George W. Bush’s Federal Reserve.

It’s important to note that all Bush really did was look at a list of approved candidates to replace Greenspan and pick one. The Fed’s chairmanship is not like any other political appointment. The list of candidates is created from the Fed’s board of governors (The shareholders of the bank), and given to the president to pick one. Most likely the president’s involvement is just a formality as there is only one person on that approved list. The Federal Reserve is completely independent of the Federal Government – there are plenty of laws on the books to keep it that way. For example, the Congress has no power to audit the Fed, nor does the Fed have to get any congressional approval to print money. Here is Rep. Ron Paul pointing that out in the exact same hearing.

There are 3 prices you need to keep in mind in all this. There is the face value. So if you got a million dollar mortgage on your mine, its face value would be $1 million.

There is the mark to market price. In a fully illiquid market for goldmines that reflected today’s housing market, this would be worth between zero and 25 cents on the dollar so we could say that at most your goldmine was worth $250,000.

Finally, if there had been a bubble in goldmines like our housing bubble, the real value of your goldmine pre-bubble would be about $600,000.

The problem we currently face is that banks are acting like their assets are worth their mark to market prices but are getting face value for them in their dealing with the Fed and Treasury.

A bank nationalization would allow the government to force banks to declare their insolvency and the value of their toxic assets at whatever value the government named. For me, the best assessment is the pre-bubble price. This would allow the government to recapitalize banks in a transparent way. It could use them to refinance mortgages at pre-bubble prices. It could get them to re-initiate normal lending practices eliminating the credit crunch, and it could break them up to prevent entities which are too monopolistic and too big to fail.

Daily fluctuations in the valuation of CDOs would be irrelevant to this process. Again you have to keep in mind that things are only worth what people are willing to pay for them and the only real buyer at the moment is the US government and the Fed.

Thank you, gs.

DW

Only the upper echelon and they’re the ones benefiting most.

i have a cousin who’s an accountant and works at a very big company – not a bank though, but one that does lots of business with the gov (mic). i’m going to ask him if that kind of thing could be kept from from the internal accountants who are responsible for reviewing the books. may not know, but will have a better clue than i.

People are definitely hoping that Obama has some decent ‘answers’, but many are beginning to worry that it will be more of the same old, same old.

The loss of trust in the financial system ought to lead to some thought regarding other things where ‘trust’ plays a role, from politics to military ‘adventures’.

My guess is that cogitation is definitely occurring, but that the visions of the future that are being offered, or will be offered, will be pinched and narrow, if not outright demogogic in nature.

This is the time to very seriously start sharing visions of a sustainable future, wherein it is recognized that humans do create their own times and that it is therefore incumbent upon us, all of us, to do so with the most courageous imagination and humanity that we can muster, or else the moment will be co-opted by the calculating and epiphitic sociopaths.

The recent financial ‘coup’ as Harvey aptly defines it, suggests that the neoliberals are still ‘winning’. Clearly they asre willing to destroy the world in order to have their own way.

People everywhere understand that.

Never, in my life, have I witnessed as much understanding.

It would be a terminal pity to let it go to waste.

It’s all a game of financial kabuki. The banks are insolvent. Their assets aren’t worth what they say they are, not even close to what they say they are. But as long as everyone pretends they are worth something then the Fed will treat them at full face value. The last thing any of them want is for somebody to come in and force either the banks or the Fed to admit publicly what is going on. The Fed would have to confess it has broken the law but knowingly accepting crap for dollars, and the banks would have to acknowledge their insolvency. It is the emperor’s new clothes all over again. As long as no one states the obvious, they hope to keep the whole thing going, not fix it, not reform it, just keep it going. It’s a deadend strategy but these are the same people who created the meltdown in all of its ignominious glory.

The assets are worth something substantial. It’s the mortgages (the toxic part of ‘toxic assets’) which are pretty much worthless.

Having to publicly state the value of those mortgages would be difficult since the asset backing them changes values daily and if the CDOs are ‘insured’ with Credit Default Swaps, then they truly do have value more than your implied ZERO.

The Fed has no problem (I wouldn’t think) admitting is has paid good money for toxic assets. The question for them, as a white knight, is whether they can fix those mortgages or refi them into something solid and resalable. It isn’t breaking the law for them to buy toxic assets. It was what they were originally supposed to do. The big problem is they can’t buy ALL of them to remove them from the public sector. So, instead, these bad mortgages have to be handled over time.

I don’t see them wanting to ‘keep it going’. It just that the Bush administration and banks have done what they could to prevent it from being fixed (see Sheila Bair’s FDIC program Paulson nixed). Actually, I think Bernanke is doing everything he can to fix problems and Obama’s team will join with him in that effort very soon. We might even see Bair’s plan go into effect since she’s been kept at FDIC.

Almost no one outside of maybe us here realize that Paulson’s plan to buy up crap assets was sidelined because the Fed was doing the same thing with far more money, far greater secrecy, and far less accountability.

i don’t think it would have ever occurred to me. but you’ve been writing about this for months, and of course it makes so many pieces of the puzzle fit that it seems obvious now (after having it pointed out a few dozen times *g*). for example, that bullshit story from npr’s planet money on how the tarp bill got modified (which makes me think that barney franks must know, or at least have a good clue, what’s going on).

so yes, what must be done now is to talk about it so much and in such a way that the M$M won’t be able to ignore the story. representative grayson has done a lot to advance the story – we can’t let up now.