naked capitalism

wintermute says:

Yves, the important observation that all FNM profits made in the boom years are now reversed with subsequent losses – has another parallel.

The US Government’s spending hundreds of billions left, right and center – is a expenditure of “boom” era money. If deflation, negative GDP, house price falls, crushed tax receipts continue for the next few years then those billions will be impossibly large to repay.

The “disastrous” outcome of letting FNM fail now – is a smaller disaster than what is being stored up in a few years time. Letting FNM go down might be the line in the sand which has to be drawn.

Anonymous says:

Take that 100 billion and multipy by 10.

Anonymous says:

Would like your thoughts here Yves if you have time. Do they think every one will eat this story. The rest is even worse if you ask me.

First things first
Of these, the first is more important. The current crisis – or more accurately the dramatically
altered dynamics that took hold after the inflexion point in mid September
– has been addressed with speed and pragmatism.
But the crisis is not over. An extended credit lockup (with its potential for extraordinary
damage) has probably been avoided. TED and related spreads seem to have
moderated. Commercial paper is being rolled over, though not through the conventional
channels (which are still largely closed). The payments system is functioning;
public funds are flowing into the financial system helping to recapitalise banks.
But there is a good deal more to do before we are out of the woods.
• Mortgages need to be removed from damaged balance sheets, terms reset and
foreclosures limited.
• Collateralised and structured assets, not trading and with uncertain values,
similarly need to be evaluated, purchased, and dismantled.
While the original conception of TARP did not act quickly enough to recapitalise the
system, it remains politically and economically important.
• Homeowners need help.
Help for homeowners was part of the bargain; implemented properly it will help prevent
a dramatic downward overshoot in housing prices. And it will begin the process
of removing the transparency fog and therefore uncertainty about value that surrounds
those portions of balance sheets with complex securitised and structured
assets, one of the reasons why private and SWF capital, having been burned once, is still mostly on the side lines.
11

tompain says:

The bulk of this quarter’s losses were from the writedown of a deferred tax asset which probably would not have to be written down if not for the fact that the government is now running the company with no intention of making a profit in the future.

doc holiday says:

This chart and many others would be more dramatic and honest if they were triangles, i.e, it would be nice to see the pyramid scheme nature of the last 10 years or more and show the percentage of phantom gross revenues, dilution from insider bonuses, dilution from excess phantom growth and of course the reality of the common share values.

What you would see, is the con artists at the top of the pyramid with all the money and the rubes at the bottom of the spreading base. I think we could also add in a little color, like insider pirates flying green and black flags, on the top, with the crying rube lemmings below sinking deeper in the red.

Lord says:

I like issuing treasuries to China and funding them directly as this makes them largely solvent with any spread accruing to the treasury. Another way to make China pay for it.