naked capitalism

Yves Smith says:

I don’t have hope that the hearings will add up to much. The post-Bear hearing were form over substance, no pushback at all on the fact that the Fed had made a fiscal commitment without authorization.

Vox Sanus says:

re: Orwellian

Paulson is using “newspeak” or “doublethink” saying that he wasn’t kicking the can down the road, while explicitly stating that that was exactly what he was doing.

bg says:

Thx for the clarification on orwellian. I just read about doublethink on wikipedia, and my core question remains.

How can you distinguish between doublethink and confusion? Also doesn’t doublethink require that you practice it at home?

One thing is clear to me. We are getting more government.

a says:

“Sorry to be a bit heavy on Fannie and Freddie…” What? By all means write all you want – write *more* than you want. We’re all ears.

Anonymous says:

Very suspicious trading on Friday. All news pointed to a big dump in the markets/flight to quality yet the USTs SOLD OFF and the markets actually closed UP.

Who would trade against the grain with such conviction? Bberg had an article stating:
“Paulson, 62, hired Morgan Stanley a month ago to probe the
companies’ finances. The investment bank concluded that the
accounting, while legal, enabled Freddie, and to a lesser extent
Fannie, to overstate the value of their reserves, according to
the people who declined to be identified because the findings
were confidential.”

Remember at the time apppointed, MS said they would do it for FREE? I’m not saying they were the ones who bot the market on Friday. I am just trying to understand how it happened. Does anyone have any ideas?

One guess Id like to make– it wasn’t the little guy. They never seemed to be tipped off ahead of the pack… .

Anonymous says:

Working all that time and spending all that the best the Tsy could come up with was nationalizing FNM and FRE and have the Treasury buy MBS?

That solution should have taken them at most 5 minutes and about a week for the lawyers to draw up the details.

Anonymous says:

re ‘orwellian tactics’

they are almost exclusively used at home. Even when fearmonger about external enemies, they do this for internal control. The state and its private partners use ‘orwellian tactics’ to maximize control, for their own benefit.

jm says:

It’s quite right not to call this “kicking the can down the road.”

Since we’ll be borrowing the money from Asia, it should be called, “tobashi”.

(If any reader is fluent in Chinese — please post the Chinese equivalent for completeness.)

Russ says:

he privately said he didn’t want to “kick the can down the road”

I took that to mean that he wasn't going to leave F&F in their limbo before Jan 20 2009. My cynical nature expected the bailout to happen after the election.

So if anything Paulson was actually making sure the next POTUS has no surprise – now they can use the fact of the F&F bailout in their campaigns rather than using speculation about the bailout in the campaigns.

Anonymous says:

Yesterday I questioned the accountability of all the official personages who were assuring us, until a couple of days ago, that the GSEs were adequately capitalized. Treas Sec Paulson (as quoted by Bloomberg) is understandably rather sensitive about this point:

————

Paulson said in an interview today with CNBC television that he never made assurances of sufficient reserves at Fannie Mae.

“I never said the company was well capitalized,” Paulson said. “What I said is the regulator said they are adequately capitalized.”

“It was only after we had gone inside with the appropriate people and the appropriate teams that it was clear to me that the layer of capital was thin,” he said.

————

Well, that’s just great Hank. You didn’t say it; you just concurred with the regulator who said it.

On the other hand, despite your vast financial knowledge and experience, you DIDN’T come out and say that the GSEs were UNDERCAPITALIZED, as some commentators have been pointing out for YEARS.

Apply Basel II capital adequacy standards to risky GSEs, and what do you get? I’m STILL waiting for an answer to that question.

Matt Dubuque says:

Anonymous I am NO defender of Paulson at all (he’s in over his head), but I specifically remember the quote, I thought at the time what kind of damning with faint praise is that when he said the GSEs were “adequately capitalized”.

And of course the cretins in the financial press were all over the quote, and it immediately became Paulson stating the GSEs were “well capitalized” when he said nothing of the sort.

For me that was a huge indication that this was going to unravel VERY soon (less than 2 accounting periods) with his “ADEQUATELY” capitalized, but again, a banana republic press is barely literate.

Matt Dubuque