I am back and I am naming names. Hearings will begin on Monday.
-Senator Joseph McCarthy aka “Commy Killer”
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Joined Nov 10, 2007
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At long last, sir…
At long last!
Have you no sense of decency?
My people are dying out here!!!
The Twilight Zone has arrived, holy crap is this a weird time. Only mcFly can make sense of this, free until he starts charging like a true capitalist, the revolution will be televised for a fee.
I refuse to answer on the ground I might incriminate myself.
I opened the WSJ this morning and on the front page was the picture of 4 criminals who need to be arrested immediately.
No, Rod Steiger:
The revolution will NOT be televised.
http://www.youtube.com/watch?v=uTCQSk2l8bc
hang the short sellers high!
Its (not so) funny how we sent men to their deaths fighting the spread of communism.
MVIS?
http://gizmodo.com/5049825/3ms-pocket-video-projector-first-to-hit-shops-30th-september
Boomer,
Not an MVIS product – their tech does not need to be focused. That one mentions a manual focus.
Beginning Monday at dawn, traitorous enemies of the state will be rounded up and burned at the stake on the Whitehouse lawn. Anyone thought to be cooperating with, consorting with, or aiding and abetting enemies of Mother USSA will dealt with swiftly. Our investigative bureau has been streamlined and modeled after the very successful Salem Witch Trials. Daily burnings will continue until every last self-serving capitalist swine has been eliminated. Property of the infidels will be confiscated by the state and distributed to the masses (after deducting incidental costs of Kommission + plus a small processing charge)
Is Senor Tropicana going to start re-loading on MVIS soon?
We need a new HOLC – more than a new RTC or RFC- to provide massive debt relief to the household sector. We need to create the HOME (Home Owners’ Mortgage Enterprise)
Nouriel Roubini | Sep 19, 2008
In the last two weeks financial markets reached near panic conditions with almost every day another major financial institution on the verge of collapse (first Fannie and Freddie, then Lehman, then Merrill, then AIG and now Morgan Stanley, Goldman Sachs, WaMu, Wachovia and other banks under pressure), money markets seizing up and interbank spreads spiking like never before, Treasury bills yields plummeting as investors were seeking the safety of near cash instruments, credit spreads surging and stock markets tumbling on Monday and Wednesday. Even the Washington policy makers finally realized that this is the worst financial crisis since the Great Depression and that their ad hoc step-by-step and unsystematic approach to resolving this crisis was not working and the effect of ad hoc and band-aid policies in boosting market confidence was fizzling out. Indeed , after the March bailout of Bear Stearns markets rallied for two months; after the July announcement that Fannie and Freddie may be rescued markets rallied for three weeks; after the announcement of the actual bailout of Fannie and Freddie last week markets rallied for only one day on Monday and went into a tailspin starting on Tuesday with the worries about Lehman and other broker dealers; and after the bailout of AIG stock markets did not even rally: actually they tumbled almost 5% on Wednesday while money markets and credit markets went into a total seizure.
So by Wednesday this week as markets were in total panic (stock prices collapsing, interbank spread surging to levels never seen before, credit spreads reaching new highs and Treasury bill rates practically down to zero as investors rushed to safety) the policy authorities decided that something more radical – that many of us had advocated for a long time – needed to be done. The most important policy action is not the decision of extending the swap lines between central banks (so as to provide dollar liquidity to non-US banks abroad); it is not the re-imposition of limits to short sales (a policy action that is itself a naked attempt to manipulate upward stock prices); it is rather the realization that a generalized debt and solvency problem required a solution that leads to significant debt reduction.
Let me explain in detail how we now need bold policy action to resolve this most severe financial and economic crisis…
Households in the US have too much debt (subprime, near prime, prime mortgages, home equity loans, credit cards, auto loans and student loans) while their assets (values of their homes and stocks) are plunging leading to a sharp fall in their net worth. And households are getting buried under this mountain of mounting debt and rising debt servicing burdens. Thus, a fraction of the household sector – as well as a fraction of the financial sector and a fraction of the corporate sector and of the local government sector – is insolvent and needs debt relief.
When a country (say Russia, Ecuador or Argentina) has too much debt and is insolvent it defaults and gets debt reduction and is then able to resume fast growth; when a firm is distressed with excessive debt it goes into bankruptcy court and gets debt relief that allows it to resume investment, production and growth; when a household is financially distressed it also needs debt relief to be able to have more discretionary income to spend. So any unsustainable debt problem requires debt reduction.
The lack of debt relief to the distressed households is the reason why this financial crisis is becoming more severe and the economic recession – with a sharp fall now in real consumption spending – now worsening. The fiscal actions taken so far (income relief to households via tax rebates) and bailouts of distressed financial institutions (Bear Stearns creditors’ bailout, Fannie and Freddie and AIG) do not resolve the fundamental debt problem for two reasons. First, you cannot grow yourself out of a debt problem: when debt to disposable income is too high increasing the denominator with tax rebates is ineffective and only temporary; i.e. you need to reduce the nominator (the debt). Second, rescuing distressed institutions without reducing the debt problem of the borrowers does not resolve the fundamental insolvency of the debtor that limits its ability to consume and spend and thus drags the economy into a more severe economic contraction.
So of the five possible uses of fiscal policy – income relief to households (the 2008 tax rebate), rescue/bailout of financial institutions (Bears Stearns, Fannie and Freddie, AIG), purchase of assets of failed institutions (an RTC-like institution), recapitalization of undercapitalized financial institutions (an RFC-like institution), government purchase of distressed mortgages to provide debt relief to households (an HOLC-like institution) – the last option is the most important and effective to resolve this severe financial and economic crisis. During the Great Depression the Home Owners’ Loan Corporation was create to buy mortgages from bank at a discount price, reduce further the face value of such mortgages and refinance distressed homeowners into new mortgages with lower face value and lower fixed rate mortgage rates. This massive program allowed millions of households to avoid losing their homes and ending up in foreclosure. The HOLC bought mortgages for two year and managed such assets for 18 year at a relatively low fiscal cost (as the assets were bought at a discount and reducing the face value of the mortgages allowed home owners to avoid defaulting on the refinanced mortgages). A new HOLC will be the macro equivalent of creating a large “bad bank” where the bad assets of financial institutions are taken off their balance sheets and restructured/reduced; thus it will be the macro equivalent of the “bad bank” that Lehman tried to create for its bad assets.
Creating a new HOLC mechanism is likely to be more effective than creating a new RTC (whose purpose was to buy and dispose over a number of years of the assets of already failed S&Ls): we need to provide debt reduction to households well before hundreds of banks failed as working out the bad assets only after banks have failed is costly. Certainly many insolvent banks will fail regardless of in this financial crisis; and once they do their bad assets can be transferred to the new HOLC to be rapidly worked out. But we don’t need an RTC that picks up the bad assets of failed banks and works them out after such banks have failed; the priority is to take off the balance sheet of distressed and/or potentially insolvent banks the bad assets and reduce their face value so as to avoid a tsunami of defaults, foreclosures and/or households walking away from their homes. Similarly having an HOLC is more important than creating an RFC (the institution that during the Great Depression injected public capital – in the form of
preferred shares – into 4000 undercapitalized banks).
Roubini has many more interesting things to say and his entire posting is well worth reading in its entirety.
Many may oppose this idea as too radical and a bailout of people who shouldn’t have gotten into mortgages that were too big for them to handle.
But creating a program to reduce the debt of overwhelmed homeowners would seem only fair after so much has been done for Wall Street institutions.
If Senators John McCain and Barack Obama really want to strike a populist note, they could no better than to adopt a program like Roubini’s proposal.
Some critics of the idea might say that the Bush Administration already has it’s HOPE plan to help distressed homeowners. But as Roubini points out, that program isn’t nearly large or aggressive enough.
Roubini continues:
Many details of this new HOLC – or HOME – will need to be figured out but rapid legislative action is urgent; if legislation is not passed in the next few weeks Congress goes into recess and does not return until next February when the new president is elected; then if legislation is passed only next spring it may too late to avoid a financial disaster: by then home prices will be 10% lower (and they have already fallen 25%), millions of more homeowners will be in foreclosure or will have walked out of their homes. To avoid a disorderly meltdown of the housing and mortgage market action should be taken now. Some of us pushed for debt reduction solutions for over a year now; but policy makers were busy pretending that this was a minor problem and that minor band-aids (such as the HOPE plan to freeze mortgage resets) would be enough. When there is a debt problem you need across the board debt reduction (not a useless, partial and voluntary freeze of debt servicing payments). Over a year has been wasted playing with minor and ineffective programs while the perfect storm of the century was battering financial markets and the economy.
At this point a severe recession is unavoidable; the only question is how severe and protracted it will be. Debt reduction and public recapitalization of banks will not instantly resolve every problem and will not prevent a painful recession that – at this point – will last at least 18 month. But it will prevent a painful U-shaped recession from turning into a multi-year L-shaped recession like the one that afflicted Japan for a decade after the bursting of its real estate and equity bubble. So let us not delude ourselves that even a HOME program of debt reduction will prevent a recession: the recession train has already left the station and the economic downturn is already becoming global. What we can avoid now is only the risk that a severe US and now advanced economy recession will turn into a Japanese style decade long stagnation. Thus, the time of dithering and using band-aid to deal with the financial storm of the century is over and the time to act boldly is now! Lets create the HOME (Home Owners’ Mortgage Enterprise) now!
Is that actually Nouriel?
If so, welcome sir.
Roubini is basically telling us that the only way to avoid a recession is to act like the sth Americans. Great idea. the only thing Sth Ams always do is renege on their debts!
he’s basically suggesting that banks and households get relief. this is fucking insane. People who can’t really afford the homes they bought should be allowed to stay in them? This guy is crazy.
Effective immediately, Czar Paulson shall be referred to as the “Emperor of the Universe” or simply the :Emperor”.
According to Bloomberg, The plan would raise the ceiling on the national debt and spend as much as the combined annual budgets of the Departments of Defense, Education and Health and Human Services.
“We want this to be clean, we want this to be quick,” Paulson said on Fox News Sunday.
Like the last 5 things they tried that didn’t work. This will be neither clean nor quick, but it should be extremely profitable for the well connected “contractors” who will be hired to carry this out.
These guys will not be happy until they pry the last nickel from the hand of that guy living in the cardboard box in the alley.
If I do not get my Trillion gazillion by Thursday I will unleash my Large Balls of Flame on the World!
The swearing-in ceremony of the first Inductees in the “Wall Street Whores Hall of Infamy”:
http://www.newsweek.com/id/159439
Who purchased three companies in one week, changed the trading rules, and profited 80% on the deal in less then one week?
Do we really trust these guys? These are the same guys who still believe Iraq has WMD’s burried in the sand 😉
This is never easy.