. September 16, 2008 SouthAmerica: I was watching CNBC cable today and I could not believe the people that they bring to put some spin on what is happening in the US financial markets and the financial crisis that is spreading around the world. Some woman was trying to make a case for the Federal Reserve to cut the Fed Funds rate by ¼ or ½ point. Here I am thinking this massive financial meltdown has to do with leverage of 30 to 1 and 60 to 1 and this silly woman is making a case for cut of ¼ or ½ percentage point in the fed funds rate. I am thinking to myself please take this woman away because she is insulting my intelligence. The other idiot that they had on the show donât want financial institutions to write down stuff that they are carrying on their books at cost when the current value of the garbage is probably 90 percent lower. This guy wants the financial institutions to keep the garbage on their books at garbage values instead of starting the process of cleaning up the US financial system. Let me give you a visual example of what we are talking about: I have been seeing the television images of the devastation caused by Hurricane Ike in Galveston, TX - some areas of that city has been completely devastated and where they used to have a house now they have on debris. Basically what this fellow is suggesting is that the financial institutions be allowed to keep the value of those houses on their books as if the houses were intact. What an idiot. I wonder why so many idiots ended up in Wall Street? .
. October 2, 2008 SouthAmerica: After watching Warren Buffett being interviewed on the Charlie Rose Show - I posted the following in the comments section of that TV show. I just watched Charlie Rose interview Warren Buffet the richest man in the United States and he almost begged that Congress pass the Wall Street bailout. Warren Buffet looked desperate about this Wall Street bailout, and he even suggested that Congress should give Treasure Secretary Paulson a blank check probably for him to use it trying to stop a meltdown in the derivatives market related to the tsunami of redemptions that is affecting the $ 3 trillion dollar Hedge Fund industry and these guys are loaded with all kinds of derivatives instruments â that is why Secretary Paulson want the authority to buy any type of financial instruments since he already placed the orders to buy $ 700 billion dollars of toxic derivatives that just God knows if these instruments are already completely worthless at this point â and the derivatives market an unregulated $ 62 trillion dollar financial weapon of mass destruction that has exploded â and nobody knows what kind of toxic fallout is underway that is going to infect the entire global financial system. After the new administration assumes office in January 2009 then they can request for another $ 1 trillion dollars to bailout the real estate market. The current $ 700 billion dollars Wall Street bailout is going to disappear very quickly into the derivatives black-hole. I worked for John M. Templeton for a number of years and learned a lot about his economic and investment philosophy and over the years I thought that Warren Buffett also had some similar beliefs â I am surprised that Warren Buffett is going around giving support to a bailout plan that is stupid and irresponsible and goes against all the economic philosophy that has made this country great. I am disappointed of Mr. Buffett latest positions because Warren Buffett understands more than anybody else that this deep recession is the way that a capitalist society adjust the entire system and clean up the system of all the distortions that has been accumulated over the years â that is how the system cleanse itself and moves forward. .
Here is a better one. Sounds familiar? Recapitalise the banking system By George Soros Published: October 1 2008 02:05 | Last updated: October 1 2008 02:05 The emergency legislation currently before Congress was ill-conceived â or more accurately, not conceived at all. As Congress tried to improve what Treasury originally requested, an amalgam plan has emerged that consists of Treasuryâs original Troubled Asset Relief Programme (Tarp) and a quite different capital infusion programme in which the government invests and stabilises weakened banks and profits from the economyâs eventual improvement. The capital infusion approach will cost tax payers less in future years, and may even make money for them. Two weeks ago the Treasury did not have a plan ready â that is why it had to ask for total discretion in spending the money. But the general idea was to bring relief to the banking system by relieving banks of their toxic securities and parking them in a government-owned fund so that they would not be dumped on the market at distressed prices. With the value of their investments stabilised, banks would then be able to raise equity capital. The idea was fraught with difficulties. The toxic securities in question are not homogenous and in any auction process the sellers are liable to dump the dregs on to the government fund. Moreover, the scheme addresses only one half of the underlying problem â the lack of credit availability. It does very little to enable house owners to meet their mortgage obligations and it does not address the foreclosure problem. With house prices not yet at the bottom, if the government bids up the price of mortgage backed securities, the taxpayers are liable to loose; but if the government does not pay up, the banking system does not experience much relief and cannot attract equity capital from the private sector. A scheme so heavily favouring Wall Street over Main Street was politically unacceptable. It was tweaked by the Democrats, who hold the upper hand, so that it penalises the financial institutions that seek to take advantage of it. The Republicans did not want to be left behind and imposed a requirement that the tendered securities should be insured against loss at the expense of the tendering institution. The rescue package as it is now constituted is an amalgam of multiple approaches. There is now a real danger that the asset purchase programme will not be fully utilised because of the onerous conditions attached to it. Different focus âTarpâs adverse consequences could be mitigated by using taxpayersâ funds more effectively. If Tarp invested in preference shares with warrants attached, private investors, including me, would jump at the opportunityâ Nevertheless, a rescue package was desperately needed and, in spite of its shortcomings, it would change the course of events. As late as last Monday, September 22, Treasury secretary Hank Paulson hoped to avoid using taxpayersâ money; that is why he allowed Lehman Brothers to fail. Tarp establishes the principle that public funds are needed and if the present programme does not work, other programmes will be instituted. We will have crossed the Rubicon. Since Tarp was ill-conceived, it is liable to arouse a negative response from Americaâs creditors. They would see it as an attempt to inflate away the debt. The dollar is liable to come under renewed pressure and the government will have to pay more for its debt, especially at the long end. These adverse consequences could be mitigated by using taxpayersâ funds more effectively. Instead of just purchasing troubled assets the bulk of the funds ought to be used to recapitalise the banking system. Funds injected at the equity level are more high-powered than funds used at the balance sheet level by a minimal factor of twelve - effectively giving the government $8,400bn to re-ignite the flow of credit. In practice, the effect would be even greater because the injection of government funds would also attract private capital. The result would be more economic recovery and the chance for taxpayers to profit from the recovery. This is how it would work. The Treasury secretary would rely on bank examiners rather than delegate implementation of Tarp to Wall Street firms. The bank examiners would establish how much additional equity capital each bank needs in order to be properly capitalised according to existing capital requirements. If managements could not raise equity from the private sector they could turn to Tarp. Tarp would invest in preference shares with warrants attached. The preference shares would carry a low coupon (say 5 per cent) so that banks would find it profitable to continue lending, but shareholders would pay a heavy price because they would be diluted by the warrants; they would be given the right, however, to subscribe on Tarpâs terms. The rights would be tradeable and the secretary of the Treasury would be instructed to set the terms so that the rights would have a positive value. Private investors, including me, are likely to jump at the opportunity. The recapitalised banks would be allowed to increase their leverage, so they would resume lending. Limits on bank leverage could be imposed later, after the economy has recovered. If the funds were used in this way, the recapitalisation of the banking system could be achieved with less than $500bn of public funds. A revised emergency legislation could also provide more help to homeowners. It could require the Treasury to provide cheap financing for mortgage securities whose terms have been renegotiated, based on the Treasuryâs cost of borrowing. Mortgage service companies could be prohibited from charging fees on foreclosures, but they could expect the owners of the securities to provide incentives for renegotiation as Fannie Mae and Freddie Mac are already doing. Banks deemed to be insolvent would not be eligible for recapitalization by the capital infusion programme, but would be taken over by the Federal Deposit Insurance Corporation. The FDIC would be recapitalised by $200bn as a temporary measure. FDIC, in turn could remove the $100,000 limit on insured deposits. A revision of the emergency legislation along these lines would be more equitable, have a better chance of success, and cost taxpayers less in the long run. The writer is chairman of Soros Fund Management
This is how it would work. The Treasury secretary would rely on bank examiners rather than delegate implementation of Tarp to Wall Street firms. The bank examiners would establish how much additional equity capital each bank needs in order to be properly capitalised according to existing capital requirements. If managements could not raise equity from the private sector they could turn to Tarp. Tarp would invest in preference shares with warrants attached. The preference shares would carry a low coupon (say 5 per cent) so that banks would find it profitable to continue lending, but shareholders would pay a heavy price because they would be diluted by the warrants; they would be given the right, however, to subscribe on Tarpâs terms. The rights would be tradeable and the secretary of the Treasury would be instructed to set the terms so that the rights would have a positive value. ......................................................... No question....a better approach..... Funds that would diversify and hold long term would be very successful..... ................................................. What is obvious here is that the people that are in charge of the solution are not qualified to solve the problem.... This is like giving a child a pair of pliers and telling him to go build a car.... Also, who in their right mind would give confidence to those that created the problem....have never got it right....to come up with a solution.... Time to end the two party by advertising system....a proven catastrophe.....
who cares?? let the west implode, a new dawn arises in the EAST. we must not be racist and accept the turning of the WORLD.