Bailout Blues

[Jeff CTNGREEN]

This Bailout blows. Years ago republicans had Greenspan lower the Fed Rate to 1% and allowed subprime (No Doc ) loans at way too low a rate to property priced way over its value. Would have been ok if only 100,000 such notes were written, but millions of these loans were done to the tune of just under 15 trillion $ in at-Market-Value was written. The payment curves on them meant that the person who had the loan was paying NOTHING into equity untill several years into the loan, so now you have broke people with no equity in a loan that is far $$$ more than the value of the property. For them its cheaper to just walk from it and forclosure sales happen - meaning BANK OWNED PROPERTY.

Backstory short form:

Schumer has the forclosure rate analysed, and this caused Bank Examiners to selectively review the condition of subprime mortgage security packages for fair market valuations as oppsed to Mark-to-Market ( basically a realestate CMA {Competitive Market Analysis} on the property held in a loan note within the overal subprime bond package) They then re-valued the entire package based on upsidedown notes ( notes that market at a higher number than fair market and look to be low equity, select a few case examples and then claim the entire package is like that) and in a depressed-value market this leads to loads of red-ink, guarenteed.

The problem is that investment houses that traded these mortage securities ( Lehman, Fannie Mae etc ) after the re-valuation would have negative balanace sheets, be ripe for takeover, and not enough cash on hand to handle the difference. Basically if you were in the FED-CLUB you got the deal, if not you got the shaft. Bank examiners see all that newly revalued balancesheet insolvency and insist that they fix it or declare bakruptcy. The Securities holder cannot fight with the drop in home values. Bank with these notes want them there in credit line trades that happen every day, they are treated nearly the same as cash for some. Its this partk of the financial market that is in trouble.

Mortgage securities in subprime notes is 5% of basically a 14-15 trillion derivitaves market and its globally traded. in a very crude way you can say that 1/2 of the subprimes in every mortgage scurities Market Valued package is bad and all of a sudden put deals into the red. The Tail is wagging the dog and now you have these situations extended into every trade aspect, when really ist the investment house side of securities trades doing the damage, freinds of the Feds and Paulson/Bush want this fixed, like poker players who lose and want the house to fund a fresh pot to play with. Its blackmail because they say - no fresh pot, no play. This means no loans to or from anyone at the table. In real terms that means No Bank that holds these Mortgage security notes really trusts the other Bank enough to trade credit. Pure deposit banks (Bank Of America for example) look stronger than the economy at large when such fund credit market conditions exist.

if you dont get it then read it again, its as simple as i can word it without going into banker vernacular thats more accurate but harder for joe sixpack to understand. Trust this - the euro banks are in worse shape and understand it just as poorly.

They ( banker/federalist powerbrokers ) are not stupid, saw this coming and want to push it through before their guarenteed puppets in the treasury are gone, and before everyone figures out that basically hostile takeovers and fresh money are to be had, thanks to the FDIC ( deposit insurance federally funded and mandated ) which basically has to do what it does regardless of right and wrong, they have a purely mechanical obligation.

Now the Republicans want to RAID THE TREASURY before they get ousted ( these loan problams were just as bad in Jan 08 they are now) and make a crisis of it that has the US treasury owning the bad notes. BANK owned now = FEDERALLY owned property worth penies on the dollar ( so they say - actually they are getting lower than actual value property in sort of a packaged blackmail ).

BAD MOVE. The housing and mortgage market ( and derivative speculation ) does NOT run this economy and they are making it out that it should. Dont fall for it. Fresh cash for bad securities is what Fannie and Freddie were supposed to guarentee, they began as nationalized banks, went public to capitalize in the stock market and now they are back where they started as govt mandated megabanks, like sacrificial lambs to the powerbrokers.

Update: The Fed quietly added 630billion into money market transactions while everyone else was bickering. Bluechip stocks regained from the previous days 1.2 trilling paperloss. Unlike Paulson's proclamation, the sky did not fall.

[Jeff CTNGREEN]

Blame some republicrats if you want for the monday crash , but the Paulson Plan was and sitll is a RAPE of the Treasury. We need to deal with it, but not like that. Fire the SEC chairman is the wrong answer too, shame on you McCAIN.

[Jeff CTNGREEN]

WaMu goes belly up - - grabbed by Jp Morgan / Chase ( deposits and assets ) i suspect with FDIC doing a bit of extra guarentee work .. really a decent deal for JP Morgan , better than Bear Stearns was ... these powerplays only benefit a few hundred rich people, the rest suffer as Bernake and Paulson STILL WANT TO RAID THE TREASURY before they are booted out.

This is a toxic Morgage security problem, not anything more, so claiming this is the entire economy is crap and it is wrong to paint that picture.