Had we followed the original bank bailout...

[OCinBuffalo]

What do you do for a living?

Computer guy....

 

...well that's what I say to women, but essentially that question screws me every time, because, if I explain fully people start running for the exits, and if I just say computer guy, people accuse me of calling them stupid, as if I think they won't understand. Lose/lose.

 

Suffice it to say: Managing partner of small mobile workflow/business intelligence full-service consulting firm. We build our own stuff, do integration work, and have a significant SME presence in two industries(in the form of the rest of our partners).

 

The health insurance gig I did was 10 years ago. I was engaged to give them a workflow game plan, amongst other things, which they then promptly ignored, once they realized that it would make them so efficient, they would actually process claims in a week = they lose money because the delay in the process means many people give up on getting their claim paid. I am certain I could walk back in there tomorrow and find the same problems the papers I wrote addressed. And, the reason those problems exist probably haven't changed either = data model/business process/business rules.

[DC Tom]

Are you honestly that stupid? So according to you the bailout wasn't to bail out bad debts the banks had on the books but it was purchase illiquid assets that weren't liquid and that's not bailing out bad debts? If the debt was good and liquid they wouldn't need money, but somehow you can twist that in your mind to pretend you know something no one else does. When a loan goes bad the bank can fund the deal without

 

If your claim is on the basis of asset definition or bad debt a bad debt is defined as "In financial accounting and finance, bad debt is the portion of receivables that can no longer be collected, typically from accounts receivable or loans."

 

Your second sentence is a tautology and doesn't clarify anything.

 

Let's take your 2nd sentence: "It was to purchase "liquid" assets that were no longer liquid." Either you mean they were to purchase non-liquid assets that aren't liquid, which is simply repeating your sorry ass and doesn't say anything of substance; or you think that by repeating yourself you are making a point unknown to anyone. Why not say the point of defining things is for the sake of definitions. Real deep Jack Handy.

 

You can also refrase that to mean "It was to purchase "liquid" assets that were illiquid." Or funnier yet since you used quotes to show flippancy to the word liquid you could also infer the following meaning: "It was to purchase illiquid assets that were illiquid." So purchasing illiquid debt because they were illiquid really clarifies things doesn't it genius?

 

Next thing you know you might say, "The point of studying history is the intent to know more about history in the event of a historical moment. In this case I studied the French Revolution because it had to do with France and a Revolution." Anyone who calls into question someone's intelligence by defining their rebuttal by repeating ideas really is a 3 legged ballerina in the world of intellectual endeavors, and then pretending I'm at fault without refuting anything and only make pretentious idiotic statements.

 

Toxic debt is not liquid Einstein, and it's bad debt. You want to play semantics and be witty, I mean you obviously have more time on your hands than I do with your waste of a life 17k posts and probably miss a normal life, but that's ok, pretend that by mentally masturbating yourself into legendary status you are accomplishing something.

 

If you had even the first clue of what a "balance sheet" is, you'd have understood that the toxic assets that were to be purchased under the bailout plan were required to be reported as liquid assets by financial institutions...however, as the markets for them ceased to exist, those assets that were required to be treated as liquid were truthfully not liquid. Because it's not the nature of the asset that defined its liquidity, it's the nature of how it was reported.

 

Hence, I made perfect sense. You're just too much of a mouth-breathing !@#$ing mongoloid to understand it. But hell, you're apparently too much of a mouth-breathing !@#$ing mongoloid to understand the difference between "asset" and "debt".

 

And the true icing on the cake is that you spent so much time typing that needlessly long post demonstrating beyond question to everyone that you are, in fact, a mouth-breathing !@#$ing mongoloid who hasn't the first clue what he's talking about. You don't understand the nature of the original intent of the bailout plan, you don't understand the nature of the assets at the root of the problem (hell, you don't even understand that they're assets ), and you didn't understand my earlier post, even though I kept it as brief and simple as possible in deference to your limited capacities.

[BillsFan-4-Ever]

The bailout without regulation, huh? I will do you one better, the bail out, without regulation, and no f'ing clue as to how to perform that regulation properly even if there was some, is bad.

 

You can't use the word "Should", as in: "There should be some regulation here!" unless you also provide a viable "How". Otherwise people can run wild saying things like: "There should not be any poverty in this country", or "Health care should be free" and never actually have to be accountable for ideas, and worse, get to pretend that anybody that doesn't agree with their "How", actually disagrees with their "Should".

 

Oh, wait, kinda like what it going on right now, huh?

 

I have new bumper sticker: No "Shoulds" without "Hows"! Idiots going against this concept is precisely where the dreaded "Unfunded Mandate" comes from. It is the ultimate "because I said so".

 

Unfunded Mandates are the opposite extreme of Unregulated Handouts. Clearly both are equally bad, and both are spawned directly from people using the word SHOULD without providing a viable HOW.

Not sure where you are going with that.

The bailout without regulation was in reference to AIG getting Multi Millions then taking their board members on a $440,000 weekend Spa trip.!!!

 

Goldman Sachs - Citi Bank wanted to continue to hand out Millions in Bonus' for CEO's FAILING to make the company profitable.

 

That was TARP I, with TARP II Obama has been watching to make sure the freeloaders are not skimming the money meant to SAVE the company on retreats and lavish unwarrented bonus'

[bills_fan]

But weren't they in effect bankrupting the banks by forcing them to revalue using mark to market values?

 

 

Thats why the original idea was abandoned.

[VABills]

Thats why the original idea was abandoned.

Right, and please correct me if I'm wrong, but when the banks were forced to revalue to current market value vs. the original sheet value it put the cost of lots of property under the 20-25% bond that's usually is enough to guarentee the loans. Hence the banks, with the values lower than the original minus the bond guarantees, were forced to move more more into liquid assets (read cash on hand) to meet their 3% minimums of deposits. Thus less money to lend and everything got jammed at the banks. The only true way out is to either allow the banks to go back to revaluing at original sheet value when the loan was taken, or the government (someone) has got to increase the bond coverage on the loans so the banks then have more coverage and can lower their money on hand, hence more money to lend.

[bills_fan]

Thanks for the reply.

 

So how would you have dealt with these two problems?

 

And

 

Assuming those 2 problems could have been overcome, how would our situation be different today?

 

 

Don't think they can be overcome; thats what is currently puzzling Geithner/Summers. They have no clue what to do.

 

This problem is extremely complex and needs a multi-prong solution, just to stabilize. Understand that the boom/bust business cycle will always be with us and is a function of the capitalist system. One big reason this one is so bad is that they kicked the can down the road in 2000-2002, didn't let the economy reset. If they did, we would have had a decent recession, but certainly nothing like the catastrophe today.

 

I humbly offer the following suggestions...

 

First we have to stablize the patient, that being the banking system.

 

1- Take $250 bil of TARP II and capitalize 5 brand new "good" banks. Locate them where the expertise is, 4 in NYC, 1 in Charlotte. IPO the newly capitalized banks into the market. Taxpayers will make money on that deal. Due to the fractionalized banking system, thats a fresh $2.5 trillion in new capital for lending and financing activities. This will help stabilize the banking system (in conjunction with #4 below).

 

2- Prohibit the owning of any CDS where you do not own the underlying bond. This is akin to prohibiting naked short selling in equities; its not legal in equities, nor should it be in debt. Lets understand what is happening here...lets say you can buy $10 mil of CDS on GE for approximately $200k (price is as of a few weeks ago); given margin requirements, that means you have to put up a maximum of $50k (in the most onerous margin accounts, usually much less) to effectively short $10 mil in GE bonds. The writer of the CDS then has to hedge his position or be out $10 mil, so he shorts GE stock or buys a put option, figuring he can make money to hedge his risk if the stock tanks. The writer of the put option also has to hedge, so he shorts GE. This creates massive downward pressure on GE stock. Rating agencies, using market cap in their models, then contemplate a downgrade, putting even more pressure on the stock. Multiply this by thousands, since you don't have to own the bond to buy the CDS and the stock gets destroyed. The buyer of the CDS has very little risk and the potential for a massive payoff, in effect a lottery ticket. This was not the original purpose of CDS (which are legitimate, hedging instruments for debtholders).

 

3- Prosecute the fraudsters. There has been a massive loss of confidence. The only way to restore it, is to let the markets know there is a cop on the beat. The US credit market is about $50 trillion (roughly). Approximately 2/3 of this is provided by non-bank lenders...pension funds, hedge funds, insurance companies etc. This is the so-called "Shadow Banking System." These are the buyers of most asset backed securities. They have been, IMHO, scammed. They bought AAA rated paper, sold by securitization banks who paid big bucks for that bundling and rating, diligenced by the originator bank on a no-doc basis, backed by Alt-A, Option ARMS on $400k homes owned by WalMart cart-pushers making $10 an hour. They are not buying this paper again. In fact, they are not buying any paper. Create an Office of Financial Fraud, run by Treasury or the SEC. Investigate all parties to this mess (including Congressmen who got cheap-o loans as a member of the Friends of Angelo program run by Countrywide). Investigate the liars on the loan applications (it is a Federal crime to lie on a mortgage application). Prosecute, prosecute, prosecute. Hell, locate the office in NY and hire only the lawyers laid off by big firms...plenty of market there.

 

4- Incent the Street. Not popular, but necessary. Rewrite all existing stock options held by employees at financial institutions that took TARP I to current market prices. You need people to try and fix this, who do not jump to the new banks in 1.

 

After the patient is stabilized, some long term reforms to consider...

 

1- Calculate Street bonuses on a rolling 3 year basis.

 

2- Permit the SEC to hire uber-qualfied people at market rates. No one will work for 140k, when they can make 440k at a bank. The SEC (and Finra) misses many things because they simply do not have people qualified to understand them. The very few people who understood CDS, CDOs etc., are paid mega bucks by the banks. Let the regulators compete fairly for services.

 

3- Return to previous home loan underwriting standards, 20% down, no more than 33% of income etc.

[OCinBuffalo]

Not sure where you are going with that.

 

The bailout without regulation was in reference to AIG getting Multi Millions then taking their board members on a $440,000 weekend Spa trip.!!!

Specifically, how would you "regulate" that? Have a regulator walk around with a ruler and slap people on the hand for thinking/talking about it before they did it? How would you prevent them from doing that? And, even if you did come up with some rule, give me 5 minutes and I will find a way around it.

 

You simply cannot make up a damn rule for everything. And even if you could there would be no way to prevent those rules being circumvented. And what punishment can you proscribe after the fact? The ruler again? Seriously, they already gave them the money, and it's by definition - a bailout - so what can you do? Ask for it back? And even if you could, who is doing the accounting? They are.

 

The trick is: you don't give them the damn money in the first place. Or, you put the money in an account that only a regulator has the keys to, and each request has to go through them. But then you are giving the regulator too much power, and, there's a good chance the regulator isn't smart enough to know a good plan from a bad one, otherwise they would be working at AIG and not for the government, and, ultimately it defeats the purpose = speed = get the money where it needs to go quickly to prevent failure.

Goldman Sachs - Citi Bank wanted to continue to hand out Millions in Bonus' for CEO's FAILING to make the company profitable.

Again, how do you prevent it, or punish after the fact, when we are talking about a bailout here? The corporation has a signed contract with these employees that it must honor, or be sued, to include all golden parachutes and stock options, etc. You can't just waive a wand(this is still the USA) and make those contracts go away. Unless you bankrupt the corporation, do an asset purchase, start a new corporation, and have the new corp buy the assets, those contracts stay.

 

And even if you were to do all that...which again is wholly counterproductive the concept of a bailout = you bankrupt the company you might as well have done nothing(or took them through a managed bankruptcy), because nobody is going to want to deal with a bankrupted company, and it fails anyway...those CEOs still have a claim against those assets, which means they are likely to get paid millions anyway.

That was TARP I, with TARP II Obama has been watching to make sure the freeloaders are not skimming the money meant to SAVE the company on retreats and lavish unwarrented bonus'

Hopefully you see, based on what I wrote above, that your statement here is wholly retarded. Unless Obama becomes a dictator and wipes away the last 200 years of contract law precedent, there's absolutely NOTHING HE CAN DO to stop a corporation from spending whatever money they get however they want, especially when they are contractually obligated to do so. Once that money is gone, it's gone.

 

Once again we see somebody talking about another "should" without the first clue as to "how". And what's worse? Thinking that Obama has magical powers that can somehow preclude contract law, or that are magically capable of outsmarting Wall Street CEOs on their own turf, in their own companies.

 

Dude I dealt with the SEC on behalf of clients on 4 separate occasions. Wall Street:SEC as NHL:Junior Hockey, and Obama's magic powers aren't going to change that. EDIT: While we are at it Wall Street CEOs:Obama as Lions:Lambs. They guy might be a good speaker in the auditorium, but so far he's getting his ass kicked in the conference room.

[Alaska Darin]

Aww and I sat down so you wouldn't have to stand on your tippy toes to suck me off.

Did you really just ask another dude to go down on you? Didn't think that one all the way through.

[GG]

In addition to the above, the money had to go in quickly to restore private sector confidence. Once Congress waffled, and then politicized the problem, it was all over. Reality is that you could have used the $700 bn to take off the least liquid stuff and that could have calmed things down and got the hedge funds & private equity to look into the dead securitizations. But once you delayed it, it was off to the races.

[Booster4324]

Did you really just ask another dude to go down on you? Didn't think that one all the way through.

 

I didn't ask, I implied he would.

[Alaska Darin]

I didn't ask, I implied he would.

You also implied you would make it easier for him. I'd tell you to stop now - but that would ruin the inevitable fun.

[Booster4324]

You also implied you would make it easier for him. I'd tell you to stop now - but that would ruin the inevitable fun.

 

 

Whatever, it is a message board. I frankly don't care what you think. If it amuses you, all the power in the world to you.

 

You know why I dislike him and dislike you too btw (other than the fact your a pompous ass). GLB. Says tons about his character the way he broke his word. Since you condone it, I can only assume you are of questionable moral character as well.

[GG]

Oh yeah, and if Rodgin Cohen gets the Asst Treasury job, then it's a good assignment, because there are few people in this country who understand banking like he does. Don't know why he'd want it though.

[/dev/null]

GLB. Says tons about his character the way he broke his word. Since you condone it, I can only assume you are of questionable moral character as well.

 

 

Did I miss something by not logging into GLB?

[Acantha]

Hence, I made perfect sense. You're just too much of a mouth-breathing !@#$ing mongoloid to understand it. But hell, you're apparently too much of a mouth-breathing !@#$ing mongoloid to understand the difference between "asset" and "debt".

Either does anyone, apparently. It's all the same thing to the banking system which uses debt to create money.

 

Understand that the boom/bust business cycle will always be with us and is a function of the capitalist system.

The boom/bust business cycle on a nation wide scale like we are seeing now is not a function of the capitalist system. It's a result of the banking system. Without the processes in place to reward creating these artificial bubbles, individual business (including banks) wouldn't be able to have the overwhelming impact they currently do. In a capitalist system, these individuals would over-extend and go bankrupt, hurting those that were involved with just those businesses.

[GG]

Either does anyone, apparently. It's all the same thing to the banking system which uses debt to create money.

 

 

The boom/bust business cycle on a nation wide scale like we are seeing now is not a function of the capitalist system. It's a result of the banking system. Without the processes in place to reward creating these artificial bubbles, individual business (including banks) wouldn't be able to have the overwhelming impact they currently do. In a capitalist system, these individuals would over-extend and go bankrupt, hurting those that were involved with just those businesses.

 

Riddle me this batman, how are you supposed to exchange value over long distances without banks? Where will you store your profits? Who will fund a new plant that you need to build?

[Alaska Darin]

Whatever, it is a message board. I frankly don't care what you think. If it amuses you, all the power in the world to you.

Sure you don't. If you didn't care, you wouldn't have answered the first post. Or the second.

You know why I dislike him and dislike you too btw (other than the fact your a pompous ass). GLB. Says tons about his character the way he broke his word. Since you condone it, I can only assume you are of questionable moral character as well.

Let's pretend for a second I know what you're talking about. When you're done with that, pretend I give a crap about what you think. Ooh, some dude I've never met from TBD doesn't like me for something I don't know about that concerns an online game. That's gonna be tough to get over.

 

Now get back to your world of inviting dudes to go down on you and pretend you're of "high moral character".

[Acantha]

Riddle me this batman, how are you supposed to exchange value over long distances without banks? Where will you store your profits? Who will fund a new plant that you need to build?

Oh hey, it's the Keynesian shill.

 

I have never said I have any problem with banks. I do have a problem with central banking and the mess that fractional reserves, with some help from legislation allowing our central bank to be able to create as much money as they like, cause.

 

And while I see no reason to do so if things ran properly, the first and last examples you gave could be accomplished without "banks", or at least what we call banks today. It would be wonderful to have banks around to "store" my money in, but unfortunately my bank doesn't do that. I deposit it, and it lends it out. My money isn't actually there. So really, not a great riddle.

[GG]

Oh hey, it's the Keynesian shill.

 

I have never said I have any problem with banks. I do have a problem with central banking and the mess that fractional reserves, with some help from legislation allowing our central bank to be able to create as much money as they like, cause.

 

And while I see no reason to do so if things ran properly, the first and last examples you gave could be accomplished without "banks", or at least what we call banks today. It would be wonderful to have banks around to "store" my money in, but unfortunately my bank doesn't do that. I deposit it, and it lends it out. My money isn't actually there. So really, not a great riddle.

 

Yup, I'm a Keynesian alright.

 

How about coming up with an original thought instead of regurgitating email chain letters. Better than that, you can let me know what happened the last time each bank was able to issue its own currency, and how that would be better than the current system.

[Acantha]

Yup, I'm a Keynesian alright.

 

How about coming up with an original thought instead of regurgitating email chain letters. Better than that, you can let me know what happened the last time each bank was able to issue its own currency, and how that would be better than the current system.

How about for once you come up with some facts. I've yet to actually see you do anything but challenge people with vague opinions. Careful though, there has been more than one central bank making a mess of the US economy. And so you don't waste your time with your current argument, I could care less if it's one bank making money from nothing (or less than nothing since it's created from negatives), or a thousand. As long as money is created at will, it's all the same game. A central bank only exacerbates the fall and the legislation making it illegal not to accept the paper makes impossible for anyone to have other options.

 

And then go ahead and forward me some of the chain mail's I'm supposedly plagiarizing. I'd like to see one.