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RE: 10.4% Unemployment - 11/18/2009 4:15:25 PM   
Politesub53


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quote:

ORIGINAL: willbeurdaddy

Their assets would have been bought and most of their employees hired by the acquiring organizations.



Who by ? What with ? You just dont get it, there was no cash flow between the banks, who could afford to by AIG and save all the jobs there. Bank to bank lending had dried up, yet here you are suggesting someone would have been willing to take on all the banks with risky assets. If, as you suggest, these banks were worth buying, they would also have been worth lending to.

(in reply to willbeurdaddy)
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RE: 10.4% Unemployment - 11/18/2009 4:30:30 PM   
willbeurdaddy


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quote:

ORIGINAL: Politesub53

quote:

ORIGINAL: willbeurdaddy

Their assets would have been bought and most of their employees hired by the acquiring organizations.



Who by ? What with ? You just dont get it, there was no cash flow between the banks, who could afford to by AIG and save all the jobs there. Bank to bank lending had dried up, yet here you are suggesting someone would have been willing to take on all the banks with risky assets. If, as you suggest, these banks were worth buying, they would also have been worth lending to.


No, you dont get it. At the right price there are always willing buyers for assets. Due to the difficulties in valuing some of the exotics, that price may indeed have been at a discount to their true value. The shareholders of the acquired banks lose. However the shareholders of the acquiring banks gain in an equal amount.

Your last statment is just silly..if they are "worth buying they are worth lending to". Again, you can buy the assets at a fair (or discounted) price and then be in total control of those assets. If you lend you lose control of your own capital and have no control over the toxic assets.

Your neighbor is facing foreclosure, and youve been looking for investment property. If his house is worth buying at its true market value, is it also worth lending him the money to save him from foreclosure?

A reasonably succesful model that could have been followed without the huge commitment of taxpayer dollars was developed for the S&L crisis. There is no reason the RTC and MIF model could not have been modified in response to the banking crisis.

< Message edited by willbeurdaddy -- 11/18/2009 4:39:47 PM >

(in reply to Politesub53)
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RE: 10.4% Unemployment - 11/18/2009 4:32:05 PM   
popeye1250


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From: New Hampshire
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quote:

ORIGINAL: Politesub53

quote:

ORIGINAL: willbeurdaddy

Their assets would have been bought and most of their employees hired by the acquiring organizations.



Who by ? What with ? You just dont get it, there was no cash flow between the banks, who could afford to by AIG and save all the jobs there. Bank to bank lending had dried up, yet here you are suggesting someone would have been willing to take on all the banks with risky assets. If, as you suggest, these banks were worth buying, they would also have been worth lending to.



Politesub, had all the "Big Guys" failed I would have invested $20k in a small start up bank! And after a few years I'd have made a killing but, it seems that the U.S. govt. is against capitalism.

If that ever happens again, "LET 'EM FAIL!"

_____________________________

"But Your Honor, this is not a Jury of my Peers, these people are all decent, honest, law-abiding citizens!"

(in reply to Politesub53)
Profile   Post #: 123
RE: 10.4% Unemployment - 11/18/2009 5:02:48 PM   
Politesub53


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Status: offline 		Popeye if it was that easy, the banks wouldnt have failed. Problem was they saw easy profits and missed the pitfalls.

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Profile   Post #: 124
RE: 10.4% Unemployment - 11/18/2009 5:08:42 PM   
willbeurdaddy


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quote:

ORIGINAL: Politesub53

Popeye if it was that easy, the banks wouldnt have failed. Problem was they saw easy profits and missed the pitfalls.


Not to mention that a "small start up bank" has minimum capital requirements and they would laugh at a 20k investor.

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RE: 10.4% Unemployment - 11/19/2009 6:04:11 AM   
xssve


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quote:

ORIGINAL: Politesub53

Popeye if it was that easy, the banks wouldnt have failed. Problem was they saw easy profits and missed the pitfalls.
These were investment banks, not commercial savings banks - the latter are still holding large quantities of cash - that's much of the problem; they're holding onto it rather than loaning it out.


(in reply to Politesub53)
Profile   Post #: 126
RE: 10.4% Unemployment - 11/19/2009 1:35:55 PM   
willbeurdaddy


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quote:

ORIGINAL: xssve

quote:

ORIGINAL: Politesub53

Popeye if it was that easy, the banks wouldnt have failed. Problem was they saw easy profits and missed the pitfalls.
These were investment banks, not commercial savings banks - the latter are still holding large quantities of cash - that's much of the problem; they're holding onto it rather than loaning it out.




Since the repeal of Glass-Steagall there is no longer a legal distinction, and with Morgan Stanley/Chase BofA/Merril Lynch etc there is no common use distinction that is relevant.

(in reply to xssve)
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RE: 10.4% Unemployment - 11/19/2009 1:41:15 PM   
mnottertail


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quote:

ORIGINAL: willbeurdaddy


quote:

ORIGINAL: xssve

quote:

ORIGINAL: Politesub53

Popeye if it was that easy, the banks wouldnt have failed. Problem was they saw easy profits and missed the pitfalls.
These were investment banks, not commercial savings banks - the latter are still holding large quantities of cash - that's much of the problem; they're holding onto it rather than loaning it out.




Since the repeal of Glass-Steagall there is no longer a legal distinction, and with Morgan Stanley/Chase BofA/Merril Lynch etc there is no common use distinction that is relevant.



agreed.

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Profile   Post #: 128
RE: 10.4% Unemployment - 11/19/2009 3:27:19 PM   
Politesub53


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quote:

ORIGINAL: xssve

These were investment banks, not commercial savings banks - the latter are still holding large quantities of cash - that's much of the problem; they're holding onto it rather than loaning it out.



Even conservative banks had large amounts of cash tied up in the investment banks. At a stroke 24,000 jobs were lost in London by the collapse of Lehmans alone. People keep telling me the market would have taken care of itself. The opposite is true, the market was on the point of collapse.

quote:


Old hands on Wall Street pinpoint this as the moment that they realised the global financial system was in danger. Nothing was safe. To avert mass withdrawals, President Bush was obliged to sign an emergency order providing government insurance to the $3.5 trillion tied up in money market funds.
"It was a very, very dangerous time," says Peter Morici, a professor at the University of Maryland and a former chief economist at the US International Trade Commission. "The concept that the 'market will police itself' failed. My feeling is we got pretty damn close to it all coming apart."


http://www.guardian.co.uk/business/2009/sep/04/lehman-brothers-aftershocks-28-days

Edited to fix quotes

< Message edited by Politesub53 -- 11/19/2009 3:38:47 PM >

(in reply to xssve)
Profile   Post #: 129
RE: 10.4% Unemployment - 11/19/2009 11:01:41 PM   
Brain


Posts: 3792
Joined: 2/14/2007
Status: offline 		Re: buying assets, you may be interested in this

2010 Real Estate Market Outlook

Following the past 2 years of decline, a full market recovery is highly unlikely during 2010. The strongest developments towards recovery will be experienced in markets where controls existed for avoiding excessive lending, speculative buying and instability. Regions that have been hardest hit during the downfall of the real estate market...

http://www.realestateproarticles.com/Art/10483/278/2010-Real-Estate-Market-Outlook.html

(in reply to willbeurdaddy)
Profile   Post #: 130
RE: 10.4% Unemployment - 11/20/2009 9:30:35 AM   
CruelNUnsual


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quote:

ORIGINAL: Brain

Re: buying assets, you may be interested in this

2010 Real Estate Market Outlook

Following the past 2 years of decline, a full market recovery is highly unlikely during 2010. The strongest developments towards recovery will be experienced in markets where controls existed for avoiding excessive lending, speculative buying and instability. Regions that have been hardest hit during the downfall of the real estate market...

http://www.realestateproarticles.com/Art/10483/278/2010-Real-Estate-Market-Outlook.html



The biggest news in real eastate in 2010 will be the bloodletting in the commercial market. Residential is going to be all over the place depending on location location location.

(in reply to Brain)
Profile   Post #: 131
RE: 10.4% Unemployment - 11/20/2009 10:06:39 AM   
Mercnbeth


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quote:

The biggest news in real eastate in 2010 will be the bloodletting in the commercial market. Residential is going to be all over the place depending on location location location.


BINGO!

Commercial loans secured by property represents a huge banking industry exposure. Its one of the whispered reasons they give for not lending. After the 'holiday' season they won't have enough 'store closing', 'going out of business', and 'for lease' signs to cover all the closing businesses and vacancies. This is especially true here in CA where the current $21 Billion budgetary shortfall coming after the largest tax increase in US history has killed business initiative.

Unlike the homeowners market the commercial side has fewer potential carpet-baggers who can put together a business plan in this economic environment to buy a mall in default with a 50%+ vacancy rate. Last year I renegotiated my commercial lease and thought I got a great deal by getting a lower cost per foot and 3 months free. Now - that's what new tenants are getting and the building is 28% vacant, including the very visible first floor.

Where and what can be identified as pending from this Administration and Congress that points to turning around that trend?

Granted, the 'Recession' that was present and belongs to Bush and the prior Congress. However, the 'Economy' belongs to the current sitting major majority party in Congress and the man at the head of the Executive Branch.

(in reply to CruelNUnsual)
Profile   Post #: 132
RE: 10.4% Unemployment - 11/20/2009 10:33:44 AM   
Politesub53


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quote:

ORIGINAL: Mercnbeth

Granted, the 'Recession' that was present and belongs to Bush and the prior Congress. However, the 'Economy' belongs to the current sitting major majority party in Congress and the man at the head of the Executive Branch.


Full marks for not blaming it all on Obama Merc, that said i dont think you can expect the ne administration to fix everything so quickly. Every financial expert I have read says the same thing, there is no short term fix.

Are you for or against government intervention, as the financial firestorm you envisage was caused by the private sector, should they all be allowed to go under, whatever the cost ?

(in reply to Mercnbeth)
Profile   Post #: 133
RE: 10.4% Unemployment - 11/20/2009 10:51:42 AM   
Mercnbeth


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quote:

as the financial firestorm you envisage was caused by the private sector
The "financial firestorm" was caused not by the private sector but by 'bailing out' the private sector without any plan in place for the resulting economy to recover.

When you bail out a financial institution that had billions invested in loans in the USA and as part of the bail out you don't require them to invest the tax money they received back into the US economy you have the result being experienced. That's at the feet of this Administration and allows for the fundamental position that I don't agree with, that the bail-outs were necessary, to be taken out of the equation.

Being in the financial lending industry I can tell you first hand that if I wanted to borrow and use my loan for offshore projects, I'd have a much better chance of having my loan approved versus the same loan application being submitted for a business opportunity in the US.

quote:

i dont think you can expect the ne administration to fix everything so quickly.
Speed isn't the problem; planning, and thinking ahead is my expectation of anyone put in a decision making position. Eleven months is more than enough time to have seen some strategy, plan, or at least a better ability to project results and not look so clueless when results compared to projections are so wrong.

(in reply to Politesub53)
Profile   Post #: 134
RE: 10.4% Unemployment - 11/20/2009 3:06:23 PM   
Politesub53


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quote:

ORIGINAL: Mercnbeth

The "financial firestorm" was caused not by the private sector but by 'bailing out' the private sector without any plan in place for the resulting economy to recover.



Maybe, since you are in the lending industry, you can explain what would have happened without any kind of bailout, given that the money flow had dried up. Post 129 of mine has a link to the view of one expert.

(in reply to Mercnbeth)
Profile   Post #: 135
RE: 10.4% Unemployment - 11/20/2009 3:16:19 PM   
willbeurdaddy


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quote:

ORIGINAL: Politesub53

quote:

ORIGINAL: Mercnbeth

The "financial firestorm" was caused not by the private sector but by 'bailing out' the private sector without any plan in place for the resulting economy to recover.



Maybe, since you are in the lending industry, you can explain what would have happened without any kind of bailout, given that the money flow had dried up. Post 129 of mine has a link to the view of one expert.


The point is that credit dried up because of uncertainty over the value of toxic assets.

A very simplistic but essentially correct model:

If the troubled banks had been allowed to fail and the toxic assets written off there would be no more uncertainty and normal credit activity would be resumed by the survivors. The money lost by the depositors at the failed banks would "disappear" and be replaced by the money that the government would have to print to cover the insurance on their deposits...ie no real net change in the money supply, no threat of hyperinflation etc.

Instead the depositors were bailed out by ADDITIONAL money that had to be printed. On top of that, despite the bailout, credit still hasnt returned to its normal flow because the toxic assets have not been cleansed from the system.

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Profile   Post #: 136
RE: 10.4% Unemployment - 11/20/2009 3:19:19 PM   
Musicmystery


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Joined: 3/14/2005
Status: offline 		Yes, but the mortgage derivatives were so arcane at that point that figuring out which were toxic was not so simple. That's primarily what prevented normal market mechanisms to proceed. Lending stopped because you couldn't be sure that secure borrower wouldn't suddenly fail over toxic assets that yesterday looked fine.

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Profile   Post #: 137
RE: 10.4% Unemployment - 11/20/2009 3:22:41 PM   
willbeurdaddy


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quote:

ORIGINAL: Musicmystery

Yes, but the mortgage derivatives were so arcane at that point that figuring out which were toxic was not so simple. That's primarily what prevented normal market mechanisms to proceed. Lending stopped because you couldn't be sure that secure borrower wouldn't suddenly fail over toxic assets that yesterday looked fine.


Thats the point..the toxic assets would essentially be written down to zero when those banks failed. The acquirer of those assets (bundled with real performing assets that are routinely valued) would only have upside from that point.

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RE: 10.4% Unemployment - 11/20/2009 3:28:44 PM   
mnottertail


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quote:

ORIGINAL: willbeurdaddy


quote:

ORIGINAL: Politesub53

quote:

ORIGINAL: Mercnbeth

The "financial firestorm" was caused not by the private sector but by 'bailing out' the private sector without any plan in place for the resulting economy to recover.



Maybe, since you are in the lending industry, you can explain what would have happened without any kind of bailout, given that the money flow had dried up. Post 129 of mine has a link to the view of one expert.


The point is that credit dried up because of uncertainty over the value of toxic assets.

A very simplistic but essentially correct model:

If the troubled banks had been allowed to fail and the toxic assets written off there would be no more uncertainty and normal credit activity would be resumed by the survivors. The money lost by the depositors at the failed banks would "disappear" and be replaced by the money that the government would have to print to cover the insurance on their deposits...ie no real net change in the money supply, no threat of hyperinflation etc.

Instead the depositors were bailed out by ADDITIONAL money that had to be printed. On top of that, despite the bailout, credit still hasnt returned to its normal flow because the toxic assets have not been cleansed from the system.

fine as far as it goes, but the ideas here are a myopic view, why not bankrupt the banks, and haul the perpertators to jail?  Remember after the depracation of Glass-Stegall they were the few the proud the self policing, the american dream.   They went wading in the east river with cement galoshes, got in over their head, how the fuck is that my problem (1) and didn't I pay government money (2) to watch over that sort of scurrilous, lassize faire, (3) illegal behavior?




_____________________________

Have they not divided the prey; to every man a damsel or two? Judges 5:30


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Profile   Post #: 139
RE: 10.4% Unemployment - 11/20/2009 3:32:57 PM   
Politesub53


Posts: 14862
Joined: 5/7/2007
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quote:

ORIGINAL: willbeurdaddy

The point is that credit dried up because of uncertainty over the value of toxic assets.

A very simplistic but essentially correct model:

If the troubled banks had been allowed to fail and the toxic assets written off there would be no more uncertainty and normal credit activity would be resumed by the survivors. The money lost by the depositors at the failed banks would "disappear" and be replaced by the money that the government would have to print to cover the insurance on their deposits...ie no real net change in the money supply, no threat of hyperinflation etc.



Firstly credit dried up because banks had no faith in there own systems. You claimed previously that if banks had been left to their own devices, there wouldn`t have been a problem.

Secondly, just how much money would have been paid by insurers, or are you saying the government would have covered the costs ? 

The trouble with any mathematical model is they are not exact, it is impossible to cover all the possible variables with any model. Sure you can get a model to predict what should happen, but not what will happen, at least not with a 100% degree of certainty.

The basic problems still remained, the banks had run out of funds, the insurance companies likewise. Everything was based on companies using toxic assets to bcover more loans, for more toxic assets. Like it or not, that was the outcome of leaving things to a free market.

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