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Almost Great Depression To Be Over This Week.

Martyrdog — Mon, 23 Feb 2009 15:20:38 +0000

Exactly when this economic crisis began is arguable. Republicans often suggest that it was left from the Clinton years and point to evidence including excess growth, albeit benign, in 1994 and evidence of excess fluidity being addressed in December 2002. While there was occasional discussion by pundits on talk radio and the Sunday shows, the impending crisis didn’t begin to make the headlines until the Spring of 2008. Noticeably limping before the Masters and coinciding with the Bear Stearns collapse. By mid June 2008, it became obvious that things were not going to turn around any time soon and Tiger Woods announced after his heroic limping playoff victory at the US Open, that he would undergo more reconstructive surgery and would be out for ten months. Reaction on was immediate and has continued. Indymac Bank was nationalized. $300 billion subprime mortgage guarantee was put into law. The Fed nationalized Fannie Mae and Freddy Mac. Bank of America took over Merrill Lynch. Lehman Brothers collapsed. The Fed lent $85 billion to AIG. Paulson announced a financial rescue. WaMu was nationalized. Citigroup took over Wachovia. Congress passed the $700 billion TARP bailout bill. The crisis spread around the world. Obama was elected to stand in for our multi-racial and multi-cultural role model superstar icon. The markets continued to tank. Millions lost their jobs. Millions lost their health insurance. Wars continued. And so on. It’s finally officially over. Tiger Woods is back on the PGA Tour this week at the Accenture Match Play Championship in Arizona (Sen. McCain, R). While experts believe it may be many more months before the recovery is complete, all the world awaits the markets’ reaction.

The Emperor’s Accounting Rules.

Martyrdog — Wed, 11 Feb 2009 17:42:24 +0000

A house was purchased a couple of years ago for $100,000 and got a $100,000 mortgage. If the homeowner sold it today, they could get about $75,000. The $3,000,000,000,000+ question is, how much is the “asset” worth?

Scenario #1: Every mortgage payment has been made on time.

The homeowner knows that their house is worth $75,000, even though, they owe $100,000.
Under current rules, the banks and the mortgage backed securities which own the mortgage, are required to say the house is worth about $75,000. Since banks have strict capital requirements by the Fed (unbelievably complicated), writing down this asset by $25,000, generally, means the bank will have to raise capital to make it up by selling about $1,000 in new stock or attracting subordinated debt (or other methods) which may be really hard to do when your stock is in a spiral.
Meanwhile, investors in the banks and the mortgage backed securities which own the mortgage, buy or sell based on their guess whether they think the companies are telling the truth on a timely basis, and, generally, don’t believe anything leaving the stock and securities prices in the toilet.
The banks, Wall Street firms, the Treasury and the Fed want to value it at $100,000 and have our government guarantee that it is. The mortgage is performing as if it is worth it is worth $100,000 and if held until maturity it would be, therefore, it is. Read the rest of this story

Where’s Chicken Little When You Need Him?

Martyrdog — Thu, 18 Dec 2008 17:13:09 +0000

Here we are in the last week before Christmas. The time to cast fear to the wind and spend, spend, spend out of hope, love and tradition. Surely our best and brightest, the good men and women who run our government have things under control – unless they are all out reading their copies of The Pet Goat instead of the daily security briefs. Surely the pundits would be screaming even louder if something really bad was going to happen – unless they just don’t have the video, or are under orders from the top to lighten up the holiday buzz kill... Read the rest of this story