We Chat on Bloggingheads with Daniel Gross on the Credit Crisis Posted on October 9, 2008 by Yves Smith We were glad to be back again on BloggingHeads this week, this time with Daniel Gross. This one was more oriented toward the a generalist audience than our chat last week with Megan McArdle. Below is a clip: You can find the entire conversation here. Post navigation ← Citi Abandons Wachovia Bid, Still Suing Wells for Damages Rout Continues in Asia → Subscribe to Post Comments 12 comments Anonymous October 9, 2008 at 6:04 pm So is the intent of the Lehman settlements tomorrow in fact to initiate a controlled demolition sequence in the CDS market? Abbott_Of_Iona October 9, 2008 at 6:08 pm Excellent!!!! Dean October 9, 2008 at 6:45 pm Good interview Yves. Hope that the “We” in the “We Chat” refers to an inclussive term, rather than some plural of majesty. Abbott_Of_Iona October 9, 2008 at 6:48 pm 27 minutes and 45 seconds of education. One minor quibble. I don’t think (I could be wrong) that Hypo Banks acquisition in Ireland had anything particularly to do with the Irish property market. The acuisition was in the IFSC (Irish Financial Services Centre). An embodiment of the shadow financial system, but not related to Ireland as such. The Irish Government is not exposed to the IFSC. Though many jobs and tax receipts are at risk. doc holiday October 9, 2008 at 7:03 pm Another metaphor, in addition to a car, or credit card is buying a house with zero down, then watching the value go down, after you paid top dollar. After buying your home, you have to shop for home insurance, but unfortunately — your a cash strapped asset owner with many debts and limited cash flow, thus, you decide to takeout the cheapest policy and then as the clock ticks, unfortunately, enter Katrina-like SIGMA 6 event, which blows down your house and washes away many of your new toys, SUV and unfortunately, your employer can not pay you. Unfortunately, you eventually default on your non-existent home which unfortunately goes into foreclosure. Unfortunately, you realize you really didn’t have tsunami insurance from the cheap policy and unfortunately, just to add misery to default, your insurance company goes under and your bank, unfortunately, is sitting through all this (Lehman) with hopes to sell your lot for pennies on the dollar — essentially because they have a contract that says you were to pay them for the $400,000 house that doesn’t exist and unfortunately, they had calculated your cash flow into payments which they unfortunately need to pay, which are connected to credit default swaps which used your mortgage as collateral. I may be 100% wrong, but I’m happy to read other metaphors. This needs expansion and further details, but maybe someone can make a better story? Kevin October 9, 2008 at 7:09 pm Wonderful insights and grasp of the situation. Excellent sound — hint: it would be just as good if the mic was moved to the side a bit, out of the way of your face. Very unflattering oblique lighting. Try to be lit more softly and from several angles, including head on. Anonymous October 9, 2008 at 7:10 pm October 9,2008 Yves: Thank you, thank you, for your heroic efforts to stay on your toes, and up to date, in this mess of all financial messes. I truly don’t know how you do it. I wish to propose the founding of an “Yves Smith Well Being and Restoration Fund” so you can jet off to the Caribbean Island of your choice on every Tuesday and Wednesday when nothing of substance ever happens anymore. I would gladly send a modest check of $100 to get the ball rolling if there were a way to do it counting on the obvious, and now probably former, blog “fat cats” to top me by several “0’s”. Just patch in a Pay Pal contribution button at the bottom of the page and watch the money flow in. The heavens know you deserve it. Earl L. CrockettSanta Cruz, CA PS: If a sleeping bag, and cot in a brand new tent, works for you you’re welcome to my, and my wife’s modest home a couple of blocks from the beach. As is often written in various locations, “Call Earl for a good time.” doc holiday October 9, 2008 at 7:14 pm Oh wait, I forgot to add there that The Bailout TARP will buy your defaulted mortgage from the bank and then suggest to taxpayers that they will make money on the increase in value of your non-existent $400,000 home, which through a long string of legal paperwork will use a mark-to-market process to value that mortgage at $4000, with zero future cash flow. But wait, it gets better, all the assets in TARP are in a pool of pools that combine and substitute a million loans that were worth a few Trillion, which are now worth a few million, but we get to pay $777 Billion, this time, and then next time, they probably will ask for $8 Trillion, which is a 10% downpayment on what the casino really wants! God Bless SIFMA & CBOT and all the folks that spun the derivative market of control! KJ October 9, 2008 at 7:38 pm Great interview. Very informative. Implement Before the Collapse of America October 9, 2008 at 9:04 pm We The People of the United States of America, in order to preserve, protect, and defend our “more perfect union,” must act now! The chart below represents one day’s worth of trading on the Dow Jones Industrial Index, despite promises from Treasury Secretary Paulson, Fed Chairman, Ben Bernanke and President George W. Bush that ‘confidence’ is being put back into the market. This is also despite the US Taxpayers giving up $700 Billion towards this ‘plan’ to instill confidence. Does this LOOK like confidence to you? http://www.hrillc.com/RJ/DOW%20100908%20…. The fact is, NONE of this so-called ‘plan’ will work! The ONLY thing that WILL work is to restore TRUST to the system and the only way that can be done is by forcing each and every one of these companies to pull their ‘assets’ out of hiding. No more phantom accounting. No more legalized fraud! It must be done now, within 24-hours or the United States will follow Iceland and worse. Worse because we are the world’s reserve currency and we will literally pull down each and every country on the planet. Worse yet, is for those of us who are Americans, WE WILL LOSE OUR COUNTRY ENTIRELY!!!! Each and every one of you reading this must right now, and continuing until this is done, call your Congressman, call the White House, call every single media outlet, every newspaper, every person you can possibly tell and DEMAND RIGHT NOW THAT OFF-BALANCE SHEET FRAUD BE STOPPED EFFECTIVE IMMEDIATELY! THIS IS OUR ONLY HOPE. AMERICA’S FUTURE NOW LIES IN THE HANDS OF HER PEOPLE Her government has not only led us to this place, but has completely failed to protect her. WILL YOU ALLOW THIS TO HAPPEN? http://www.FedUpUSA.org Richard Smith October 10, 2008 at 6:42 am Dean, I think the “we” must be Yves and the cat (sadly less ebullient this time out); either that, or it’s just a slightly old fashioned style – the academic stuff I occasionally read is certainly full of that particular quaintly solemn locution. Our apparently teen-aged blogger’s complexion seems to thrive on two hours’ sleep a night. I wish mine did. whatcould October 10, 2008 at 11:23 pm I agree with Earl, Yves… I don’t know how you do it, and without this blog I would be woefully uninformed. There’s gotta be something we can do for you besides buy books from your amazon store! Much better this time on camera! Comments are closed. Tip Jar Please Donate or Subscribe!