THE Bailout Thread pt 2 (merged) Archived

[shakespear1]

Well this thread made my head spin. If what Mr. John Olagues writes is even half truth then we have a financial system rife with corruption competing with Swiss cheese. Here is another angle to the Bears and Sterns bailout: Options

[jlw61]

Well this thread made my head spin. If what Mr. John Olagues write is even half truth then we have a financial system rife with corruption competing with Swiss cheese.

Here is another angle to the Bears and Sterns bailout

Options

Welcome to the age of compassionate conservatism.

The Fed did something it was not supposed to do, perhaps in conjunction with these criminals or simply because they are too stupid to understand economics. In layman medical terms, a quick sharp pain that may cost you an arm is better than a long term dull ache that will likely kill you.

[shakespear1]

As I have just discovered the forum from which I read the article, perhaps others may also find this discussion of interest on the subject of our economic system.

Money

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famous line from Dr. Irving Fisher, Ph.D. in economics, on Oct. 17, 1929: "Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months." Or Professor Lawrence, Princeton University, in September 1929: "[T]he consensus of judgment of millions whose valuations function on that admirable market... is that stocks are not at present over-valued. Where is that group of men with the all-embracing wisdom which will entitle them to veto the judgment of this intelligent multitude?" Or Fed Chairman Alan Greenspan in testimony before the Joint Economic Committee, U.S. Congress, June 1999: "But bubbles generally are perceptible only after the fact. To spot a bubble in advance requires a judgment that hundreds of thousands of informed investors have it all wrong."

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Consider these data:

1) Money supply growth has gone parabolic. It took us from 1620 until 1974 to create the first $1 trillion of US money stock. Every road, factory, bridge, school, factory, and house built, every unit of economic transaction that ever took place over those first 350 years required the creation of $1 trillion in money stock. But it only took 10 months to create the most recent $1 trillion and I don’t recall seeing an entire continent’s worth of factories, schools or bridges built during that time.

2) Household debt has doubled in only 6 years. Think about that for a minute.

3) Total credit market debt (that’s everything) was about $5 trillion in 1975, has increased by $5 trillion in just 2 years, and now stands at over $51 trillion.

4) The wealth gap between the super-wealthy and everybody else is widening at a furious pace.

[FreakOil]

From the story:

So there were requests, during the period of March 10 to 13, to the exchanges to open the March and April series for buying massive amounts of extremely out-of-the-money puts, which were accommodated by the Options Exchanges.

Am I to understand that they mystery buyers had to ask the Options Exchange to reopen the sale of those puts? And they did? And the Options Exchange would know who those mystery buyers were? It seems so ham-fisted and easily traceable, but I don't know much about these matters.

This reminds me of how airline stocks were shorted before Sept. 11. Did I bring up a touchy subject?

[shakespear1]

Freakoil, I don't think so. Who put in the orders prior to 911 MUST be know. There is a trail on every transaction.

[shakespear1]

Amazing that the guys on itulip.com had this thing so well analyzed on 10-02-06 !!!

Amazing !!!

[FreakOil]

Freakoil, I don't think so. Who put in the orders prior to 911 MUST be know. There is a trail on every transaction.

The problem is that those trails aren't always followed. Will the trail that starts at the Options Exchanges be followed this time?

Shouldn't there be a bit more outrage from our fellow posters? Where is everybody?

[shakespear1]

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Will the trail that starts at the Options Exchanges be followed this time?

It will NOT. As for the rest, I suspect they are exhausted on issues that are coming from every direction. Hence "The Cats Will Play", to the tune of Trillions of $$$.

Not a happy situation

[heroineworshipper]

[Creating a stick for this thread is a useful reference and reduces duplicate posting, Tyler_JC]

This will be a running count of your liability for the debt of the rich.

Currently in processing:

new FHA loans: $300 billion
Fannie, Freddie payoff: $75 billion
housing tax breaks: $14.5 billion
first-time home buyer credit: $8,000 per person * 3 million annual
buying and rehabilitating foreclosed properties: $3.9 billion


Paid so far:

Bear Stearns acquisition: $30 billion
short term loan auctions: $75 billion * 3

Grand total: $672,400,000,000

Tax cut for renters? I don't think so.[fade][/fade]

[Cashmere]

I'm not getting the whole - we're paying for the rich - thing in your post. I've noticed in several of your posts that you've implied that "we" are paying for the rich. I probably wouldn't agree with you on most of your basis for that theory.

I'd guess that I'm going to pay more in taxes this year than you've paid your entire life. But, at least ad hoc, I'd like to know how you think you're getting screwed by rich folks on FHA loans and such.

[jlw61]

And even more interesting is the fact that we're not paying for any of it, yet. We will possibly never pay for it, since the Fed seems intent on running the printing presses 24/7. I'm still waiting for them to announce the purchase of several new printing presses to keep things rolling.

In the end we'll pay for it all right, just not in taxes. It will just be a good old fashioned crash that will hurt lots of people. That will include the vast majority who didn't have the common sense to elect responsible people and hold their feet to the fire.

This is possibly not too dissimilar to how the Romans did it. Pity.

[MyOldTDiIsStillGoing]

This will be a running count of your liability for the debt of the rich. Currently in processing:
new FHA loans: $300 billion
Fannie, Freddie payoff: $75 billion
housing tax breaks: $14.5 billion
first-time home buyer credit: $8,000 per person * 3 million annual
buying and rehabilitating foreclosed properties: $3.9 billion

Paid so far:
Bear Stearns acquisition: $30 billion
short term loan auctions: $75 billion * 3
Grand total: $672,400,000,000 Tax cut for renters? I don't think so.

FHA loans and Fannies and Freddies are usually for those who "are not Rich" since they don't have a 20% down in their pockets and such. Now a FHA backed loan on a $400K house is another topic, but looking at the numbers you posted, the majority is to bail out the Federal subsidized programs and not the BStreans of the finance world..

However, me being a paid off home owner, I do agree that the tax structure for interest write off for those paying mortgages is the biggest unspoken DISCRIMINATION that our PC federal government is doing. This is an economic discrimination.
Everyone says: Get a mortgage, you can write off the interest. What a stupid method of thinking. Adjust the tax structure so it doesn't matter if you own or not own. Since mortgage interest is now the only interest write off out there, it was an enticement for people to "buy". Many of them that should not of bought. So, what do we have today. A bail out of this mentality.

Good website: http://www.angryrenters.com .

[MrBill]

HW is on this class trip right now as if it is 1871. It is very popular around here to hate big business, big government, big banks, energy cos. and the such. It is also quite popular to call for government to do something to make us all equal again, but with lower taxes and balanced budgets of course.

THE SIMPLE LIFE: One frozen pond, a few sticks, a little round puck and a bunch of rowdy kids.

Even better on a cold, crisp, but sunny day. Ah, those were the days. I feel sorry for anyone that has never tasted blood, broken a tooth or taken a punch!

[heroineworshipper]

Can't vouch for the media story, but around here the average home ower in distress has a net worth of over $1 million & houses go from $1 million to $70 million. Home owers are the top 0.5% of the population, yet the bottom 99.5% is paying up its entire wealth & then some to subsidize that top 0.5%.

[pup55]

we're not paying for any of it, yet

"We" are never going to pay for it. It will be paid for (if at all) by the little kids crawling around at your feet, or the apathetic Gen Y'ers that are going to be the taxpayers in a generation, after all of us baby boomers, who ran up the debt, are off in our wheelchairs retired, whining about the poor quality of the applesauce.

They don't know how badly we've screwed them.

[Ludi]

Home owers are the top 0.5% of the population, yet the bottom 99.5% is paying up its entire wealth & then some to subsidize that top 0.5%.

I'm not sure how that works when the lowest earners don't pay taxes, or very little.....

Sorry, I must be missing something.

[FoxV]

we're not paying for any of it, yet

"We" are never going to pay for it. It will be paid for (if at all) by the little kids crawling around at your feet, or the apathetic Gen Y'ers that are going to be the taxpayers in a generation, after all of us baby boomers, who ran up the debt, are off in our wheelchairs retired, whining about the poor quality of the applesauce. They don't know how badly we've screwed them.

Come on pup, you know better than that. You're just as screwed as the rest of us. You just won't be screwed as long.
Bernanke Tells GSEs Discount Window Open: Source

Federal Reserve Chairman Ben Bernanke told Freddie Mac chief Richard Syron that his company and Fannie Mae could take advantage of the emergency discount window, said a source familiar with a conversation between Bernanke and Freddie Mac chief Richard Syron.

No bailout. No lobby groups. No political uproar. Not even the approval of a mouth piece committee. The whole problem of the GSE's (and by extension all debt ladened institutions) solved by the creativity of one man and his resolve to fly helicopters in a hurricane.
All ye Deflationist kneel before me and repent.

[Cashmere]

Can't vouch for the media story, but around here the average home ower in distress has a net worth of over $1 million & houses go from $1 million to $70 million. Home owers are the top 0.5% of the population, yet the bottom 99.5% is paying up its entire wealth & then some to subsidize that top 0.5%.

What does that even mean? Why not just say, "Marx was right, rich people suck" and put it on a bumper sticker? I notice you said "home owers" twice. Was the spelling error intentional - if so, I like the pun a lot.
What do you mean "home owners" are the top 0.5% of the population? Are 99.5% of the population renters? How do you subsidize my home ownership? I haven't gotten the check yet, if you've mailed it.

[mattduke]

Home owers are the top 0.5% of the population, yet the bottom 99.5% is paying up its entire wealth & then some to subsidize that top 0.5%.

I'm not sure how that works when the lowest earners don't pay taxes, or very little..... Sorry, I must be missing something.

It works in the magic way that "not one in a million can understand" according to Keynes: inflation of the dollar supply. The poor folk receive the majority of their income through dollar denominated fixed-rate salaries. Watch as they scratch their heads trying to figure out why they can't afford to pay for anything anymore. Of course, savers that don't understand how to profit from inflation (particularly the elderly in their government bonds) are also expropriated.

[emersonbiggins]

How do you subsidize my home ownership? I haven't gotten the check yet, if you've mailed it.

Moneymakers in order of most to least positive tax returns
• Research office parks.
• Industry.
• Commercial.
• Retail.
• Retirement and vacation homes.
Break even
• Green space.
Money losers in order of least to most negative tax returns
• One-bedroom garden apartments, two-bedroom townhouses, three-bedroom detached houses.
• Two-bedroom garden apartments, three-bedroom townhouses, four-bedroom detached houses.
• Mobile homes.
• Subsidized housing.
Source: Robert W. Burchell, director of the Center for Urban Policy, Rutgers University

All forms of residences are money sinks, when the infrastructure to connect and maintain connections [roads, utilities, public services] to them are considered. The detached, sporadic kind are, of course, the worst offenders.
Also, the federal deduction for mortgage interest is a staggering $80 billion per year entitlement program. From an apartment dweller - you're welcome.