The Stress Tests

NYTimes Editorial:

If they are credible, the stress tests will finally provide the information the government needs to deal forcefully with the banking mess — assuming the White House also has the will to do what is needed. . . . If the capital shortfalls are severe, . . . it is all but certain that private capital will not be forthcoming. The government should act quickly to plug the holes. . . . The administration should . . . recapitalize the banks. And it should take temporary control if that infusion results in a majority stake.

[MORE . . .]

The banks’ current executives would be fired, shareholders would be wiped out and bondholders would take a haircut. But that is the best way to ensure that the banks’ finances are quickly and efficiently restructured, and the taxpayers’ investment is protected. . . . If the tests have been rigorous, the White House has the information it needs. Now the question is how it will use it.

Who believes Geithner will do this? Count me among those who do not. It is up to Congress to demand real action from the Obama Administration on the banking crisis. On this issue, the Obama Administration has been an abject failure.

Speaking for me only

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    Pinning the bogometer (5.00 / 4) (#2)
    by lambert on Sun Apr 26, 2009 at 12:14:14 PM EST
    The stress tests are not based on analysis of underlying assets or even paperwork -- necessarily so, if what you want to do is maintain the banking system as is, since as Bill Black points out, that would reveal massive accounting control fraud.

    Therefore, the so-called stress tests are based on computer models, which are only as good as their assumptions and inputs. The only way to grant the results credibility is for the models themselves to be published, which of course hasn't happened. In fact, current conditions already exceed the worst case scenarios in the models. [That's as of April 7, 2009, so sure, they can have rewritten and rerun the models; some stress test!]

    Finally, Geither has already announced that no banks will be allowed to fail the tests. As LOLfed asks, What's the point of giving a test if you're just going to pass everyone?

    If you ask yourself what would stress the banksters the most, it would be, in more or less this order: (1) accountability, (2) transparency, and (3) putting a halt to their looting (not just of the public purse, but the economy generally). So, it's really not the government stressing the banksters, but the banksters stressing Timmy, Larry, and Obama who, so far, have met or exceeded expectations by hardly stressing the banksters at all. It's all good, when looked at in the right light.

    Cue the apologists!

    NOTE In the best case scenario, the taxpayers will be on the hook for another big bank, which will be allowed to be EATED pour encourager les autres. Not Goldman Sachs, of course; they're too busy running the government. I nominate Bank of America.

    Has Black Commented On... (5.00 / 1) (#10)
    by santarita on Sun Apr 26, 2009 at 01:21:35 PM EST
    the White Paper that way put out by Treasury on Friday?  That paper detailed the assumptions and methodology.  I note that your link is to a Feb. 17th article.

    I read it (none / 0) (#16)
    by Militarytracy on Sun Apr 26, 2009 at 03:02:18 PM EST
    The PPIP is supposed to reduce the overhang of uncertainty associated with the legacy assets.  Yeah right, in an economy contracting as painfully as ours is anybody making such a statement and having an understanding of economics and what investors need and what they are going to buy if they have the money right now has got to be lying their effing asses off or maybe they're just a moron.  And in an economy contracting as painfully as ours is the legacy assets will do nothing else outside of becoming more troubled.  The whole thing is so absurd.  I'm certain that Black will say much savvier things to than me though if he goes there.  There wasn't any "new" and "improved" information though in the white paper that hasn't been commented on already at length by the big economic voices out there. But we did get a newer acronym.  We got PPIF's via the TALF.  I don't care who you are, that sounds so cool it has to be something phenomenal somehow......except it really isn't.

    For "bogometer"... (none / 0) (#3)
    by lambert on Sun Apr 26, 2009 at 12:16:02 PM EST
    ... see here. See also Bogon flux.

    Like all complicated issues.... (5.00 / 2) (#4)
    by NYShooter on Sun Apr 26, 2009 at 12:27:27 PM EST
    ....once the wheat is separated from the chafe, it turns out quite simple.

    It boils down as a battle between the bondholders and the American taxpayers. In ordinary times bondholders are sacrosanct, and first in line. But when the situation becomes Armageddon, throw ordinary times out the window.

    The banks need capital; the bondholders own the debt. I say, no more taxpayer money; force the bondholders to swap the bonds for equity shares. Instantly, the banks would be reliquified, and have more capital than they need. If we reinstitute a modern version of Glass-Steagall, the banks would have only one way to make money:..... lend.

    The result:
    1.    Banks wouldn't have to hoard capital to make interest payments.
    2.    Banks competing to lend; the economy would boom.
    3.    Equity shares would sky rocket.

    The problem, of course, is that bondholders have the Administration's ear, and are demanding the taxpayers take all the risk.

    So, who does Obama represent, the taxpayers, or the bondholders? It's obvious who Geithtner and Summers represent.

    Who Are the Bondholders? n/t (5.00 / 1) (#11)
    by santarita on Sun Apr 26, 2009 at 01:23:31 PM EST
    The people (none / 0) (#12)
    by NYShooter on Sun Apr 26, 2009 at 01:48:27 PM EST
    and institutions who own the bonds.

    or, did you want names?


    Just Curious as To... (none / 0) (#13)
    by santarita on Sun Apr 26, 2009 at 01:59:44 PM EST
    who you think the bondholders are...

    How about identifying just some of the more significant institutions - and are you talking about bondholders or creditors in general - and secured or unsecured?  And creditors that have hedged with credit default swaps or unhedged creditors.

    How do you account for the fact that in the Chrysler negotiations, the US and the big creditors are at odds?  Isn't it strange that in once case they would be on the same page but in another case they would be negotiating against each other?


    Please, I won't dance to your tune (none / 0) (#14)
    by NYShooter on Sun Apr 26, 2009 at 02:24:15 PM EST
    You can look up names quite easily by yourself; that is, if you really want to know.

    And what kind of question is, ".....bondholders or creditors in general - and secured or unsecured?" Are there such things as "unsecured bondholders?" I didn't know.

    And "creditors; "secured and unsecured?" Those creditors will be in line exactly where they belong once the financial situation is exposed, and transparent.

    And "creditors at odds...." Duh. When one favored group has the U.S. treasury as its private piggy bank, while another has to deal with market forces, "creditors at odds" shouldn't come as a surprise.


    Bondholders are... (5.00 / 1) (#19)
    by santarita on Sun Apr 26, 2009 at 03:10:14 PM EST
    creditors.  Without collateral, they are treated like any other unsecured creditor of the debtor, i.e. paid on a pro-rata basis from the unsecured assets of the debtor.    If a bondholder has a credit default swap, it can get paid from the issuer of the credit default swap.  

    Understanding who the bondholders are may explain the actions of the government.  For instance, if a major holder of bonds is, let's say a Chinese bank or a large American pension fund, the US government may have a different approach to negotiations than if the bondholder were a wealthy individual.  

    In other words, it's a complicated mess that doesn't yield easily to simplistic solutions.  


    Finally, we agree (none / 0) (#21)
    by NYShooter on Sun Apr 26, 2009 at 03:13:37 PM EST
    "it's a complicated mess that doesn't yield easily to simplistic solutions."  

    Good for you (5.00 / 2) (#52)
    by Big Tent Democrat on Sun Apr 26, 2009 at 06:29:43 PM EST
    Too many hear think the phrase "bondholders" is supposed to scare you into thinkiong "your 401K" is at risk.

    I am sick of their games.


    Not sure Chryler's bondholders (none / 0) (#15)
    by oculus on Sun Apr 26, 2009 at 02:28:49 PM EST
    will be exactly in line where they belong post-bankruptcy.  That is why they are negotiating with the federal government I gather.  I thought the bankruptcy judge decided what the bondholders receive but--no.

    I didn't say (none / 0) (#18)
    by NYShooter on Sun Apr 26, 2009 at 03:09:56 PM EST
    Bondholders "being in line...." They're a separate group. I was referring to the other poster's question regarding "creditors, secured and unsecured," not bondholders.

    Bondhlders (none / 0) (#59)
    by BackFromOhio on Sun Apr 26, 2009 at 07:20:57 PM EST
    are in effect lenders.  It is my understanding that for those who hold bonds subordinate in right of payment to other loans, they are often on the short end of the stick in bankruptcy.  Secured creditors get paid first in a bankruptcy, with "senior" secured -- having priority in right of payment coming first, and then junior secured, then senior and junior unsecured, and then equity holders.  Perhaps GM bondholders are willing to negotiate with the Feds because they, and/or GM (& thus their investments overall), will come out ahead of the results they'd receive in a bankruptcy.



    Right You Are... (none / 0) (#60)
    by santarita on Sun Apr 26, 2009 at 07:47:53 PM EST
    about the order of priorities in bankruptcy.  But don't forget that some of the bondholders and other large unsecured creditors may have purchased protection (e.g. credit default swaps) so they may have less incentive to negotiate.

    Creditors, even well-secured creditors, take into consideration the time and fees that a contested Chapter 11 would take and so may have an incentive to take a bit less than they would otherwise receive in Chapter 11 if the other creditors agree to a pre-packaged plan.

    In the Chrysler situation, the banks that appear to be the sticking point are the ones who made, what they thought were short-term loans that would be taken out by a term lender.  At least, I believe that that is the case.


    Investors (none / 0) (#17)
    by Militarytracy on Sun Apr 26, 2009 at 03:05:20 PM EST
    And when your investment fails you lose!

    Who do you think they are? (none / 0) (#51)
    by Big Tent Democrat on Sun Apr 26, 2009 at 06:28:17 PM EST
    And what about them makes them immune from a haircut?

    Not Immune From A Haircut... (5.00 / 1) (#57)
    by santarita on Sun Apr 26, 2009 at 06:58:57 PM EST
    because no one is immune.  

    My suspicion is that some of the parties at the barbershop might be sovereign wealth funds (China), other foreign creditors and pension plans.  And that those with credit default swaps could trigger a run on the issuers.  It's the cascading series of defaults that will cause serious systemic consequences.  

    I think Geithner believes that the problems are temporary and with some government assistance, a problem will be avoided that will have more serious consequences and cost us much more.


    Plus ça "change"... (none / 0) (#5)
    by lambert on Sun Apr 26, 2009 at 12:39:44 PM EST
    ... plus c'est la même chose.

    On NPR yesterday, (5.00 / 1) (#7)
    by oculus on Sun Apr 26, 2009 at 12:56:15 PM EST
    Marketplace reported auto bondholders are negotiating with federal government for better deal if Chrysler files bankruptcy. Better payout and more control of Chrysler.

    it's a start..... (none / 0) (#8)
    by NYShooter on Sun Apr 26, 2009 at 01:08:13 PM EST
    Now, if the Government took a similar line with the banks as they did with the autos, we might get somewhere.

    Or, as we say in Russia (none / 0) (#6)
    by NYShooter on Sun Apr 26, 2009 at 12:49:37 PM EST
    "мы ввернуты"

    (we're screwed)


    My Prediction... (5.00 / 1) (#9)
    by santarita on Sun Apr 26, 2009 at 01:17:43 PM EST
    Citi, BAC and maybe Wells, as well as some regional banks will be told that they need to raise capital and/or sell business lines or assets (like the toxic assets). They will have 6 months from May 4, 2009 to do this.   Some of the banks will not be able to raise enough capital through private parties and will go to the government.  At that point, if not before, CEOs and Boards will be replaced or put under significant government control.  

    The mistake that Geithner made was to talk about "stress tests" because to most people this means something that gets a pass or fail.  He should have not used that shorthand phrase.  He should have said that the bank examiners were going to analyze the banks' capitalization needs.  

    BAC may be a special case in light of the questionable antics of Bernanke and Paulson as exposed by Cuomo.  

    So far, Geithner has proceeded in a manner consistent with taking appropriate action - find out the scope of the problem, determine capital needs, inform the banks, give them the opportunity to raise the capital within a reasonably short period of time and then take action.  

    If May 4th comes around and Geithner announces that no bank has to raise capital, then I'll join the ranks of the suspicious.

    Nothing has changed. (none / 0) (#20)
    by ChiTownDenny on Sun Apr 26, 2009 at 03:12:02 PM EST
    The "stress tests" were always about sufficient capital levels.  Efforts by the MSM, and non-MSM, to imply otherwise is disingenuous.  
    The "19" represent 50% of Amarica's financial apparatus.  The U.S. has stated it is not willing to risk the apparatus.  Capiatl will be provided, privately or publicly.  Nothing mysterious going on here.  

    except that these guys should have already (5.00 / 2) (#22)
    by of1000Kings on Sun Apr 26, 2009 at 03:28:35 PM EST
    had sufficient capital...

    I thought that's why they are banks...unfortunately I am wrong...

    these banks have turned out to be more like Bookies who don't have the coin to pay off some of the bets they've taken on...

    then again, I thought bookies were illegal...guess I'm wrong again...


    You must be from the streets :) (none / 0) (#23)
    by Militarytracy on Sun Apr 26, 2009 at 03:38:05 PM EST
    Those of us from the burbs just can't seem to understand the difference between a bank and a bookie.  Of course we will eventually figure it out whether we like it or not, and then we will be streetwise.

    With all due respect, (none / 0) (#24)
    by ChiTownDenny on Sun Apr 26, 2009 at 03:47:27 PM EST
    what world are you living in?  Real estate, auto loans, credit cards, all types of loans are being defaulted upon.  Captital keeps the banks going, even with the significant credit loss writedowns.  
    Let me be clear; Wall Street is culpable for extending credit to those who, in "normal" times, would otherwise not receive it.  But main street is also culpable for taking out credit upon the financial "wish and a prayer" theory.  From my point of view, I am forced to deal with the consequences of those who perpetrated this fiancial calamaty.

    The banks were loaning money (5.00 / 1) (#25)
    by Militarytracy on Sun Apr 26, 2009 at 04:04:09 PM EST
    using lax and often fraudulent qualifying because the real short term fat money was in the derrivatives they were creating out of the loans.  Now all those pathetically qualified for loans are being defaulted on and the banks already made their big money and spent it.  This was an administration and management utter and complete failure to desire to follow any sort of responsible business model and now we have wholesale insolvency.  Fire all the uppercrust of the failures, take them all over, the derrivatives were crap investments to begin with so everyone into them loses because that is what happens when you make crap investments.......the CEO's ran their banks into bankruptcy and they are bankrupt now and that's that.  Doing this will not end our need for banks and we will have banks.  We will have solvent banks again.

    And the banksters put a gun to the borrowers' (2.00 / 1) (#27)
    by ChiTownDenny on Sun Apr 26, 2009 at 04:33:49 PM EST
    head to take out credit!  Yup!  I, too, was offered credit for my primary residence and for financing my second residence.  Phenomenal interest only credit.  Perhaps I, and the 90% of Americans who are current with their bills, but short on their 401Ks and other investments,  would have been better served to take the gamble.  Then, I'd be screaming and shouting "it's the banks fault", too!

    Ordinary people.... (5.00 / 2) (#31)
    by trillian on Sun Apr 26, 2009 at 04:58:22 PM EST
    ...usually believe what the "experts" tell them. The "experts" told them they qualified for a loan. But of course it was all about the "fees". They didn't care if the borrower defaulted because it would be off their books when they chopped it up into little pieces and sold them to investors for yet another "fee".

    The man in the street does not know what he is qualified for. He takes the word of the banker, the real estate agent and the appraiser .....who were all in on the scam.


    You're right! (2.00 / 1) (#35)
    by ChiTownDenny on Sun Apr 26, 2009 at 05:16:28 PM EST
    The "experts" did sell a bill of goods.  However, why is it that 90% of us didn't buy?  The "experts" contacted each of us (mailings, telemarketing, friends of friends, ...).  
    BTW, I have a bridge in Brooklyn I'd like to talk to you about investing in...!  Puhleeze.

    What BS you tghrow around (5.00 / 1) (#50)
    by Big Tent Democrat on Sun Apr 26, 2009 at 06:27:31 PM EST
    The banks did it. IT is on them.

    But... (none / 0) (#53)
    by trillian on Sun Apr 26, 2009 at 06:31:07 PM EST
    ....even if ALL delinquent mortgages were to go into default, we are only talking about $30bill....so why is Geithner giving trillions...with a T... to his buddies in Wall St?  

    Methinks more than delinquent mortgages are the problem.....but it's easier to blame joe sixpack than the fraudulent banksters


    Hey, I'm not saying (5.00 / 1) (#38)
    by Militarytracy on Sun Apr 26, 2009 at 05:46:49 PM EST
    those taking out the loans aren't responsible for their part in this but if they are broke you can't do much about that now can you unless you want to start up some debtors prisons.  That is why is you have to make loans to those who are credit worthy and because there is risk involved..that is why the banks charge us interest and that is why they get to make that money! If the banks are making loans just to create loans though and didn't care if people were credit worthy, and those loans are defaulted on - that's the bank's fault and the bank's loss and the bondholder's loss and the creditor's loss and shareholder's loss......that isn't my loss if I'm not one of those players!  That is the nature of the game in this jungle, and if you want that game to stay functional you have to play by the rules period.  If you try to make the innocent have to pay for the playas, the game will go away for about 20 years like it did in the 30's when they broke the snot out of everything.  Because nobody wants to abide by the rules of the business jungle maybe it should away too until the playas can get with the real program again.

    I agree with so much of what you say (none / 0) (#43)
    by ChiTownDenny on Sun Apr 26, 2009 at 06:22:42 PM EST
    and what you have said on this subjeect, except:  "(if) those loans are defaulted on - that's the bank's fault and the bank's loss and the bondholder's loss and the creditor's loss and shareholder's loss......that isn't my loss if I'm not one of those players!  That is the nature of the game in this jungle"
    Look at your 401K; look at your real estate; look at your job security.  If you're like me, all of it is down.  It is down not due to the responsible action most of us have taken.  Yet, if our "too big to fail" financial institutions collapse, the risk to our 401k, real estate, and job security is overwhelmingly increased.  Just look at what happened to the economy and domestic and international finance after the collapse of Lehman.  Regardless of our participation in this quagmire, we are all stuck with cleaning it up.

    Our job security (5.00 / 1) (#46)
    by Big Tent Democrat on Sun Apr 26, 2009 at 06:25:01 PM EST
    does not depend on Citi's survival. Stop lying about that please.

    My small pension, (5.00 / 1) (#56)
    by MO Blue on Sun Apr 26, 2009 at 06:53:04 PM EST
    which I worked 25 years to get and I need, does depend on Citi's survival. Citi has many thousands of lower level retirees worldwide whose survival will be jeopardized if Citi fails. They never made the BIG BUCKS and did not create the problem but they will pay while the big guys sail away on their yachts. Another side to the coin.

    you don't HAVE to participate (none / 0) (#61)
    by of1000Kings on Sun Apr 26, 2009 at 08:12:25 PM EST
    in a 401K do you?

    See... (3.50 / 2) (#34)
    by Romberry on Sun Apr 26, 2009 at 05:00:50 PM EST
    ...post 4165.

    (M)odern American households are worse off than their counterparts of a generation ago, even with an additional breadwinner. . . Today's families literally cannot afford not to borrow, and unregulated financial products, with their limitless interest rates and myriad fees, are literally killing them.

    Next time you get ready to post a sarcastic comment that effectively blames struggling wage earners for borrowing in a system that is set up for expanding EZ access to credit and promoting asset bubbles in lieu of wage gains in proportion to gains in productivity, you might want to step back and look at the issues in a more in-depth and complex fashion.

    You're disingenuous! (none / 0) (#36)
    by ChiTownDenny on Sun Apr 26, 2009 at 05:21:57 PM EST
    You obviously are confused about the term "credit"!  You appear to be referring to income (or lack of income).  Get your arguments aligned!  Low income is a wholly differnet subtext.

    STOP! (none / 0) (#37)
    by ChiTownDenny on Sun Apr 26, 2009 at 05:25:54 PM EST
    Your troll-rating my comments is tiresome.  I, too, can troll-rate.  
    Argue the facts, or move along!

    I think you deserfve 1 ratings (5.00 / 1) (#48)
    by Big Tent Democrat on Sun Apr 26, 2009 at 06:26:45 PM EST
    Your tiresome and disingenuous act on this is really ridiculous. Please stop it.

    A "2" is not a troll rating. (none / 0) (#40)
    by Romberry on Sun Apr 26, 2009 at 05:54:32 PM EST
    A "2" is a subjective call on what I perceive to be the quality of your comment. A "1" is a troll rating. If I thought you were merely trolling, I'd rate a "1". But I do in fact believe that you sincerely believe what it is you are posting, hence no troll rating. Anyway, as long as you keep blaming people who are living in an EZ credit/asset bubble society for doing exactly what the banksters want them to do (and which the stagnant and declining nature of wages over the last 30 years has left them no choice but to do in order to live as society demands), I'll keep rating 'em like I see 'em.

    Who's talking low income? (none / 0) (#39)
    by Romberry on Sun Apr 26, 2009 at 05:50:18 PM EST
    Not me. I'm talking about the substitution of EZ credit and asset bubbles for wages in an economy where 65-70+ percent is dependent on consumer spending. You mis-read, mis-interpret or both. Frankly, I just don't think you're very well informed (though you certainly think you are.)

    BTW... (none / 0) (#41)
    by Romberry on Sun Apr 26, 2009 at 05:57:54 PM EST
    ...as a former licensed securities dealer and professional in consumer finance, I assure you that I do in fact understand credit. Let me add that binary style either/or thinking which keeps nuance at bay is not your friend.

    You are dissembling (none / 0) (#47)
    by Big Tent Democrat on Sun Apr 26, 2009 at 06:25:31 PM EST
    It is the bank's fault (none / 0) (#30)
    by NealB on Sun Apr 26, 2009 at 04:56:59 PM EST
    It's not like their customers made them crash the economy.

    Who put a gun to the banks' head? (none / 0) (#45)
    by Big Tent Democrat on Sun Apr 26, 2009 at 06:23:51 PM EST
    You really are appalling on this issue.

    Argh! Games' over. (none / 0) (#54)
    by ChiTownDenny on Sun Apr 26, 2009 at 06:33:12 PM EST
    Bulls won, and BTD's back online.  Hmmm.  I have dinner plans.  (that means i don't fight with the administrator.)

    but should they not have already had the capital (5.00 / 1) (#26)
    by of1000Kings on Sun Apr 26, 2009 at 04:16:16 PM EST
    to cover the losses?  or are the capital requirements only set up for a 'great' economy?

    again, it's like a bookie who takes a 100-1 bet without the money to cover in case the bet wins (of course there's only a 1 in 100 chance that you need the money, but the chance is still there)...

    it seems like right now that in terms of banking the bookie would only need a few dollars in hand to cover that $1 100-1 bet, rather than needing the full 100 in case the bet wins...

    I guess that's where AIG comes in...
    maybe the next time I go to the gamblin' boat I can see if AIG will insure me on my loses...

    you're point is well taken, though, you're not the first person who has asked me what world I live in...(I live in this one, but as a person who expects perfection in any job I do I don't fit in very well)


    Well, you did make me giggle. :) n/t (none / 0) (#29)
    by ChiTownDenny on Sun Apr 26, 2009 at 04:53:04 PM EST
    one could argue that giggling (5.00 / 1) (#32)
    by of1000Kings on Sun Apr 26, 2009 at 04:59:19 PM EST
    is the most valuable asset in this world..

    it's really the only way to deal with it...you can't compete with the Bildebergers of the world, they've already entrenched too much power...


    And yet (none / 0) (#44)
    by Big Tent Democrat on Sun Apr 26, 2009 at 06:22:48 PM EST
    you have been a joke on this issue from the beginning.

    CDSs (5.00 / 1) (#42)
    by Big Tent Democrat on Sun Apr 26, 2009 at 06:22:14 PM EST
    You know you are ingorning the elephant in the room. But then your apologist act for the banksters has been pretty appalling for a while now.

    You may be misunderstading my message. (none / 0) (#49)
    by ChiTownDenny on Sun Apr 26, 2009 at 06:27:06 PM EST
    I support salvaging the institutions.  The U.S. states that is their intent.  The U.S. states to do otherwise would be of significant risk.  I support those efforts.

    That is the problem (5.00 / 1) (#55)
    by Big Tent Democrat on Sun Apr 26, 2009 at 06:42:07 PM EST
    The institutions should not be saved. The system needs to be saved - by temporary regulatory takeover of insolvent banks.

    Oh (5.00 / 2) (#58)
    by cal1942 on Sun Apr 26, 2009 at 07:19:51 PM EST
    and I suppose that everyone on Main St. possessed the sophisticated knowledge to understand exactly what they were getting into.

    Your premise that Main St. shares blame with Wall St. is ridiculous.

    Many loan offerings were scam city from the start.  Loan originators booked anything they could get their hands on an pocketed the commissions.  The shadier the deal the higher the commission.  Even credit worthy borrowers who had the wherewithal to pay back a fairly written loan were scamed.

    Don't give us this crap:

    But main street is also culpable for taking out credit upon the financial "wish and a prayer" theory.

    The fault lies with the finance industry. They were the controlling party.  Originators, the professionals sought these people out and made them think they could afford the loan.  Anything with a pulse; just keep those commissions coming in.


    Exactly (5.00 / 1) (#28)
    by NealB on Sun Apr 26, 2009 at 04:41:30 PM EST
    I'm surprised this has been so difficult for young Barack. He doesn't seem to have a problem giving his political base a haircut; why does he dither so when it comes to the banksters and their ilk?

    Dancing.... (5.00 / 2) (#33)
    by trillian on Sun Apr 26, 2009 at 04:59:33 PM EST
    ...with them that brung'm

    Geithner is quite busy. He (none / 0) (#1)
    by oculus on Sun Apr 26, 2009 at 11:59:38 AM EST
    also has to worry about world poverty.


    Again, keep it simple (none / 0) (#62)
    by NYShooter on Mon Apr 27, 2009 at 01:25:35 AM EST
    Certainly the banks issued many classes of bonds; from the highest rated, secured by cash, or its equivalent, to junk, virtually worthless.
    My point was that there are enough high grade bonds in the hands of investors that, converted to equities, would provide more than enough of the capital shortfall most of these banks are experiencing.

    Even if you excuse the first Tarp 350 billion, taxpayer funded, panic bailout, why would you want to give them any more of our money? The public thought the money was given so the banks could start lending again, but they couldn't. They needed the capital to pay the bondholders their interest. If the public knew their money wasn't going for the purpose of kick-starting the economy (as they were lied to into believing) but to pay the fat cat bondholders their interest (yes, yes I know...China, pension funds, whatever) they might have had a slightly more animated reaction.

    There is simply no justification for the Government to be involved in bailing out the banks when the principals involved have it within their ability to negotiate a Capitalist, Free Market solution.

    But, of course they won't. And why should they when the Government is willing to provide all the capital, take on all the risk, while our money goes directly to the bondholders.

    To add insult to injury, many of these "secured" bonds are secured by mortgages; the very same mortgages that make up that wonderful land known as Toxic Assets > Troubled Assets > Legacy Assets..............The Sh*t Pile. And as long as Geithner keeps shoveling our money to them, they can flick their noses at us suckers, while singing the tune, "our sh*t don't stink. na, na, na."