On MTM, insolvency, and market over-corrections

[davelj]

[quote=barnaby33]

The problem is we can pretty accurately know what it will cost to make depositors whole, but the stealth bailouts with no transparency have no practical upper limit.

… as taxpayers we don’t have any idea how big the CDS books of these banks are, or how many banks the Fed is going to bailout.
Josh[/quote]

Josh, these two statements are completely incompatible. On the one hand you say that we know what it will cost to make depositors whole and yet on the other hand you say that we don’t have any idea how big the CDS books of the banks are. If we don’t know the value of the CDS books, how can we know what it will cost to make depositors whole? That makes absolutely zero sense.

My point is, hey, let’s STOP putting more money into these pigs, treat them like government entities for a few years, and let the earnings of the good parts of the bank fill the holes at the bad parts. The equity holders are hosed regardless. But why have a fire sale of assets when it’s the taxpayers and bank customers who will be subsidizing the profits of Wall Street and PE firms? That seems like adding insult to injury. But, hey, some folks are masochists.

[TheBreeze]

[quote=davelj]

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.

[/quote]

Whoah, whoah, whoah! I’ve seen some circular arguments in my day but this one takes the cake. The only reason the big banks can meet their obligations is because the short-term debt that has to be rolled over occasionally has been guaranteed by the government. Otherwise, creditors would not re-extend that credit and the big banks would be the very definition of insolvent — they couldn’t meet their obligations.

This is exactly what happened to Bear Stearns. I guess you would argue that Bear Stearns wasn’t insolvent, they just ran out of liquidity.

[TheBreeze]

[quote=davelj]

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.

[/quote]

Whoah, whoah, whoah! I’ve seen some circular arguments in my day but this one takes the cake. The only reason the big banks can meet their obligations is because the short-term debt that has to be rolled over occasionally has been guaranteed by the government. Otherwise, creditors would not re-extend that credit and the big banks would be the very definition of insolvent — they couldn’t meet their obligations.

This is exactly what happened to Bear Stearns. I guess you would argue that Bear Stearns wasn’t insolvent, they just ran out of liquidity.

[TheBreeze]

[quote=davelj]

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.

[/quote]

Whoah, whoah, whoah! I’ve seen some circular arguments in my day but this one takes the cake. The only reason the big banks can meet their obligations is because the short-term debt that has to be rolled over occasionally has been guaranteed by the government. Otherwise, creditors would not re-extend that credit and the big banks would be the very definition of insolvent — they couldn’t meet their obligations.

This is exactly what happened to Bear Stearns. I guess you would argue that Bear Stearns wasn’t insolvent, they just ran out of liquidity.

[TheBreeze]

[quote=davelj]

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.

[/quote]

Whoah, whoah, whoah! I’ve seen some circular arguments in my day but this one takes the cake. The only reason the big banks can meet their obligations is because the short-term debt that has to be rolled over occasionally has been guaranteed by the government. Otherwise, creditors would not re-extend that credit and the big banks would be the very definition of insolvent — they couldn’t meet their obligations.

This is exactly what happened to Bear Stearns. I guess you would argue that Bear Stearns wasn’t insolvent, they just ran out of liquidity.

[TheBreeze]

[quote=davelj]

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.

[/quote]

Whoah, whoah, whoah! I’ve seen some circular arguments in my day but this one takes the cake. The only reason the big banks can meet their obligations is because the short-term debt that has to be rolled over occasionally has been guaranteed by the government. Otherwise, creditors would not re-extend that credit and the big banks would be the very definition of insolvent — they couldn’t meet their obligations.

This is exactly what happened to Bear Stearns. I guess you would argue that Bear Stearns wasn’t insolvent, they just ran out of liquidity.

[davelj]

[quote=TheBreeze][quote=davelj]

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.

[/quote]

Whoah, whoah, whoah! I’ve seen some circular arguments in my day but this one takes the cake. The only reason the big banks can meet their obligations is because the short-term debt that has to be rolled over occasionally has been guaranteed by the government. Otherwise, creditors would not re-extend that credit and the big banks would be the very definition of insolvent — they couldn’t meet their obligations.

This is exactly what happened to Bear Stearns. I guess you would argue that Bear Stearns wasn’t insolvent, they just ran out of liquidity. [/quote]

Breeze, for christ’s sake. Bear Stearns WASN’T A BANK! It had no deposits. It was entirely funded with debt. It was an INVESTMENT BANK. You do understand the difference between a commercial bank and an investment bank, don’t you? Yes, even the big commercial banks have short-term debt that needs to be rolled over, but it’s TINY in relation to their total funding base. It’s largely the investment banks that have the short-term debt issues. Yeah, Bear was insolvent. But, actually, even Bear probably could have eventually earned its way out of its problems… but it would have been too far down the road for it to matter. Bear probably needed to be shot. As well as Lehman, as unpopular as that is to say at this point.

[davelj]

[quote=TheBreeze][quote=davelj]

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.

[/quote]

Whoah, whoah, whoah! I’ve seen some circular arguments in my day but this one takes the cake. The only reason the big banks can meet their obligations is because the short-term debt that has to be rolled over occasionally has been guaranteed by the government. Otherwise, creditors would not re-extend that credit and the big banks would be the very definition of insolvent — they couldn’t meet their obligations.

This is exactly what happened to Bear Stearns. I guess you would argue that Bear Stearns wasn’t insolvent, they just ran out of liquidity. [/quote]

Breeze, for christ’s sake. Bear Stearns WASN’T A BANK! It had no deposits. It was entirely funded with debt. It was an INVESTMENT BANK. You do understand the difference between a commercial bank and an investment bank, don’t you? Yes, even the big commercial banks have short-term debt that needs to be rolled over, but it’s TINY in relation to their total funding base. It’s largely the investment banks that have the short-term debt issues. Yeah, Bear was insolvent. But, actually, even Bear probably could have eventually earned its way out of its problems… but it would have been too far down the road for it to matter. Bear probably needed to be shot. As well as Lehman, as unpopular as that is to say at this point.

[davelj]

[quote=TheBreeze][quote=davelj]

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.

[/quote]

Whoah, whoah, whoah! I’ve seen some circular arguments in my day but this one takes the cake. The only reason the big banks can meet their obligations is because the short-term debt that has to be rolled over occasionally has been guaranteed by the government. Otherwise, creditors would not re-extend that credit and the big banks would be the very definition of insolvent — they couldn’t meet their obligations.

This is exactly what happened to Bear Stearns. I guess you would argue that Bear Stearns wasn’t insolvent, they just ran out of liquidity. [/quote]

Breeze, for christ’s sake. Bear Stearns WASN’T A BANK! It had no deposits. It was entirely funded with debt. It was an INVESTMENT BANK. You do understand the difference between a commercial bank and an investment bank, don’t you? Yes, even the big commercial banks have short-term debt that needs to be rolled over, but it’s TINY in relation to their total funding base. It’s largely the investment banks that have the short-term debt issues. Yeah, Bear was insolvent. But, actually, even Bear probably could have eventually earned its way out of its problems… but it would have been too far down the road for it to matter. Bear probably needed to be shot. As well as Lehman, as unpopular as that is to say at this point.

[davelj]

[quote=TheBreeze][quote=davelj]

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.

[/quote]

Whoah, whoah, whoah! I’ve seen some circular arguments in my day but this one takes the cake. The only reason the big banks can meet their obligations is because the short-term debt that has to be rolled over occasionally has been guaranteed by the government. Otherwise, creditors would not re-extend that credit and the big banks would be the very definition of insolvent — they couldn’t meet their obligations.

This is exactly what happened to Bear Stearns. I guess you would argue that Bear Stearns wasn’t insolvent, they just ran out of liquidity. [/quote]

Breeze, for christ’s sake. Bear Stearns WASN’T A BANK! It had no deposits. It was entirely funded with debt. It was an INVESTMENT BANK. You do understand the difference between a commercial bank and an investment bank, don’t you? Yes, even the big commercial banks have short-term debt that needs to be rolled over, but it’s TINY in relation to their total funding base. It’s largely the investment banks that have the short-term debt issues. Yeah, Bear was insolvent. But, actually, even Bear probably could have eventually earned its way out of its problems… but it would have been too far down the road for it to matter. Bear probably needed to be shot. As well as Lehman, as unpopular as that is to say at this point.

[davelj]

[quote=TheBreeze][quote=davelj]

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.

[/quote]

Whoah, whoah, whoah! I’ve seen some circular arguments in my day but this one takes the cake. The only reason the big banks can meet their obligations is because the short-term debt that has to be rolled over occasionally has been guaranteed by the government. Otherwise, creditors would not re-extend that credit and the big banks would be the very definition of insolvent — they couldn’t meet their obligations.

This is exactly what happened to Bear Stearns. I guess you would argue that Bear Stearns wasn’t insolvent, they just ran out of liquidity. [/quote]

Breeze, for christ’s sake. Bear Stearns WASN’T A BANK! It had no deposits. It was entirely funded with debt. It was an INVESTMENT BANK. You do understand the difference between a commercial bank and an investment bank, don’t you? Yes, even the big commercial banks have short-term debt that needs to be rolled over, but it’s TINY in relation to their total funding base. It’s largely the investment banks that have the short-term debt issues. Yeah, Bear was insolvent. But, actually, even Bear probably could have eventually earned its way out of its problems… but it would have been too far down the road for it to matter. Bear probably needed to be shot. As well as Lehman, as unpopular as that is to say at this point.

[Allan from Fallbrook]

Dave: “Never teach a pig to sing. It wastes your time and it annoys the pig”.

Don’t get into an argument with Breezie. For one thing, he doesn’t have the first clue how to construct a factually based, coherent argument. He reads articles by Michael Shedlock, or Fleck or Krugman and then runs back here and regurgitates what he’s read and pretty much without understanding any of it.

Then, when called on the facts (or lack thereof), he resorts to thin strawman arguments or ad hominem. You’re going to find yourself going down the rabbit hole with this mental bantamweight. Trust me, it ain’t worth it. His inability to understand that Bear Stearns was an investment bank underscores my point. You’re trying to discuss finance and banking with someone that probably doesn’t know how to balance a checkbook.

[Allan from Fallbrook]

Dave: “Never teach a pig to sing. It wastes your time and it annoys the pig”.

Don’t get into an argument with Breezie. For one thing, he doesn’t have the first clue how to construct a factually based, coherent argument. He reads articles by Michael Shedlock, or Fleck or Krugman and then runs back here and regurgitates what he’s read and pretty much without understanding any of it.

Then, when called on the facts (or lack thereof), he resorts to thin strawman arguments or ad hominem. You’re going to find yourself going down the rabbit hole with this mental bantamweight. Trust me, it ain’t worth it. His inability to understand that Bear Stearns was an investment bank underscores my point. You’re trying to discuss finance and banking with someone that probably doesn’t know how to balance a checkbook.

[Allan from Fallbrook]

Dave: “Never teach a pig to sing. It wastes your time and it annoys the pig”.

Don’t get into an argument with Breezie. For one thing, he doesn’t have the first clue how to construct a factually based, coherent argument. He reads articles by Michael Shedlock, or Fleck or Krugman and then runs back here and regurgitates what he’s read and pretty much without understanding any of it.

Then, when called on the facts (or lack thereof), he resorts to thin strawman arguments or ad hominem. You’re going to find yourself going down the rabbit hole with this mental bantamweight. Trust me, it ain’t worth it. His inability to understand that Bear Stearns was an investment bank underscores my point. You’re trying to discuss finance and banking with someone that probably doesn’t know how to balance a checkbook.

[Allan from Fallbrook]

Dave: “Never teach a pig to sing. It wastes your time and it annoys the pig”.

Don’t get into an argument with Breezie. For one thing, he doesn’t have the first clue how to construct a factually based, coherent argument. He reads articles by Michael Shedlock, or Fleck or Krugman and then runs back here and regurgitates what he’s read and pretty much without understanding any of it.

Then, when called on the facts (or lack thereof), he resorts to thin strawman arguments or ad hominem. You’re going to find yourself going down the rabbit hole with this mental bantamweight. Trust me, it ain’t worth it. His inability to understand that Bear Stearns was an investment bank underscores my point. You’re trying to discuss finance and banking with someone that probably doesn’t know how to balance a checkbook.

[Author]

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