Wed 2010-08-25 08:41 EDT

2008 Bailout Counter-Factual | The Big Picture

Barry Ritholtz

...My disagreement with the Zandi-Blinder report is not its theoretical underpinnings -- it is by definition a hypothetical counter-factual. Rather, it is the counter-factual Blinder/Zandi chose to use: ``What would the economy look like now if we had done nothing?'' Instead, I propose a better counter-factual: ``What if we had done the right thing, instead of nothing -- or the wrong thing?''...In my counter factual, the bailouts did not occur. Instead of the Japanese model, the US government went the Swedish route of banking crises: They stepped in with temporary nationalizations, prepackaged bankruptcies, and financial reorganizations; banks write down all of their bad debt, they sell off the paper. In the end, the goal is to spin out clean, well financed, toxic-asset-free banks into the public markets...One by one, we should have put each insolvent bank into receivership, cleaned up the balance sheer, sold off the bad debts for 15-50 cents on the dollar, fired the management, wiped out the shareholders, and spun out the proceeds, with the bondholders taking the haircut, and the taxpayers on the hook for precisely zero dollars. Citi, Bank of America, Wamu, Wachovia, Countrywide, Lehman, Merrill, Morgan, etc. all of them should have been handled this way...

2008 Bailout Counter-Factual; Big Picture.

Sat 2010-08-07 20:18 EDT

Wall Street's Big Win | Rolling Stone Politics

Matt Taibbi

...Obama and the Democrats boasted that the bill is the "toughest financial reform since the ones we created in the aftermath of the Great Depression" -- a claim that would maybe be more impressive if Congress had passed any financial reforms since the Great Depression, or at least any that didn't specifically involve radically undoing the Depression-era laws...What it was, ultimately, was a cop-out, a Band-Aid on a severed artery. If it marks the end of anything at all, it represents the end of the best opportunity we had to do something real about the criminal hijacking of America's financial-services industry. During the yearlong legislative battle that forged this bill, Congress took a long, hard look at the shape of the modern American economy -- and then decided that it didn't have the stones to wipe out our country's one --dependably thriving profit center: theft...Dodd-Frank was never going to be a meaningful reform unless these two fateful Clinton-era laws -- commercial banks gambling with taxpayer money, and unregulated derivatives being traded in the dark -- were reversed...Republican and Democratic leaders were working together with industry insiders and deep-pocketed lobbyists to prevent rogue members like Merkley and Levin from effecting real change...Geithner acted almost like a liaison to the financial industry, pushing for Wall Street-friendly changes on everything...Without the Volcker rule and the --Lincoln rule, the final version of finance reform is like treating the opportunistic symptoms of AIDS without taking on the virus itself. In a sense, the failure of Congress to treat the disease is a tacit admission that it has no strategy for our economy going forward that doesn't involve continually inflating and reinflating speculative bubbles...

Rolling Stone political; Wall Street's Big Win.

Wed 2010-08-04 20:48 EDT

Janet Tavakoli: Stranguflation: Deflation and Inflation Where it Hurts America Most

Janet Tavakoli

The U.S. is suffering from high unemployment combined with too much consumer debt in a weak economy...our bloated financial sector has been sucking the life-blood out of the U.S. economy for years, and recent decisions insure it will continue to feed off taxpayers, while the host economy struggles for life...The bailouts were a perversion of capitalism and the principles upon which The Republic was founded. This was the result of influential interested parties reaching into the U.S. Treasury with no accountability. Capitalism doesn't call for bailouts, instead investors take losses. Shareholders in failed financial institutions should have been wiped out, debt holders would have had to accept discounts combined with debt for equity swaps, and financial institutions would have then been recapitalized without taxpayers footing the bill. Instead banks lobbied for relaxed accounting and ineffective "financial reform." No one, including bank managers, can tell how much capital is truly needed, and taxpayers' ongoing heavy subsidies give these financial institutions the appearance of stability.

deflation; hurting America; Inflation; Janet Tavakoli; Stranguflation.

Jesse's Café Américain Wed 2010-04-07 19:06 EDT

Banks Come Back For Another Bailout in Ireland While the US 'Manages Perceptions'

Jesse

The whole notion of bank bailouts is a tremendous injustice when not accompanied by personal bankruptcy and civil and criminal prosecution for those banks managers who created them and are found guilty of fraud. In addition, the owners of the banks, whether through debt or shares, should be wiped out and the bank placed in a proper receivership while its books are sorted out. The US is an accounting mirage. The notion that it will make money from its stake in Citi is a sleight of hand. The enormous subsidies to the banks both in terms of direct payments, indirect payments through entities like AIG, and subsidies such as the erosion of the currency and the deterioration of the real economy, will never be repaid. ...the facts seem to indicate that the US is still pursuing a policy of managed perceptions, accounting deceptions, and old fashioned insider dealing and other forms of corruption that always accompany government, but reach a feverish pitch in times of crisis. It is the establishment's form of looting.

Bailout; banking comes; Ireland; Jesse's Café Américain; managing perception.

Tue 2010-01-12 23:31 EST

Here Comes the Screw Job

Garrett Johnson

...Like America, Argentina sold off its public enterprises for pennies on the dollar in privatization schemes. Like America, Argentina had an artificially inflated currency which crushed its industrial base and led to an over-sized trade deficit. Like America, Argentina tried to disguise these problems by borrowing from foreign creditors. In the end, the Argentine government seized the retirements savings of their own citizens in order to continue to function after foreign creditors abandoned them. They shoved that savings into treasury-like bonds and then massively devalued their currency. In so doing, 70% of the retirement savings of the Argentinian people was wiped out overnight...

comes; screw job.

naked capitalism Tue 2009-10-27 11:49 EDT

Wow, judges now nixing lenders' foreclosure claims entirely in court

Edward Harrison of Credit Writedowns

Gretchen Morgenson: One surprising smackdown occurred on Oct. 9 in federal bankruptcy court in the Southern District of New York. Ruling that a lender, PHH Mortgage, hadn't proved its claim to a delinquent borrower's home in White Plains, Judge Robert D. Drain wiped out a $461,263 mortgage debt on the property. Edward Harrison: I see this as a watershed case in jurisprudence surrounding mortgage-related bankruptcies and foreclosures. The reason this is huge is that it echoes the case in Kansas...what legal rights do lenders or their agents have in foreclosure in the new byzantine world of securitized mortgages. In the New York case the judge nixed the entire claim as the mortgagee could not prove it had legal claim to the mortgage note...PHH and MERS, the two lender agents in each cases, are not the actual owners of the mortgages. They are the agents of the mortgagees. This is why these cases have a lot to do with securitization.

court; foreclosure claims entirely; judge; naked capitalism; nixing lenders; Wow.

Wed 2008-07-16 00:00 EDT

naked capitalism: On the Ackman GSE Restructuring Plan

Common and preferred equity wiped out

Ackman GSE Restructuring Plan; naked capitalism.

Mon 2007-12-17 00:00 EST

Bear In Mind > Wipe out on Wall Street: Derivatives credit risk

Bear In Mind > Wipe out on Wall Street: Derivatives credit risk; ACA Capital hedge counterparty CIBC takes 3B markdown; major investment banks "dead men walking"

Bear; Derivatives credit risk; mind; Wall Street; WIPED.

Tue 2007-12-04 00:00 EST

A - Could Citadel's valuation of E*Trade's CDOs wipe out capital at three big banks? - BloggingStocks

A - Could Citadel's valuation of E*Trade's CDOs wipe out capital at three big banks? by Peter Cohen; BloggingStocks

big banks; BloggingStocks; capitalism; Citadel's valuation; e; Trade's CDOs wipe.