Archive for July 2008
Dominoes - 2008-07-12 05:37:02
A real honest run on the bank and bank failure. And not of a minor bank. One of the biggies.
And it's only July, 2008 is already ahead in FDIC takeover count back until 2002. We'll see if they can compare with the 80s banking crises...
Washington Mutual, First Federal Financial, Bank of America (due to buying Countrywide for no apparent reason), Freddie Mac, Fannie Mae, all to follow...
Half of those are "too big to fail", so it'll be exciting.
Treasury Acts to Save Mortgage Giants - 2008-07-14 03:25:42
... the Bush administration on Sunday asked Congress to approve a sweeping rescue package that would give officials the power to inject billions of federal dollars into the beleaguered companies through investments and loans.
You can hear the printing presses starting up from here...
Since the US government is already $53 trillion in the hole (well almost a year ago given the trends since 2000 probably more like $58 trillion), printing the cash is the only real solution. So Inflation here we come (not that it's not already running way above what the numbers manage to report).
Interesting times... If things keep accelerating the way they have been in the last few weeks, this is all going to implode while Bush is still President which would be fair at least. Of course I expect those dollars just to get printed so fast that it drags out just long enough to crash on Obama's watch.
And the fuse gets lit - 2008-07-27 16:00:14
Seriously, they must think everyone is retarded.
* There is a better-than-even chance that the emergency measures will not be needed, meaning there will be no cost to taxpayers. If the lifeline is required, the Congressional Budget Office said, there is a 5 percent chance that the companies may need $100 billion but more likely would need $25 billion.
...
* The bill would increase the federal debt limit by $800 billion to $10.6 trillion.
Yes, I'm sure there's a greater than 50% chance they won't spend a cent, and the total expected cost is : 0*.51+100*.05+25*.44 = $16 billion. That's why they also saw the need to expand the debt limit by 8 times what they claim is the 5% chance high cost...
One large side effect of this is that since the Treasury explicitly backs Freddie Mac and Fannie Mae, their bonds should end up being almost the same price as US Treasury bonds.
It will also mean that Freddie and Fannie will grow from holding 50% of the American mortgages to holding somewhere near 100%. Since you'd be crazy to be a mortgage originator and not send all your business to the US Treasury. So gasoline on the fire.
Pure insanity, the housing bubble in the US was caused by giving ridiculous loans that the borrower could never afford to pay, with the assumption that the house price would rise so it wouldn't matter. House prices rose because those loans meant buyers could pay way more than they could actually afford. And the whole cycle is the result of interest rates being held too low for too long. The fix is obviously for house prices to fall which will happen due to lending standards tightening as banks lose billions of dollars. So the Government steps in and tries to lower lending standards again. Seriously, if I can sell the mortgage I just wrote to the US Treasury, I'm going to have no standards at all...