The Fed and market BS!

[cmonhox]

Let me get this straight:

Banks made incredibly bad loans, which investment banks turned and made into bad derivatives & investment vehicles, all the while using those investment vehicles as collateral for funding agreements, which in turn created a liquidity crisis.

And now the Fed says it is contemplating a plan to assist those banks and financial institutions to be free of the billions of bad loans it made or took on.

And to top it off, you now can't short the stock of any of the 800 financial institutions that created the mess?

What a bunch of utter BS!!!!!!!!! Plain f'ing stupid!!!!

How exactly are these financial instutions going to be punished by any of this? Yes, let's give them a free pass for both the bad loans and investments they created and we'll keep their stock from falling too?

Geezus! I'm in the wrong line of business.

Sign me up where I can make some dumbass business models and decisions but still be bailed out and keep my stock afloat.

"The commission is committed to using every weapon in its arsenal to combat market manipulation that threatens investors and capital markets," said SEC Chairman Christopher Cox in a statement. "The emergency order temporarily banning short selling of financial stocks will restore equilibrium to markets."

What a load of crap. How is it market "manipulation" when traders are correctly shorting POS financial stocks heading for ruins based on bad loans that created this mess?

[socal]

Sept 19, 2008 7:55:22 GMT -6 cmonhox said:

Let me get this straight:

Banks made incredibly bad loans, which investment banks turned and made into bad derivatives & investment vehicles, all the while using those investment vehicles as collateral for funding agreements, which in turn created a liquidity crisis.

And now the Fed says it is contemplating a plan to assist those banks and financial institutions to be free of the billions of bad loans it made or took on.

And to top it off, you now can't short the stock of any of the 800 financial institutions that created the mess?

What a bunch of utter BS!!!!!!!!! Plain f'ing stupid!!!!

How exactly are these financial instutions going to be punished by any of this? Yes, let's give them a free pass for both the bad loans and investments they created and we'll keep their stock from falling too?

Geezus! I'm in the wrong line of business.

Sign me up where I can make some dumbass business models and decisions but still be bailed out and keep my stock afloat.

"The commission is committed to using every weapon in its arsenal to combat market manipulation that threatens investors and capital markets," said SEC Chairman Christopher Cox in a statement. "The emergency order temporarily banning short selling of financial stocks will restore equilibrium to markets."

What a load of crap. How is it market "manipulation" when traders are correctly shorting POS financial stocks heading for ruins based on bad loans that created this mess?

"Does that new insurance company I now own, protect me from the predatory lenders that supposedly owe me money?"

[lpcalihawk]

They are delaying the inevitable. Ron Paul was on CNN this morning. He is so right on when talking about this subject.

[cmonhox]

[/quote]


"Does that new insurance company I now own, protect me from the predatory lenders that supposedly owe me money?"


[/quote]

;D - That actually had me laughing. Great take on it!

I don't get how the SEC quote states market manipulation from short selling, but we will NEVER see a similar quote when a clear bubble is forming (think tech boom/bust).

If that's the case, I want them to stop the "market manipulation" on the upside as well -- when it's clear that something other than fundamentals & reasonableness are driving a stock higher than what it's really worth.

They try to have it both ways.....you can't short a stock unless there is an uptick in price first. Fine, then let's have the same stupid rule on the upside. You can't go long until there's a downtick in the price first.

Short selling brings over inflated pigs to their rightful and reasonable levels.

[twinegarden]

I completely agree that this whole mess is complete bullshit.

Here are some random thoughts on the subject:

What is the purpose of the fed lowering the interest rate to 2% so that banks can loan money to eachother more easily? One of the ways this could situation could have been helped would have been for the fed to lower interest rates and then force the "bad lenders" to lower the interest rates on mortgages and other types of loans/credit to the people who are unable to pay them back. This could have made it less of a burden for the borrowers, decrease foreclosure rates, and probably saved some of the financial institutions that are having hundreds of thousands of loans go into default.

I realize that this may be an oversimplification of how the lending buisness works and hope that some of you guys could quip in to explain why something like this wouldn't help the situation.

From what I see it appears that irresponsible lenders were writing loans, mortgages, etc. to people who were obviously not qualified to have them for years. Not only that, but due to these people's poor credit ratings they were given unaffordably high APRs on their loans as well as bait and switch type ARMs. In this regard I have no idea why some of these institutions deserve to be bailed out. I talked to a lady in the mortgage buisness yesterday and she was telling me how she couldn't believe some of the people who were getting loans. As far as I am concerned that is horrible buisness practice and by no means do these people deserve to be bailed out for writing predatory loans that defaulted then it came back to bite them in the ass.

But no, big Ben thinks it would be a great idea to give these companies billions of dollars of money to get them out of the hole they dug themselves in. What a bunch of horse shit. It seems just as irresponsible as if a company were trying to write 400% markups on all their items in a retail store, nobody shopped there, then the company went bankrupt. They do not deserve to be in buisness, plain and simple. So why in the hell would the gov't bail out companies who are completely screwing these people over?

One other thing too is that while most of our major companies have a large portion of their assets owned in foreign countries, why is it the responsiblility of the US gov't to bail them out? We are basically giving these countries a handout and now I've heard that Goldman Sachs is selling ton's of its assets to China, a country whose growth is a little worrisome.

Also, with all of this pumping of invisible money into the economy, the burden will surely fall on taxpayers and also cause inflation.

McCains proposal to reinact the RTC, which bailed out several loaning institutions in the late 80's early 90's is not a very feasible plan given the amount of money it would take to alleviate the problem in the same manner. Again I am not overly versed on the subject, but from what I have heard the fed pumped $500 billion into loan institutions. In order to have the same effect this time, supposedly the gov't would have to put $2 trillion into rescuing these institutions. In contrast the stimulus package that gave all Americans $600 cost the gov't $160 billion so if there were to be a $2 trillion package to aid these institutions it would cost the average joe $7500 in taxes.

I am sure that there are many flaws in my points here and I know that there are some people on this board that are smarter than I am, but as a regular dude trying to piece all of this together there seems to be alot of fucked up, crooked shit going on.

[cmonhox]

Not sure if you were posing a question or not, but the purpose of lowering the rate banks loan each other is a reserves issue. Banks have to hold a percentage of their savings/deposits as reserves and if they can't meet those reserves can borrow from other banks temporarily or the Fed reserve as last resort.

Lowering the interest rate banks loan each other, frees up reserves & pust money into the system as the banks can now borrow more from other banks to meet their reserve requirements. The more money in the "system", means more funds available for banks to lend to consumers.

It seemed to me, and we probably had this discussed somewhere, that a lot of the ninja (no income, no jobs or assets) loans were made as subprime on the belief the housing market would continue to rise. Banks would be ok with foreclosures if they knew they would get the house through foreclosure at a price worth way more than what they lent out originally.

When housing demand fell, housing prices fell and suddenly the banks were losing money on the foreclosures as the house was worth much less than the original + home equitied mortgages.

In other words, banks didn't care if the borrowers had no income or couldn't afford the house as they were figuring they'd get the house back at a better price. It was that lack of underwriting and due care that did them in.

[Gumbyhawk]

Sept 19, 2008 9:25:02 GMT -6 lpcalihawk said:

They are delaying the inevitable. Ron Paul was on CNN this morning. He is so right on when talking about this subject.

Not to hijack, but I really wish Ron would have won the nomination.