Why the Financial Meltdown?
by Victor Gerhard

The past week has seen a collapse of the financial markets in the US.
Stock and bond brokerage firms, banks and insurance companies have all
had some trouble, been taken over, gone into bankruptcy, or been
bailed out by the Federal Government (aka the citizens of this
country).

The center of this all is the mortgage holding corporations, Fannie
Mae and Freddie Mac. In fact, the cause of this entire financial
disaster is the lending policies of these two companies.

What do Fannie Mae and Freddie Mac do? This is pretty simple. First, a
regular bank, small, medium or large, lends money to a person or
couple to buy a house. This is called of course a mortgage. Now, the
bank could just hold on to this mortgage and collect principal and
interest payments for the twenty or thirty-year life of the mortgage.
But, if it sells that mortgage, it can take the payment and then loan
out that money as a new mortgage. This allows a bank with supposedly
limited assets (the savings accounts, checking accounts and cds of
customers) to make many more mortgages than would otherwise be
possible. Who do they sell these mortgages to? Fannie Mae and Freddie
Mac.

Now, what do Fannie Mae and Freddie Mac do with these mortgages? They
don’t hold on to them either. They roll them into bundles of thousands
of mortgages and sell them on the open market as investments for
brokerage firms, banks and insurance companies. Some of these bundles
are then also sold in part to private investors or even other nations.
These are the entities that then collect the interest and principle on
the investments.

For the past decades, the housing market more or less has been a great
investment. Housing prices moved up continuously and most people were
able to make their mortgage payments. Generally, everyone involved in
the mortgage market prospered.

So what happened? If you listen to the liberal commentators, on the
news and in the newspapers, the cause of the collapse was
“deregulation,” which allowed the original banks to make bad loans -
loans without down payments and without verification of mortgagee
income. One of the most repulsive commentators has been the disgusting
Senator from New York, Charles Shumer. He blamed Republicans and their
mantra of free markets for causing the whole problem. Generally, the
entire Left has blamed Republican deregulation and Regan-esque belief
in free markets.

But what really happened? The problem began, as far as I know, during
the Clinton era. In an effort to allow more “poor” (Black and
Hispanic) people to own homes, the Clinton Administration urged and
sometimes forced banks to make loans they otherwise would not have
made. Some of this was based on the myth of “redlining.” Supposedly,
according to the Leftists, banks deliberately did not make loans in
certain parts of their community, which were mainly Black and
Hispanic, because they hated Blacks and Hispanics. Of course, this
lack of mortgages in the inner city was based on the fact that more
Blacks and Hispanics were poor, unemployed, had crappy credit or were
without the means to make a down payment on a house. All relevant
statistics showed that this was true - the discrimination was
economic, not racial.

But because of Leftist insanity, banks were encouraged, intimidated,
or forced into making loans to more Blacks and Hispanics. These loans
were on crazy terms. No down payment was necessary - the loan was for
100% of the value of the house. Also, and you might find this hard to
believe, the mortgagee didn’t even have to show that he or she had a
job. Basically, a homeless Black street person could walk into a bank
and buy a house as long as it was in a certain neighborhood. In this
situation, many, many people purchased more “house” than they could
afford.

Well, then what happened? The unemployment rate rose. The price of
living rose. The housing market bubble burst. People who bought a
house for $100,000 with a 100%, zero-down mortgage suddenly saw the
value of their house sink to $80,000. They owed more money than the
house was worth. What did they do? They walked away from it and the
mortgage. Also, over time, all the people who were loaned money
without having jobs began to have trouble making their mortgage
payments. People who tried to sell their house ended up still owing
money on the mortgage even after giving the full sales price to the
mortgage company, money they couldn’t pay. All these problems slowly
added up, and then suddenly exploded this week.

So, who cause all the current economic problems? The Left, in its
insane desire to appease its minority pets and destroy the free
market. The free market, for all its faults, is what built this
country into an economic powerhouse. It is a success and has been of
great help to White people throughout the history of this country. It
is one of the last bastions of freedom in this country, since the Left
controls all our media, academia, government and bureaucracy. The Left
would love Marxist-style socialism, which would allow it to control
every transaction made in this country. Imagine the future of this
country if that ever happened.

snip a whole lotta BS

Here's some hilarity for ya:

Since 2006, the federally sponsored mortgage giant Freddie Mac has
paid at least $345,000 to the lobbying and consulting firm of John
McCain's campaign manager Rick Davis, according to two sources
familiar with the arrangement...

McCain and his aides have vehemently objected to suggestions that
Davis has ties to Freddie Mac—an especially sensitive issue given that
the Republican presidential candidate has blamed "the lobbyists,
politicians and bureaucrats" for the mortgage crisis that recently
prompted the Bush administration to take over both Freddie Mac and its
companion, Fannie Mae, and put them under federal conservatorship.

But neither the Times story—nor the McCain campaign—revealed that
Davis's lobbying firm, Davis Manafort, based in Washington, D.C.,
continued to receive $15,000 a month from Freddie Mac until last month—
long after the Homeownership Alliance had been terminated. The two
sources, who requested anonymity discussing sensitive information,
told NEWSWEEK that Davis himself approached Freddie Mac in 2006 and
asked for a new consulting arrangement that would allow his firm to
continue to be paid. The arrangement was approved by Hollis
McLoughlin, Freddie Mac's senior vice president for external
relations, because "he [Davis] was John McCain's campaign manager and
it was felt you couldn't say no," said one of the sources...

Huh.

D'ohBoy

D'ohBoy wrote:
snip a whole lotta BS

Here's some hilarity for ya:

Since 2006, the federally sponsored mortgage giant Freddie Mac has
paid at least $345,000 to the lobbying and consulting firm of John
McCain's campaign manager Rick Davis, according to two sources
familiar with the arrangement...

McCain and his aides have vehemently objected to suggestions that
Davis has ties to Freddie Mac—an especially sensitive issue given that
the Republican presidential candidate has blamed "the lobbyists,
politicians and bureaucrats" for the mortgage crisis that recently
prompted the Bush administration to take over both Freddie Mac and its
companion, Fannie Mae, and put them under federal conservatorship.

But neither the Times story—nor the McCain campaign—revealed that
Davis's lobbying firm, Davis Manafort, based in Washington, D.C.,
continued to receive $15,000 a month from Freddie Mac until last month—
long after the Homeownership Alliance had been terminated. The two
sources, who requested anonymity discussing sensitive information,
told NEWSWEEK that Davis himself approached Freddie Mac in 2006 and
asked for a new consulting arrangement that would allow his firm to
continue to be paid. The arrangement was approved by Hollis
McLoughlin, Freddie Mac's senior vice president for external
relations, because "he [Davis] was John McCain's campaign manager and
it was felt you couldn't say no," said one of the sources...

Huh.

D'ohBoy
Good point, however you forgot to mention that Obama was also on the
receiving end of a little over $500K from Freddie and Fannie. They are
after all just politician, what do we expect of them? I vote for
"None of the above".

{Snip}

Victor:

The problem with your rant, which was a fine rant BTW, is some facts.

From where I am located geographically, the problem was not a few
minority mortgages, but a lot of jumbo mortgages for McMansions a long
way out into the Ex-urban areas. Yes, every city has its wealthy with
their huge homes. But 7000 sq ft homes with 14 ft high entrance ways
being built by the dozens on a several dozen 'tracts'? And building
these McMansions with a 50 minute drive (one way) to work.

Plus, ordinary homes that were built for $45,000 USD for labor and
material added to the cost of the land, were re-mortgaged and re-
mortgaged to the limit of the housing bubble and the owners paying off
Credit Card debt and going on vacations with the excess money; A $65,000
original home purchase price becomes a $250,000.00 mortgage.

And now add downsizing, loss of manufacturing jobs, and just plain
unemployment, and BINGO there goes the ability to pay the JUMBO
mortgage.

Please re-read your post, Victor, what you wrote was basically, hard
working blue collar workers should never have any hope of owning a home
in USA, because there is too much risk of them losing their jobs to
foreign workers at a lower pay. The same to most small business owners
since statistically speaking 3 out 5 small business fail within a few
years.

You should be forced to watch the movie "It's a Wonderful Life" 10 times
in a single month.

Phil

Phil Again wrote:

Plus, ordinary homes that were built for $45,000 USD for labor and
material added to the cost of the land, were re-mortgaged and re-
mortgaged to the limit of the housing bubble and the owners paying off
Credit Card debt and going on vacations with the excess money; A
$65,000 original home purchase price becomes a $250,000.00 mortgage.

In addition a third of the homes now in foreclosure were bought as
investment properties by people who never intended to live in them, they
were going to rent them or sell them for a profit. Or so they thought.
They were among the first to walk away from mortgages they couldn't pay.

Even if there was a significant amount of truth in the original poster's
rant (which seems unlikely), it remains that financial institutions bundled
bad loans with good ones and sold them to each other with high ratings. Now
they're all shocked and horrified to learn that was a bad idea. Lehman
Bros. made a four billion dollar profit last year, paid their top monkey a
twenty-two million dollar bonus--now they're kaput thanks to their own greed
and incompetence. And we're supposed to blame this on leftist polticians?
Pfffft, get real.

Phil Again wrote:
{Snip}

Victor:

The problem with your rant, which was a fine rant BTW, is some facts.

From where I am located geographically, the problem was not a few
minority mortgages, but a lot of jumbo mortgages for McMansions a long
way out into the Ex-urban areas. Yes, every city has its wealthy with
their huge homes. But 7000 sq ft homes with 14 ft high entrance ways
being built by the dozens on a several dozen 'tracts'? And building
these McMansions with a 50 minute drive (one way) to work.

Plus, ordinary homes that were built for $45,000 USD for labor and
material added to the cost of the land, were re-mortgaged and re-
mortgaged to the limit of the housing bubble and the owners paying off
Credit Card debt and going on vacations with the excess money; A $65,000
original home purchase price becomes a $250,000.00 mortgage.

And now add downsizing, loss of manufacturing jobs, and just plain
unemployment, and BINGO there goes the ability to pay the JUMBO
mortgage.

Please re-read your post, Victor, what you wrote was basically, hard
working blue collar workers should never have any hope of owning a home
in USA, because there is too much risk of them losing their jobs to
foreign workers at a lower pay. The same to most small business owners
since statistically speaking 3 out 5 small business fail within a few
years.

You should be forced to watch the movie "It's a Wonderful Life" 10 times
in a single month.

Phil

do a google on Victor, very interesting.

On Sep 24, 6:16 pm, Phil Again wrote:
{Snip}

Victor:

The problem with your rant, which was a fine rant BTW, is some facts.

From where I am located geographically, the problem was not a few
minority mortgages, but a lot of jumbo mortgages for McMansions a long
way out into the Ex-urban areas. Yes, every city has its wealthy with
their huge homes. But 7000 sq ft homes with 14 ft high entrance ways
being built by the dozens on a several dozen 'tracts'? And building
these McMansions with a 50 minute drive (one way) to work.

Plus, ordinary homes that were built for $45,000 USD for labor and
material added to the cost of the land, were re-mortgaged and re-
mortgaged to the limit of the housing bubble and the owners paying off
Credit Card debt and going on vacations with the excess money; A $65,000
original home purchase price becomes a $250,000.00 mortgage.

And now add downsizing, loss of manufacturing jobs, and just plain
unemployment, and BINGO there goes the ability to pay the JUMBO
mortgage.

Please re-read your post, Victor, what you wrote was basically, hard
working blue collar workers should never have any hope of owning a home
in USA, because there is too much risk of them losing their jobs to
foreign workers at a lower pay. The same to most small business owners
since statistically speaking 3 out 5 small business fail within a few
years.

You should be forced to watch the movie "It's a Wonderful Life" 10 times
in a single month.

Phil

A corporate attorney from Albany, N.Y., Victor Gerhard plunged into
the radical right in early 1999, when he joined the neo-Nazi National
Alliance* after a period of studying the group's literature.

Intelligent, tough and sometimes very amusing, Gerhard left what he
calls "a high-paying job" and bought an A-frame cabin just outside the
group's rural West Virginia compound in early 2000. He was named
general counsel and chief of staff, and in fact did help some members
and supporters with legal problems.

(He also wrote a sarcastic song at the time, "On the cover of the
Intelligence Report," sung to the tune of Dr. Hook's "On the Cover of
the Rolling Stone," asking what he needed to do to get his picture
featured in this magazine.)

But when he tried to sort out a number of the National Alliance's
internal problems, he clashed with the late Alliance boss William
Pierce and his soon-to-be successor, Erich Gliebe (see Führer of the
Titanic), and was fired in May 2001 for insubordination.

Remaining in the area, Gerhard contained his anger until the day after
Pierce's death on July 23, 2002, when he got into a fistfight with
Alliance member Dr. Charles Ellis, resulting in his arrest for
battery. (He later pleaded no contest and was fined $100.)

During this period, Gliebe was orchestrating a whisper campaign
against Gerhard, accusing him of being mentally unstable. Days after
Pierce's death, Gerhard sent an E-mail to friends viciously attacking
Pierce and the Alliance, which he described as "two badly run
businesses [the Alliance's Resistance Records* and National Vanguard
Books operations] and a membership con-game."

He accused Pierce of lies, "siphoning off all the cash into his
pocket," surrounding himself with "toadies, lickspittles and ass-
kissers," covering up for rapists, and being "a sexual pervert" who
relentlessly pursued female staffers and Internet porn despite being
married.

Not long after these events, Gerhard moved to Wilmington, N.C., where
he incorporated Condor Legion Ordnance, Inc., "a new, growing, pro-
White corporation" that has several Web sites (most notably,
whitepowerrecords.com) and started selling racist T-shirts, music and
pins from a warehouse in Wilmington.

Later in 2002, Gerhard joined forces with the neo-Nazi White
Revolution*, a group formed by key former Alliance staffer Billy Roper
(see Revolting in Arkansas) after Roper was ejected by Gliebe. Today,
all Condor Legion stock is held by White Revolution members.

Early this year, Gerhard added two E-Bay "stores" and 14 Words Press*
to the Condor Legion family of firms. (14 Words Press is a publisher
of racist neo-Pagan materials that was founded by the legendary David
Lane [see Preaching from Prison], now serving a 190-year sentence in
connection with a 1984 murder by the terrorist group The Order.) In
July, Gerhard began producing a nightly Web-based "news" program.

On Sep 24, 6:08*pm, "DGDevin" wrote:
Phil Again wrote:
Plus, ordinary homes that were built for $45,000 USD for labor and
material added to the cost of the land, were re-mortgaged and re-
mortgaged to the limit of the housing bubble and the owners paying off
Credit Card debt and going on vacations with the excess money; A
$65,000 original home purchase price becomes a $250,000.00 mortgage.

In addition a third of the homes now in foreclosure were bought as
investment properties by people who never intended to live in them, they
were going to rent them or sell them for a profit. *Or so they thought.
They were among the first to walk away from mortgages they couldn't pay.

Even if there was a significant amount of truth in the original poster's
rant (which seems unlikely), it remains that financial institutions bundled
bad loans with good ones and sold them to each other with high ratings. *Now
they're all shocked and horrified to learn that was a bad idea. *Lehman
Bros. made a four billion dollar profit last year, paid their top monkey a
twenty-two million dollar bonus--now they're kaput thanks to their own greed
and incompetence. *And we're supposed to blame this on leftist polticians?
Pfffft, get real.

The blame lies solely on those who were minding the store...the
Republicans.

The same ones who want $700 billion dollars given to them in a week
with no accountability.

Time for a change...a BIG change in the White House.

TMT

"Too_Many_Tools" wrote in message
...
On Sep 24, 6:08 pm, "DGDevin" wrote:


The blame lies solely on those who were minding the store...the
Republicans.

The same ones who want $700 billion dollars given to them in a week
with no accountability.

Time for a change...a BIG change in the White House.

================================================== ======

Not that I'm in favor of this bailout, but where did you get the scoop that
there would be no accountability? As for the change in the White House -
well, that's coming - one way or another.

--

-Mike-

On Wed, 24 Sep 2008 22:04:54 -0400, "Mike Marlow"
wrote:

Not that I'm in favor of this bailout, but where did you get the scoop that
there would be no accountability?
========
From Hank "the bazooka" Paulson.
------------
snip

"Decisions by the Secretary pursuant to the authority of this Act
are non-reviewable and committed to agency discretion, and may
not be reviewed by any court of law or any administrative
agency," the original draft of the proposed bill says.

And with those words, the Treasury secretary - whoever that may
be in a few months - would be vested with perhaps the most
incredible powers ever bestowed on one person over the economic
and financial life of the United States.
snip
Just take a look at the original draft: "The Secretary is
authorized to take such actions as the Secretary deems necessary
to carry out the authorities in this act," the proposed bill read
when it was first presented to Congress, "without regard to any
other provision of law regarding public contracts."

It goes on to say, "Any funds expended for actions authorized by
this Act, including the payment of administrative expenses, shall
be deemed appropriated at the time of such expenditure."
snip
The bigger issue is that the bill effectively creates protections
not just for the Treasury, but for the executives on Wall Street
who created this near Armageddon. Rosner says the draft bill
"prevents judicial review that could allow the protection of
decisions that create false marks, hide prior marks, or could be
used to prevent civil or criminal prosecution in situations where
a management knowingly provided false marks that aided the growth
of this crisis of confidence."

False marks - using mark-to-market accounting to hide the true
value of security, rather than disclose it honestly - has a lot
to do with why Jeffrey Skilling, the former Enron chief
executive, is in jail.
snip
-----------------
for complete article see
http://www.iht.com/articles/2008/09/....php?pass=true

Note that this is the International Herald Tribune based in
Paris. The domestic US media won't touch this background story.


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).

Mike Marlow wrote:

"Too_Many_Tools" wrote in message
...
On Sep 24, 6:08 pm, "DGDevin" wrote:


The blame lies solely on those who were minding the store...the
Republicans.

The same ones who want $700 billion dollars given to them in a week
with no accountability.

Time for a change...a BIG change in the White House.

================================================== ======




Not that I'm in favor of this bailout, but where did you get the scoop that
there would be no accountability? As for the change in the White House -
well, that's coming - one way or another.



Why did that make the hair on my neck stand up??

--

Richard

(remove the X to email)

On Wed, 24 Sep 2008 22:04:54 -0400, "Mike Marlow"
wrote:

Not that I'm in favor of this bailout, but where did you get the scoop that
there would be no accountability?
-------------
Several people [actually two] have sent me off list emails asking
what they can do about this money grab. In all honesty, not
much, as this appears to be a "done deal," and Congress is again
putting on a punch-n-judy show for the amusement and diversion of
the great unwashed [that's you and me]. However if you are
interested and want to do something, write or email your senators
and representative to vote no. You can get their email/snail
mail/fax addresses at
http://www.senate.gov/general/contac...nators_cfm.cfm
http://www.house.gov/

tip - bookmark their web mail sites for easy access in the
future.


For whatever help it might be here is the copy of the email I
sent on just the immunity aspect of TARP bill. Feel free to use
all, part or none.
-------------------------
I have already emailed you urging the rejection of TARP [Troubled
Asset Relief Program] aka the 700 billion dollar Wall Street
bailout.

As is increasingly common, the more critical background
information is not being presented in the U. S. media, and must
be obtained from international sources. After reviewing this
material, I am even more adamantly opposed to this legislation.

Two items of particular interest and critical importance:

(1) The 700 billion figure appears to have been pulled out of
thin air, and has no basis in fact. "The cost of the Treasury
plan to save the US financial system from collapse cannot be
estimated because it is too vague, Peter Orszag, head of the
Congressional Budget Office, told legislators on Wednesday." For
details and complete article see
http://www.ft.com/cms/s/0/78ecb166-8...0779fd18c.html

(2) The rescue program as proposed will place the Secretary of
the Treasury above the law and answerable to no one. This also
has the potential to shield the people and organizations that are
responsible/accountable for this situation from both criminal and
civil liability. Any legislation that contains language such as
"Decisions by the Secretary pursuant to the authority of this Act
are non-reviewable and committed to agency discretion, and may
not be reviewed by any court of law or any administrative
agency," and "The Secretary is authorized to take such actions as
the Secretary deems necessary to carry out the authorities in
this act, without regard to any other provision of law regarding
public contracts." Is totally unacceptable. Indeed, I suggest
that anyone submitting such a proposal should be immediately
removed from any public office of trust and responsibility, as
they obviously have either no understanding or no intention of
abiding by their oath to "uphold, protect and defend the
Constitution of the United States." For complete article see
http://www.iht.com/articles/2008/09/....php?pass=true

Senator McCain's proposal for a governmental commission to
examine the causes for the current economic problems has merit as
long as the commission is a Federal Grand Jury issuing
indictments under the RICO, mail/wire fraud, and conspiracy
statues, with both significant prison time and asset forfeitures
resulting.
-----------------------

Note that the American car makers just got their snouts in the
trough for "only" 25 billion in the House revenue bill just
passed. (Still must pass the senate, but this is a "must pass"
bill to keep the fed. government running]
http://www.ft.com/cms/s/0/83bfe68c-8...0779fd18c.html

also see Wall Street comes to Main Street [the real economy]
http://plantcity2.tbo.com/content/20...ships-nationw/
http://www.theautochannel.com/news/2...24/128852.html



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).

D'ohBoy wrote:

snip a whole lotta BS

Here's some hilarity for ya:

.... snip

But neither the Times story€”nor the McCain campaign€”revealed that
Davis's lobbying firm, Davis Manafort, based in Washington, D.C.,
continued to receive $15,000 a month from Freddie Mac until last month€”
long after the Homeownership Alliance had been terminated. The two
sources, who requested anonymity discussing sensitive information,
told NEWSWEEK that Davis himself approached Freddie Mac in 2006 and
asked for a new consulting arrangement that would allow his firm to
continue to be paid. The arrangement was approved by Hollis
McLoughlin, Freddie Mac's senior vice president for external
relations, because "he [Davis] was John McCain's campaign manager and
it was felt you couldn't say no," said one of the sources...


The above has been shown to be propaganda --Rick Davis was a paid
consultant, not a lobbiest, this was simply the NYT running a campaign ad
for the Obama campaign under the guise of front page news. Consultants are
paid for their expertise that they provide as a service. What the NYT
seems to have forgotten to mention (and that is not propaganda) is the fact
that Obama received $109,000 in less than two years in the Senate as
campaign donations (i.e. payoff in expectation of a service from a
Senator). It took Chris Dodd 9 years to accumulate $120,000 in campaign
donations from them. So how come you're not all over that?

--
If you're going to be dumb, you better be tough

"F. George McDuffee" wrote in message
...
On Wed, 24 Sep 2008 22:04:54 -0400, "Mike Marlow"
wrote:

Not that I'm in favor of this bailout, but where did you get the scoop
that
there would be no accountability?
-------------
Several people [actually two] have sent me off list emails asking
what they can do about this money grab. In all honesty, not
much, as this appears to be a "done deal," and Congress is again
putting on a punch-n-judy show for the amusement and diversion of
the great unwashed [that's you and me]. However if you are
interested and want to do something, write or email your senators
and representative to vote no. You can get their email/snail
mail/fax addresses at
http://www.senate.gov/general/contac...nators_cfm.cfm
http://www.house.gov/


Unfortunately, this has the familiar ring to it that is reminiscent of the
Patriot Act. My second biggest concern with this administration is their
ability to recognize a highly charged environment and to capitalize on it to
grab power and authorities over the people. I do not see this as a
Republican vs Democrat thing, but as a hallmark of the Bush administration.

--

-Mike-

Mike Marlow wrote:
"F. George McDuffee" wrote in
message ...
On Wed, 24 Sep 2008 22:04:54 -0400, "Mike Marlow"
wrote:

Not that I'm in favor of this bailout, but where did you get the
scoop that
there would be no accountability?
-------------
Several people [actually two] have sent me off list emails asking
what they can do about this money grab. In all honesty, not
much, as this appears to be a "done deal," and Congress is again
putting on a punch-n-judy show for the amusement and diversion of
the great unwashed [that's you and me]. However if you are
interested and want to do something, write or email your senators
and representative to vote no. You can get their email/snail
mail/fax addresses at
http://www.senate.gov/general/contac...nators_cfm.cfm
http://www.house.gov/


Unfortunately, this has the familiar ring to it that is reminiscent
of the Patriot Act. My second biggest concern with this
administration is their ability to recognize a highly charged
environment and to capitalize on it to grab power and authorities
over the people. I do not see this as a Republican vs Democrat
thing, but as a hallmark of the Bush administration.

What Henry Paulson and Ben Bernanke want to do is buy up the worlds "bad"
inventory not of mortgages but of Credit Default Swaps and other derivative
products.
They have told the Congress and anyone else that will listen that these
instruments are terribly complex, difficult to value and beyond the
comprehension of all but a small group of mental giants that just happens to
include them. There is some truth to this but even a child can understand
what these things are if you call them by their right name.
They are securitized INSURANCE POLICIES and they insure the losses on
bundles of mortgage backed securities.
As such, they have absolutely NO underlying value. ZERO.

They do, however, pose tremendous downside risk if the risk they are meant
to protect against materializes. They are a purely speculative bet that
mortgages will be paid.

Guess what? The risk has materialized. Ten thousand foreclosures
per day as a matter of fact, and accelerating.

About a year ago I started calling credit default swaps "Uninsurance". Were
they
actually called insurance, and that is what they are, the issuers would have
had to back them with adequate reserves and been subject to regulation.
That's the way insurance companies work. In the case of credit default swaps
and risk management derivatives, Phil Graham introduced legistlation that
was passed and signed in 2002 specifically exempting and precluding these
products from oversight or regulation. There now exists $46 trillion dollars
of these "uninsurance" policies in an environment where they have been sold
and
traded to people who never considered that they would ever have to pay off
on them and don't have the reserves to do so in any event.

As traded securities, the worlds banks, investment banks and hedge funds
were making a market for them in the same way market makers do for equities
on Wall Street. You know, like the NYSE, for instance. There is always a
buyer of
last resort or the stock is delisted and that is the real distinction here.
Traded equities - stocks - have an underlying value. There is an actual
company with assets.

Credit default swaps and risk management derivatives are just bets that some
other security ( a mortgage backed bond ) that does have an underlying asset
( a mortgage in this case ) will be worth face value. When you budle
substandard mortgages together and those mortgages default, the insurance is
supposed to kick in but in this case it's not insurance at all, it's
"Uninsurance" and there isn't any cash around to pay off.

What the Bush administration is currently trying to sell Congress is the
idea that the US Treasury should buy up what amount to a bundle of insurance
claims needing to be paid and that somehow we can take these turds and sell
them at some later date for their value at maturity. I'm sure you can see
now why there is reluctance on the administrations part to delineate their
intentions or explain the simple truth. The financial products involved are
complex but what they represent as a practical matter is very simple and in
the end they aren't worth even the thinnest dime.

One other thing.
Since Banks are limited in what they are allowed to purchase, all of this
garbage was run by the ratings agencies and rated AAA.
The banks and our otherwise regulated institutions could not have invested
in them otherwise. Huge fees were paid to ratings agencies such as Standard
and Poors to get these things rated and even today, these agencies will tell
you point blank that they didn't understand them or know how to asses the
risks involved. They just figured they ought to be AAA rated because they we
remotely tied to home and commercial mortgages.

We now have $46 trillion dollars of this "Uninsurance" infesting the entire
banking system.
$700 billion or even $1 trillion dollars isn't going to go far as a fix for
that and it isn't even necessary do so.
What we need to do is establish a fund to step in and support the banking
entities that would be crushed if they had to actually pay claims and then
let the earnings of those institutions recoup the loss over time. IOW, they
would have to pay back the US Treasury every dime, with interest, and their
shareholders would bear the burden. That is how regulated free markets are
supposed to work.

That's my take anyway. Your 401K, stock portfolio and retirement nest egg
are already gone, you just don't realize it yet. America needs to face that
fact and right now. This
doesn't mean the world is going to end by the way.

Here is something from a guy, James K. Galbraith, who is as smart as his
dad - John Kenneth Galbraith.
We need to follow his advice, not transfer a trillion dollars in good money
from the American tax payer to a bunch of down on their luck gamblers.


A Bailout We Don't Need

By James K. Galbraith
Thursday, September 25, 2008; A19

http://www.washingtonpost.com/wp-dyn...d=opinionsbox1

Now that all five big investment banks -- Bear Stearns, Merrill Lynch,
Lehman Brothers, Goldman Sachs and Morgan Stanley -- have disappeared or
morphed into regular banks, a question arises.

Is this bailout still necessary?

The point of the bailout is to buy assets that are illiquid but not
worthless. But regular banks hold assets like that all the time. They're
called "loans."

With banks, runs occur only when depositors panic, because they fear the
loan book is bad. Deposit insurance takes care of that. So why not eliminate
the pointless $100,000 cap on federal deposit insurance and go take
inventory? If a bank is solvent, money market funds would flow in,
eliminating the need to insure those separately. If it isn't, the FDIC has
the bridge bank facility to take care of that.

Next, put half a trillion dollars into the Federal Deposit Insurance Corp.
fund -- a cosmetic gesture -- and as much money into that agency and the FBI
as is needed for examiners, auditors and investigators. Keep $200 billion or
more in reserve, so the Treasury can recapitalize banks by buying preferred
shares if necessary -- as Warren Buffett did this week with Goldman Sachs.
Review the situation in three months, when Congress comes back. Hedge funds
should be left on their own. You can't save everyone, and those investors
aren't poor.

With this solution, the systemic financial threat should go away. Does that
mean the economy would quickly recover? No. Sadly, it does not. Two vast
economic problems will confront the next president immediately. First, the
underlying housing crisis: There are too many houses out there, too many
vacant or unsold, too many homeowners underwater. Credit will not start to
flow, as some suggest, simply because the crisis is contained. There have to
be borrowers, and there has to be collateral. There won't be enough.

In Texas, recovery from the 1980s oil bust took seven years and the pull of
strong national economic growth. The present slump is national, and it can't
be cured that way. But it could be resolved in three years, rather than 10,
by a new Home Owners Loan Corp., which would rewrite mortgages, manage
rental conversions and decide when vacant, degraded properties should be
demolished. Set it up like a draft board in each community, under federal
guidelines, and get to work.

The second great crisis is in state and local government. Just Tuesday, New
York Mayor Michael Bloomberg announced $1.5 billion in public spending cuts.
The scenario is playing out everywhe Schools, fire departments, police
stations, parks, libraries and water projects are getting the ax, while
essential maintenance gets deferred and important capital projects don't get
built. This is pernicious when unemployment is rising and when we have all
the real resources we need to preserve services and expand public
investment. It's also unnecessary.

What to do? Reenact Richard Nixon's great idea: federal revenue sharing.
States and localities should get the funds to plug their revenue gaps and
maintain real public spending, per capita, for the next three to five years.
Also, enact the National Infrastructure Bank, making bond revenue available
in a revolving fund for capital improvements. There is work to do. There are
people to do it. Bring them together. What could be easier or more sensible?

Here's another problem: the wealth loss to near-retirees and the elderly
from a declining stock market as things shake out. How about taking care of
this, with rough justice, through a supplement to Social Security? If you
need a revenue source, impose a turnover tax on stocks.

Next, let's think about what the next upswing should try to achieve and how
it should be powered. If the 1960s were about raising baby boomers and the
'90s about technology, what should the '10s and '20s be about? It's obvious:
energy and climate change. That's where the present great unmet needs are.

So, let's use the next few years to plan, mapping out a program of energy
conservation, reconstruction and renewable power. Let's get the public
sector and the universities working on it. And let's prepare the private
sector so that when the credit crunch finally ends, we'll have the firms,
the labs, the standards and the talent in place, ready to go.

Some will ask if we can afford it. To see the answer, don't look at budget
projections. Just look at interest rates. Last week, in the panic, the
federal government could fund itself, short term, for free. It could have
raised money for 30 years and paid less than 4 percent. That's far less than
it cost back in 2000.

No country in this situation is broke, or insolvent, or even in much
trouble. For once, Wall Street's own markets speak the truth. The
financially challenged customer isn't Uncle Sam. He's up on Wall Street,
where deregulation, greed and fraud ran wild.




--

John R. Carroll
www.machiningsolution.com

"Mike Marlow" wrote:

I do not see this as a Republican vs Democrat thing, but as a
hallmark of the Bush administration.

It's a "My way or the highway" classic we've seen since 2001 from Bush
et all.

Lew

On Thu, 25 Sep 2008 04:11:42 -0400, "Mike Marlow"
wrote:

Several people [actually two] have sent me off list emails asking
what they can do about this money grab. In all honesty, not
much, as this appears to be a "done deal," and Congress is again
putting on a punch-n-judy show for the amusement and diversion of
the great unwashed [that's you and me]. However if you are
interested and want to do something, write or email your senators
and representative to vote no. You can get their email/snail
mail/fax addresses at
http://www.senate.gov/general/contac...nators_cfm.cfm
http://www.house.gov/


Unfortunately, this has the familiar ring to it that is reminiscent of the
Patriot Act. My second biggest concern with this administration is their
ability to recognize a highly charged environment and to capitalize on it to
grab power and authorities over the people. I do not see this as a
Republican vs Democrat thing, but as a hallmark of the Bush administration.


Oh **** yes.

Think your Obamassiah is going win?

On Wed, 24 Sep 2008 18:40:42 -0700, SavasTU wrote:


A corporate attorney from Albany, N.Y., Victor Gerhard plunged into the
radical right in early 1999, when he joined the neo-Nazi National
Alliance* after a period of studying the group's literature.

{Snip, Snip, Snip}

Early this year, Gerhard added two E-Bay "stores" and 14 Words Press* to
the Condor Legion family of firms. (14 Words Press is a publisher of
racist neo-Pagan materials that was founded by the legendary David Lane
[see Preaching from Prison], now serving a 190-year sentence in
connection with a 1984 murder by the terrorist group The Order.) In
July, Gerhard began producing a nightly Web-based "news" program.

Thanks SavasTU.

I am in a bit of a shock by your information. I had no idea, or I
wouldn't have posted my reply to OP. Now I comprehend what I thought was
implied racist content was not implied but blatant and deliberate
racism.

Thanks again. I apologize for posting a reply when it should have been
ignored.

On Sep 25, 5:46 am, Phil Again wrote:
On Wed, 24 Sep 2008 18:40:42 -0700, SavasTU wrote:

A corporate attorney from Albany, N.Y., Victor Gerhard plunged into the
radical right in early 1999, when he joined the neo-Nazi National
Alliance* after a period of studying the group's literature.

{Snip, Snip, Snip}

Early this year, Gerhard added two E-Bay "stores" and 14 Words Press* to
the Condor Legion family of firms. (14 Words Press is a publisher of
racist neo-Pagan materials that was founded by the legendary David Lane
[see Preaching from Prison], now serving a 190-year sentence in
connection with a 1984 murder by the terrorist group The Order.) In
July, Gerhard began producing a nightly Web-based "news" program.

Thanks SavasTU.

I am in a bit of a shock by your information. I had no idea, or I
wouldn't have posted my reply to OP. Now I comprehend what I thought was
implied racist content was not implied but blatant and deliberate
racism.

Thanks again. I apologize for posting a reply when it should have been
ignored.

Here is an article in today's N.Y.Times,trying to shed some light on
this
financial mess.
http://www.nytimes.com/2008/09/25/bu...th&oref=slogin
http://www.nytimes.com/2008/09/25/bu...th&oref=slogin

On Wed, 24 Sep 2008 16:08:43 -0700, DGDevin wrote:

In addition a third of the homes now in foreclosure were bought as
investment properties by people who never intended to live in them, they
were going to rent them or sell them for a profit. Or so they thought.
They were among the first to walk away from mortgages they couldn't pay.

That's a really good reminder. Little details like that tend to escape
the memory in the midst of a bailout hullabaloo. I knew that, but it had
gotten shoved back into secondary memory. Thanks for reminding me.

Now I'm going to go remind my senator :-).

On Thu, 25 Sep 2008 01:14:29 -0700, John R. Carroll wrote:

Phil Graham introduced legistlation that
was passed and signed in 2002 specifically exempting and precluding these
products from oversight or regulation. There now exists $46 trillion dollars
of these "uninsurance" policies in an environment where they have been sold
and
traded to people who never considered that they would ever have to pay off
on them and don't have the reserves to do so in any event.

The more I learn about the background of this mess, the more I think Gramm
should be held accountable for at least a portion of the loss. Or be run
out of town on a rail. Of course, neither will happen - he'll just keep
on advising McCain.

Now where did I hear that and in what context? As I recall, there was
a giant hoax being perpetrated by the current administration upon the
people.

Surprisingly, many people are having trouble swallowing this latest
cry of wolf from Bushco. I just don't understand how anyone could
find this band of crooks and liars untrustworthy.

And even if it is true, a bailout will not lead to changes in
behavior. Learning DOES NOT OCCUR without reinforcement.

A good recession is what this country needs to purge these scumbags
from positions of power (both governmental and financial).

D'ohBoy

I posted this in another thread, John, but it's more on topic here.

This is what Dave Ramsey said on his site.
Basically, the whole mess was caused by a change in the accounting laws
(as a result of the Enron mess).



http://www1.daveramsey.com/etc/fed_b...up_10887.htmlc



Remember Enron, WorldCom, Adelphia, and other companies had artificially
put assets on the books? They'd say something was worth $10M when they
bought it, but eventually it decreased in value, and they never updated
the value in the books. That was part of the fraud. Under current laws
at that time, they were all convicted and put in jail for fraud.

Then we got all mad and made all these new laws that are coming out the
wazoo called sarbanes oxley. It's a huge, massive law but the idea is
that we were going to mandate ethics to corporate America because
apparently they didn't have any, according to the Enron failure. It's
now a total pain in the butt to execute it in a publicly traded company.

It didn't work because you can't cause ethics to happen. However, it
does make each company each day restate what their assets are worth if
sold on the market. This accounting procedure is mark to market
accounting--you need to remember that. It's a good concept and keeps
companies from having loaded balance sheets.
How This Affects Us Today

However, it's part of what's caused this in the news now. Merrill Lynch
was sitting with $30 billion tied up in sub-prime loans with houses.
Stupid! They get what they deserve for doing that, and I'm with you on
that. Those houses didn't become worthless all of a sudden because those
people couldn't sell their bonds. Since they couldn't sell them, they
basically gave them away for 22 cents on the dollar. Now do you think
all those houses lost 80% of their value underneath that deal? No, they
didn't, so they gave them away for 22 cents on the dollar (about $6
billion total) because there was no market for them. Nobody wants to buy
sub-prime bonds because they suck. They're junk bonds. But at 22 cents
on the dollar, it's a bargain because even if you foreclosed on every
one of the houses in there, you'd probably get $20 billion back out of
$30 billion, and so the company that bought those for $6 billion got a
deal! But there's no market for them. That's where these companies are
stuck. They can't sell this stuff, but accounting-wise, they've had to
mark it down to market and it's frozen the marketplace.

Economist Wesbury is saying that if we change that one rule and don't
force them to mark down to market value and just let them hold on to all
the stuff, and say just on sub-primes for this period of time you can
change that rule -- a temporary change -- that'll free the market up.
It's seized right now; it's frozen. This will thaw it out and get it
going again. He says that'll solve 60% of the problem ... and I think
he's right.

That one accounting rule is what made Merrill Lynch sell out. That one
accounting rule is what's driving other ones into the dirt. Would you
rather let them change their accounting rule or loan them $700 billion
for us to buyout their bad paper?

I'd rather them work their own crap out than change the accounting rule.

I don't like giving them any money or any help with my tax dollars. But
I'd rather see that than see the whole thing turn completely upside down
in a fruit basket turnover than have a whole meltdown or something and
freak out here in the middle of the election season. Why don't we just
take the FHA insurance program and extend it across these sub-primes?
What that means is that you and I are guaranteeing the lender that
they're not going to lose as much or any money on those mortgages. Now I
don't like guaranteeing them, but I like it better than buying them. In
other words, instead of $700 billion in tax-payer debt going out there
to bail out these companies, just extend the insurance out. You could
probably do that for less than $40 billion. It's like a 95% savings!

If the government insured those mortgages, they would then be
marketable. And could sell them. And the companies would stay afloat.
And we, the people, don't have to get into the mortgage business. Now
we're going to get in there a little bit because of the insurance on
those getting foreclosed on. But foreclosures aren't causing this. This
is being caused because these companies are frozen and seized up. We've
got to let some of the steam come off and put some oil in there to get
this thing moving again. We can do that without going into debt $700
billion.
Here's Your Plan

Call your Congressman. Call your Senator. Tell them to change the
mark-to-market accounting law and to extend insurance but extend no
loans. If they extend loans - if they borrow the money on the national
debt in order for us to all go into the mortgage business a trillion
dollars - you're going to fire their butts and send them home.

I've talked with several people today, and it's on the tables in
Washington, but it's not something you're going to see on TV. If you'll
let your Congressmen know you know about this and that you'll vote
against them if they don't vote to change the mark-to-market law and
you'll contribute your money to make sure they never serve in office
again. That's what you need to tell them early and often.

cavelamb himself wrote:
I posted this in another thread, John, but it's more on topic here.

This is what Dave Ramsey said on his site.
Basically, the whole mess was caused by a change in the accounting
laws (as a result of the Enron mess).



http://www1.daveramsey.com/etc/fed_b...up_10887.htmlc




I saw it Richard and it just ain't so.
Mortgages and the bonds they form aren't really the problem that the current
bail out seeks to address.
That you believe this to be the case is completely understandable but not
true.


--

John R. Carroll
www.machiningsolution.com

John R. Carroll wrote:




I saw it Richard and it just ain't so.
Mortgages and the bonds they form aren't really the problem that the current
bail out seeks to address.



That you believe this to be the case is completely understandable but not
true.



Sorry John, but please note, unlike a lot of people here,
I'm ASKING not TELLING.

Because, frankly, I don't have a clue what to believe.



--

Richard

(remove the X to email)

Mike Marlow wrote:
"Too_Many_Tools" wrote in message
...
On Sep 24, 6:08 pm, "DGDevin" wrote:


The blame lies solely on those who were minding the store...the
Republicans.

The same ones who want $700 billion dollars given to them in a week
with no accountability.

Time for a change...a BIG change in the White House.

================================================== ======

Not that I'm in favor of this bailout, but where did you get the
scoop that there would be no accountability? As for the change in
the White House - well, that's coming - one way or another.

Please take care to attribute quotations correctly; I did not write the
lines you quoted.

Too_Many_Tools wrote:

The blame lies solely on those who were minding the store...the
Republicans.

The same ones who want $700 billion dollars given to them in a week
with no accountability.

Time for a change...a BIG change in the White House.

TMT

It doesn't lie *solely* with the Repubs. The previous administration helped
to get the ball rolling, and the banks and associated companies displayed
not only greed (that we expect) but stunning incompetence as well.

As for the White House, I tend to think of myself as a conservative sort,
but enough is enough. Until recently I thought John McCain was one of the
better politicians in Washington, but I can't take any more of someone with
an "R" after his name having the top job. I'm quite prepared to give the
Dems their own chance to screw things up for four years, and I'm sure they
will. It simply seems impossible for them to do as horrible a job as we've
seen for the past eight years, what an incredible mess.

On Thu, 25 Sep 2008 13:44:25 -0500, cavelamb himself
wrote:
John R. Carroll wrote:

I saw it Richard and it just ain't so.
Mortgages and the bonds they form aren't really the problem that the current
bail out seeks to address.

That you believe this to be the case is completely understandable but not
true.

Sorry John, but please note, unlike a lot of people here,
I'm ASKING not TELLING.

Because, frankly, I don't have a clue what to believe.
---------------------
When embezzlers are caught, they always blame the auditors.

What something is "worth" is one of the basic philosophical
questions, and "worth" will vary from person to person.

One of the reasons for accounting is the establishment of the
financial "health" of an organization, one very significant
factor of which is their solvency, or "net worth." Net worth is
defined as "assets" less "liabilities," and one of the basic
reasons for outside auditors is to obtain an independent and
unbiased opinion as to the accuracy and legitimacy of the assets
[overstated?] and liabilities [understated?].

The solvency of an organization ==is its condition at the
present time,== not what it was at some period in the past or
what *MAY* be at some period in the future, but currently.

The actual culprit here appears to have been the bond ratings
organizations such as S&P, Fitch, Moody's etc. which assigned a
AA or AAA investment grade rating to novel securities such as
synthetic structured residential mortgage backed collateralize
debt obligations with no history, and no knowledge of or
experience with such securities.

Indeed, many of these securities are so complex [CDOs exist that
are backed by or based on other CDOs] they could only be analyzed
by computer programs, and unfortunately many of these programs
have been discovered to have errors and omissions which oddly
enough rated the securities many levels too *HIGH* [I am unaware
of any computer analysis which rated the securities too
low/risky]

At some point an asset is worth what it is worth, no matter what
the owner thinks or wishes. In this case Mr. Market said these
many of these SSRMBCDOs are now worth 10 cents to 30 cents per
dollar of their face value, and some are worth nothing. It is not
the accountants' fault that 2 + 2 still equals 4, and not 6 or 8
as the CEO would like, no matter how hard he pounds on the table.

If the banks and brokerage houses collapse as a result of honest
accounting, too bad. At least this stops them from sucking up
additional capital. If "mark to market" had been in effect, it
is highly likely that Enron [and many others] would have
collapsed years earlier, and spared the state of California the
electric screw job, as well as preserving huge amounts of capital
for their employees who continued to invest in their 401 k plans.


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).

On 2008-09-25, F George McDuffee wrote:
One of the reasons for accounting is the establishment of the
financial "health" of an organization, one very significant
factor of which is their solvency, or "net worth." Net worth is
defined as "assets" less "liabilities," and one of the basic
reasons for outside auditors is to obtain an independent and
unbiased opinion as to the accuracy and legitimacy of the assets
[overstated?] and liabilities [understated?].

George, my impression from this bailout story is as follows:

1) There is a lot of hysterical screaming about impending economic
collapse

2) There is not a lot of details about this impending collapse

3) There is no data whatsoever and no listings of various players and
instruments under mortal danger.

The whole story seems fishy to a huge extent, due to extreme lack of
details.

Just who would fail?

By how much would credit contract?

How inflationary would be the effect of flooding the financial world
with more money?

The fact that these details are either not available, or are hidden
from us, suggests that there is a lot more to the story that is not
being told.

I totally do not buy what is going on and cannot support a secret plan
that is being adopted due to secret reasons.

I think that this is another republican ploy, akin to their lying
about "mortal danger from Iraqi nuclear mushrooms". The objective is
to appear saviors right before elections, but let us suffer from
increased debt, more recklessness, etc, for years to come.

i

F. George McDuffee wrote:

Sorry John, but please note, unlike a lot of people here,
I'm ASKING not TELLING.

Because, frankly, I don't have a clue what to believe.

---------------------
When embezzlers are caught, they always blame the auditors.

What something is "worth" is one of the basic philosophical
questions, and "worth" will vary from person to person.

One of the reasons for accounting is the establishment of the
financial "health" of an organization, one very significant
factor of which is their solvency, or "net worth." Net worth is
defined as "assets" less "liabilities," and one of the basic
reasons for outside auditors is to obtain an independent and
unbiased opinion as to the accuracy and legitimacy of the assets
[overstated?] and liabilities [understated?].

The solvency of an organization ==is its condition at the
present time,== not what it was at some period in the past or
what *MAY* be at some period in the future, but currently.

The actual culprit here appears to have been the bond ratings
organizations such as S&P, Fitch, Moody's etc. which assigned a
AA or AAA investment grade rating to novel securities such as
synthetic structured residential mortgage backed collateralize
debt obligations with no history, and no knowledge of or
experience with such securities.

Indeed, many of these securities are so complex [CDOs exist that
are backed by or based on other CDOs] they could only be analyzed
by computer programs, and unfortunately many of these programs
have been discovered to have errors and omissions which oddly
enough rated the securities many levels too *HIGH* [I am unaware
of any computer analysis which rated the securities too
low/risky]

At some point an asset is worth what it is worth, no matter what
the owner thinks or wishes. In this case Mr. Market said these
many of these SSRMBCDOs are now worth 10 cents to 30 cents per
dollar of their face value, and some are worth nothing. It is not
the accountants' fault that 2 + 2 still equals 4, and not 6 or 8
as the CEO would like, no matter how hard he pounds on the table.

If the banks and brokerage houses collapse as a result of honest
accounting, too bad. At least this stops them from sucking up
additional capital. If "mark to market" had been in effect, it
is highly likely that Enron [and many others] would have
collapsed years earlier, and spared the state of California the
electric screw job, as well as preserving huge amounts of capital
for their employees who continued to invest in their 401 k plans.


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).


I follow what you are saying here.

So check me on this?

Housing prices have escalated tremendously over a short period of time.

If I follow all this correctly, these houses were valued at way over
their true market value.

Then comes the "funny" paper insuring the higher value.

Then, when the house prices hit about 4X, amazingly, people quit buying.

Those already in a house (or holding the mortgage on a house for
investment) suddenly found that the house isn't worth the price they
paid (and still owe).

ok so far?

So they walk away from the deal and let the banks (or ?) have it back.

Foreclosure happens.

The bank now owns lots of houses that they think are worth a lot more
than any real value.

They can't sell them at that price, but won't devalue them because it
would cost them too much of the artificial price.

Then comes the "funny" paper business - which to my mind plays out very
much the same way.

Nobody will buy the paper because they (now) KNOW it isn't worth what
it's printed on.

So, here is my big quandary...


If we don't bail out the financial houses, there won't be any credit
for anybody - a depression happens, and everybody suffers.


But if we do bail them out, are we not propping up the over inflated
price of housing? a recession happens, and everybody suffers?


Ok, I know I don't know a lot about this mess.

But that doesn't mean I can't understand it, if someone who does
know what's happening can explain it.


Richard


There is one thing that I do know for sure.
Those who can't explain it don't understand it.

On Thu, 25 Sep 2008 15:19:36 -0500, cavelamb himself
wrote:
snip
If we don't bail out the financial houses, there won't be any credit
for anybody - a depression happens, and everybody suffers.
snip
--------------
It is exactly at this point that the non sequitur starts.

Indeed, it can be argued [and I tend to agree] than many of our
current socio-economic problems are the result of the financial
"great houses" and their "high rollers," and the sooner we are
rid of them the better.

There was credit long before there were the great houses of
finance, and there will be credit long after they are gone. What
there won't be [for a while] if the great houses disappear are
the huge piles of [other peoples] money controlled by the "high
rollers" and "generous sports."

There will of course be huge paper losses, but these will be born
mainly by the "high rollers," their stock and bond holders, and
the hedge and private capital funds. The depositors in FDIC
institutions will be compensated up to 100k$ per account. [Which
IMNSHO is a *MUCH* better use of the tax payers $s]

If this were allowed to happen there would be little risk of
inflation as the total supply of money would probably go down
slightly, not increase drastically as under "Bazooka" Paulson's
plan, and there will be ample number of banks and credit unions
to provide the required credit for "normal" human activities.
{Now if you want to buy the entire country of Bolivia on E-Z
credit, that might be a different story.}

This would also concentrate the losses on those who caused and
profited by the asset bubble creation, although there would be
some collateral damage [in the military sense] to the average
person who had a pension plan, 401k, mutual funds, etc. invested
in these so-called "assets."

Note that many of the people screaming the loudest for a
governmental bail out are the same people that ground entire
American communities into the ground in the name of profit, free
enterprise and the free market such as [Neutron] Jack Welch of
GE.
--------
Jack Welch says U.S. faces "deep downturn"
Wed Sep 24, 2008 2:44pm EDT
By Nick Zieminski

NEW YORK (Reuters) - Former General Electric Co (GE.N: Quote,
Profile, Research, Stock Buzz) Chairman and Chief Executive
Officer Jack Welch said the U.S. economy faces a deep downturn in
coming quarters, and he supports a proposed $700 billion
government rescue package for the financial sector.

"I now believe we are in for one hell of a deep downturn," Welch
told the World Business Forum in New York on Wednesday, adding
that the first quarter of 2009 will likely be "brutal."

Until recently, Welch said, he had believed the U.S. economy
could avoid recession, but he has changed his mind.

"I am now caving," he said. "Get ready for real tough times.
They're coming. There is no credit available."

Welch said mortgage lenders, legislators, investment bankers and
others are all to blame for the crisis, which stemmed from easy
credit and investors' appetite for yield.

"The problem was money didn't cost anything," Welch said. "People
took swings."
snip
-------------
for complete article see
http://www.reuters.com/article/newsO...48N74H20080924

[Chainsaw Al Dunlop seemed to be missing.]
http://www.businessweek.com/1998/27/b3585090.htm

Also be reminded that the FED has/is pumping in even more than
700 billion to keep the big banks afloat. {Until after the
election?}
----------
Federal Reserve Doubles Lending as Crisis Worsens (Update1)

By Scott Lanman

Sept. 25 (Bloomberg) -- Commercial banks and bond dealers
borrowed $217.7 billion from the Federal Reserve as of yesterday,
more than double the prior week, as the financial crisis worsened
and private funding dried up.
snip
---------------
for entire article see
http://www.bloomberg.com/apps/news?p...nA0&refer=home

At that rate in a little more than 3 weeks they will have pumped
in 700 billion *MORE* conjured up fiat dollars. Thus the 300
point bounce in the Dow. It should be obvious that a lack of
liquidity is *NOT* the major problem, but when the only tool you
have is a hammer, everything looks like a nail...

Does anyone know where these huge sums are going? I did notice
the Maybach and Masaratti ads are back in the Wall Street
Journal.
http://www.maserati.com/
http://www.maybachusa.com/


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).

cavelamb himself wrote:
John R. Carroll wrote:




I saw it Richard and it just ain't so.
Mortgages and the bonds they form aren't really the problem that the
current bail out seeks to address.



That you believe this to be the case is completely understandable
but not true.



Sorry John, but please note, unlike a lot of people here,
I'm ASKING not TELLING.

Because, frankly, I don't have a clue what to believe.

I've given considerable thought to an analogy that you would understand on
an intrinsic basis Richard.
You are a programmer.
What the United States of America is looking at is what you, a programmer,
and I , a guy that has programmed hundreds of millions of lines of code know
as

----

VAPOR - WARE


--

John R. Carroll
www.machiningsolution.com

John R. Carroll wrote:

cavelamb himself wrote:

John R. Carroll wrote:




I saw it Richard and it just ain't so.
Mortgages and the bonds they form aren't really the problem that the
current bail out seeks to address.



That you believe this to be the case is completely understandable
but not true.



Sorry John, but please note, unlike a lot of people here,
I'm ASKING not TELLING.

Because, frankly, I don't have a clue what to believe.


I've given considerable thought to an analogy that you would understand on
an intrinsic basis Richard.
You are a programmer.
What the United States of America is looking at is what you, a programmer,
and I , a guy that has programmed hundreds of millions of lines of code know
as

----

VAPOR - WARE




Got it!

--

Richard

(remove the X to email)

"John R. Carroll" wrote:

VAPOR - WARE

AKA: McCain's "No Show" on Letterman's program last night.

Not much of a fan of Letterman, but he surely asked some relative and
interesting questions.

Doubt McCain's handlers will let him respond.

Lew

"Gunner" wrote in message
...
On Thu, 25 Sep 2008 04:11:42 -0400, "Mike Marlow"
wrote:

Several people [actually two] have sent me off list emails asking
what they can do about this money grab. In all honesty, not
much, as this appears to be a "done deal," and Congress is again
putting on a punch-n-judy show for the amusement and diversion of
the great unwashed [that's you and me]. However if you are
interested and want to do something, write or email your senators
and representative to vote no. You can get their email/snail
mail/fax addresses at
http://www.senate.gov/general/contac...nators_cfm.cfm
http://www.house.gov/


Unfortunately, this has the familiar ring to it that is reminiscent of the
Patriot Act. My second biggest concern with this administration is their
ability to recognize a highly charged environment and to capitalize on it
to
grab power and authorities over the people. I do not see this as a
Republican vs Democrat thing, but as a hallmark of the Bush
administration.


Oh **** yes.

Think your Obamassiah is going win?

You are a damned fool. You could save yourself the public embarrassment by
not assuming I am for a particular candidate, in total absence of any
insight.

--

-Mike-

"DGDevin" wrote in message
...
Mike Marlow wrote:
"Too_Many_Tools" wrote in message
...
On Sep 24, 6:08 pm, "DGDevin" wrote:


The blame lies solely on those who were minding the store...the
Republicans.

The same ones who want $700 billion dollars given to them in a week
with no accountability.

Time for a change...a BIG change in the White House.

================================================== ======

Not that I'm in favor of this bailout, but where did you get the
scoop that there would be no accountability? As for the change in
the White House - well, that's coming - one way or another.

Please take care to attribute quotations correctly; I did not write the
lines you quoted.


Correct - the attributes show it to have been from Too_Many_Tools

--

-Mike-

On Thu, 25 Sep 2008 15:13:38 -0500, Ignoramus23784
wrote:

On 2008-09-25, F George McDuffee wrote:
One of the reasons for accounting is the establishment of the
financial "health" of an organization, one very significant
factor of which is their solvency, or "net worth." Net worth is
defined as "assets" less "liabilities," and one of the basic
reasons for outside auditors is to obtain an independent and
unbiased opinion as to the accuracy and legitimacy of the assets
[overstated?] and liabilities [understated?].

George, my impression from this bailout story is as follows:

1) There is a lot of hysterical screaming about impending economic
collapse

2) There is not a lot of details about this impending collapse

3) There is no data whatsoever and no listings of various players and
instruments under mortal danger.

The whole story seems fishy to a huge extent, due to extreme lack of
details.

Just who would fail?

By how much would credit contract?

How inflationary would be the effect of flooding the financial world
with more money?

The fact that these details are either not available, or are hidden
from us, suggests that there is a lot more to the story that is not
being told.

I totally do not buy what is going on and cannot support a secret plan
that is being adopted due to secret reasons.

I think that this is another republican ploy, akin to their lying
about "mortal danger from Iraqi nuclear mushrooms". The objective is
to appear saviors right before elections, but let us suffer from
increased debt, more recklessness, etc, for years to come.

i

In other words..."Its all Bush's fault!!!"

Would that be a correct assessment of your position?

Gunner

On Sep 26, 4:54*am, Gunner wrote:
On Thu, 25 Sep 2008 15:13:38 -0500, Ignoramus23784



wrote:
On 2008-09-25, F *George McDuffee wrote:
One of the reasons for accounting is the establishment of the
financial "health" of an organization, one very significant
factor of which is their solvency, or "net worth." *Net worth is
defined as "assets" less "liabilities," and one of the basic
reasons for outside auditors is to obtain an independent and
unbiased opinion as to the accuracy and legitimacy of the assets
[overstated?] and liabilities [understated?].

George, my impression from this bailout story is as follows:

1) There is a lot of hysterical screaming about impending economic
collapse

2) There is not a lot of details about this impending collapse

3) There is no data whatsoever and no listings of various players and
instruments under mortal danger.

The whole story seems fishy to a huge extent, due to extreme lack of
details.

Just who would fail?

By how much would credit contract?

How inflationary would be the effect of flooding the financial world
with more money?

The fact that these details are either not available, or are hidden
from us, suggests that there is a lot more to the story that is not
being told.

I totally do not buy what is going on and cannot support a secret plan
that is being adopted due to secret reasons.

I think that this is another republican ploy, akin to their lying
about "mortal danger from Iraqi nuclear mushrooms". The objective is
to appear saviors right before elections, but let us suffer from
increased debt, more recklessness, etc, for years to come.

i

In other words..."Its all Bush's fault!!!"

Would that be a correct assessment of your position?

Gunner

Probably in large part, though far from totally. As we argue this,
Washington Mutual, the largest bank to fail, has gone belly-up. Odd.
Last week I got three credit card solicitations from those people, a
repetition of three weeks out of four over the past couple of years.

I don't know what could have been done to stop it, but my wife and I
started predicting some five or six years ago that this 15-20% annual
gain in housing prices was out of hand and would soon start to slither
down the chart. For people as fiscally unaware as us to realize this,
it makes one wonder WTF the experts were thinking, and doing, besides
grabbing the loot and stuffing it in their pockets.

The upturn didn't show many in good light, but the downturn is
pointing a spotlight at the worst offenders, a process that is
probably going to take longer than I expect to live to complete.
Unfortunately, few, if any, perpetrators will go to jail.

Charlie Self wrote in
:

On Sep 26, 4:54*am, Gunner wrote:
On Thu, 25 Sep 2008 15:13:38 -0500, Ignoramus23784



wrote:
On 2008-09-25, F *George McDuffee
w
rote:
One of the reasons for accounting is the establishment of the
financial "health" of an organization, one very significant
factor of which is their solvency, or "net worth." *Net worth is
defined as "assets" less "liabilities," and one of the basic
reasons for outside auditors is to obtain an independent and
unbiased opinion as to the accuracy and legitimacy of the assets
[overstated?] and liabilities [understated?].

George, my impression from this bailout story is as follows:

1) There is a lot of hysterical screaming about impending economic
collapse

2) There is not a lot of details about this impending collapse

3) There is no data whatsoever and no listings of various players
and instruments under mortal danger.

The whole story seems fishy to a huge extent, due to extreme lack of
details.

Just who would fail?

By how much would credit contract?

How inflationary would be the effect of flooding the financial world
with more money?

The fact that these details are either not available, or are hidden
from us, suggests that there is a lot more to the story that is not
being told.

I totally do not buy what is going on and cannot support a secret
plan that is being adopted due to secret reasons.

I think that this is another republican ploy, akin to their lying
about "mortal danger from Iraqi nuclear mushrooms". The objective is
to appear saviors right before elections, but let us suffer from
increased debt, more recklessness, etc, for years to come.

i

In other words..."Its all Bush's fault!!!"

Would that be a correct assessment of your position?

Gunner

Probably in large part, though far from totally. As we argue this,
Washington Mutual, the largest bank to fail, has gone belly-up. Odd.
Last week I got three credit card solicitations from those people, a
repetition of three weeks out of four over the past couple of years.

I don't know what could have been done to stop it, but my wife and I
started predicting some five or six years ago that this 15-20% annual
gain in housing prices was out of hand and would soon start to slither
down the chart. For people as fiscally unaware as us to realize this,
it makes one wonder WTF the experts were thinking, and doing, besides
grabbing the loot and stuffing it in their pockets.

The upturn didn't show many in good light, but the downturn is
pointing a spotlight at the worst offenders, a process that is
probably going to take longer than I expect to live to complete.
Unfortunately, few, if any, perpetrators will go to jail.


Well, Charlie, maybe we all should have seen it coming. However, home
prices going up and down is only a part of the problem, I think.
Borrowing more money than your assets are worth is a more direct problem
in this context. The other problem is banks pushing this type of loan
on (stupid) people. But the real problem is selling the mortgages as
securities mixing "good" mortgages with "bad" mortgages and getting
rating agencies (for a fee) to give these (un)securities high ratings.
On top of this there was trading in insurance betting that the mortgages
would or would not be defaulted upon. In essence the whole thing was a
huge Ponzi scheme where future earnings would pay for the current
yields.

Indeed it could be all roses forever, and now it is badly smelling
garbage. WaMu was real good at selling bad stuff, and now is under.
The result will likely be that the personnel in the branch on the NW
corner of First Ave and 23rd Str in Manhattan will have to look for
another job, since there is already a Chase on the SE corner, and
another bank on the SW corner. Other banks are within a couple or three
blocks.

Main problem now is how to get credit flowing again to worthwhile
customers ...

--
Best regards
Han
email address is invalid

On 2008-09-26, Gunner wrote:
On Thu, 25 Sep 2008 15:13:38 -0500, Ignoramus23784
wrote:

On 2008-09-25, F George McDuffee wrote:
One of the reasons for accounting is the establishment of the
financial "health" of an organization, one very significant
factor of which is their solvency, or "net worth." Net worth is
defined as "assets" less "liabilities," and one of the basic
reasons for outside auditors is to obtain an independent and
unbiased opinion as to the accuracy and legitimacy of the assets
[overstated?] and liabilities [understated?].

George, my impression from this bailout story is as follows:

1) There is a lot of hysterical screaming about impending economic
collapse

2) There is not a lot of details about this impending collapse

3) There is no data whatsoever and no listings of various players and
instruments under mortal danger.

The whole story seems fishy to a huge extent, due to extreme lack of
details.

Just who would fail?

By how much would credit contract?

How inflationary would be the effect of flooding the financial world
with more money?

The fact that these details are either not available, or are hidden
from us, suggests that there is a lot more to the story that is not
being told.

I totally do not buy what is going on and cannot support a secret plan
that is being adopted due to secret reasons.

I think that this is another republican ploy, akin to their lying
about "mortal danger from Iraqi nuclear mushrooms". The objective is
to appear saviors right before elections, but let us suffer from
increased debt, more recklessness, etc, for years to come.

i

In other words..."Its all Bush's fault!!!"

Would that be a correct assessment of your position?

No. I do not think that this economic trouble is Bush's fault.

This is a general failure of the economic structure and human nature,
and possibly soem deregulation decisions. The only persons to write
about it and warn us were Buffett and Munger. I own stock in their
company and thus was following what they said. Everyine else was
cheering "go, go".

However, the "bailout" story is very fishy.
--
Due to extreme spam originating from Google Groups, and their inattention
to spammers, I and many others block all articles originating
from Google Groups. If you want your postings to be seen by
more readers you will need to find a different means of
posting on Usenet.
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