naked capitalism

Abbott_Of_Iona says:

On the assumption that there actually is a crisis,

Should a Financial Institution not wish to take part because of the requirement for equity participation by the Government (on behalf of the Taxpayer), then so be it. They are on their own. They can sink or swim.

Should a Financial Institution not wish to take part because of the requirement for restrictions on executive compensation, then so be it. They are on their own. They can sink or swim.

Should a Financial Institution not wish to take part because of the requirement for independent oversight and transparency, then so be it. They are on their own. They can sink or swim.

So if large Banks, Wall Street or otherwise, find the terms less than palatable that leaves more for small regional banks. And if a prolonged recession (depression) occurs the money will be better placed there rather than Wall Street.

I like the idea (ok it may not happen) of “requiring posting of transactions online”. I hope they mean within a short space of time following the transaction. If this is the case the market will have information it can use to discover price.

However, even if there is a crisis, and presuming that these measures stave off that crisis, the USA still needs to way up to the fact that as a Nation and as Individuals the game is over. Too much debt at a National and Individual level.

These measures may or may not stop imminent Armageddon.

But one thing is for sure they do nothing to stop the inevitable deep recession.

The funny money is gone and it’s not coming back any time soon.

Of course if Hank actually needed $700 right now to pay off his gambling debts it won’t work.

The debt collector will give him two days and promise to break his legs after that.

In other words either Hank was telling the truth or he was not.

If this bill does not pass by Friday then Armageddon should have happened.

If Armageddon does not happen the the WORD OF THE US GOVERNMENT was sufficient = Hank lied.

satan says:

It also has

1] Banks can have 0% reserves [no reserve requirements - god help us].

2] Mark to Model [Fantasy - isn't that how we got here]

3] Oversight by Bernanke and Cox [Irony - Proof the universe was created by the devil].

4] Only the top 3 employees of an assisted corporation will have their compensations capped.

I require a drink..

Abbott_Of_Iona says:

satan said:

4] Only the top 3 employees of an assisted corporation will have their compensations capped.

I agree. Not sufficient at all.

What is required is a complete wage freez and NO BONUS.

If someone in onre of the distressed institutions thinks they are a Master of The Universe.

Then they can go find another job.

Also a dividend freez until any Government aid is paid back.

In other words,

as long as Financial Armageddon is averted there is no reason to support the excess remuneration of those who failed, nor is there any requirement to support the share prices of institutions that have failed.

But maybe Financial Armageddon is not happening. Maybe Hank lied.

Anonymous says:

Buffett is a really pushing for this? Why? Also, he’s a great investor, but what does he really know about all this such that the bail out is the only real option?

ScottH says:

Last chance.

Pick up the phone.

Fire up the fax machine.

Let them know they will be out of office if they pass this bill in anything close to this form. Start over!

Do it now … 5:30 p.m. in Washington.

Thanks to Yves and to all who have been commenting here through this crisis.

Glory's List says:

Once the details of the plan start to become public tomorrow (Monday), we’ll have a better idea of what we’re dealing with from the Fed and Congress. Once everyone sees the likely horrifying details, other and better alternatives may be taken more seriously (i.e., listen to Arnold Kling who, co-edits EconLog, a weblog devoted to economic issues, and is an independent scholar who writes about a wide variety of economic issues. He was an economist on the staff of the Board of Governors of the Federal Reserve System from 1980-1986, and served as a senior economist at Freddie Mac from 1986-1994 — he strongly and convincingly argues that another Great Depression is NOT in the cards, and this leaves room and time to consider better alternatives):

http://www.cato.org/dailypodcast/podcast-archive.php?podcast_id=741

Bob Shore says:

It’s the Paulson plan with some toothless window dressing that utterly lacks credibility. What a surprise!

Erich Riesenberg says:

I think it would be helpful if the document described the purpose of the Plan and the price to be paid for assets.

Is it a bailout of firms or to save the world?

Will it be above, below or at fair market prices.

Weird we can’t even get that now.

As to money markets, I think something could have been worked out to provide liquidity. The Fed is lending against all sorts of assets, could they not find some way to lend against commercial paper instead of some guarantee that still has to be worked out weeks after it was announced?

Anonymous says:

Your shares are held in ’street name’ at your broker. Your name is not on them. Jim Sinclair has been urging to take shares in certificate form in your name which as time goes on is not always possible which leaves you at the mercy of your broker or you sell and take your cash which is not a bad idea the way things are going.

Anonymous says:

Sorry to be so ‘ad hominem.’ But I’m looking at the unflattering photo of Nancy Pelosi in a BBC story about the bailout. And I see:

- The fascist-style serried array of flags behind her.
- Her severe hairstyle.
- The heavily-lidded eyes.
- Her severe, hypermasculine dark-blue suit.
- The weary, war-criminal poker face.
- Her pimpled, sun-damaged cleavage.

And I think, OMG, 20 years ago I actually used to admire this woman. Before she got sucked into the untethered, morally-compromised, inside-the-Beltway universe of unbridled power.

Now she presents a horrific, degraded, syphilitic, ‘Picture of Dorian Gray’ visage to an appalled world. Au revoir, Nancy-pants. You’re all used up.

http://news.bbc.co.uk/2/hi/americas/default.stm

Anonymous says:

How much worse will Main Street look this time next year? One in ten out of work? Three in ten?

Can anyone offer a worst case/best case picture? To a layman lover of economics. Or any links to other blogs that discuss this in a intelligent way and not a conspiracy theory knee jerk way?

In other words, I read a lot of words and hear a lot of numbers but they do not offer any image. Are we talking final scene of grapes of wrath here or what?

Should I start saving thread and hoarding toilet paper?

Armageddon says:

Anonymous said…

“How much worse will Main Street look this time next year? One in ten out of work? Three in ten?”

You with a bag of rice and a shot gun

Taggart Galt says:

Below is the asset pricing language of the draft:
http://financialservices.house.gov/essa/ayo08c04_xml.pdf

“PREVENTING UNJUST ENRICHMENT.—In making purchases under the authority of this Act, the Secretary shall take such steps as may be necessary to prevent unjust enrichment of financial institutions participating in a program established under this section, including by preventing the sale of a troubled asset to the Secretary at a higher price than what the seller paid to purchase the asset. This subsection does not apply to troubled assets acquired in a merger or acquisition, or a purchase of assets from a financial institution in conservatorship or receivership, or that has initiated bankruptcy proceedings under title 11, United States Code.”

Does that mean that prices up to book value are acceptable? And is JP Morgan is free to sell Bear paper at level higher than it paid for them?

Abbott_Of_Iona says:

Taggart Galt said…

“Does that mean that prices up to book value are acceptable?”

No it dosent.

It is, if I understand it correctly, the posion pill for any taker of the bait.

It they end up with more money that “was justified” whether they did it with or without knowledge of their own enrichment ALL OF THE ENRICHMENT CAN BE TAKEN BACK.

“Unjust enrichment” does not require knowledge of being unjustly enriched.

In short. The State can take any thing it likes back to the State by proving (not difficult in the case of Wall Street) that Wall Street was unjustly enriched.

In short, again, the next Presedency call take back the entire $700 without opposition.

Anonymous says:

Armageddon,

Really? I feel my stomach dropping out of my body right now. Do you really think it is going to get that bad?

And Yes, I am married with children and my husband is in a highly competitive and poorly paid field. (College professor, full time) that would make it hard to get a job elsewhere.

We would have to walk away from all we have (our house) and move in with our parents because rent is too high in any better area and our credit would be ruined by walking away from our house.

Something I am willing to do to survive but still a rough choice.

Really though. It’s going to get that bad?

Anonymous says:

“…in the interest of the taxpayers.”

I think it is important to remember that Hank and Ben believe that a gift (helicopter drop) to the banks is in the interest of the taxpayers. So this clause is not in conflict with striking a poor bargain on the price of the warrants.