Score One For America.

[Landis82]

Quote from CPTrader:

it would be best if this were done via a standard auctions intead of a reverse-auction with the US Govt playing the role of Auctioneer not bidder.

I really don't think that the Treasury acting as the initial bidder is all that bad.

What these securities need is "price-discovery" via some sort of market mechanism. It would be great if someone in Congress were smart enough to propose that these securities clear through some sort of a "clearing house" and that they wind-up trading on some sort of an actual "exchange" rather than OTC. That would be a win/win for everyone involved because you would then have accountability and TRANSPARENCY.

 

[magnum29464]

Quote from CPTrader:

3. Force banks, etc to reach this 12-1 leverage cap by selling their toxic assets within 180 days via a US Govt Auction. The US Govt will be the Auctioneer but will NOT bid for assets

Who is going to buy those assets though? If the government wont buy them how is forcing them to sell gonna force others to buy? if there was a market for this debt wouldn't it already be sold?

 

[drsteph]

Quote from Landis82:

I really don't think that the Treasury acting as the initial bidder is all that bad.

What these securities need is "price-discovery" via some sort of market mechanism. It would be great if someone in Congress were smart enough to propose that these securities clear through some sort of a "clearing house" and that they wind-up trading on some sort of an actual "exchange" rather than OTC. That would be a win/win for everyone involved because you would then have accountability and TRANSPARENCY.

Its fine if treasury acts to create 'price discovery'.

Problem is WHERE they discover the price. They will invariably mark these too high to their actual value, bailing out the banks and saddling the taxpayers with assets that NEVER will reach anything close to what was paid for them. That's a giveaway, and why most of the population is hopping mad over this.

INSTEAD:

Allow the mess to be cleaned out of the system via bk's, mergers, etc... THEN government steps in and recapitalizes the banks with funds. Instead of good money after bad, the bad money gets wiped out and good money comes back in. I believe this is the 'Swedish' solution, but am probably wrong.

Golden parachutes might not hold either in a bk, so that's one way to cut out the fat. Moral hazard is a two edged sword.

 

[sprstpd]

Reverse auction is lame in this situation. Make people bid for this crap and hit the highest bidder. If the bank doesn't like the bid than tough crap, you're bankrupt.

 

[Landis82]

Quote from magnum29464:

Who is going to buy those assets though? If the government wont buy them how is forcing them to sell gonna force others to buy? if there was a market for this debt wouldn't it already be sold?

http://www.washingtonpost.com/wp-dyn/content/article/2008/09/23/AR2008092302322.html

Bill Gross, an obvious interested market participant who has "skin" in the game.

Nonetheless, it is a basic primer and spells out how the Treasury's Proposal would unfold. Be mindful that this debt is NOT ALL THE SAME. There are several different classes and risk levels.

 

[CPTrader]

Quote from magnum29464:

Who is going to buy those assets though? If the government wont buy them how is forcing them to sell gonna force others to buy? if there was a market for this debt wouldn't it already be sold?

there re buyers. Lone Star bought MER CDOs' albeit at 5c on the dollar. Some parties bought some competitive auction and you'll see plenty of buyers emerge. The problem is the banks want to sell this thrash at 70-80 cents on the dollar.

 

[jprad]

Quote from Landis82:

The RTC "bail-out" nearly 20 years ago saved taxpayers roughly $250 Billion.
But no one wants to even talk about that.

They can't talk about a savings that never existed:

http://www.fdic.gov/bank/analytical/banking/2000dec/brv13n2_2.pdf

The Cost of the Savings and Loan Crisis

pg. 33:

Summary
The savings and loan crisis of the 1980s and early 1990s produced the greatest collapse of U.S. financial institutions since the Great Depression. Over the 1986–1995 period, 1,043 thrifts with total assets of over $500 billion failed. The large number of failures overwhelmed the resources of the FSLIC, so U.S. taxpayers were required to back up the commitment extended to insured depositors of the failed institutions. As of December 31, 1999, the thrift crisis had cost taxpayers approximately $124 billion and the thrift industry another $29 billion, for an estimated total loss of approximately $153 billion.

 

[gnome]

Quote from drsteph:

"... Allow the mess to be cleaned out of the system via bk's, mergers, etc... THEN government steps in and recapitalizes the banks with funds. Instead of good money after bad, the bad money gets wiped out and good money comes back in...."

Yes, yes... Paulson has proposed "no limitations on executive compensation, bonus, golden parachutes" for displaced CEO's*... BULLSHIT!

When public money is required to be paid, all of THAT should be out the window.

* One of the several reasons we can't trust "Sneaky, Deceiver Paulson"...

 

[athlonmank8]

Quote from Nofear777:

I am proud of this country today.

If you are a believer in a free market, then you share my sentiments.

Sometimes a forest must burn to grow bigger.

lol Actually a great post

 

[Landis82]

Quote from Nofear777:

I am proud of this country today.

If you are a believer in a free market, then you share my sentiments.

Sometimes a forest must burn to grow bigger.

A very naive post.

The FED's "bail-out" has already started. The FED's balance sheet increased by $218 BILLION as of the week ended last Wednesday, and now puts the FED's balance sheet well over $1 TRILLION DOLLARS for the first time ever!

Continue at such a pace for the next two-weeks and you are already at the $700 Billion of Paulson's proposal.

For example, the TAF just expanded from $300 Billion to $450 billion. The FED injected $75 billion alone of asset-backed securities into the commercial paper market last week to try and "un-freeze" the lack of participation in a market place that is critical to Corporate America's short-term financing ( < 270 days ) needs.

It's simply amazing how naive and utterly ignorant some people are here.

Think people, think!