Comments on: Trifecta: Bair, Paulson, Ross

By: Art

Art — Tue, 21 Oct 2008 01:28:10 +0000

There’s not often in life where we have powerful win-win opportunities. Today’s banking crisis offers up one such opening.

The first part involves Bernanke. When the Fed next meets 10/29-30, Bernanke should lower rates another half point, minimum.

As you pointed out to Paulson, this rescue plan was not effectively sold to the American people, who view it cynically as a banking bailout that will pad the coffers of the wealthy while leaving the middle class with not only the bill, but the indignity of begging those same banks for credit. In other words, first we get to pay for this bailout and then suffer rejection as our financed bailout fails to provide any liquidity.

But let’s say the Fed drops rates aggressively. And perhaps there’s some incentive or aggressive moral suasion thrown in to assure banks actually lend this money at rates that resemble their historically low borrowing costs. The Fed could change the perception that Americans aren’t simply bailing out the banks, but participating in the system’s financial renewal while SIMULTANEOUSLY, via re-financing at much much lower rates, opening the spigot of consumer spending through tapping home equity and/or lowering monthly outflow.

After all, there is no point in easing the credit crisis if there are no consumers around to buy the widgets and services of businesses that will be tapping this credit. Broad refinancing or mortgages will create a sense of fair play, allowing many abused taxpayers to at least participate in the rescue plan. Fairness will help create confidence in the system. Confidence being a word Paulson and Bernanke have used a lot lately.

The Fed, Paulson, Bush, and others have hammered the point that they are looking out for the taxpayer. It’s a rescue plan for our economy. Yet many Americans still feel left out of the process. The perception is that the benefits are flowing, once again, only to the wealthy.

With a slight change in focus, the Fed will be able to create a sense of fairness, foster wide participation in the rescue plan, ultimately heating the engine of the economy that is consumer spending – that’s WIN-WIN!

By: G.P.

G.P. — Fri, 17 Oct 2008 15:49:14 +0000

sorry alexis i called you neil.

G.P.

By: G.P.

G.P. — Fri, 17 Oct 2008 15:45:46 +0000

Neil,
I am a mortgage trader. This bailout off 700b will not work as you have
stated. Instead of buying up dead cmo or cdo’s that are dead asset’s now flow
of funds because the homeowner will and cannot pay. Instead of trying to get
mortgage rates to 5.00% the homeowner cannot refi. Banks will not lend to him
anyway. Take down the wamu, countrywide etc signs and put up federal govt 2009.
How much can you pay mr. smith to stay in your home $500, $1,000 whatever. Ok
we will PAY OFF the existing mortgage. That amount that you can pay comes to 2%
3% 1% whatever. Done. The old mortgage now in a cmo or cdo’s shows cash flow
into the dead assets as a trader I can analyze flow of funds (speeds) and know
dead asset’s show some life, have value. The man on the street stays in his or
her home and the economy shows life. Banks have lending competition with the
govt, won’t be under pressure to lend what they do not have, money. Buy just
buying up assets and giving citi 100b of the 700b they are not being forced to
lend it out. The main on the street already in under pressure how can he refi
with say 20% down. Another bailout package is being floated. What will another
$600 do? Get the money into the hands of the people that need to stay in their
homes. The govt will make money on anything over 1.5% and the dead asset’s mr.
Paulson is buying will have value if they show movement within the various
traunches that make them up. Modification of the loans just reduce the value
of the traunche that that loan is in and makes them more worthless not more
valuable . so the 20 or 40 cents on the dollar the govt is paying will just
cause the govt to lose money. As traders we need to look at cmo’s or cdo’s with
cash flow. Then we can trade them. Why would I participate in a market of
worthless assets. Get the flow of funds into them and then a trader can spot
value at a price. The housing market will never recover with more and more
foreclosure’s. in the short run a homeowner will have a mortgage rate, rather a
payment he can pay. The govt is already the largest land owner thru fannie mae
and freddie mac. Let the govt back into the rate. The mortgage market can never
get mortgage rates low enough nor can the homeowner ever get the necessary down
payment to refi his exsisting mortgage.

a tired mortgage trader
G.P.

By: Gary Driscoll

Gary Driscoll — Thu, 16 Oct 2008 18:25:18 +0000

We should be thankful that they reacted at record speed to spend 2 1/2 TRILLION dollars over the last 2 weeks? No thanks from here!