… Do not be fooled. The $700 billion (ultimately $1 trillion or more) bailout is not predominantly for mortgages and homeowners. Instead, the bailout is for mortgage-backed securities. In fact, some versions of these instruments are imaginary derivatives. These claims overlap on the same types of mortgages. Many financial institutions wrote claims over the same mortgages, and these are the majority of claims that have “gone bad.” …
Comments? I’ll be the first to admit this level of economics is a bit above the micro/macro that I took in college.
Expires tomorrow. Shorts will be able to get in Thursday. I would expect an extension near closing today.
As for Lehman, I wouldn’t buy it now. I played it as a true “dead cat bounce.” Ultimately, FRE and FNM have the full faith and credit of the US Gov’t behind them. They aren’t going away. The LEHMQ stock is ultimately worthless. They have enough higher priority claims on their assets that teh stockholders are going to inevitably get nothing, or maybe a penny or 2 a share. It only went up from 13 cents to 25-35 because people are speculating heavily. Eventually, it will go to 0. Day trading to play a quick dip might be the only option for that dead cat.
I know you hate hearing about Ron Paul but, he and Peter have been talking about this false or fiction values based on derivitives.
It really is insane.
This crisis is now about availability of credit to millions of small businesses on main st and the businesses they do business with. That’s where the economic meltdown will come from. That’s why the government buyout to right the financial institutions balance sheets is necessary.
Most of corporate america functions on revolving lines of credit. From a business perspective it doesn’t make sense growth wise to hoard cash. Unfortunately that means that if the credit market dries up (like it’s doing) it effects just about the entire country. Debt based growth son. One of the worst perpetuated financial assumptions is that debt is bad. Over leveraging anything is bad, but using debt effectively is incredibly smart; you’re just relying on the credit market not melting down (a pretty low risk gamble bc if credit markets freeze this country will have much bigger things to worry about)
The problem is if they bail out all these companies who went under from being greedy and having bad buisness practices, whats to say they will not do the same thing again, and crash again, thus we are right back to where we started?
yes but the problem is they gave credit to people who could not afford it. In their greed they dug themselves a hole and can’t get out. There should have been a better checks and balance system to ensure this would not happen. Its like if you’re really wealthy and you loan 99% of your money out with ridiculous interest rates to people who can’t even afford a sandwich. Then when you try to collect, nobody can afford to pay, and you’re fucked.
That’s why you institute REGULATION. It is the job of financial co. managers to make as much profit as possible, it’s the job of regulatory agencies to make sure they’re not risking the economy while they do it. Unfortunately there was only one half of this equation at work.
THIS BAILOUT IS MORE THAN SAVING THESE COMPANIES, IT’S ABOUT SAVING EVERY BUSINESS THAT RELIES ON CREDIT.
IF CREDIT TOTALLY FREEZES MOST OF YOU WILL NOT RECEIVE PAYCHECKS. PERIOD. Seriously, go ask your boss how much of your company relies on it’s line of credit. Then call all of your companies customers and ask them if they use credit to purchase your goods & services. Unless everyone says they’re all cash not passing this rescue package will effect you in a negative way.
At time of crisis, the congress will not be in session to resolve the
rescue bill but to go into recess to celebrate Jewish new year. That
is just great.
On the money. We issue internal credit financed by our lines of credit with our banks. I could get a 200K order today and my company will tell me to fuck off and that they can’t do anything about it. Our credit has already tightened to a pinch. I for one definitely understand how this works out as it will cost me money in my pocket in the end.
Who do you think employs those people? This isn’t “Oh noes I can’t get a credit card anymore” this is “Oh fuck I just got laid off b/c the company I work for can’t function anymore” and this goes from Small Businesses all the way to the biggest corporations in the country.
Then since there’s no consumer side credit either they’re living off whatever savings they have, which means the deposit bases at banks go lower and BOOM credit is EVEN TIGHTER.