bills_fan

We'll have to disagree on the "match" analogy. GS/MS had that ready to go for a few weeks, no way they could continue in present form. True investment banks no longer existed in the bulge bracket form, although they exist (and IMHO, the model works) in the botique and middle market. There will be a place for the Lazard/Fox Pitt/Sandler ONeal/Thomas Weisels of the world.

I read that draft on Saturday. It has been changed since Saturday. Many details are still being worked out. Folks like Dodd are not helping.

But for the magic that is mark-to-market accounting, this mess would have been mitigated. Mark-to-market accounting was the match that lit the powder keg of bad mortgages.

The Fed has a balance sheet of about $880 billion. It is not infinite. Treasury on the other hand...

I hope they can.

No, buying the toxic debt that banks, brokerages and insurance companies have that caused this mess. The gov't will not buy any company, just the loans they have on the books. AIG is a loan, will will be repaid via sale of AIG's assets, at 11.56% interest. The gov't will make money there too, but far less than via the new facility.

It is. Although the government will end up making hundreds of millions on this facility. So, for the taxpayers, it will end up being a very good deal. Want to know how to fund infrastructure?

I don't think so. Of course we will still have crisis du jour, but this was different due to the lack of a floor. Many buyer walked into AIG last week, they had no way to measure the downside risk...due to mark-to-market accounting, the risk was almost infinite. This allows the banks to offload the bad debt, thereby enabling them to begin lending again, restoring credit and liquidity (after the stupid short selling order expires). This will actually put a floor under home prices. Combined with all the capital injected into the market, I think we will be in good shape.

Add on to my "buy financials" tip, keeping buying Mon and Tues, put sells in pre-open on Wed. Lock in your gains and wait for normalization.

They always go one step too far...buy index funds over the next days. Short covering rallies will take the market far higher in the next 2.5 days. This is not a rally. Legitimate shorting is a very valid strategy. Hell, many hedge funds invest 3 to 1, For every 3 bucks they put into a stock, 1 goes on shorting it, just as a hedge. Fools. I really hope this is just a temporary solution. The other SEC orders handed down regarding price disclosure and issuer repurchase of securities are good and ought to be permanent. Talk about reactive bull...I thought McCain was an ass to say that about Cox, now I think Cox is even more of an ass than McCain said he was.

Bastard!! I have far too much inside information to trade the way I want to!!

Here's a tip... Buy financials as soon as the market opens tomorrow. As many as you can get. Buy SSB, GS, MS, C, GE...buy as much as possible. Tomorrow should be a big up day for the market. If you want the whole story, see my thread on PPP. And that 10% down may turn to 10% in the other direction within the next 30 days.

Exactly correct. You have to be able to value it correctly now, to make the real profit in the future. If anyone has this formula, I'll quit my job and we're starting a hedge fund to buy this stuff. The government will make a good chunk of cash on this, with very little downside.

My original thread premise stands corrected, albeit a week too late. Leadership..... Paulson, Bernanke and Congressional leaders just emerged from a closed-door meeting in the Capitol. Standing shoulder-to-shoulder with their GOP counterparts, Democratic Congressional leaders said the group reached "a bi-partisan agreement to work together" and that the Administration will soon submit a proposal to the Congress, which Senate Majority Leader Reid said he "expect to receive in a matter of hours, not days." Reid said he was "very impressed" with Paulson and Bernanke and said "we're committed to working with them" on this. Paulson said he "saw the best of the United States of America" at work in tonight's meeting and said the Administration would soon submit "an approach to deal with systemic risk in our capital markets." Specifically, Paulson said it will be a "comprehensive approach" and "expeditious solution aimed at the heart of this problem: illiquid assets on financial institutions' balance sheets." In sum, nary a false note in the bipartisan chorus.

Didn't hear that, but was out of the office on Mon/Tues. Wow, that is a massive deal that will have repercussions down the road (like much of the actions in this period).

I would pay to watch that guy and his counterparts from Moodys and Fitch sit before a congressional committee and face questions on the AIG downgrade this week as well as the original ratings.

I try not to speak in absolutes, and tend not to favor government intervention. Could you find something I posted, yeah, maybe... You, of all posters here, should appreciate how close to the abyss we got this week. By mid-Oct, MS, GS, State St, GE, C, F and GM would likely all have failed or required AIG/Bear style intervention. Thats reactive and does not solve the problem. Central banks around the world have injected a collective $2 trillion into financial systems in the last 13 months, yet we were still spinning ever faster to the brink of disaster. Now we can go back to managing the crisis du jour, instead of fearing the entire system will fail. Fix the regulation, assign blame, try to correct the problems....sure. But we won't fear the entire system failing while we do it.

I never claimed it was. Sometimes the one with the big balance sheet has to step up and save the system.

Confidence...it will solve the problem. It will set a floor (however low it does not matter) and the panicky death spiral is over. At this rate, MS would have gone bankrupt or been sold over the weekend. GS two weeks later. State Street the week thereafter. The ratings agencies (most evil entities on earth, IMHO) have effectively been neutralized. The drove the final nail in the AIG coffin, after of course, helping to build the coffin. If you really want to learn more, I linked an article about the agencies below. That site, BTW, is a terrific site for market information and one I visit daily. http://www.minyanville.com/articles/GS-MCO...y/index/a/19056

Either proposal, Schumer's or RTC II, puts a floor under the problem. The banks can put their bad debt somewhere and break out of the death spiral they were in. The govt will take the debt for nickles and dimes on the dollar. The gov't will then sell off the debt over time. Since it really is worth far more than the gov't will pay, the gov't will make money on the deal, just like RTC I. If any entity had a big enough balance sheet, they could do the same thing. No one does, due to the scope of the problem. And the gov't didn't !@#$ up the original RTC. Many of the players for that (Robert Glauber, William Kroner, Volker) are still around. Reassemble the old gang and let them have at it again. They did a fantastic job last time.

Schumer speaks!! Schumer to announce a "new, comprehensive proposal for calming roiled Wall Street markets." He plans to make the announcement in a speech on the Senate floor around 3:15pm and will propose a "grand bargain" involving the creation of a new gov't agency modeled on the Reconstruction Finance Corporation of the 1930s. The new RFC would provide capital to the banking industry in return for a USG equity stake in those companies. In return, Schumer's RFC would require the banks to agree to "judicial loan modifications allowing bankruptcy judges to facilitate the re-financing of mortgage loans." He will pitch this idea as an alternative to the proposals others have made (e.g., Rep. Barney Frank) that would be modeled on the Resolution Trust Corporation of the late 1980s and 1990s. And ExiledinIllinois, RTC made money for the taxpayers.

Paulson went for broke...released the story just as Congress was leaving!!! Thats leadership. Market is up 400 points right now on this news. Straight up. Now if Congress says they will do nothing, market will crash. http://biz.yahoo.com/ap/080918/wall_street.html EDIT: Most importantly, MS/GS are turning green on my screen as we speak!

Neither candidate has a clue on these issues. If McCain did say that, I did not hear any specifics and someone probably dumped on him a talking point.

Funny you should ask... This Articlein today's WSJ sums up my attitude toward "deregulation". More regulation is not necessarily needed, better regulation almost assuredly is needed. An overhaul of the regulatory system is needed, there would be less overall regulation, numerically, but it would be more streamlined. In the securities world, you have the SEC, FINRA and various other entities. The commodities world has the CFTC. The banking world is a true mess, the Fed, OTS, State Agencies, OCC etc. all have jurisdictions over various banks. The insurance world is state regulated. The accounting world has FASB. The overlap is significant, as are the areas that they miss, such as derivatives and hedge funds. So, you have heavy, overburdensome regulation in certain areas and the wild west in others. If you had one, single, Federal regulator for financial products and institutions, you would have a more efficient, streamlined and effective regulator. This model has proved effective in Britan with the Financial Services Authority, although they still split out banking.

The decision to put members of Congress on the spot to authorize the creation of RTC II is not one that Paulson can undertake. Let the President come on TV, call for Congress to create RTC II and send over Paulson's plan. Then apply pressure daily to Congress to move on it. Take whatever heat you have to and provide Congressmen of both parties political cover to pass it and get it done. In the meantime, let the markets know exactly what is going on so that irrational fear amd panic do not permeate the system, such as yesterday. That would constitute leadership to get us out of this crisis.