politician would have the balls to do something like this. Specially kill Goldman Sachs.
Drunken Crystal Ball seer Sat Mar 14 15:35:41 2009 MST #
energyecon says:
Thanks popeye, more data always appreciated...I have not been as deep into the international trade and shipping numbers. It would be interesting to see the amount of shipping capacity going into various types of shutdown/storage in a graph...
energyecon Sat Mar 14 15:36:20 2009 MST #
energyecon says:
popeye, from your link:
Seafin Pte Ltd, a Singapore-based ship-financer, expects more than a third of shipping companies to collapse this year as the recession hammers global trade and vessel prices.
This speaks to the capacity idled and the assertion of BDI rate 'normalization' with yesterday's post...
energyecon Sat Mar 14 15:38:53 2009 MST #
Broward Horne says:
"The discussion on the Port of Los Angeles TEU volumes"
Interesting graph. It's yet another confirmation that the current crash is a continuation of the 2001 Dot Com Crash. Each traffic peak after March, 2000 is successively lower, a technical analysis confirmation that the trend peaked in 2000.
Broward Horne Sat Mar 14 15:40:45 2009 MST #
popeye says:
energyecon,
from the link, The Business Times:
Thome Group offers lay-up services
In a sign of depressing times, ship manager Thome Group is offering lay-up services to meet increasing demand from owners who want to take their vessels out of service.
popeye Sat Mar 14 15:41:58 2009 MST #
Paradigm Lost says:
"...the cult of shareholder value" became more important than that of customer value or that of their employees' value.
Take for example eBay. Ebay treats their customers (the sellers who pay their fees and stocks the merchandise) like crap. And as I expected, it's emerged recently that they treat their employees the same way.
Also, you cannot have an increase in profits every quarter unless you're cookin' the books. Long-term value be damned.
Paradigm Lost Sat Mar 14 15:42:41 2009 MST #
Threads Must Die (aka bobn) says:
including through government guarantees to financial institutions’ liabilities;
So now it's official government policy to not only lose money you have (or at least money you have *already* borrowed), but also to put youself on the hook for future losses before they happen and in advance.
How does this make governements any different from unreserved CDS writers?
Threads Must Die (aka bobn) Sat Mar 14 15:47:59 2009 MST #
Uncle Billy, Mental Widget says:
Since we're talking about global themes here, is this weird?:
"The People’s Republic of China subscribed 110 shares of the capital stock of the Inter-American Investment Corporation (IIC), which represent 0.16% of the IIC’s share capital"
http://www.iic.int/newsrelease/view.asp?id=636
"he Inter-American Investment Corporation (IIC) announced that it has received generous financial support from the Korea-IIC SME Development Trust Fund to design a strategic framework for developing creative quasi-equity financing instruments for SMEs in Latin America and the Caribbean. Support from Korea will enable the IIC to design a flexible equity-type long-term financing program suitable for SMEs that are at the point in their business life cycle where conventional b... "
http://www.iic.int/newsrelease/view.asp?id=637
Uncle Billy, Mental Widget Sat Mar 14 15:48:18 2009 MST #
Some Investor Guy says:
Funny. No mention of compensation or bonuses. If you reduce compensation and marketing expenses, a surprising number of banks start to cashflow again.
Some Investor Guy Sat Mar 14 15:48:52 2009 MST #
KR says:
Andrew says:
Today, 4:01:24 PM
“Seems that everyone in the global financial leadership are still pushing the "the assets are undervalued and so we won't need to nationalize the insolvent banks if we can just get the market to value them correctly" meme. Wonder how long this will continue to go on for?"
I buy into Roubini's commentary that housing prices will adjust (after pendulum swing over shoot) down to 2.75 times the average national income (from 3.45X). But then he doesn't mention in the same breath, the average national income (and rents etc) deflationary spiral. So the short answer to your question i believe is when current RE values have come off another 30% to 40%, which means the foreclosure rates go way WAY up. its going to take 2 years for residential RE to bottom out nationally. Meanwhile a few thousand banks will have to implode.
KR Sat Mar 14 15:50:08 2009 MST #
Some Investor Guy says:
Hold on, there is something different and important in this link, "financial regulations [should] dampen rather than amplify economic cycles, including by building buffers of resources during the good times and measures to constrain leverage"
Yes. I recommend several steps. Anybody from the Federal Reserve listening? 1. When home prices start to depart from cost of ownership vs rent fundamentals, require larger and larger downpayments. 2. Limit leverage used for stock buybacks and LBOs. 3. In financial statements, require disclosure about what would happen if the firm encountered a sudden stop and was unable to renew credit facilities or issue new credit for 18 months.
Some Investor Guy Sat Mar 14 15:53:24 2009 MST #
Paradigm Lost says:
Drunken glass: I like some of your ideas. Interesting.
Paradigm Lost Sat Mar 14 15:56:11 2009 MST #
Counterpointer says:
burnside/Paradigm - I know this all too well. I have negotiated very similar communiques for about 20 years nad I know the linguistic trade-offs. My fundamental proble with this is not the misrepresentation and pandering to the financial markets, but the signal it sends to inquiring minds about whether the forum really understands the problem, and knows what to do about it.
I remember one communique where we were tasked to shut down 3 kinds of complete stupidity, and failed because of the weight of opinion in favour, and the chair had been turned. Thus stupid stuff in the communique.
Again, a bit wearying.
C
Counterpointer Sat Mar 14 15:56:50 2009 MST #
Anonymous says:
Does Moral Hazard have something to do with Gentile Warts? (question inspired by Michael)
Anonymous Sat Mar 14 15:57:54 2009 MST #
popeye says:
energyecon,
You kinda have me on a mission now.
"Globally, 10 per cent of the containerships, or 427 vessels, have reportedly been idled. Thousands of containers are also going unused worldwide, leaving ports struggling to find space for them. Busan International Terminal in South Korea is holding at least 30,000 empty boxes, it is learnt."
http://www.eximin.net/past_news/news_template_Sql.asp?newsid=54951
popeye Sat Mar 14 16:03:32 2009 MST #
Paradigm Lost says:
C: Wish they'd send the Commentariat some oblique signals that they understand. You know, like the Bush speeches sprinkled here & there with words & phrases that only the fundamentalists understood.
Geez, some little crumb, just a morsel.
Paradigm Lost Sat Mar 14 16:03:52 2009 MST #
energyecon says:
popeye,
From your latest link then we see ~120% increase in idled container ships in Subic Bay (22 vs. 10 ex ante), and only 405 idled container ships to accout for lol (22 of 427)...
energyecon Sat Mar 14 16:09:32 2009 MST #
BeemMeUpTimmy says:
Where is Jas?
BeemMeUpTimmy Sat Mar 14 16:09:55 2009 MST #
Jas says:
--
Where Jas is supposed to be! Observing dopes and Crooks wherever they happen to be.
Jas
Parent Post
Jas Wed Dec 31 18:00:00 1969 MST #
CRbot says:
New Thread: Inventory Correction
http://www.calculatedriskblog.com/2009/03/inventory-correction.html ( 0 comments ...You could be FIRST! )
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CRbot Sat Mar 14 16:11:32 2009 MST #
Comrade Byzantine_Ruins says:
Counterpointer says:
Today, 5:56:50 PM
burnside/Paradigm - I know this all too well. I have negotiated very similar communiques for about 20 years nad I know the linguistic trade-offs.
I always wanted to meet a sherpa.
Comrade Byzantine_Ruins Sat Mar 14 16:59:02 2009 MST #
Chris Monoki says:
I've on FAS 157 Mark-to-market, FAS 133 Fair value account and the problems with the flawed gaussian copula model. You might to look into the Commidity Future Modernization Act of 2000.
http://monoki.wordpress.com
Keep pressing,
Chris Monoki
Chris Monoki Sat Mar 14 17:55:22 2009 MST #
Quincy k says:
Good-bye M2M. Shorts are going to get squeezed here.
Unless we hyperinflate, this will be one of the last chances to cash out.
There are no more bullets left other than entirely banning short sellers and then fundamentals(high UE, wage decreases, increased savings and capitulating consumtion)take over.
Quincy k Sat Mar 14 18:23:01 2009 MST #
Anonymous says:
systemically means government intervention preventing financial important firms skipping normal legal process of BK and enjoy protection from creditors since they are the most politically connected.
Anonymous Sat Mar 14 18:27:19 2009 MST #
Money Man says:
I am an appraiser and I would gladly help...However, the GA Dept. of Banking and Finance said they were on a hiring freeze and could not pay for my services. Sounds about par for the course.... :(
Money Man Sat Mar 14 18:46:38 2009 MST #
blert says:
Refi the existing mortgages that underlie the RMBS...
AND CASH THEM OUT.
Use a Resolution Mortgage Bank: a direct arm of the USG...
The new mortgages: 2.5% 15year term, with full recourse.
Concentrate on the good credits first. There is a ton of value in the national mortgage pool. Many markets have prices that are not irrational and should be the first mortgages tackled.
The deal doesn't break the Treasury while resolving what the RMBS are worth as they get PAID OFF much quicker than the market expects right now.
Next lift all of the limits on SBA lending and change its name to Suffering Business Assistance. Permit the Agency fraction of those loans to be securitized. This mechanism provides private industry with credit at reasonable rates. It also permits the commercial banking sector a way to earn their way out.
The syn-CDO market needs to be unwound 'nunc pro tunc,' yesterday. If this is not defused, investor confidence in the truth and sanity of TPTB will be wiped out.
The solution is to go back to the future and start with structures that the market knows and trusts. Shut down all of this new age finance which has no market cred left and no chance of earning it.
Simplify.
BTW the actual cost to build housing is not really plunging. No new supply is going to be tooled up for years. So in most markets prices have already reached levels low enough that they undercut any prospective new construction.
Here and there some fools are still building like mad. But new construction is destined to collapse almost entirely this year.
Then population growth should begin its steady pressure on housing inventory. Still we have to get through a valley of tears as transaction prices are going to head directly lower from here.
Can you say Pick-A-Default ? Alt-A ? ...
blert Sat Mar 14 21:53:46 2009 MST #
killben says:
Exactly .. you can mouth a lot of stuff which are politically correct or would be to your advantage at a particular point of time...
But there comes a time to act when you would have to ask these questions even when you have dumb suckers (tax-payers) whom you could loot to your heart's content in the guise of avoiding systemic failure, pain for main street etc.. and you suddenly become aware of such ackward questions
killben Sun Mar 15 03:17:51 2009 MST #
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