Sunday Morning Talk Show Thread 21 September 2008

Various driveby media television networks ^ | 21 September 2008 | Various Self-Serving Politicians and Big Media Screaming Faces

[Sunnyflorida]

“This may mean NO BAILOUT before the election.”

And we cannot short them. I wonder what the puts look like on Monday.

[PerConPat]

The problem is that the poisoned assets, or securitized mortgage debt obligations are clogged in the system and no amount of injection of capital will bring value to this paper so that it can move and therefore allow the billions and trillions of related assets to move.

I certainly don't dispute this. And time is of the essence in the attempt to address the crisis. But one can surely have serious misgivings with a plan that, in order to address the underlying cancer of certain derivatives, must supply value to mortgages that essentially have come a cropper.

The currently proposed approach, or bailout, that is being undertaken by the government may be all that we have. I have heard from a constant succession of sources, from Sec. Paulson on down to my next door neighbor, that it is the least dangerous path. However, a potential fix that has taxpayers underwriting failed mortgages and makes the promise of better regulation in the long run, does not warm the cockles of my heart. It's a fine line, to be sure; but there needs to be a generous helping of financial pain, not just regulation, served up to those who have engaged in the "Casino Capitalism" of derivatives.

And, other than an imminent economic collapse, my greatest fear is the potential for an even greater disaster down the road as a result of conditioning freebooters to believe that the government will step in to remove the risk of failure. It is a knowledge of the real possibility of failure as a result of risky behavior that does more to hold financial termites in check than any government regulator. This is a moral and financial dilemma of historic proportions.

I appreciate your insights, today.

[ThreePuttinDude]

(((PING)))

[STARWISE]

Oh no ... I wasn’t referring to the credit reporting agencies in regard to the financial bailing.

Just mentioned in passing, although her bank, Superior Bank, went under, she took millions, cost us (FDIC) millions, was fined millions, and contributed to the fall of Bear Sterns, due to their sub prime lending.

[Cold Heat]

Naw, I live in SE Arkansas....Clinton country...LOL (not necessarily Obama from what I hear on the street)

My point about the SEC is something I still need to argue. My read is that the SEC could have warned, but they don't unless advised to do so by The Fed, by justice or by Congress or the President. The SEC is a enforcement arm as I read it, and enforces what it is told to and by it's charter. By going rogue and talking warnings, they would upset the market, and then you would see a new SEC chairman in a week.

Allen Greenspan uttered a warning once, and he as Fed chairman was severely criticized for doing so. Remember the "irrational exuberance" quote?

After the Dot Com bust, he looked pretty smart, but in between they tried to get him replaced and Clinton held on, as did Bush. These SEC guys do have a committee that makes recommendations to Congress. In 2002, the Admin tried to reign in Fanny, and later, McCain tried. The SEC went through channels as it should, and that;s how I see it.

What is happening now with the current SEC, is that after a years worth of complaining to everyone and the SEC about short-sellers damaging the financial, The SEC has now limited short selling temporarily to back up the EU and their efforts. Now the street is attacking the SEC for doing what it wanted it to do earlier.

Pretty funny actually, but that's Wall street. It's as fickle as fickle gets.

Now we have to take Cramer and separate him out because he only attacks shorts when it's his stock that is hit. He, as a former short seller and part of the cabal still, is usually a big cheerleader for the shorts, except when he thinks they are wrong.

Shorts provide a great service. They are like the catfish in the tank, but right now, to achieve stability, I don't see a problem with the temporary bans on certain stocks and if we had not, after the EU ban, our market would have been flooded with twice as many shortsellers, and that could not be tolerated under the current circumstances, so the EU forced the SEC on that one.

[A.Hun]

Thanks...sorry I misunderstood. I got a couple of good responses back anyway for my questions!

[Cold Heat]

but there needs to be a generous helping of financial pain, not just regulation, served up to those who have engaged in the "Casino Capitalism" of derivatives.

Oh there will be! Even if this works like a charm, there is at least another trillion in writedowns that will have to work their way through. A Trillion has already been taken, and there will still be many failures. These institutions are going to be required to bite it, and many of them cannot do that. They can't take anymore, and the Fed will as they have in the past, let most fail as the Fed has already done a lot to boost liquidity. The FDIC is already short of funds. They are not out, but their balance sheet is below the recommended numbers, and they will have to be funded with some more billions.

The pain is nowhere near over.

[STARWISE]

SEPTEMBER 20, 2008
Government Bailouts: A U.S. Tradition Dating to Hamilton

The bubble pops. Lenders freeze. Depositors lose faith. Panic spreads. And the government steps in because nobody else will.

Today it is Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke putting together the rescue package for a financial system rocked by falling home prices and a wave of defaults on subprime mortgages.

[Bailouts throughout history at link]

But a short walk through U.S. history demonstrates the point made by Alex J. Pollock of the American Enterprise Institute: “If you would like an empirical law of government behavior, it is that in a panic or threatened financial collapse, governments intervene — every government, every party, every country, every time.”

http://online.wsj.com/article/SB122186662036058787.html?mod=googlenews_wsj

[Bernard]

“Sarbanes/Oxley”

Sarbox is a joke. Not as much of a joke as Reg FD.

IFRS, on the other hand, could play more havoc with US securities, especially the part about valuation of assets. It might actually be a good thing that the weak critters are being cut from the herd now, ahead of the US usage of IFRS.

[Cold Heat]

Yep......It’s a fact.

[FreeReign]

Private plaintiffs and the Justice Department brought suits against lending institutions. "Patterns of Discrimination" were charged.

It appears that those lawsuits were routinely dismissed.

Really? Source?

As for mortgages-if you check the graphs, the worst foreclosure rates are in the upper middle class to upper class areas. Stockton CA is #1 in the nation for foreclosures. I can't see low income borrowers buying houses in those areas.

Stockton has a large minority(now majority) population. Like any metro area, there are upper income areas and lower income areas in it.

If you're basing your opinion that most foreclosures are not in poorer neighborhoods because Stcokton Metro appears on a foreclosure list than I can't come to the same conclusion.

Thanks for the response.

Thanks for raising the question.

[Carley]

Mayor Bloomers is a personal friend of McCain’s. He flew McCain home to Arizona when Cindy had her stroke.

[SE Mom]

Fascinating- thanks for posting. All weekend I’ve been looking for perspective, comparisons and contrasts...this goes in the keep file.

It may be worth a separate thread.

[A.Hun]

This is the link and the pertinent quote is below for the lawsuit question. This was the best interpretation of CRA I have been able to find. It is footnoted.

http://www.cov.com/files/Publication/4ff03652-ad68-4844-be21-614ad67c1ef1/Presentation/PublicationAttachment/2f2febe8-4b34-4156-8f75-671d1bc692de/oid6515.pdf

B. Regulatory Process. Under the current CRA regulations, the federal bank

regulators “take[] into account any views expressed by interested parties,”
including community and local activist groups, when deciding whether an
institution’s CRA performance is adequate to approve the pending application.

1. In practice, community and local activist groups have often protested the
applications of depository institutions and their holding companies on
CRA grounds in an apparent effort to hold up the transaction until certain
demands are met. On occasion, such protests have caused institutions or
holding companies seeking regulatory approval for a transaction to modify
particular business practices in order to satisfy such groups and/or the
federal bank regulator, or even to agree to provide a protesting group with
financial support for its particular projects. More often, however, the
federal regulators have rejected these sorts of protests and proceeded to
approve an institution’s or a holding company’s application.

2. When federal bank regulators have approved applications notwithstanding
CRA protests, community groups have occasionally sued the regulator to
block the approval. The courts, however, thus far have dismissed these
actions on the ground that CRA protesters suffer no constitutional “injury”
necessary to invoke federal jurisdiction.6

[A.Hun]

On the breakdown of mortgage failures vs. income, the trend is the same across the boards. I used Stockton as an example because it is #1. It’s income is way above average.

Most failures are in generally affluent areas that experience mega growth and mega appreciation over the last decade.

I wish I could find info somewhere that just breaks bad mortgages down by income. The reason its important to me is that I believe strongly in home ownership, and if CRA is not to blame, I don’t want starter loans for homes to stop.

I know that the best way to turn someone into a Republican is to make him a homeowner.

[STARWISE]

;)

Feel free to post .. it’s now
nap time ..... LOL.

[Morgan in Denver]

Agreed, but what can we expect from a radical racist?

[csmusaret]

I think we should declare open season on them.

[Sunnyflorida]

Well I see the SEC get mighty petty over the companies I follow when it comes to filings. All the CFOs walk the line. Look at MSTR. These guys got hammered for a minor transgression - and they should have. The SEC has really very few responsibilities. Not many people know that, but making sure the filings are not toilet paper is one. The other organization is CFRA. When I was an analyst a report from CFRA could totally screw a call. A lot of times these guys were wrong. But it looks like they got acquired and you have to pay to find out what they are saying.

[Sunnyflorida]

Well I see the SEC get mighty petty over the companies I follow when it comes to filings. All the CFOs walk the line. Look at MSTR. These guys got hammered for a minor transgression - and they should have. The SEC has really very few responsibilities. Not many people know that, but making sure the filings are not toilet paper is one. The other organization is CFRA. When I was an analyst a report from CFRA could totally screw a call. A lot of times these guys were wrong. But it looks like they got acquired and you have to pay to find out what they are saying.