Posted on 09/27/2008 7:50:20 PM PDT by TFine80
Right jail for those people who did what Congress asked them to do in the 1990s. That should encourage business formation and economic growth.
I’d like to see what the actual cost of the FDIC insurance is to the banks. It would be awful if they had to lower bank salaries to cover it (sarcasm).
Actually, the insurance would be a cost passed on to the depositors in the form of a lower return on your savings accounts. But wouldn’t people pay for that in this environment? I think they would.
And the Fed can use that $700 billion as a backstop on the insurance to reduce the premiums.
Buying the bad mortgages won’t solve the problem if “bank runs” which has now been created as a result of this. We need much higher FDIC limits.
I looked up the FDIC rates. They charge between 5 basis points and 43 basis points. Strong banks pay 5 bps and really weak banks 43bps on a sliding scale.
So if I am earning 1.4% on my bank account at a strong bank, I now would earn only 1.35% to presumably get more coverage.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
vbmoneyspender wrote: “So one of the questions that needs to be answered is how much were the problematic financial instruments purchased for.”
The mortgages went into the MBS at par. The problem is what are they worth now because so many are in default, along with the fall in value of the collateral.
I doubt there was fraud related to selling the same mortgage 5 times over.
Where the fraud was is more related to the rating agencies: rating these MBS at AAA given the default rates we have seen suggests “enron” accounting standards were being used by the rating agencies.
The folks over at Calculated Risk have been forecasting and analyzing this growing mess for years. Some of the housing bubble blogs and economic/market blogs, as well.
Credit bubbles, though, don't breed a lot of rationality or studied curiosity; just a mindless herd of manic traders trying to turn an easy buck.
It would be nice to know what the numbers are. I gotta think somewhere they have the numbers. How many of the mortgages upon which the bad paper is based are in default. That at least gives a starting point for how much money is needed. Maybe I am wrong, but right now I get the impression that Paulson doesn’t have a firm handle on this and that the $700 billion figure has been plucked out of thin air.
My request would be to use the bailout money we gave to Fannie/Freddie to bail the market out and then shut the doors on FF forever. Why should we watch all these banks fall when the culprit that caused it all remains standing?
Likewise if the mortgage has been sliced and diced, does the originator of the loan foreclose or do the holders of derivative interests foreclose. The point I am getting at is that logistically, it seems that the Treasury Department is getting itself into something far beyond what it has any expertise in. From what I have read, it doesn't even seem like we are talking auctions of real property. Instead, what is being dealt with are pieces of paper made up of a portions of interests in multiple mortgages some of which may not be in default and some of which may be default.
They might as well have come into our homes...stole thousands of dollars from us and gave it to someone else as a handout!
Don't give the money to the banks. Give it to the citizens.
The Email figured there were about 2 million citizens over 18 in the U.S. Each citizen would get a check for $850,000 (after paying taxes 30% =$255,000) the citizen would have $595,000 (Married $1,190,000) to spend,invest or save. No more mortgage problems or stock market problems.
There are 300 million people in the US..how do you get only 2 million over 18 years old?
Sorry ‘bout that, should read 200 million.
I agree that large amounts of change need to be applied to the government intervention in the market and to true appropriate regulation/monitoring/accounting/transparency.
I can’t find the link but somewhere in the Minyanville articles on this crisis they previously pointed out that there is $700-800 billion in corporate paper to be refinanced this year. That may be where Paulson got the $700 number from.
http://www.kitco.com/commentary/old/roulston/roulston_sep272007.htm
this article has a brief description of how mortgages of various default risks are stratified within a mbs.
Thanks for the link. From the article, it really does seem like Paulson should be able to put out numbers that define the scope of the problem. Mortgages totalling X are in default. Mortgages totalling Y may go into default. Mortgage totalling Z will probably not go into default.
now i’m not so sure about “it really does seem like Paulson should be able to put out numbers that define the scope of the problem.”
check this link, page 7, where Cramer says there is no valuation metric for any of this and refers to SEC no disclosure rules on geog, FICO, vintage etc. I think this refers to SEC Regulation AB, but i’m not sure.
caveat: Cramer supports the bailout
now i’m not so sure about “it really does seem like Paulson should be able to put out numbers that define the scope of the problem.”
check this link, page 7, where Cramer says there is no valuation metric for any of this and refers to SEC no disclosure rules on geog, FICO, vintage etc. I think this refers to SEC Regulation AB, but i’m not sure.
http://www.thestreet.com/story/10439669/7/jim-cramers-best-blogs.html
caveat: Cramer supports the bailout
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