Geithner's Plan
- Thread starter Cancel7
- Start date
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The Almighty
This is where I have a huge problem with what you are saying... while they are certainly a lot less than they paid for, where do you come off saying they are worth less than they are currently pricing? They are pricing based on the firesale prices of banks like Indybank and by brokerages like Lehman.
The problem is not that there aren't buyers. There are buyers for these securities for values above those the banks are showing. But the banks wont sell because they dont think they are high enough. Bottom line, because the banks and the buyers know the assets are worth more. But because of the mark to market, the securities are priced based on the firesales. That is the fundamental problem of mark to market. It was well intentioned, but when a group of securities enter into a firesale in an illiquid market it causes exactly what we are seeing. The market locks up. Because buyers become willing to buy above the firesale prices but the sellers wont sell because they know the real value is higher. You end up with a stalemate and no trading.
Again, the reason mark to market came into place was because of the previous lack of transparency of assets. The risk pre MTM was the uncertainty of what was owned and the performance of those assets. We cannot go back to that either. Which is why we need to find the middle of the road option. We need to remove mark to market while maintaining complete transparency of assets and their cash flow.
I go back to an example I used with you before... If you and ten neighbors all buy homes for $300k and two get in trouble and are forced to sell their homes in a buyers market for $250, then under mark to market your home value also drops. If the drop is drastic enough, it may send mortgages under water. Assuming you have equity requirements (as the banks do) then you are forced to come up with the equity. If two of your remaining neighbors are unable to, then they too are forced to sell at $225k.... and the cycle continues until the buyers come in. But if you and the remaining 7 say... sorry... we know our homes are worth more than $225k.... our neighbors simply got into a financial jam so we refuse to sell for less than $275.
What happens in that case? Your asset is priced to market at $225k, you have had to come up with additional equity and your are unable to sell the asset for its true value. All this happened despite the fact that you were able to pay your mortgage the whole time and were able to raise the additional equity when called upon to do so.
Do you not see the problem with that?
SmarterthanYou
rebel
of course he doesn't. This plan was written by Democrats. If it was written by Republicans, however, he'd be all kinds of pissed off.
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The Almighty
Again, this is just the talking point. If you buy an asset for $50 that is worth $60, you are not socializing a loss. It all depends on the price paid for the assets.
The government also has the ability to require warrants. Which they should. That allows the taxpayers two ways to make money. One is off the loans, the other off the warrants. The warrants issued would in turn dilute the current shareholders value. Which also should happen.
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The Almighty
WHAT plan? There is no plan. They keep stating their goals and calling it a plan. Neither the Reps nor the Dems have put forth a plan.
Well, they haven't done that.
I don't really believe that anyone on this or any other message board has the answer, and I also don't even believe that anyone really knows what the question is, because I highly doubt we know even half of the real story.
What's scary to me personally is that today it really looked like our new treasury sect doesn't have the answer either. I know our old one didn't.
I guess it would be ironic, but in no way funny, if usc were right all along, and the US basically folded sometime over the past couple of years , and no one has broken it to us yet.
Did you know that Richard Nixon believed that the United States had seen its best economic days, and had entered a permanent decline, when he was running for reelection? And that he believed he was the only person in the country who could prepare the American people for their new, kinda dim, future? But first he had to be elected again, so he ran on a "the fundamentals of the economy are still strong" platform?
Isnt' that something.
But the problem is that no one knows what the assets are worth and part of the "plan" requires that a high value be placed on the assets otherwise the losses are too high and the institution ends up insolvent anyway, requiring yet additional money from the government.
Om the warrant issue, it should happen but it isn't going to happen. The whole point of buying the assets instead of buying stock or warrants is to keep the shareholders afloat. If you are getting warrants or common stock there is no need to just buy the bad stuff, you get the good stuff to.
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The Almighty
Again, you keep saying that... but it isnt true. You keep asking for a value on the securities as a whole... that is not possible as they have different underlying assets. But simple cash flow models can determine the value of the underlying loans. Then you adjust based on future default probabilities.
Go back and look at my previous post that discusses the housing example. Perhaps then you will understand where we are at.
Based Chad
Was it me?
They're destroying the system on purpose, PRECISELY SO they can completely take it over and dictate all material relations on earth. Who lives, who dies, etcetera. They feel they must do it to save humanity from itself. But what they don't see is that their logic is just merely evil, and done for their own aggrandizement and power. It's not FOR HUMANITY. It's for themselves.
Epicurus
Reasonable
Just wow.
And a sidenote Asshat, I thought the internationalist fascist elites were already benefiting from the established economic order?
Why are they now destroying it?
(Which is a question I'm sure you think you can answer.)
Based Chad
Was it me?
So they can declare emergency and TAKE IT OVER COMPLETELY, and CHOOSE WINNERS AND LOSERS, grant world monopolies, etc.
SmarterthanYou
rebel
its like military boot camp. they must break you down to rebuild you. same with the system. if they get to build it up from scratch, you'll worship them for saving the world or some shit.
Asshat, do you use a lot of nutmeg in your food?
It's not necessarily that simple. If it were that simple there would be no need for the "Public-Private Investment Fund" Geithner outlined today.
Based Chad
Was it me?
I use it in your food.
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The Almighty
True, that is a simplified way of explaining it. I was simply trying to convey the general concept of what is going on. It is more complex because many of these assets need to be unwound. We need to be able to clean it up so we know who owns what mortgage etc...
Epicurus
Reasonable
LOL
Based Chad
Was it me?
What does CLEAN IT UP mean, you douchebag? More evasive bullshit. Clean it up means, make taxpayers buy it. stop being a lying fucking cunt.
Based Chad
Was it me?
Unwound. hmmmm.