Sniglet, The problem with leave it to the maerkt is that the credit maerkt was on the verge of failure due to fear. Raise fund from private sector? How can anyone do that when NO ONE is willing to lend money? Citi share issue? Why? They either have no need for additional capital at this time and their stock price is sustained or they do need capital and you'll see C in low single digits overnight, at which point share issue won't save them. If an institution has sufficient capital, it won't need to (and it would be foolish to, considering current environment) raise money, and those that do need to raise capital simply can't. The maerkt believers answer to that is well, then let'em fall! , which would be the right answer in normal times, but this is not at all normal situation. Let's see, first AIG, WaMu, MS, Wachovia will fall, then GS and Citi probably will follow, and at that point even those that used to have enough capital will start to have problems. Why? Well, for one, the fear factor, and the real factor of relationships between financial institutions. Those who thought they were protected by CDS written with AIG as the counter party will now have to take a loss. Mass withdrawals from money maerkt funds (which I believe was actually the main trigger for Paulson to take action) will lead to collapse of those funds which will make even more entities suddenly strapped for cash. Bank of America being driven to failure due to a classic bank run could have been the next headline, and if BAC falls, that means the collapse of U.S. financial system. Another reason THE bailout is necessary is because the attitude prevalent everywhere including this forum, that all mortgage related debt is effectively worthless. It's not just bad. It's toxic. Recently, Merill sold about half of their CDO's at 22 cents on the dollar. People read that and think OMG, these CDO's ARE really worthless! . Yes, the delinquencies have been rising and will continue to rise. And CDOs can be notoriously complex instruments. But let take a step back and think about that for a moment. The CDOs that Merill sold was super senior tranche, which means that the default rate on the ABS's that the CDOs owned must be pretty darn high for them to be discounted to 22 cents on the dollar. In fact, assuming 85% super senior tranche, the default rate needs to be over 80% for the buyer to take a loss in that case. If the default rate stays around more realistic 30%, the buyer will easily earn more than 3.5 times the stated rate. Assume 5%, that means the buyer can make 17.5% annual return with 30% default rate. I think that's quite attractive. Which brings the question, why aren't there more buyers at those fire-sale prices? Because the maerkt is not working. No one wants to buy CDOs. And those that do will only do with significant discount, a kind of discount that will make sure the buyers will not lose money even if mild depression comes about. The CDO holders however, still have to take losses based on those sales as asset valuation adjustments, which leads to the capital questions, collapsing stock price, etc. Back to the Merill example, presumably Merill kept the better CDOs and unloaded more undesirable ones. However, just two months later it still had to sell itself to BAC after witnessing Lehman's death.The Treasury plan is not about buying individual mortgages, although it probably will be included. It's more about buying all of these acronym-happy assets from financial institutions, so that the maerkt fear subsides and the maerkt for these securities can function again. Heck, the private money who have been waiting for an asset sale may start competing for these securities once government starts buying them, and it's a distinct possibility that the U.S. government will use the cash flow from these assets to pay off reduce borrowing in the years ahead. Rate this comment: 0 0

by Diari 09:17:09 AM 2012.06.19

parkadsie,Itâ??s Obamaâ??s way to try and bludadgeon banks into refiadnancading underadwaadter mortadgages for homeadownaders that are peradfectly able to make their payments.Preadsumadably, then, you beielve that 49 Attoradneys Genaderal are in the tank for Obama? One would think that wouldnâ??t go over very well in states like Texas, Alabama, Wyoming, Utah, or Idaho. Those AGs must not like their jobs verya0much.Donâ??t give any numadbers of actual error rates in the foreadcloadsure docaduadments â?? just highadlight a few egreadgious cases. Donâ??t menadtion that the vast majoradity of the foreadcloadsures were actuadally legitimate.The issue isnâ??t the errors. Itâ??s that the errors are a direct result of these instiadtuadtions willadfully ignorading the checks that were put in place preadcisely to preadvent these sorts of errors. These checks were put in place because they were less espenadsive for the lenders than the prior alteradnaadtive, which required the banks to haul the delinadquent boradrowaders into court to achieve the judgadment against them.This was the finanadcial equivadaadlent of airadline mechanadics signading off on inspecadtions and work that were never peradformed, resultading in . Most of the time, the airadplanes arrive at their desadtiadnaadtions withadout inciaddent. The â??error rateâ?? is low. But the checks were put in place for a very good reason.And, if these lendersâ?? checks were so oneradous, they should have been lobadbyading to get the rules changed. Instead, they ignored them, and legally comadmitadted fraud. Yes, I do blame them for their fraudaduadlent behavadior, because they knew it was fraudaduadlent and chose to do it anyway.Donâ??t blame the legions of idiot homeadbuyaders who took on more debt than they were able to handleSo peoadple who got into more debt than they could hanaddle assemadbled en masse at the offices and demanded that the loans be foreadclosed withadout foladlowading the law? I was unaware of this. Please, do proadvide eviaddence to back thisa0up.Or are you claimading that it was OK for the lenders to break the law because they were only doing it to get the bad peoadple who got NINJA loans, and who cares if some innoadcent peoadple got hurt in the process?Do help me out here. Iâ??m tryading to underadstand why you seem to feel that these lenders did nothadinga0wrong.Give away money to underadwaadter homeadownaders that are peradfectly able to make their payments.Yeah, Iâ??m not sure how I feel about this, either.Who pays? Everyadbody else. Pay a litadtle more for a mortage. Pay a few more fees at mortadgage iniadtiadaadtion or refiadnance time. You donâ??t think the banks are going to just take the losses, doa0you?From the point of view of the lenders, this is a fine. Would you argue that comadpaadnies that choose to break the law should not be fined because theyâ??re going to pass the cost of the fines onto future cusadtomers? What methadods would you proadpose be used to ensure that busiadnesses foladlow thea0law?

by Taylor 01:14:31 AM 2013.10.24

Liability policies are sold in states that have a fault Quotes Chimp of redressing damages caused by auto accidents as well as in no-fault states, which modify this aspect of the auto insurance policy (see Chapters 8 and 9).

by Allayna 02:33:23 AM 2014.03.07