tag:blogger.com,1999:blog-30643134.post5208351771366128721..comments2023-12-26T01:10:26.319-05:00Comments on Accrued Interest: Why Main Street should support this rescueAccrued Interesthttp://www.blogger.com/profile/05096191765979971184noreply@blogger.comBlogger57125tag:blogger.com,1999:blog-30643134.post-78771500669903104572010-09-03T08:23:10.145-05:002010-09-03T08:23:10.145-05:00Robert Kiyosaki says "You know there's go...Robert Kiyosaki says "You know there's good debt and bad debt. Bad debt makes you poor," so we have to be very carefull which kind of dept are we using in our economy. It is very easy to say that this greedy Wall Street will make us suffer greatly in this crisis.<br /><br />Harv Eker says in his beautiful book something like this "When you are complaining, you become a living,breathing “crap magnet.”" and I don't want anyone wants to be that kind of magnet, no ?inchirieri apartamente clujhttp://www.edil.ro/noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-58485439794896344232008-11-06T12:27:00.000-05:002008-11-06T12:27:00.000-05:00Jim Schlemmer:Just revisited this post after a lon...Jim Schlemmer:<BR/><BR/><BR/>Just revisited this post after a long time. The CRA didn't "Mandate" the repackaging of mortgages. However the amount of risk associated with these mortgages basically made it a necessity to pass this risk through to investors with a higher risk tolerance than individual banks. With only a small nubmer (17?) failing this year, I believe that spreading the risk throughout the economy was a better scenario than having every single regional bank in the country fail due to a portfolio of risky loans. <BR/><BR/>Also what the hell is a Janitor who makes 35K a year doing thinking he can buy a 350K dollar house... As someone who prides himself on being self taught I figured you of all people would agree that homeowners should have made more educated choices...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-2831444263987868532008-10-05T02:42:00.000-05:002008-10-05T02:42:00.000-05:00you make the fatal error of having the underlying...you make the fatal error of having the underlying assumption (you actually don't even discuss the idea that MAYBE this is not the solution to the problem) that this "$700b" is a step in the right direction in solving the lack of illiquid asset liquidity and credit advancement. <BR/><BR/>because of this huge leap of faith you are asking your readers to make, i believe you should dedicate a post to explaining WHY the '$700b' solution is the right one. otherwise, the rest of your post is a moot point.la plagehttps://www.blogger.com/profile/07617791253191004096noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-13624399065749747042008-10-04T19:38:00.000-05:002008-10-04T19:38:00.000-05:00dlr;My point is that it would be less unfair, and ...dlr;<BR/><BR/>My point is that it would be less unfair, and it would fall to those who have benefited the most during the party. Wrongdoing aside, those who have been making out in all parts of the economy on the effects of the credit bubble while middle class income stagnated share a greater responsibility for the clean up costs. If it helps with your sense of fairness, this includes myself, as I am a high enough income individual to get scalped by the tax surcharge alternative you objected to. But I understand that my business thrived and my real estate investments were more profitable based on the prevailing conditions than they would have been in more long run average environment.<BR/><BR/>It's not my first choice, and I hope there will be plenty of civil judgments and criminal prosecutions of the actual guilty. And I wouldn't expect that the entire $800b would come from just us. But proper symbolism and a realistic bite are important.<BR/><BR/>Rich people are generally too quick to assume that their wealth is due entirely to their skill and hard work and not to the health of the society in which thei9r efforts take place. Adam Smith is misunderstood by anyone who hasn't read the companion volume to Wealth of Nations, which explains the duty and values which must be in place underlying a market economy and specialized production.SGhttps://www.blogger.com/profile/10868464331839314127noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-67458540635764379872008-10-04T16:43:00.000-05:002008-10-04T16:43:00.000-05:00Hey wait a minute, Steve, "At the very bare minimu...Hey wait a minute, Steve, "At the very bare minimum, passing a n income tax surcharge on all income above $1m for the next X years"? No way. That is guilt by association. LET THE GUYS PAY FOR IT WHO CAUSED THE PROBLEM. Not rich guys in general, but those EXACT rich guys that caused the problem. Fair is fair. Penalizing a group to pay for something that some members of a group did is wrong. For the same reason racism/sexism/ageism/ is wrong. <BR/><BR/>I read today that one of the proposals in Congress to recoup any losses on this $700B is to levy a tax on all banks across the board. That is just WRONG. There are PLENTY of responsible banks out there that didn't engage in irresponsible lending practices. They should not have to pay to bailout the banks that did. It would be unfair. In fact just exactly as unfair as making the taxpayer pay for the bailout.dlrhttps://www.blogger.com/profile/15427138049283211787noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-12238153088172245222008-10-04T04:47:00.000-05:002008-10-04T04:47:00.000-05:00"And to the previous commenter on Warren Buff..."And to the previous commenter on Warren Buffet.. that guy has written enough out-of-the-money puts on the S&P index such that if the market does crash, he is BANKRUPT. He supports the bailout because it keeps him financially solvent."<BR/><BR/>I shouldn't bother, but Buffett wrote at the money puts on 4 global indices, but the are 15 and 20 year european puts and had hefty premiums, no collateral requirements for BRK, and -- having collected in advance, no counterparty risk. No need to worry about any cash impact unless the indices to to zero and stay there for 15 to 20 years. As far as the worst case, he goes from 0 leverage to a little leverage, with no cash impact. <BR/><BR/>If all the indices go to zero, we are all pretty much BK, no?cap vandalhttps://www.blogger.com/profile/17179669039246988631noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-62528638084019406282008-10-02T18:38:00.000-05:002008-10-02T18:38:00.000-05:00Its a short term fix...markets will go up for a co...Its a short term fix...markets will go up for a couple days maybe a couple weeks but its not solving the large problems here. The government is looking to take some crazy action I read today. I dont think it will help only hurt. Take a look http://www.gotoguy.com/?p=367Unknownhttps://www.blogger.com/profile/16457518803927651774noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-35950834261269080422008-10-02T16:47:00.000-05:002008-10-02T16:47:00.000-05:00Great post. Clear, articulate, and well-reasoned....Great post. Clear, articulate, and well-reasoned. We would all be in a better place this week if Bush had simply read your posting when he was trying to get taxpayer support for this plan.joshfrompdxhttps://www.blogger.com/profile/02740183004696573436noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-73843480146924033392008-10-02T16:24:00.000-05:002008-10-02T16:24:00.000-05:00I am not opposed to govt intervention or the bailo...I am not opposed to govt intervention or the bailout as it is called now. I understand that properly working credit markets are integral foe economic growth. That said I do not support the proposal in it's current form. The intervention in case of AIG and agencies at least made sense in that the govt was assuming the role of a share holder and if it's efforts succeeded, the public will enjoy the benefits. <BR/>In case of Paulson's plan, the down side is the same as in the case of AIG bailout but the upside is very limited.<BR/><BR/>Though these two bailouts are different in their structure, they are aimed to achieve the same, improve balance sheets and increase confidence and liquidity . That being the case why should one accept such an unfair risk-return position by buying these toxic Assets? Let us use that 700 b instead to buy capital and dilute the existing shareholders who should rightfully suffer. This plan is nothing but socializing the losses.venkathttps://www.blogger.com/profile/16017990463905817657noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-25057531322555426312008-10-02T13:36:00.000-05:002008-10-02T13:36:00.000-05:00One more point, I think Joe Nocera's piece in the ...One more point, I think Joe Nocera's piece in the Times today was supposed to convince res populi that the bailout is needed (or at least report the case from wall street's point of view, crediting the Times with reporter's objectivity). It is neither a bad nor a great read, but I do recommend it.<BR/><BR/>I am a skeptic by nature, but I am still not convinced, particularly by the facts and timeline as outlined in that article. Hedge funds worrying about their redemption and clearing brokerage has NOTHING to do with vanilla corporate finance. Ok, maybe bond issues are hard right now. Where is the evidence that non-financial (which should have been my qualifier on my earlier post above) medium and large corporations can’t borrow to finance operations (not expansion) if needed to stave off bankruptcy? Small businesses may be financially in trouble, but the problem there is a lot of small businesses do fail every year regardless of the financial climate. More will fail in a slow period. I contend that reflects economic slowness more than a liquidity crunch, as it is not rational necessarily to lend to a failing small business in a slow period…DABhttps://www.blogger.com/profile/17664853658943281026noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-80772610052090610002008-10-02T09:13:00.000-05:002008-10-02T09:13:00.000-05:00AI, I always enjoy your blog, but disagree with th...AI, I always enjoy your blog, but disagree with this bailout. Some banks will fail, and the Wamu and Wachovia transactions seemed pretty healthy overall. <BR/><BR/>Maybe we have seen a massive over-extension of credit to people who shouldn't have ever had it. Trying to put 700b in to buying past loans doesn't seem to be likely to change bankers' newly more prudent analysis. <BR/><BR/>Maybe it's better for the Fed to put bids into the CP market and even into the market for new, good ABS's? That makes more sense to me.JoshKhttps://www.blogger.com/profile/17028441526311718240noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-30994896385372425132008-10-02T08:53:00.000-05:002008-10-02T08:53:00.000-05:00David - The bill repealing Glass-Steagall had more...David - The bill repealing Glass-Steagall had more than enough votes in the House and Senate to pass over a presidential veto. Republicans controlled both the House and Senate at that time. Good try at blaming that one on Clinton, though! Wikipedia has the vote counts. You should know the bill by its other name.. the Gramm-Leach-Bliley act. <BR/><BR/>Not coincidentally, McCain's current proposal for Sec'y of the Treasury? None other than Phil Gramm. It's fun to note that the current bill adds an additional $100B of spending. Oink oink!Unsympathetichttps://www.blogger.com/profile/01139905123679721805noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-87751626348466295752008-10-02T07:49:00.000-05:002008-10-02T07:49:00.000-05:00Banks were PIGS - They overleveraged themselves so...Banks were PIGS - They overleveraged themselves so that they could inflated their income statements, rewarding management / shareholders with an artificial run up in the stock price. The blame here lies with the US government, that permitted this to happen. Clinton's administration repealed Glass Steagall Act, which was meant to separate "risk taking" investment banks from depository lending based institutions. Like everything in this society over the last 20 years, nobody has wanted to pay the piper for bad decisions. It's all coming home to roost now. The Bailout will only prolong the pain.<BR/><BR/>This is changing the world as we now know it. The printing of money to insure anything and everything against failure. That's not capitalism. We're giving up control of our society to the Wall St. elite and the politicians at the expense of our kids ! http://displacedema.blogspot.comAuthorhttps://www.blogger.com/profile/00828169881002489757noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-20643955298750929972008-10-01T23:07:00.000-05:002008-10-01T23:07:00.000-05:00shockandbrah said... "Well we forget that the b...shockandbrah said...<BR/><BR/> "Well we forget that the banks didn't want to make these loans in the first place. Historically they had never made such loans. There was pressure from "main street" and congress via. The Community Reinvestment Act....."<BR/><BR/>This is a thoroughly debunked conservative canard, no doubt kept in circulation by talk radio hosts. Did the Community Reinvestment Act also mandate the repackaging of mortgages into MBSs and CDOs? <BR/><BR/>The janitor making $35K who bought a $350K house in SoCal was enabled by greed up and down the financial ladder, not by the CRA, bud.Jim Schlemmerhttps://www.blogger.com/profile/09683083682315508311noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-11942778086595430612008-10-01T23:01:00.000-05:002008-10-01T23:01:00.000-05:00"Second, there would be no secondary education. Li...<I>"Second, there would be no secondary education. Like housing, the vast majority of people need loans to get a college education. Granted, colleges would probably pare back on the quality of the education offered in an attempt to lower their costs. Even so, it would likely be that only wealthy people could afford college."</I><BR/><BR/>Where to begin in response to this? First, if this bailout doesn't pass, credit will be more difficult to come by, but it won't disappear entirely. <BR/><BR/>Second, even if it did, some elite universities have large enough endowments that they could afford to waive undergraduate tuition now if they wanted to. They could also skew their admissions to accept more applicants from lower income backgrounds if they so chose. <BR/><BR/>Third, before colleges pared back on the quality of the educations they offer, they could first pare back on the spa-like amenities many of them have been adding to woo spoiled kids to apply. <BR/><BR/>Fourth, I doubt that access to money for college significantly impacts inequality. There is plenty of scholarship money available for bright kids from poor backgrounds, and there are ways for smart, ambitious folks to succeed without overpaying for a four year degree.DaveinHackensackhttps://www.blogger.com/profile/01313169814904229272noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-7780570656483132382008-10-01T21:04:00.000-05:002008-10-01T21:04:00.000-05:00Wow. I thought most of the people reading this bl...Wow. I thought most of the people reading this blog were Wall Street types. Based on the feedback I'm reading, most of the commenters do not work in financial services and will not directly benefit from any bailout the Federal government puts in place.<BR/><BR/>From where I sit, it looks like the pool of liquidity has gotten shallower, but has not dried up. LIBOR and the TED spread have spiked higher, but loans are still being made. At the Main Street level, it is harder to get loans, but if the bubble has taught us anything, it is that credit should have been tighter all along.<BR/><BR/>I think one of the things that bothers Americans about this bailout is that we have seen no evidence of sacrifice from the Wall Street guys who work in the system the bailout is purported to save.<BR/><BR/>As I have commented elsewhere, when Lee Iacocca went to the Feds for loan guarantees for Chrysler in the 80's, he volunteered to go for a year without a salary or bonus. There was an article on MSN today about the soon to be former CEO of Wachovia. The guy was brought in to turn around the situation just two months ago, and he failed. Between his signing bonus and severence package, he is going to walk away with $19 million.<BR/><BR/>When they read about skewed incentives like that, people just see red. Okay, when I read things like that, I see red. Anyway, until some of the guys running things on Wall Street start volunteering to take a personal hit themselves, I don't think the "crisis" is that dire yet.<BR/><BR/>On a separate note, keep up the great work, AI. This blog has some of the best analysis and explanation of the credit markets out there.Christopher Wheelerhttps://www.blogger.com/profile/03011681827652509509noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-18409991450433297542008-10-01T18:13:00.000-05:002008-10-01T18:13:00.000-05:00AI,I know that where we are is a surprise to you, ...AI,<BR/><BR/>I know that where we are is a surprise to you, AI. It is not to me. I've repeatedly told you that you were wildly underestimating this thing. <BR/><BR/>But now YOU want to tell US why the bailout is a good thing. You neglect to address the fact that 700B isn't NEAR ENOUGH, and will just dig a deeper hole and make the eventual and inevitable reset that much more painful. <BR/><BR/>In your own weird and wrongheaded way, you are consistent.vikinghttps://www.blogger.com/profile/16776745711618715960noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-9716527038695560862008-10-01T17:41:00.000-05:002008-10-01T17:41:00.000-05:00The citizenry was told Iraq War 2 would cost $50B....The citizenry was told Iraq War 2 would cost $50B. Today the costs look more like $3T.<BR/><BR/>If we're told the bailout will cost $700B (an arbitrarily selected "big number"), how much will it have cost five years from now? $42T?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-51223662524831762282008-10-01T16:26:00.000-05:002008-10-01T16:26:00.000-05:00Totally wrong-headed article. I see some people sa...Totally wrong-headed article. I see some people saying we have to do "something", so lets do this. Why? It won't work. A depression -deflation is already in progress. Google "liquidity trap" and you will see what is and will be happening. Don't add hyper-inflation to the problem (well that may be too late). I hear the Senate, fools that they are, are adding tax cuts to the bill...figures. Get the government out of this.ronmachttps://www.blogger.com/profile/02159586924757596148noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-86381665314043197822008-10-01T12:31:00.000-05:002008-10-01T12:31:00.000-05:00I dont think the bailout will help that much and t...I dont think the bailout will help that much and the only banks that it seems like it would help are the "dead" ones. I think the market will crush the debt/eq of any "healthy" firm taping the fund,as a show of weekness....any thoughts?Unknownhttps://www.blogger.com/profile/04647041979375864953noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-24255282530807589102008-10-01T11:36:00.000-05:002008-10-01T11:36:00.000-05:00If you want to help via a bailout type of situatio...If you want to help via a bailout type of situation, help the 10,000 people per day going thru foreclosure. Many (not all) cannot afford the current payments due to thier payments being drastically increased either from balloon payments or ARM rate increases. Even if 1/2 of these were fixed and the payments could be made, millions would flow back to the mortgage holders and be available for loans. Also these houses would not be a drag on the market which would help "naturally" to support the housing market. The "bailout" needs to be down at the bottom and it would then with natural forces, help (not a quick fix) the overall situation.<BR/><BR/>This would not be a quick fix but it would change the direction in a more normal way.leemhttps://www.blogger.com/profile/09233694069655441978noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-79269039175302404792008-10-01T10:50:00.000-05:002008-10-01T10:50:00.000-05:00Please READ your feedback, Mr. Accrued Interest! ...Please READ your feedback, Mr. Accrued Interest! In short, I don't see much support for TARP in the comments here, among those of us that follow economics closely and/or perhaps among those working in the financial industry...<BR/><BR/>What's wrong with collateral?<BR/>What's wrong with security?<BR/>What's wrong with sanity?<BR/>What's wrong with a world where CASH (finally, again) is king?<BR/><BR/>Those supporting the bailout simply wish to return to business as usual -- albeit now requiring forced participation of the American taxpayer to the risk Wall Street high risk matrix -- i.e. as the ultimate backstop to irresponsible Wall Street shenanigans as have occurred for at least one decade or more thus far.<BR/><BR/>However, those opposing the bailout want to FIX the system, returning it to sanity. We want secured lending. We want less churn. We want greater stability in our financial markets. In short, we want America (world) financial systems to work as they had previously when CASH (not a credit line) mattered -- when America and the world economy were not prone to the instability inherent in the system - i.e. bubble after bubble after bubble and crisis after crisis after crisis and collapse after collapse after collapse. <BR/><BR/>Thus, this crisis and potential collapse represents a unique opportunity for us, who consider ourselves sane, relative to your/others' insanity regarding structured finance - i.e. your desire for a world where a human being's only options are: a.) spend all wages immediately to avoid loss of value relative to inflation OR "invest" (trade) in insanely risky markets (to be exploited by hedge funds and very, very large investors).<BR/><BR/>Thus, if, in the process of de-leveraging, as sanity requires, this world's economy goes "into the tank" for several decades, in order to simply restore financial sanity, then SO BE IT. <BR/><BR/>Because your "business as usual" has simply failed the vast majority of human beings alive today on this planet. Therefore business as usual cannot (or at least should, rationally, not) be allowed to continue.<BR/><BR/>CASH SHOULD BE KING and money should mean something -- otherwise what is the point of having a complex, highly structured economy. <BR/><BR/>Specifically, what is the point of an economy where the vast majority of human beings work for IT, but IT simply does NOT work for them?<BR/><BR/>Answer: there is no point. END WALL STREET (exploitation) INSANITY NOW!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-68042735651725929822008-10-01T10:42:00.000-05:002008-10-01T10:42:00.000-05:00WAAS & DAB,I believe you’ve captured the salie...WAAS & DAB,<BR/>I believe you’ve captured the salient points regarding the financial arguments summarizing why the bailout is fundamentally a poor decision.<BR/><BR/>I can only add the following: the mechanisms proposed to implement the tactics supporting the strategy are as flawed as the strategy itself. The “local” institutions that will be funded to liquidate the assets include, but are certainly not limited to, ACORN and other highly contentious organizations.<BR/>The underlying reasons for the failures lie at the feet of legislation by fiat. When Fan & Fred set these wheels in motion, the outcomes were inevitable. Therefore, all the comments to date decrying adding fuel to the firestarters’ arsenal are logical and well advised.SalmonDazehttps://www.blogger.com/profile/15796698078327375321noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-50312364955668520042008-10-01T10:16:00.000-05:002008-10-01T10:16:00.000-05:00dab said.." I have yet to hear or read that the re...dab said.." I have yet to hear or read that the regionals are in trouble as a group (PNC, Frost, etc...). "<BR/><BR/>FWIW, common stock of PNC Bank has a GAIN on the time frames of YTD, 1 year and 2 year. I just bought some preferred. JP Morgan and Wells Fargo also have some great deals on preferreds. Some with 15% tax rate!Unknownhttps://www.blogger.com/profile/08542801042852133148noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-58698051640667197872008-10-01T10:09:00.002-05:002008-10-01T10:09:00.002-05:00This comment has been removed by the author.Anonymoushttps://www.blogger.com/profile/12865483848479273102noreply@blogger.com