Posted on 11/12/2008 11:08:51 AM PST by reaganaut1
Paulson's speech and in particular the bit about not using tarp funds to buy troubled mortgage assets from banks is a striking negative for financial equities in my opinion. When the initial plan was announced these stocks absolutely ripped on the hope they could dump their bad mortgages (Alt-A, subprime, pick-a-pay, etc, etc) on the government and not have to mark them to market (Citi's ABS CDO book still marked 58 cents on the dollar) and take losses. Now that this is off the table atleast for now, the government will only be able to inject dillutive equity into the banks when they need more capital (and they absolutely will). This effectively removes the put from beneath the bank shares in my opinion and eventually opens the door to possible nationalization in the banking sector. Citi in my opinion is the most at risk given CDO exposure and the fact they have biggest C&I loan book (160bln) that saw the biggest increase in NPA rate over the last year.
The U.S. may be going down the tubes, and in fairness to Obama, the process did not start under him. I suppose one advantage of direct government purchases of equity or debt is that taxpayers can at least understand what is being purchased. The government almost certainly will not let Citigroup fail.
I don’t get the “won’t let it fail” bit....We can’t just continue to print money...SOMETHING has to fail.....
The stocks ripped initially because of the short-selling ban. Anyone who was short was forced to cover. Of course, that didn’t stop people who held the stock from selling, so the pop was short lived.
and we gave this clown $700 BILLION?
And what about that $700 Billion? Where is it? Nobody knows and nobody is accountable...
God help us!
Why are Goldman and Morgan Stanely being allowed to pay $13,000,000,000 [13 billion] in bonuses this year, when they and their ilk have wiped out tens of trillions of dollars in wealth worldwide, and enriched themselves in the process.
These firms should CEASE TO EXIST, much less be given taxpayer money that allows them to use other funds to give this $13 billion in bonuses for 2008.
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