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| User Info | The Fed has no clue...; entered at 2007-12-02 03:26:28 | |||
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Theneedles Posts: 3259 Registered: 2007-08-31 
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Yes, this situation has been horribly mishandled by various government and quasi-government entities. A deeper and bigger hole is now being dug. A good example is Countrywide. They should have been allowed to fail. Instead they were given $51 billion in loans by the FHLB for which Countrywide put up $62 billion in collateral. If Etrade's valuing of Mortgage backed securities (27% of face-value - the optimistic value, others say 11%) is the number to go by, then Countrywide's collateral is worth around $16 billion. A person has to be absolutely delusional to think that Countrywide will be paying that money back instead of just forfeiting their collateral. The FHLB, which will eventually be bailed out by the taxpayers, basically gave Countrywide $35 billion. The numbers can be found here: http://today.reuters.com/news/articleinv.... So now the government via the FHLB will say "Hey, we're already on the hook for $35 billion to Countrywide so we can't let them fail now!" It's a complete ****ing disaster. This is just the start, there is going to be more and more of this ****. If any company was the poster child for being allowed to fail it was Countrywide. That even this company couldn't be allowed to go shows that there will be bailouts for everyone. Sickening. Then there's the attempt to "freeze interest rates" to "help out homeowners". Mish Shedlock writes about it better than I could ever hope to: http://globaleconomicanalysis.blogspot.c.... Quote:But let's get one thing straight right up front. This has nothing whatsoever to do with "saving people's homes". This is about saving financial institutions from collapse. And the plan will fail. It rewards those who cannot afford to pay. The details are not in yet but I suspect one measure of the ability to pay will be whether or not one is current on their loans. There was an article a few weeks back about how the asians were enjoying a good bit of schadenfreude. After the Asian collapse of the late 80s, the US was on its high horse telling them that the asian economies (Japan mainly) needed to "take their medicine", recognize and cut their losses (a lot of them in real estate - how bout that?), and extinguish the zombie companies if they wanted their economy to recover. Japan failed to do that and had years of slow economic growth. Apparently its easier to preach about good economic policy than it is to face the hard political realities involved in practicing it. 2007-12-02 03:26:28
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