bills_fan

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.

Three major national institutions (LEH, MER, AIG) have folded over the last 4 days and no longer exist. Many others are in real trouble. Where is the politcial leadership? Patterson got out in front of AIG and played an instrumental role in helping to save the system. But AIG was an insuance company, which is State regulated. Where has the President of the United States been? I haven't heard from him. He's maintaining radio silence throughout this whole crisis. His administration is pursuing a reactive, ad-hoc strategy in stead of getting in front of the problem, via RTC II. And Congress? From todays WSJ, a solution I've advocated since March... http://online.wsj.com/article/SB122169466799949977.html That giant sucking sound we are all hearing is our financial system being consumed by a giant cosmic black hole created by the vacuum of leadership.

I didn't mean to imply you were uninformed. Sorry, if came out that way. The government made an $85 billion credit facility available to AIG. Any drawdown by AIG would come at a rate of 8.5% plus LIBOR. Three-month LIBOR Wednesday was fixed at 3.06%, which would put the 24-month loan’s rate currently at 11.56%, which is a harsher rate than many of the sales of preferred stock by major banking institutions over the last few months. This rate is basically onerous and AIG will aim to repay its loan with sales of businesses. As to the why... My libertarian tendencies also cause me to shirnk when the gov't "bails" out individual institutions. But it really is more like the government backstopping the entire system. Bear was "bailed out" primarily due to the speed of its demise and the fact that Bear's clearing firm Pershing, is huge. The loss of Pershing would have caused a true market crash back in March, and people did not have the time to adjust. AIG, while an insurer of everything from individuals to drilling platforms and airlines, also had almost 70% of the market share for insurance of debt instruments and derivative products, the very products that got us into this mess. This insurance is necessary as a hedge against default. This insurance is also worthless if the company goes into bankruptcy court. If its worthless, then so is the hedge. Hence, a market riot. Many banks would have been exposed, unable to hedge and would have gotten pummeled (I know, a simplistic explanation, but it really is all I can say). Problem is many of the securities laws are written to convey certain rights and privledges on investment grade rated products. So, if a product is investment grade (as determined by the agencies), it operates according to a different set of laws than junk products (as determined by the agencies). Thats why it is such a big deal. In theory, its a good idea...have an independent 3rd party analyze the product and give it a rating. In practice, not much analysis was being done. I also just read that the bastards are now going to take a second look at Barclays, following the purchase of certain LEH assets. I don't think a downgrade is coming, but these agencies have far too much power.

I understand your concern about AIG, but how much do you really know about them? Absent an AIG "bailout," we would be in 1929 territory today. At least a dozen regional banks and at least one national bank would have failed...overnight. The market would be trading in the 8000-9000 range, if at all. The market knew that AIG had to be saved, LEH did not. And I really think the "bailout" and its draconian terms will force AIG to cease to exist. It just bought AIG time for an orderly liquidation, without cancelling all of its counterparty insurance contracts. That would have happened in bankruptcy court. As an aside, I believe that Moodys and S&P are two of the most loathsome entities on earth. After their substantial role in creating this mess, to pull an 11th hour downgrade and obliterate a Dow component, is the ultimate in hypocrisy. AIG had a chance, albeit a small one, before the downgrade. After, they were toast. The rating agencies should be legislated out of existence, and thats not a concept in which I tread lightly.

Far from it, the original Resolution Trust, created to solve the S&L crisis in the 80s, actually made money for the government while it orderly disposed of the assets. Taxpayers will actually make money if they use an RTC II.

I have many friends at investment banking botiques. They serve a great purpose and they will get some more business. But, botiques cannot drive the bus, they don't have the capital to do the deals that really matter. And your friend may have just changed his tune after today.

What a f*cking unmitigated disaster. Dow is off 350 points today, headed well under 10,000. MS is down 34%, GS off 25% The more I see those two companies tick down, the angrier I am getting at Paulson and the Bush administration for being reactive and not getting out in front of the problem. I said back when Bear when down in March that the only way out will be Resolution Trust II. The only public official who even mentioned the idea was Barney Frank, Chair of the House Financial Services Chair and even then only in the last two days. The lack of political leadership (with the exception of David Patterson on AIG) is appalling. The alternative is global financial meltdown, which will happen in the next couple of weeks. It is too late for Leh, AIG, Bear and Mer. The only question is if GS and MS will still be around when Congress and the Bushies get around to acting on this. If GS/MS go, say goodbye to American economic growth for quite some time. As badly as the investment banks are portrayed by the media and as poorly as their decisions were, they serve a very necessary function in driving true economic growth (not just the overly-leveraged kind). Tieing them in with commercial banks, and all of their leverage limitations, will be disasterous for the long term economic outlook. Lots of blame to go around for this...the Bush administration, Clinton administration, Congress, the banks, homeowners and mortgage brokers all deserve a piece of it. Now, lets out of it before we really wreck things. http://blogs.wsj.com/economics/2008/09/16/...ernment-entity/

I was living in Brooklyn at the time, I didn't want to go home. I figured I would drive myself crazy watching CNN all day.

Lot 16C is where we go from McFaddens. I think we join up with you guys from New Jersey. Its a lot of fun and I go every year.

There was a person who tried to climb down from about the 90th floor. He made it about 10 floors before falling.

And I apologize if I misconstrued your "Big Barbeque" comment to mean 9/11. Way to man up.

Thank you for your service. I lost a lot of friends that day, the financial services industry really is a small town. Find the bastard and kill him. I don't care how. Just kill him. As an aside, for my Lagavulin last nite, I went to the same bar I was in on 9/11, Jim Brady's, in lower Manhattan. By sheer chance, I saw a few of the same faces, 7 years older. The bartender was also the same. One Lagavulin turned into more than a couple.

It got even worse. Noone in my office really knew what happened. We figured a plane had crashed into the tower, but figured it was some type of accident, perhaps the pilot had a heart attack or whatever. A coworker's wife worked on a very high floor in the North Tower, as a compliance officer. He told me they had told the workers to stay at their desks and not to panic because the fire from the South Tower would not affect the North Tower. She did not listen to them and left the building. I walked downstairs with a few co-workers and stood outside Brooks Brothers (the one they later used as a morgue) in my building, just looking up at the towers..really pretty dumbfounded. We were facing the towers when suddenly the second tower just exploded...no warning or anything. Debris falling down all around us and the plate glass windows of the Brooks Brothers shattered. Then it was mass confusion as everyone tried to figure out what was going on. I was standing on Broadway, at the corner of Liberty, with a coworker in disbelief, watching as people jumped the 105+ stories. Then, we heard an awful low rumbling, that just got louder and louder, like an earthquake or bomb...the tower was coming down. We turned and ran into the nearest builing, at the corner of Broadway and Maiden Lane. I escaped the major plume of debris headed through the streets of lower Manhattan. I walked out of the side door and into the dust. What was a brilliant, blue sky was now black with dust. The streets were covered in dust three inches thick. I walked down the street in a daze. I went to a bar we often went for happy hour. They had stopped their lunch preparations. It was a makeshift infirmary. They had used all the tablecloths and napkins to bandage anyone who came in looking for help. Those of us who were unhurt started pitching in and helping, bringing people in from the streets until the whole place was full. I do confess, a large glass of scotch was had by me well before noon. There was one payphone in the bar, it was the only phone that was working. Cell service was out. People were taking turns trying to get in touch with loved ones. We waited in the bar, there was still one tower standing. It was a surreal sight on TV, seeing only one tower. When the second tower fell, the ground shook. The windows rattled and got black as night as the debris cloud passed. You could have heard a pin drop. A short while later, I walked outside and it was surreal. As I walked outside and up Broadway, I looked down Maiden Lane, by Century 21, toward the towers where I had stood about an hour before. There was a section of the latticework of the towers, stuck into the ground on a 45 degree angle. Behind it, the fires glowed fiercely. I wished I had a camera. There were human remains on Broadway. I walked to City Hall Park and finally got cell service, got in touch with my folks and girlfriend (now wife). There was a polic officer looking for volunteers to help takes supplies to FDNY. I'm in. Turns out, we waited for most of the day at the command post set up on the West Side Highway, the fire was just too hot to approach and we had to wait until 7 WTC came down. NYC was a ghost town. Finally, after 10 PM, I walked over the Manhattan Bridge, where my girlfriend picked me up. It was a very long day. EDIT: 7 years later, I type this and am still tingling. Time for a LaGavulin.

I seriously hope you are pulling a Hogboy and trying to get a rise out of everyone...