Hi masaccio
ugh

It’s like hiring Blackwater do things the Army used to do, only much more expensive.

I can’t answer your question (why haven’t the assets been evaluated), but I assume part of the answer is that the banks holding them really don’t want anyone to know the actual value of their bad assets. As for who could evaluate them, I’d guess that the hundreds of well-run banks have people that could. They would reject 20% to 50% of the poorly written mortgages, buy the rest at discount, and eventually fill the void left by those institutions that were “too large to fail”, if we’d just let them fail.

Why does Geithner, or anyone responsible to taxpayers, think it makes sense to pay hedge funds to do this routine data-gathering task?

All depends on what you want the data to look like.

Why hasn’t this been done?

Because by whatever means BO’s chosen path has been use of Fed gov resources, as in all we got, to artificially pump up book value of all these bad assets (real estate). Just more of “free market” being market manipulation in favor of whatever those howling “free market” principles decide said principles should be.

Closer one looks, worse TALF appears… on every single level.

The criminals are still in charge!

Let us read tape!

note to Bilbo – can’t get Today Show link of the Orman/Taibbi interview to work – just keeps going back to another MSNBC page
linky

I posted it back yonder, it was Mornin Joe not Today.

Digg is open

Taibbi

Paul Krugman thinks it’s a bad idea if the taxpayers take all the risk (since there’s a deductible of how much the “players” can lose). I know little, but I smelled a rat at taxpayers buying “toxic assets”. Krugman said it will work like the Savings and Loan mess. He was on DemocracyNow this morning, making a lot of sense in easy English (which I need).
http://www.democracynow.org

This is what happens when you put a weasel in charge of the henhouse. I’m buying an extra mattress to stuff.

am listening now – muchas gracias !

Finding a solution to this problem is like finding that needle in a haystack
The financial systems are so intertwined that you can’t pin the blame on any one sector,pouring more tax payer funds into this system isn’t gonna solve a thing
I get the feeling the Fed is just using a trial and error approach hoping to hit on the right solution

The reason I see for hedge fund participation is to over bid on garbage and launder the money back to the bank and stick the taxpayer with the overpriced cost.

Banks own hedge funds. This is an money laundering operation.

I’ve posted this elsewhere, but I’ll say it again:

Were I running a hedge fund, I’d let banks set whatever prices they want for their toxic misunderstood assets, e.g., twice what they paid. All I’d ask for is a CDS that covers my 3% of the cost plus another 5% transaction fee. They’d wind up with a 100% profit from the taxpayers’ money, and I’d wind up owning the asset. On the up-side, I’d make money on the asset. And, on the down-side, I’d make a 5% commission. All with minimal risk. Sweet!

It’s capitalism and the revolution is right around the corner.

BO’s chosen path has been use of Fed gov resources, as in all we got, to artificially pump up book value of all these bad assets (real estate). Just more of “free market” being market manipulation in favor of whatever those howling “free market” principles decide said principles should be.

B b bu but that inteferes with the unseen hand and the miracle of free enterprise.

Mr Obama..these pages contain ‘more than just’ bullshit opinions. They point out the iceburg and it’s past time for a ‘full stop’. The abyss awaits the politically foolhardy that hang with bigshots and their criminal ways. Mr President….turn that economic ship around, save yourself and America.

It’s like hiring Blackwater do things the Army used to do, only much more expensive.

or in the case of crafting the solution – like Cheney’s Energy Task Force

the demons at Goldman’s must have been rolling on their bukhara’s laughing their asses off as they watched the unwashed protesting outside of AIG last week

Just watched Krugman, boy are we screwed

Thanks for that link. Matt Taibbi is one of my heroes these days. Who knew Rolling Stone was such a great mag? (Heh. My guess is that Raven knew!)

Here’s the original article in case anyone missed it:
http://www.rollingstone.com/po…..over/print

William Greider was their political writer for years, he wrote “Who Will Tell the People” about, what. 17 years ago?

An angry inquiry into the putative decline of democracy in the US. Unlike many observers, Greider (Secrets of the Temple, 1987, etc.) goes beyond the manifest deficiencies of electoral campaigns to focus on the politics of governance–and he concludes that so- called monied interests are ascendant in Washington’s power centers. By the author’s anecdotal account, the institutionalized intervention of these corporate advocates into administrative as well as legislative affairs costs ordinary citizens dearly–from purposefully lax enforcement of federal law and indulgent treatment of casino capitalism through an inequitable tax system. In Greider’s canon, the sorry state of the union does not lack for guilty parties. He blames the ebb of democracy in America on both major political parties (which cater to affluent elites), the press (which no longer mediates between the public and its representatives), big business (as exemplified by the awesome influence wielded by General Electric Co.), and even the populace (whose activism has been limited of late to grass-roots concerns). Greider goes on to argue that the cold war’s end offers the US a historic opportunity to renew its democratic principles and to apply them on a global basis. For starters, he proposes that a citizenry committed to challenging the status quo could make multinational enterprises more accountable to society at large, if need be by denying them access to the vast domestic marketplace until they measure up to populist standards of responsibility. Whether the heterogeneous American people have an agenda as explicitly progressive as Greider assumes (and embraces) will strike many as a very open question. Still, a provocative and sobering assessment of how self-government’s reach can exceed its grasp. — Copyright ©1992

As you point out, the mortgage data is easily handled. Use the database and separate wheat from chaff by institution. Buy the wheat & make the institutions post the chaff on the P&L. Too many loses, even after we bought the wheat, let the institution go bankrupt.

The answer is clear and it’s not going to change, but it will become more painful the longer we delay answering it.

We are avoiding putting a value on these assets because the value is declining with every passing moment.

Those who own these “assets” have yet to accept that they are worthless, because so far, they still see a slim chance of un-loading them on US tax-payers, with the help of Tim Geitner, Larry Summers, and unfortunately, it seems Barak Obama.

masaccio, thank you again for clear writing, and for distilling key issues.

I might be willing to give Geithner and the banksters the benefit of the doubt if they could explain to me the mathematical equations and formulas that underlie their gambles.

They won’t be able to do it.

And no member of Congress will ever actually ask Geithner, nor Libby, nor any of the banksters these questions: “Explain the mathematical equation(s) on which your CDOs and CDSs were based. Explain them to me. Show me how they actually work. Walk me through a couple of those Navier-Stokes equations and explain at every step how they operate, and why they don’t actually describe markets accurately.”

They won’t be able to do it.

We’ve become lost in a world of our own creations, but they are mostly creations that we do not understand.

Until we pull back the curtain on that simple, disturbing fact, we’ll continue to be held up by highly paid pretenders. Until we unmask the fact that many of these people are taking far too much on faith, without actually understanding what makes them work, we’ll continue to be in very big trouble.

Maybe we can recover our own humanity by making the world make sense again. It would certainly be more civil than what we’ve seen to date.

And it would be grounded in a kind of ‘craft knowledge’ that occurs when real people solve real problems because they actually know and understand what they are dealing with.

When that kind of ‘craft knowledge’ functions in the world, real people are phenomenally capable of addressing huge problems in truthful, coherent ways.

Well I’m 17 years late to that party. On top of meticulous research, Taibbi is a pleasure to read. Few writers can bring economics alive.

WHEN IS OBAMA GONA REALIZE THAT TIM GEITHNER DOES NOT HAVE OUR BEST INTEREST AT HEART HE HAS WALL ST. HOW LONG ARE WE GONNA LET THESE BANKS HOLD US HOSTAGE?

A mag that carried pieces by Hunter S Thompson for years can’t be anything but great.

as best as I can tell (reading the linked article) Golden Boy G is proposing that distressed “toxic” securities, presumably including the troubled ABSs and MBSs referenced in the post, should be repackaged (hybridized and reengineered) with lower risk, and presumably interest-bearing, components to be attached to them by regulatory action (the subsidies he references). The repackaged security will have lower risk and lower volality (as a result of the hybridized piece the guvmint plans to attach to them) and with a guaranteed- or near-guaranteed return component in addition to upside to the investor (hedge funds and the like).

Question 1:
what will the cost of these government-added features be? will it really be cheaper for the government to add these features as opposed to simply retiring the same $500 billion in toxics and financing that retirement by the issuance of good ole-fashioned US treasury securities?

Question 2:
what assurance will Mr. Geithner give us that the valuation of the new hybridized/subsidized securities will be “fair” to the taxpayers – in other words, that this isn’t just another giant giveaway to investors, where we socialize their risk and they keep all of the upside?

At a minimum, we must demand that an independent, comprehensive “fairness opinion” (a term of art used to refer to a legally binding valuation report) be prepared by the GAO on these new repackaged securities, and that any congressional action on the proposal be linked to a finding of “fairness” favorable to taxpayers.

By the way, I cannot see any “fairness” outcome, short of the outright tender for or seizure of the bad stuff and their replacement with good stuff (treasuries), that’ll work for taxpayers. Even in derivative-land, you cannot make good stuff out of thin air, so if the bad stuff is effectively worthless, you might as well buy them, retire them and issue new, clean stuff isntead.. to put it all very simplistically. Until somebody can convince me otherwise, I’m going to assume that this is just another huge scam to benefit the hedge funds.

Per the Rassmussen Reports, the political types love Geithner.

“Why hasn’t this been done? Why does Geithner, or anyone responsible to taxpayers, think it makes sense to pay hedge funds to do this routine data-gathering task?”

Fallacy is that NO ONE is “responsible to taxpayers”; There is a reason why ‘the right to petition grievances’ does NOT include the requirment to take action to address those grievances.

This says it all:
“Taxpayers are certain to lash out at the terms. They will get a share of the profits, if there are any. Investors will get a share of the profits, even if there aren’t any. Buyers also won’t be subject to executive-pay limits.(Can you say Goldman Sachs, Morgan Stanley?)

And this ’should’ tell everyone what is going on: “The details announced Monday would cover purchases of whole loans held by banks. Details about purchasing mortgage-backed securities will be announced later, after further discussions with banks and potential investors.”

I read some a couple of the articles on the use of the Gaussian Copula to evaluate these pools, and I can say that there were some black swans circulating overhead by the time I got done.

HOW LONG ARE WE GONNA LET THESE BANKS HOLD US HOSTAGE?

As long as they can sell the myth that we can base our economy on debt instead of manufacturing.

…

You’re still under the illusion that Obama is something other than a politician whose second largest source of funds came from Goldman Sachs.

From CNN:

He added that the stock market is also reacting well because the plan is skewed in favor of the private investor, who only has to be responsible for around 7% of the total in any transaction.

Instead of loaning money to hedge funds to buy the crap why not loan the money to “the taxpayers” to buy the crap. The taxpayers wouldn’t have to put up any of their real money so in the long run the taxpayers won’t lose any real money but could make a profit instead of the hedge funds. /s

Just as too big to fail should mean too big to exist, too complex to understand should mean too complex to do.

I suggested sampling tranches several months ago. We don’t need to get this stuff right down to the last cent, or even million, or even billion, but we can get sufficient information to make good decisions about what all this stuff is worth and consequently how much will be needed to relaunch a restructured system.

We have thousands of unemployed accountants out there. We have computers. We have computer programs. This is basically about number crunching. Even though CDOs can contain securities or pieces of securities other than mortgages the same approach applies.

The reason that this has not been done is, as we have seen happen so often in this, the banks and the government don’t want to come clean about the extent of the losses. So instead we see opacity marketed to us as transparency and we are offered a series of hare-brained bailouts because quite simply they don’t want us to know what is going on.

well hello, what’s happenin’ hot stuff ?

hmmmm I seem to remember some dfh grousing earlier in the day about the coming media Wall St Loves It ! circle jerk

looks like there’s some comic relief upstairs !

Until somebody can convince me otherwise, I’m going to assume that this is just another huge scam to benefit the hedge funds.

And the banks. It is my contention that the hedge funds are as bankrupt as the banks. It is only lack of transparency and over-valuing assets that keeps any of the players from having their underlying insolvency exposed.

What all these plans have in common is that they act as if by pushing the underlying risk around somehow it will go away. The truth is that is just being dumped on us.

He did pretty well with the 9/11 Truth Movement and Hagee’s Church in “the Great Derangement”.

Hugh, I’ve also concluded that the hedges are insolvent, and IMHO were using TARP to cover that fact. Along with banks. Not all of them, but enough to be a critical mass.

Also agree that DC can’t seem to come clean.
After all, their lives are also built on many of the same fictions that built Wall Street.

thanks, masaccio.

I’m sure you are slammed for time, but if you’ve not read this WIRED article on quants, when you have a few minutes, I think that you’d find it useful:
http://www.wired.com/techbiz/i…..3/wp_quant

Black Swans, indeed.
Along with an increasing number of vultures, of all nationalities.

I do, however, believe that the system can’t right itself until the illusions are stripped away. Many people have been going through this process now for months (or more), and I think the public is increasingly ready for competent, hands-on solutions over more delusion and high-tech enabled illusion.

And I say that as someone who uses computers **a lot**. The only times that I’ve ever found myself upside-down is when I’ve used something that I don’t understand; once I can understand it, things manage to untangle well enough.

I think this is also true in the larger world.

We have to strip out the illusion.
Once that’s done, the number of Black Swans is actually shockingly high.

banks and hedge funds are not sentient. they are organizations not individuals. this isn’t being done to benefit hedge funds or banks. this is being done by people who have been using the levers of banks, hedge funds, pension funds, etc. and our gov to amplify their own power in order to exert their own will.

but the house of cards that is called our global financial services industry is bankrupt (not every bit of it, but in aggregate i think it is).

obama and company may think they are trying to prop up the house of cards, but what it looks like to me is as if they have unlocked the treasury doors and left them opened wide – what we are now seeing is a free for all as the looters scramble and fight each other for as much as they can get while the getting is good.

the idea that we should just wait and see what the looters leave behind is preposterous.

Not only is Obama’s financial team shoveling money out the door faster than Bush, he’s imitating Bush by outsourcing the valuation of assets held by peers of the people doing the evaluating. An unreliable method and another wasteful use of public funds.

The inexperienced Mr. Obama is facing a George Bush problem. He’s relying on people he knows, we all do, and they in turn sell him on using people in their patronage networks. But now his economics team IS part of the problem, not the cure. They are perpetuating it along with their own jobs.

Mr. Obama had better deal with this deficiency quickly. He is quite capable of thinking outside the box. But he is acting as if he’s been put in a round room and told to sit in the corner.

Why hasn’t this been done? Why does Geithner, or anyone responsible to taxpayers, think it makes sense to pay hedge funds to do this routine data-gathering task?

Why indeed? Seems some people are still singing the Swedish mantra in defense of Geithner’s announcement. Like *cough* one finance person who breather fire fumes on me today.

Then my question is, how do I start my own hedge fund? Because it appears that’s the only way I’ll ever see a dime of the money at this point.

Apparently Geithner figured this out his own self, from the Treasury White Paper:

Institutions of all sizes will be eligible to sell assets under the Legacy Loans Program. To start the process, banks will identify to the FDIC the assets, typically a pool of loans, that they wish to sell. Assets eligible for purchase will be determined by the participating banking organizations, including the primary banking regulators, the FDIC, and the Treasury. In order to protect taxpayer dollars from credit losses, the FDIC will employ contractors to analyze the pools and will determine the level of debt to be issued by the PPIF that it is willing to guarantee.

Just watched Krugman, boy are we screwed

Republicans have been in charge, so that’s no surprise.
Question is whether we can fix things and Krugman’s opinion is but one.

We are avoiding putting a value on these assets because the value is declining with every passing moment.

I doubt that. As time passes there are more mortgages being fixed and more walkaways (amounting to a refinancing as they buy a new house), so the bottom of the housing market is closer (with a definite value for houses) and not an infinite time away (where houses are valued at zero).

Instead of loaning money to hedge funds to buy the crap why not loan the money to “the taxpayers” to buy the crap.

It’s impractical, the public wouldn’t know how to value these assets, the public couldn’t sit on them and (what with all the whining I’m reading lately) I’m guessing the public would complain they’re being required to buy a pile of shit they can’t evaluate.

The best subgroup of the public to buy these things are Wall St. firms who deal in such assets and understand better how to value these things and how much of their own assets to risk in buying them.

This is perhaps another reason the government isn’t simply buying them directly. We don’t think government is very good at business stuff, so Obama is simply saying we’ll stay away from that and let private firms do it.

Another thing is that if government bought them with treasuries that would inject a lot more debt than just underwriting the potential failures these private firms will face. Certainly that part of the results will be less than government taking it all on.

the idea that we should just wait and see what the looters leave behind is preposterous.

Count the silverware! LOL

But he is acting as if he’s been put in a round room and told to sit in the corner.

Some people say the Oval office was specifically designed to avoid the President being cornered. Ole.

Why hedge funds? Why not simply value the alleged assets? Because based on what you and your colleagues at FDL have written, it is pretty obvious that the entities involved–AIG, the investment banks, and now the hedge funds–have to keep the music playing so that no one stops and realizes that they’ve stolen all the chairs. As with any bankrupt business, there is money to be made as long as no one knows that the business is insolvent. So you need to kee up the appearnance of solvency for as long as possible, above all by keeping people away from the books.

The value of these “assets” when offered for sale is zero (or as close to it as does not matter). But the assets have been insured for lots more than zero using unregulated CDSs. As long as the assets aren’t fairly valued, the counterparties can collect on the insurance in the event of loss. So far we have a classic insurance fraud.

Only in this case the insurers have no actual reserves to cover the CDSs (if I understood the revelations about AIG’s offshore reinsurance scam). So the idea is to get the taxpayers to pay hedge funds to buy the “assets” at the price on the insurance policies, thus sustaining the imaginary value of the asset and the imaginary solvency of the banks.

The insurance scam is doubly good because the Treasury appears to be paying off the insurance without proof of its loss, much less proof of its value. Everybody Who Matters wins: the insured/counterparty gets paid and the asset still gets sold at an inflated price so that the bank gets paid.

If, as rumor has it, CDSs were bought by the same hedgefunds that are being paid to profit from the asset sales and by the same banks that got TARP bailouts and profit from what the hedge funds will pay (using taxpayer money), then we are seeing a massively compouned fraud that makes loan-shark levels of compound interest look positively anemic.

I think the hedge fund racket will have folded after all this, after most the cash is safely overseas.

So I think that, if we wanted to get rich, you and I would have to cash out whatever is left in the IRA and put it into one of those NRA innovative financial instruments-–something large caliber that will impress the folks in the gated communities during “naked” foreclosures and car repossessions (if you are wondering, remember that a naked CDS lets you insure and collect on property that you don’t own). Now that the banks are where the money isn’t, we’d need to diversify.

It should mean “too complex to actually exist”. Whenever complexity is offered as a reason for not explaining, I smell fraud. Most things are complex only in the details. An expert that knows something about the domain can reduce it to patterns, formulae, or rules of thumb that make it clear how things work at a high level. I’ve had experts in topology, superconductivity, and quantum mechanics explain their life’s work in a few cogent sentences–like listening to Mr. Krugman. But con artists always argue that they can’t explain and that you would’t understand.

Why can’t the public value a given asset? It’s called “selling a house” and it happens every day. All you need to do is find a way to separate a house from its CDO pool upon default & foreclosure, and then * poof * one less toxic mortgage in that CDO. The CDO becomes less toxic and less risky and its value increases because the uncertainty’s been shed.