Posted on 05/03/2008 7:12:06 PM PDT by drbasketball
The global credit crunch has eased for bankers, says Warren Buffett.
“The worst of the crisis on Wall Street is over,” Buffett said. “In terms of people with individual mortgages, there’s a lot of pain left to come...
(Excerpt) Read more at nationaleconomist.com ...
Wasn’t he predicting all kinds of calamity for thebanks just a short time ago.
Didn’t this jackass just say he was no expert on this subject just the other day? I guess that doesn’t stop him from opening his ignorant piehole anyway.
Right, the bill is gonna come due for all of us who just paid for the banking bailout...
Right, the bill is gonna come due for all of us who just paid for the banking bailout... <<
Bingo!...we have a winner!...
Free enterprise my ass!...only the little guy is allowed to fail...
He was just trying to depress the stuff further so he could buy at the bottom. Now he’s trying to talk it up. Or that would be my guess.
That was before the the sycophant federal government bailed them out with loans to be paid by our children and grandchildren. This is how things are done nowadays, as morality has been flushed down the commode.
“In terms of people with individual mortgages, there’s a lot of pain left to come.”
** No...really????
Please excuse my not recognizing your expertise earlier.
“He was just trying to depress the stuff further so he could buy at the bottom. “
That was my guess as well. I don’t see he’s much different than Soros.
Buffett doesn’t have a political agenda. He does one thing and does it extraordinarily well: He calculates the value of companies and other institutions. He’s a disciple of Ben Graham who, quite literally, wrote the book on the subject.
Just how did the Federal Government "loan" the banks money that has to be repaid by your children?
Warren Buffett is a smart guy when he picks companies to buy out...but he has terrible politics and has an agenda—a liberal one—when he speaks on the subject.
Let him make his million$, but let’$ beware of his policy recommendations. :)
There was the 28 day emergency loan to Bear Stern, and then the nonrecourse to JP Morgan when they took over Bear Stern.
He has an economic agenda, and his words move markets.
When this guy said a few years ago he was going to sell dollars and buy euros, you can bet your ass he had already sold all the dollars he was going to sell.
‘Buffett doesn’t have a political agenda”
Sure he does, he’s a socialist and actively supports people like Hillary.
It looks like Buffet is long the stock market and wants it to go up.
That wasn’t a government loan. It was a central bank loan, collateralized, and it has to be paid back by the borrower over a short term. How will our children and grandchildren be liable for it?
The treasury hasn't lost a dime on any of it, and isn't going to. Bank stock investors, on the other hand, are presently out a cool $750 billion since last July.
Nope, he’s only made himself the richest man in the world by recognizing value when others shun it and putting his money behind his predictions.
But you still don’t want him to open his “ignorant piehole” and talk about banking. Many of the banking “experts” seem not to have understood it as well as they thought they did, so I’d say Buffet’s opinion is worth as much as almost anyone’s.
It was the federal reserve bank. The second loan was a nonrecourse loan, so if JP defaults, too bad for the tax payers.
Sure he does, he’s a socialist and actively supports people like Hillary.
Warren Buffett is a socialist? Truthfully, I don’t have a response for that...
Oh and while we are at it, who exactly stiffed the banks for $300 billion in bad loans to date, and counting? Oh, right, the glorious middle American virtuous salt of the earth little guys, otherwise known as the pack of reckless deadbeats who made all the promises they couldn't deliver on in the first place.
In case everybody forgot, men who *owed* the likes of Bear billions of dollars stiffed them - that is how they got into trouble in the first place. But Bear shareholders lost their entire fortunes taking the JPM deal, rather than stiff a single Bear creditor.
I despise this ridiculous populist anti capitalist dreck flooding this site. It is all media class warfare brainwashing, is what it is.
If JP defaults the Fed will have 30 billion of asset/mortgaged backed securities plus the haircut it took on them. BTW, a lot of people are buying the same type of securities right now because they are so cheap>
Believe me, if JP defaults to the Fed then the whole system is at risk of implosion.
But nowhere in the whole deal are taxpayers at risk. Only congress could authorize such a thing.
Also, the Fed isn't "the taxpayers".
Goodness.
I mean, if you’re angry with Warren Buffett, just say so.
However, this “jackass” and his “ignorant piehole” have quite an impressive track record. I don’t have to agree with him, but I have no trouble respectfully listening to his opinion.
What the hell does Jimmy Buffett know about banking? “Stepped on a pop-top, pulled out my flip-flop”?
may be,
but bank of america’s got a $38,000,000,000 problem
over at countryside to decide about.
Maybe I misunderstand the situation. If JP defaults on the loan and the collateral does not cover the debt, who is losing money?
Excuse me. In post 19 I said the loan is short term. It is, in fact, for a term of 10 years.
BUFFET IS WRONG!! Even the Comptroller Generals’ office knows it. A blogger, as part of a larger piece, included some current data from the US Comptrollers’Office regarding just TWO major US financial institutions: JP Morgan and CitiGroup. If just 5% of the credit derivatives fail, are forced to be ‘marked to market’, brought back on the acutal books from their current ‘level 3’ category, the amt. these two institutions will owe together, will require funding for, is 5% times ($91.7 trillion plus $34 trillion) = $6.29 trillion. If they require, say, 8% in reserve capital on deposit to take this amount back on the books, they require $500 billion in capital to avoid bankruptcy. MANY of our banks have derivative exposures. The FDIC has publicly called back dozens of retired bank failure and bank receivership specialists in the last 90 days anticipating many regional bank failures due to the credit crisis. The FDIC has at least 78 smaller banks now on a watch list, and anticipates an initial est. of up too 150 bank failures in the next 24 months. As there are 8,862 approx., FDIC banks, the number is small, but the failures will have an impact exceeding their actual numbers.
If I remember my Buffet history, there was a time, back in the early '70s I believe, when he sent all of his investors' money back to them because he couldn't find anything cheap to buy.
Shortly after that came the 73 , 74 bear market which cut the S&P 500 in half.
That aside, the collateral will probably cover the loan.
That aside, if it doesn't, the Federal Reserve is the party that will own the collateral.
Since the Fed is a highly profitable institution that earns billions a year by providing us money, paying no interest on its liabilities while earning on its assets...
Here are the figures posted by the blogger from the Comptroller GEns office: After the merger, refers to Bear Stearns and JP Morgan.
After the merger, JPMorgan - with around $91.7 trillion in total derivative exposure - will solidify its position atop the derivative league tables. Citigroup (C, Fortune 500) is a distant second at $34 trillion, according to the Office of the Comptroller of the Currency. To top of page
(Meaning, of course, he bought...)
Yep. But then Friday there were tons of media opinions that the worst was over. So Buffett had to try and take credit.
Not as though there's any chance of that happening.
Just like the Federal Government engages in any financial transaction within the economy. It makes promises which are guaranteed by future tax receipts. Since the government has no reserves, it makes these promises based upon garnisheed income and other confiscation of wealth from the citizenry. You haven't figured that out yet?
No, it doesn't.
OK, if you say so. Have a nice ignorance.
Nice discussion today by Deninger...worth the read, ESPECIALLY re the CONSTITUTIONALITY of the Feds actions recently..http://market-ticker.denninger.net/2008/05/credit-crunch-over-all-clear.html#links
I agree — his area of expertise is narrow.
How does a credit derivative "fail"? Why would they need to fund a percentage of the notional value of their derivatives?
Credit derivative as a term means swaps and such, not exotic securities. JPMs total assets were $1.6 trillion before buying Bear and are $2 trillion after it. The figure you quote is meaningless, about like counting the face value of all checks written on JPM stationary in the last ten years.
Why? Because they may lose money on their $2 trillion in assets, but the other "credit derivatives" figure - which includes every Eurodollar future long or short, every swap contract, every currency forward to help Ford Germany change moneys etc - aren't assets and don't have any principle to pay or repay or not be repaid.
Next, because your word salad soup of what is supposed to happen to them is meaningless. You can't bring back on books a level 3 asset because level 3 assets are already on the books. You can't be "forced" to mark to market a level 3 asset because level 3 assets are already marked down to fair values, but don't have quoted markets.
Level 1 assets are those marked down to a current price quote, and level 2 assets are those similar enough to quoted ones and dependent only on variables regularly quoted (e.g. an interest rate), that they can be fairly valued based on market info alone. Whereas a level 3 asset is one that needs additional model inputs to value, which are not market-observable. E.g. the prepayment speed of a mortgage pool due to refinancing activity.
Next because if a bunch of assets are marked down, it does not mean they are marked from 100% of their original loan amount to 0. These are typically market quotation declines, like a corporate bond portfolio dropping to 80 or 90 cents on the dollar. Not, "that whole asset class just defaulted".
Next, because even defaults are not loan losses. If a mortgagee defaults, the bank takes the house. The house may not be worth what was paid for it, and it may not be worth the lesser amount of the mortgage either. But this doesn't mean it is worth zero.
Next, because all the asset classes with non zero risk of default also pay non zero spreads above other assets, and it is only when the realized losses in that asset class are larger than this spread, that there is any impairment to worry about. Suppose a quarter of JPM assets are mortgages and 5% of them default, does this mean JPM loses $25 billion? No.
It means it earns 6% interest on 95%, and recovers perhaps 2.5% on the other 5% as the houses are sold. If its funding cost was 3% (LIBOR, CDs) that may drop it to break even on that asset class, only (5.7% interest collected, 2.5% loan loss, 3% funding cost, net 0.2%). It still have another 3/4 of assets etc.
Sigh. People who know nothing about banking read drivel on a blog and think the world must be ending, and think Warren bloody Buffett can't read a balance sheet...
After 9/11 my aircraft industry business's sales went from millions to zero. I got nothing. The airlines had a dip in sales and got a fifteen billion dollar bailout.
The F'ing SBA had a 9/11 hardship loan program that they let bankers use their discretion on, so businesses that were actually having problems as a result of the terrorism were not given loans since the bankers thought it more appropriate to lend their money to businesses that were doing well and would have no difficulty repaying them.
After eleven years as a small business owner I still have not met another small business owner who has been helped by the SBA in a way that is not available through normal commercial lending. We need to abolish the SBA so that people realize the government is not helping small business in any way. People assume small businesses are being helped because their is an agency called the Small Business Administration. Nothing could be further from the truth. When was the last time the Department of Motor Vehicles came out and fixed your transmission? The SBA just seems to like to do studies on why so many small businesses fail. No large business has ever been prosecuted for getting and performing a federal small business set aside contract, EVER! It happens all the time. To the federal government GE is a small business because Exxon/Mobile passed them up.
Please excuse my not recognizing your expertise earlier. 10 posted on Saturday, May 03, 2008 9:24:23 PM by ThePythonicCow,
So you come across a single line barb directed at a public figure, which prompts you to seek out the poster's history so you can post an insult about the travesty of said posters insults? Lots of time in your hands?
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