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LOL: Fed creates an "entity" for bad debt....User Forum Topic
Submitted by flu on September 18, 2008 - 1:26pm
Wow....Bailout bailout bailout and more bailout...Can't beat em, join them. Banks offload all this bad debt into this entity and then poof, this debt just disappears. I love this.... In geek terms, it's a /dev/null for bank's bad debt. http://biz.yahoo.com/ap/080918/wall_stre... Stocks end sharply higher on report that government will create entity to hold banks' debt NEW YORK (AP) -- Wall Street rallied in a stunning late-session turnaround Thursday, shooting higher and hurtling the Dow Jones industrials up 400 points following a report that the federal government may create an entity that will take over banks' bad debt. A report that Treasury Secretary Henry Paulson is considering the formation of an entity like the Resolution Trust Corp. that was set up during the savings and loan crisis of the late 1980s and early 1990s left investors ebullient. Investors hoped a huge federal intervention could help financial institutions jettison bad mortgage debt and stop the drain on capital that has already taken down companies including Bear Stearns Cos. and Lehman Brothers Holdings Inc. Worries about financial land mines on companies' books have hobbled the world's financial markets and led to the intense volatility in the markets this week. "It's going to take a lot of the bad debt off the balance sheets of these companies," said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York, commenting on the possibilities of an entity akin to the RTC. It could alleviate many of the pressures causing the credit crisis, he said, and open up the credit markets again. But Fullman noted, "the devil's in the details." "Bear markets are very sensitive to news. And on a scale of 1 to 10, this one is a 13," he said. The report gave direction to a market that had bolted in and out of positive territory for much of the session as investors shuttled between the safety of Treasury bills and gold and the bargains posed by stocks that have been pounded lower. According to preliminary calculations, the Dow soared 410.03, or 3.86 percent, to 11,019.69, surging 560 points from its low of the day, 10,459.44. Broader stock indicators also jumped. The Standard & Poor's 500 index rose 50.01, or 4.32 percent, to 1,206.60, and the Nasdaq composite index advanced 100.25, or 4.78 percent, to 2,199.10. The report of a broader government bailout proved more reassuring to investors than moves before the opening bell Thursday by the Federal Reserve and other major central banks to inject as much as $180 billion into global money markets. The moves were an attempt to keep the credit crisis from worsening; the Fed added another $55 billion in overnight loans Thursday. But it was only the prospect of a more comprehensive vehicle to sweep up bad debt that emboldened investors. Congress established the RTC in 1989 to buy $394 billion worth of real estate, mortgages and other assets of hundreds of failed savings-and-loan institutions. The corporation operated for several years disposing of the associations' assets, and then went out of business. That could help alleviate the grinding gears in the world's credit markets have driven up the cost of borrowing for businesses; banks have become hesitant to make loans even to other banks for fear of what institutions might be hobbled by soured debt. Investors are also contending with fears that more big-name financial companies could falter.
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so it is confirmed.. we are going to inflate our way out of this problem. You guys who diligently saved up your money for a rainy day are screwed :)
You should've just bought that Lexus when you had a chance because soon you're not going to be able to afford one.
Yeah, but neither will anyone else unless they work in the Fed or Treasury. In fact, maybe we should just use all luxury cars as our currency now.
That would make more sense than setting up a Government entity designed solely to lose money.
They have no problem doing that on their own.
What they're doing is crafting legislation that will make a deal with banks to write down their mortgages to the homeowners and in return the government goes on the hook for the liability if the loan goes bad. This lets the banks clear their balance sheets of problem loans/
Now, this is right out of a Looney Tunes cartoon.
*If they think people will stay in homes that are worth 30-60% less than they're paying for with their mortgage, they must be smoking some strong stuff. If the banks (with a safety net from the U.S. Govt), renegotiate a $500k loan down to $400k and at a fixed rate and the home is now worth (or will soon be worth) $300k, a LARGE percentage of homeowners are gonna walk away and rent or buy a home that's selling at true market price.
*And who would finance the mortgage if they ever tried to sell it at the value of the mortgage? And when they can't sell it, they will walk away.
*And how many people would qualify for a mortgage (down pymt and income requirements) if they could find a buyer? Not many unless the government wants to start another housing bubble by financing homes at values greater than they're really worth. (sound familiar)
*And how would they get an appraisal?
All this will do is shift the liability of all of these potentially fatal mortgages to the Federal Government, i.e. the taxpayers.
The older I get, the more I am convinced that there are essentially nothing but crooks and thieves. masquerading as Senators and Congressmen & women. Any of us who have saved our money and acted responsibly just keep getting it stuck up our rears and there's really not a whole lot we can do about it. Charles Schumer is heavily involved in this latest escapade. I have thoroughly disliked Schumer for a long time. It started when he proposed a 50% tax on ammunition many years ago. He was shouted down with his bullet tax and it went away but it convinced me that the man is an idiot and a first class asshole. Since then, he's done plenty of other things to convince me that I was correct. This STINKS!
Gotta go now and grease my ass up with my daily dose of Vasoline for tomorrow's schennanigans from Capitol Hill.
More smoke and mirrors. No one wants to accept the fact that these assets simply aren't worth what everyone wants to will them to be worth. Putting them in the Entity's hands won't change a thing. Anyone who wants to buy this crap will still need to finance it and no one has capital to lend for this sort of crap.
My prediction: More smoke and mirrors to follow once people see through this silly ploy. And so on and so on and so on...
U.S. Treasury and Federal Reserve officials are considering a "permanent'' plan to address the financial crisis, said Sen. Charles Schumber, who proposed a new agency to pump capital into troubled financial companies.
"The Federal Reserve and the Treasury are realizing that we need a more comprehensive solution,'' Schumer, a Democrat who chairs the congressional Joint Economic Committee, told reporters in Washington today. "I've been talking to them about it.''
Schumer proposed an agency to inject funds into financial companies in exchange for equity stakes and pledges to rewrite mortgages to make them more affordable. His remarks indicate momentum is building for some wider plan after the Fed and Treasury's takeovers of Fannie Mae, Freddie Mac and American International Group Inc. this month.
You Republicans should be ashamed of yourselves. Even a liberal is not this bad! :P
More smoke and mirrors. No one wants to accept the fact that these assets simply aren't worth what everyone wants to will them to be worth. Putting them in the Entity's hands won't change a thing. Anyone who wants to buy this crap will still need to finance it and no one has capital to lend for this sort of crap.
My prediction: More smoke and mirrors to follow once people see through this silly ploy. And so on and so on and so on...
Sadly, it will prop up the equity markets i think.
Shift the bad debt into a seperate legal entity. The original banks with this shoddy debt have their books clean.
BAC Ken Lewis is probably laughing his ass off right now. Because he's going to move everything crappy that came from Countrywide into that instrument...And now do the same thing with Merrill. Suddently, Ken doesn't look as dumb as people say he is, does he? And by picking up Merrill first, it basically left a trail for all the other C-banks and I-banks to figure out who should merge with who. It's as if everyone was on the dance floor, and BAC picked the best dancer off the dance floor and now that the music has stopped, everyone else has to settle for second, third, forth fifth. It's almost as if Ken *knew* this level of bailout would happen.
Morgan thinking about merging with Wachovia??? Talk about scraping from the bottom of the barrel!
And once the banks get there books clean this way, they will play clean for a few years until they come up with an even more clever way to lose money in the future.
Why do banks continuously try to find new and more ingenious ways at losing money, when the old ways worked perfectly well????