On Tue, 11 Mar 2008 15:52:30 -0800, "Jim Insolo"
wrote:
This whole discussion sounds like a bunch of buggy whip makers in 1903
===========
A "Bear" market?
More follow up on Bear Stearns and Darwinian Capitalism [not]
== Remember that as a tax payer and/or holder of US dollars
[i.e. through inflation], it is your capital that is being
flushed down this toilet. ==
NB: the CDS [credit debt swap] derivatives have yet to kick in.
Derivatives were accurately described by Warren Buffet as
"financial weapons of mass destruction." 5-4-3-2.... When this
particular grift blows, it is likely that the Fed/Treasury won't
be able to create "money" fast enough to contain the explosion.
for complete article click on
http://www.nytimes.com/2008/03/16/bu...tner=BREITBART
===========
Rescue Me: A Fed Bailout Crosses a Line
By GRETCHEN MORGENSON
Published: March 16, 2008
snip
WHAT are the consequences of a world in which regulators rescue
even the financial institutions whose recklessness and greed
helped create the titanic credit mess we are in? Will the
consequences be an even weaker currency, rampant inflation, a
continuation of the slow bleed that we have witnessed at banks
and brokerage firms for the past year?
snip
Agreeing to guarantee a 28-day credit line to Bear Stearns, by
way of JPMorgan Chase, the Federal Reserve Bank of New York
conceded last Friday that no sizable firm with a book of mortgage
securities or loans out to mortgage issuers could be allowed to
fail right now. It was the most explicit sign yet of the Fed’s
“Rescues ‘R’ Us” doctrine that already helped to force the
marriage of Bank of America and Countrywide.
snip
Bear’s default rates on so-called Alt-A mortgages that it
underwrote also indicates that its lending practices were
especially lax during the real estate boom. As of February,
according to Bloomberg data, 15 percent of these loans in its
underwritten securities were delinquent by more than 60 days or
in foreclosure. That compares with an industry average of 8.4
percent.
{ My comment: Note that these CDOs are *NOT* backed by GSE AAA
rated bonds but are backed by Alt-A "high yield" [i.e. "junk"]
mortgages, yet the taxpayers are still on the hook.}
snip
“For the government to print money at the expense of taxpayers as
opposed to requiring or going about a receivership and wind-down
of any insolvent institutions should be troubling to taxpayers
and regulators alike,” said Josh Rosner, an analyst at Graham
Fisher & Company and an expert on mortgage securities. “The Fed
has now crossed the line in a very clear way on ‘moral hazard,’
because they have opened the door to the view that they are
required to save almost any institution through non-recourse
loans — except the government doesn’t have the money and it
destroys the U.S.’s reputation as the broadest, deepest, most
transparent and properly regulated capital market in the world.”
snip
Only last Monday, for example, Bear put out a press release
saying, “there is absolutely no truth to the rumors of liquidity
problems that circulated today in the market.” The next day,
Christopher Cox, the chairman of the Securities and Exchange
Commission, said he was comfortable that the major Wall Street
firms were resting on satisfactory “capital cushions.”
Three days later, it was bailout time for Bear.
snip
==============
Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).