Fed shotgun wedding of BofA and Merrill

Discussion in 'Wall St. News' started by WaveStrider, Jun 10, 2009.

  1. Daal

    Daal

    Lewis would not even win if the tried to call an MAC and put the merger off
    http://www.businessinsider.com/sorr...-the-mac-clause-to-back-out-of-merrill-2009-6

    A guy who bluffs and threatens a huge failure in the middle of a market panic deserves to be at least removed from his job by their regulator

    These congress hearings are a joke, its like asking a nuclear power regulator to testify before congress on why he threatened a nuclear plant CEO's job after the CEO said he would let one of his newly acquired plants to blowup if he didnt get a subsidy. Guess what, its part of the regulator job description
     
    #51     Jun 12, 2009
  2. There's too many silly misconceptions and too much outright ignorance in this 'stream of consciousness' for me to even begin correcting. Suffice it to say, you clearly have no idea how the credit mkts function (no surprise there, as, having been brainwashed, you don't even bother understanding what a CDS contract is). On top of that, your rhetorical question about subprime mtges suggests that you also have no idea how the economy functions as a whole.
     
    #52     Jun 12, 2009
  3. achilles28

    achilles28

    Lol. Yea, okay. Then get off the bench and prove it, Big Man. Put up or shut up.

    :p :p
     
    #53     Jun 12, 2009
  4. achilles28

    achilles28

    Yep. Very true.
     
    #54     Jun 12, 2009
  5. Fine, against my better judgement I will...

    Firstly, may I suggest that you start with this, which is a very good response to the 'kill CDS' crowd:
    http://www.acredittrader.com/?p=117

    Secondly, in the current regulatory framework, the govt CANNOT just go out there and nullify CDS. Suggesting such a solution is plain idiotic. They can, theoretically, ban the contracts going forward, but even that would require some legal effort.

    Thirdly, people like you who keep repeating the famous Warren Buffett's quote about derivatives being 'financial weapons of mass destruction' should give it a pause, given that ol' Warren hasn't exactly been practicing what he preaches (10y S&P puts, anyone?).

    Fourthly, to address your question about subprime mtges, I invite you to read a macroeconomics textbook, a speech by Mishkin about the effects of housing on the economy and to look at the US GDP. I am sure that things may (or may not) clarify themselves.
     
    #55     Jun 12, 2009
  6. nravo

    nravo

    Ok, I read the credit link and the other comments you posted about bailing out MER, and I still don't see how letting BOA break off the MER sale 1) relates and 2) is any different than, say, letting LEH go under.

    The idea that the world will collapse if MER wasn't bailed out by BOA, which in turn the becomes insolvent because of the MER positions, if market to market was in place, (a condition neatly nullified by removing M-T-M), still baffles me. (Next time I get a margin call on a futures or options contract, I want the Fed to nullify M-T-M for me. Give me some time, make that option European execution instead of American. But I digress.)

    Saying trust me -- it would, without even hypothesizing a specific scenario is wholly speculative, if not absurd.

    This Wall Street/Fed knows best belief got us into this mess. Wasn't long ago that everyone was toasting Alan Greenspan.

    With MER you have (or had) two choices: Chapter 11 or nationalize. Doing some on-the-fly forcing another company to do the nationalization for you and the shareholders of that other company (BOA) eat the losses (instead of MER shareholders) is facism, and I don't say that as political hyperbole. Look up the definition and read how it was applied in Italy: it's state-run corporatism, arm-twisting one company to favor another. Total Banana Republic time.

    Imagine if BOA now were to face insolvency again, for some reason. Would the Fed force another bank to buy them? Would anyone one -- Congress, the public, the media -- let them, now that they have figured out, a little, what's going on? Seriously, that's the true test. Would the Fed do it again, now that the fog has lifted and they have the benefit of hindsight? Would BOA? I seriously, seriously doubt it; the Fed simply would find another buyer or let them go. Market might have tanked another 1,000 points, but it would have recovered, just like it has, and BOA would be trading at 30 or 40 instead of 12.

    It's just bizarre on so many levels -- economic, political, legal, philosophical.
     
    #56     Jun 12, 2009
  7. So a person hornwrassled into buying a bucket of "gold" he didn't want should just finish out the transaction even after discovering that the bucket was actually full of shit, just because it might cause others in the market to more closely examine the buckets of "gold" thery were being hornwrassled into buying?

    ^ This I bristle at.

    However, if the motive of balking was to get an even sweeter deal than he was already getting at taxpayers expense (which would also ultimately be the fed's fault) maybe I don't feel so strongly.

    Another thing no-one mentions: why the sudden, unexpected sooth-talking by the CEO? was there another back-channels deal for him to not tell the truth during the hearing??
     
    #57     Jun 12, 2009
  8. achilles28

    achilles28

    I'm not surprised you threw out that light read as 'proof positive' for CDS.

    That article is a trite point-counterpoint to Soros' critique that admits no contextual understanding of systemic downside risk caused by proliferated derivative shorts. Leverage magnifies losses. Leverage (fractional lending) compounded by more leverage (derivative shorts) spells doom for sellers when the market farts. Your blogger friend desperately clings to a myopic definition of risk and "Free markets" when its used sparingly in the examination of a contract. Or a company. Not the broader system in total. Which is the problem. Something you missed, evidently.

    Idiotic? No, whats idiotic is the CDS-crowd getting Trillions in public bailouts because they've got no collateral (or cash) to make good on the mountains of derivatives they wrote. Thats idiotic.

    The Government has total regulatory authority to license or ban any instrument deemed beneficial - or harmful - to the financial system.

    CDS is leverage. When Banks and mono-lines gear themselves 50 to 1 on debt and toxic paper, a mere rustling of the leaves is enough to bury a few unhedged insurers. Then, bring down more after that!!

    Its a house of cards. Thats what you don't get. Mortgages were derivatized in CDO's. Corporate Debt was derivatized in CDS. Sovereign debt was derivatized in CBO's . For every non-performing asset, writers take a hit on many multiples of the underlying. Even when hedged, this creates a cascading failure within the system.

    Which is why you chicken-necked women run around shouting "systemic risk" and "apocalyptic meltdown" without even having fathomed where that risk is borne.

    Buffet and Soros are One-Worlder 'tards, which doesn't happen to make them wrong, in this instance.

    You know what 'insurable interest' means? I suggest you look it up.

    Insurance companies don't sell policies to anyone besides the title holder because they'd quickly go bankrupt from rampant short speculation.

    CDS should be regulated 1-to-1 against the underlying. That's it. There's no need to enrich speculative protection buyers off the backs of the Taxpayer because the original seller never had a fraction of the required capital to cover! But I guess you consider private looting of the Treasury a shining example of "free markets".

    How about all the douche-bag Mono-lines and Banks go tits up, and you protection buyers get stuck holding the bag? Thats justice. Not only are you betting against America, but hastening its demise by compounding the damage of every bankruptcy.

    Invite me to read an macro book? Lol.

    I invite YOU to go back and relearn what a credit default swap is and the excessive risk it imbues to the writer, and the entire financial system when compounded atop itself. You're talking crap, Martin.
     
    #58     Jun 12, 2009
  9. Funny how they do the wrong things in both - hands-off regulating mortgage lenders (they had the power since 1994), and doctrinaire on keeping interest rates artificially low (Mr GreenBubble and now).

    Nice planning.
     
    #59     Jun 12, 2009
  10. nravo

    nravo

    lol. I agree I read that post and wondered if the guy who posted it realized that he had just defeated his own argument. Greenspan and Mellon were that far apart in many ways.
     
    #60     Jun 12, 2009