Santelli, Cerberus And Nationalization

By Big Tent Democrat, Section Economy
Posted on Mon Feb 23, 2009 at 09:35:19 AM EST
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A clownish CNBC "on-air personality" (I take the phrase from a Chicago Tribune article), Rick Santelli, acted a fool the other day, ranting against help to homeowners in distress (WH spokesman Robert Gibbs rightly dismssed Santelli as someone "who does not know what he is talking about." But today, the NYTimes has an editorial that touches the actual issue with a needle. The editorial asks:

If Chrysler is really on track for a turnaround and all it needs is some financing to get over a bad patch in sales and debt markets, why doesn’t Cerberus Capital Management, which owns 80 percent of the company, put up the money itself? Why should taxpayers have to take the risk? That’s what private equity funds like Cerberus are supposed to do. . . . It seems the secretive private-equity fund is willing to gamble on Chrysler’s survival with the taxpayer’s dime, but not its own.

(Emphasis supplied.) [More...]

This argument is available, of course for the distressed financial sector as well. If Citibank, Bank of America, et al, are worth saving, why doesn't private equity step in and save them? Or to put it in Santelli's parlance, do we live in "Communist Cuba?" Of course, the difference between individuals needing relief to avoid becoming homeless (oh by the way and demolishing the housing market) and handing out hundreds of billions of dollars to wealthy investors so they can go gamble at the dogtrack is patent to anyone above the intelligence of a Santelli. But this discussion leads us to the big one - nationalization.

The new euphemism for the issue is bank stability, but I think it applies to automakers with equal force. A NYTimes article reports:

The Obama administration will begin taking a hard look at the financial condition of the country’s 20 biggest banks this week to judge whether they could hold up even if the downturn worsens further than policy makers already expect. These reviews of the banks’ books, known as “stress tests,” are heightening a dilemma for Obama aides about how candid they should be about the health of banks like Citigroup and Bank of America. The tests are expected to take several weeks.

Bank shares were pummeled last week, partly because of rumors that the government might nationalize some of the banks. Officials consider many of the top 20 banks “too big to fail." On Monday, the administration reiterated in a statement that it thought banks should remain private but also offered some reassurance that it would support the banks as needed.

(Emphasis supplied.) This is rather insane. These banks are not too big too fail. They have already failed. Bank shares were not pummeled last week, they were pummelled the past year. In May 2008, Citi was trading at 25. Today it trades at 2. Oh, in case you are wondering, last week it was trading at 3. Long term Citi shareholders have already been wiped out. Short term vultures are counting on the government to make them a bundle.

In the NYTimes story, the government is reported to say:

“The government will ensure that banks have the capital and liquidity they need to provide the credit necessary to restore economic growth . . . Moreover, we reiterate our determination to preserve the viability of systemically important financial institutions so that they are able to meet their commitments."

There is one way to do that now - nationalization. Citi, Bank of America and other such financial institutions (and the troubled automakers as well) have to go into "government receivership" (that is a pretty phrase for temporary nationalization) and when the financial crisis and these institutions are stabilized, the government can return them to the private markets.

After all, as Rick Santelli says, this is not Communist Cuba.

Speaking for me only

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Santelli, Cerberus And Nationalization | 74 comments (74 topical)

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Nationalization and other stuff (5.00 / 1) (#11)
by Intrepid One on Mon Feb 23, 2009 at 10:30:22 AM EST

"Long term Citi shareholders have already been wiped out."

Well, No! Not if they hold. And they probably will because it would be insane to sell now if you did not need to. If you are long term you are long term. Buy and hold. Sure there are some who had planned to cash out now, but that probably represents a minority of investors. Which means for now there will be less money being sent in the economy which most likely makes Obama's effective 2010 tax increase on people who are not necessarily rich dumb because it will for sure take more money out of the economy effectively canceling out part of the money the Fed Gov put into the economy.

"They have already failed."

Really? The dairy mentions BofA. They aren't failing. In fact they purchased part of Countrywide's portfolio and have been offering mortgage modifications to those customers since December. A blanket statement that the banks have failed based just on stock prices is ridiculous. Today stock prices do not necessarily represent that banks true value. Many stocks are artificially deflated due to the world mess we are in.

"There is one way to do that now - nationalization."

The diarist knows not what he speaks. Most of the banks and other financial institutions have already been partially nationalized. When they were given loans by Bush the Fed Gov took an equity stake in them. And some banks like BofA did not even want the money but were asked to take it to make the loan seem palatable to those who did need the money. In other words some of the weaker banks were afraid to borrow the money for fear that it would weaken their public perception even more. With Banks like BofA taking what they didn't need it cleared the road for other to follow.

According to today's news the Fed Gov may take even a larger equity stake (read nationalization) in CitiGroup than they have today.

So screaming for Nationalization when Nationalization is already happening seems a little silly to me.

I see this dairy as terribly uninformed and as is often the case is centered around a media personality who according to the diarist is a media that does not matter. If they don't matter why write about them? Why read them? Good question. Why read them? Because they do matter.

Snort (5.00 / 1) (#15)
by Big Tent Democrat on Mon Feb 23, 2009 at 10:35:49 AM EST

[ Parent ]

Snort is right (none / 0) (#34)
by Intrepid One on Mon Feb 23, 2009 at 10:56:19 AM EST

That is what every reader here should do when they read your bold call for nationalization when it has already been taking place. LOL. I guess your forgot all about the equity stakes we have already took as taxpayers.

Additionaly you are totally unaware that there are loan modification programs by several banks. Snort snort!

And you don't even consider that stock prices don't really reflect the long term value of certain banks or other companies for that matter. Snort snort snort!

Anyone who would like to dispute those things is welcome to at their own peril. Instead of intelligently addressing what I said your most intelligent remark of "snort" speaks for itself.

[ Parent ]

FYI (none / 0) (#38)
by Big Tent Democrat on Mon Feb 23, 2009 at 10:58:03 AM EST

USG owns 7.8% of preferred Citi stock.

If that is nationalization in your mind, then little need be said about your ignorance of the term.

[ Parent ]

Speaking of ignorance (none / 0) (#50)
by Intrepid One on Mon Feb 23, 2009 at 11:20:24 AM EST

You think percentage of stock is all the Gov holds? What a narrow and uninformed view.

Try reading my post below

You think you have all the answers and obviously you don't.

[ Parent ]

As I said (none / 0) (#56)
by Big Tent Democrat on Mon Feb 23, 2009 at 11:27:02 AM EST

You seem to be arguing with the entire economic field.

Go try your silliness on someone ignorant.

I know for sure you have not the foggiest clue what you are talking about.

Last response from me.

[ Parent ]

Sure thing (none / 0) (#59)
by Intrepid One on Mon Feb 23, 2009 at 11:50:33 AM EST

Do you really think an unsubstantiated, unsourced blanket statement like that is going to 'bail you out'?

I'm certain the astute readers here will take what I put forth and agree that in fact the Fed Gov has all the leverage they need without the silly and dangerous last resort move of putting the tax payer on the hook for the mess we are in. Because that is what you are proposing...

To put the tax payers on the hook for everything!

But hey if that is your position you have certainly let everyone know. LOL.

Personally I prefer to have the Gov play the regulatory and future loan game and leave as much as my tax dollars out of it as possible.

You on the other hand want everyone to be on the hook for EVERYTHING.

I'm not so sure either Krugman or Greenspan would agree with that until playing out all the less expensive options.

[ Parent ]

: Any astute reader here can see (none / 0) (#72)
by wurman on Mon Feb 23, 2009 at 01:57:58 PM EST

that you are far worse off than merely not understanding the issues: you can't even repeat the reported, bona fide problem.
Business Week, Jan 20, 2009:

New York University Professor Nouriel Roubini, who foresaw the credit crisis, heightened investors' panic when Bloomberg reported on Jan. 20 that he estimated credit losses for U.S. firms could hit $3.6 trillion. Thus, the U.S. banking system--with just $1.4 trillion in capital--is "effectively insolvent," Roubini said, according to Bloomberg. "The problems of Citi, Bank of America, and others suggest the system is bankrupt," he added.

Bloomberg.com, Feb 23,2009

Bank of America
Charlotte, North Carolina-based Bank of America, which has received $45 billion in TARP funds in exchange for preferred shares and warrants, would be 66 percent owned by the government if its entire stake were converted to common equity, according to data compiled by KBW Inc., a New York-based investment bank.
Contrary to your statements, Bank of America is bankrupt by 2 of the definitions used in a federal bankruptcy court. 1) The value set by shares of stock is lower than the total value of the company, so it's upside down & any 3 creditors can call their debts to put the bank in receivership. 2) The bank owes 66 percent of its debts to a single creditor & that debt exceeds the value of the bank, so the creditor can call the debt due & force liquidation by the court.

[ Parent ]
: You should try actually reading (none / 0) (#78)
by cal1942 on Mon Feb 23, 2009 at 03:00:25 PM EST

I'm not so sure either Krugman or Greenspan would agree with that until playing out all the less expensive options.
Better actually read Krugman. I'll spare you, in essence Krugman is saying: as soon as possible, with all deliberate speed. The sooner nationalization happens the sooner credit will flow. Delay is damaging the economy and making recovery all the more difficult.
In other words Krugman is saying stop putzing around and do it, do it now.
For your edification today's Krugman is here.

[ Parent ]

Leave the Cows Out of This... (none / 0) (#30)
by santarita on Mon Feb 23, 2009 at 10:49:30 AM EST

But you are right... there are certainly badges of nationalization already - USG owns preferred stock in 9 major banks. But we don't yet have a controlling interest.

[ Parent ]

Controlling interest (none / 0) (#32)
by Big Tent Democrat on Mon Feb 23, 2009 at 10:54:22 AM EST

being the KEY to nationalization of course.

[ Parent ]

Who says? You? (none / 0) (#46)
by Intrepid One on Mon Feb 23, 2009 at 11:11:09 AM EST

You know when you are the Fed Gov and you have a significant stake in a company in which you are the present financial savior, the possible future financial savior, and you control all present and future regulation of that banks industry - meaning you can force them by regulation to divest in businesses they are in or change any number of things then...

You already have controlling interest in what they do without having to hold a majority of the stock.

Snort! Whatever happened to common sense? Snort snort.

It's like in a private business where the bank holds no stock in your company but by virtue of lending you money and being able to call the loan - or by virtue of not lending you any more money and chocking you to death they effectively have control of every thing you do if you still want their money.

And again in the case of the Gov they hold a regulatory stick.

[ Parent ]

Well (none / 0) (#48)
by Big Tent Democrat on Mon Feb 23, 2009 at 11:16:36 AM EST

Krugman and Greenspan for two.

But what do they know>

[ Parent ]

LOL (none / 0) (#57)
by Intrepid One on Mon Feb 23, 2009 at 11:39:41 AM EST

Yeah right.

Show me whee either of those two would disagree with what I said in my post about the governments leverage.

In fact you didn't even disagree with what I said about the Govs leverage. Because you can't.

The Gov does have a very awesome leverage, especially in this case.

Heck even without a dime of equity the Gov is able to say who survives and who doesn't as they did with Lehman Brothers.

Even without a dime of equity!

So your call for Nationalization when what we already have is Nationalization, as so many levels that you don't consider, is silly.

When you control the lifeblood of an entire industry via regulation and funding, some directly from the WH, and some from Congress, you have effective Nationalization without having the taxpayer having to go on the hook for the entire financial mess!!!

[ Parent ]

: Um (none / 0) (#67)
by Big Tent Democrat on Mon Feb 23, 2009 at 12:28:08 PM EST

Krugman's column today?

[ Parent ]

Nothing about government is like (none / 0) (#74)
by wurman on Mon Feb 23, 2009 at 02:05:32 PM EST

private business. Actual nationalization would have no relationship to loaning lots of money to a bank.

A government takeover would remove all the execs & most managers, dissolve the boards of trustees, suspend trading on the exchanges, set up a new method of accounting, & radically restrict the "profit" (mark-ups) from operations.

What's going on now has no resemblance to the real process of nationalizing a bank.

[ Parent ]

A little emotional are we (none / 0) (#79)
by cal1942 on Mon Feb 23, 2009 at 03:06:01 PM EST

A blanket statement that the banks have failed based just on stock prices is ridiculous.

BTD did not even remotely imply that current stock price was a determinant of actual value. These banks have failed specifically because their liabilities far outweigh their assets. The fact that BofA buys up some other enterprise only tells us that they have some cash flow. It does not tell us anything about their actual value. BTD's statement about stock prices relates to the viability of nationalization, that stockholders have already seen a significant loss of capital value. Your statement about hanging on for the long haul is faulty because it's abundantly clear that much Citi stock has already been abandoned. Hanging on for the long haul is probably more of a reflection that some stockholders are betting that the government will simply bail them out, raising their value at the expense of the taxpayer.

The diarist knows not what he speaks. Most of the banks and other financial institutions have already been partially nationalized.

No. When we talk about nationalization, it's about bouncing current management and the Federal government running the show.

[ Parent ]

Can't Wait (5.00 / 1) (#12)
by squeaky on Mon Feb 23, 2009 at 10:31:16 AM EST

Until the pompous (and all too greedy) bankers become civil servants. Something tells me that their bonuses will not be what they used to be, and OMG there will be regulation.

: Something tells me.... (none / 0) (#77)
by kdog on Mon Feb 23, 2009 at 02:45:33 PM EST

they'll keep getting rich off of the sweat and tears of others, by hook or by crook...they will even end up writing their own self-serving regulations.
The way of the world squeaky....way of the world.

[ Parent ]

I liked the Santelli rant... (none / 0) (#1)
by kdog on Mon Feb 23, 2009 at 09:56:17 AM EST

wish we were hearing more of it, I know I'm not keen on helping to subsidize people "better off", in the economic sense, than I. That being said, you're absolutely right that Santelli is full of sh*t because he doesn't appear to have a problem with taxpayers subsidizing his golden goose...the subsidization of the banking and investment industries...the biggest welfare whores in the history of welfare at last count. I'm most angry about subsidizing Citibank, not homeowners, but not keen on any of it...you help the hungry, the sick, the old, and the children first and foremost...not brokers and bankers and McMansion owners.

If you like idiocy (5.00 / 1) (#3)
by Big Tent Democrat on Mon Feb 23, 2009 at 10:10:11 AM EST

Then Santelli is clearly your man.

[ Parent ]

He is an idiot... (none / 0) (#5)
by kdog on Mon Feb 23, 2009 at 10:21:48 AM EST

an idiot who made a good point...people living in one bedroom apartments should not pay taxes so people who earn more than they do can live in houses they can't afford.

He just left out that people living in one bedroom apartments check to check should also not be subsidizing him and his cronies loser arses in the financial sector.

[ Parent ]

Barney Frank's point (none / 0) (#6)
by andgarden on Mon Feb 23, 2009 at 10:25:46 AM EST

about "collateral benefit" seems apt here.

[ Parent ]

Kinda reminds me of Reagan's.... (none / 0) (#10)
by kdog on Mon Feb 23, 2009 at 10:29:30 AM EST

"trickle down".

[ Parent ]

Really? (5.00 / 1) (#17)
by Big Tent Democrat on Mon Feb 23, 2009 at 10:36:37 AM EST

Then I think you did not get the point.

[ Parent ]

The main point I get is... (none / 0) (#21)
by kdog on Mon Feb 23, 2009 at 10:42:01 AM EST

you're telling a guy making 500 a week to sit tight while we cut a check to the guy making 1500 a week, or 15,000 a week.

Not even just sit tight...you're telling him to sit tight and chip in. That is trickle down.

[ Parent ]

: you missed the point then (none / 0) (#24)
by Big Tent Democrat on Mon Feb 23, 2009 at 10:44:39 AM EST

[ Parent ]
: But (none / 0) (#26)
by squeaky on Mon Feb 23, 2009 at 10:46:03 AM EST

For the people making$50,000/week there is no question that they should get bailed out according to these creeps.

[ Parent ]

You think that was a good point? (none / 0) (#9)
by Big Tent Democrat on Mon Feb 23, 2009 at 10:29:01 AM EST

Allrighty then.

[ Parent ]

You bet I do....n/t (none / 0) (#14)
by kdog on Mon Feb 23, 2009 at 10:32:40 AM EST

: Allrighty then (none / 0) (#16)
by Big Tent Democrat on Mon Feb 23, 2009 at 10:36:11 AM EST

[ Parent ]

So then what again did you like (1.00 / 1) (#2)
by cotton candy on Mon Feb 23, 2009 at 10:07:12 AM EST

about Santelli's rant? I'm all for bailing out the poor and those that were targeted by greedy predatory lenders but Santelli is calling those people "losers."

Santelli wants a class war and he mimicked many of the conservative talking points along the lines of "teh blacks and teh poor are to blame."

The only way that we are going to get out of this crisis is if we deal with housing. Period. Unfortunately some individuals who were greedy during the housing bubble will benefit whether you like it or not.

As for Citi and BofA, the latter of which I am an angry former customer--let them fail.

[ Parent ]

I didn't like the "loser" bit.... (5.00 / 1) (#8)
by kdog on Mon Feb 23, 2009 at 10:28:19 AM EST

Though technically they are losers in the capitalist system sense...they gambled on a house and lost for whatever reason...predatory lending, over-extension, loss of income, etc.

I liked the main point...people making 35k a year should not subsidize people making 80k a year, or 8 million a year, or 80 million a year. That is reverse Robin Hood and morally repugnant.

[ Parent ]

What? (none / 0) (#20)
by cotton candy on Mon Feb 23, 2009 at 10:41:15 AM EST

I liked the main point...people making 35k a year should not subsidize people making 80k a year, or 8 million a year, or 80 million a year.

But it's the 35-75K folks that are losing their homes. Actually, it will be folks like me whose taxes will be going up to subsidize others and not the other way around.

Go back and listen or even read the transcript of what Santelli is saying. He is all about the banks being bailed out and he wants more foreclosures so that the greedy pigs that got us into this situation can buy up these houses for pennies and turn around and make a big profit creating yet, another vicious cycle.

The 35-75k folks... (5.00 / 1) (#28)
by kdog on Mon Feb 23, 2009 at 10:47:14 AM EST

who didn't buy a house they couldn't afford with no money down, the 35-75 folks who saved for years for a down payment to get a fixed rate loan...aka the people who did the right thing.

I said Santelli is full of sh*t, his cronies are the biggest leeches around...I just agree with the main point regarding renters and responsible home owners subsidizing those higher on the food chain, whether they earn more or simply live at a higher standard...in what universe is that not morally wrong?

[ Parent ]

You don't understand the crisis (none / 0) (#31)
by cotton candy on Mon Feb 23, 2009 at 10:54:05 AM EST

because there are those that did the right thing and are STILL losing their homes may it be because of layoffs,etc. Should they not get a subsidy?

Go back and listen to what the man is saying. Nothing that came out of his mouth was for the "average man."

[ Parent ]

Still, (1.00 / 0) (#39)
by Samuel on Mon Feb 23, 2009 at 10:59:15 AM EST

it wasn't the taxpayers fault. The should not be required. Charity is always an option. On that level I'd bet you find better application of the funds.

[ Parent ]

: Jeez Samuel (none / 0) (#80)
by cal1942 on Mon Feb 23, 2009 at 03:13:13 PM EST

you and Herbert Hoover

[ Parent ]

No subsidy... (none / 0) (#41)
by kdog on Mon Feb 23, 2009 at 11:02:05 AM EST

that is capitalism...fortunes are made and lost everyday in America. It sucks, I don't like it anymore than the next guy, but that is our system. If I lose my job tomorrow I'd expect to have to maybe find another cheaper place to live.

I can totally sympathize with those in legit hard spots...I'd rather they simply squat. F*ck the banks for a change instead of f*cking the taxpayer again and again and again.

[ Parent ]

Frankly, I don't think there is (none / 0) (#42)
by dk on Mon Feb 23, 2009 at 11:02:55 AM EST

too much controversy as to whether there will be economic assistance given to homeowners in crisis (short answer: there will be). I think the bigger question is who will pay for it. Will Obama and the Democratic Congress hang tough and make the rich pay, or will the pain be spread out among the folks that Kdog is talking about (i.e. the folks who not only didn't get their houses during the good times, but now would have to suffer double by helping to subsidize homeowners to keep their houses).

[ Parent ]

If there are foreclosures... (none / 0) (#35)
by Samuel on Mon Feb 23, 2009 at 10:56:26 AM EST

Then the bad debt gets erased and people who CAN afford the home will have a chance to buy it at a low price.

Why would I want to pay other people mortgages and consequently keep home prices elevated? I'd rather keep my money and buy into a cheap housing market.

Now are you saying that large investors will buy up foreclosures from lenders that recently foreclosed and that these lenders will voluntarily drop prices for only these large investors? How is the act of these investors "turning around and making a big profit" even possible? Think: home prices are at record highs. The taxpayer will lose more money bailing out mortgage holders and being exposed to an artificially stimulated housing market then if they didn't pay the mortgages of other people and the housing market was allowed to readjust to actual demand.

[ Parent ]

Are you kidding? (5.00 / 0) (#43)
by cotton candy on Mon Feb 23, 2009 at 11:04:13 AM EST

Do you not know anything about foreclosures? There is a reason why people except for the greedy and predatory hate foreclosures--they lose.

Now are you saying that large investors will buy up foreclosures from lenders that recently foreclosed and that these lenders will voluntarily drop prices for only these large investors?

Who the hell do you think is buying these foreclosures? And yes, lenders do LOWER the prices significantly to try to get some of these bad debts off their books which causes another problem of neighboring property values plummeting.

Lenders hate foreclosing. (none / 0) (#47)
by Samuel on Mon Feb 23, 2009 at 11:16:15 AM EST

It costs them in legal fees, property management, property taxes and ultimately transfer tax.

Buyers - be it companies or individuals - like foreclosure because they add supply and lower prices.

When you quoted me there it was in direct response to an assertion of yours stating something like "big business wants foreclosures so they can buy all the houses cheap and screw the little man". Now what I was indicating through the question was that whoever is left with the title will sell the house to the highest bidder. This can be a large evil business or an individual.

The prospective home buyer is the big winner. The lender is a loser that salvaged something. The foreclosed upon could not pay the sum of money they had agreed to pay for whatever reason - it is not the lender's responsibility to help them and it isn't the prospective buyer's responsibility to pay that guy's mortgage through taxes.

[ Parent ]

And their neighbors (5.00 / 1) (#55)
by cotton candy on Mon Feb 23, 2009 at 11:26:28 AM EST

hate foreclosures because property values plummet. And what happens when property values plummet,the revenue that cities get from property taxes goes down. And what happens when the revenues that the cities collect go down?

It's a vicious cycle and only a certain group of individuals and investors actually benefit from foreclosures and it is not your everyday man.

Why is this so hard to understand?

[ Parent ]

That's absurd. (none / 0) (#60)
by Samuel on Mon Feb 23, 2009 at 11:53:43 AM EST

I just sold a home that had an 800k loan for 335k. I think the buyer made out alright. I know the lender got screwed out of 800k-335k + all the other costs of selling the home. And guess what - the property tax amounts did not change.

PURCHASE PRICE ISN'T TAX ASSESSED VALUE

So we're bailing out mortgage holders so that the neighbors can pay higher taxes (which would not be the case) so that the city has more tax revenue?

Here's an idea - don't put a future tax on the cities population by subsidizing mortgages. The city tax office will be MUCH better off.

[ Parent ]

: You heard of appraisals? (none / 0) (#70)
by cotton candy on Mon Feb 23, 2009 at 12:58:31 PM EST

Based on the GOING PRICE OF HOUSES IN THE NEIGHBORHOOD. I don't know what city you live in but because of the amount of foreclosures and the lowering of property values in the city that I live, my city has suffered from a decline in revenue.
I'm done here because I'm tired arguing with someone who is obviously willfully ignorant about the effects of foreclosure and the current situation that we are in.

[ Parent ]

Ok wait. (none / 0) (#18)
by Samuel on Mon Feb 23, 2009 at 10:36:48 AM EST

He's calling them losers because they made an investment move and ending up losing money.

He did not say that these people caused the problem in the economy.

"Dealing with housing" as in the government rewriting contracts will result in many incentive problems (why would both the husband and wife work if it is the case that if one is fired they get that much more in mortgage relief?). Hell, why would anyone ever do business in the US again - we just rewrite contracts?

If the crash never had come and all the ARM flippers had made a bundle, they wouldn't be giving the money to tax payers but tax payers are supposed to cover their mistakes?

How is it not within an individuals rights to say "No, I don't want to pay for the house you agreed to pay for without having the necessary funds."?

[ Parent ]

Here's the deal (5.00 / 4) (#19)
by Big Tent Democrat on Mon Feb 23, 2009 at 10:39:45 AM EST

Is he calling Ge losers? Citi? and so on?

You get the point?

[ Parent ]

Wow. (2.00 / 0) (#27)
by Samuel on Mon Feb 23, 2009 at 10:46:35 AM EST

So we're worried about if he hurt feelings?

I don't know if he's called those companies "losers".

None of that comments on the point the man made. Home mortgage holder bailouts reward those who made the wrong decision at the expense of those who did not. First you refute the idea, then feel free to refute the person.

I don't know his opinions on the larger bailouts - if he said they were good I'd disagree. So what was your point?

[ Parent ]

Wow (5.00 / 0) (#33)
by Big Tent Democrat on Mon Feb 23, 2009 at 10:56:19 AM EST

Are we really this obtuse? the problem is NOT helping homeowners or their feelings.

The problem is deflections from the real problems and real solutions.

I find less and less of worth in your comment every day, ooops, did I hurt your feelings?

[ Parent ]

I'm ok. (none / 0) (#44)
by Samuel on Mon Feb 23, 2009 at 11:06:44 AM EST

Letting the housing market reset IS a real solution. Government intervention in the private sector IS the identification of a problem.

Homeowners not affording their mortgages is a problem and not a symptom. We can't treat symptoms directly and expect to cure their future repeated onset.

[ Parent ]

uuughhh (none / 0) (#45)
by Samuel on Mon Feb 23, 2009 at 11:07:20 AM EST

"symptom and not a problem" - sorry

[ Parent ]

How about letting the financial sector reset? (none / 0) (#49)
by Big Tent Democrat on Mon Feb 23, 2009 at 11:17:34 AM EST

the auto industry? The global economy?

you sound like Herbert Hoover to me.

[ Parent ]

I'm all for that! (none / 0) (#61)
by Samuel on Mon Feb 23, 2009 at 11:57:43 AM EST

I've been saying laissez faire since I got here man!

You're saying Hoover was an interventionist right? He was the furthest thing from laissez faire and instituted large government actions that FDR campaigned against. Lot of talk about Hoover increasing the deficit in that election. FDR promised change - and we didn't get any.

[ Parent ]

: Hoover was no interventionist (none / 0) (#68)
by Big Tent Democrat on Mon Feb 23, 2009 at 12:29:17 PM EST

and that GOP lie is incredibly absurd.

[ Parent ]

Assuming that all taxpayers are paying for.. (none / 0) (#63)
by santarita on Mon Feb 23, 2009 at 12:08:02 PM EST

the bailout of mortgagors, then isn't it possible that some taxpayers who made lousy decisions will be paying for those mortgagors as well.

People that live in a community often have to "pay for" the mistakes of others in the community. Why do we pay for police protection? Why do we pay for mosquito abatement?

[ Parent ]

I don't think you understand (5.00 / 0) (#29)
by cotton candy on Mon Feb 23, 2009 at 10:49:26 AM EST

He's calling them losers because they made an investment move and ending up losing money.
He did not say that these people caused the problem in the economy.

Go back and listen to what the man said and you will know EXACTLY who he is and isn't calling "losers."

How is it not within an individuals rights to say "No, I don't want to pay for the house you agreed to pay for without having the necessary funds."?

You are right and you are entitled to feel that way. Maybe this country isn't for you because this is a country where you pay taxes to subsidize others.

[ Parent ]

: I didn't know we were communists... (none / 0) (#71)
by kdog on Mon Feb 23, 2009 at 01:20:58 PM EST

I thought we paid taxes for services rendered, at least in theory...local taxes for police, fire, sanitation, schools, etc....federal taxes for defense, standards enforcement, etc.
If we're subsidizing others, where is the check for the homeless cat making 12k a year redeeming bottles and cans? iow, the truly needy...not the guy making 80k a year in danger of losing his half a million dollar home.
I gotta question the wisdom of letting the government take from our checks every week, only to have to beg and plead for it back in subsidies. Why not just keep our gross and save money on paperwork? Or give the government 100% of our checks and let the central planners dole it out as they see fit on a as-needed basis? As in the CEO of Citibank needs to pay off his yacht, and since you don't have a yacht, go f*ck yourself.

[ Parent ]

If the government nationalizes Chrysler (none / 0) (#4)
by andgarden on Mon Feb 23, 2009 at 10:15:20 AM EST

I fear that it will never be able to unload it.

A wellfounded fear (none / 0) (#7)
by cotton candy on Mon Feb 23, 2009 at 10:27:23 AM EST

Time for Chrysler to fail. Sorry, but that is one unproductive company and nationalizing it is not going to solve the problem.

[ Parent ]

Better to have it merge in some way (5.00 / 0) (#13)
by tigercourse on Mon Feb 23, 2009 at 10:32:13 AM EST

with GM I think. We are trying to save/create jobs right now and letting several hundred thousand go poof doesn't seem like a good idea.

[ Parent ]

Nope (none / 0) (#37)
by cotton candy on Mon Feb 23, 2009 at 10:57:32 AM EST

GM does not need to merge with Chrysler when it has its own major problems.

This is like saying that two people deep in debt should marry and then magically things will get better because they have "merged" their debt.

It's not going to work, look what has happened with Merrill and BofA.

[ Parent ]

: I've got it! Chrysler should merge with (5.00 / 1) (#40)
by tigercourse on Mon Feb 23, 2009 at 10:59:45 AM EST

Wal Mart and GM with Exxon Mobil. McDonalds aside, they are the strongest companies around.
Somebody give me a Noble Prize.

[ Parent ]

The main reason now (none / 0) (#22)
by Intrepid One on Mon Feb 23, 2009 at 10:42:24 AM EST

that Chrysler is bound to fail is because they ARE owned by a private equity firm. Private equity firms have no long term stake in the success of a company. They are in in for ROI. And as such at any given time could either try to flip the company as a whole or "break it up" and sell it in pieces.

Which is why BTD asking for Private Equity to save the banks is insane. Being saved by Private Equity Firms does nothing for the longevity of banks. In fact knowledgeable perception is that it weakens their long term prospects for the exact same reasons that they weaken Chryslers long term prospects.

It pains me to see uninformed call in blogs for things like having Private Equity take over banks. People who say such things no not what they are suggesting.

[ Parent ]

: I am not asking for anything (none / 0) (#23)
by Big Tent Democrat on Mon Feb 23, 2009 at 10:44:15 AM EST

I am laughing at the absurd notion that nationalization is avoidable UNLESS you prefer the government to bailout the Cerberuses and wealthy investors of the world.
I think it is pretty clear that that is what you want.

[ Parent ]

Private equity (none / 0) (#25)
by gyrfalcon on Mon Feb 23, 2009 at 10:44:45 AM EST

Seems to me a whole big chunk of "private equity" has been wiped out at this point. Does anybody know how much Cerberus actually has? Is it even in a position to save Chrysler? I don't know, I'm just asking. Same with the banks.

An argument for nationalization (none / 0) (#36)
by Big Tent Democrat on Mon Feb 23, 2009 at 10:57:11 AM EST

Did you intend it as such?

[ Parent ]

: Certainly not opposed (none / 0) (#64)
by gyrfalcon on Mon Feb 23, 2009 at 12:13:43 PM EST

My instinctive layman's perspective is "Nationalize these suckers now and let's get it over with instead of farbling around." But I don't trust my layman's instincts any more than I trust, say, Santelli's. Well, maybe a little bit more than that...
I'm just a little leery of calls for "private equity" to solve all these problems when I keep hearing trillions of dollars of private equity have been wiped out in the last six months.
So it's not an argument, but a genuine question because I don't know whether Cerberus or anybody else is really in a position to take on Chrysler. And if, in fact, they're not, then there's no point arguing about whether they should or shouldn't.

[ Parent ]

Private Equity Firms... (none / 0) (#53)
by santarita on Mon Feb 23, 2009 at 11:23:32 AM EST

may not have the desire or ability. Or maybe they are just holding out for sweetheart deals.

Cerberus can get government funding but on appropriate terms - which it may not like.

[ Parent ]

Well, in a capitalist (none / 0) (#65)
by gyrfalcon on Mon Feb 23, 2009 at 12:22:40 PM EST

society, Cerberus is only going to do what it thinks is best for its investors. We could, and appear to be right now, playing a sort of game of chicken with Cerberus. If the government doesn't prop up Chrysler, will Cerberus (if they're even able) step in and save it in hopes of preserving their investment in it long-term, or will they instead just cut their losses and liquidate it?

The financial reporters I've heard since well before the big meltdown that Cerberus never had any intention of holding onto Chrysler long-term but had been looking for a profitable way to unload it almost from the beginning. That suggests to me that if given a choice between saving it themselves and letting it die, they'd let it die.

Am I right that because Cerberus is a privately held firm, we have no clue what its actual financial position is?

[ Parent ]

I Think You Are Right... (none / 0) (#69)
by santarita on Mon Feb 23, 2009 at 12:57:42 PM EST

that we don't know what Cerberus's financials look like.

Cerberus may or may not be looking to unload Chrysler. The overarching question for me in all of these situations, is this:
Assuming that it is the only feasible alternative, is there a strong enough benefit for the country in putting $$$ at risk for a non-government owned entity? If there is, then the fact that shareholders, private or public, are coincidentally benefitted is not important.

[ Parent ]

: Agreed (none / 0) (#73)
by gyrfalcon on Mon Feb 23, 2009 at 02:05:24 PM EST

But I don't know the answer.
The government is the only entity with a big-picture perspective and the resources, and more importantly, the obligation to act on behalf of the country's economy as a whole. Cerberus -- or BofA, etc. -- not only don't have that obligation, they would be in collossal breach of their fiduciary obligations to their investors if they took action that helped the country or the broader ecnomy out but put their investors at a loss.
Such is the dilemma of a capitalist system.

[ Parent ]

I don't understand why some folks (none / 0) (#51)
by Militarytracy on Mon Feb 23, 2009 at 11:20:39 AM EST

out there can't grasp that due to the shadow banking system that had taken hold.....the banks are now insolvent. It has been something we could have easily acknowledged for months now but ummmm, I guess we couldn't bring ourselves to. I didn't know what the heck could have been fueling the need for denial and the desire to talk about efforts to save what can be saved while making in vain attempts to keep the system privatized either until I read your words short term vultures. I like to think I'm tough and realistic, but then sometimes I also have to embrace and realize that I'm also just a bit naive and sort of a sucker.

Why Should Taxpayers Save Chrysler, GM,Citi or ... (none / 0) (#52)
by santarita on Mon Feb 23, 2009 at 11:21:25 AM EST

the guy across the street who made an imprudent decision to buy a house with a mortgage?

And if you come up with a good reason for saving any or all of the above, then what terms should we demand in return?

Santelli has an easy answer - don't save any of them. Let them all fail and then the free market will pick up the pieces and life will go on. No government intervention.

Of course, what happens to communities and nations in the interim between failure and recovery is what concerns policy makers in government. High unemployment doesn't make for a civil society. Economic problems in the late 20's and 30's in Europe gave rise to fascism. The squadristi who helped Mussolini to power were largely unemployed youth.

So the Santelli is entitled to his worldview. But I think I'll stick with people who are looking at the broader picture. If government intervention prevents widespread civil unrest and class warfare, then I'm in favor of it. On the other hand, I don't think we save anyone for nothing in return. So let's bail people and companies out but on terms that make sense.

: An "easy" answer? (5.00 / 1) (#54)
by Big Tent Democrat on Mon Feb 23, 2009 at 11:25:25 AM EST

That was Herbert Hoover's "easy answer."
The question is not should we save them but HOW we save them.
I personally have no patience for the silly Santellian nonsense.

[ Parent ]

I don't understand about BoA (none / 0) (#58)
by jbindc on Mon Feb 23, 2009 at 11:40:02 AM EST

Now,I haven't been following this stuff closely, but I bank at BoA. I know took a bath on mortgages, but they received $20 billion to cover losses on Merrill Lynch, and part of another $25 billion that they split with Citi. But they still posted a $4 billion profit in 2008.

What's the deal? Can someone please explain this to me as to why they need more money and may be nationalized?

Well... (none / 0) (#62)
by santarita on Mon Feb 23, 2009 at 12:01:53 PM EST

the fear about Citi and BofA and other large banks is that they may be undercapitalized. They are currently able to pay debts when due. But if they are undercapitalized, their long term ability or even near term ability to handle further economic downturns is in question. Many suspect that they are undercapitalized because a portion of their capital is in hard to value assets and intangible assets.

[ Parent ]

Thanks! (none / 0) (#66)
by jbindc on Mon Feb 23, 2009 at 12:22:50 PM EST

Many banks are proven insolvent. (none / 0) (#75)
by wurman on Mon Feb 23, 2009 at 02:17:27 PM EST

A substantial percentage of bank assets are based on "derivatives," in which 100s of mortgages were bundled & then borrowed against (or pledged as collateral) with creditors who accepted them--mostly Wall Street investment banks (a slightly different breed of lender) & these derivatives are now known to be almost worthless.

Additionally, many of the largest banks hold commercial paper from mega-corporations, such as GM & Chrysler or Circuit City or Linens & Things, from which it appears there may not be much liklihood of repayment.

Finally, almost all of the large financial firms are in the hole because their stock is trading above the value of their assets. Their balance sheets are upside down. Their creditors could bankrupt them & force liquidation in order to get partial payment of the debts.

[ Parent ]

: A Better Choice of Words Might Be... (none / 0) (#76)
by santarita on Mon Feb 23, 2009 at 02:34:57 PM EST

Several large banks are thought to be insolvent in the sense that their liabilities exceed their assets.
There are any number of regional banks and smaller banks that are well-capitalized.

[ Parent ]

Shows What an Economic Ignorant (none / 0) (#81)
by daring grace on Mon Feb 23, 2009 at 03:34:39 PM EST

and mythology savant I am.

When I saw the word Cerberus in the title of this thread, I immediately was imagining the three headed dog that guarded the gates of Hades, preventing escape.

May be accurate, at that.