The Great Recession - post mortem

[albionmoonlight]

Random question.

You know how they have guest people (like the executive board of companies that went public that day, or celebrities/dignataries who are visiting NYC) to ring the bell at the end of the day at the NYSE and it is a nice photo-op and feel-good moment for them?

Do they do that on the days when the markets lose 5+% of value? I mean, if you are in NY to ring the bell, it seems like a waste to not do it.

[Mizzou B-ball fan]

Originally Posted by albionmoonlight

Random question.

You know how they have guest people (like the executive board of companies that went public that day, or celebrities/dignataries who are visiting NYC) to ring the bell at the end of the day at the NYSE and it is a nice photo-op and feel-good moment for them?

Do they do that on the days when the markets lose 5+% of value? I mean, if you are in NY to ring the bell, it seems like a waste to not do it.

They noted on the radio yesterday that there was only one person ringing the bill at the end of trading. They joked that all of his friends likely were already at the bars crying in their beers.

[Gary Gorski]

Originally Posted by JonInMiddleGA

Not "surely" at all actually. A certain thinning of the herd might not be the worst thing possible.



Wouldn't the creation of those toxic assets be the "original" cause of that aspect of the problem? If so, are there adequate safeguards in place to prevent a bailed out lender from repeating the same mistakes again? For that matter, are there adequate safeguards in place to prevent the new government interest holders from repeating the same mistakes again?

And those are just quickie questions without adequate answers for starters.

Questions.

Can you thin the herd (moreso than already has been done) without bringing down the entire system? If so, how do you essentially choose which banks survive? Aren't JP Morgan, Bank of America, Citigroup and Wells Fargo essentially too big to fail? (WF is a very well run bank though so they shouldn't fail anyway) What about all the regional banks that are in trouble? What happens there?

How long do you feel it would take to create adequate safeguards to prevent these things from happening? Can it be done in a few days time? The market is impatient and wants a solution yesterday - how do you pacify the market to stop the bleeding while working out the ideal solution?

[JonInMiddleGA]

Originally Posted by Gary Gorski

Can you thin the herd (moreso than already has been done) without bringing down the entire system?

Don't know. Don't know that it happen couldn't either.

how do you pacify the market to stop the bleeding while working out the ideal solution?

Careful not to overstate what I'm looking for there, specifically the word "ideal". I don't believe at any point I mentioned shooting for that lofty goal, I've tried to stick to more reasonable aims such as "adequate". Let 'em hit that threshold at least, then I'll worry about improving the plan toward ideal (meaning that among the changes I strongly favor was a phased plan rather than a lump sum up front payoff).

[GrantDawg]

Originally Posted by sterlingice

Are we missing a giant opportunity for the country to buy up some assets, sit on them, and then pay down the debt by trillions, thus saving huge future taxes?

God, how much would I love that written into this bill is that any money actually "made" of this deal could only go to help pay off the national debt.

[molson]

Originally Posted by Mac Howard

It's quite wrong to say that we know nothing. We know a great deal - particularly about what happens if you do nothing. We know that because we've been doing nothing. And what has happened? The largest banks have gone bust. Insurance companies, mortgage lenders, mortgage security companies - all going bust. We also know that financial organisations are refusing to deal with each other. We know there's a credit crunch bordering on credit freeze. This is not "nothing". This is very real information indeed.

It sure sounds like a whole lot of "somethings" brought us here today:

RealClearMarkets - Articles - In Times of Crisis, Trust Capitalism

"somethings" can be good, "somethings" can be bad.

You (and most) haven't even conceded that it's possible for Congress to make this worse. It doesn't matter what they throw out. Imagine that environment - congressman knowing that they HAVE to do ANYTHING, and anything is perfectly enough. Horryfying.

[Gary Gorski]

Since were talking market here - did anyone who watches it see something crazy happen with Google at the end of the day? The price on my screen just started jumping all over the place - it showed as low as the 200s and appears to have closed at 341.43 - down over 10% - yet in after hours it seems to be back over 400 a share. Anyone else see that and if so any explanations for it?

[sterlingice]

Originally Posted by JonInMiddleGA

FWIW, I'm pretty sure I get where you're coming from & took no offense to it.
I've got no problem with acknowledging that there probably isn't a soul on this board that has a full grasp on the subject.

What I took offense to, and was trying to illustrate, is
-- the suggestion that anyone who isn't fully on board with the proposals to date just "doesn't get it"
-- More specifically, that those who aren't on board somehow "get it" less than some of the more vocal ones here who support it.

There are quite a few people in this thread who seem to have at least a roughly equal understanding of both the micro & macro economics involved (however limited that equal understanding may be), they're just reaching different conclusions about the solution, impact, etc.

It's scary- after being inundated for nearly a week with all of this information and taking a crash course in national and global economics with the rest of everyone here. This bailout seems like a horrible idea from a free market perspective.

And that's from someone who is "socialist" enough to let the government buy out the bad banks or nationalize stuff, if it were my call. Either let the government assume the risk and reward for all of it or let the free market sort it all out. The middle ground once again introduces huge amounts of moral hazard and just opens us up for this happening again.

While the free market people out there saying how great their system is- this isn't a victory for them. Unbridled capitalism got us into this mess because anytime you don't make a rule explicitly outlawing something, people will abuse rules to make a buck. That's why we're here. The free market doesn't give two whits about the good of the people, it just serves those who put money as their only priority in life. That's horrible for a society.



Onto the big tangent, tho: If I were dictator for a day, here would be my plan. Warning- I'm pretty sure most of this isn't feasable and borders on crazy as I'm mostly blue skying, but it's what I would go with off the top of my head as suggestions to look into the advantages and disadvantages of each.

Any bank who wants it gets nationalized and their CEO's and boards slapped for the American people's pound of flesh. Any bank who doesn't, gets to go play on the open market because no bailout is coming and there is no middle ground to continually artificially inflate the values. Don't like those assets? There's a market for them, they're all just waiting on the sideline to see what the government will pay. Similarly, the sellers want a higher value rather than having to let the market buy them at a cut rate.

Once they get back on their feet, these banks are sold back to the market and those profits go right back to paying off the national debt: not into the current year's budget, not into some fund, right back towards paying off the debt.

But along with this- new regulation *must be passed at the same time as part of a comprehensive bill*. Bye bye, ridiculous financial vehicles: what you buy is what you get. None of this buying up bundles of weird debt. Capital gains tax cut? No way- that's just a joke. Change leverage rules so they can't extend themselves out 30:1. That's an insane ratio.

I'd love to put in a CEO reform bundle, too, but I'm sure there is no way any of this is feasible. You can only make something like 15x your lowest employee or 10x your average- some sort of more fair multiplier. I don't know the number but the idea is there- your wages are tied to worker wages *and* that includes all of your oursources overseas partners. So you just shipped out 10000 jobs to China for $1 a day, that's going to drag your pay down You want more money, pay your people more. Not only that, but you don't get odd compensation like stock options- you want stock as part of your pay, you get it like the rest of us, as stock, at the price you bought it. The problem with the theory of tying CEO pay to 5 years like everyone is now suggesting is that you can cook the books for 5 years just as easy as you can for 1. I bet every company magically has an "accounting adjustment" just as soon as those 5 years are up and the CEO is paid.

This would just be a start. There are a couple of other good ideas that have come out of this which just are not coming to mind at the moment but there's my crazy plan. Really, is it any worse than "give $700B to a former Wall Street crony so he can buy up worthless assets from his old buddies to bail them out from awful, short-sighted decisions"?

SI

[sterlingice]

Originally Posted by Gary Gorski

Since were talking market here - did anyone who watches it see something crazy happen with Google at the end of the day? The price on my screen just started jumping all over the place - it showed as low as the 200s and appears to have closed at 341.43 - down over 10% - yet in after hours it seems to be back over 400 a share. Anyone else see that and if so any explanations for it?

GOOG: Summary for GOOGLE - Yahoo! Finance

What the hell- I just looked at their chart for today. From 9:30 until 3:50, everything was just fine, somewhere between 390 and 420- but pretty much steady all day.

3:55 413 19K shares (roughly normal price and volume all day)
3:56 470 379K
3:57 249 1444K
3:58 401 226K
3:59 341 2673K (close)

No idea... WTF

SI

[Flasch186]

Originally Posted by Gary Gorski

Since were talking market here - did anyone who watches it see something crazy happen with Google at the end of the day? The price on my screen just started jumping all over the place - it showed as low as the 200s and appears to have closed at 341.43 - down over 10% - yet in after hours it seems to be back over 400 a share. Anyone else see that and if so any explanations for it?

I actually own some google and shat myself. I think someone dumped a ton of shares at mkt and the stop limit spikes grabbed them, perhaps. unless they were mis-trades or erroneous. Kind of freaky though and after listening to how hedge funds may need to liquidate in the next few weeks to meet calls and withdrawals, its kind of scary.

[SteveMax58]

Originally Posted by molson

You (and most) haven't even conceded that it's possible for Congress to make this worse. It doesn't matter what they throw out. Imagine that environment - congressman knowing that they HAVE to do ANYTHING, and anything is perfectly enough. Horryfying.

Bolded for emphasis, as this is the fear that I have right now...even more than a consolidation of FI's(which I find to be the most likely if nothing happens...not complete armageddon).

Similar to the article JiMG linked to earlier stated...it seems too many "well intentioned" people are trying to fix things...and most of them should worry about their "actual" jobs(i.e. Bernanke should focus on keeping the dollar stable and high, Congress should be debating sound policy, etc.).

Sounds cliche...but I would rather measure twice and cut once...rather than hack the entire thing up doing "something".

[Flasch186]

CNBC reporting 'Erroneous trades' in GOOG but what exactly does that mean?

[SirFozzie]

Originally Posted by Flasch186

CNBC reporting 'Erroneous trades' in GOOG but what exactly does that mean?

Someone fucked up big time.. the example I see elsewhere is "Someone fell asleep with their finger on the Sell Button"

Considering the stock is back up to $408 in after hours trading, I bet someone dumped shares that really didn't want to.


Ooooohhhh.. I see what happened. Someone DID fuck up big time. They entered the wrong value for a bunch of share trades, bunch of sales were recorded as shares being sold for 1 cent and 2 cents. (Considering the stock is at $400, that's obviously wrong). Wow.

[Tekneek]

So, everybody in the DJIA went up today, except for Caterpillar which went down 0.29. Citigroup, Morgan Chase, and Bank of America had big gains.

Even WaMu made a big gain (by percentage).

It is nice to know that bargain hunters are not convinced enough that we are facing imminent disaster to stay out of the market. Since credit is so hard to get, apparently, this must have been a play by those who actually have cash on hand and will then, presumably, still be standing when all the borrowers crash and burn.

[molson]

Add Lou Dobbs to the list of those that apparently "don't get it"

Lou Dobbs: Hooray for those who defeated bailout - CNN.com

[Flasch186]

Originally Posted by Tekneek

It is nice to know that bargain hunters are not convinced enough that we are facing imminent disaster to stay out of the market. Since credit is so hard to get, apparently, this must have been a play by those who actually have cash on hand and will then, presumably, still be standing when all the borrowers crash and burn.

to reiterate that the markets (equities) are a tiny sliver of the picture. I dont know how many times I have to say it.

The rally occurred on the hopes of a bill Thurs/Fri and the SEC talking about a valuation change in their accounting rules for Lev. 3 assets. That was fuel to the fire.

The rally doesnt change anything and the selloff yesterday wasn't fully representative either. You have to take the info and bundle it with a ton of other info, that ive listed a ton of times already in this thread so there's no point in banging my head against the wall anymore and I want to say, again, I PRAY you are right.

Molson, hilarious that a GOP champion would side with Dobbs. LOL

[Galaxy]

Originally Posted by SirFozzie

Someone fucked up big time.. the example I see elsewhere is "Someone fell asleep with their finger on the Sell Button"

Considering the stock is back up to $408 in after hours trading, I bet someone dumped shares that really didn't want to.


Ooooohhhh.. I see what happened. Someone DID fuck up big time. They entered the wrong value for a bunch of share trades, bunch of sales were recorded as shares being sold for 1 cent and 2 cents. (Considering the stock is at $400, that's obviously wrong). Wow.

Wait....How do you sell something for 1 cent when the market values it about $400, or whatever it was trading at the time.

[SirFozzie]

Update on Google:

* Pursuant to Rule 11890(b) NASDAQ, on its own motion, has determined to cancel all trades in security Google Inc Cl - A "GOOG" at or above $425.29 and at or below $400.52 that were executed in NASDAQ between 15:57:00 and 16:02:00 ET. In addition, NASDAQ will be adjusting the NASDAQ Official Closing Cross (NOCP)and all trades executed in the cross to $400.52. This decision cannot be appealed. MarketWatch has coordinated this decision to break trades with other UTP Exchanges. NASDAQ will be canceling trades on the participant’s behalf.

[molson]

Originally Posted by Flasch186

Molson, hilarious that a GOP champion would side with Dobbs. LOL

Well, Dobbs is in favor of doing "something", you I figured you and Mac would agree with him.

"Dobbs: Well, the first thing we need to do is return to a traditional role of regulation. ... The problem here is not simply the housing market. ... But $700 billion and nothing in that bill deals with the foreclosure crisis, if you can imagine that. That's arrogance. That's stupidity. That is your leadership in Washington, D.C. Democratic leadership in Congress and Republican leadership in the White House.

So that's an absurdity. The first thing that has to be dealt with is mitigating the foreclosure crisis, period. Secondly, in terms of instilling confidence in the banking system and in our credit markets, the first thing to do is to deal with those institutions that are wildly out of balance, whose balance sheets, frankly, are a joke. And the regulators who should have been tending to them over the years are also a joke.

It's time to end the joke. That means aggressive regulation. It means aggressive intervention on an institution-by-institution basis."

[SirFozzie]

Originally Posted by Galaxy

Wait....How do you sell something for 1 cent when the market values it about $400, or whatever it was trading at the time.

Apparently someone fatfingered entering the trade into the NASDAQ tracker.. only thing I can think of...

[Galaxy]

Originally Posted by molson

Well, Dobbs is in favor of doing "something", you I figured you and Mac would agree with him.

"Dobbs: Well, the first thing we need to do is return to a traditional role of regulation. ... The problem here is not simply the housing market. ... But $700 billion and nothing in that bill deals with the foreclosure crisis, if you can imagine that. That's arrogance. That's stupidity. That is your leadership in Washington, D.C. Democratic leadership in Congress and Republican leadership in the White House.

So that's an absurdity. The first thing that has to be dealt with is mitigating the foreclosure crisis, period. Secondly, in terms of instilling confidence in the banking system and in our credit markets, the first thing to do is to deal with those institutions that are wildly out of balance, whose balance sheets, frankly, are a joke. And the regulators who should have been tending to them over the years are also a joke.

It's time to end the joke. That means aggressive regulation. It means aggressive intervention on an institution-by-institution basis."

I keep hearing about these other options. I have not heard of what they are, expect little things such as the FDIC providing higher rates (which will help, but it doesn't solve the problem). The problem with regulation, is it's too late. It doesn't solve anything right now. We need it, of course, but it doesn't fix the current problem.

[molson]

Originally Posted by Galaxy

I keep hearing about these other options. I have not heard of what they are, expect little things such as the FDIC providing higher rates (which will help, but it doesn't solve the problem). The problem with regulation, is it's too late. It doesn't solve anything right now. We need it, of course, but it doesn't fix the current problem.

What's done is done. Many seem to think that you should take the hit, address the underlying issues and then look forward, rather than delay that hit with an expansive bandaid.

[GrantDawg]

DEAR AMERICAN:

I NEED TO ASK YOU TO SUPPORT AN URGENT SECRET BUSINESS RELATIONSHIP WITH A TRANSFER OF FUNDS OF GREAT MAGNITUDE.

I AM MINISTRY OF THE TREASURY OF THE REPUBLIC OF AMERICA. MY COUNTRY HAS HAD CRISIS THAT HAS CAUSED THE NEED FOR LARGE TRANSFER OF FUNDS OF 800 BILLION DOLLARS US. IF YOU WOULD ASSIST ME IN THIS TRANSFER, IT WOULD BE MOST PROFITABLE TO YOU.

I AM WORKING WITH MR. PHIL GRAM, LOBBYIST FOR UBS, WHO WILL BE MY REPLACEMENT AS MINISTRY OF THE TREASURY IN JANUARY. AS A SENATOR, YOU MAY KNOW HIM AS THE LEADER OF THE AMERICAN BANKING DEREGULATION MOVEMENT IN THE 1990S. THIS TRANSACTIN IS 100% SAFE.

THIS IS A MATTER OF GREAT URGENCY. WE NEED A BLANK CHECK. WE NEED THE FUNDS AS QUICKLY AS POSSIBLE. WE CANNOT DIRECTLY TRANSFER THESE FUNDS IN THE NAMES OF OUR CLOSE FRIENDS BECAUSE WE ARE CONSTANTLY UNDER SURVEILLANCE. MY FAMILY LAWYER ADVISED ME THAT I SHOULD LOOK FOR A RELIABLE AND TRUSTWORTHY PERSON WHO WILL ACT AS A NEXT OF KIN SO THE FUNDS CAN BE TRANSFERRED.

PLEASE REPLY WITH ALL OF YOUR BANK ACCOUNT, IRA AND COLLEGE FUND ACCOUNT NUMBERS AND THOSE OF YOUR CHILDREN AND GRANDCHILDREN TO [email protected] SO THAT WE MAY TRANSFER YOUR COMMISSION FOR THIS TRANSACTION. AFTER I RECEIVE THAT INFORMATION, I WILL RESPOND WITH DETAILED INFORMATION ABOUT SAFEGUARDS THAT WILL BE USED TO PROTECT THE FUNDS.

YOURS FAITHFULLY MINISTER OF TREASURY PAULSON

[Flasch186]

Originally Posted by Galaxy

I keep hearing about these other options. I have not heard of what they are, expect little things such as the FDIC providing higher rates (which will help, but it doesn't solve the problem). The problem with regulation, is it's too late. It doesn't solve anything right now. We need it, of course, but it doesn't fix the current problem.

bingo, whether or not you agree with Lou or not is not the issue. shit, we may both agree but that doesnt change the fact that, IMO, we have to avoid the train in the next few days and weeks.

[molson]

lol

[Bigsmooth]

This whole situation reaks of manipulation, fraud, and criminal activity. All I know is, I'm willing to lose my life savings to see some of these clowns that are running the Federal Reserve put in jail....

Cox from the SEC, too. The shit going down in the penny markets right now, under his watch, is flat out amazing.

[Gary Gorski]

Originally Posted by Tekneek

So, everybody in the DJIA went up today, except for Caterpillar which went down 0.29. Citigroup, Morgan Chase, and Bank of America had big gains.

Even WaMu made a big gain (by percentage).

It is nice to know that bargain hunters are not convinced enough that we are facing imminent disaster to stay out of the market. Since credit is so hard to get, apparently, this must have been a play by those who actually have cash on hand and will then, presumably, still be standing when all the borrowers crash and burn.

Yes, it was a fantastic day for the market. People who had cash on the sidelines or had cash from bailing before the end yesterday or have margin available had the opportunity to put it to work today because the market sentiment was positive. People who did put their cash to work early today had large gains and with the renewed hope for the congressional bill this week as well as some of the other stuff I talked about like upping the FDIC insurance and changing mark to market rules possibly coming into play the overall mood of the market has gone from doom and gloom to hopeful.

But if say the bill does not get passed those same bargain hunters will do a complete 180, sell and take those easy gains and we'll be headed back down almost assuredly lower than where we started today.

I HOPE yesterday was the bottom. I don't want to see the fallout of anything worse than that. Congress seems to have bought themselves a couple of days to get something better on the table. Something that more people on main street either understand or are willing to support. Things look hopeful - they're not stable but there is hope. We need stable and I really think that right now everything hinges on Congress. Hopefully for once they can stop playing politics and actually work together to get something done to give stability to the financial system and allow for the proper time to figure out just how we're going to fix the underlying problems that will exist whether there is a bailout or not.

[molson]

Originally Posted by Gary Gorski

Yes, it was a fantastic day for the market. People who had cash on the sidelines or had cash from bailing before the end yesterday or have margin available had the opportunity to put it to work today because the market sentiment was positive.

Do we positively know that there's ZERO credit for anyone right now, or it possible that premise is being overstated just a tad?

[Buccaneer]

I was worried we weren't going to see Chicken Little today...until he showed up at 2:54 MST.

[Gary Gorski]

Originally Posted by molson

Do we positively know that there's ZERO credit for anyone right now, or it possible that premise is being overstated just a tad?

I never said there's zero credit right now - things are what they are right now. Credit is getting tighter and more expensive and the banks don't seem to be willing to lend to each other - I don't know what its like on an individual level at the moment for getting cars or houses but I'm sure credit is available right now. I don't think its a time for panic or despair but I do think that some people really are not concerned enough about what potentially could happen to the world's economy if our financial system goes in the tank. That's not a "correction" - that's a global disaster.

If our financial system collapses will credit be available? I doubt much will be available then but that's the whole point here - we can't get to that point. IF that happens that's when the trouble is going to be very real and very serious. I just don't want to see that point but I think it would be possible if we don't get the intervention soon. Today was a great day - we had a great gain in the market and we've got the hope that a number of things will come in play by the end of the week to provide support for our financial system. We have hope, we have confidence, we feel better today about our portfolios than we did yesterday. What we don't have yet is stability - once we get that hopefully things will be fine and our lawmakers will have a chance to take a good look at how we got to this point and take steps to make sure it never happens again.

[Flasch186]

gary, you should delete the word confidence....until a bill is passed thats one very important thing missing.

[Gary Gorski]

I guess I should clarify - I mean confidence in the bill being passed as opposed to the overall market. I think that exists as of this moment - I don't think we get a 500 point rebound today if we're not pretty confident that this bill is going to be passed this week. Its also why I think if it doesn't pass we'll get slaughtered again. Maybe I'm wrong though on that - at least I'm pretty confident at this point that a bill is going to get passed.

[Mac Howard]

Tech Stocks Bounce Back Sort of | Epicenter from Wired.com

Just a couple of points from it:

The tech-heavy Nasdaq index inched up 3 percent in Tuesday's session, but it has a ways to go before it makes up for Monday's selloff, when it fell 9 percent to 2004 levels.

Apple, one of the hardest hit tech stocks on Monday, climbed up roughly 5 percent on Tuesday, but it was still nearly 14 percent off of Friday's close.

the market believes that Congress will pass the bill and I think that's right but they're still wary. If the bill is passed the market will continue reacting to financial news as before until the effectiveness of the package can be assessed or hit by some major event. But if it isn't, Monday's fall will look like a day at the beach by comparison with the bloodletting we'll get.

A couple of quotes from tv this morning:

"It is well nigh impossible to get a loan right now and a large problem for everyone" - ABC News

The bottom line is this: if we don't act promptly around here, and effectively, then a lot of people are going to lose their jobs and Main Street is going to be put into dire straits" - Judd Gregg, Republican Senator

[miami_fan]

Originally Posted by Galaxy

I keep hearing about these other options. I have not heard of what they are, expect little things such as the FDIC providing higher rates (which will help, but it doesn't solve the problem). The problem with regulation, is it's too late. It doesn't solve anything right now. We need it, of course, but it doesn't fix the current problem.

You know it is funny. It was too early for any sort of regulation before we got into this mess. Now that we are in the mess, it is too late for regulation. And after the bailout/investment plan/ whatever is the proper term is, it will not be the proper time for regulation then either.


Sidenote: If I can get one JUST one person in authority to stand up and say "I know I said everything was in good shape but I was wrong and I had a part in fucking up the whole situation", I would vote for a trillion dollar plan"


Accountability: What happened to it?

[Mac Howard]

Newt Gingrich, who ranted against the plan five days ago, said on O'Reilly to explain his switch to support for the bailout plan:

"And I spent part of the weekend talking with people I trust, who are very, very successful, all of whom said to me as business people, not folks who have a lot of money in the market, that they believe we are on the edge of a real credit crisis and they said that doing nothing would be far worse than accepting a bad piece of legislation"

Of course you guys are going to jump on the "bad legislation" but the fact that Gingrich sees it as that only emphasises the importance of immediate action. That Gingrich sees all government intervention as "bad" puts it in context and his support for a bill that goes against everything he's ever believed in in his political career could not be a greater justification for action now.

This is a committed, right-wing politician who was totally against the bailout but has talked to those who understand the consequences of doing nothing and, though he dislikes the bill intensely, has realised that it is essential to pass it.

[Galaxy]

The Aussie market is up 3%.

[DanGarion]

From Sons of Steve Garvey...

McCourt Jumps On Bailout Bandwagon
from Sons of Steve Garvey by Steve Sax

LOS ANGELES -- Salivating at the thought of handouts from the federal government, Los Angeles Dodgers owner Frank McCourt has decided to take advantage of the current congressional impasse and submit a Los Angeles Dodgers bailout plan, requesting relief from the "toxic contracts" of Andruw Jones (2 years, $36M), Jason Schmidt (3 years, $47M), and Juan Pierre (5 years, $44M).

"The Los Angeles Dodgers have a mounting credit crisis due to $127M in sub-prime contracts," said McCourt. "I'm hoping to get a piece of that $700 billion before Hank Paulson gives it away on superfluous pursuits like maintaining stability in the global capital markets."

McCourt went on to argue that the contracts were on the verge of default given a range of different factors (low batting averages, meager on-base percentages, and microscopically small cumulative win totals), which in aggregate threatened to destabilize the entire LA Dodger payroll. With capital in short supply following a highly-leveraged purchase of other non-revenue generating assets, and maximum limits already reached on beer and parking prices (some of the highest in the league), McCourt sought governmental relief to compensate for the failures of his high-risk, high-leverage contracts.

The fact of the matter is, these contract instruments, including those known as Boras-backed (offensive-woe-in)securities, were just too complicated for the average MLB GM to process," explained McCourt. "The complexities of these derivative instruments were simply too great, and the risks too high. And when those adjustable (pant waist) rates exploded, we were just not in a place to cover the (team snack table) payments." When asked a follow-up question asking for clarification on whether McCourt was insinuating Dodger GM Ned Colletti was an "average GM," McCourt refused to answer the question.

Other MLB teams did not understand why the Dodgers should be awarded federal relief when their own risks were not eligible for bailouts. "As if I didn't want to revoke that Zito deal," muttered Giants owner Peter Magowan. "What the hell do you think?"

"I have never wanted to fleece (blanket) the American public," explained McCourt, "which is why we only award that stadium giveaway to the first 50,000 rather than to every fan. But come on, someone's gotta help me out with these three toxic contracts. Anyone? Anyone?"

[Mac Howard]

In a discussion with an economics journalist who expressed doubt that the "folks" were on board with the bailout yet, O'Reilly said "People are now wired into this".

So I sent him the url of this thread

[Fighter of Foo]

Originally Posted by Bigsmooth

This seems rediculous to me. Betting on a company/stock to fail is good for the market? There has to be a better way to stabilize the damn market. Come on, people that are shorting stocks make money off of other shareholders losses. Short selling stocks reeks of organized crime IMO. Make no mistake, some bastards made millions off of our failing 401k's. I mean, isn't banning short selling of those 799 companies implying that short selling will crush a stock? Maybe if they ban short selling across the board, the market willl stabilize?

I missed this before...

When you short a stock, you sell it today and promise to buy it back at some unknown price in the future. When the market tanks like it did the other day, the closing out of short positions are the equivalent of BUYING stocks. Buying stocks make the price go up. If there aren't any buyers then the prices continue to fall.

If you short a stock and the price goes up, then you lose. If everyone is shorting a stock, it means that stock is a piece of trash. And wouldn't you want to know that before you invest in it?

Had short selling been fully allowed, your 401k wouldn't have lost as much as it did.

[Tekneek]

The changing of accounting rules is probably going to be even worse than the bailout, in terms of the unintended consequences that may come back and bite us in the ass later. No big deal, I suppose, since most people seem to be wailing for a quick-fix band aid type short-term solution to this, instead of one that attempts to prevent this from happening again.

My understanding of the proposed accounting change means we'll be staring at Enron 2.0 in the not too distant future (in terms of the accounting fraud involved).

[Mac Howard]

Originally Posted by Tekneek

The changing of accounting rules is probably going to be even worse than the bailout, in terms of the unintended consequences that may come back and bite us in the ass later. No big deal, I suppose, since most people seem to be wailing for a quick-fix band aid type short-term solution to this, instead of one that attempts to prevent this from happening again.

My understanding of the proposed accounting change means we'll be staring at Enron 2.0 in the not too distant future (in terms of the accounting fraud involved).

No one is saying that the bailout is the be all and end all of the fix. The bailout is meant to bring things back under control and the regulatory changes needed to prevent this happening again should then be applied. It's too late to fix things with the regalatory changes alone now.

[SteveMax58]

The problem I still have is that we waited this long to fix the problem, and now we have a real crisis to avert...we're going to pass some really bad legislation...and then after we pass it congress will break for election season and then we'll be onto some other topic while this bad legislation manifests itself for another 3 years and cripples us again because (as Tekneek pointed out), there is never a good time to fix anything.

I am not full of solutions...but this sounds like that commercial (cant recall the company now)..."Are you proposing we throw money at the problem?"

I still believe the mechanics to fix this lies in government credits...not government buying bad debt and reselling it. If banks own property(or at least the rights to sell the property), then they would also benefit from seller credits...as would struggling homeowners. EDIT: I understand this isnt just a real estate problem any more.

A couple of honest questions for those who are on board(or those who are not FTM) with this bailout as I have a hard time answering these for myself.
1) Who is going to buy this bad debt back from the government?
2) Why would somebody buy it?
3) Why do you believe that these debts will increase in value?
4) Do you believe Paulson(or the next Treasury Sec) will be capable of weeding out the inevitable fraud that the FI's will be trying to pass on to them? Or do you believe the FI's books are completely accurate and transparent?

[DaddyTorgo]

Originally Posted by SteveMax58

A couple of honest questions for those who are on board(or those who are not FTM) with this bailout as I have a hard time answering these for myself.
1) Who is going to buy this bad debt back from the government?
2) Why would somebody buy it?
3) Why do you believe that these debts will increase in value?
4) Do you believe Paulson(or the next Treasury Sec) will be capable of weeding out the inevitable fraud that the FI's will be trying to pass on to them? Or do you believe the FI's books are completely accurate and transparent?

1) Banks and other financial institutions will buy the mortgages back from the government in time, because the underlying assets (real estate) has value. It's not as if all land/houses will suddenly become worthless. Given it will take time to cleanse the balance sheets and recapitalize, and the financial institutions will no doubt demand (in a positive step) that it is more clear what they are buying, but they will buy it back.
2) See #1. Because housing and real estate cannot simply become worthless.
3) I don't believe the debts will increase in value to the point where it covers the bailout at all. And frankly I think anyone who truly believes that is scarily delusional, which is why I think we need equity in the financial institutinos whose crap-assets we take, so that when those financial institutions balance sheets are clear and their stock price begins to recover the government can sell those shares of stock and make some more of the money back.

[molson]

Originally Posted by SteveMax58

The problem I still have is that we waited this long to fix the problem, and now we have a real crisis to avert...we're going to pass some really bad legislation...and then after we pass it congress will break for election season and then we'll be onto some other topic while this bad legislation manifests itself for another 3 years and cripples us again because (as Tekneek pointed out), there is never a good time to fix anything.

I am not full of solutions...but this sounds like that commercial (cant recall the company now)..."Are you proposing we throw money at the problem?"

Or as I saw (expressed much less tastefully) on another board:

"In 12 months, Paulson's going to say, 'hey, thanks for the $700 billion, now I need another $1.5 trillion or you're all going to die of AIDS".

[molson]

Originally Posted by Mac Howard

In a discussion with an economics journalist who expressed doubt that the "folks" were on board with the bailout yet, O'Reilly said "People are now wired into this".

So I sent him the url of this thread

You just don't get what the other side is saying at all.

(I just wanted to see what it felt like to say that. I feel all smug).

[Gary Gorski]

Originally Posted by SteveMax58

The problem I still have is that we waited this long to fix the problem, and now we have a real crisis to avert...we're going to pass some really bad legislation...and then after we pass it congress will break for election season and then we'll be onto some other topic while this bad legislation manifests itself for another 3 years and cripples us again because (as Tekneek pointed out), there is never a good time to fix anything.

I agree with you - where was Congress a year ago when it was becoming increasingly clear that there was going to be a problem? Problem is we're on the edge of the cliff now - some kind of legislation - good or bad - buys the time to attempt to fix the problem. Now if Congress still can't figure out how to fix the problem you and some others are right - all we're doing is delaying the crisis. But I would rather delay the problem and have a shot at fixing it rather than just roll the dice and see how bad it could get. Living through a depression was never on my to do list in life.

[Fighter of Foo]

Originally Posted by DaddyTorgo

1) Banks and other financial institutions will buy the mortgages back from the government in time, because the underlying assets (real estate) has value. It's not as if all land/houses will suddenly become worthless. Given it will take time to cleanse the balance sheets and recapitalize, and the financial institutions will no doubt demand (in a positive step) that it is more clear what they are buying, but they will buy it back.
2) See #1. Because housing and real estate cannot simply become worthless.
3) I don't believe the debts will increase in value to the point where it covers the bailout at all. And frankly I think anyone who truly believes that is scarily delusional, which is why I think we need equity in the financial institutinos whose crap-assets we take, so that when those financial institutions balance sheets are clear and their stock price begins to recover the government can sell those shares of stock and make some more of the money back.

Factoring in taxes, any property can in fact have a negative value.

The answers to Steve's questions are No one(short term), No one, they won't and no.

[SteveMax58]

Originally Posted by DaddyTorgo

1) Banks and other financial institutions will buy the mortgages back from the government in time, because the underlying assets (real estate) has value. It's not as if all land/houses will suddenly become worthless. Given it will take time to cleanse the balance sheets and recapitalize, and the financial institutions will no doubt demand (in a positive step) that it is more clear what they are buying, but they will buy it back.

Maybe not worthless...but potentially worth less than what the government buys into it?

See #1. Because housing and real estate cannot simply become worthless.

Similar to #1, if they have still not hit bottom...then will the derivitives not be worth less as well? Why not let the FI's get rid of the properties and offer them credits, while also increasing their borrowing amount temporarily?

3) I don't believe the debts will increase in value to the point where it covers the bailout at all. And frankly I think anyone who truly believes that is scarily delusional, which is why I think we need equity in the financial institutinos whose crap-assets we take, so that when those financial institutions balance sheets are clear and their stock price begins to recover the government can sell those shares of stock and make some more of the money back.

I agree with this, and hope this actually works, if passed.

[molson]

Originally Posted by Gary Gorski

But I would rather delay the problem and have a shot at fixing it rather than just roll the dice and see how bad it could get.

No matter what happens now it's a huge roll of the dice.

I see it as risking a depression to get out of a recession, but we'll see how it goes down.

I wish I had a world simulator that could quickly try out a bunch of different options, and sim out the results over 20 years. Maybe I'll build one in my garage.

[sterlingice]

Originally Posted by molson

Or as I saw (expressed much less tastefully) on another board:

"In 12 months, Paulson's going to say, 'hey, thanks for the $700 billion, now I need another $1.5 trillion or you're all going to die of AIDS".

That's my biggest fear (not quite in those words, tho).

"Hey, guys, thanks for the ill-conceived and hastily thrown together bad plan. But I've made a bigger mess of things so we'll need even more to dig ourselves out"

SI