These add-ons to the bailout bill are getting better and better.
The Senate measure will graft the bailout language to a tax bill it approved last week, on a 93-2 vote. It includes: a provision to prevent more than 20 million middle-class taxpayers from feeling the bite of the alternative minimum tax, $8 billion in tax relief for those hit by natural disasters in the Midwest, Texas and Louisiana and some $78 billion in renewable energy incentives and extensions of expiring tax breaks.
So we get a reduction in the people hit by the AMT, tax relief for people hit by natural disasters, more renewable energy incentives, and some tax breaks for businesses I think. It seems like this may be the bipartisan buffet bill with a little something for everyone.
Tuesday, September 30, 2008
Bailout Plan Adds some Bolt-ons
It seems like the Bailout will be a smorgasbord of added on stuff. Most of them actually sound pretty decent though.
The idea drawing the biggest support was to raise the federal deposit insurance limit, now $100,000 per account, to $250,000. Several officials, including presidential nominees John McCain and Barack Obama, endorsed the change.
That sounds like a pretty good idea because it puts quite a few Americans under the savings protection umbrella. Cramer has talked about raising this rate over and over and it seems like a good plan.
Other ideas include extending unemployment insurance benefits, typically a Democratic goal, but one that appeals to some Rust Belt Republicans. Another Democratic-backed idea would double the property tax deduction taken by people who do not itemize their taxes. And another calls for more spending on transportation infrastructure projects, which would create more jobs. Budget hawks in both parties might object, however.
Most of this stuff seems okay especially the unemployment insurance since the economy is slowing down and people are going to need it to buoy consumer spending. The property tax deduction sounds like a good idea as well since I may eventually qualify for that.
The infrastructure part I don't like since it will probably be a sop to unions and construction firms and other big Democratic contributors. I guess I could go along with it as long as the amount is kept fairly low.
The idea drawing the biggest support was to raise the federal deposit insurance limit, now $100,000 per account, to $250,000. Several officials, including presidential nominees John McCain and Barack Obama, endorsed the change.
That sounds like a pretty good idea because it puts quite a few Americans under the savings protection umbrella. Cramer has talked about raising this rate over and over and it seems like a good plan.
Other ideas include extending unemployment insurance benefits, typically a Democratic goal, but one that appeals to some Rust Belt Republicans. Another Democratic-backed idea would double the property tax deduction taken by people who do not itemize their taxes. And another calls for more spending on transportation infrastructure projects, which would create more jobs. Budget hawks in both parties might object, however.
Most of this stuff seems okay especially the unemployment insurance since the economy is slowing down and people are going to need it to buoy consumer spending. The property tax deduction sounds like a good idea as well since I may eventually qualify for that.
The infrastructure part I don't like since it will probably be a sop to unions and construction firms and other big Democratic contributors. I guess I could go along with it as long as the amount is kept fairly low.
Monday, September 29, 2008
Alternative Bailout Plan: Pay Builders not to Build
I love how Minyanville always seems to have great ideas that no one has tried yet.
Even today, we're building new homes at an annual rate of 500,000. Builders on average earn about $50,000 a home in gross profit. So why not pay them not to build? If the government gave the builders a subsidy of $50,000 to not build (up to 500,000 homes) it would allow the builders to maintain their infrastructure without actually having to build anything. Additionally, the government could punish builders who build anyway by taxing new homes $50,000.
This would surely hurt employment in the building trade, but it would only be needed for 12 to 18 months or so. And the most it would cost would be $25 billion - a lot less than $700 billion.
This is what I would like to call a "bedrock solution." Instead of buying the distressed debt the government would instead raise the value of the collateral that the debt is based on. In fact maybe a housing authority can be created to buy the distressed properties as well to get them off of the market.
Then the government can use them as subsidised housing for renters or as inventory for home buyers. This idea costs far less then $700 billion and helps "Main Street" at the same time. I think turning Uncle Sam into a landlord may be an easier sell then a Wall Street Bailout.
Even today, we're building new homes at an annual rate of 500,000. Builders on average earn about $50,000 a home in gross profit. So why not pay them not to build? If the government gave the builders a subsidy of $50,000 to not build (up to 500,000 homes) it would allow the builders to maintain their infrastructure without actually having to build anything. Additionally, the government could punish builders who build anyway by taxing new homes $50,000.
This would surely hurt employment in the building trade, but it would only be needed for 12 to 18 months or so. And the most it would cost would be $25 billion - a lot less than $700 billion.
This is what I would like to call a "bedrock solution." Instead of buying the distressed debt the government would instead raise the value of the collateral that the debt is based on. In fact maybe a housing authority can be created to buy the distressed properties as well to get them off of the market.
Then the government can use them as subsidised housing for renters or as inventory for home buyers. This idea costs far less then $700 billion and helps "Main Street" at the same time. I think turning Uncle Sam into a landlord may be an easier sell then a Wall Street Bailout.
The Europeans Get in on the Bailout Act
It seems that America won't lead in this crisis and we already have fallout of their inactivity in world markets.
The governments of Belgium, the Netherlands and Luxembourg took partial control late Sunday of struggling bank Fortis NV, while Britain seized control of mortgage lender Bradford & Bingley early Monday.
Germany organized a credit lifeline for blue-chip commercial real estate lender Hypo Real Estate Holding AG, while Iceland's government took over Glitnir bank, the country's third largest.
The governments of Belgium, the Netherlands and Luxembourg took partial control late Sunday of struggling bank Fortis NV, while Britain seized control of mortgage lender Bradford & Bingley early Monday.
Germany organized a credit lifeline for blue-chip commercial real estate lender Hypo Real Estate Holding AG, while Iceland's government took over Glitnir bank, the country's third largest.
The Hoover Republicans
These are the GOP members that have sent us into the second Great Depression. Remember to vote these people out when you lose your job or can't get a home loan, a car loan, or a line of credit for your small business. They will be responsible for *years* of hardships for Main Street. Here are the names of the Hoover Republicans.
Aderholt, Akin, Alexander, Bachmann, Barrett (SC,) Bartlett (MD,) Barton (TX)Biggert, Bilbray, Bilirakis, Bishop (UT,) Blackburn, Boustany, Broun (GA,)Brown-Waite,Ginny, Buchanan, Burgess, Burton (IN,) Buyer, Capito, Carter, Chabot, Coble, Conaway, Culberson, Davis (KY,)Davis, DavidDeal (GA,) DentDiaz-Balart, L.Diaz-Balart, M.Doolittle, Drake, Duncan, English (PA)Fallin, Feeney, Flake, Forbes, Fortenberry, Foxx, Franks (AZ,)Frelinghuysen, Gallegly, Garrett (NJ,) Gerlach, Gingrey, Gohmert, Goode, Goodlatte, Graves, Hall (TX,) Hastings (WA,)Hayes, Heller, Hensarling, Hoekstra, Hulshof, Hunterv, Issa, Johnson (IL,) Johnson, SamJones (NC)Jordan, Keller, King (IA,)Kingston, Knollenberg, Kuhl (NY)Lamborn, Latham, LaTourette, Latta, Linder, LoBiondo, Lucas, Mack, Manzullo, Marchant, McCarthy (CA,) McCaul (TX,)McCotter, McHenry, McMorris Rodgers, Mica, Miller (FL,) Miller (MI,) Moran (KS,) Murphy, Tim, Musgrave, Myrick, Neugebauer, Nunes, Paul, Pearce, Pence, Petri, Pitts, Platts, Poe, Price (GA) Ramstad, Rehberg, Reichert, Renzi, Rogers (MI,) Rohrabacher, Ros-Lehtinen, Roskam, Royce, Sali, Scalise, Schmidt, Sensenbrenner, Shadegg, Shimkus, Shuster, Smith (NE,) Smith (NJ,)Stearns, Sullivan, Terry, Thornberry, Tiahrt, Tiberi, Turner, Walberg, Wamp, Westmoreland, Whitfield (KY,) Wittman (VA,) Young(AK,) Young (FL.)
Aderholt, Akin, Alexander, Bachmann, Barrett (SC,) Bartlett (MD,) Barton (TX)Biggert, Bilbray, Bilirakis, Bishop (UT,) Blackburn, Boustany, Broun (GA,)Brown-Waite,Ginny, Buchanan, Burgess, Burton (IN,) Buyer, Capito, Carter, Chabot, Coble, Conaway, Culberson, Davis (KY,)Davis, DavidDeal (GA,) DentDiaz-Balart, L.Diaz-Balart, M.Doolittle, Drake, Duncan, English (PA)Fallin, Feeney, Flake, Forbes, Fortenberry, Foxx, Franks (AZ,)Frelinghuysen, Gallegly, Garrett (NJ,) Gerlach, Gingrey, Gohmert, Goode, Goodlatte, Graves, Hall (TX,) Hastings (WA,)Hayes, Heller, Hensarling, Hoekstra, Hulshof, Hunterv, Issa, Johnson (IL,) Johnson, SamJones (NC)Jordan, Keller, King (IA,)Kingston, Knollenberg, Kuhl (NY)Lamborn, Latham, LaTourette, Latta, Linder, LoBiondo, Lucas, Mack, Manzullo, Marchant, McCarthy (CA,) McCaul (TX,)McCotter, McHenry, McMorris Rodgers, Mica, Miller (FL,) Miller (MI,) Moran (KS,) Murphy, Tim, Musgrave, Myrick, Neugebauer, Nunes, Paul, Pearce, Pence, Petri, Pitts, Platts, Poe, Price (GA) Ramstad, Rehberg, Reichert, Renzi, Rogers (MI,) Rohrabacher, Ros-Lehtinen, Roskam, Royce, Sali, Scalise, Schmidt, Sensenbrenner, Shadegg, Shimkus, Shuster, Smith (NE,) Smith (NJ,)Stearns, Sullivan, Terry, Thornberry, Tiahrt, Tiberi, Turner, Walberg, Wamp, Westmoreland, Whitfield (KY,) Wittman (VA,) Young(AK,) Young (FL.)
Wachovia Bought Out by Citigroup: Hopefully Citi is not next
It seems that Wachovia is the latest casualty of Congressional failure on Capital Hill. Citigroup took them over for $1 a share.
But it comes at a cost: Citigroup Inc. said it will slash its quarterly dividend in half to 16 cents. It also will dilute existing shareholders by selling $10 billion in common stock to shore up its capital position.
I hope we don't see Citigroup on the "maybe list" if this thing continues for a few more weeks. They have lost $46 billion already and will take on another $42 billion in losses from Wachovia. They have $618 billion in cash and $967 billion in debt on their books. Also they were forced to cut their dividend and dilute shareholders so they couldn't use all cash for the deal.
I hope they are in the "cannot fail" category and maybe Prince Al-Walid bin Talal who I think is still a big Citigroup shareholder could give them a capital infusion if things really get too dicey.
But it comes at a cost: Citigroup Inc. said it will slash its quarterly dividend in half to 16 cents. It also will dilute existing shareholders by selling $10 billion in common stock to shore up its capital position.
I hope we don't see Citigroup on the "maybe list" if this thing continues for a few more weeks. They have lost $46 billion already and will take on another $42 billion in losses from Wachovia. They have $618 billion in cash and $967 billion in debt on their books. Also they were forced to cut their dividend and dilute shareholders so they couldn't use all cash for the deal.
I hope they are in the "cannot fail" category and maybe Prince Al-Walid bin Talal who I think is still a big Citigroup shareholder could give them a capital infusion if things really get too dicey.
The Republicans Let Down America
It is just that simple. Since Pelosi made them mad with a partisan speech they have doomed the nation to a recession.
Republicans blamed Pelosi's scathing speech near the close of the debate — which attacked Bush's economic policies and a "right-wing ideology of anything goes, no supervision, no discipline, no regulation" of financial markets — for the vote's failure.
"We could have gotten there today had it not been for the partisan speech that the speaker gave on the floor of the House," Minority Leader John Boehner said. Pelosi's words, the Ohio Republican said, "poisoned our conference, caused a number of members that we thought we could get, to go south."
Yup, Pilosi gave a speech and the House Republicans voted for a depression. I hope each and every one of them get voted out of office. I think we may see a Democrat landslide in this coming election because the House GOP obviously does not care about America, Main Street or anybody else. Their small-minded party ideology trumps logic, raw numbers, and even the pleading of their own President. They do not deserve to hold their jobs any longer.
Republicans blamed Pelosi's scathing speech near the close of the debate — which attacked Bush's economic policies and a "right-wing ideology of anything goes, no supervision, no discipline, no regulation" of financial markets — for the vote's failure.
"We could have gotten there today had it not been for the partisan speech that the speaker gave on the floor of the House," Minority Leader John Boehner said. Pelosi's words, the Ohio Republican said, "poisoned our conference, caused a number of members that we thought we could get, to go south."
Yup, Pilosi gave a speech and the House Republicans voted for a depression. I hope each and every one of them get voted out of office. I think we may see a Democrat landslide in this coming election because the House GOP obviously does not care about America, Main Street or anybody else. Their small-minded party ideology trumps logic, raw numbers, and even the pleading of their own President. They do not deserve to hold their jobs any longer.
Friday, September 26, 2008
Now Wachovia is on the Ropes?
First WaMu and now Wachovia is facing the prospect of selling itself or dying from the inaction and stupidity of the Hoover Republicans.
Wachovia is talking to potential buyers including Wells Fargo & Co., Banco Santander SA of Spain and Citigroup Inc., according to people familiar with the situation. Wachovia officials don't believe they need to rush into a deal, and the bank isn't feeling immediate pressure on its financial condition, people familiar with the company said.
From all accounts WB is supposed to have enough capital to stay afloat but you never know with credit markets frozen up like this. If there is a run on Wachovia like there was on WaMu then this will be the next bank to either sell itself or go under. And judging from this person's comments we have a case-in-point why Americans are totally clueless about anything economy related and should not be trusted to know what is best for them in this situation.
At a Chicago WaMu branch on Friday, Catriona Johnson, 27 years old, said she had come intending to take out all her money. "I wanted to close my account and hold it in my bra or something," she said. However, after being told that her account balance is federally insured, Ms. Johnson, the administrative coordinator at a Chicago company that tests homes for the presence of toxins, decided to leave the money alone for now.
Yup, she thinks her bra is the safest place where she can keep her money. This is exactly why discussions about LIBOR and interbank lending falls on deaf ears with many Americans. They see the $700 billion dollar price tag and then say its all going to Paulson where he will immediately spend it on yachts, bling-bling, and islands and stuff.
Wachovia is talking to potential buyers including Wells Fargo & Co., Banco Santander SA of Spain and Citigroup Inc., according to people familiar with the situation. Wachovia officials don't believe they need to rush into a deal, and the bank isn't feeling immediate pressure on its financial condition, people familiar with the company said.
From all accounts WB is supposed to have enough capital to stay afloat but you never know with credit markets frozen up like this. If there is a run on Wachovia like there was on WaMu then this will be the next bank to either sell itself or go under. And judging from this person's comments we have a case-in-point why Americans are totally clueless about anything economy related and should not be trusted to know what is best for them in this situation.
At a Chicago WaMu branch on Friday, Catriona Johnson, 27 years old, said she had come intending to take out all her money. "I wanted to close my account and hold it in my bra or something," she said. However, after being told that her account balance is federally insured, Ms. Johnson, the administrative coordinator at a Chicago company that tests homes for the presence of toxins, decided to leave the money alone for now.
Yup, she thinks her bra is the safest place where she can keep her money. This is exactly why discussions about LIBOR and interbank lending falls on deaf ears with many Americans. They see the $700 billion dollar price tag and then say its all going to Paulson where he will immediately spend it on yachts, bling-bling, and islands and stuff.
It is Tough For me to Praise Dems but Barney Frank is Doing a Good Job
I think Rep. Barney Frank is going a long way toward me supporting the Dems going forward.
"I'm convinced that by Sunday we will have an agreement that people can understand on this bill," predicted Massachusetts Rep. Barney Frank, a key Democrat in eight days of up-and-down talks designed to stave off an economic crisis.
I think they are on the right side of the issue for whatever reason and I have to applaud them and the Bush administration for going the extra mile. I am going to keep track of every Republican that votes against this bill and make sure that they will be labeled Hoover Republicans and hope they lose their jobs.
I wish I had billions like George Soros so I could give money to their opponents so they would each be voted out of office. I would rather it be them out on their asses then the people working at my local bank or for GM.
"I'm convinced that by Sunday we will have an agreement that people can understand on this bill," predicted Massachusetts Rep. Barney Frank, a key Democrat in eight days of up-and-down talks designed to stave off an economic crisis.
I think they are on the right side of the issue for whatever reason and I have to applaud them and the Bush administration for going the extra mile. I am going to keep track of every Republican that votes against this bill and make sure that they will be labeled Hoover Republicans and hope they lose their jobs.
I wish I had billions like George Soros so I could give money to their opponents so they would each be voted out of office. I would rather it be them out on their asses then the people working at my local bank or for GM.
The Last Bank Standing
It seems that the era of easy credit is over replaced by the era of the superbank.
The banks benefiting the most right now, he said, are Wells Fargo(WFC Quote - Cramer on WFC - Stock Picks), JPMorgan(JPM Quote - Cramer on JPM - Stock Picks), PNC(PNC Quote - Cramer on PNC - Stock Picks) and U.S. Bancorp(USB Quote - Cramer on USB - Stock Picks). "That's it," he said. "People will only trust having their money there until we get FDIC insurance. We are having a nationwide pullout of deposits except for at those institutions, where everyone knows they're doing well."
You also have to add Bank of America to this list as well. My money will be on JP Morgan as dominating the banking industry. The management there are low risk and high reward.
The banks benefiting the most right now, he said, are Wells Fargo(WFC Quote - Cramer on WFC - Stock Picks), JPMorgan(JPM Quote - Cramer on JPM - Stock Picks), PNC(PNC Quote - Cramer on PNC - Stock Picks) and U.S. Bancorp(USB Quote - Cramer on USB - Stock Picks). "That's it," he said. "People will only trust having their money there until we get FDIC insurance. We are having a nationwide pullout of deposits except for at those institutions, where everyone knows they're doing well."
You also have to add Bank of America to this list as well. My money will be on JP Morgan as dominating the banking industry. The management there are low risk and high reward.
Credit Markets Are Frozen Again
I think a GOP staffer needs to brief the Hoover Republicans on this little nugget.
For instance, one gauge that banks use to determine lending rates rose to an all-time high. The difference between the London interbank offered rate, or Libor, and the Overnight Index Swaps rose to an unprecedented 2.08%. The Libor-OIS "spread," or difference between the two rates, measures how much cash is available for lending between banks. The higher the spread, the lower availability of cash for lending
Banks don't have cash to lend so if you want some debt then banks can't provide it for you. If this is allowed to happen for a few more weeks then who know what damage will come of it. Next week we will have a headline "Who's fault is it that there was a 1000 point drop in the DJIA?" And the Hoover Repulicans will to blame. Not Bush, not Paulson, not Dodd, not Wall Street or Main Street but the Hoover Republicans.
For instance, one gauge that banks use to determine lending rates rose to an all-time high. The difference between the London interbank offered rate, or Libor, and the Overnight Index Swaps rose to an unprecedented 2.08%. The Libor-OIS "spread," or difference between the two rates, measures how much cash is available for lending between banks. The higher the spread, the lower availability of cash for lending
Banks don't have cash to lend so if you want some debt then banks can't provide it for you. If this is allowed to happen for a few more weeks then who know what damage will come of it. Next week we will have a headline "Who's fault is it that there was a 1000 point drop in the DJIA?" And the Hoover Repulicans will to blame. Not Bush, not Paulson, not Dodd, not Wall Street or Main Street but the Hoover Republicans.
McCain Agrees to Debate
It looks like going to Washington was a big bust so he's going to debate after all.
"John McCain's decision to suspend his campaign was made in the hopes that politics could be set aside to address our economic crisis," the statement said. "In response, Americans saw a familiar spectacle in Washington. At a moment of crisis that threatened the economic security of American families, Washington played the blame game rather than work together to find a solution that would avert a collapse of financial markets without squandering hundreds of billions of taxpayers' money to bail out bankers and brokers who bet their fortunes on unsafe lending practices."
His own stupid House Republicans are going to cause and not avert a collapse of the financial markets. Also bankers and brokers aren't the only ones getting bailed out. There are auto workers, home builders, bank workers, people who want car and home loans, etc. Oh well I hope people enjoy the Dems running things for a while because the GOP is cutting their own throat by standing in the doorway like this.
"John McCain's decision to suspend his campaign was made in the hopes that politics could be set aside to address our economic crisis," the statement said. "In response, Americans saw a familiar spectacle in Washington. At a moment of crisis that threatened the economic security of American families, Washington played the blame game rather than work together to find a solution that would avert a collapse of financial markets without squandering hundreds of billions of taxpayers' money to bail out bankers and brokers who bet their fortunes on unsafe lending practices."
His own stupid House Republicans are going to cause and not avert a collapse of the financial markets. Also bankers and brokers aren't the only ones getting bailed out. There are auto workers, home builders, bank workers, people who want car and home loans, etc. Oh well I hope people enjoy the Dems running things for a while because the GOP is cutting their own throat by standing in the doorway like this.
Thursday, September 25, 2008
Did McCain Sink the Bailout?
If this is true and if Congress does not pass this bailout then I will be calling it the McCain Depression.
Late Thursday, McCain's campaign issued a statement saying, "the plan that has been put forth by the administration does not enjoy the confidence of the American people as it will not protect the taxpayers and will sacrifice Main Street in favor of Wall Street."
You sir, Senator (and hopefully you will stay a Senator) McCain are wrong. I'm sorry to have to say it but sometimes the American people's confidence needs to be sacrificed for the greater good. This plan will protect the taxpayers and the economy. Even if those self-same American taxpayers do not understand it.
I would rather take Obama voting Present then McCain voting for a Great Depression. The world economy is just too important to throw down the crapper for the principles of no government intrusion and "protecting" the taxpayers. Also the House GOP proposal is asinine:
One group of House GOP lawmakers circulated an alternative that would put much less focus on a government takeover of failing institutions' sour assets. This proposal would have the government provide insurance to companies that agree to hold frozen assets, rather than have the U.S. purchase the assets.
Buying Insurance does not create liquidity. How much would the companies that take "frozen asset insurance" have to pay for that insurance? Do they have to use the capital that they don't have or can they go to the discount window and take money from taxpayers? Doesn't the government suddenly become a massive insurance company? The GOP plan is just freezing the cancer and hoping it doesn't grow instead of cutting it out of the body.
The GOP is betraying Main Street and they will be blamed when (not if) the economy goes into a deep depression. If that happens then I say vote them all out and let's give the Dems a shot at running the country. The McCain Depression will usher all of these stupid neo-Hoovers right out the door.
The GOP obviously doesn't care about the regular people (home owners, car buyers, credit card holders, auto industry, banking industry, housing industry, the US dollar, companies that need credit for expansion etc etc.) that will be hurt by this mess. I guess McCain "just doesn't get it" after all. Oh well, Obama will at least back Stem Cell research so I guess there is some good there.
Late Thursday, McCain's campaign issued a statement saying, "the plan that has been put forth by the administration does not enjoy the confidence of the American people as it will not protect the taxpayers and will sacrifice Main Street in favor of Wall Street."
You sir, Senator (and hopefully you will stay a Senator) McCain are wrong. I'm sorry to have to say it but sometimes the American people's confidence needs to be sacrificed for the greater good. This plan will protect the taxpayers and the economy. Even if those self-same American taxpayers do not understand it.
I would rather take Obama voting Present then McCain voting for a Great Depression. The world economy is just too important to throw down the crapper for the principles of no government intrusion and "protecting" the taxpayers. Also the House GOP proposal is asinine:
One group of House GOP lawmakers circulated an alternative that would put much less focus on a government takeover of failing institutions' sour assets. This proposal would have the government provide insurance to companies that agree to hold frozen assets, rather than have the U.S. purchase the assets.
Buying Insurance does not create liquidity. How much would the companies that take "frozen asset insurance" have to pay for that insurance? Do they have to use the capital that they don't have or can they go to the discount window and take money from taxpayers? Doesn't the government suddenly become a massive insurance company? The GOP plan is just freezing the cancer and hoping it doesn't grow instead of cutting it out of the body.
The GOP is betraying Main Street and they will be blamed when (not if) the economy goes into a deep depression. If that happens then I say vote them all out and let's give the Dems a shot at running the country. The McCain Depression will usher all of these stupid neo-Hoovers right out the door.
The GOP obviously doesn't care about the regular people (home owners, car buyers, credit card holders, auto industry, banking industry, housing industry, the US dollar, companies that need credit for expansion etc etc.) that will be hurt by this mess. I guess McCain "just doesn't get it" after all. Oh well, Obama will at least back Stem Cell research so I guess there is some good there.
After the WaMu Deal: Jamie Dimon of JP Morgan is a Fiend!
He did it again after buying Bear for a song now this deal is even better.
Washington Mutual Inc was closed by the U.S. government in by far the largest failure of a U.S. bank, and its banking assets were sold to JPMorgan Chase & Co for $1.9 billion.
And this is what he gets:
Seattle-based Washington Mutual has about $307 billion of assets and $188 billion of deposits, regulators said. Washington Mutual had 2,239 branches and 43,198 employees.
Plus a solid share of the West Coast market. The man is a machine and it would be nice to own shares in a company run by a canny deal maker like this. I think the banks still living after this mess are going to some of the strongest in the country.
Washington Mutual Inc was closed by the U.S. government in by far the largest failure of a U.S. bank, and its banking assets were sold to JPMorgan Chase & Co for $1.9 billion.
And this is what he gets:
Seattle-based Washington Mutual has about $307 billion of assets and $188 billion of deposits, regulators said. Washington Mutual had 2,239 branches and 43,198 employees.
Plus a solid share of the West Coast market. The man is a machine and it would be nice to own shares in a company run by a canny deal maker like this. I think the banks still living after this mess are going to some of the strongest in the country.
GOP Congressman King Puts My Mind at Ease
Well at least there was one voice of reason in the GOP. I hope it is posturing and fake table pounding on the GOP end just made to placate their constituencies. Maybe they are going to setup McCain as the White Knight to swoop in and get a deal from his own restive party. Until we have some confirmation then I'm staying all cash.
Republican Peter King of New York joined the traders to discuss the bailout deal. King says Congress is very close to getting the deal done and he said he wouldn't read too much into what Sen. Shelby had to say. "It's our responsibility to show that we are doing this to bail out Main Street and not to bail out Wall Street," he added.
Republican Peter King of New York joined the traders to discuss the bailout deal. King says Congress is very close to getting the deal done and he said he wouldn't read too much into what Sen. Shelby had to say. "It's our responsibility to show that we are doing this to bail out Main Street and not to bail out Wall Street," he added.
The Bailout On Its Last Legs?
It seems that the Dem Congress and the Herbert Hoover Administration may have a lot in common come this time next week. I never had much faith in those losers in Congress doing anything anyway.
Chaos erupted on Thursday in the negotiations over the proposed financial bailout as lawmakers bickered over competing counterproposals to the Bush administration's $700 billion rescue plan.
A meeting at the White House between President Bush, congressional leaders and the presidential candidates was meant to speed approval of an agreement, but instead revealed deep divisions between Democrats and Republicans.
Also if it turns out to be the GOP that blocks this deal then I will officially become a Reagan Democrat and never support that party again. This might be the most important Bill that the Congress has ever voted on in my lifetime and it might be killed due to their stupidity and ineptitude. They know the risks and they know the consequences and they still baulk at the price tag then I can say that Sen. Shelby and his ilk are dead to me.
Chaos erupted on Thursday in the negotiations over the proposed financial bailout as lawmakers bickered over competing counterproposals to the Bush administration's $700 billion rescue plan.
A meeting at the White House between President Bush, congressional leaders and the presidential candidates was meant to speed approval of an agreement, but instead revealed deep divisions between Democrats and Republicans.
Also if it turns out to be the GOP that blocks this deal then I will officially become a Reagan Democrat and never support that party again. This might be the most important Bill that the Congress has ever voted on in my lifetime and it might be killed due to their stupidity and ineptitude. They know the risks and they know the consequences and they still baulk at the price tag then I can say that Sen. Shelby and his ilk are dead to me.
Washington Mutual is a Dead Duck: JP Morgan Scoops
It seems that JP Morgan is getting another sweetheart of a deal as it seems the FDIC is going to have to take control of WaMu.
The Federal Deposit Insurance Corp. plans to take control of Seattle-based WaMu, the biggest U.S. savings and loan, according to the CNBC television network, and New York-based JPMorgan will buy deposits and branches, the Wall Street Journal said, without citing any sources. The FDIC insurance fund is not expected to contribute any money, the Journal said.
JP Morgan may be the only bank standing here before too long. In any case there are some canny deal makers there. I think JPM will be my long term financial sector hold once the smoke clears from this credit mess. They got an investment bank on the cheap now they get a bunch of deposits and branches from the biggest S&L in the US at a fire sale price.
The Federal Deposit Insurance Corp. plans to take control of Seattle-based WaMu, the biggest U.S. savings and loan, according to the CNBC television network, and New York-based JPMorgan will buy deposits and branches, the Wall Street Journal said, without citing any sources. The FDIC insurance fund is not expected to contribute any money, the Journal said.
JP Morgan may be the only bank standing here before too long. In any case there are some canny deal makers there. I think JPM will be my long term financial sector hold once the smoke clears from this credit mess. They got an investment bank on the cheap now they get a bunch of deposits and branches from the biggest S&L in the US at a fire sale price.
Economists Urge To Do Nothing on Bailout
It seems the Ivory Tower set does not want there to be any sort of bailout.
In a letter yesterday to congressional leaders, 166 academic economists said they oppose Treasury Secretary Henry Paulson's plan because it's a ``subsidy'' for business, it's ambiguous and it may have adverse market consequences in the long term. They also expressed alarm at the haste of lawmakers and the Bush administration to pass legislation.
``It doesn't seem to me that a lot decisions that we're going to have to live with for a long time have to be made by Friday,'' said Robert Lucas, a University of Chicago economist and 1995 Nobel Prize winner who signed the letter. ``The situation may get urgent, but it's not urgent right now. Right now it's a financial sector problem.''
Yup, lets wait until there is a world-wide depression before we do anything. Then I bet they will study the problem, catalogue it, and then after all long course of study and rigourous examination they will declare an action plan recommendation. In the meantime we have Great Depression II and millions are thrown out of work, can't get car loans, and lose their homes. Sometimes you have to act first and study second. I guess if you are tenured you don't have to worry about what the common person has to.
In a letter yesterday to congressional leaders, 166 academic economists said they oppose Treasury Secretary Henry Paulson's plan because it's a ``subsidy'' for business, it's ambiguous and it may have adverse market consequences in the long term. They also expressed alarm at the haste of lawmakers and the Bush administration to pass legislation.
``It doesn't seem to me that a lot decisions that we're going to have to live with for a long time have to be made by Friday,'' said Robert Lucas, a University of Chicago economist and 1995 Nobel Prize winner who signed the letter. ``The situation may get urgent, but it's not urgent right now. Right now it's a financial sector problem.''
Yup, lets wait until there is a world-wide depression before we do anything. Then I bet they will study the problem, catalogue it, and then after all long course of study and rigourous examination they will declare an action plan recommendation. In the meantime we have Great Depression II and millions are thrown out of work, can't get car loans, and lose their homes. Sometimes you have to act first and study second. I guess if you are tenured you don't have to worry about what the common person has to.
Wednesday, September 24, 2008
McCain Goes to Help Obama Goes to Talk
I think this is case-in-point how both men would govern this country. Obama talks while McCain works.
"It's my belief that this is exactly the time when the American people need to hear from the person who, in approximately 40 days, will be responsible for dealing with this mess," Obama said at a news conference in Clearwater, Fla. "It's going to be part of the president's job to deal with more than one thing at once."
America doesn't need to "hear from the person" that is "dealing with this mess" they need someone that will go to the scene of the crisis and start bailing water. I'm hoping McCain goes in there swinging and gets the idiots in Congress to pass the bill by this weekend in some form.
I mean Bush did too much talking (you're doing a fine job Brownie) and not enough actual work in New Orleans after Katrina and it killed his Presidency. It all boils down to Obama would rather hear the sound of his own voice in at the debate in Mississippi rather then actually do his job as Senator. It is just that simple.
"It's my belief that this is exactly the time when the American people need to hear from the person who, in approximately 40 days, will be responsible for dealing with this mess," Obama said at a news conference in Clearwater, Fla. "It's going to be part of the president's job to deal with more than one thing at once."
America doesn't need to "hear from the person" that is "dealing with this mess" they need someone that will go to the scene of the crisis and start bailing water. I'm hoping McCain goes in there swinging and gets the idiots in Congress to pass the bill by this weekend in some form.
I mean Bush did too much talking (you're doing a fine job Brownie) and not enough actual work in New Orleans after Katrina and it killed his Presidency. It all boils down to Obama would rather hear the sound of his own voice in at the debate in Mississippi rather then actually do his job as Senator. It is just that simple.
Is Washington Mutual In Dire Straits?
Uh oh it looks like we could see the first casualty of the Congress foot dragging on the Bailout.
This is the left hook from S&P:
Standard & Poor's Ratings Services downgraded Washington Mutual Inc.'s creditworthiness further into junk territory Wednesday, noting the increased likelihood that any sale of the company would only be done in piecemeal fashion.
This is the right hook from Moody's.
WaMu has insisted that its capital levels remain above regulatory standards for being considered "well capitalized," but debt ratings agency Moody's this week cut the financial strength rating of WaMu's main bank subsidiary to "E," its lowest, saying the thrift's capital is insufficient to absorb its mortgage losses.
And this could be the telegraphed punch that might bring them down.
Credit default swaps on WaMu's debt surged to an upfront cost of 54.5 percent the sum insured, or $5.45 million paid upfront to insure $10 million in debt for five years, from 40 percent on Monday evening, according to Markit Intraday. The swaps also require annual payments of 5 percent.
That seems like quite a bit of money to insure $10 million of debt. Also if you look at their balance sheet they have $9 billion in cash and $30 billion in debt so they might not survive too much longer without a buyout, cash infusion, or a Congress bailout. If they were leveraged 26 times or whatever Lehman was then they would already be dead. Hopefully there won't be a bank run like there was an IndyMac so they would have enough time to find a buyer.
This is the left hook from S&P:
Standard & Poor's Ratings Services downgraded Washington Mutual Inc.'s creditworthiness further into junk territory Wednesday, noting the increased likelihood that any sale of the company would only be done in piecemeal fashion.
This is the right hook from Moody's.
WaMu has insisted that its capital levels remain above regulatory standards for being considered "well capitalized," but debt ratings agency Moody's this week cut the financial strength rating of WaMu's main bank subsidiary to "E," its lowest, saying the thrift's capital is insufficient to absorb its mortgage losses.
And this could be the telegraphed punch that might bring them down.
Credit default swaps on WaMu's debt surged to an upfront cost of 54.5 percent the sum insured, or $5.45 million paid upfront to insure $10 million in debt for five years, from 40 percent on Monday evening, according to Markit Intraday. The swaps also require annual payments of 5 percent.
That seems like quite a bit of money to insure $10 million of debt. Also if you look at their balance sheet they have $9 billion in cash and $30 billion in debt so they might not survive too much longer without a buyout, cash infusion, or a Congress bailout. If they were leveraged 26 times or whatever Lehman was then they would already be dead. Hopefully there won't be a bank run like there was an IndyMac so they would have enough time to find a buyer.
In all the Turmoil are Munis a safe bet?
It seems that Municipal Bond yields are the highest in 6 years.
``Current conditions arguably represent the most stressed fixed income market in our lifetimes,'' Mike Nicholas, co-chief executive of the Regional Bond Dealers Association, said in a statement. The Alexandria, Virginia-based trade group canceled a conference in Dallas this week because of the market turmoil.
Average yields on the highest quality 30-year municipal bonds have risen 42 basis points, or 0.42 percentage point, since Sept. 11 to 5.24 percent today, based on an index compiled by Concord, Massachusetts-based Municipal Market Advisors.
You just have to worry about revenue from these municipalities if there are large banks failing (and taking their tax revenues with them) in their territory. So in other words New York and California Muni's may have room to drop if things get worse. The good thing is that Municipal Bonds rarely fail.
The historical default rate on single-A-rated munis is 0.0084 percent - 80 times lower, according to rating agency Moody's Investors Service, than the historical default rate on triple-A-rated corporate bonds.
``Current conditions arguably represent the most stressed fixed income market in our lifetimes,'' Mike Nicholas, co-chief executive of the Regional Bond Dealers Association, said in a statement. The Alexandria, Virginia-based trade group canceled a conference in Dallas this week because of the market turmoil.
Average yields on the highest quality 30-year municipal bonds have risen 42 basis points, or 0.42 percentage point, since Sept. 11 to 5.24 percent today, based on an index compiled by Concord, Massachusetts-based Municipal Market Advisors.
You just have to worry about revenue from these municipalities if there are large banks failing (and taking their tax revenues with them) in their territory. So in other words New York and California Muni's may have room to drop if things get worse. The good thing is that Municipal Bonds rarely fail.
The historical default rate on single-A-rated munis is 0.0084 percent - 80 times lower, according to rating agency Moody's Investors Service, than the historical default rate on triple-A-rated corporate bonds.
Now GOP may block Bailout
I thought the GOP was supposed to be the party of big business. Then I read crap like this:
The administration needs to do a better job of explaining how the financial crisis affects ordinary Americans, LaTourette said.
``They're talking about inter-company loans,'' LaTourette said. ``The guys at the diner aren't interested in inter-company loans, they want to know how they're going to pay their mortgage or their credit card bill. So they have a ways to go.''
I can tell you exactly how a failed credit market would affect the "guys at the diner." If the guys want to buy a car or a new truck on credit forget it unless they have a prestine FICO score. Also if they work for the car industry there is a good chance that they will be laid off. If they have credit card debt then I hope they are prepared to pay a higher rate. It might even cause them to default on those debts depending on how much in the hock they are.
If they are a small businessman and want to get a loan to expand their business then they would be out of luck. If they have a 401K that is in the market then I hope they don't need to retire for a while because they might need to get a job at that diner instead of sitting there eating. In other words if Congress fails this or they have this view:
``To say that there is a healthy dose of skepticism would be putting it mildly,'' LaTourette said. ``I think the overwhelming sentiment at this moment in time is, what's the rush?''
Um, Congressman LaTourette banks will fail if you let this thing go past the election. So they either pay $700 billion now or they get to pump that money into the FDIC if these banks start to die.
The administration needs to do a better job of explaining how the financial crisis affects ordinary Americans, LaTourette said.
``They're talking about inter-company loans,'' LaTourette said. ``The guys at the diner aren't interested in inter-company loans, they want to know how they're going to pay their mortgage or their credit card bill. So they have a ways to go.''
I can tell you exactly how a failed credit market would affect the "guys at the diner." If the guys want to buy a car or a new truck on credit forget it unless they have a prestine FICO score. Also if they work for the car industry there is a good chance that they will be laid off. If they have credit card debt then I hope they are prepared to pay a higher rate. It might even cause them to default on those debts depending on how much in the hock they are.
If they are a small businessman and want to get a loan to expand their business then they would be out of luck. If they have a 401K that is in the market then I hope they don't need to retire for a while because they might need to get a job at that diner instead of sitting there eating. In other words if Congress fails this or they have this view:
``To say that there is a healthy dose of skepticism would be putting it mildly,'' LaTourette said. ``I think the overwhelming sentiment at this moment in time is, what's the rush?''
Um, Congressman LaTourette banks will fail if you let this thing go past the election. So they either pay $700 billion now or they get to pump that money into the FDIC if these banks start to die.
CDS Market to Finally get Regulated
Finally, the SEC is getting its act together and regulating this massive market.
The swaps became one-way bets on the demise of financial institutions as traders hedged the risk that their partners might implode, said Gary Kelly, a strategist at broker Tradition Asiel Securities Inc. in New York. The wagers sent distorted signals about credit risk, he said.
The resulting run on shares of financial companies prompted Cox yesterday to seek enforcement powers over the market. New York State will also start regulating some sales of the derivatives, according to Governor David Paterson.
So you can't take two sides of this trade anymore by buying the CDS and then shorting the stock at the same time. It still boggles my mind how a $62 trillion market was not regulated in the first place. You would figure that some alphabet soup organization would have taken control of things when it went over like $10 trillion. In any case this move will go a long way toward keeping the market stable in the years to come.
In fact it may be a boon for ICE, NYSE Euronext, or the CME group or whoever sets up a liquid market for these things. You would think that fees on trades of a $62 trillion market will be the kind of thing that lifts all boats in this industry.
The swaps became one-way bets on the demise of financial institutions as traders hedged the risk that their partners might implode, said Gary Kelly, a strategist at broker Tradition Asiel Securities Inc. in New York. The wagers sent distorted signals about credit risk, he said.
The resulting run on shares of financial companies prompted Cox yesterday to seek enforcement powers over the market. New York State will also start regulating some sales of the derivatives, according to Governor David Paterson.
So you can't take two sides of this trade anymore by buying the CDS and then shorting the stock at the same time. It still boggles my mind how a $62 trillion market was not regulated in the first place. You would figure that some alphabet soup organization would have taken control of things when it went over like $10 trillion. In any case this move will go a long way toward keeping the market stable in the years to come.
In fact it may be a boon for ICE, NYSE Euronext, or the CME group or whoever sets up a liquid market for these things. You would think that fees on trades of a $62 trillion market will be the kind of thing that lifts all boats in this industry.
The Oracle Weighs In
It seems that even Warren Buffett thinks the bailout is a good idea.
``I think the Treasury will pay back the $700 billion and make a considerable amount of money,'' Buffett said, adding that if he had $700 billion on the government's terms to buy distressed assets, he would. ``Unfortunately, I'm tapped out.''
He is now long Goldman at $115 a share. That is quite a vote of confidence but it is all up to Congress now. They hold the fate of trillions of dollars in 401Ks, mortgages, and even car loans.
``I think the Treasury will pay back the $700 billion and make a considerable amount of money,'' Buffett said, adding that if he had $700 billion on the government's terms to buy distressed assets, he would. ``Unfortunately, I'm tapped out.''
He is now long Goldman at $115 a share. That is quite a vote of confidence but it is all up to Congress now. They hold the fate of trillions of dollars in 401Ks, mortgages, and even car loans.
Tuesday, September 23, 2008
Top 5 Lies About the Bailout
I think Cramer hit the nail right on the head with his insight on the the Bailout. In other words the critics are full of crap or short the market.
Cramer dispelled what he called the top five "lies" about the Paulson plan.
Critics argue the plan doesn't address the real problem of people losing their homes. Cramer said people are losing their homes because of declining values and foreclosures. Taking out the bad loans, he said, will stop the foreclosures.
Wait until the credit market siezes up. People will be losing more then their homes. There won't be any homes purchased in the US for a few months.
Critics complain the plan costs too much. Cramer said the plan will not cost a lot of money and could even make money. "Paulson will make money for us," he argued.
The costs don't even compare to the potential for damage to this market. Perhaps trillions of dollars in losses to 401K are at stake. A multi-year slowdown might eat 10 times more then the bailout in capital.
Critics say executives of the failing firms will make too much money from the bailout. Cramer argued that there are ways to deal with this issue, such as creating an executive compensation board, or requiring executives to waive their salaries in order to take advantage of the plan.
I like what the co-CEO of Pimco suggested. Allow a giveback compensation like they have in the NFL. You get x-dollars up front and you get the rest of the money if you hit certain goals. Kind of like a signing bonus with built in contract incentives.
The government's pricing of failed loans will force banks to take huge write-downs. Calling this argument ridiculous, Cramer said that the responsible banks have already written down the value of their loans, and the irresponsible ones could easily be given forbearance.
The writedowns will be for the rest of the loans on their balance sheets after they go belly up. The government can pay $700 billion now or trillions later. It is their choice.
Critics argue that there's no need to rush towards a solution to the crisis. Cramer responded, saying "Rome is burning," and citing Washington Mutual's (WM Quote - Cramer on WM - Stock Picks) last debt writedown that occurred Monday night. "We need this deal if only to save Washington Mutual," he said.
This one is just asinine and WaMu won't be the only dead bank come October.
Cramer dispelled what he called the top five "lies" about the Paulson plan.
Critics argue the plan doesn't address the real problem of people losing their homes. Cramer said people are losing their homes because of declining values and foreclosures. Taking out the bad loans, he said, will stop the foreclosures.
Wait until the credit market siezes up. People will be losing more then their homes. There won't be any homes purchased in the US for a few months.
Critics complain the plan costs too much. Cramer said the plan will not cost a lot of money and could even make money. "Paulson will make money for us," he argued.
The costs don't even compare to the potential for damage to this market. Perhaps trillions of dollars in losses to 401K are at stake. A multi-year slowdown might eat 10 times more then the bailout in capital.
Critics say executives of the failing firms will make too much money from the bailout. Cramer argued that there are ways to deal with this issue, such as creating an executive compensation board, or requiring executives to waive their salaries in order to take advantage of the plan.
I like what the co-CEO of Pimco suggested. Allow a giveback compensation like they have in the NFL. You get x-dollars up front and you get the rest of the money if you hit certain goals. Kind of like a signing bonus with built in contract incentives.
The government's pricing of failed loans will force banks to take huge write-downs. Calling this argument ridiculous, Cramer said that the responsible banks have already written down the value of their loans, and the irresponsible ones could easily be given forbearance.
The writedowns will be for the rest of the loans on their balance sheets after they go belly up. The government can pay $700 billion now or trillions later. It is their choice.
Critics argue that there's no need to rush towards a solution to the crisis. Cramer responded, saying "Rome is burning," and citing Washington Mutual's (WM Quote - Cramer on WM - Stock Picks) last debt writedown that occurred Monday night. "We need this deal if only to save Washington Mutual," he said.
This one is just asinine and WaMu won't be the only dead bank come October.
Congress Fiddles While Rome Burns
It seems that the know-nothing Senators are determined to send us into a recession. At least Bernanke is telling it to them in the strongest possible terms:
"The financial markets are in quite fragile condition and I think absent a plan they will get worse," Bernanke said.
Ominously, he added, "I believe if the credit markets are not functioning, that jobs will be lost, that our credit rate will rise, more houses will be foreclosed upon, GDP will contract, that the economy will just not be able to recover in a normal, healthy way."
Of course is he met with the same old crap from Senators that are really out of touch:
Dodd later spoke disparagingly of the administration's proposal. "What they have sent us is not acceptable," he told reporters after presiding over a lengthy Senate Banking Committee hearing at which Bernanke and Treasury Secretary Henry Paulson urged swift action by Congress.
Sen. Richard Shelby of Alabama, the panel's senior Republican, added, "We have got to look at some alternatives" to the administration's plan.
I have your alternatives Sen. Shelby: You don't pass the plan. Then credit markets seize up and borrowing costs go through the roof. Suddenly Americans can't buy a car or a house on reasonable credit. That fouls up the auto industry and the banking industry at the same time.
Then multiple large banks can't give out loans at reasonable rates and fail. Which drains the FDIC and causes multiple bank runs. Which in turn causes banks to refuse to give you your money in a timely manner. Which would retard consumer spending and hurt 2/3 of the American economy.
So Sen. Shelby you have the choice between passing the plan or a recession that might turn into a depression. It is just that simple. If the Congress does not pass this plan by Friday and recesses for the elections then you better be all cash and 20% gold because there is a good chance we will get a 1000 point drop some time next week.
"The financial markets are in quite fragile condition and I think absent a plan they will get worse," Bernanke said.
Ominously, he added, "I believe if the credit markets are not functioning, that jobs will be lost, that our credit rate will rise, more houses will be foreclosed upon, GDP will contract, that the economy will just not be able to recover in a normal, healthy way."
Of course is he met with the same old crap from Senators that are really out of touch:
Dodd later spoke disparagingly of the administration's proposal. "What they have sent us is not acceptable," he told reporters after presiding over a lengthy Senate Banking Committee hearing at which Bernanke and Treasury Secretary Henry Paulson urged swift action by Congress.
Sen. Richard Shelby of Alabama, the panel's senior Republican, added, "We have got to look at some alternatives" to the administration's plan.
I have your alternatives Sen. Shelby: You don't pass the plan. Then credit markets seize up and borrowing costs go through the roof. Suddenly Americans can't buy a car or a house on reasonable credit. That fouls up the auto industry and the banking industry at the same time.
Then multiple large banks can't give out loans at reasonable rates and fail. Which drains the FDIC and causes multiple bank runs. Which in turn causes banks to refuse to give you your money in a timely manner. Which would retard consumer spending and hurt 2/3 of the American economy.
So Sen. Shelby you have the choice between passing the plan or a recession that might turn into a depression. It is just that simple. If the Congress does not pass this plan by Friday and recesses for the elections then you better be all cash and 20% gold because there is a good chance we will get a 1000 point drop some time next week.
Monday, September 22, 2008
This Economic Mess: It's the Dems Fault
This article makes a pretty good claim that the Dems are the cause behind this whole mess by blocking bill S.190 to reform Frannie and Freddie. I think McCain needs to pound Obama on his ties to Freddie and Fannie and the damage that relationship caused the economy.
But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter.
That such a reckless political stand could have been taken by the Democrats was obscene even then. Wallison wrote at the time: ``It is a classic case of socializing the risk while privatizing the profit. The Democrats and the few Republicans who oppose portfolio limitations could not possibly do so if their constituents understood what they were doing.''
But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter.
That such a reckless political stand could have been taken by the Democrats was obscene even then. Wallison wrote at the time: ``It is a classic case of socializing the risk while privatizing the profit. The Democrats and the few Republicans who oppose portfolio limitations could not possibly do so if their constituents understood what they were doing.''
How Wall Street Hits Main Street
This is a pretty straightforward post on how close we came to "financial armageddon." A money market run would have devastated America worse then almost any terrorist could have. I think we might have seen a new Great Depression if it was allowed to continue.
If the FDIC hadn't stepped in to backstop the runs on the money market funds, it's not crazy to think that we might have seen a massive liquidation of huge portions of the banking system at fire sale prices. That magnitude--one person I talked to before the bailout gave a wild-sounding estimate of $1 trillion worth of money market fund redemptions in the immediate offing. With the money market essentially destroyed, the resulting bank liquidations would have been even worse, beyond even the ability of the US Government's borrowing power to pull back. That would have touched the bank accounts, the investments, and the firms of even the hawkiest of credit hawks--unless you've actually got it buried in your back yard in tin cans, you'd lose something, and even then, who would buy whatever it is you sell to make a living?
If the FDIC hadn't stepped in to backstop the runs on the money market funds, it's not crazy to think that we might have seen a massive liquidation of huge portions of the banking system at fire sale prices. That magnitude--one person I talked to before the bailout gave a wild-sounding estimate of $1 trillion worth of money market fund redemptions in the immediate offing. With the money market essentially destroyed, the resulting bank liquidations would have been even worse, beyond even the ability of the US Government's borrowing power to pull back. That would have touched the bank accounts, the investments, and the firms of even the hawkiest of credit hawks--unless you've actually got it buried in your back yard in tin cans, you'd lose something, and even then, who would buy whatever it is you sell to make a living?
Dems Could Scuttle Deal: Throw Country into Depression
It would be just like these idiots on Capital Hill to kill this deal over some BS. The demands show exactly how they are not cut out to make financial decisions.
Under other additions the Democrats are asking to the administration package, according to a draft of the plan obtained by The Associated Press:
• Judges could rewrite mortgages to lower bankrupt homeowners' monthly payments.
Yeah, let's let a person trained to be a lawyer make banking decisions. Maybe they can legislate to get a plumber to do brain surgery next. They need to let some mortgage board or something make the decision instead of some unqualified person.
• Companies that unloaded their bad assets on the government in the massive rescue would have to limit their executives' pay packages and agree to revoke any bonuses awarded based on bogus claims.
So in other words the cost to get rid of your bad debt is to cut your own pay? I'm sure that some executives would just let their company fail because they get their golden parachutes that way instead of having their contracts renegotiated by the government. Only their stock options going to zero will get executives motivated enough the do something. If they do a cost benefit and find that their golden parachute is more then the value of their lost options then Chapter 11 it is. Then the government gets to control the dead bank just like IndyMac. I hope the FDIC has enough money stored up.
The proposal by Sen. Chris Dodd, D-Conn., the Banking Committee chairman, would give the government broad power to buy up virtually any kind of bad asset — including credit card debt or car loans — from any financial institution in the U.S. or abroad in order to stabilize markets.
Yup Dodd is involved. His deal was probably written in crayon. I like how we will suddenly be able to buy foreign distressed debt. I guess we can now control the economy of a foreign power by buying up their mortgaged backed debt then causing a default. Then we can seize large portions of their territory in foreclosure and put army bases or CIA installations on them. I think the Ottoman Empire did something like this IIRC. I'm sure Dodd has thought about that possibility.
But it would end the program at the end of next year, instead of creating the two-year initiative that the Bush administration has sought. And it would add layers of oversight, including an emergency board to keep an eye on the program with two congressional appointees, and a special inspector general appointed by the president.
They also cut it short by a year because I'm sure Dodd knows better then Paulson the time they are going to need to get house prices back up. That is the key to this whole deal. If house prices improve then all of the bad debt turns back into good debt again. That means this bailout needs to go as long as possible to make sure they catch everything. Maybe Dodd was distracted by a shiny object and didn't think about that.
The plan also would require that the government get shares in the troubled companies helped by the rescue.
Great now the government will get to dilute the companies stock as well? I'm sure Wachovia and Washington Mutual will jump at that idea. They can get rid of all of their bad debt but their execs only have to lose pay and see their options die due to dilution from the government? That will really motivate them to not see their companies fail. After all the government can't touch their golden parachutes.
Under other additions the Democrats are asking to the administration package, according to a draft of the plan obtained by The Associated Press:
• Judges could rewrite mortgages to lower bankrupt homeowners' monthly payments.
Yeah, let's let a person trained to be a lawyer make banking decisions. Maybe they can legislate to get a plumber to do brain surgery next. They need to let some mortgage board or something make the decision instead of some unqualified person.
• Companies that unloaded their bad assets on the government in the massive rescue would have to limit their executives' pay packages and agree to revoke any bonuses awarded based on bogus claims.
So in other words the cost to get rid of your bad debt is to cut your own pay? I'm sure that some executives would just let their company fail because they get their golden parachutes that way instead of having their contracts renegotiated by the government. Only their stock options going to zero will get executives motivated enough the do something. If they do a cost benefit and find that their golden parachute is more then the value of their lost options then Chapter 11 it is. Then the government gets to control the dead bank just like IndyMac. I hope the FDIC has enough money stored up.
The proposal by Sen. Chris Dodd, D-Conn., the Banking Committee chairman, would give the government broad power to buy up virtually any kind of bad asset — including credit card debt or car loans — from any financial institution in the U.S. or abroad in order to stabilize markets.
Yup Dodd is involved. His deal was probably written in crayon. I like how we will suddenly be able to buy foreign distressed debt. I guess we can now control the economy of a foreign power by buying up their mortgaged backed debt then causing a default. Then we can seize large portions of their territory in foreclosure and put army bases or CIA installations on them. I think the Ottoman Empire did something like this IIRC. I'm sure Dodd has thought about that possibility.
But it would end the program at the end of next year, instead of creating the two-year initiative that the Bush administration has sought. And it would add layers of oversight, including an emergency board to keep an eye on the program with two congressional appointees, and a special inspector general appointed by the president.
They also cut it short by a year because I'm sure Dodd knows better then Paulson the time they are going to need to get house prices back up. That is the key to this whole deal. If house prices improve then all of the bad debt turns back into good debt again. That means this bailout needs to go as long as possible to make sure they catch everything. Maybe Dodd was distracted by a shiny object and didn't think about that.
The plan also would require that the government get shares in the troubled companies helped by the rescue.
Great now the government will get to dilute the companies stock as well? I'm sure Wachovia and Washington Mutual will jump at that idea. They can get rid of all of their bad debt but their execs only have to lose pay and see their options die due to dilution from the government? That will really motivate them to not see their companies fail. After all the government can't touch their golden parachutes.
Friday, September 19, 2008
Government Mortgage Plan Might Cost Half a Trillion
Well they have already spent $600 billion getting to this point what is a few hundred billion more among friends?
Congressional officials said they expected a request for legal authority to buy up the bad loans, at a cost in excess of $500 billion to the government. Democrats were discussing whether to try to attach middle class assistance to the legislation, despite a request from Bush to avoid adding controversial items that could delay action. An expansion of jobless benefits was one possibility.
What is funny is that the idiotic Democrat Congress wants to attach some BS about middle class assistance to a plan that might save the economy, peoples 401Ks, and maybe even keep people in their homes. And they wonder why they have a 9% job approval rating. Put the assistance plan or whatever in another unrelated spending bill. This bailout is not a political football.
Congressional officials said they expected a request for legal authority to buy up the bad loans, at a cost in excess of $500 billion to the government. Democrats were discussing whether to try to attach middle class assistance to the legislation, despite a request from Bush to avoid adding controversial items that could delay action. An expansion of jobless benefits was one possibility.
What is funny is that the idiotic Democrat Congress wants to attach some BS about middle class assistance to a plan that might save the economy, peoples 401Ks, and maybe even keep people in their homes. And they wonder why they have a 9% job approval rating. Put the assistance plan or whatever in another unrelated spending bill. This bailout is not a political football.
The Primer of What Went Down in the Markets in the Last 10 Days
I think this is something that every American needs to read and understand.
In what follows, they discuss what has happened in the financial sector in the last few days, why it happened, and what it means for everyday people.
It is a nice clearly written rundown of all the events which would be considered historic if any regular folks (and even their leaders) understood them fully.
In what follows, they discuss what has happened in the financial sector in the last few days, why it happened, and what it means for everyday people.
It is a nice clearly written rundown of all the events which would be considered historic if any regular folks (and even their leaders) understood them fully.
Thursday, September 18, 2008
Did Short Sellers Attack this Market? Could Be
So it seems that the Brits outlawed shorting bank shares and AG Cuomo may put some shorties in jail. I read somewhere that some shorties may have did some rumor mongering while shorting Morgan and Goldman stock at the same time as they were buying up the Investment Banks Credit Default Swaps.
If you think about it that trade it would be like profiting from a drop in the stock that you are causing yourself. CDSs seem to be like any other asset that is subject to supply and demand. So if you drive up the CDS prices then start to pull your money out of a highly leveraged investment bank like Morgan you create both the cause and reap the bonus from the effect at the same time. Many CDSs were going nuts in the last few days for both Morgan and Goldman.
Five-year credit default swaps on Morgan Stanley rose by 40 basis points to 796 basis points, or $796,000 a year to protect $10 million of debt, while Goldman's swaps rose by 16 basis points to 462 basis points, according to data from CMA DataVision.
As of late Tuesday, Morgan Stanley's credit default swaps were trading as though it were rated deep into junk territory at "B2," according to data from Moody's Investors Service's credit strategy group. That is 10 steps below its actual rating of "A1."
Goldman's swaps were rating as though it were rated "Ba3," a junk level that is nine steps below its actual rating of "Aa3," Moody's added.
How can Morgan's credit be trading at junk status when they have $77 billion in cash and having just had a quarter that beat the Street to the tune of $1.43 billion in earnings? No rating agencies were talking about downgrading their debt as far as I can tell. Even if they did downgrade their debt it wouldn't be by 10 steps from A1 to B2.
The Goldman news was even weirder to me. It is the top Investment Bank in the world with $98 billion in cash. How can their credit trade as if it dropped from Aa3 to Ba3 so quickly? I have to agree with Cramer with his take on Goldman.
"Goldman has no home equity loans and car loans. Goldman does not have exposure to the parts of the economy that are bad," he said. "No one's listening to me that I think Goldman is fine."
Goldman doesn't have billions in toxic debt on their books like Fannie and Freddie or billions in underwater commercial real estate like Lehman did. So there would be no real reason at all why their credit was suddenly 9 steps more expensive in like 2 days time.
So the cause and effect thing could have gone down like this. The hedge funds (or whomever) bought the CDS of Goldman and Morgan like mad. This drove the price of the CDSs up so high that the media starts saying things like "look, it costs $796,000 a year to protect $10 million of Morgan debt. They must be in big trouble."
Morgan has $447 billion in debt outstanding so they would need $35 billion in capital (If my math is right) to insure that amount of debt. That means that $77 billion in cash will only be enough for like 2 quarters. Don't think about the fact that Morgan can and has serviced this debt all this year when there was one crisis after another. They just could not at this moment because their CDSs were driven up to artificially high levels. So Morgan has to scramble fast for capital from a Wachovia merger or China or whomever just to keep afloat.
So then these funds get to go short the stock without having to borrow it or wait for an uptick. After that they pull their money out of Morgan thus causing a crisis of confidence. A mini-bank run if you will. Then they spread a few rumors that Morgan will go out of business just like Lehman since everyone is pulling their money out at the same time, they can't service their debt, $700K for each $10 million, pairing with Wachovia is a bad move, etc.
These funds know that the government will not bail out Morgan because they let Lehman die earlier in the week. So these funds are safe to continue to buy their CDSs while shorting the stock since no one will step in to save the company. They only risk losing the amount they paid for the CDSs (I'm not sure if they get that back in a liquidation) with the chance to wipe out all of the equity in the stock.
The hard evidence is that the market went up almost at the same time as pension funds stopped lending out the stock and these funds had to close the trades. I think the New York State Common Retirement Fund and Calpers both stopped in the same hour period.
So message to Congress, McCain, Bush, Obama, Paulson, and the Man-In-The-Moon: Regulate the CDS market before you bail anything else out. That is the key before Goldman and Morgan are both killed as well.
If you think about it that trade it would be like profiting from a drop in the stock that you are causing yourself. CDSs seem to be like any other asset that is subject to supply and demand. So if you drive up the CDS prices then start to pull your money out of a highly leveraged investment bank like Morgan you create both the cause and reap the bonus from the effect at the same time. Many CDSs were going nuts in the last few days for both Morgan and Goldman.
Five-year credit default swaps on Morgan Stanley rose by 40 basis points to 796 basis points, or $796,000 a year to protect $10 million of debt, while Goldman's swaps rose by 16 basis points to 462 basis points, according to data from CMA DataVision.
As of late Tuesday, Morgan Stanley's credit default swaps were trading as though it were rated deep into junk territory at "B2," according to data from Moody's Investors Service's credit strategy group. That is 10 steps below its actual rating of "A1."
Goldman's swaps were rating as though it were rated "Ba3," a junk level that is nine steps below its actual rating of "Aa3," Moody's added.
How can Morgan's credit be trading at junk status when they have $77 billion in cash and having just had a quarter that beat the Street to the tune of $1.43 billion in earnings? No rating agencies were talking about downgrading their debt as far as I can tell. Even if they did downgrade their debt it wouldn't be by 10 steps from A1 to B2.
The Goldman news was even weirder to me. It is the top Investment Bank in the world with $98 billion in cash. How can their credit trade as if it dropped from Aa3 to Ba3 so quickly? I have to agree with Cramer with his take on Goldman.
"Goldman has no home equity loans and car loans. Goldman does not have exposure to the parts of the economy that are bad," he said. "No one's listening to me that I think Goldman is fine."
Goldman doesn't have billions in toxic debt on their books like Fannie and Freddie or billions in underwater commercial real estate like Lehman did. So there would be no real reason at all why their credit was suddenly 9 steps more expensive in like 2 days time.
So the cause and effect thing could have gone down like this. The hedge funds (or whomever) bought the CDS of Goldman and Morgan like mad. This drove the price of the CDSs up so high that the media starts saying things like "look, it costs $796,000 a year to protect $10 million of Morgan debt. They must be in big trouble."
Morgan has $447 billion in debt outstanding so they would need $35 billion in capital (If my math is right) to insure that amount of debt. That means that $77 billion in cash will only be enough for like 2 quarters. Don't think about the fact that Morgan can and has serviced this debt all this year when there was one crisis after another. They just could not at this moment because their CDSs were driven up to artificially high levels. So Morgan has to scramble fast for capital from a Wachovia merger or China or whomever just to keep afloat.
So then these funds get to go short the stock without having to borrow it or wait for an uptick. After that they pull their money out of Morgan thus causing a crisis of confidence. A mini-bank run if you will. Then they spread a few rumors that Morgan will go out of business just like Lehman since everyone is pulling their money out at the same time, they can't service their debt, $700K for each $10 million, pairing with Wachovia is a bad move, etc.
These funds know that the government will not bail out Morgan because they let Lehman die earlier in the week. So these funds are safe to continue to buy their CDSs while shorting the stock since no one will step in to save the company. They only risk losing the amount they paid for the CDSs (I'm not sure if they get that back in a liquidation) with the chance to wipe out all of the equity in the stock.
The hard evidence is that the market went up almost at the same time as pension funds stopped lending out the stock and these funds had to close the trades. I think the New York State Common Retirement Fund and Calpers both stopped in the same hour period.
So message to Congress, McCain, Bush, Obama, Paulson, and the Man-In-The-Moon: Regulate the CDS market before you bail anything else out. That is the key before Goldman and Morgan are both killed as well.
The Difference Between Paulson and Congress
I think this statement is case-in-point how much smarter Paulson is then anyone on any finance committee in Congress.
The notion of an RTC solution for the financial sector today was first mentioned this week by House Financial Services Committee Chairman Barney Frank, D.-Mass. But his Senate counterpart, Chris Dodd, D.-Conn., indicated that such a solution would be a long time coming -- at least until after the November elections.
But on Thursday, as the markets wavered back and forth into negative territory, digesting the dramatic events of the past few weeks, CNBC reported that Paulson was formulating an RTC plan already. A call and email message to the Treasury to confirm the report was not immediately returned.
While Paulson is doing yeoman's work trying to keep everything going at once Dodd just sits around and says "wait until after November, uh I haven't been briefed." I'm sure Paulson has had that RTC plan formulated months ago just-in-case it all went pear shaped. Paulson is the fricken Geordi La Forge of Finance.
While on the other hand it is absolutely criminal how dumb Chris Dodd is. He would wait until after the elections to do anything? Why, so the economy can be a political issue while world markets are roiled and hundreds of thousands of people are thrown out of work due to a financial market crisis?
Um, Senator Dodd, November might be too late. I guess he wants to go around saying "I hadn't been briefed" over and over while the American Financial System becomes a smoking crater. Maybe Paulson should brief Dodd with a specially prepared cartoon created by the Treasury department and maybe a puppet show just to hammer the points home. Looking at this resume you can see the truth about Senator Dodd.
Lets see he had a bachelors in English Lit. from Providence College, then the Peace Corps, and then the Army Reserve. Then a lawyer, then a Congressman, and Senator. Great stuff for a figurehead for a nonprofit but nothing about finance or banking in that stuff at all.
It seems like the only time he was in a financial institution was so he could get that sweetheart loan from Countrywide. In fact Dodd isn't qualified to run a Starbucks let alone the House Banking Committee. In any case I think Paulson deserves the medal of freedom or a fruit basket or something for saving everyone's 401Ks. Dodd should just shut his trap and let the adults do the real work.
The notion of an RTC solution for the financial sector today was first mentioned this week by House Financial Services Committee Chairman Barney Frank, D.-Mass. But his Senate counterpart, Chris Dodd, D.-Conn., indicated that such a solution would be a long time coming -- at least until after the November elections.
But on Thursday, as the markets wavered back and forth into negative territory, digesting the dramatic events of the past few weeks, CNBC reported that Paulson was formulating an RTC plan already. A call and email message to the Treasury to confirm the report was not immediately returned.
While Paulson is doing yeoman's work trying to keep everything going at once Dodd just sits around and says "wait until after November, uh I haven't been briefed." I'm sure Paulson has had that RTC plan formulated months ago just-in-case it all went pear shaped. Paulson is the fricken Geordi La Forge of Finance.
While on the other hand it is absolutely criminal how dumb Chris Dodd is. He would wait until after the elections to do anything? Why, so the economy can be a political issue while world markets are roiled and hundreds of thousands of people are thrown out of work due to a financial market crisis?
Um, Senator Dodd, November might be too late. I guess he wants to go around saying "I hadn't been briefed" over and over while the American Financial System becomes a smoking crater. Maybe Paulson should brief Dodd with a specially prepared cartoon created by the Treasury department and maybe a puppet show just to hammer the points home. Looking at this resume you can see the truth about Senator Dodd.
Lets see he had a bachelors in English Lit. from Providence College, then the Peace Corps, and then the Army Reserve. Then a lawyer, then a Congressman, and Senator. Great stuff for a figurehead for a nonprofit but nothing about finance or banking in that stuff at all.
It seems like the only time he was in a financial institution was so he could get that sweetheart loan from Countrywide. In fact Dodd isn't qualified to run a Starbucks let alone the House Banking Committee. In any case I think Paulson deserves the medal of freedom or a fruit basket or something for saving everyone's 401Ks. Dodd should just shut his trap and let the adults do the real work.
What a Wild Market Day: Shorts Days are Numbered
It seems the double barrel of government intervention Resolution Trust Corp style and lots of pension funds stopping their stock loans to short sellers has made the market whipsaw.
The buying was evident across all industries, but led by the financial stocks, helped by more tough talk about short-sellers, both from across the pond (where the U.K. outlawed short-selling of bank shares) and here (where New York Attorney General Andrew Cuomo announced an investigation). “At one point the market begins to realize that the end of the financial system is not at hand,”
I would hate to be short this market now since it is like a bucking bronco. One day it is way down and the next day it pops right up.
The buying was evident across all industries, but led by the financial stocks, helped by more tough talk about short-sellers, both from across the pond (where the U.K. outlawed short-selling of bank shares) and here (where New York Attorney General Andrew Cuomo announced an investigation). “At one point the market begins to realize that the end of the financial system is not at hand,”
I would hate to be short this market now since it is like a bucking bronco. One day it is way down and the next day it pops right up.
I Think LiveScience Needs to Leave Economics Alone
More gloom-and-doom "sky is falling" BS this time from a science website.
In light of the current crisis on Wall Street and yesterday's stock market losses, some experts fear the worst and even claim that, for the first time in recent American history, future generations could be worse off economically than their parents.
"For many U.S. households this may result in a new reality, with declining economic prospects for the next generation," said economist Ross Gittell of the University of New Hampshire.
Yup a 500 point loss in the market causes people to say that the Great Depression is here again.
I will believe these economists when 9000 banks fail, there is 26.6% unemployment, and crop prices fall by 40-60%. Until then I will just wonder if some of these professors are just pumping up this crisis due to political affiliation. It seems that Obama might to be doing according to McCain and I wouldn't put it past a few economists as well.
In light of the current crisis on Wall Street and yesterday's stock market losses, some experts fear the worst and even claim that, for the first time in recent American history, future generations could be worse off economically than their parents.
"For many U.S. households this may result in a new reality, with declining economic prospects for the next generation," said economist Ross Gittell of the University of New Hampshire.
Yup a 500 point loss in the market causes people to say that the Great Depression is here again.
I will believe these economists when 9000 banks fail, there is 26.6% unemployment, and crop prices fall by 40-60%. Until then I will just wonder if some of these professors are just pumping up this crisis due to political affiliation. It seems that Obama might to be doing according to McCain and I wouldn't put it past a few economists as well.
Wednesday, September 17, 2008
Now Money Market Funds at Risk?
I was reading this Minyanville article and came across this nugget.
The Reserve Primary Fund, a money-market mutual fund with $62.6 billion in assets as of August 31st, fell below $1 a share in net asset value—also known as “breaking the buck”—due to a $785 million loss on Lehman Brothers (LEH) debt, which is now being valued at zero.
As of 3:00 pm on Tuesday, total fund assets stood at $23 billion, or a $40 billion hit since Friday. Redemptions have been delayed for as long as seven days as the fund wrestles with a run.
Yes that money market fund had $785 million tied up in Lehman Debt that just went poof. I agree with Minyanville's advice when they say stash your rainy day money above $100K in Treasuries and not all in money market funds. Especially if those funds are only 80% treasuries and 20% crappy Lehman Debt.
The Reserve Primary Fund, a money-market mutual fund with $62.6 billion in assets as of August 31st, fell below $1 a share in net asset value—also known as “breaking the buck”—due to a $785 million loss on Lehman Brothers (LEH) debt, which is now being valued at zero.
As of 3:00 pm on Tuesday, total fund assets stood at $23 billion, or a $40 billion hit since Friday. Redemptions have been delayed for as long as seven days as the fund wrestles with a run.
Yes that money market fund had $785 million tied up in Lehman Debt that just went poof. I agree with Minyanville's advice when they say stash your rainy day money above $100K in Treasuries and not all in money market funds. Especially if those funds are only 80% treasuries and 20% crappy Lehman Debt.
The AIG Yardsale Might be Good for Uncle Sam
Hmm it seems that Uncle Sam may be a pretty prudent investor judging by some of the stuff AIG has to sell. The government loaned AIG $85 billion over two years at 11.5% interest which they get to borrow for 3.4% in exchange for the right to buy 79.9 percent of the company.
One unit that analysts said will likely be sold is the International Lease Finance Corp., which leases out more than 900 aircraft with asset values topping $44 billion at the end of the second quarter. This division has been a moneymaker for AIG, tallying $873 million in operating income in 2007 and $555 million in the first half of this year, according to securities filings.
Another possibility for sale is AIG's foreign life insurance business, with profits of $1.5 billion in the first half of this year on top of earnings of $6.19 billion in 2007. Gary Ransom, an analyst with Fox-Pitt Kelton, pegged the value of that business at as much as $50 billion.
I would love to be able to borrow money at 3.4% and then lend it out at 11.5% to a company that would be able to get up to $94 billion from selling just 2 profitable units. Crazy Hank Paulson says "Everything at AIG Must Go-go-go!"
One unit that analysts said will likely be sold is the International Lease Finance Corp., which leases out more than 900 aircraft with asset values topping $44 billion at the end of the second quarter. This division has been a moneymaker for AIG, tallying $873 million in operating income in 2007 and $555 million in the first half of this year, according to securities filings.
Another possibility for sale is AIG's foreign life insurance business, with profits of $1.5 billion in the first half of this year on top of earnings of $6.19 billion in 2007. Gary Ransom, an analyst with Fox-Pitt Kelton, pegged the value of that business at as much as $50 billion.
I would love to be able to borrow money at 3.4% and then lend it out at 11.5% to a company that would be able to get up to $94 billion from selling just 2 profitable units. Crazy Hank Paulson says "Everything at AIG Must Go-go-go!"
Morgan and Wachovia May Merge
It seems that Morgan Stanley is looking for a money center bank to bolster their position according to this article.
According to the Times, Morgan Stanley Chief Executive John Mack received a phone call from Wachovia (NYSE:WB) expressing interest in the bank.
The talks are preliminary, the newspaper says, and no deal may emerge. Morgan Stanley is considering other options, as well, the newspapers report, and other banks have expressed interest in the company.
Wachovia currently has a market cap of $19.48 billion. Morgan has $77 billion in cash according to their balance sheet. So they could conceivably do an all cash deal for Wachovia and still have some capital to fall back on in case they need it. Supposedly Wachovia is almost done cleaning out their balance sheet if you believe their CEO Robert Steel. It also seems that Wachovia came to Morgan and not the other way around so there probably won't have to be a proxy fight or other such nonsense.
I can see the two companies joining up because it bolsters both of their positions. Morgan will get market confidence back up and a depositor base to fall back on if they need it and Wachovia doesn't have to sell themselves at a fire sale price if there is a run on them. This article also shows what could come out of both of them joining forces.
A deal would marry a company with a dominant investment bank and trading business with Wachovia, the No. 4 U.S. commercial bank with branches spanning 21 states. It would also create the largest retail brokerage force in the country with more than 20,000 advisers.
According to the Times, Morgan Stanley Chief Executive John Mack received a phone call from Wachovia (NYSE:WB) expressing interest in the bank.
The talks are preliminary, the newspaper says, and no deal may emerge. Morgan Stanley is considering other options, as well, the newspapers report, and other banks have expressed interest in the company.
Wachovia currently has a market cap of $19.48 billion. Morgan has $77 billion in cash according to their balance sheet. So they could conceivably do an all cash deal for Wachovia and still have some capital to fall back on in case they need it. Supposedly Wachovia is almost done cleaning out their balance sheet if you believe their CEO Robert Steel. It also seems that Wachovia came to Morgan and not the other way around so there probably won't have to be a proxy fight or other such nonsense.
I can see the two companies joining up because it bolsters both of their positions. Morgan will get market confidence back up and a depositor base to fall back on if they need it and Wachovia doesn't have to sell themselves at a fire sale price if there is a run on them. This article also shows what could come out of both of them joining forces.
A deal would marry a company with a dominant investment bank and trading business with Wachovia, the No. 4 U.S. commercial bank with branches spanning 21 states. It would also create the largest retail brokerage force in the country with more than 20,000 advisers.
Hillary Fundraiser In McCain Camp
It looks like the leftist wing of the Democratic Party is starting to tick off the centrists.
"I believe that Barack Obama, with MoveOn.org and Nancy Pelosi and Howard Dean, has taken the Democratic Party — and they will continue to — too far to the left," Lynn Forester de Rothschild said. "I'm not comfortable there."
I have to agree with Lynn Forester de Rothschild that the Far Left of the Democratic Party is what turns me off the most about them. They seem to look down on the majority of Americans that they want to "help." They are also very defeatist when it comes to dealing with the world. Instead of pushing for American leadership they are welcome to cede it to the Chinese. If you think Guantanamo is bad the Chinese still have a Gulag-like system in place. I'm pretty sure no one is praying to Mecca or able to read the Koran in a Chinese Laogai.
Also the Chinese have cracked down on political dissent in Tibet and are about the only country that support the repressive regimes in the Sudan and Myanmar. The Chinese have come a long way but sometimes people forget that they are still a Communist system where a Chinese version of MoveOn.org or Code Pink would not be tolerated and their leaders would be jailed and reeducated in a minute.
I would love a return of the Dems to a JFK stance. He advocated a strong US hand in the world. He wanted intervention in other countries when it was in the US interest to do so. He also knew who the enemy was at the time (Communism) and was strong enough to confront it. He also basically believed in the the American people and did not have contempt toward them.
"I believe that Barack Obama, with MoveOn.org and Nancy Pelosi and Howard Dean, has taken the Democratic Party — and they will continue to — too far to the left," Lynn Forester de Rothschild said. "I'm not comfortable there."
I have to agree with Lynn Forester de Rothschild that the Far Left of the Democratic Party is what turns me off the most about them. They seem to look down on the majority of Americans that they want to "help." They are also very defeatist when it comes to dealing with the world. Instead of pushing for American leadership they are welcome to cede it to the Chinese. If you think Guantanamo is bad the Chinese still have a Gulag-like system in place. I'm pretty sure no one is praying to Mecca or able to read the Koran in a Chinese Laogai.
Also the Chinese have cracked down on political dissent in Tibet and are about the only country that support the repressive regimes in the Sudan and Myanmar. The Chinese have come a long way but sometimes people forget that they are still a Communist system where a Chinese version of MoveOn.org or Code Pink would not be tolerated and their leaders would be jailed and reeducated in a minute.
I would love a return of the Dems to a JFK stance. He advocated a strong US hand in the world. He wanted intervention in other countries when it was in the US interest to do so. He also knew who the enemy was at the time (Communism) and was strong enough to confront it. He also basically believed in the the American people and did not have contempt toward them.
Tuesday, September 16, 2008
AIG Bailed out for $85 Billion
It looks like the deal is $85 billion in exchange for an 80% stake in the company.
Sources said the loan, which will allow AIG to avoid bankruptcy, will be secured and include incentives for quick asset-sales by AIG.
The deal severely dilutes existing shares of the company.
Management at the firm will be fired as part of the deal.
If it is anything like the Fannie/Freddie Bailout then the equity will probably be wiped out by the deal. I was seriously considering buying some AIG Puts on Friday but I didn't pull the trigger. Too bad because it would have been some quick profit. In any case the stock market will live another day. I think we can call this the bottom since there are only 2 Investment Banks left (both are actually still in the black) and the biggest US Insurer is now on government life support.
Sources said the loan, which will allow AIG to avoid bankruptcy, will be secured and include incentives for quick asset-sales by AIG.
The deal severely dilutes existing shares of the company.
Management at the firm will be fired as part of the deal.
If it is anything like the Fannie/Freddie Bailout then the equity will probably be wiped out by the deal. I was seriously considering buying some AIG Puts on Friday but I didn't pull the trigger. Too bad because it would have been some quick profit. In any case the stock market will live another day. I think we can call this the bottom since there are only 2 Investment Banks left (both are actually still in the black) and the biggest US Insurer is now on government life support.
Wall Street Journal Agrees That the Economy is Still Fairly Strong
Even though there is a financial crisis it doesn't mean that the economy itself is still on fairly strong footing according the the WSJ.
So far, however, this is a financial crisis, as opposed to a broader economic crisis. Giant insurer AIG has gotten into trouble because of its (highly leveraged) investments in complex derivatives and mortgage-backed securities. The latest economic data still show the broad U.S. economy expanding, and these are data from earlier this year when oil, gas and other commodity prices were soaring. Now commodity prices are plunging, which should provide the economy a powerful boost.
I also like his picks for stocks to watch coming out of this crisis. I mean some really good firms are at sale prices. I like his pick of Bank of America as well since they are a pretty strong force now that they have Merrill Lynch for Investment Banking and Countrywide for mortgage initiations.
As for me, I continue to eye some of the financial stocks. Bank of America, which I own, is well-capitalized and is doing exactly what I would do if I were the CEO, which is to aggressively capitalize on its strength. If there's a fire sale, I want to be the buyer. Yet BofA was roundly punished for snatching Merrill Lynch, dropping 21% on Monday. That strikes me as an overreaction. (The stock rose 11% to $29.55 Tuesday.)
For investors interested in some rock-solid financial companies, see my column in the October issue of SmartMoney magazine, which highlights Northern Trust, SVB Financial, Bank of New York Mellon and UMB Financial.
So far, however, this is a financial crisis, as opposed to a broader economic crisis. Giant insurer AIG has gotten into trouble because of its (highly leveraged) investments in complex derivatives and mortgage-backed securities. The latest economic data still show the broad U.S. economy expanding, and these are data from earlier this year when oil, gas and other commodity prices were soaring. Now commodity prices are plunging, which should provide the economy a powerful boost.
I also like his picks for stocks to watch coming out of this crisis. I mean some really good firms are at sale prices. I like his pick of Bank of America as well since they are a pretty strong force now that they have Merrill Lynch for Investment Banking and Countrywide for mortgage initiations.
As for me, I continue to eye some of the financial stocks. Bank of America, which I own, is well-capitalized and is doing exactly what I would do if I were the CEO, which is to aggressively capitalize on its strength. If there's a fire sale, I want to be the buyer. Yet BofA was roundly punished for snatching Merrill Lynch, dropping 21% on Monday. That strikes me as an overreaction. (The stock rose 11% to $29.55 Tuesday.)
For investors interested in some rock-solid financial companies, see my column in the October issue of SmartMoney magazine, which highlights Northern Trust, SVB Financial, Bank of New York Mellon and UMB Financial.
Biden Says Obama Tax Cut Plan Allows One to Buy a Toaster
So I guess Change You Need is actual pocket change.
Sen. Joe Biden (D-Del.) said on NBC’s “Today” show: “Our tax plan would take that tax cut of another $130 billion that John [McCain] wants to give to people making over $250,000 next year, not let it go forward and give it to the middle class — the very people who desperately need it to stay in their homes, to buy food, to take care of the gas, to fill up their tank, to be able to go out and buy a toaster, to employ people.”
If Obama is boss I hope his tax cut will net me $34.26 so I can purchase this toaster. Whenever I eat a bagel I can marvel that Obama loves the middle class so much that he would actually willingly give $34.26 of their own money back. I mean Obama understands that the middle class clings to their toast and needs these $34.26 handouts from Mama Washington to keep them in bread. Obama's new campaign slogan: "A Toaster in Every House."
Sen. Joe Biden (D-Del.) said on NBC’s “Today” show: “Our tax plan would take that tax cut of another $130 billion that John [McCain] wants to give to people making over $250,000 next year, not let it go forward and give it to the middle class — the very people who desperately need it to stay in their homes, to buy food, to take care of the gas, to fill up their tank, to be able to go out and buy a toaster, to employ people.”
If Obama is boss I hope his tax cut will net me $34.26 so I can purchase this toaster. Whenever I eat a bagel I can marvel that Obama loves the middle class so much that he would actually willingly give $34.26 of their own money back. I mean Obama understands that the middle class clings to their toast and needs these $34.26 handouts from Mama Washington to keep them in bread. Obama's new campaign slogan: "A Toaster in Every House."
AIG Might Get Bailed Out Senate Banking Committee Chairman Dodd Is Still A Doof
It seems like the government may float AIG a loan going forward.
The Federal Reserve is considering extending a ``loan package'' to American International Group Inc., the insurer facing a cash shortage, according to a person familiar with the negotiations.
The stance by federal regulators is a reversal from a position they held as late as last night, and people with knowledge of the talks are ``cautiously optimistic,'' said the person, who declined to be identified because negotiations are confidential.
Of course it made Sen. Dodd has demand a bunch of crap from people that are trying to keep the stock market from tanking and throwing AIGs 116,000 employees out of work.
"I'm willing to listen. I'm skeptical ... I want to have them come to me as they're thinking about it, not announce it and expect us to necessarily go along with it."
"I would say to them now, don't announce that without talking with us up here and telling us why that is necessary," he said, referring to U.S. lawmakers.
You know what Senator? Why don't you or one of your staff go to AIG headquarters and find out why this loan is necessary. I'm sure you can get the CEO of AIG on the phone and ask him why his firm needs $70 billion in loans or his company will fail. In fact why the hell aren't you an integral part of this process working shoulder to shoulder with Paulson and New York FED Chairman Timothy Geithner?
Maybe someone will tell Dodd that if AIG goes bankrupt then they might break open the $62 trillion (yeah trillion with a T) market in Credit default swaps that just about every financial firm in the world owns and would then have trouble marking to market. I'm sure Dodd can Google what a CDS is if he isn't already aware of how crucial they are to the banking system. And people wonder why Democrats aren't trusted when it comes to the economy.
The Federal Reserve is considering extending a ``loan package'' to American International Group Inc., the insurer facing a cash shortage, according to a person familiar with the negotiations.
The stance by federal regulators is a reversal from a position they held as late as last night, and people with knowledge of the talks are ``cautiously optimistic,'' said the person, who declined to be identified because negotiations are confidential.
Of course it made Sen. Dodd has demand a bunch of crap from people that are trying to keep the stock market from tanking and throwing AIGs 116,000 employees out of work.
"I'm willing to listen. I'm skeptical ... I want to have them come to me as they're thinking about it, not announce it and expect us to necessarily go along with it."
"I would say to them now, don't announce that without talking with us up here and telling us why that is necessary," he said, referring to U.S. lawmakers.
You know what Senator? Why don't you or one of your staff go to AIG headquarters and find out why this loan is necessary. I'm sure you can get the CEO of AIG on the phone and ask him why his firm needs $70 billion in loans or his company will fail. In fact why the hell aren't you an integral part of this process working shoulder to shoulder with Paulson and New York FED Chairman Timothy Geithner?
Maybe someone will tell Dodd that if AIG goes bankrupt then they might break open the $62 trillion (yeah trillion with a T) market in Credit default swaps that just about every financial firm in the world owns and would then have trouble marking to market. I'm sure Dodd can Google what a CDS is if he isn't already aware of how crucial they are to the banking system. And people wonder why Democrats aren't trusted when it comes to the economy.
"Yes We Can" Meets "Yes Washington Can"
This is a great article from Alex Castellanos a Romney advisor. He tells how Obama turned from JFK style populism that lifted up the voter to the same old Liberal BS of big government taxing the crap out of you just so some corrupt bureaucrat can squander your money.
Barack Obama may believe "change doesn't come from the top down, it comes from the bottom up," but the leadership of his party doesn't. The national Democratic establishment, from the Daily Kos and MoveOn.org to Pelosi and Reid in Congress, still believe in top-down big-government from Washington, especially if they get to run the factory. Politically, they are industrial-age dinosaurs.
They believe the era of big government is back, not over. They would keep money and power in their hands, not devolve it to the average American. That was not something the Denver Democrats were eager to confess.
That is how McCain is currently running as a change agent and trying to distance himself from Bush. We had big government and wasteful spending as well as corrupt bureaucrats under Bush and McCain will clean it up. Under Obama we will have big government and wasteful spending but this time not on the War on Terror (which is actually keeping us safe) but on the Socialized Health Care (which will guarantee another terrorist attack in Obamas first term.)
Barack Obama may believe "change doesn't come from the top down, it comes from the bottom up," but the leadership of his party doesn't. The national Democratic establishment, from the Daily Kos and MoveOn.org to Pelosi and Reid in Congress, still believe in top-down big-government from Washington, especially if they get to run the factory. Politically, they are industrial-age dinosaurs.
They believe the era of big government is back, not over. They would keep money and power in their hands, not devolve it to the average American. That was not something the Denver Democrats were eager to confess.
That is how McCain is currently running as a change agent and trying to distance himself from Bush. We had big government and wasteful spending as well as corrupt bureaucrats under Bush and McCain will clean it up. Under Obama we will have big government and wasteful spending but this time not on the War on Terror (which is actually keeping us safe) but on the Socialized Health Care (which will guarantee another terrorist attack in Obamas first term.)
Monday, September 15, 2008
The Media Won it for McCain
I think this little blurb from the same Peggy Noonan that secretly slimed Palin is exactly why Obama will lose this election if he doesn't do something in a hurry. The media scorched the earth against Palin and she survived and thrived. Now any attack from the media against Palin will backfire and put even more independents in the GOP corner. If Obama loses these paragraphs are prophetic.
Then Mrs. Palin, and the catastrophe of the Democratic and media response to her. Books will be written about this, but because it's so recent, and so known, we're almost not absorbing how huge it was, and is. Here was the central liberal mistake: They used the atom bomb just a few days in. They used it so brutally, and yet so ineptly, in a way so oblivious to the true contours of the field, that the radiation blew back over their own lines. They used it without preliminary diplomatic talks, multilateral meetings or Security Council debate. They just went boom. And it boomeranged.
The atom bomb was personal and sexual perfidy, backwoods knuckle-draggin' ma and pa saying, Tell the neighbors the baby's ours. Then the ritual abuse of the 17-year-old girl. Then the rest of it—bad mother, religious weirdo. (On this latter it must be noted that Mrs. Palin never told a church that the Iraq war was God's will; she asked them to pray that it was God's will. It wasn't the sound of Republican hubris, it was the sound of Christian humility: We can't know the mind of God, we can only pray we are in accord with it.)
All of this was unacceptable to normal Americans. They experienced it as the town gossip spreading rumor and slander before the new neighbor even got to put down her bags. It offended the American sense of fairness. And—it still lives!—gallantry.
Most crucially, the snobbery of it, the meanness of it, reminded the entire country, for the first time in a decade, what it is they don't like about the left. Really, America had forgotten. Mr. Obama's friends reminded them. Unforgettably.
Then Mrs. Palin, and the catastrophe of the Democratic and media response to her. Books will be written about this, but because it's so recent, and so known, we're almost not absorbing how huge it was, and is. Here was the central liberal mistake: They used the atom bomb just a few days in. They used it so brutally, and yet so ineptly, in a way so oblivious to the true contours of the field, that the radiation blew back over their own lines. They used it without preliminary diplomatic talks, multilateral meetings or Security Council debate. They just went boom. And it boomeranged.
The atom bomb was personal and sexual perfidy, backwoods knuckle-draggin' ma and pa saying, Tell the neighbors the baby's ours. Then the ritual abuse of the 17-year-old girl. Then the rest of it—bad mother, religious weirdo. (On this latter it must be noted that Mrs. Palin never told a church that the Iraq war was God's will; she asked them to pray that it was God's will. It wasn't the sound of Republican hubris, it was the sound of Christian humility: We can't know the mind of God, we can only pray we are in accord with it.)
All of this was unacceptable to normal Americans. They experienced it as the town gossip spreading rumor and slander before the new neighbor even got to put down her bags. It offended the American sense of fairness. And—it still lives!—gallantry.
Most crucially, the snobbery of it, the meanness of it, reminded the entire country, for the first time in a decade, what it is they don't like about the left. Really, America had forgotten. Mr. Obama's friends reminded them. Unforgettably.
With Lehman Dead So Goes a Democrat Moneybag
It seems that Lehman was a big contributor to the Democratic party and Hillary and Obama's campaign. It is just hilarious that Obama is now blaming the whole Lehman mess on Bush. I'm pretty sure it was Bush that advised them to buy all of that mortgage debt and exotic CDOs that all went belly up.
In the current Congress, 271 lawmakers have collected nearly $3 million since 1989, with 72 percent going to Democrats. Democratic presidential candidates and senators Hillary Clinton and Barack Obama top the list of all-time recipients for the company, collecting $410,000 and $395,600 respectively.
In the current Congress, 271 lawmakers have collected nearly $3 million since 1989, with 72 percent going to Democrats. Democratic presidential candidates and senators Hillary Clinton and Barack Obama top the list of all-time recipients for the company, collecting $410,000 and $395,600 respectively.
McCain Says "fundamentals of our economy are strong" and I agree
It seems that McCain is still saying this in his stump speeches:
Delighting Democrats: "The fundamentals of our economy are strong," McCain reiterates at a Florida rally this morning, before noting that "these are very, very difficult times."
Dems love this stuff because economic doom-and-gloom is all they can run on now that Iraq is out of the picture. But I think you have to say that the fundamentals of the US economy are strong. The US economy is much more complicated and robust then just Lehman and AIG.
I mean the tech, energy, and the pharmaceutical/biotech industries in the US are still growing fairly well and we even had a GDP growth rate of 3.3 for the 2nd quarter mostly due to exports. Even the dollar is strengthening due to the European economy slowing. With oil prices and thus gas prices dropping to a 7 month low we may even see the consumer pick up slightly in the coming quarters.
Most companies have raised prices to cope with the commodity inflation and they will probably keep them at the same level so they might see profits pick up. Also notice that most of the corporate bankruptcies seem to be concentrated in the financial and construction fields. If the economy was fundamentally weak then you would figure they would be in all sorts of different industries and not concentrated like that.
It is true that the financial industry is currently in turmoil but I think they will emerge from the crisis in very strong positions. There will be far less competition in investment banking and thus fees could go up for future mergers, private placements, and such. These things will start to come back online next year and need to be handled by someone. There are only a few companies left that can do it and they will reap the lions share of fees.
Also large pools of capital will congregate in the remaining firms who have track records of making good money or keeping risks down like Goldman and JP Morgan. There will be no more 30x leverage to make record profits but steady profits will still be in the cards since competition has been reduced.
Even the non-government mortgage market will be dominated by a few firms that kept clear of the sub-prime crap like Wells Fargo and Bank of America. People will start buying homes again and the housing market should be on the mend by the first half of 2009. There will only be a few companies left that can give you a mortgage and all of them will have managed their risk correctly to have survived the crisis. In other words the strong, the careful and the smart will be the only ones left standing.
I think the only blow to this will be increased regulation from an overaggressive Obama administration. If he stays true to his Carter economy roots and raises taxes while things are just starting to come back around in 2009 then all bets are off. You will then be able to say "because of Obama's tax hikes our economy has been made weak." High taxes sink all ships.
Delighting Democrats: "The fundamentals of our economy are strong," McCain reiterates at a Florida rally this morning, before noting that "these are very, very difficult times."
Dems love this stuff because economic doom-and-gloom is all they can run on now that Iraq is out of the picture. But I think you have to say that the fundamentals of the US economy are strong. The US economy is much more complicated and robust then just Lehman and AIG.
I mean the tech, energy, and the pharmaceutical/biotech industries in the US are still growing fairly well and we even had a GDP growth rate of 3.3 for the 2nd quarter mostly due to exports. Even the dollar is strengthening due to the European economy slowing. With oil prices and thus gas prices dropping to a 7 month low we may even see the consumer pick up slightly in the coming quarters.
Most companies have raised prices to cope with the commodity inflation and they will probably keep them at the same level so they might see profits pick up. Also notice that most of the corporate bankruptcies seem to be concentrated in the financial and construction fields. If the economy was fundamentally weak then you would figure they would be in all sorts of different industries and not concentrated like that.
It is true that the financial industry is currently in turmoil but I think they will emerge from the crisis in very strong positions. There will be far less competition in investment banking and thus fees could go up for future mergers, private placements, and such. These things will start to come back online next year and need to be handled by someone. There are only a few companies left that can do it and they will reap the lions share of fees.
Also large pools of capital will congregate in the remaining firms who have track records of making good money or keeping risks down like Goldman and JP Morgan. There will be no more 30x leverage to make record profits but steady profits will still be in the cards since competition has been reduced.
Even the non-government mortgage market will be dominated by a few firms that kept clear of the sub-prime crap like Wells Fargo and Bank of America. People will start buying homes again and the housing market should be on the mend by the first half of 2009. There will only be a few companies left that can give you a mortgage and all of them will have managed their risk correctly to have survived the crisis. In other words the strong, the careful and the smart will be the only ones left standing.
I think the only blow to this will be increased regulation from an overaggressive Obama administration. If he stays true to his Carter economy roots and raises taxes while things are just starting to come back around in 2009 then all bets are off. You will then be able to say "because of Obama's tax hikes our economy has been made weak." High taxes sink all ships.
Wachovia Almost Out of the Woods
At least according to the CEO Robert Steel:
Wachovia Corp (WB.N: Quote, Profile, Research, Stock Buzz), which has been battered by mortgage losses, is "almost done" paring $20 billion of loans and securities from its balance sheet, a process it had hoped to complete by year end, Chief Executive Robert Steel said.
I guess they won't be needing any capital infusions after all and Steel seems to be there to spruce things up. Of course if the housing market gets any worse going into 2009 then all bets are off. There has been some takeover talk also that was contingient on getting rid of that $20 billion in bad loans.
The clean-up would have to come before any buyer would step forward, but there are any number of potential acquirers that would be attracted to Wachovia's presence in the Southeast and California. Among the likely suspects are JPMorgan Chase and Wells Fargo.
Goldman itself has been rumored as a potential acquirer. It advised Wachovia on its loan portfolio and helped it raise the capital in April. But Wachovia's chairman, Lanty Smith, tried to douse the speculation Thursday, calling it "silly."
Wachovia Corp (WB.N: Quote, Profile, Research, Stock Buzz), which has been battered by mortgage losses, is "almost done" paring $20 billion of loans and securities from its balance sheet, a process it had hoped to complete by year end, Chief Executive Robert Steel said.
I guess they won't be needing any capital infusions after all and Steel seems to be there to spruce things up. Of course if the housing market gets any worse going into 2009 then all bets are off. There has been some takeover talk also that was contingient on getting rid of that $20 billion in bad loans.
The clean-up would have to come before any buyer would step forward, but there are any number of potential acquirers that would be attracted to Wachovia's presence in the Southeast and California. Among the likely suspects are JPMorgan Chase and Wells Fargo.
Goldman itself has been rumored as a potential acquirer. It advised Wachovia on its loan portfolio and helped it raise the capital in April. But Wachovia's chairman, Lanty Smith, tried to douse the speculation Thursday, calling it "silly."
Rock Band 2 Shipped Yesterday (9/14)
I think I might have to buy this one judging by this setlist. These are the songs that I am especially interested in:
1. AC/DC "Let There Be Rock" 1970s
7. Bad Company "Shooting Star" 1970's
13. Bob Dylan "Tangled Up in Blue" 1970's
20. Duran Duran "Hungry Like the Wolf" 1980's
28. Jimmy Eat World "The Middle" 2000's
32. Kansas "Carry On Wayward Son" 1970's
35. Linkin Park "One Step Closer" 2000's
42. Modest Mouse "Float On" 2000's
45. Norman Greenbaum "Spirit in the Sky" 1960's
52. Red Hot Chili Peppers "Give it Away" 1990's
62. Steve Miller Band "Rock'n Me" 1970's
63. Survivor "Eye of the Tiger" 1980's
69 Go-Go's "We Got the Beat" 1980's
71. The Guess Who "American Woman" 1970's
73. The Offspring "Come Out & Play (Keep ‘em Separated)" 1990's
75. The Who "Pinball Wizard" 1960's
1. AC/DC "Let There Be Rock" 1970s
7. Bad Company "Shooting Star" 1970's
13. Bob Dylan "Tangled Up in Blue" 1970's
20. Duran Duran "Hungry Like the Wolf" 1980's
28. Jimmy Eat World "The Middle" 2000's
32. Kansas "Carry On Wayward Son" 1970's
35. Linkin Park "One Step Closer" 2000's
42. Modest Mouse "Float On" 2000's
45. Norman Greenbaum "Spirit in the Sky" 1960's
52. Red Hot Chili Peppers "Give it Away" 1990's
62. Steve Miller Band "Rock'n Me" 1970's
63. Survivor "Eye of the Tiger" 1980's
69 Go-Go's "We Got the Beat" 1980's
71. The Guess Who "American Woman" 1970's
73. The Offspring "Come Out & Play (Keep ‘em Separated)" 1990's
75. The Who "Pinball Wizard" 1960's
Saturday, September 13, 2008
Greenspan Pops Off About McCain Tax Cuts
I think Greenspan should keep his trap shut after nearly ruining the current economy with his cheap credit when he was FED chairman. Now he is injecting himself into this campaign where two Presidential candidates are essentially trying to clean up the credit mess that he caused.
At least the McCain camp is saying they won't be borrowing money to pay for these tax cuts.
"John McCain opposed President Bush's tax cuts in 2003, because they didn't include the necessary spending controls. Sen. McCain's proposed job-growing tax cuts are modest in comparison to his plans to slow the exploding growth of federal expenditures — meaning that contrary to Chairman Greenspan's assertions, this relief isn't proposed on borrowed money," said McCain spokesman Tucker Bounds.
At least the McCain camp is saying they won't be borrowing money to pay for these tax cuts.
"John McCain opposed President Bush's tax cuts in 2003, because they didn't include the necessary spending controls. Sen. McCain's proposed job-growing tax cuts are modest in comparison to his plans to slow the exploding growth of federal expenditures — meaning that contrary to Chairman Greenspan's assertions, this relief isn't proposed on borrowed money," said McCain spokesman Tucker Bounds.
Friday, September 12, 2008
Obama Mocks McCain over Emails: Finds out that Vietcong Beatings Makes it Tough to Type
The Obama campaign steps on yet another landmine while mocking McCain over not being able to send emails.
[Obama spokesman Dan] Pfeiffer said. "It's extraordinary that someone who wants to be our president and our commander in chief doesn't know how to send an e-mail."
Yet if they read a little bit about the person they are so quick to mock they would find out this fact:
The outrage comes from inside: McCain's severe war injuries prevent him from combing his hair, typing on a keyboard, or tying his shoes.
I'm sure McCain knows how to send an email but it's sometimes tough to type one out when you have been tortured by the Vietcong for 6 years. Of course Dan Pfeiffer only had to look that stuff up before he shot off his big mouth but I guess the Internet connections at Obama HQ aren't working so well.
[Obama spokesman Dan] Pfeiffer said. "It's extraordinary that someone who wants to be our president and our commander in chief doesn't know how to send an e-mail."
Yet if they read a little bit about the person they are so quick to mock they would find out this fact:
The outrage comes from inside: McCain's severe war injuries prevent him from combing his hair, typing on a keyboard, or tying his shoes.
I'm sure McCain knows how to send an email but it's sometimes tough to type one out when you have been tortured by the Vietcong for 6 years. Of course Dan Pfeiffer only had to look that stuff up before he shot off his big mouth but I guess the Internet connections at Obama HQ aren't working so well.
McCain and Obama Divided Right Down Color and Age Lines
At least according to this AP poll.
McCain leads Obama by 55 percent to 37 percent among whites. That includes comfortable leads of 24 points with suburban whites and 26 points with whites who haven't finished college, and has similar advantages with white men and whites who are married.
He also leads by 23 points among rural voters and by 13 points with voters age 65 and over.
Obama leads 61 percent to 35 percent among voters under age 30. He has about a 5-to-1 edge with minorities and a narrow 5-point lead with women, though he trails among white women 53 percent to 40 percent.
If that under 30 crowd doesn't show up on election day then I think Obama may be sunk. It must suck to base your Presidential hopes on such a fickle crowd. The groups in McCains column are solid voters like my Dad who has voted in every Presidential election even when he was away in a foreign country.
The voters in Obama's camp may not vote simply because the polling place wasn't listed on Facebook or they figure "the election is fixed anyway so why should I vote." I have seen big support and enthusiasm from the under 30 crowd for Obama this election. However all of that will be washed away if they don't show up at the polling place in large numbers.
If they are absent for another Presidential election (this time for a candidate that thinks he is a rock star) then you can write off that under-30 group as a waste of time from here on in. All that "Vote or Die" or "Rock the Vote" stuff will be an exercise in futility. The under 30 crowd will only be good for Internet money but actually doing anything for them in the future will be time and money wasted.
McCain leads Obama by 55 percent to 37 percent among whites. That includes comfortable leads of 24 points with suburban whites and 26 points with whites who haven't finished college, and has similar advantages with white men and whites who are married.
He also leads by 23 points among rural voters and by 13 points with voters age 65 and over.
Obama leads 61 percent to 35 percent among voters under age 30. He has about a 5-to-1 edge with minorities and a narrow 5-point lead with women, though he trails among white women 53 percent to 40 percent.
If that under 30 crowd doesn't show up on election day then I think Obama may be sunk. It must suck to base your Presidential hopes on such a fickle crowd. The groups in McCains column are solid voters like my Dad who has voted in every Presidential election even when he was away in a foreign country.
The voters in Obama's camp may not vote simply because the polling place wasn't listed on Facebook or they figure "the election is fixed anyway so why should I vote." I have seen big support and enthusiasm from the under 30 crowd for Obama this election. However all of that will be washed away if they don't show up at the polling place in large numbers.
If they are absent for another Presidential election (this time for a candidate that thinks he is a rock star) then you can write off that under-30 group as a waste of time from here on in. All that "Vote or Die" or "Rock the Vote" stuff will be an exercise in futility. The under 30 crowd will only be good for Internet money but actually doing anything for them in the future will be time and money wasted.
Tuesday, September 09, 2008
Did Obama just Call Palin a Pig?
Oh oh, the Obama campaign puts its foot in its mouth again. I think he should just stop speaking off the cuff in case he calls Palin something that is going to lose him the rest of the Hillary supporters as well.
"You can put lipstick on a pig," he said to an outbreak of laughter, shouts and raucous applause from his audience, clearly drawing a connection to Palin's joke. "It's still a pig. You can wrap an old fish in a piece of paper called change. It's still going to stink after eight years."
McCain's campaign immediately organized a telephone conference call in response and called on Obama to apologize for calling Palin a pig. Obama's campaign said he wasn't referring to Palin; he had been talking about McCain immediately before the lipstick comment.
"You can put lipstick on a pig," he said to an outbreak of laughter, shouts and raucous applause from his audience, clearly drawing a connection to Palin's joke. "It's still a pig. You can wrap an old fish in a piece of paper called change. It's still going to stink after eight years."
McCain's campaign immediately organized a telephone conference call in response and called on Obama to apologize for calling Palin a pig. Obama's campaign said he wasn't referring to Palin; he had been talking about McCain immediately before the lipstick comment.
Obama May not Recind the Bush Tax cuts
I guess one of his economic advisors finally told him that raising taxes during a recession creates a depression.
Democrat Barack Obama says he would delay rescinding President Bush's tax cuts on wealthy Americans if he becomes the next president and the economy is in a recession, suggesting such an increase would further hurt the economy.
So at least we have until 2011 before the Bush tax cuts actually expire. Obama won't make them permanent but at least we have 3 years for the economy to improve. He is going forward with the $500 tax cut ($1000 for families) for middle income Americans and we might get another stimulus package out of the Dem Congress. Maybe a Carter second term will be delayed until at least 2011.
Democrat Barack Obama says he would delay rescinding President Bush's tax cuts on wealthy Americans if he becomes the next president and the economy is in a recession, suggesting such an increase would further hurt the economy.
So at least we have until 2011 before the Bush tax cuts actually expire. Obama won't make them permanent but at least we have 3 years for the economy to improve. He is going forward with the $500 tax cut ($1000 for families) for middle income Americans and we might get another stimulus package out of the Dem Congress. Maybe a Carter second term will be delayed until at least 2011.
Palin Causes a 20 Point Swing in White Women says Poll
Now this is a very telling statistic culled from this article that should have the Dems running scared.
Voters, particularly women, seem to agree, according to new polls. An ABC News-Washington Post survey showed white women have moved from backing Obama by 8 points to supporting McCain by 12 points, with majorities viewing Palin favorably and saying she boosts their faith in McCain's decisions.
That is a 20 point swing in just a few weeks. That is a number that should keep the Obama campaign up at night. And I think that all of this anti-Palin attack pieces are what is fueling some of these numbers. I think some women are saying "would the media make up lies and post US magazine hit pieces about my family if I was picked to be VP?"
The media is making Palin into a scrappy fighter that is surrounded by media wolves biting at her family and even going after her minor daughter. America loves an underdog and the main stream media is making Palin into one. I think the white woman's vote is crucial for Obama to win and he can't afford to lose it by 12 points. His campaign needs to give US magazine and the New York Times a call and tell them to dial back the heat on Palin or it will sink him
Voters, particularly women, seem to agree, according to new polls. An ABC News-Washington Post survey showed white women have moved from backing Obama by 8 points to supporting McCain by 12 points, with majorities viewing Palin favorably and saying she boosts their faith in McCain's decisions.
That is a 20 point swing in just a few weeks. That is a number that should keep the Obama campaign up at night. And I think that all of this anti-Palin attack pieces are what is fueling some of these numbers. I think some women are saying "would the media make up lies and post US magazine hit pieces about my family if I was picked to be VP?"
The media is making Palin into a scrappy fighter that is surrounded by media wolves biting at her family and even going after her minor daughter. America loves an underdog and the main stream media is making Palin into one. I think the white woman's vote is crucial for Obama to win and he can't afford to lose it by 12 points. His campaign needs to give US magazine and the New York Times a call and tell them to dial back the heat on Palin or it will sink him
Monday, September 08, 2008
Holy Crap they Love McCain/Palin
I thought this was just another Obama "the Rockstar" picture but that is McCain and Palin at center of this massive crowd. I think Obama may start worrying that his brand of Arena-rock has been stolen along with his "Change" mantra.
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