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Long Live Corporate Welfare!


Hugh Conway

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Seems like they're smart enough to devise mechanisms that would transfer at least some of any upside that arose from their action to the public, while still looking like a life-ring to the institutions circling the drain - but who knows. Maybe things are too far gone at this point.

 

eh? how does giving banks access to the discount window directly benefit us w.r.t risk?

 

By bailing out BSC because their clients are to important to fail sends the message you can do business with any unregulated scumbag.

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It doesn't. Where do you see may saying "...from which the public will profit handsomely" in that post. The only upside for the public as far as the discount window operations involving NCBs are concerned, as far as I understand, is avoiding a much more dramatic meltdown that would have repercussions far beyond Wall Street.

 

As far as BSC is concerned, again - BSC is dead. Dead. They were as good as dead before the Fed extended the loan, which looks to me like it was constructed to allow for a less destructive unwinding. Financial equivalent of a screamer on a single piece of pro, with the rest of the country being unwittingly tethered to a mank-anchor a short distance below.

 

The benefits associated with the BSC deal have and will accrue to parties outside of BSC.

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The benefits associated with the BSC deal have and will accrue to parties outside of BSC.

 

It's good to be Morgan

 

We can hope.

 

 

Hope is what I reserve for my daily bank (WAMU) not to implode in the coming week

 

some not so good news coming out for them too. look for them to be gobbled within 2 months (thats my bet)

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The benefits associated with the BSC deal have and will accrue to parties outside of BSC.

 

It's good to be Morgan

 

We can hope.

 

 

Hope is what I reserve for my daily bank (WAMU) not to implode in the coming week

 

At least it's not Lehman.

 

I'm personally hoping that Fidelity has enough cash in the bank to make sure that FDRXX doesn't go deer-balls if any of the commercial paper in the portfolio goes bad in a BSC like implosion.

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The benefits associated with the BSC deal have and will accrue to parties outside of BSC.

 

It's good to be Morgan

 

We can hope.

 

 

Hope is what I reserve for my daily bank (WAMU) not to implode in the coming week

 

some not so good news coming out for them too. look for them to be gobbled within 2 months (thats my bet)

 

I've had a bad gut-feeling about WAMU for a while. I think the only basis I have for that, aside from their enthusiastic participation in the present megacluster is some stuff I read in the WSJ about their exposure to SoCal, and the percentage of their profits that were derived from negative amortization on residential loans. I think the accounting rules say that you can book the additional interest that accrues on neg-ams when people use the "pay-option" feature of the loans to pay less than the interest that they owe as "interest paid." Makes sense, but still a bit spooky if it makes up too much of the total interest paid IMO.

 

Somewhere there's a stat out there concerning the percentage of Alt-A and Prime optionARMs in which the borrowers are paying the lowest possible (neg-AM) payment. I think the figure I saw was something like 70%, but that could be:

 

A)Wrong.

B)Include subprime.

 

WAMU. Booga-Booga.

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Short of a time machine that could go back to 1998 and rewrite the rules governing retail lending, transparency and ratings standards for securitizing mortgages, etc...

 

:lmao: "Golly gee, if only we had known something like this could happen when we were clamoring to deregulate the financial services industry!" Wash hands, a few bad apples, business as usual. BTW, I'm under no illusion that what is playing out here is any serious collapse (in the short term), if for no other reason than that the State has proven so willing and adept at managing increasingly frequent, if less destructive, capitalist crises and bailing out individual firms when the "free-market" inevitably shits the bed.

 

 

 

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Short of a time machine that could go back to 1998 and rewrite the rules governing retail lending, transparency and ratings standards for securitizing mortgages, etc...

 

:lmao: "Golly gee, if only we had known something like this could happen when we were clamoring to deregulate the financial services industry!" Wash hands, a few bad apples, business as usual. BTW, I'm under no illusion that what is playing out here is any serious collapse (in the short term), if for no other reason than that the State has proven so willing and adept at managing increasingly frequent, if less destructive, capitalist crises and bailing out individual firms when the "free-market" inevitably shits the bed.

 

 

 

When did this "de-regulation" that you speak of occur? Are you suggesting that prior to a specific point, the financial sector had price controls governed by the state that determined say, how much someone would have to pay for advice on a leveraged buy-out, bringing a stock public, etc?

 

In this sector, as in others, regulations are typically backward looking. When innovation outpaces regulations, risks can accumulate that aren't addressed by the previous set of rules. Unfortunately, it normally takes a crisis to expose the true magnitude of the risks, and for the government to address them with a new set of rules that mitigate the said risks. When automobiles started to appear on the roads alongside the horse and buggy, it took a while for the rules of the roads to catch-up with changes in technology. That's a common failure of governance, and not one that is entirely preventable in all cases. In this case it was clear that the rules governing the real-estate market needed to be changed to reflect the changes from a thrift-based model to an originate-and-securitize model.

 

I think we'll see broad revisions to the rules governing securitization, risk management, etc - but that's it.

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Short of a time machine that could go back to 1998 and rewrite the rules governing retail lending, transparency and ratings standards for securitizing mortgages, etc...

 

:lmao: "Golly gee, if only we had known something like this could happen when we were clamoring to deregulate the financial services industry!" Wash hands, a few bad apples, business as usual. BTW, I'm under no illusion that what is playing out here is any serious collapse (in the short term), if for no other reason than that the State has proven so willing and adept at managing increasingly frequent, if less destructive, capitalist crises and bailing out individual firms when the "free-market" inevitably shits the bed.

 

 

 

When did this "de-regulation" that you speak of occur?

 

Clinton probably kicked this off through his initative to increase home ownership in 1994. Instead of trying to make housing cheaper, however, he decided to loosen the rules on mortgages.

 

Making homeownership more attainable became a goal early in the administration. In late 1994, President Clinton set as a national goal to raise the homeownership rate to 67.5 percent by the end of 2000.

 

HUD used its oversight of Fannie Mae and Freddie Mac to encourage those entities to reach out to low-income borrowers and areas underserved by the private market. Finally, a revitalized Federal Housing Administration (FHA) has substantially increased lending to African Americans, Hispanics, and other traditionally underserved groups and, in doing so, has worked to increase homeownership opportunities of these segments.

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I've heard similar analysis elsewhere - at least to the effect that compelling banks to modify their lending standards if the standards in place lead to them extending fewer loans to minority populations resulted in a general weakening of lending standards.

 

Seems like this is more of a case of the state adding well-intentioned regulations with some unforseen (at least by them) secondary consequences more than de-regulating.

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