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Haven't you heard of the new retirement plan in Congress. Investing in the stock market is too risky so they are going to end the 401K plan. Then they are going to force everyone to invest 5% of their salary in Treasuries.
The government will get more revenue because of the end of tax deductible contributions and because they are going to make it part of the social security program, if you die with a positive balance the government keeps the money instead of your heirs getting it like in a 401K.
The U.S. employee will keep the treasury market a float.
Of coarse we'll probably see Dow 3000 but I don't think they've thought of that.
Wow!!! Don't need any coffee this morning. That future's number is quite the eye opener. Look out below!!!!!
Obama's Plan will fine you too if you don't do everything your supposed to. Don't feel like getting a physical this year - You pay a fine.
If the Dems get 60 Senators we're really f#cked. I saw Pelosi going off about a year ago about how daytraders don't contribute to society, all they do is buy and sell paper, she said if you wanted to invest in America for the long haul that was good but she wanted to raise short term capital gains tax to 90% because they were ill gotten gains.
I saw all this shit coming too, I just didn't make enough to buy my own island in time.
Pretty soon we'll all have to report to our neighborhood captain for calisthenics before work.
Transcript of Speaker Pelosi’s Speech
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Published: September 29, 2008
Text of a speech given by Speaker Nancy Pelosi before the House vote on the bailout plan on Monday.
Madam speaker, when was the last time anyone ever asked you for $700 billion? It’s a staggering figure. And many questions have arisen from that request. And we have been hearing, I think, a very informed debate on all sides — of — of this issue here today. I’m proud of the debate.
$700 billion. A staggering number. But only a part of the cost of the failed Bush economic policies to our country. Policies that were built on budget recklessness. When President Bush took office, he inherited President Clinton’s surpluses — four years in a row, budget surpluses, on a trajectory of $5.6 trillion in surplus. And with his reckless economic policies, within two years, he had turned that around.
And now eight years later, the foundation of that fiscal irresponsibility, combined with an anything goes economic policy, has taken us to where we are today. They claim to be free market advocates, when it’s really an anything goes mentality. No regulation, no supervision, no discipline. And if you fail, you will have a golden parachute, and the taxpayer will bail you out.
Those days are over. The party is over in that respect. Democrats believe in a free market. We know that it can create jobs, it can create wealth, it can create many good things in our economy. But in this case, in its unbridled form, as encouraged, supported, by the Republicans — some in the Republican Party, not all — it has created not jobs, not capital, it has created chaos.
And it is that chaos that the secretary of the Treasury and the chairman of the Fed came to see us just about a week and a half ago — seems like an eternity, doesn’t it, so much has happened, the news was so bad. They described a very, very dismal situation. A dismal situation describing the state of our economy, the fragility of our financial institutions and the instability of our markets, our equity markets, our credit markets, our bond market.
And here we were listening to people who knew of what they spoke. Secretary of the Treasury brings long credentials and knowledge of the markets. More fearful, though, to me, more scary, was the statement — were the statements of Chairman Bernanke [Ben S. Bernanke, chairman of the Federal Reserve], because Chairman Bernanke is probably one of the foremost authorities in America on the subject of the Great Depression. I don’t know what was so great about the Depression, but that’s the name they give it. And we heard the secretary and the chairman tell us that this was a once in a hundred year phenomenon, this fiscal crisis was so drastic. Certainly once in 50 years, probably once in a hundred years.
And how did it sneak up on us? So silently, almost on little cat feet. That they would come in on that day — and they didn’t actually ask for the money, that much money that night. It took two days until we saw the legislation that they were proposing to help calm the markets. And it was on that day that we learned of a $700 billion request.
But it wasn’t just the money that was alarming. It was the nature of the legislation. It gave the secretary of the Treasury czar-like powers, unlimited powers, latitude to do all kinds of things and specifically prohibited judicial review or review of any other federal administrative agency to review their actions.
Another aspect of it that was alarming is it gave the secretary the power to use any money that came back from these infusions of cash to be used at the discretion of the secretary. Not to reduce the deficit, not to go into the general funds so that we could afford other priorities. To be used at the discretion of the secretary. It was shocking. Working together in a bipartisan way, we were able to make major improvements on that proposal, even though its fundamental basis was almost arrogant and insulting.
The American people responded almost immediately. Overwhelmingly, they said they know that something needs to be done. Say 78 percent of the American people said Congress must act. Fifty-eight-some percent said, but not to accept the Bush proposal. And so here we are today, a week later and a couple of days later, coming to the floor with a product — not a bill that I would have written, one that has major disappointments with me, beginning with the fact that it does not have bankruptcy in this bill — and we will continue to persist and work to achieve that.
It’s interesting, though, to me that when they describe this, the magnitude of the challenge and the precipice that we were on and how we had to act quickly and we had to act boldly and we had to act now, that it never occurred to them that the consequences of this market were being felt well in advance by the American people. And unemployment is up, and therefore we need unemployment insurance. That jobs are lacking, and therefore we need a stimulus package. So how can on the one hand could this be so urgent at the moment, and yet so unnecessary for us to address the effects of this poor economy in the households of America across our country?
We’ll come back to that in a moment. Working together, we put together some standards — and I am really proud of what Barney Frank did in this regard. The first night, that night, that Thursday night, when we got the very, very dismal news, he immediately said, if we’re going to do this — and Spencer Bachus was a part of this as well — in terms of if we’re going to do this, we must have equity for the American people. We’re putting up $700 billion, we want the American people to get some of the upside. So equity, fairness for the American people.
Secondly, if they were describing the root of the problem as the mortgage-backed securities, Barney insisted that we would have forbearance on foreclosure. If we’re now going to own that paper, that we would then have forbearance to help responsible homeowners stay in their home.
In addition to that, we have to have strong, strong oversight. We didn’t even have to see the $700 billion or the full extent of their bill to know that we needed equity and upside for the taxpayer, forbearance for the homeowner, oversight of the government on what they were doing, and something that the American people understand full well, an end to the golden parachutes and the — a — review and reform of the compensation for C.E.O.’s.
Let’s get this straight. We have a situation where on Wall Street people are flying high, they are making unconscionable amounts of money. They make a lot of money, they privatize the gain, the minute things go tough, they nationalize the risk. They get a golden parachute as they drive their firm into the ground, and the American people have to pick up the tab. Something is very, very wrong with this picture.
So just on first blush, that Thursday night, we made it clear, meeting much resistance on the part of the administration, that those four things, equity, forbearance, oversight, and reform of compensation. Overriding all of this is a protection of the taxpayer. We need to stabilize the markets. In doing so, we need to protect the taxpayers.
And that’s why I’m so glad that this bill contains a suggestion made by Mr. Tanner [Representative John Tanner, Democrat of Tennessee] that if at the end of the day, say in five years, when we can take a review of the success or whatever of this initiative, that if there is a shortfall and we don’t get our whole $700 billion back that we have invested, that there will be an initiative to have the financial institutions that benefited from this program to make up that shortfall.
But not one penny of this should be carried by the American people. People asked, and Mr. Spratt [Representative John M. Spratt Jr., Democrat of South Carolina] spoke with great knowledge and eloquence on the budget and aspects of the budget. $700 billion, what is the impact, what is the opportunity cost for our country of the investments that we would want to make?
O.K., now we have it in place where the taxpayer is going to be made whole and that was very important for us. But why on the drop of a hat can they ask us for $700 billion, and we couldn’t get any support from the administration on a stimulus package that would also help grow the economy?
People tell me all over the world that the biggest emerging market, economic market in the world, is rebuilding the infrastructure of America. Roads, bridges, waterways, water systems in addition to waterways. The grid, broadband, schools, housing, certain schools. We are trillions of dollars in deficit there.
We know what we need to do to do it in a fiscally sound way, in a fiscally sound way that creates good-paying jobs in America immediately. Brings money into the treasury by doing so, and again does all of this in an all-American way. Good-paying jobs here in America.
We can’t get the time of day for 25, $35 billion for that, which we know guarantees jobs, et cetera, but $700 billion. So make no mistake, when this Congress adjourns today to observe Rosh Hashanah and have members go home for a bit, we are doing so at the call of the chair. Because this subject is not over, this discussion about how we save our economy.
And we must insulate Main Street from Wall Street. And as Congresswoman Waters [Representative Maxine Waters, Democrat of California] said, Martin Luther King Drive, in my district Martin Luther King Drive, and Cedar Chavez Road and all of the manifestations of community and small businesses in our community. We must insulate them from that. And so we have difficult choices, and so many of the things that were said on both sides of this issue in terms of its criticisms of the bill we have and the bill that we had at first, and the very size of this, I share. You want to go home, so I’m not going to list all of my concerns that I have with it.
But it just comes down to one simple thing. They have described a precipice. We are on the brink of doing something that might pull us back from that precipice. I think we have a responsibility. We have worked in a bipartisan way. I want to acknowledge Mr. Blunt and Mr. Boehner, the work that we have done together, trying to find as much common ground as possible on this.
But we insisted the taxpayer be covered. We all insisted that we have a party-is-over message to Wall Street. And we insisted that, that taxpayers at risk must recover — that any risk must be recovered. I told you that already. So, my colleagues, let’s recognize that this Congressional — this legislation is not the end of the line.
Mr. Waxman [Representative Henry A. Waxman, Democrat of California] will be having vigorous oversight this week, hearings this week on regulatory reform and other aspects of it. I hope you will pursue fraud and mismanagement and the rest. Mr. Frank and his committee will continue to pursue other avenues that we can stabilize the markets and protect the taxpayer. For too long, this government, in eight years, has followed a right-wing ideology of anything goes, no supervision, no discipline, no regulation.
Again, all of us are believers in free markets, but we have to do it right. Now, let me again acknowledge the extraordinary leadership of Mr. Frank. He has been an exceptional leader in the Congress, but never has his knowledge and his experience and his judgment been more needed than now. And I thank you, Mr. Frank, for your exceptional leadership, Mr. Chairman.
I also — so many people worked on this, but I also want to acknowledge the distinguished chair of our caucus, Mr. Emanuel. His knowledge of the markets, the respect he commands on those subjects, and his boundless energy on the subjects served us well in these negotiations. But this, this is a bipartisan initiative that we are bringing to the floor. We have to have a bipartisan vote on this. That is the only message that will send a message of confidence to the markets.
So I hope that — I know that we will be able to live up to our side of the bargain. I hope the Republicans will, too.
But my colleagues, as you go home and see your families and observe the holiday and the rest, don’t get settled in too far, because as long as the American — this challenge is there for the American people, the threat of losing their jobs, the credit, their credit, their jobs, their savings, their retirement, the opportunity for them to send their children to college.
As long as in the households of America, this crisis is being felt very immediately and being addressed at a different level, we must come back, and we will come back as soon and as often as it is necessary to make the change that is necessary. And before long we will have a new Congress, a new president of the United States, and we will be able to take our country in a new direction.
S & P is saving time and just putting the world on watch...
S&P says world's banks will face further write-downs in 2H08
S&P says the world's financial institutions will face more securities write-downs combined with rising loan losses in the second half. "The overlap of these two phases may prove to be the most difficult test yet for the battered global financial sector," said Standard & Poor's credit analyst Scott Bugie. We believe that turbulent capital market conditions and continuing negative news from the U.S. mortgage market will lead to another large wave of write-downs in the second half of 2008. The financial industry raised a huge amount of capital over the past year to compensate for securities losses. The present market conditions are less favorable, and financial institutions face this next wave of write-downs with reduced opportunities to raise additional capital. "The success in future capital raising, through issues or asset sales, to compensate for additional securities write-downs, will be the key factor driving the credit ratings on many global financial institutions in the second half of this year," said Mr. Bugie.
CEG getting killed, ratings agency should be jailed...
Constellation Energy resumes slide on credit watch
By Steve Gelsi, MarketWatch
Last update: 11:45 a.m. EDT Sept. 17, 2008Comments: 1NEW YORK (MarketWatch) -- Constellation Energy Group shares rallied but then resumed their slide after S&P placed the electric power giant under credit watch Wednesday, with the stock falling on top of its nearly 40% decline in the previous session.
Constellation Energy said it hired Morgan Stanley and UBS to review strategic alternatives and reaffirmed a $2 billion line of credit, while sticking to its earnings forecast for the year.
Despite these moves, Standard & Poor's Ratings Services placed its ratings on CreditWatch with developing implications.
Resolution of the CreditWatch depends on the sustained availability of the $2 billion bank lines, the near-term infusion of equity, and the completion of the asset sale, or an outright sale of the company, S&P said.
"In the absence of rapid execution of these credit supportive actions, a multiple-notch downgrade is likely," S&P said. "We do not expect the company to withstand such a rating action."
Strategic options include the outright sale of Constellation, which carried a market cap of $6 billion. Management informed S&P that it's in an advanced state in selling the business, analysts at the ratings firm noted.
While the firm has closed a $2 billion credit line with The Royal Bank of Scotland and The Union Bank of Switzerland, it could be cancelled, S&P said.
"This commitment contains a material adverse change clause tied to operating performance and financial condition," S&P noted. "Still, Constellation is facing an acute crisis of confidence."
In recent action, Constellation shares fell 4% to $29.51. Earlier the stock had rallied as much as 20%.
The moves come a day after the stock lost more than a third of its value, as electric power providers with substantial commodities exposure and dealings with investment banking firms such as Lehman Brothers have come under pressure.
"This market [is] shooting first, asking questions later," TPH Energy Research said in its note to clients about big power sellers and gas marketers. The Houston-based research firm said it would closely watch the situation, "to see if any Enron-esque situations develop."
The Baltimore firm said it continues to expect third-quarter earnings of 83 cents to 99 cents a share, and full-year 2008 earnings of $5.25 to $5.75 a share.
"Constellation Energy also reinforced that its credit exposure to financial institutions is limited" to about $120 million, the company said. No single financial institution represents more than $28 million of net credit risk exposure, the company said.
The corporate parent of Baltimore Gas & Electric and the nation's largest wholesale power seller has been under pressure since August following a disclosure it would need more collateral if its bonds were downgraded -- a situation aggravated this week over rising jitters tied to risk and liquidity in its global commodities group.
Over the summer, executives discussed the prospect of selling upstream natural gas assets, while selling or recapitalizing its international coal and freight business. This followed the company's announcement that it would seek a possible joint venture for its commodities business.
AIG American Intl: Citigroup discusses last night's deal; cuts tgt to $4.50 (3.75 ) -Update-
Citigroup cuts their AIG tgt to $4.50 (1x current tangible book) from $14 following last night's deal with the Fed, noting that while shareholders are significantly diluted, the stock will retain some value. The firm would expect shares to rally up through yesterday's close and perhaps beyond due to short covering. However, given the low ROE characteristics of the stock, they do not expect that it can hold a value above BVPS beyond technical trading pressures.
So if this works out, the government gets its $85 Billion paid back and they are left holding about 12 billion shares possibly worth $5 each or $60 Billion profit on an $85 Billion loan.
Not bad.
AIG ~ That's a good question. It all depends on what assets they sell and how much of the good business is left. Analyst have them pegged to make $4.30 in 2009. Let's say they do half that, so $2.15 x .2 = .43 x a P.E. of 10 = $4.30/share.
I wouldn't call it a bail out either, more like a hold up.
ROTFLMAO!!! C downgraded the brokers this morning. eom.
BAC Bank of America on MER M&A Call -Update-
Asked why pay $29 at this point: Says MER had the liquidity and capacity to see this through; says they would have likely seen this through; says always possibility that others were interested; says they could have rolled the dice and gotten it for cheaper but they thought the benefits were so appealing that they believed it was still a compelling price; says impossible to pick a bottom... says JC Flowers was key as they had been reviewing MER books for a while; had knowledge of MER as they are competitors in a number of areas... MER trading at 22.53, BAC 29.15.
Out CVI @ $12.40 for $1.18 from yesterday. eom.
Long CVI @ $11.22 ~ Small refiner with no exposure to the gulf.
52wk low $9.93
52 wk high $30.94
Do you find it ironic that Democrats are against killing the most hardened, horrific murders in our society but they don't mind killing unborn babies???
LMFAO!!! That was the best belly laugh I've had in a while.
Thanks!
Out ADS @ $51.50 for $3.50 hanging on to a tiny bit if the deal really goes through.
In ADS @ $48...
ADS Alliance Data follow-up: (46.98 +2.23) -Update-
The chances just got a whole lot better for a deal that no one thought would ever happen. The chances just got a whole lot better for a deal that no one thought would ever happen. Today, the Office of the Comptroller of the Currency held a conference call with Blackstone Group and Alliance Data Systems Inc. about their proposed $6.4 billion leveraged buyout. In a surprising move, the regulator removed the deal's biggest sticking point by putting a definite cap on the amount of money Blackstone would be required to provide as a backstop if ADS's credit-card bank ever falls into financial trouble, according to people familiar with the talks. Today the OCC told Blackstone and ADS that the regulator would allow ADS to sock away $400 million of collateral in case of any financial trouble with the credit card bank. And if ADS hits hard times and for any reason could not cover the collateral, Blackstone would then have to step in and bring it back up to $400 million, said a person close to the talks. But — and this is the crucial point -- Blackstone would only have to do that up to limit of $400 million. That would effectively cap Blackstone's exposure to the credit-card bank. Together, ADS's collateral and Blackstone's backstop would provide an $800 million cushion for Alliance Data System's credit-card bank, which is regulated by the OCC.
MF MF Global warning adds to market worries - Daily Telegraph (9.36 ) -Update-
Daily Telegraph reports one of London's leading brokers has demanded that clients put up significantly more cash to cover derivative positions - a move which traders fear could result in millions of shares being dumped on the market today. MF Global informed clients yesterday that the "margin" on contract for differences was increasing on certain stocks from 25-90%. The clients have been given until this morning to put up the extra cash or close positions. "You are going to see a lot of forced selling," said one leading London stockbroker... A senior MF Global salesman told one client the co was finding it increasingly difficult to finance highly-leveraged positions. "We're freezing people out of anything but the FTSE 100," he said. MF Global, which is listed in New York, denied rumours about its liquidity.
Gartman was on Fast Money tonight, he said he sold 95% of his gold position and closed out most of his stock positions and got small in his other commodity positions. He's hearing banks are cutting hedge fund leverage from 10 to 1 down to 5 to 1. He said in all his years of trading he's never seen a market that seemed this confused so he's stepped aside.
Could get ugly.
And don't lie about watching CNBC, you're always talking about how fat Maria Butteroma is getting. #8^)
Ya, he's so funny that even though I don't usually agree with his politics I still LMAO anyway.
I couldn't believe Cramer was still trying to defend himself last night. He showed the Bear clip but cut it off before he said there was nothing wrong with the company and then he told everyone that simple logic proved he was right. He said he had to be talking about the bank because he told everyone the common was going to zero.
Sounds logical but the only problem with that is he said everything was fine on Tuesday and he didn't say the stock was going to zero until Friday.
I don't know why he didn't just apologize and say he hoped people made some back on his Friday call.
Jon Stewart nails him about 4 minutes into this clip...
http://www.spike.com/show/17676
Click on Broken Arrow under the March 17th show.
Crisis in Chartland is very funny too!
Jon Stewart does the financial news, he nails Cramer about 4 minutes in...
http://www.spike.com/episode/18030?startsWith=2953862
This might turn into Cramergate, at least admit your mistakes and move on, the guy is dangerous...
Part II
That's why everyone is nervous...
So far the company hasn't gone out of its way to provide any details about either the strength of the assets on its books or its liquidity situation. On Mar. 17, Lehman Chairman and Chief Executive Officer Richard Fuld Jr. issued a statement saying the Fed's "decision to create a lending facility for primary dealers and permit a broad range of investment-grade securities to serve as collateral improves the liquidity picture and, from my perspective, takes the liquidity issue for the entire industry off the table." A separate statement by a company spokesman saying Lehman's liquidity position remains strong was short on specifics.
To dispel the market's doubts about Lehman's liquidity, it's critical that Fuld disclose what's on the firm's books, says Larkin. "If he were to have a no-holds-barred, fully candid disclosure of what they're sitting on, that is the only way for people not to assume the worst at this point." Anything less and Lehman risks a mass withdrawal of capital similar to what hit Bear Stearns last week, he adds.
In contrast, Merrill Lynch, Goldman Sachs (GS), and Morgan Stanley historically have been forthcoming about the quality and volume of the mortgages they have securitized
http://www.businessweek.com/investor/content/mar2008/pi20080317_703353_page_2.htm
MF going off the cliff, can't find any news.
LEH Lehman Brothers: Moody's affirms Lehman rating amid concern about Bear fallout - WSJ (39.26 )
WSJ reports Moody's Investors Service affirmed its rating on the co but lowered its ratings outlook to stable, citing the investment bank's real estate holdings and broader worries -- including the collapse of Bear Stearns -- as causes for concern going forward. Moody's said Lehman's A1 rating recognizes the co has "navigated quite well" the current credit crisis. But the agency said the continuing volatility of financial markets have decreased the chances that the ceiling on its long-term debt can be raised, thus the revised "stable" rating. The ratings outlook had been at positive, meaning a ratings upgrade was possible. Although Moody's expects Lehman to continue to generate acceptable levels of quarterly profitability, the co's said Lehman's current exposure to commercial and residential real estate, and to a lesser degree leveraged loans, will "likely pose a not-insignificant burden on profitability" for at least the next several quarters... Additionally, revenues from investment banking are also likely to slow this year... Moody's noted Lehman's liquidity management and position remain "robust."... Analysts at ING wrote in a note to clients Lehman may not get the support from the Fed that Bear Stearns did. "We think the Fed was moved to provide lender of last resort facilities because it judged Bear's large prime brokerage business made it "too big to fail" in the wholesale payments, clearing and settlement system. On the face of it, Lehman is not too big to fail," they said.
Nikkei now below the Dow down almost 400 so far tonight, dollar getting crushed, gold is rocking.
Bear Stearns just cancelled their earnings call. They are NOT rescheduling it, we will never know how bad it got this quarter.
Even the people who bought the $5 puts on Friday made 15 times their money. Wow!
Posted by: Painterguy1
In reply to: BuzzOnDaBeach who wrote msg# 145208 Date:9/11/2007 2:03:04 PM
Post #of 155946
I'm starting to lean toward no rate cut again. The question is does Bernake have the balls to take the heat if he doesn't cut.
I don't think he cuts yet because no matter what the Fed does things are going to get worse. Why waste the bullets now.
If the Fed cuts is the housing inventory suddenly going to go away? Are housing prices going to go back up? Are lenders going to get stupid with loan applications allowing anyone with a pulse to buy a house? Are appliance and furniture sales going to rebound? Are painters and movers and remodelers suddenly going to be swamped with business? Are Realtors and Loan Officers going to get their jobs back?
I believe the answers to all those questions are no. So why should Bernake waste the powder now? Let the economy take the hit that's coming and wait until we are closer to a bottom to start letting loose with the cuts.
Besides, one month is not a lot of data; even in a flat job market we will see positive GDP thanks to productivity growth; and Bernake is in no hurry to let all these idiots off the hook.
We're in a liquidity crisis and the Fed can handle that other ways.
I will have a tremendous amount of respect for the man if he gets up there and stands pat.
You must have missed Cramer on Friday when he said he saw this coming a mile away and he would have pulled all his money out days ago. He also said he thought the common would be worthless so he will be gloating I'm sure.
Fed just cut rates...
Fed drops lending rate a quarter-point
Move leaves it at 3.25 percent; new lending outlet for banks created
updated 1 minute ago
WASHINGTON - The Federal Reserve announced a series of new steps Sunday to help provide relief to a spreading credit crisis that threatens to plunge the economy into recession.
The central bank approved a cut to its lending rate to financial institutions to 3.25 percent from 3.50 percent, effective immediately, and created another lending facility for big investment banks to secure short-term loans.
The steps are “designed to bolster market liquidity and promote orderly market functioning,” the Fed said in a statement. “Liquid well-functioning markets are essential for the promotion of economic growth.”
The new lending facility will be available to financial institutions on Monday.
It will be in place for at least six months and “may be extended as conditions warrant,” the Fed said. The interest rate will be 3.25 percent and a range of collateral will be accepted to back the loans.
The Fed also approved the financing arrangement announced Sunday in which JPMorgan Chase & Co. will acquire rival Bear Stearns Cos. The deal valued at $236.2 million, a stunning collapse for one of the world’s largest and most venerable investment banks. The Fed will provide special financing to JPMorgan Chase for the deal, JPMorgan Chase said. The central bank has agreed to fund up to $30 billion of Bear Stearns’ less liquid assets.
The Fed’s actions are the latest in a recent string of unconventional steps to deal with a worsening credit crisis that has unhinged Wall Street. And, the action comes just two days before the central bank’s scheduled meeting on Tuesday, where another big cut to a key interest rate that affects millions of people and businesses is expected to be ordered.
The “discount” rate cut announced Sunday covers only short-term loans that financial institutions get directly from the Federal Reserve.
Even with the Fed’s aggressive moves, economic and financial conditions keep deteriorating.
LTCM, Payback's a bitch!
Interesting, Bear is NOT going to allow CNBC to broadcast the call.
Bear CC @ 12:30 CNBC is going to carry it.
I'd vote for both!
Cramer was on CNBC this morning saying that everyone should have seen this coming and that if he were still a fund manager he would have pulled all his business from Bear Stearns days ago.
He also said he thinks there is a good chance the common is worthless. lol.
I can't believe they just won't let the market correct and get all this crap over with. They are going to turn us into the next Japan.
My only hope is that they will be just as efficient as they have been in the past...
http://www.msnbc.msn.com/id/23617100
This is scary...
Next shoe to drop: Prime mortgages
The credit crunch is cutting a broad swath across the economy, and it's hard to know how far it will go. That's because for years, the housing bubble was the heart of the economy.
By Bill Fleckenstein
Several years ago, I sketched out a thesis called "The Next Time Down." Its onset took a bit longer than I had expected (like about three years) due to the lunacy in the credit markets. However, "the next time down" is essentially the situation in which we now find ourselves.
According to a friend I've dubbed the "Lord of the Dark Matter," credit is rapidly being withdrawn across a broad spectrum -- especially for the major brokers, giants like Goldman Sachs (GS, news, msgs) and Citigroup (C, news, msgs), which have served as enormous financial intermediaries. This is now raising the costs for nearly all credit-oriented hedge funds. And, my friend said, the pace of massive de-leveraging could accelerate further. That in all likelihood would feed on itself.
Lift a rock, find more schlock
I believe the next area of the credit sector to implode will likely be Alt-A -- loans granted to people who didn't want to document their income, also known as liar loans -- which will help illuminate the fact that our mortgage problems were never just subprime. Rather, they sprang from one big credit bubble, thanks to which mortgages were handed out to anyone who could fog a mirror. Most people took on more than they should have. (Some are now walking away from their obligations, a development recently highlighted in the media.)
In time, it will be clear that prime mortgages are also vulnerable.
"You can almost draw (the credit unwind) out in a diagram," said a managing director at the Economic Outlook Group in Princeton, N.J. "With home prices going down, consumers cut back on spending. If consumers cut back on spending, the economy weakens further. If the economy weakens further, fewer people are able to afford mortgages, so home foreclosures increase."
Meanwhile, the problems in the municipal market have been well-chronicled in the media. And, since the plain-vanilla money funds have already flirted with trouble, I wouldn't be shocked to see liquidity or credit issues in that arena, also.
Fannie Mae's new trick
Knowing the complete scope of this credit disaster is impossible because of the absurdly pliable accounting treatment accorded to financial institutions.
Case in point: Fannie Mae (FNM, news, msgs). Before excerpting one of the relevant passages from the company's latest quarterly financial report, let me cut to the chase with this explanation from a friend: "They take a delinquent mortgage loan and replace the delinquent part with an unsecured loan in order to circumvent the buybacks and mark-to-market consequences." That is the reality.
Here is how Fannie goes at lengths to sugarcoat it:
"We recently introduced a new HomeSaver Advance initiative, which is a loss mitigation tool that we began implementing in the first quarter of 2008. HomeSaver Advance provides qualified borrowers with an unsecured personal loan in an amount equal to all past due payments relating to their mortgage loan, allowing borrowers to cure their payment defaults under mortgage loans without requiring modification of their mortgage loans. By permitting qualified borrowers to cure their payment defaults without requiring that we purchase the loans from the MBS (mortgage-backed security) trusts in order to modify the loans, this loss mitigation tool may reduce the number of delinquent mortgage loans that we purchase from MBS trusts in the future and the fair value losses we record in connection with those purchases."
Obfuscation cannot change the big picture. The housing bubble -- which bailed out the equity bubble -- was in essence the economy. Now that we don't have the housing ATM or the jobs it created, the economy will continue to weaken.
In a recent panel discussion on the US housing crisis, columnist Jim Jubak of MSN Money and Bruce Marks, the CEO of the Neighborhood Assistance Corporation of America, say there's still plenty to worry about.
It's pretty obvious that the Federal Reserve is in a box and that its decision to fight economic weakness by printing money has been a losing one. What the Fed fails to understand is that the best route to full employment is through stable prices and sound money. Its policies have trashed the dollar, created the explosion in the price of so many items and solved nothing.
Bullion as antidote to bungling
Now to quote a recent Bloomberg headline that I thought was perfect and long overdue: "Gold beats financial assets on global distrust of central banks." That is why folks need to own gold. You can't trust central banks to preserve your purchasing power. It's taken quite a while to reach this point, but now we're here, and I think it's going to be extraordinarily difficult to get the genie back in the bottle.
When gold was $850 an ounce 28 years ago, then-Fed Chairman Paul Volcker was bent on breaking the back of inflation. His focus on controlling the supply of money created double-digit interest rates. Now the Fed is pursuing the opposite path. I have no idea how high the metals can go. But I think folks will need to own them for quite some time to come.
Streets paved with gold potholes
That is not to say there won't be shakeouts along the way. There will be. The next time we see a shakeout, folks who initially didn't understand the case for gold (and silver) -- which is that it's an insurance policy against Fed money printing -- will be able to start building positions.
For those readers who already have positions that have grown beyond what might constitute "insurance," a bit of active management may be in order. That is not to say that you're supposed to lighten up on a large position. Rather, you just need to have a plan for what you're going to do.
More from MSN Money
A great pretender of a rally
What went wrong at Citigroup?
A little 'magic' won't fix debt insurers
Mortgage mess is far from over
Housing mess too big for a quick fix
In the shameless self-promotion department, I would just say that in order to prepare for what lies ahead, folks need to understand the path that brought us here, which is one reason why I wrote "Greenspan's Bubbles."
Set out a chair for laissez faire
Finally, in light of all the government bailout attempts, I would just add my own suggestion: Let the government get out of the way, enforce the rules that exist, and let the markets decide who should get a mortgage and at what rate.
To think the government can fix the problem is similar to the Fed thinking that easy money can solve all problems -- when, to repeat, easy money is what brought us to this sorry state in the first place.
At the time of publication, Bill Fleckenstein did not own shares of any company mentioned in this column
http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/NextShoeToDropPrimeMortgages.aspx
15:50 U.S. Alt-A RMBS performance deteriorating rapidly, Fitch initiates extensive review - Reuters