From your lips to god’s (Paulson’s) ear!

Just in CNN now predicts Obama 277 electorial votes.

Yeehaa

http://www.cnn.com/ELECTION/2008/calculator/

From Bloomberg:
Banks Need Capital, Not Government Management: John M. Berry
From me:
Banks Need management, Not Government Capital.

If the taxpayers pay, the taxpayers own.

Good one Ian, I always like your posts.

Ian that was just brilliant.

Spotlight folks. And Digg

They crapped their pants when part of the deal was putting a cap on the outrageous salaries and options they give to the bums who run these banks into the ground and then walk away Scot free.

Suck it up while you can you bastards, before there is someone from the FDIC is there to see you escorted out of the building.

as if

Thanks Ian.

Bullseye!

digg

The thing is that other than forbidding golden parachutes, the exec comp limits were pretty mild. You just:

a) had to pay taxes on them
b) had to give it back if your accounting was found to be a lie.

I think (b) may have been the real issue, (a) is a joke, who cares if you have to pay tax, just increase the amount.

I think he may have done something like that today (without going as far as is needed - but that pattern).

He told them to sign up for the plan or don’t come begging later and they all said where is the pen.

I agree they have to do more to make the plan clear and to make it clear that its one way or you are on your own with massive regulation and we will come in and clear house.

I think you (or at least others pointed this out) - they want to make more free money, but if a bank can’t lend money what is the point.

I demand equity!

Thanks Ian.

Bullseye!

digg

and upvote on reddit

I demand my share of the bailout, gotta fix my sump pump

Thanks for the post, Ian.

Ian, please feel very free to ignore this off topic and rather unfocussed question. I am wondering if we’re reaping the “unintended consequences” of the law of the junge aka too much permissiveness. I am hearing that no one trusts anyone else’s accounting. Is that fear/paralysis exacerbated by the absence of enforcement from teh SEC and bank regulators? Is that further exacerbated by neocon federal judges who are hate trial attorneys?

OT
Their talking on CNN about why McCain was so behind in the polls. When asked if Palin was bringing McCain’s numbers down Bill Bennett said remember how she energized the base, McCain could never have energized the base with out her. They still don’t get it. If McCain had an ounce of maverick in him he would have shrugged off the extreme right that has a hold of the GOP by the balls and he could have steered the party back out of the gutter.The right wings would never had let him “cross the isle” and work with the other side. Now their party will have to build back up from scratch and it will take years. The right don’t have enough power and they never really did. The last 2 elections were stole not won!

As many CEO serve on others Boards, what’s to prevent back door deals where Banks holding bad derivatives/debt, sell them at face value to their more insecure brethren, who must accept the bail out? Taadaa, everyone wins except us.

Maybe they are waiting to cook their books some more. Maybe they are waiting to see who wins the debate. Maybe they thought their side could steal the election and since Obama’s has such a huge lead they are having to accept defeat and know there will be investigations.

They all know they’re lying, so they know everyone else is too.

Lying is perhaps too strong a word (perhaps not). Everyone thinks mark to market is great, but in illiquid markets it’s actually very gameable. I you are the only person with the product, you sell it once at inflated prices, then book the rest at that cost, right? They used to love mark to market because it could be gamed so easily.

That’s why I had Paulson say “I will instruct the TARP program to not buy any assets you own, or any assets you sell to anyone else from this moment on”

ie. you can’t launder.

Much appreciated.

Actually, I think you’re on to something. They aren’t going to get a better deal than they’ll get from Paulson, basically. I don’t think Obama will follow policies on this that I love, but I’m pretty sure he won’t be half as lenient as Bush and Paulson. And they know it. Time to take the best terms they can get, while they can. Obama would probably make them issue Buffett shares.

Will McCain be too medicated to meltdown on camera tonight?

unfortunately, yes.

The stock market took a dive today so much for this latest iteration of the Paulson plan. $125 billion to his biggest, bestest buds in banks and well Goldman Sachs doesn’t amount to a recapitalization of the banking system. And as I keep saying recapitalization is only one element of a comprehensive approach to the meltdown which must include re-regulation, help for homeowners, nullification of most derivatives, and bank insolvency.

Interesting. On the one hand we have a financial crisis of essentially unknown dimension that may be too big to unwind without the Masters of the Universe being exposed for the reckless lying honorless do-whatever-it-takes they truly are. On the other hand, we have a Constitutional crisis of essentially unknown dimension that may be too big to unwind without the Bush adminstration being exposed for the reckless lying honorless do-whatever-it-takes they truly are. Both sides more than willing to accept any given amount of collateral damage in their battle to hang onto their present eminence, even if they’re willing to accept the loss of wealth and power. So if McSame does not become presnit, there’ll be ten kinds of hell to pay on both sides… and soon.

Seeing as a lot of Democrats signed off on both, it is debatable how much hell they are really willing to unleash.

SPREADING THE VIRUS
HOW ACORN & ITS DEM ALLIES BUILT THE MORTGAGE DISASTER
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By STANLEY KURTZ
Still pushing to protect junk mortgages at any cost: ACORN continues to march and rally to get Congress to support its radical agenda, as with this demonstration in Washington, DC, in March.Posted: 4:09 am
October 13, 2008

TO discover the roots of to day’s economic crisis, consider a tale from 1995.

That March, House Speaker Newt Gingrich was scheduled to address a meeting of county commissioners at the Washington Hilton. But, first, some 500 protesters from the Association of Community Organizations for Reform Now (ACORN) poured into the ballroom from both the kitchen and the main entrance.

Hotel staffers who tried to block them were quickly overwhelmed by demonstrators chanting, “Nuke Newt!” and “We want Newt!” Jamming the aisles, carrying bullhorns and taunting the assembled county commissioners, demonstrators swiftly took over the head table and commandeered the microphone, sending two members of Congress scurrying.

The demonstrators’ target, Gingrich, hadn’t yet arrived - and his speech was cancelled. When the cancellation was announced, ACORN’s foot soldiers cheered.

Editorial writers from Little Rock to Buffalo condemned ACORN’s action as an affront to both civility and freedom of speech. Editorialists also pointed out that the “spending cuts” the protesters railed against were imaginary - Gingrich proposed merely to slow the growth in some welfare programs and turn control back to the states.

Yet ACORN had only just begun. Two days later, 50 to 100 of the same protesters hit their main target - a House Banking subcommittee considering changes to the Community Reinvestment Act, a law that allows groups like ACORN to force banks into making high-risk loans to low-credit customers.

The CRA’s ostensible purpose is to prevent banks from discriminating against minorities. But Rep. Marge Roukema (R-NJ), who chaired the subcommittee, was worried that charges of discrimination had become an excuse for lowering credit standards. She warned that new, Democrat-proposed CRA regulations could amount to an illegal quota system.

FOR years, ACORN had combined manipulation of the CRA with intimidation-protest tactics to force banks to lower credit standards. Its crusade, with help from Democrats in Congress, to push these high-risk “subprime” loans on banks is at the root of today’s economic meltdown.

When the role of ACORN and congressional Democrats in the mortgage crisis is pointed out, Democrats reply that banks subject to the CRA represent only about a quarter of the loans that led to our current troubles. In fact, the problem goes way beyond the CRA.

As ACORN ran its campaigns against local banks, it quickly hit a roadblock. Banks would tell ACORN they could afford to reduce their credit standards by only a little - since Fannie Mae and Freddie Mac, the federal mortgage giants, refused to buy up those risky loans for sale on the “secondary market.”

That is, the CRA wasn’t enough. Unless Fannie and Freddie were willing to relax their credit standards as well, local banks would never make home loans to customers with bad credit histories or with too little money for a downpayment.

Forrest Gump on the financial crisis.

Mortgage Backed Securities are like boxes of chocolates. Criminals on Wall Street steal chocolates from the boxes and replace them with turds. Their criminal buddies at Standard & Poor rate these boxes AAA Investment Grade chocolates. These boxes are then sold all over the world to investors. Eventually somebody bites into a turd and discovers the crime. Suddenly nobody trusts American chocolates anymore worldwide.

Hank Paulson now wants the American taxpayers to buy and hold all these turd-infested boxes for $700 billion dollars until the turd market returns to normal. Meanwhile, Hank’s buddies, the Wall Street criminals who stole all the good chocolates are not being investigated, arrested, or indicted.

Mama always said: ‘Sniff the chocolates first, Forrest’.

I think this works for banks and bankers as well.

Investigate, indite, convict.

Criminals who steal belong behind bars. Personally I think the bankers, the politicians, and the administrations prosecutors, torturers, and givers of legal openions on unitary executive should all share the same cell block.

Bank Welfare….why wasn’t that in my college economicas books?
Hi Ian 733 point loss equals a cool trillion dollars of equity wiped out today and Paulson knows what he is doiing…no he is way in over his head. This takes what you suggested yesterday….restructuring the economy with FDR type programs. as strong social safety net and a massive job program for sustainable energy industry.

Ian…Thank you for all the effort you are putting into this.

CRA loans defaulted at a lower rate than non CRA loans. End of story.

thanks for post. Paulson Mark II is very odd. Wells Fargo needs recapitalization? Does it? Really? Let me know how?

The crony capitalism and ultra free market fundamentalism runs so deep in their bones, they just cannot do the sensible thing.

I think Paulson and the administration just cannot admit to themselves that the whole unregulated unsupervised mortgage backed securities system is rotten. Produces a chronic market for lemons problem due to lack of transparency, unworkable complexity in the securities and unregulated, unknown and extreme leverage. Un-evaluatable securities and extreme leverage lead to unknown risks credit risks in own institution and partners. Add inability of mortgage securitization to deal with anything on real asset market other than continuous increase in house prices and increase in sales volume. Result, spontaneous market magic that just stopped one day and cannot start itself up one day.

What Paulson is doing is not the UK and growing number of European countries are doing. Equity with no control at all, and no clear rules or standards for determining solvency, along with government guarantees will result in more moral hazard where it is most dangerous.

Better to have formulated a good plan for coming financial institution insolvencies (triage, write-downs, and equity stake with some control, or at leas guards agains moral hazard) than this. Better a new HOLC than this.

I guess we are doomed to try the Japan 1990s route at least until a new administration comes in. Let’s see if courtly ol’ economic illiterate Bob can derail that tonight, then we can get ready for 10 years of chronic recession with McCain.

Also, economic stimulus for real economy is essential now. Recession in real economy will be seen to have started before start of financial panic.

Do we know how much of contraction in credit market is due to financial panic now, and now much due to recession in real economy. I do not see how we would know.

The longer they wait to use sensible, the historically proven, approaches, the more lost they become.

Interesting to see whether this crisis revives structural theories of recession and depression? As any of the market magic theories of the Great Depression held up well for this crisis. Like the idea that if only Bernanke had gotten the governemnt liquidity spigot just right, it would have fixed things? I don’t think so. Will have take another look at coordination failures, income distribution and hidden systematic risk in securities markets again. Free market fundamentalism is taking a big hit from this. A very large chunk of decades of neoclassical Great Depression economist theorizing saying that it was the gummint’s fault is going down in flames bigtime.