Federal govenment will create entity to hold banks' debt

[FinanceDude]

We'll be better off because that pool of unemployed people will be ready to take ramp-up jobs quickly when the economy picks up, and they may be willing to work for less than they used to.

Not good for them, but having been forced to look at unemployment charts a lot lately, it looks to me like periods of high unemployment are always followed by economic booms. Maybe theres a correlation there...

It will work again unless the folks who create jobs should "feel patriotic and pay more taxes"..........

 

[Retire Soon]

Money Market Fund Insurance

Jack Bogle was interviewed on Fox Business a few minutes ago. He said he was in favor of MM Fund insurance with some reservations.

He stated that he was not surprised that the first MM Fund to go under was the exact same fund that was bragging at the end of 2007 about having the highest annual return of any MM fund. He went on to add that they had the highest yields, only because their investments were the riskiest.

He said the purpose of a MM fund is to preserve the dollar, not to lose it.

The main reservation that he had with the insurance is that it should not be used to rescue MM funds such as the two that just went under because of their investment in risky paper. He said, "you would not buy life insurance for a dying person."

Further, he said that he was "for" the current government rescue plan.

Edit: typo

 

[Nords]

One thing we can count on when all of this is over with, is that we'll all face a lower standard of living.

My standard of living has risen every year of ER.

Our biggest parenting concern is that our standard of living doesn't get translated by our teenager into a "standard of entitlement"...

And now the SEC has banned short selling on a list of 799 financial stocks for 10 days. If you are short, this will be extremely ugly.

Gosh, I wonder if that explains why the regional banking ETF (KRE) is up over 20% in a couple days to over $43/share.

Whoever was calling that ETF's "fair value" at $28/share early this year to nearly-unanimous derision, well... I hope you had the strength of your convictions to back up the truck, go on margin, buy options, and take out a home-equity loan.

 

[OAG]

Easy. The government will take ownership of all the foreclosed homes, and then use them all for free housing for people on welfare.

Or relocate everyone that used to live too close to the water that the Government is going take the land back. Or relocate all the Texans that need housing. Or relocate whoever is left in NO that need housing. Or all of the foregoing. Have to also give them some Government vouchers so they can replace all the wiring, piping, appliances, doors and other stuff that has been removed from the houses. As long as the vouchers keep coming that should create more jobs, etc., to help the economy. I am feeling the tugging at my right rear pocket already (I am left handed).

 

[Notmuchlonger]

I was worried this thread was headed to the Soap Box for a moment...

Its all GB's fault!

 

[al_bundy]

Jack Bogle was interviewed on Fox Business a few minutes ago. He said he was in favor of MM Fund insurance with some reservations.

He stated that he was not surprised that the first MM Fund to go under was the exact same fund that was bragging at the end of 2007 about having the highest annual return of any MM fund. He went on to add that they had the highest yields, only because their investments were the riskiest.

He said the purpose of a MM fund is to preserve the dollar, not to lose it.

The main reservation that he had with the insurance is that it should not be used to rescue MM funds such as the two that just went under because of their investment in risky paper. He said, "you would not buy life insurance for a dying person."

Further, he said that he was "for" the current government rescue plan.

Edit: typo

i read that the insurance is not going to be required. either way most firms had several MM funds and the higher yielding ones all had disclaimers because they would invest in things like ARS's

 

[ladelfina]

Did Bogle say how/whether it was possible to sort out 'dying' MMFs from the ones that are merely ill? This is just mind-boggling to me.. a completely open-ended commitment to private accounts where it is not even clear what is in them on any given day? They've never been regulated items so who is going to sift through it all and figure it out?

And even if someone tries to assess them.. people had looked at these other firms and declared "AAA". Nothing was wrong.. until there was.

Another question is what about the global nature of some of these entities? US taxpayers cannot backstop the entire financial universe.. it's just an impossibility. Where is the 'coalition of the willing', as it were?

 

[OAG]

My thoughts are a) not too many money market fund operators have had to bridge a 'breaking the buck' gap, in fact I'll bet more money has been paid out in FDIC deposit insurance than money market spackling and b) I hope that covering MM's doesnt cause the MM operators to start taking more risks to shoot for higher yields...and more customers.

Not sure about MMA but Chase Bank has sent me THREE letters very recently; two to "Our close friends" and ONE to me, by name, offering a total of $500 cash if I will open a Checking account with them. All I have to do is deposit $100 and move a direct deposit to them for 6 months. Hunting for new clients?

 

[Purron]

Here's an idea - We have lots of retired people with brilliant financial minds on this board. Why not take a temporary job with the new organization Treasury creates? They might let you telecommute from where you live. Just think of the advantages - paycheck coming in, TSP matching funds, health insurance and a cool Treasury Department name badge to impress your friends and neighbors

 

[FIRE'd@51]

Here's an idea - We have lots of retired people with brilliant financial minds on this board. Why not take a temporary job with the new organization Treasury creates? They might let you telecommute from where you live. Just think of the advantages - paycheck coming in, TSP matching funds, health insurance and a cool Treasury Department name badge to impress your friends and neighbors

Telecommute? Naw, I want to sit on the new trading desk, right next to you

Seriously though, with all these "brilliant minds" bidding for these distressed securities, aren't you afraid we might bid too low and force the banks to mark down their paper even lower, resulting in more failures.

 

[ladelfina]

this administration is cleaning up the results of what was passed during the clinton administration. repeal of glass-steagal,

al_bundy... just FYI: the Republicans had Congressional majority and Clinton was presented with a veto-proof bill. That enough Dems went along with it is sad and reprehensible.. but the Rs were the instigators behind the repeal of G-S.. Phil Gramm being the author and main macher.

 

[al_bundy]

so what about the fact that Robert Rubin went to work for Citi the next year? the whole thing started when Citi decided to buy Travelers. not like the repubs just decided to repeal it for no reason

 

[Retire Soon]

Interview: "Bogle on Money Market Funds"

Did Bogle say how/whether it was possible to sort out 'dying' MMFs from the ones that are merely ill? This is just mind-boggling to me.. a completely open-ended commitment to private accounts where it is not even clear what is in them on any given day? They've never been regulated items so who is going to sift through it all and figure it out?

And even if someone tries to assess them.. people had looked at these other firms and declared "AAA". Nothing was wrong.. until there was.

Another question is what about the global nature of some of these entities? US taxpayers cannot backstop the entire financial universe.. it's just an impossibility. Where is the 'coalition of the willing', as it were?

No, he doesn't think we sure insure junk. Attached is a link the the interview:

Video - FOXBusiness.com

 

[socca]

I was thinking about the bailing out Wall Street vs. bailing out Main Street issue today, and came up with a brilliant idea to bail out Main Street. Why not have everyone who has a residential mortgage apply to the Gov't to become part of a new Mortgage Stamps program. Each month, instead of sending your mortgage payment to your servicer, you send in a Mortgage Stamp in its place. The U.S. Treasury then makes your mortgage payment on your behalf. Anyone with a residential mortgage of any size could become part of this program, and any new residential real estate purchase financed with a mortgage would automatically be enrolled in the Mortgage Stamps program.

Think about it!! Anyone could qualify for a mortgage of any size at any time, because the American taxpayer would be paying the bill! Think about what would happen to the real estate market as millions of eager buyers flood the market looking for their dream home! The entire real estate industry would boom like never before! Boom! Boom! Boom!

I shouldn't joke about this. If past experience is any guide, Congress is perfectly capable of passing legislation to make this happen

 

[lazygood4nothinbum]

Does the Great Depression Hold the Answers for the Current Mortgage Distress?

from may 2008 fed reserve bank release:

One of the proposals to stem the tide of loan defaults and foreclosures includes creating a new federal corporation to purchase distressed mortgages from investors and convert them to 30-year fixed-rate mortgages. “The type of agency being suggested,” said Wheelock, “would closely mimic one from the Great Depression called the Home Owners’ Loan Corporation.”

Home Owners' Loan Corporation - Wikipedia, the free encyclopedia

 

[socca]

George Bush quoted in today's Washington Post: "The risk of doing nothing far outweighs the risk of the [$700B bailout] package, and over time we're going to get a lot of the money back."

FLASHBACK to March 2003!! Haven't we heard this before?? Something to do with Iraq?? Am I not supposed to remember this??

Another quote from the Post: "In a briefing to lawmakers Friday, Paulson and Federal Reserve Chairman Ben Bernanke painted a grave picture of an economy on the edge of a major recession and telling them that action was urgent and imperative."

It may be that a recession/depression is exactly what this country needs to make sure that there is widespread demand for comprehensive reforms so that it doesn't happen again. The beauty of screwing future taxpayers - many who have not yet been born - is that it reduces the impetus for comprehensive reform and thus allows the folks who profit immensely from the status quo to keep on doing what they've been doing.

The reason why I am outraged by the Wall Street bailout is very simple: if my neighbor plays Russian Roulette, I shouldn't get shot, but that is exactly what is going to happen. A financial system that allows this to happen is fundamentally broken. The bailout practically guarantees that it won't be fixed this time around. Being able to greedily collect the winnings when your bets succeed, and charge your losses to the taxpayer when they don't, is a marvelous, marvelous scam, and we taxpayers may be stupid enough to fall for it.

 

[ladelfina]

socca, you're right.. but do we have a choice barring outright revolution and putting our taxes in escrow like the anti-war tax protesters?? I read a comment somewhere suggesting to "turn off the spigot" by encouraging everyone to immediately cancel their tax witholding. I can understand the sentiment, but don't see how it will help. The only power people have is to boot out every incumbent and take all their money out of the system, but that still won't change the structure at this point, or soften the landing.

No, you are not supposed to remember the promises about Iraq. Didn't you take the rohypnol that was handed out with the high-fructose corn syrup?

 

[ERD50]

The Soap Box is still open right?

The Soap Box is still open right? Was the last time I posted there.

I thought the purpose of the Soap Box was to [-] blame the other guy [/-] keep discussions of some of the more fiery topics out of the main forum.

This is the "FIRE and Money" forum, and there is a legitimate financial aspect to this which is worth discussing w/o all the blame game and name-calling stuff.

How 'bout it - can we keep this to a money discussion? A quick scan of this thread shows I'm not the first to make this request.

-ERD50

 

[Gone4Good]

I've been trying to come up with a catchy name for the new version of the Resolution Trust Corporation, but haven't had any luck.

I kind of like Structured Housing Investment Trust

 

[clifp]

I've been trying to come up with a catchy name for the new version of the Resolution Trust Corporation, but haven't had any luck. Here are some ideas:

I have one. Paulson's comments actually inspired it

As illiquid mortgage assets block the system, the clogging of our financial markets has the potential to have significant effects on our financial system and our economy...

So essentially we have a plumbing problem and we need a plumbers helper to fix the problem, enter the

Debt Restructuring And Nationalization Organization
or DRANO for short. Flush those illiquid assets down the drain (along with a few hundred billion dollars). Plus the actual name is reasonably close to what the organization will be doing.

 

[Purron]

Federal Undersecretary of Brokerage And Restructuring

Business Office of Housing Investment and Credit Administration