Plan in increase powers of Federal Reserve

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http://www.nytimes.com/2008/03/29/business...agewanted=print

 

First the Patriot Act was passed for our personal security

Now this will give us financial security

 

Welkome to Amerika Komrades

[Sketch Soland]

bull sh--.

 

Swallow it, people. Idiots.

[UConn James]

http://www.nytimes.com/2008/03/29/business...agewanted=print

 

First the Patriot Act was passed for our personal security

Now this will give us financial security

 

Welkome to Amerika Komrades

 

No, the Patriot Act was passed for our national insecurity.

 

The gun ban, automobile ban, knife ban, alcohol ban, cigarette ban, dart ban, 30mg Sudafed ban, trans fat ban, cell phone ban, screwdriver ban, pencil ban.... These will be for our 'personal' insecurity. Motherment, ya dig?

[Sirius99]

No, the Patriot Act was passed for our national insecurity.

 

The gun ban, automobile ban, knife ban, alcohol ban, cigarette ban, dart ban, 30mg Sudafed ban, trans fat ban, cell phone ban, screwdriver ban, pencil ban.... These will be for our 'personal' insecurity. Motherment is good, ja?

 

As long as they don't ban Diet Coke, I'm golden.

[GG]

Just like there's generally a misconception about PATRIOT (it mostly threw together existing laws and regulations into one sweeping law at the federal level), the proposed rules by Paulson will look to streamline the regulations that affect the financial firms. If you looks at existing regulations it's a hodge podge of patchwork rules that have been put in place over time. Compounding is the evolution of financial transactions, but no effective way to normalize the regulation among competing firms.

 

Case in point, the biggest reason people were screaming about Fed's actions on Bear Stearns is that BS was not a bank, thus not eligible for direct funding. In order to qualify for fed funding a bank needs to comply with minimum capital requirements and Fed oversight of its books. As a securities firm, BS didn't have that, yet still got access to funding, to which traditional bank objected. On the other hand, since they're regulated differently, banks can hold assets on its books at different values than a securities firm like BS, even though the asset is the same. To securities firms, this accounting accounting treatment is unfair, as the securities need to reflect the current value, while banks can keep those assets at the historic cost until they sell the assets. This gives banks a huge advantage during market turmoil.

 

So as you can see, it's not an easy solution, but regulatory parity is one positive step to fixing the mess. Paulson won't be proposing any new rules, just making sure that there's more consistency in regulation across the markets. I'm guessing there will be more complaints from the handful of regulators' losing power than from the financial industry.

[Live&DieBillsFootball]

Just like there's generally a misconception about PATRIOT (it mostly threw together existing laws and regulations into one sweeping law at the federal level), the proposed rules by Paulson will look to streamline the regulations that affect the financial firms. If you looks at existing regulations it's a hodge podge of patchwork rules that have been put in place over time. Compounding is the evolution of financial transactions, but no effective way to normalize the regulation among competing firms.

 

Case in point, the biggest reason people were screaming about Fed's actions on Bear Stearns is that BS was not a bank, thus not eligible for direct funding. In order to qualify for fed funding a bank needs to comply with minimum capital requirements and Fed oversight of its books. As a securities firm, BS didn't have that, yet still got access to funding, to which traditional bank objected. On the other hand, since they're regulated differently, banks can hold assets on its books at different values than a securities firm like BS, even though the asset is the same. To securities firms, this accounting accounting treatment is unfair, as the securities need to reflect the current value, while banks can keep those assets at the historic cost until they sell the assets. This gives banks a huge advantage during market turmoil.

 

So as you can see, it's not an easy solution, but regulatory parity is one positive step to fixing the mess. Paulson won't be proposing any new rules, just making sure that there's more consistency in regulation across the markets. I'm guessing there will be more complaints from the handful of regulators' losing power than from the financial industry.

 

Isn't this because the banks are classifying the assets as held-to-maturity while the securities firms are holding them for sale which forces them to mark to market? If the securities firm was holding a secrity to maturity, do they get to treat it as such or do they always have to mark to market? If that was the case then it is indeed unfair.

 

However, I wouldn't think that securities firms would want to hold long term assets to maturity. Don't they want to be more liquid and have the ability to buy and sell frequently?

[GG]

Isn't this because the banks are classifying the assets as held-to-maturity while the securities firms are holding them for sale which forces them to mark to market? If the securities firm was holding a secrity to maturity, do they get to treat it as such or do they always have to mark to market? If that was the case then it is indeed unfair.

 

However, I wouldn't think that securities firms would want to hold long term assets to maturity. Don't they want to be more liquid and have the ability to buy and sell frequently?

 

Securities firms don't have the flexibility to "hold things to maturity" They have to mark everything to market. The banks have a choice of classifying it as holding for the long term. The banks do have to set aside reserves for potential losses, but if that loan/asset is still paying interest and principal, the banks are not under pressure to write down that asset, while securities firms have to write it down if the market value if that same asset goes down.

 

That's why it's important to see the distinction in the "losses" that have been taken in the last year. A large portion are paper losses due to market deterioration, not the loss from the asset itself.

[jjamie12]

Securities firms don't have the flexibility to "hold things to maturity" They have to mark everything to market. The banks have a choice of classifying it as holding for the long term. The banks do have to set aside reserves for potential losses, but if that loan/asset is still paying interest and principal, the banks are not under pressure to write down that asset, while securities firms have to write it down if the market value if that same asset goes down.

 

That's why it's important to see the distinction in the "losses" that have been taken in the last year. A large portion are paper losses due to market deterioration, not the loss from the asset itself.

And, I might point out, losses that *may* never happen, too. If you own a AAA mortgage bond right now, you have, most likely, taken a huge hit due to mark-to-market. You have also been getting your principal and interest payments every month, on time. No actual losses... yet.

[Live&DieBillsFootball]

And, I might point out, losses that *may* never happen, too. If you own a AAA mortgage bond right now, you have, most likely, taken a huge hit due to mark-to-market. You have also been getting your principal and interest payments every month, on time. No actual losses... yet.

 

It would seem to me that due to the huge drops in all bonds, that someone would see a buying opportunity in the better quality stuff. Unless thy're unsure as to whether AAA are really AAA.

[GG]

It would seem to me that due to the huge drops in all bonds, that someone would see a buying opportunity in the better quality stuff. Unless thy're unsure as to whether AAA are really AAA.

 

I'll go out on a limb and say that after 9 months of subprime and mortgage mess, if a bond is still rated AAA, there's a very high probability it really is AAA.

[bills_fan]

And, I might point out, losses that *may* never happen, too. If you own a AAA mortgage bond right now, you have, most likely, taken a huge hit due to mark-to-market. You have also been getting your principal and interest payments every month, on time. No actual losses... yet.

 

 

Yes. And if you can figure out a way to properly value the thing, as well as find people willing to sell it to you at your value, you will make a friggin killing. In 5 years time, you can buy the Bills.

[DC Tom]

It would seem to me that due to the huge drops in all bonds, that someone would see a buying opportunity in the better quality stuff. Unless thy're unsure as to whether AAA are really AAA.

 

Or even the low-quality stuff. If a mortgage bond rate is backed by mortgages with a 60% default rate...how much would you pay for it? Theoretically, paying twenty cents on the dollar for it makes you 100+% in the long run, since with a 60% default rate you'll still get forty cents back on the dollar (in principal payments - I'm not even considering mortgage interest or the simple fact that the mortgages are backed by real property in this estimate).

 

The problem is that a large number of the buyers of these securities have to mark them to market on their balance sheets...and their is no market. But for people that can make a reasonable estimate as to value, buy cheap, and are able to hold them for a decent time span there's probably a killing to be made. Wells Fargo should do pretty well in the long run with their Bear Stearns investment...BoA's Countrywide purchase was looking like a great deal for them, until they realized that Countrywide is more !@#$ed up than everyone realized.

[outsidethebox]

So is this good or bad. I'm sorry, I do not anything about what you guys are taliking about. I just want to know if this is good or bad for the average citizen of this country? Thanks in advance.

[Dwight Drane]

http://www.nytimes.com/2008/03/29/business...agewanted=print

 

First the Patriot Act was passed for our personal security

Now this will give us financial security

 

Welkome to Amerika Komrades

 

Amen

 

Republicans and Democrats are both right. The other side is full of s#!*

 

I have always been a lifelong Republican, but I am pretty sure I will vote for Obama. It's sort of my version of Flight 93. We might as well bring ourselves down instead of siding with those who pretend to believe in conservative values, and free markets. That is if we even have the election in November. The way things are going economically and the way the Middle East is ready to explode, I wouldn't be shocked if we delay elections, "for our own protection".

[Chilly]

Republicans and Democrats are both right. The other side is full of s#!*

 

I have always been a lifelong Republican, but I am pretty sure I will vote for Obama.

 

lolz

[Sketch Soland]

lolz

 

lulz!

[bills_fan]

So is this good or bad. I'm sorry, I do not anything about what you guys are taliking about. I just want to know if this is good or bad for the average citizen of this country? Thanks in advance.

 

 

Bad. If you believe in capitalism. This steps toward socialism. Not to mention empowering the entity that created the mess in the first place (the Fed).

[Fan in Chicago]

Bad. If you believe in capitalism. This steps toward socialism. Not to mention empowering the entity that created the mess in the first place (the Fed).

Yep. In other words, big government getting bigger. Goes against free market theory.

[GG]

A general indication that most people don't understand the proposal, WSJ slams it because according to them it would increase regulatory powers, and Paul Krugman slams it because he feels it continues Bush & Co.'s deregulatory agenda.

 

Again, the proposed rules do not introduce new regulations, just moving around parts of who should be regulated by whom. In a sense, it's a final fix that a panicked government created after the Great Depression and the idiocy that was Glass Steagall.

[bills_fan]

A general indication that most people don't understand the proposal, WSJ slams it because according to them it would increase regulatory powers, and Paul Krugman slams it because he feels it continues Bush & Co.'s deregulatory agenda.

 

Again, the proposed rules do not introduce new regulations, just moving around parts of who should be regulated by whom. In a sense, it's a final fix that a panicked government created after the Great Depression and the idiocy that was Glass Steagall.

 

 

It also strips certain entities of regulatory responsibilities (such as State regulators). The State securities regulators serve an important front-line role that will be severely curtailed by the proposal.

 

I'm still digesting exactly what the proposal means for all involved entities.