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You are here: Home / Politics / Domestic Politics / Another Day of Chaos

Another Day of Chaos

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And almost two weeks after this mess started, I still have no real clear grasp what will happen or what should happen. Last night on CNN, though, there was this:

ROBERTS: Will there be dire consequences?

FREELAND: Well, I think that what we are going to see a little bit is a fight between the political process and the markets.

I spoke to a major hedge fund manager today, who said to me the markets are very good at applying really, really tough pressure in these situations. And even with the short-selling ban, we’re already seeing the system really freezing up. The money markets have been frozen.

It’s almost impossible to borrow money. So, I think we’re going to see that pressure ratcheting up. And this WaMu — apparent collapse of WaMu, it will be interesting to see what impact that has tomorrow morning.

I expect the markets will tank hard today.

*** Update ***

WaMu was so yesterday. Today it is Wachovia.

Bush looks drunk, and I have no idea what the point of that speech was- if it was to inspire confidence, it failed mightily.

Reader Interactions

67Comments

  2. 2.

    Rick Taylor

    Via Taylor Marsh (which I actually may start reading again; she seems to have recovered from the primaries better than Talk Left did), Paul O’Neil said our leaders are in a panic, and there are other options than buying hundreds of billions of dollars worth of homes. He advocates insuring rather than buying the mortgages.

  4. 4.

    linda

    and, to make it even more thrilling, idiot son is scheduled to make remarks on the bailout at 9:35 this morning — just in time for the market’s opening…

  5. 5.

    Bob In Pacifica

    At least locally they’re still running the “Whoo Hoo! WaMu” ads. Remember back when there was a commercial plane crash the airline in question had the decency to pull its commercials for a week? Would it be too much to ask Washington Mutual to have the decency to stop their damned commercials?

  6. 6.

    r€nato

    thanks a lot, St. Johnny, for fucking everything up riding to the rescue.

    Fucker went to the White House and hardly said a thing at the meeting. Even that douche of a McCain economics advisor Douglas Holtz-Eaken had a hard time spinning that one on Morning Edition.

  10. 10.

    Svensker

    Paul O’Neil said our leaders are in a panic, and there are other options than buying hundreds of billions of dollars worth of homes. He advocates insuring rather than buying the mortgages.

    Apparently, that’s the House Republican plan (plus tax bennies for corporations, natch) that St. McCain is buying into.

  11. 11.

    lutton

    I’m both wondering and starting to think, so what?

    My wife keeps asking me, ‘so what would happen if there’s no bail out?’ And I really don’t know…no one has explained the part about ‘the sky is falling’ adequetly enough for me.

    So, banks won’t be able to borrow money? And? And the stock market goes down? And? So? Maybe the whole system needs a real comeupance? Way too much of it seems based on churn–just the same money going around and around through different structures and vehicles again and again, with the brokers/dealers/ibanks scraping a little (or a lot in some cases) of ‘vig’ off the top each time it comes around again.

    It’s like bizzarro musical chairs: they’re not taking away the chairs , they’re taking away the players. Now we have more financial vehicles/structures/etc (the chairs) then we do money (players to sit in the chairs). Huh?

    People are going to still need groceries, and gas for their cars. And some people will still need new places to live, but perhaps we don’t all need new mini-mansions. And some people will need new cars, but perhaps not so many will need new leased luxury cars every two years…

    I just don’t get it…

  12. 12.

    Comrade RareSanity

    You have got to be kidding me.

    WASHINGTON – The chairman of the House Financial Services Committee declared Friday that an agreement on legislation to relieve a spreading financial crisis depends on House Republicans “dropping this revolt” against President Bush.

    FAIL.

  13. 13.

    Comrade Jake

    Taylor Marsh:

    Democrats should have stood up from the beginning and opposed this bailout, because the American people would have been behind them. As I said in the comments, I’ve been against it from Paulson’s first two-page print out (or was it three?), sensing a rush to rescue not unlike the Iraq war resolution that we may all live with the rest of our natural lives and was not necessary. But our side didn’t oppose it. It just may cost us because of it.

    I don’t know folks. I’m sympathetic to looking at this crisis from a purely political lens, I really am, but that’s not leadership. That’s pure cynicism.

    Perhaps that’s the way the Dems should approach everything, I don’t know. I just find it incredibly discouraging.

  14. 14.

    jibeaux

    Am I crazy, or does insuring the mortgages, i.e. PMI, protect consumers not at all and just protect the mortgage holder? You’re telling me the REPUBLICANS proposed a plan to protect mortgage holders but not the homeowners? That’s crazy talk!

    Seriously, that sounds awful. Can you imagine how expensive that insurance would be? Why does it make sense to pay an inflated rate for the middleman to protect the mortgage holders, let people lose their homes and have vacant unsold houses — rather than let people keep their homes and make the mortgage holders happy?

  16. 16.

    lutton

    >>insuring rather than buying the mortgages.

    Clif at sadlyno:

    The difference between the dirtbag proposal and the White House proposal is that under the dirtbag proposal, the distressed company holding a troubled mortgage-based asset gets a taxpayer-funded insurance policy for the full value of the asset in exchange for a small premium payment. Under the White House proposal the federal government pays an amount to the distressed company that will, at least temporarily, assuage the company’s financial woes in exchange for the troubled mortgage assets and an equity interest in the company.

    Now compare the two results. Under the dirtbag proposal, if the mortgage-based asset performs, all the upside goes to the distressed company, and if it doesn’t, the taxpayers bear the full downside, potentially the entire “face value” of an otherwise worthless asset. Under the White House proposal, if the mortgage performs, the taxpayers may get more than they payed for the asset plus an appreciation in the government-held equity interest; if it doesn’t perform, the taxpayers’ liability is limited to the amount paid to buy the asset. The dirtbag proposal potentially costs the taxpayers more and gives the taxpayer no upside.

  17. 17.

    Comrade Jake

    My wife keeps asking me, ‘so what would happen if there’s no bail out?’ And I really don’t know…no one has explained the part about ‘the sky is falling’ adequetly enough for me.

    My understanding is that, right now, people in several communities are having a very difficult time obtaining loans. The “sky is falling” basically speaks to the extent to which so much of our economy is based on a functioning credit system.

  18. 18.

    Xanthippas

    Democrats should have stood up from the beginning and opposed this bailout, because the American people would have been behind them.

    So they’d be allied with the House Republicans that are now apparently against the bailout, and want to insure bad mortgages instead? What the hell is going on up there?

    Also, I signed into my Wamu checking account online this morning and saw a message that said “Welcome to JP Morgan Chase.” Awesome.

    And can somebody explain to me why the hell McCain is up in D.C. right now? Nobody seems to know for sure what plan he’s actually behind, and is he the one whose supposed to bring House Republicans around? For real?

    I’m just stunned. Yesterday afternoon I read that a bailout is in agreement, and then before I go to bed I get online and read “bailout deal collapses” and “Wamu sold.” WTF?

  19. 19.

    Comrade Stuck

    Apparently, that’s the House Republican plan (plus tax bennies for corporations, natch) that St. McCain is buying into

    That sounds like a true corporate bailout to me. Homeowners will lose their home, forced into bankruptcy to where they will still have to pay some (given the bankruptcy bill wingnuts created) and Wallstreet and Banks will get their money from taxpayers (some of which lost their homes) AND the property foreclosed on to resell. I don’t know if my analysis is correct, but the deal sounds like the typical Joe E. Publious reaming by the GOP.

  20. 20.

    Xanthippas

    I’m listening to NPR, and Renee Montagne and Steve Inskeep are drilling McCain advisor Douglas Holtz-Eakin. They asked him why he rushed back to D.C. only to appear to endorse no plan explicitly, and what exactly his role is there now. Holtz-Eaken has nothing to say other than basically, McCain is there to help out and support whatever plan both the parties agree to. Seriously?

  21. 21.

    Rick Taylor

    I don’t know folks. I’m sympathetic to looking at this crisis from a purely political lens, I really am, but that’s not leadership. That’s pure cynicism.

    I’m not sure either, but the thing is, it is the administrations job to come up with the solution. The President with his cabinet can be unified in a way congress can’t. If his initial proposal is worse than the problem, and if he can’t even get his own party behind him, what are the Democrats supposed to do?

  22. 22.

    rishathra

    At this point, I’m holding hard to the only rule of thumb that works with this Administration: if they want it, it’s the wrong thing to do. Fearless Leader is even now saying that we gotta run in circles, scream and shout, and bail the poor ickle banks out. Which has me writing to my Senators and Congresscritters (both to email and to read on the phone to their offices), begging them not to go with Bush’s biggest looting job yet.

  23. 23.

    Rick Taylor

    And almost two weeks after this mess started, I still have no real clear grasp what will happen or what should happen.

    What’s worse is I have not idea what is happening. At this point I think the government should receive stock in the banks it helps bail out, so if the mortgages south we own them. It should be painful enough that only the banks that really need help will apply for it. Does Dodd’s plan qualify? I have no idea.

  24. 24.

    Comrade Jake

    And can somebody explain to me why the hell McCain is up in D.C. right now? Nobody seems to know for sure what plan he’s actually behind, and is he the one whose supposed to bring House Republicans around? For real?

    McCain is clearly winging it. This morning on GMA, one of his surrogates was suggesting that McCain’s role is to bring all the sides together and prevent them from screaming at one another.

    That would be a reasonable position were McCain not running for POTUS. As a presidential candidate, there’s really no set of circumstances under which he can function as a good-faith arbiter on his own. That should be obvious to just about anyone.

    In fact, it’s impossible for him to play a constructive role on his own. Dems will simply refuse to enter into a process that gives him credit. The only role he can reasonably play is destructive. Were he to come out and say “This bill is a POS, I’m here to make sure it dies!”, that would be a credible position. So far, he hasn’t said anything close to that.

    So as far as I can tell, his plan is to basically: do nothing, and perhaps stir the pot a little, until he sees an opening. He’s winging it.

  25. 25.

    Montysano (All Hail Marx & Lennon)

    I spoke to a major hedge fund manager today, who said to me the markets are very good at applying really, really tough pressure in these situations.

    I’ve listened to and read enough economists in the last two weeks to know one thing: there is absolutely no consensus that this bailout will fix anything, and absolutely no consensus that the consequences of no bailout at all are apocalyptic.

    I just called my congress critters, again, and said “No bailout. Think it over. Work on it. Don’t rush”. Johnny McCain made his “no deal, no debate” bed; let him sleep in it.

    Props where props are due: one of my senators, Richard Shelby, has put country above party in advising against rushing into anything. And Mike Huckabee also stood up against the insanity.

  27. 27.

    Comrade Jake

    FWIW, Marc Ambinder has had a lot of good stuff on what’s going on and the CW inside DC these days. Check out his recent post on the FDIC, the Banks, and WaMu. That’s the current crisis in a nutshell, IMO.

    He also has a couple of posts on McCain’s role. A snippet:

    House Republicans did their best last night to bring McCain to their side, even though McCain did not intend to endorse any set of principles. Senate Republicans feel slightly emboldened now, in what became sort of a domino effect.

    McCain needs to find a way to get House Republicans to buy into a deal.

    If not — and if there’s a market sell-off — McCain’s going to have a tough, tough weekend. Never have the downside risks been so clear.

  28. 28.

    Comrade Face

    I’m convinced this “urgency” that Bush alludes to but refuses to publically explain has to do with some either implicit or explicit threat the Chinese have made to refuse to keep buying our Treasury notes, or some such financial blackmail by the Chinese. It would make sense that only he, and a few others, would be aware of this dire warning, while Average Joe Economist has no privvy to such info.

  29. 29.

    Xanthippas

    Laura Rozen is worth reading.

    As my Hill friend said yesterday, the bailout seems to be in more trouble than some earlier reports indicated. My two cent summary of his take, which is worth reading, was that there is a seriously underestimated gap between the White House and Congressional leadership on one side, and the Congressional rank and file on the other; and that the media reports suggesting a deal was imminent by and large were being informed by the former, who are more committed to a quick deal; while the Congressional rank and file is more informed by being overwhelmed with thousands of calls from screaming constituents who are truly outraged over the prospect of a bailout of Wall Street fat cats. Vulnerable incumbents may not feel they can vote for anything resembling a bailout until after the election.

    In other words, no deal was ever that close to getting passed, because members of the House are getting their asses chewed by voters who hate this plan.

  30. 30.

    Brian J

    Did anyone else besides me and one or two guys on CNBC have the reaction that what happened with WaMu was relatively good? Of course, it’d be better if the bank never had to be sold, but in this case, nobody but the top employees lose their jobs (at least not right away) and it didn’t cost the government anything. All things considered, this was the way for this to happen, it seems, if it had to happen at all.

  32. 32.

    Comrade Grumpy Code Monkey

    My wife keeps asking me, ‘so what would happen if there’s no bail out?’ And I really don’t know…no one has explained the part about ‘the sky is falling’ adequetly enough for me.

    Here’s Andrew Leonard’s take:

    So why should we all be worried? Well, for one thing, if banks start failing, and credit markets freeze up, then any business that depends on rolling over short-term debt to fund daily activities is in danger. Remember Enron? Enron imploded in a matter of days because its lenders suddenly refused to roll over its short-term debt. But it’s not just Wall Street investment banks and out-of-control Houston energy companies that depend on debt markets — a vast number of large corporations engage in the same practices. And if a significant percentage of large corporations can no longer borrow money the implications for the “real economy” will be substantial. Higher unemployment, slower or negative economic growth, etc.

    And, of course, tight credit doesn’t just affect giant corporations that borrow a lot — it affects any small business or individual who needs a loan. Credit is the grease that keeps the modern economy going. Think about what happens to a car engine that runs out of oil. Hint: It doesn’t work anymore, and it costs an awful lot to fix.

  33. 33.

    Comrade Zifnab

    Why does it make sense to pay an inflated rate for the middleman to protect the mortgage holders, let people lose their homes and have vacant unsold houses—rather than let people keep their homes and make the mortgage holders happy?

    SHUT THE FUCK UP! That’s why.

    Seriously, though. The banks aren’t afraid of lending to people who need credit. They are afraid of lending to each other, because they’ve all got this humongous debt hanging over their heads. But if the banks don’t lend to each other, they can’t raise the capital necessary to make loans to anyone else. This means people won’t be able to get mortgages for houses or cars or businesses or any other big-ticket items. And the result will be a lock-up of the economy, because you can’t grow your business if you’ve got to pay for everything up front with cash.

  34. 34.

    Brian J

    He advocates insuring rather than buying the mortgages.

    Where does he say that? And didn’t Paulson and others say something like that wouldn’t work?

    O’Neill has been asked by the Obama campaign “on several occasions” to take part in conversations with the candidate on the economy with the understanding that his participation doesn’t represent an endorsement. He said he would be willing to offer the same help to McCain but hasn’t been asked.

    Last Friday, he was on the telephone with an Obama meeting that involved the candidate, his running mate Sen. Joseph Biden, investor Warren Buffet, former Federal Reserve Chairman Paul Volcker, former treasury secretaries Larry Summers and Robert Rubin, and the former chairwoman of the President’s Council of Economic Advisers, Laura Tyson.

    I don’t get it. Earlier in the article, he’s complaining that he doesn’t like what he’s seeing from either side and that no matter who is president, he hopes that this person has a chance to stop the nonsense and “tell the truth.” Yet at the end of the article there’s a passage–what I posted above–that says one side is reaching out and trying to talk about sensible economic policy, while the other side isn’t. When he was on the phone with all of those Obama people last week, did he tell them that he doesn’t like what Obama is saying and why? And why does he still think the candidates are equally bad, considering one side is grandstanding and the other side is trying to act like, you know, responsible adults?

  35. 35.

    John S.

    I’m listening to NPR, and Renee Montagne and Steve Inskeep are drilling McCain advisor Douglas Holtz-Eakin.

    That segment was truly brutal.

    Inskeep stopped just short of screaming at Holtz-Eakin, “Then what the fuck is McCain there for, exactly?!”

    Of course, we all know the answer to that.

  36. 36.

    Comrade The Moar You Know

    Under the dirtbag proposal, if the mortgage-based asset performs, all the upside goes to the distressed company, and if it doesn’t, the taxpayers bear the full downside, potentially the entire “face value” of an otherwise worthless asset.

    Nails it. The House Republican plan wants us taxpayers to assume all the risk, and get none of the potential profit.

    What a surprise.

  41. 41.

    Tsulagi

    Also, I signed into my Wamu checking account online this morning and saw a message that said “Welcome to JP Morgan Chase.” Awesome.

    Great. Don’t have banking accounts with WaMu, but do have three mortgages with them. Look forward to sending payments to my new Chase overlords. The same guys who got a sweetheart deal from the gov to buy Bear Stearns. Guessing they got a pretty good deal too from FDIC who seized WaMu. Somebody loves them some Chase.

    Thanks to the recent re-education by the Republicans, I see I’ve been doing it wrong.

    First, I should have married a 20something heiress worth at least 9 figures. Then I should have set up something to get a bailout. Maybe it’s not too late before Bush leaves office. Give the current wife warning she needs to get her ass in gear. Then rename a LLC I have that has two pissant rental properties in it THE BIG ASS CORP THAT MUST NOT FAIL. Buffet and Gates could be my new yardmen.

  42. 42.

    Montysano (All Hail Marx & Lennon)

    Reid and Dodd just held a press conference. Reid said “We could possibly reach a deal by midnight tonight”, IOW “no deal today”. The stock market doesn’t seem particularly upset about it.

    So, Mr. Maverick: no deal, no debate?

  43. 43.

    Comrade Stuck

    Again, I’m hardly competent to give sound advice on this finance shit. But it seems to me, that already huge companies like J.P. Morgan and BofA buying these other companies is just repeating the same mistake (or worse) of letting a few companies get so large and with such long reaching tentacles into our economy, that if (more like when) they have troubles they will threaten collapse of the economy once again. Somebody should pass some Anti-Trust legislation. Oh wait…

    The burning question for today is how long and if the Balloon Juice Wormhole will remain open to the Hot Air Quadrant.

  44. 44.

    Comrade Cris Ivanov

    The same guys who got a sweetheart deal from the gov to buy Bear Stearns.

    That’s interesting. So is JPMC winning because they’re compentent enough to remain solvent, or was somebody in the Cheney cabal once on their board?

  47. 47.

    DecidedFenceSitter

    I like the amusing thought of “Pay everyone in the united states 1 million dollars” let them do what they want with it, buy down debt, buy their home. Costs only 180 million dollars, no more bad debt on the books.

  48. 48.

    Mary

    McCain blinked? Presidents aren’t supposed to blink, damn it.

    Here. I’ll get the toothpicks, you get the eye drops. We have just a few hours to prep him for the debates.

  49. 49.

    JL

    Here. I’ll get the toothpicks, you get the eye drops. We have just a few hours to prep him for the debates.

    My vision is of McCain snoozing on the plane while his make-up artist dabs on the powder. The image I have is not pretty.

  50. 50.

    Comrade Cris Ivanov

    Decided Fence Sitter, I love your plan but I would like to send you a new calculator. $180 million won’t get every adult in the US a million bucks, it’ll get each of them a crisp new dollar.

  51. 51.

    Halteclere

    My wife keeps asking me, ‘so what would happen if there’s no bail out?’ And I really don’t know…no one has explained the part about ‘the sky is falling’ adequetly enough for me.

    My understanding is that, right now, people in several communities are having a very difficult time obtaining loans. The “sky is falling” basically speaks to the extent to which so much of our economy is based on a functioning credit system.

    As Warren Buffet said in a recent interview with CNBC:

    Unfortunately, the economy is a little like a bathtub. You can’t have cold water in the front and hot water in the back. And what was happening on Wall Street was going to immerse that bathtub very, very quickly in terms of business. Look, right now business is having trouble throughout the economy. But a collapse of the kind of institutions that were threatened last week, and their inability to fund, would have caused industry and retail and everything else to grind to something close to a halt

  52. 52.

    Martin

    So, banks won’t be able to borrow money? And? And the stock market goes down? And? So? Maybe the whole system needs a real comeupance? Way too much of it seems based on churn—just the same money going around and around through different structures and vehicles again and again, with the brokers/dealers/ibanks scraping a little (or a lot in some cases) of ‘vig’ off the top each time it comes around again.

    It’s like bizzarro musical chairs: they’re not taking away the chairs , they’re taking away the players. Now we have more financial vehicles/structures/etc (the chairs) then we do money (players to sit in the chairs). Huh?

    Not just banks, but corporations, and working down now even to individuals. If you are a retailer that needs a loan to help with setup for the holidays, (many retailers make their bank between thanksgiving and xmas) you probably can’t get it right now.

    Look at your local rates for non-conforming mortgages. Conforming still has a market thanks to Freddy/Fannie, but the non-conforming are harder to sell. Our local banks are around 9% for a 30 year fixed – almost 3 points higher than for a conforming. Here’s Wells Fargo this morning:

    30-Year Fixed 6.125% 6.353%
    20-Year Fixed 6.125% 6.427%
    15-Year Fixed 5.875% 6.252%
    5-Year ARM 6.125% 6.353%
    Jumbo Loans – Amounts that exceed conforming loan limits
    30-Year Fixed 9.125%

    Need a $415K mortgage, you’ll get 6 1/8 with no points. Need a $420K mortgage, you’re looking at 9 1/8 with no points. The pools of credit are drying up. Cities with median home prices over $600K are pretty fucked right now since almost everyone is going to need a non-conforming mortgage, and they’re going to have to pay through the eyes for it.

    And once companies dependent on credit get shut out they’re going to start failing – and not just banks, but anyone who needs access to credit.

    But the more things seize up, the more tightly these guys need to hold onto the cash, so there’s nothing in the system to naturally unwind things. That’s what the bailout is designed to do, to get *someone* buying to bring valuation back where it ought to be so people holding bonds aren’t having to write them down in value simply due to there being no market.

    Long term, it solves nothing. Your house is still on fire. This is just the equivalent of moving the propane tank to a safe place. After this, it needs to be regulation and a reworking of some of the rules we have in place.

  53. 53.

    камрад комисaр Xenos

    Given the comments by Rollins (on TPM and Sullivan, I won’t link for fear of being sent to limbo) about house Republicans deciding to run against McCain in the course of rebuilding the party, I wonder if McCain might be the guy who was suckered here.

    In this scenario he got set up by the 100 or so GOP hard-right reps into showing up for the deal being settled, so he can get the credit. Lo and behold, no deal after all, McCain looks like a first class chump. Then he has to go unprepared to a debate where he will lose face just by showing up. Dude is screwed.

    My God do I miss Hunter Thompson at a time like this. Maybe he had a moment of clarity and prescience and that is why he killed himself.

  54. 54.

    Brachiator

    It’s almost impossible to borrow money. So, I think we’re going to see that pressure ratcheting up. And this WaMu—apparent collapse of WaMu, it will be interesting to see what impact that has tomorrow morning.

    But of course, WaMu did not “collapse.” It was bought by JP Morgan Chase. The transaction did not cost taxpayers a dime. Depositors did not lose a dime. Shareholders took it in the shorts, but that was going to happen anyway, since the value of the company stock had fallen so low. The buyer had to write down the value of bad mortgages.

    And if Morgan Chase has money to buy, it probably has money to lend.

    The week has gone by since Bush made his dire pronouncements, and financial markets have not collapsed.

    So, tell me again, why is a $700 billion bailout necessary?

    Comrade Stuck Says:

    Again, I’m hardly competent to give sound advice on this finance shit. But it seems to me, that already huge companies like J.P. Morgan and BofA buying these other companies is just repeating the same mistake (or worse) of letting a few companies get so large and with such long reaching tentacles into our economy, that if (more like when) they have troubles they will threaten collapse of the economy once again. Somebody should pass some Anti-Trust legislation. Oh wait…

    It gets better. With savings banks and investment houses merging, the new companies may be able to partly gamble with FDIC insured monies.

  55. 55.

    Brian J

    Again, I’m hardly competent to give sound advice on this finance shit. But it seems to me, that already huge companies like J.P. Morgan and BofA buying these other companies is just repeating the same mistake (or worse) of letting a few companies get so large and with such long reaching tentacles into our economy, that if (more like when) they have troubles they will threaten collapse of the economy once again. Somebody should pass some Anti-Trust legislation.

    I don’t know if that is the right way to look at it. I don’t think it was necessarily the size of the companies that did them in, but rather the types of investments that they made. If JP Morgan is solvent enough to keep buying these companies, then is really a big deal that they do? I’m trying to find the market share for the country as a whole for JP Morgan, but unless it’s something really absurd, I’m not going to worry.

    That’s interesting. So is JPMC winning because they’re compentent enough to remain solvent, or was somebody in the Cheney cabal once on their board?

    If I had to guess, it’s probably because they are one of the few places that it’s in a relatively solid position. Remember that they tried to get WaMu back in March, but WaMu thought the offer was too low. Now they are getting it, but for a lot, lot less, without any threats from the shareholders. It’s a pretty big win for them.

  56. 56.

    Martin

    And I should add, if mortgage rates that have no market are at 9%, imagine what non-secured personal and small-business loans are which have an even smaller market. If you’re a small business owner and just had a piece of equipment blow up, you’re gonna pay through the ass for a loan right now, which means that piece of equipment either won’t get bought, or we’re going to ramp into an ugly inflationary cycle. Keep in mind that the Fed will loan banks money at 2%, yet banks are asking 9% from you. They’re just not willing to take on the risk.

  57. 57.

    Comrade Napoleon

    Something just occured to me on the WaMu seizure. They almost always only do those on the Friday evening. So did they do WaMu on a Thursday evening because they didn’t think they could make it 24 hours, or do the Feds know they have bigger fish to fry tonight?

  59. 59.

    Comrade FLILF Hunter

    WaMu was so yesterday. Today it is Wachovia.

    Fucking awesome. Yesterday my bank accounts, tomorrow my mortgage.

    Really, truly, fucking awesome.

    Polish the guillotines. Shine ’em up. Grease ’em well.

  61. 61.

    jake

    Hmmm. I found this while looking for another story on Wachovia:

    We’re entering that exciting phase of any financial crisis when the lawsuits come fast and furious, criminal charges are lodged, and Wall Street firms agree to pay hundreds of millions of dollars for having snookered their customers once again.

    In recent weeks, Merrill Lynch, Goldman Sachs, Deutsche Bank, Citigroup, J.P. Morgan Chase, Morgan Stanley, UBS and Wachovia have reached settlements with state regulators under which they agreed to pay more than $500 million in fines and penalties. They have also agreed to buy back more than $50 billion in so-called auction-rate securities from retail investors who had been misled into believing that those securities were as safe as shares in money-market funds.

    Let’s see. Beginning of September, a lot of people are about to get spanked. Mid-September, they don’t feel too good. End of September, they’re rolling around on their death beds.

    Sounds like me Sunday evening when I didn’t want to go to school on Monday.

  63. 63.

    Comrade Stuck

    I don’t know if that is the right way to look at it. I don’t think it was necessarily the size of the companies that did them in, but rather the types of investments that they made.

    That’s not the point I was making. Not what caused them to go under, but having the effect of being so large, they threaten the entire economy if one or two have problems.

  64. 64.

    KevinD

    I don’t get it. If things are so bad and credit is so hard to get, why is my bank (Wells Fargo)calling me up last night asking if I want to refinance, get some cash out, and/or get a new HELOC? I ask the guy, Hey what’s going on, didn’t you get the memo or something? He tells me “Oh, there’s no problem, we got plenty of money to give out. We’re just being a little more careful”. This all sounds like a bullsh*t scare story to me.

  65. 65.

    binzinerator

    Martin, thanks for the explanation of what happens if nothing is done. It makes sense to me, and it’s a damn sight better than what’s been pushed by assholes on tv. I really hated this “We need this bad and we need it now because if we don’t it’s scary bad and we’re doomed ’cause that’s why if we don’t so shut up”.

    So why the fuck can’t the people who are demanding the bailout explain that like you did? The dems like Frank and Dodd et al don’t seem to be any more motivated to do that either.

    Another thought:

    When my wife had our first kid, we had some birthing classes that taught some pretty commonsense stuff about what to ask your doctor when making serious kinds of decisions involving possible complications. To translate them to the current emergency procedure that is being contemplated for our economy by our political leaders, the questions would look like this:

    * Why is this bailout recommended?
    * How will this bailout help the economy?
    * What are the benefits?
    * What are the risks involved?
    * What are the chances of failure vs. success for this procedure?
    * What are the possible kinds of side effects?
    * How much will this cost?
    * Who pays for it?
    * What other treatment options are available?
    * What will happen if we do nothing?
    * And of course if you can, get second opinions from other experts in the field

    Those IMHO are pretty damn basic and common sense questions you oughta ask your doctor Paulson if you are told you absolutely need an emergency procedure RIGHT NOW due to suddenly discovered threats to your our economy’s health.

    Other than cost and who pays, why aren’t these questions being asked? Why no answers? Martin’s answer was the first non-simpleton one I heard regarding the critical question of “what happens if we do nothing”?

    Doesn’t it strike anyone else as alarming that few of these questions are being asked, that no one is willing to try to explain using adult language what’s going on? Too complicated? They never even tried to explain it. Or maybe if they explain they will reveal that they too have no idea what this all means.

  66. 66.

    Brachiator

    Martin Says:

    Long term, it solves nothing. Your house is still on fire. This is just the equivalent of moving the propane tank to a safe place. After this, it needs to be regulation and a reworking of some of the rules we have in place.

    Good stuff. The problem is that the President and the Congress talk about “oversight,” but very little about actual regulation, and less about re-working any rules.

    Even the Democrats are weak on this, even though they appear to be as anxious as Bush to get something passed.

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