Oil's energy contribution has declined by about 12% since 1999. The world's economies have also declined by about 12%. (Using conventional metrics, which are time delayed determinations, this will only be seen in hind sight). The massive destruction of asset values now occurring testifies to it happening.
Peak is well behind us, world economies have peaked and will continue to decline.
Joined: Oct 15, 2004 Posts: 2258 Location: Arkansas
Posted: Thu Sep 18, 2008 6:55 pm Post subject: Paulson RTC proposal is to bailout WaMu
By Monday we will know, but I believe the evidence suggests that Paulson is proposing a new RTC to buy bad financial institution debts to save Wamu. Here's why:
Washington Mutual is going down. It is big enough to potentially bring down the financial system.
Quote:
Monday, September 15, 2008
WaMu Failure Could Trigger Extension of Deposit Guarantees
The alert have taken note that the failure of Washington Mutual, which looks increasingly likely, would consume the FDICs reserves and, as in the savings and loan crisis, force the agency to go hat in hand to Congress for more money.
But this is comparatively early in our burgeoning banking crisis for the bulwark of commercial banks to be tested. Worse, the concern is that uninsured depositors will flee weak banks, and in process, push more over the edge.
Many readers might think there is no reason for anyone to be so exposed. It's easy to divide one's deposits across many banks to remain below the $100,000 limit, right?
Not if you are a business. Many firms carry more than $100,000 in balances over the course of a month, particularly if they have a healthy payroll. And the requirements of payroll processing in particularly make it prohibitively expensive to operate multiple accounts. Although the Financial Times article does not address that issue, it does discuss that it may be necessary to increase the scope of FDIC insurance in this nervous environment.
From the Financial Times:
Attention has focused on the danger presented by the failure of Lehman Brothers. But the failure of a commercial bank such as Washington Mutual can have systemic consequences if it threatens a run on other weak banks....
The failure of a bank its size would test the strength of the US deposit insurance system and its ability to maintain the confidence of the nation's savers.
The US Federal Insurance Deposit Corporation covers the first $100,000 in deposits held by each individual in a given bank. As of June 30, 64 per cent of the total $7,000bn deposits were insured in the US - a much larger proportion than in the UK at the time when Northern Rock. the commercial bank, failed.
Nonetheless, this still leaves $2,500bn in uninsured deposits. If a high-profile failure causes these uninsured deposits to shift abruptly in a flight to safety, it could be highly destabilising for the banking system.
The US could be forced to adopt a de facto blanket guarantee on all bank deposits, as the UK did on a temporary basis during the Northern Rock crisis.
There are other precedents. At the start of the Asian financial crisis in the 1990s, the International Monetary Fund opposed extending deposit guarantees. But the IMF soon changed tack and told crisis-hit countries to issue full guarantees.
A formal blanket guarantee in the US would require legislation. But under a 1991 law, the FDIC could seek a systemic risk exemption to cover all the deposits of a failing institution, subject to the approval of its board, a supermajority of the Federal Reserve governors, and the Treasury secretary in consultation with the president.
The FDIC has no desire to invoke this authority...
The FDIC is respected for its operational effectiveness. But its $45bn deposit insurance fund is underfunded according to its own guidelines,....analysts fear it may have to draw on its $70bn Treasury credit lines. Alan Avery, a partner at Arnold and Porter, said a single failure - if big enough - "would cause the FDIC to immediately draw on the Treasury credit".
Washington Mutual had $143bn in insured deposits on June 30 - about three times the size of the deposit insurance fund, but less than half of its $307bn assets.
They tried for days now to find a buyer for Wamu, to no avail because of all the toxic waste on its books.
Quote:
Last update: 5:06 p.m. EDT Sept. 18, 2008SAN FRANCISCO (MarketWatch) - Washington Mutual, which put it self up for sale this week, has yet to attract any bidders, the Financial Times reported late Thursday on its Web site.
Potential buyers are reluctant to take on WaMu's huge portfolio of risky mortgages, the newspaper explained.
Since no private party will buy WaMu, that leaves the US taxpayer as the only one who will buy it. Late Thursday, Paulson proposes new RTC to buy bad agency debts. Of course, if its too toxic for private parties, it should be too toxic for the taxpayer, but, what when did our elected officials ever act in the best interest of the taxpayer?
Quote:
Treasury Secretary Henry Paulson has approached government leaders about developing a facility to take on bad debts from financial institutions and prevent the global credit crisis from worsening, CNBC has learned.
The facility would be similar to the Resolution Trust Corporation, which was set up in 1989 to take on all the failed thrift assets during the savings and loan crisis, sources said.
Paulson briefed House Speaker Nancy Pelosi and other congressional leaders on the proposal at a meeting on Thursday night.
"What we are working on now is an approach to deal with the systemic risk and stresses in our capital markets," Paulson said after the meeting. "And we've talked about a comprehensive approach that will require legislation to deal with illiquid assets on financial institutions' ... balance sheets."
"As we've said for some time, the root cause for the stress in the capital markets is the real estate correction and what's going on in terms of the price declines in real estate. We're coming together to work on an expeditious solution, which is aimed right at the heart of this problem, which is illiquid assets on financial institutions' balance sheets," Paulson said.
A government official speaking to CNBC ruled out any announcements Thursday or Friday.
A federal government plan could also involve FDIC-type protection for money market funds, according to a report in the Wall Street Journal.
The meeting, held at Pelosi's office, included House Financial Services Chairman Barney Frank, Senator Majority Leader Harry Reid, other Senate and House leaders from both political parties, Federal Reserve Chairman Ben Bernanke, and SEC Chairman Christopher Cox.
On the news appearance carried live on MSNBC, Senate leader Reid went so far as to say a solution was only hours away, not days.
So, I believe that by this weekend, the US Congress will approve some form of RTC to initially save Wamu from failure, but also as a stick save for all other financial institutions. We shall know real soon whether this hypothesis is correct.
Last edited by seahorse on Thu Sep 18, 2008 9:10 pm; edited 1 time in total
Joined: Oct 23, 2004 Posts: 5928 Location: New Jersey
Posted: Thu Sep 18, 2008 7:24 pm Post subject: Re: Paulson RTC proposal is to bailout RTC
Good summary, and although they may 'save' WaMu, that would probably be only as a complete takeover by the federal government.
In other words, declared insolvent - like the FDIC would, but instead of liquidation, just continuation under a new government agency.
Of course the taxpayers will pick up all the costs.
It's an illusion that the $2 trillion in mortgage related losses being passed unto the public won't be a huge burden to the taxpayers of the US. _________________ It's already over, now it's just a matter of adjusting.
Posted: Thu Sep 18, 2008 7:30 pm Post subject: Re: Paulson RTC proposal is to bailout RTC
So, what happens to the housing market from here? It was effectively nationalized, given the 80% GSE share of new mortgages, even before the explicit guarantees for FNM/FRE given a couple of weeks back, and I can't imagine these bad loans making their way back onto the federal balance sheet and not depressing home values and volume of transactions for YEARS to come.
So, are 99-year mortgages the answer? Nationalizing a significant % of the housing stock? Is there a way out? _________________ "It's called the American Dream because you'd have to be asleep to believe it."
Posted: Thu Sep 18, 2008 7:37 pm Post subject: Re: Paulson RTC proposal is to bailout RTC
emersonbiggins wrote:
So, are 99-year mortgages the answer? Nationalizing a significant % of the housing stock? Is there a way out?
Was there a way out of Nazi Germany in 1935? This is fascism, plain and simple. The marriage of business and government. It's what Prescott Bush wanted way back when. His grandson finally gave it to us.
Posted: Thu Sep 18, 2008 7:47 pm Post subject: Re: Paulson RTC proposal is to bailout RTC
How would they get this RTC going by this weekend? Congress is out now, isn't it?
I think this is the fool's rally before the real slide into depression. _________________ Deep in the mud and slime of things, even there, something sings.
Posted: Thu Sep 18, 2008 8:20 pm Post subject: Re: Paulson RTC proposal is to bailout RTC
emersonbiggins wrote:
So, are 99-year mortgages the answer?
man that's disgusting.
i always found it incredible that we accepted 30 year mortgages. i mean, never in human history had mere shelter demanded such a significant proportion of an individual's time and effort. and now... sheesh.
Joined: Oct 06, 2006 Posts: 1371 Location: East Texas
Posted: Thu Sep 18, 2008 9:23 pm Post subject: Re: Paulson RTC proposal is to bailout RTC
nobodypanic wrote:
I always found it incredible that we accepted 30 year mortgages. i mean, never in human history had mere shelter demanded such a significant proportion of an individual's time and effort. and now... sheesh.
15 year fixed remain available.
If you can't buy the house with one...
The house is too big. _________________ Yes, we are. As we are.
And so shall we remain; Until the end.
Joined: Oct 15, 2004 Posts: 2258 Location: Arkansas
Posted: Fri Sep 19, 2008 5:19 am Post subject: Re: Paulson RTC proposal is to bailout WaMu
Now that Congress and Paulson are obviously going to pass some type of legislation creating an RTC or something similar, I see Citigroup is now, suddenly, interested in buying WaMu, when 2 days ago they weren't. What's the difference? If you know that the gov't will buy all the b.s., then they get all Wamu's good assets without any risk.
Joined: Oct 15, 2004 Posts: 2258 Location: Arkansas
Posted: Fri Sep 19, 2008 6:37 am Post subject: Re: Paulson RTC proposal is to bailout WaMu
I'm now firmly against any taxes. No taxation without representation. They need tax money to keep these crime going. I am against paying any taxes to support these usury charging democratic parasites.
Joined: Sep 04, 2005 Posts: 446 Location: central MA, USA
Posted: Fri Sep 19, 2008 7:18 am Post subject: Re: Paulson RTC proposal is to bailout RTC
AgentR wrote:
15 year fixed remain available.
If you can't buy the house with one...
The house is too big.
I disagree. We could've afforded a 15Y mortgage, but opted for a 30Y, which we are paying off at a faster-than-15Y rate. But the 30Y gives us an option of dropping down to lower monthly payments in an emergency.
The higher interest rate? I think of that as an insurance premium for the option of paying less if we need to.
Joined: Sep 29, 2005 Posts: 456 Location: I heard we are not the real America..Eugene, Oregon.
Posted: Fri Sep 19, 2008 8:10 am Post subject: Re: Paulson RTC proposal is to bailout WaMu
After watching the goings on this week, I don't think they will let WaMu fail. When you have magic money all around you can do anything! Of course it will come back to bite us big time..sooner than later.
cb _________________ Punk is not really a style of music. It was more like a state of mind.
-Mike Watt
Joined: Oct 06, 2006 Posts: 1371 Location: East Texas
Posted: Fri Sep 19, 2008 8:22 am Post subject: Re: Paulson RTC proposal is to bailout RTC
FoolYap wrote:
AgentR wrote:
15 year fixed remain available.
If you can't buy the house with one...
The house is too big.
I disagree. We could've afforded a 15Y mortgage, but opted
No, you don't disagree. You bought a house that you could buy with a 15 yr mortgage. I didn't say you had to USE that vehicle, but rather its a benchmark.
I did the same to start this house, then shifted the note to a 15yr fixed when the rates bottomed out. There were no longer any possible outcomes that put the 15 yr pmt out of reach while still having the dollar as useable currency. _________________ Yes, we are. As we are.
And so shall we remain; Until the end.
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