Hurray! Grassley to investigate Bear paper

[RockOn]

I hope it happens, Charles Grassley and others want to make public the quality level of the paper that Bear put on the Fed's account on behalf of all of us. I think it will be low quality.

If it is, it's time to abolish the FED. Who's been saying that? Jim Rogers, Ron Paul, anyone else?

All the Tinfoil hats I suppose?

 

[HFWR]

All we need is $1,375,000,000,000,000 worth of gold, and we can replace our fiat currency...

I'll donate a couple of gold teeth...

 

[Notmuchlonger]

All we need is $1,375,000,000,000,000 worth of gold, and we can replace our fiat currency...

I'll donate a couple of gold teeth...

Now wait a minute. This is seriounesses businesses.

 

[brewer12345]

All we need is $1,375,000,000,000,000 worth of gold, and we can replace our fiat currency...

I'll donate a couple of gold teeth...

Makes good sense. After all, the fillings are how the gummint and the Gnomes of Zurich control your mond, dontchaknow.

Grassley is just grandstanding for the rubes. It will result in some muchraking journalism of the most shallow and clueless sort, a few soundbites, and not much else.

 

[RockOn]

Grassley is just grandstanding for the rubes. It will result in some muchraking journalism of the most shallow and clueless sort, a few soundbites, and not much else.

I'm not so sure of that. My feeling is that the average american, as opposed to the Wall Street crowd, is pretty fed up with high prices, dropping home prices, and a looming recession. To see the Government giving away money to bail out a Wall Street firm that made stupid loans and took on 30 to 1 leveraged risk isn't sitting well. The Dems will start beating it like a drum. I think it may have legs. Since Bear got a bailout watch out for everyone else asking for a handout. Homeowner bailout plans are already stirring, Bush sounded today like even he wouldn't fight it too much. Time will tell. I expect some intensive regulation as a minimum. Especially if it becomes obvious Bear unloaded junk paper on the Fed.

 

[brewer12345]

I'm not so sure of that. My feeling is that the average american, as opposed to the Wall Street crowd, is pretty fed up with high prices, dropping home prices, and a looming recession. To see the Government giving away money to bail out a Wall Street firm that made stupid loans and took on 30 to 1 leveraged risk isn't sitting well. The Dems will start beating it like a drum. I think it may have legs. Since Bear got a bailout watch out for everyone else asking for a handout. Homeowner bailout plans are already stirring, Bush sounded today like even he wouldn't fight it too much. Time will tell. I expect some intensive regulation as a minimum. Especially if it becomes obvious Bear unloaded junk paper on the Fed.

Much luck to those hoping to be bailed out; they will need it.

The Fed has a LOT of autonomy. I rather doubt if Grassley can do anything more than jawbone. Hence my belief that this is about soundbites rather than substance.

 

[RockOn]

All we need is $1,375,000,000,000,000 worth of gold, and we can replace our fiat currency...

I'll donate a couple of gold teeth...

You sure you have enough zero's. Maybe if we make a dollar equal to 0.0000000000000000000000000001 of an oz of gold we make it work.

 

[RockOn]

The Fed has a LOT of autonomy. I rather doubt if Grassley can do anything more than jawbone. Hence my belief that this is about soundbites rather than substance.

Time will tell, I see politicians getting themselves aligned with a public outrage, things could hit the fan. Especially if the Bear paper is declared more than a 50% write off during the hearings.

I dind't catch it all, but for what I did hear it sounded like Bush was biting on a homeowner bailout today.

 

[brewer12345]

Especially if the Bear paper is declared more than a 50% write off during the hearings.

That's how you can tell Bernanke is nobody's fool: very few details of the transaction and exactly what paper the fed is exposed to have been released.

 

[RockOn]

You don't think Grassley will get Bernacke to disclose the details? Grassley said tonight that he was told that the information was going to be released.

 

[brewer12345]

You don't think Grassley will get Bernacke to disclose the details? Grassley said tonight that he was told that the information was going to be released.

Haaaahahahaaaha!!!

Remember, Congress had to pass a law just to get the Fed chief to testify before it a couple times a year. I think Uncle Ben will say as much as he wishes to. And no more.

 

[RockOn]

We'll see, you are probably correct. We'll have to wait to see who gets to cash in on "I told You So". I'm long the forced "nearly full" disclosure by Uncle Ben.

 

[brewer12345]

We'll see, you are probably correct. We'll have to wait to see who gets to cash in on "I told You So". I'm long the forced "nearly full" disclosure by Uncle Ben.

Assuming there is some disclosure, it will be interesting to see what exactly they release. Securities by CUSIP? I doubt it. By rating stratification and asset class? Maybe. Really don't know what they will tell the world. In any case, JP Morgan is on the hook for the first $1 billion of losses, so I don't imagine the Fed will realize any significant loss (or possibly any loss).

 

[Notmuchlonger]

We'll see, you are probably correct. We'll have to wait to see who gets to cash in on "I told You So". I'm long the forced "nearly full" disclosure by Uncle Ben.

So you don't trust the Fed. But you will take a Congressman's word that they got full disclosure.

 

[RockOn]

So you don't trust the Fed. But you will take a Congressman's word that they got full disclosure.

No I wouldn't trust his word if that's all I got. He said he wants "full public disclosure", if I heard him right. Full sunshine.

 

[Zipper]

I watched a news show on HDnet a couple of weeks ago that made me sit up and take notice. I think it was a Dan Rather's news programme.

It showed a U.S. army captain (female) handing out stacks and stacks of newly minted $100 bills to some tribal leaders in Iraq. They were supposed to distribute it to locals to keep highways open and buy the peace. We are talking about 10's of $millions in just this one area.

I looked at those stacks of paper and realized that the printing presses must be going full full tilt.

Makes me glad I have some gold in the portfolio.

 

[Notmuchlonger]

I watched a news show on HDnet a couple of weeks ago that made me sit up and take notice. I think it was a Dan Rather's news programme.

It showed a U.S. army captain (female) handing out stacks and stacks of newly minted $100 bills to some tribal leaders in Iraq. They were supposed to distribute it to locals to keep highways open and buy the peace. We are talking about 10's of $millions in just this one area.

I looked at those stacks of paper and realized that the printing presses must be going full full tilt.

Makes me glad I have some gold in the portfolio.

Better yet stock up on water and ammo.

 

[RockOn]

Assuming there is some disclosure, it will be interesting to see what exactly they release. Securities by CUSIP? I doubt it. By rating stratification and asset class? Maybe. Really don't know what they will tell the world. In any case, JP Morgan is on the hook for the first $1 billion of losses, so I don't imagine the Fed will realize any significant loss (or possibly any loss).

That is worth a small bet. I think there will be a significant loss on many of the MBS securities which is what I am assuming Bear sent to the FED.

I suppose the FED could ignite the printing presses and the problem could vanish and I could lose the bet. I noticed the monetary base spiked a little on the last report.

 

[brewer12345]

I watched a news show on HDnet a couple of weeks ago that made me sit up and take notice. I think it was a Dan Rather's news programme.

It showed a U.S. army captain (female) handing out stacks and stacks of newly minted $100 bills to some tribal leaders in Iraq. They were supposed to distribute it to locals to keep highways open and buy the peace. We are talking about 10's of $millions in just this one area.

I looked at those stacks of paper and realized that the printing presses must be going full full tilt.

Makes me glad I have some gold in the portfolio.

I have the world's largest producer of methanol and a large owner of dry bulk ships in my portfolio for much the same reason.

The spending on this idiot misadventure is astonishing. Its also a constant source of amazement to me that orthodox republicans are so staunchly behind continuing it indefinately. I know they are big fans of the Crusade Against the Brown Peoples, but I would have thought that fiscal conservatism would come in there at some point.

 

[Notmuchlonger]

Well good news. It should end next election with Obama.

 

[brewer12345]

That is worth a small bet. I think there will be a significant loss on many of the MBS securities which is what I am assuming Bear sent to the FED.

Impossible to really say without knowing more details on what the reference portfolio is. It probably contains a grab bag of stuff, including corporate loans, MBS of various flavors, ABS, etc.

I suspect that the Fed made JPM put up the better (if illiquid) stuff, which is why JPM was willing to take a first loss position. There is a lot of paper that will almost certainly be money good in the fullness of time, but which is essentially not salable at the moment. For example, I have seen seasoned, AAA rated, short term (couple of years, max), insured (by a good insurer, not a crap one) securitization paper backed by a portfolio of subprime auto loans that is without a doubt going to pay all coupons and principal. Priced at a 16+% yield to maturity. I think that is the kind of stuff that wentinto the reference portfolio.

 

[brewer12345]

Well good news. It should end next election with Obama.

I hope so, but ground wars of occupation are a lot easier to start than they are to finish.

 

[RockOn]

Impossible to really say without knowing more details on what the reference portfolio is. It probably contains a grab bag of stuff, including corporate loans, MBS of various flavors, ABS, etc.

I suspect that the Fed made JPM put up the better (if illiquid) stuff, which is why JPM was willing to take a first loss position. There is a lot of paper that will almost certainly be money good in the fullness of time, but which is essentially not salable at the moment. For example, I have seen seasoned, AAA rated, short term (couple of years, max), insured (by a good insurer, not a crap one) securitization paper backed by a portfolio of subprime auto loans that is without a doubt going to pay all coupons and principal. Priced at a 16+% yield to maturity. I think that is the kind of stuff that wentinto the reference portfolio.

If that what the FED got, I'm totally with you. I own a few bank loan funds and hopefully have some of those myself. I'm not that confident it is that good of quality. I think JP only put up the first $1B to justify raising the stock purchase price from $2 to $10 which is about equal to $1B. The FED probably made them do it for political cover. Let's say it turns out to be all MBS, including all the tranches, then what would you say about the deal? You'd still be for it?

 

[brewer12345]

If that what the FED got, I'm totally with you. I own a few bank loan funds and hopefully have some of those myself. I'm not that confident it is that good of quality. I think JP only put up the first $1B to justify raising the stock purchase price from $2 to $10 which is about equal to $1B. The FED probably made them do it for political cover. Let's say it turns out to be all MBS, including all the tranches, then what would you say about the deal? You'd still be for it?

I'd be for the deal even ifthe Fed wrote a check for $30 billion and never got a penny back. I think that if they had not orchestrated the deal we would be hurtling toward another Depression right now.

But supposing that they got just MBS, it would really depend. Even the crappiest subprime mortgage deals will almost certainly pay back the AAA tranche in full as long as the underlying collateral was first lien loans. Mezzanine tranches from prime deals are probably OK. Home equity, not so much. Other ABS (car loans, credit card receivables, mixed collateral, CMBS, etc.) is very likely fine as long as its not too subordinated. But a lot depends on vintage and what exactly the collateral is. I'd rather own paper backed by subprime auto loans than prime piggyback second mortgages.

 

[RockOn]

I'd be for the deal even ifthe Fed wrote a check for $30 billion and never got a penny back. I think that if they had not orchestrated the deal we would be hurtling toward another Depression right now.

I don't think it would have been that serious to let Bear go into liquidation but what do I know. If it was a bad as hurtling toward another depression, I think things must be much worse than we think. I've heard many estimates, they are not all crackpots, that not even 50% of the losses have been written off so far. If those estimates are correct, there will surely be more shoes to fall. The FED cannot bail out many more from the numbers I have seen but are acting like they have unlimited resources.

It seems to me they could pump the printing presses, prop up house prices, and inflate us out of the problem. Do you see that happening? Do you watch the monetary base? It broke to a minor new high, it could be the start of a new trend. Too early to tell though.