Excellent Commentary on the bailout.. We got it all wrong!

Discussion in 'Economics' started by The Kin, Sep 29, 2008.

  1. Mecro


  2. u21c3f6


    This works only if the Treasury is able to break even on the purchased mortgages.

    But how will that be accomplished? Will the Treasury be buying all the questionable mortgage paper at a deep enough discount to break even on resale as well as pay the interest to the bond holders?

    This will cost somebody something. Guess who?
  3. TGregg


    The rich guys and the politicians? ;)
  4. You can put a frock on the pig along with lipstick for all I care, it is still a pig to me.

    Private money will only buy into a potentially rising asset.

    Since the mortgage market is upside down then private money will either short it or leave it alone ...
    The only time PM will buy into it is with gov cover to the short side.

    Since the gov never has money of it's own, it is sponsoring you the US tax payer to provide that cover.

    Since you are obligingly providing the cover, thereby assuming the risk, you need to make damn certain that you are entitled to the profits, otherwise the pig (that is you) is off to market with or without lipstick.

  5. cokezero


    If the process yeild a loss then Treasury will have to pay interest to the bond holders each year which comes from the tax payers.

    In fact the tax payers are paying interest from day one the Treausry sells US Treasury paper to bond holders. Bond holders lend the money to the US for a price and that price is paid by tax papers. It's not free money.

    The only way for this to work is to have Treasury pay way above market price for the toxic assets. Had they pay market price the banks would take the lost instantly and go bankrupt straight. This is not a liquidity issue as many suggest. This is an insolvency issue and buying at above market price is what this bailout really is about.

    Treasury might as well just write a check to the banks. At least it's easier.
  6. people are trying to float bullshit that the mortgage 'securities' might be bought at a rate they can eventually be sold at later

    i dont believe that for a minute

    secondly, it's said that even if the taxpayer is paying a premuim, the money lost is only the difference between the premium paid by the taxpayer, minus the amount sold for later on the open market

    but what if that which is bought, is used as 'colateral' for leveraged buiyng? They want as much of this JUNK bought as possible

    Even if colateral apprasied is cents on the dollar, it's possible to lever up to the point where the 700 billion is GONE

    I wouldnt put it past them to do that, then come back and day 'we have to have MORE'

    after all, Paulson said things were fine on sept 15th


    what's he going to say next week? month?

    this was a massive, forseeable disaster

    does anyone really think wall street is going to take a check for 700 billion, and give any of it back?
  7. jprad


    The fact that Paulson has not been able to explicitly define the exact universe of what "mortgage-related assets" he's planning to buy should make everyone very suspicious of their true intentions.

    If the "assets" he wants to buy are more than two levels removed from the mortgages that they were written against then there's no hope of ever recovering a penny of what was paid for these assets as well as the additional money that will have to be appropriated and spent to manage the entire program.

    My guess is that he's planning to off-load the heavily leveraged stuff that brought down Lehman and Bear Stearns.
  8. I'm still waiting to hear the "number" that we need from the 200 or so economists that said this won't work.