On MTM, insolvency, and market over-corrections

[TheBreeze]

[quote=Chris Scoreboard Johnston]Dave

I for one appreciate your summaries on these issues due to the fact that I do not have the depth of knowledge that you do in these areas, and do not pretend to be a paper champion like so many who read a few things then start challenging you. That is generally embarassing to the challengers.
[/quote]

Yes, it’s best to leave these things to the ‘experts’ as that has worked out so well over the last nine years. I have to laugh at Dave when he tries to add weight to one of his arguments by saying something like ‘and all my banker buddies agree as well’.

Back in 2005, all of the banking establishment agreed that making 110% loans to illegal immigrants based on stated income of $300K per year was a good idea. That worked out real well.

[davelj]

[quote=TheBreeze][quote=davelj]

Have any of the big banks stopped making payments to creditors or depositors? Even without the TARP funds they would still be current on such payments, although dramatically undercapitalized.
[/quote]

LMFAO! How the hell can you know that the big banks would still be current without all this government support? And it’s not just TARP, it’s TALF, AIG-FP, FDIC-guaranteed bank debt and all the other benefits that the government has forced taxpayers to provide. If the big banks can so easily make their payments, why did the FDIC need to step in and guarantee $1.4 trillion in bank debt?

http://www.msnbc.msn.com/id/27848325//

[/quote]

Because supporting deposit and creditor payments in banking isn’t generally about solvency, it’s about liquidity. So long as depositors and creditors believe that they’ll get paid – that is, once a run on the bank is taken off the table – even a struggling bank – technically insolvent – can meet its obligations. For a long, long time. And often until it’s no longer insolvent. (Back to the analogy of the insolvent surgeon out of medical school.) But I realize that this is an inconvenient fact vis-a-vis your world view.

[davelj]

[quote=TheBreeze][quote=davelj]

Have any of the big banks stopped making payments to creditors or depositors? Even without the TARP funds they would still be current on such payments, although dramatically undercapitalized.
[/quote]

LMFAO! How the hell can you know that the big banks would still be current without all this government support? And it’s not just TARP, it’s TALF, AIG-FP, FDIC-guaranteed bank debt and all the other benefits that the government has forced taxpayers to provide. If the big banks can so easily make their payments, why did the FDIC need to step in and guarantee $1.4 trillion in bank debt?

http://www.msnbc.msn.com/id/27848325//

[/quote]

Because supporting deposit and creditor payments in banking isn’t generally about solvency, it’s about liquidity. So long as depositors and creditors believe that they’ll get paid – that is, once a run on the bank is taken off the table – even a struggling bank – technically insolvent – can meet its obligations. For a long, long time. And often until it’s no longer insolvent. (Back to the analogy of the insolvent surgeon out of medical school.) But I realize that this is an inconvenient fact vis-a-vis your world view.

[davelj]

[quote=TheBreeze][quote=davelj]

Have any of the big banks stopped making payments to creditors or depositors? Even without the TARP funds they would still be current on such payments, although dramatically undercapitalized.
[/quote]

LMFAO! How the hell can you know that the big banks would still be current without all this government support? And it’s not just TARP, it’s TALF, AIG-FP, FDIC-guaranteed bank debt and all the other benefits that the government has forced taxpayers to provide. If the big banks can so easily make their payments, why did the FDIC need to step in and guarantee $1.4 trillion in bank debt?

http://www.msnbc.msn.com/id/27848325//

[/quote]

Because supporting deposit and creditor payments in banking isn’t generally about solvency, it’s about liquidity. So long as depositors and creditors believe that they’ll get paid – that is, once a run on the bank is taken off the table – even a struggling bank – technically insolvent – can meet its obligations. For a long, long time. And often until it’s no longer insolvent. (Back to the analogy of the insolvent surgeon out of medical school.) But I realize that this is an inconvenient fact vis-a-vis your world view.

[davelj]

[quote=TheBreeze][quote=davelj]

Have any of the big banks stopped making payments to creditors or depositors? Even without the TARP funds they would still be current on such payments, although dramatically undercapitalized.
[/quote]

LMFAO! How the hell can you know that the big banks would still be current without all this government support? And it’s not just TARP, it’s TALF, AIG-FP, FDIC-guaranteed bank debt and all the other benefits that the government has forced taxpayers to provide. If the big banks can so easily make their payments, why did the FDIC need to step in and guarantee $1.4 trillion in bank debt?

http://www.msnbc.msn.com/id/27848325//

[/quote]

Because supporting deposit and creditor payments in banking isn’t generally about solvency, it’s about liquidity. So long as depositors and creditors believe that they’ll get paid – that is, once a run on the bank is taken off the table – even a struggling bank – technically insolvent – can meet its obligations. For a long, long time. And often until it’s no longer insolvent. (Back to the analogy of the insolvent surgeon out of medical school.) But I realize that this is an inconvenient fact vis-a-vis your world view.

[davelj]

[quote=TheBreeze][quote=davelj]

Have any of the big banks stopped making payments to creditors or depositors? Even without the TARP funds they would still be current on such payments, although dramatically undercapitalized.
[/quote]

LMFAO! How the hell can you know that the big banks would still be current without all this government support? And it’s not just TARP, it’s TALF, AIG-FP, FDIC-guaranteed bank debt and all the other benefits that the government has forced taxpayers to provide. If the big banks can so easily make their payments, why did the FDIC need to step in and guarantee $1.4 trillion in bank debt?

http://www.msnbc.msn.com/id/27848325//

[/quote]

Because supporting deposit and creditor payments in banking isn’t generally about solvency, it’s about liquidity. So long as depositors and creditors believe that they’ll get paid – that is, once a run on the bank is taken off the table – even a struggling bank – technically insolvent – can meet its obligations. For a long, long time. And often until it’s no longer insolvent. (Back to the analogy of the insolvent surgeon out of medical school.) But I realize that this is an inconvenient fact vis-a-vis your world view.

[davelj]

[quote=TheBreeze][quote=Chris Scoreboard Johnston]Dave

I for one appreciate your summaries on these issues due to the fact that I do not have the depth of knowledge that you do in these areas, and do not pretend to be a paper champion like so many who read a few things then start challenging you. That is generally embarassing to the challengers.
[/quote]

Yes, it’s best to leave these things to the ‘experts’ as that has worked out so well over the last nine years. I have to laugh at Dave when he tries to add weight to one of his arguments by saying something like ‘and all my banker buddies agree as well’.

Back in 2005, all of the banking establishment agreed that making 110% loans to illegal immigrants based on stated income of $300K per year was a good idea. That worked out real well.
[/quote]

Well, my “banker buddies” weren’t making these ridiculous loans, Breeze. As I’ve attempted to point out here many times – and as even the bears such as Roubini, et al. acknowledge – the vast majority of the banks in this country – by charter as opposed to by asset concentration – did not engage in the crazy lending you’re referring to, which is why they’re not going to fail. You make it sound as though I was sipping champagne on a yacht in the Caribbean with Mozilo, Lewis, Greenberg, and Prince back in 2005. I don’t know these folks. Never did business with them. I’m down at the community bank level. I wrote a piece on the housing bubble for a well-known financial website back in 2003, so I share much of your outrage at the situation. Again, I know it’s inconvenient for your argument, but all bankers and bank investors are not in the same boat. As much as you want it to be the case.

[davelj]

[quote=TheBreeze][quote=Chris Scoreboard Johnston]Dave

I for one appreciate your summaries on these issues due to the fact that I do not have the depth of knowledge that you do in these areas, and do not pretend to be a paper champion like so many who read a few things then start challenging you. That is generally embarassing to the challengers.
[/quote]

Yes, it’s best to leave these things to the ‘experts’ as that has worked out so well over the last nine years. I have to laugh at Dave when he tries to add weight to one of his arguments by saying something like ‘and all my banker buddies agree as well’.

Back in 2005, all of the banking establishment agreed that making 110% loans to illegal immigrants based on stated income of $300K per year was a good idea. That worked out real well.
[/quote]

Well, my “banker buddies” weren’t making these ridiculous loans, Breeze. As I’ve attempted to point out here many times – and as even the bears such as Roubini, et al. acknowledge – the vast majority of the banks in this country – by charter as opposed to by asset concentration – did not engage in the crazy lending you’re referring to, which is why they’re not going to fail. You make it sound as though I was sipping champagne on a yacht in the Caribbean with Mozilo, Lewis, Greenberg, and Prince back in 2005. I don’t know these folks. Never did business with them. I’m down at the community bank level. I wrote a piece on the housing bubble for a well-known financial website back in 2003, so I share much of your outrage at the situation. Again, I know it’s inconvenient for your argument, but all bankers and bank investors are not in the same boat. As much as you want it to be the case.

[davelj]

[quote=TheBreeze][quote=Chris Scoreboard Johnston]Dave

I for one appreciate your summaries on these issues due to the fact that I do not have the depth of knowledge that you do in these areas, and do not pretend to be a paper champion like so many who read a few things then start challenging you. That is generally embarassing to the challengers.
[/quote]

Yes, it’s best to leave these things to the ‘experts’ as that has worked out so well over the last nine years. I have to laugh at Dave when he tries to add weight to one of his arguments by saying something like ‘and all my banker buddies agree as well’.

Back in 2005, all of the banking establishment agreed that making 110% loans to illegal immigrants based on stated income of $300K per year was a good idea. That worked out real well.
[/quote]

Well, my “banker buddies” weren’t making these ridiculous loans, Breeze. As I’ve attempted to point out here many times – and as even the bears such as Roubini, et al. acknowledge – the vast majority of the banks in this country – by charter as opposed to by asset concentration – did not engage in the crazy lending you’re referring to, which is why they’re not going to fail. You make it sound as though I was sipping champagne on a yacht in the Caribbean with Mozilo, Lewis, Greenberg, and Prince back in 2005. I don’t know these folks. Never did business with them. I’m down at the community bank level. I wrote a piece on the housing bubble for a well-known financial website back in 2003, so I share much of your outrage at the situation. Again, I know it’s inconvenient for your argument, but all bankers and bank investors are not in the same boat. As much as you want it to be the case.

[davelj]

[quote=TheBreeze][quote=Chris Scoreboard Johnston]Dave

I for one appreciate your summaries on these issues due to the fact that I do not have the depth of knowledge that you do in these areas, and do not pretend to be a paper champion like so many who read a few things then start challenging you. That is generally embarassing to the challengers.
[/quote]

Yes, it’s best to leave these things to the ‘experts’ as that has worked out so well over the last nine years. I have to laugh at Dave when he tries to add weight to one of his arguments by saying something like ‘and all my banker buddies agree as well’.

Back in 2005, all of the banking establishment agreed that making 110% loans to illegal immigrants based on stated income of $300K per year was a good idea. That worked out real well.
[/quote]

Well, my “banker buddies” weren’t making these ridiculous loans, Breeze. As I’ve attempted to point out here many times – and as even the bears such as Roubini, et al. acknowledge – the vast majority of the banks in this country – by charter as opposed to by asset concentration – did not engage in the crazy lending you’re referring to, which is why they’re not going to fail. You make it sound as though I was sipping champagne on a yacht in the Caribbean with Mozilo, Lewis, Greenberg, and Prince back in 2005. I don’t know these folks. Never did business with them. I’m down at the community bank level. I wrote a piece on the housing bubble for a well-known financial website back in 2003, so I share much of your outrage at the situation. Again, I know it’s inconvenient for your argument, but all bankers and bank investors are not in the same boat. As much as you want it to be the case.

[davelj]

[quote=TheBreeze][quote=Chris Scoreboard Johnston]Dave

I for one appreciate your summaries on these issues due to the fact that I do not have the depth of knowledge that you do in these areas, and do not pretend to be a paper champion like so many who read a few things then start challenging you. That is generally embarassing to the challengers.
[/quote]

Yes, it’s best to leave these things to the ‘experts’ as that has worked out so well over the last nine years. I have to laugh at Dave when he tries to add weight to one of his arguments by saying something like ‘and all my banker buddies agree as well’.

Back in 2005, all of the banking establishment agreed that making 110% loans to illegal immigrants based on stated income of $300K per year was a good idea. That worked out real well.
[/quote]

Well, my “banker buddies” weren’t making these ridiculous loans, Breeze. As I’ve attempted to point out here many times – and as even the bears such as Roubini, et al. acknowledge – the vast majority of the banks in this country – by charter as opposed to by asset concentration – did not engage in the crazy lending you’re referring to, which is why they’re not going to fail. You make it sound as though I was sipping champagne on a yacht in the Caribbean with Mozilo, Lewis, Greenberg, and Prince back in 2005. I don’t know these folks. Never did business with them. I’m down at the community bank level. I wrote a piece on the housing bubble for a well-known financial website back in 2003, so I share much of your outrage at the situation. Again, I know it’s inconvenient for your argument, but all bankers and bank investors are not in the same boat. As much as you want it to be the case.

[davelj]

[quote=patientrenter][quote=davelj]…My issue as a taxpayer and bank customer is that I want the least costly resolution to these huge problem banks…[/quote]

DaveLJ, for some of us, fairness is one of the most important goals of any resolution of this mess. I would prefer a very fair $15 trillion solution to an unfair $10 trillion solution. I’d prefer a solution that costs $5 trillion dollars more and administers lots more pain to the people who bought assets or goodies liberally on borrowed money or who assisted professionally in reckless lending, and delivers much less pain to the people who were restrained and refused to try to ride leverage to riches.

Otherwise, what’s the point in exercising self-restraint and good sense in the future? It just makes you a loser, an easy mark.[/quote]

PR, what you’re saying is that you’d rather cut off your nose to spite your face. Which is fine, but obviously I don’t share that view.

I’d like to see fairness and pain as well. After all, I loves me some schadenfreude. But how much pain is enough? Greenberg, Lewis, and most of these other former financial titans have probably seen their net worths dive by 80%-90% in this crisis. Granted, that’s down from very large numbers to begin with. But you’re not going to get EVERYTHING from them. It’s not going to happen. Most of these folks’ lifestyles will not be dramatically affected even if their companies go BK. You may not be happy to hear that, but it’s reality.

And the small speculators? They’re mostly dead or dying at this point. Done. And the folks that just bought too much house and are underwater? Even if they end up getting some “help” in the form of loan mods, that just brings them back from the brink. My point is that I don’t believe moral hazard is much of an issue at this point. Most of the folks that did the really dumb things are either wiped out or have seen a good 80%+ of their net worths wiped out. The pain has been deep and wide. Folks are scared. Which is a good thing. A necessary thing. Where we differ is that you apparently believe that we need to have Great Depression II – with all that entails – in order to properly punish the evil doers. I don’t. I’m not one to cut off my nose to spite my face.

[davelj]

[quote=patientrenter][quote=davelj]…My issue as a taxpayer and bank customer is that I want the least costly resolution to these huge problem banks…[/quote]

DaveLJ, for some of us, fairness is one of the most important goals of any resolution of this mess. I would prefer a very fair $15 trillion solution to an unfair $10 trillion solution. I’d prefer a solution that costs $5 trillion dollars more and administers lots more pain to the people who bought assets or goodies liberally on borrowed money or who assisted professionally in reckless lending, and delivers much less pain to the people who were restrained and refused to try to ride leverage to riches.

Otherwise, what’s the point in exercising self-restraint and good sense in the future? It just makes you a loser, an easy mark.[/quote]

PR, what you’re saying is that you’d rather cut off your nose to spite your face. Which is fine, but obviously I don’t share that view.

I’d like to see fairness and pain as well. After all, I loves me some schadenfreude. But how much pain is enough? Greenberg, Lewis, and most of these other former financial titans have probably seen their net worths dive by 80%-90% in this crisis. Granted, that’s down from very large numbers to begin with. But you’re not going to get EVERYTHING from them. It’s not going to happen. Most of these folks’ lifestyles will not be dramatically affected even if their companies go BK. You may not be happy to hear that, but it’s reality.

And the small speculators? They’re mostly dead or dying at this point. Done. And the folks that just bought too much house and are underwater? Even if they end up getting some “help” in the form of loan mods, that just brings them back from the brink. My point is that I don’t believe moral hazard is much of an issue at this point. Most of the folks that did the really dumb things are either wiped out or have seen a good 80%+ of their net worths wiped out. The pain has been deep and wide. Folks are scared. Which is a good thing. A necessary thing. Where we differ is that you apparently believe that we need to have Great Depression II – with all that entails – in order to properly punish the evil doers. I don’t. I’m not one to cut off my nose to spite my face.

[davelj]

[quote=patientrenter][quote=davelj]…My issue as a taxpayer and bank customer is that I want the least costly resolution to these huge problem banks…[/quote]

DaveLJ, for some of us, fairness is one of the most important goals of any resolution of this mess. I would prefer a very fair $15 trillion solution to an unfair $10 trillion solution. I’d prefer a solution that costs $5 trillion dollars more and administers lots more pain to the people who bought assets or goodies liberally on borrowed money or who assisted professionally in reckless lending, and delivers much less pain to the people who were restrained and refused to try to ride leverage to riches.

Otherwise, what’s the point in exercising self-restraint and good sense in the future? It just makes you a loser, an easy mark.[/quote]

PR, what you’re saying is that you’d rather cut off your nose to spite your face. Which is fine, but obviously I don’t share that view.

I’d like to see fairness and pain as well. After all, I loves me some schadenfreude. But how much pain is enough? Greenberg, Lewis, and most of these other former financial titans have probably seen their net worths dive by 80%-90% in this crisis. Granted, that’s down from very large numbers to begin with. But you’re not going to get EVERYTHING from them. It’s not going to happen. Most of these folks’ lifestyles will not be dramatically affected even if their companies go BK. You may not be happy to hear that, but it’s reality.

And the small speculators? They’re mostly dead or dying at this point. Done. And the folks that just bought too much house and are underwater? Even if they end up getting some “help” in the form of loan mods, that just brings them back from the brink. My point is that I don’t believe moral hazard is much of an issue at this point. Most of the folks that did the really dumb things are either wiped out or have seen a good 80%+ of their net worths wiped out. The pain has been deep and wide. Folks are scared. Which is a good thing. A necessary thing. Where we differ is that you apparently believe that we need to have Great Depression II – with all that entails – in order to properly punish the evil doers. I don’t. I’m not one to cut off my nose to spite my face.

[davelj]

[quote=patientrenter][quote=davelj]…My issue as a taxpayer and bank customer is that I want the least costly resolution to these huge problem banks…[/quote]

DaveLJ, for some of us, fairness is one of the most important goals of any resolution of this mess. I would prefer a very fair $15 trillion solution to an unfair $10 trillion solution. I’d prefer a solution that costs $5 trillion dollars more and administers lots more pain to the people who bought assets or goodies liberally on borrowed money or who assisted professionally in reckless lending, and delivers much less pain to the people who were restrained and refused to try to ride leverage to riches.

Otherwise, what’s the point in exercising self-restraint and good sense in the future? It just makes you a loser, an easy mark.[/quote]

PR, what you’re saying is that you’d rather cut off your nose to spite your face. Which is fine, but obviously I don’t share that view.

I’d like to see fairness and pain as well. After all, I loves me some schadenfreude. But how much pain is enough? Greenberg, Lewis, and most of these other former financial titans have probably seen their net worths dive by 80%-90% in this crisis. Granted, that’s down from very large numbers to begin with. But you’re not going to get EVERYTHING from them. It’s not going to happen. Most of these folks’ lifestyles will not be dramatically affected even if their companies go BK. You may not be happy to hear that, but it’s reality.

And the small speculators? They’re mostly dead or dying at this point. Done. And the folks that just bought too much house and are underwater? Even if they end up getting some “help” in the form of loan mods, that just brings them back from the brink. My point is that I don’t believe moral hazard is much of an issue at this point. Most of the folks that did the really dumb things are either wiped out or have seen a good 80%+ of their net worths wiped out. The pain has been deep and wide. Folks are scared. Which is a good thing. A necessary thing. Where we differ is that you apparently believe that we need to have Great Depression II – with all that entails – in order to properly punish the evil doers. I don’t. I’m not one to cut off my nose to spite my face.

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