Have you guys been following?

[Embar Angylwrath]

McCain's speech today was.. disgusting. After playing the White Knight, dramatically suspending his campaign, indicating he brought a coalition together, and then watching most Republicans bail on the legislation... he seriously misplayed this gambit.

Having said that, most Americans won't notice. I again repeat my mantra, America will get what it deserves.

On Obama, he too has devolved into playing the game of McCain. Instead of addressing the issue directly, and putting a plan out there for Americans to consider, he has started the finger pointing game.

Here's the reality. Over 90% of mortgages are current. The default rate is about 8% or so I think. Allowing for further degradation in the CDOs due to further defaults, lets drop that number to 80% (which would mean 20% of Americans go into foreclosure, which is almost impossible). Those CDOs, at WORST, are worth 80% of face value. And I bet most banks are willing to take 70% of face value just to get them off the books, stabilize balance sheets, and move forward. A 30% reduction in balance sheets would be recouped in 5-10 years if the economy got off life support.

If banks offered those CDOs at 70% of face value, I'd buy as much as I could afford to buy, and I'd probably make 20-30% on the deal. I bet other vulture investors would do the same. If the government offered to buy CDOs at 80% of face value, there would be a market competition for those CDOs by vulture investors, and the majority of those CDOs would be snapped up, essentially setting the floor price for those types of securities.

If you add to that some legislation that allowed people to file bankruptcy and keep their homes, you'd see a frenzied sell-off to the government and vulture investors, and may bank CEOs would whack off into a sock-puppet for the opportunity to do so.

Make it painful on the banks to keep liquidity frozen, and give them an out at the same time. That will resolve this crisis.

[Harlowe]

On Obama, he too has devolved into playing the game of McCain. Instead of addressing the issue directly, and putting a plan out there for Americans to consider, he has started the finger pointing game.

I must have missed something (and I'm a news junkie, I'm all over paper sites and news sites continuously all day), because that's not at all what I've seen in the press with regard to this, it has been his urging calm and reassuring people that some sort of agreement would be worked out. Whether that is a "bailout" or some other solution, I don't know, but the only blame pointed back at McCain with regard to this bill failing was in response to McCain blaming him. The primary message he's been putting out has been more of a "simmer down" kind of thing.

Scolding congress & McCain for his immediate comments are the only blame I've seen and that's just recently, not when the bill first failed.

"This is a moment of national crisis, and today's inaction in Congress as well as the angry and hyper-partisan statement released by the McCain campaign are exactly why the American people are disgusted with Washington," the Obama-Biden campaign said in a statement released shortly after the vote.

The statement went on to say that every American "should be outraged that an era of greed and irresponsibility on Wall Street and Washington has led us to this point."

Looking at how they both responded immediately is extremely telling. Obama didn't come out blaming, he came out trying to keep people from flipping out encouraging calm. McCain came out whinging and blaming.

[Lurker]

On Obama, he too has devolved into playing the game of McCain. Instead of addressing the issue directly, and putting a plan out there for Americans to consider, he has started the finger pointing game.

Obama isn't President yet and he's not on the congressional committee that is debating this. He's done all he can at this point. He's issued a statement listing the principles the legislation needs to follow to gain his support, he's been in daily contact with all the key players from the White House and Congress, and he's made public pleas for calm and resolve.

That's quite a bit different from McCain, who very publically inserted himself in the middle of all this with the phony campaign suspension and then actually tried to take credit for the bills passage this morning, hours before the bill failed to pass.

[Ddrak]

Here's the reality. Over 90% of mortgages are current. The default rate is about 8% or so I think. Allowing for further degradation in the CDOs due to further defaults, lets drop that number to 80% (which would mean 20% of Americans go into foreclosure, which is almost impossible). Those CDOs, at WORST, are worth 80% of face value. And I bet most banks are willing to take 70% of face value just to get them off the books, stabilize balance sheets, and move forward. A 30% reduction in balance sheets would be recouped in 5-10 years if the economy got off life support.

No.

You clearly don't understand what a toxic CDO is, and they sure as hell aren't worth 80%. In fact, they'll be lucky to break 20% in most cases. Here's a long-winded primer for you: http://thismatter.com/money/bonds/types/cdo.htm

The problem is the fact that the mortgages are stratified into tranches, and the best returning tranche (for obvious reasons) over the last decade is also the most risky one. You're thinking the CDOs in question are based evenly on the mortgages across the country, but they are actually based on the riskiest mortgages which are offered at the highest interest rates, then repackaged to spread the risk of foreclosure and magically increase their credit rating above the individual average.

Fact is, the whole lot are failing badly, and when you subtract all the accumulated liabilities on these toxic CDOs, they may even have negative value. Your 80% number is simply a complete failure to understand the crisis.

Dd

[Ddrak]

Oooh - here's a better picture of what CDOs are and why they are bad: http://www.portfolio.com/interactive-fe ... 007/12/cdo

The point being that CDOs aren't directly backed by mortgages. They are backed by the lower tranches of the actual collateralized mortgage securities - in other words they are backed by the first parts of the mortgage industry that fail in a falling market, thus making them essentially worthless in a real estate collapse.

Embar's thinking of RMBSs, not CDOs in his descriptions.

Dd

[Klast Brell]

I love how you guys drink the Koolaid. You blame Pelosi who voted for the bill and give the over half of the republican delegation who voted against the bill a free pass.

[Embar Angylwrath]

Oooh - here's a better picture of what CDOs are and why they are bad: http://www.portfolio.com/interactive-fe ... 007/12/cdo

The point being that CDOs aren't directly backed by mortgages. They are backed by the lower tranches of the actual collateralized mortgage securities - in other words they are backed by the first parts of the mortgage industry that fail in a falling market, thus making them essentially worthless in a real estate collapse.

Embar's thinking of RMBSs, not CDOs in his descriptions.

Dd

You're right, I was thinking RBMS, bot CDOs.

[Embar Angylwrath]

I love how you guys drink the Koolaid. You blame Pelosi who voted for the bill and give the over half of the republican delegation who voted against the bill a free pass.

Where'd you get that? No one is putting the entire blame on Pelosi. Plenty of blame to go around. However, she knew many of the Republicans were against the bill. Knowing that going into the vote, and watching the bill tank, why wasn't she able to get 12 of the 95 Democrats who were voting no to switch sides?

[Lurker]

However, she knew many of the Republicans were against the bill. Knowing that going into the vote, and watching the bill tank, why wasn't she able to get 12 of the 95 Democrats who were voting no to switch sides?

Nobody was jumping for joy at the prospect of voting for this. Both parties had to make compromises, and part of the negotiating process involves the leadership gauging what their party will or will not support. I'm sure Pelosi was told by the House Republican leadership that they had enough support to pass the bill. It was expected that both parties would do equal lifting to get it passed or the measure never would have reached the floor of the House.

The Democrats managed 60% in favor and the Republicans managed 33%. The bill making it to the floor and then not passing was the result of 1) a failure in leadership on the part of the Republicans, or 2) a total screwup in the negotiating process on the part of both parties, or some combination of 1 and 2.

[Harlowe]

Uh, where in the world are we giving Republicans a free pass? Pelosi was an idiot, as she usually is. She's an arrogant, grand-standing shitty speaker.

I clearly said "shame on them" if they voted against it just because of her speech, but shame on her for political grand-standing in a partisan way when putting forth a bill that was to be presented as bi-partisan. You could go "wahh poor baby did it hurt your feelings?" but she behaved irresponsibly and lacked leadership, but she was equally a baby for making the stupid comments to begin with. This isn't the first time she's been a bombastic douche.

So what she is to blame for setting the tone that this was a partisan fight. She is to blame for giving fence-sitters, undecideds & those that were teetering away from "yes' to vote "no".

Now 40% of the Democrats didn't want it either, so it's not like this was a bill everyone was on board with to begin with. Hell if it was so great, her partisan speech should have rallied a much larger % of Democrats, but it didn't. It didn't because, everyone isn't sure this is the right bill to pass and no one likes having a huge decision bulldozed through congress (hello war in Iraq).

[Embar Angylwrath]

I know we Americans tend to be incredibly myopic, and sometimes we think the world begins and ends at our borders, but have you guys been tracking the world markets, and what is happening to the banking systems in other countries? England has already nationalized a failing bank, France had to intervene to save a bank, and the Euro has fallen dramatically against the dollar.

The reports are that heads of state in just about every western country are communicating with the White House on this. Seems there's a general consensus that if the US economy fails, its going to take a lot of other countries with it.

[Harlowe]

This is some scary shit about the economic crisis, I'm only half way through it, but so far - I highly recommend it for it's information.

Princeton Economists (warning it's an hour long)

http://es.youtube.com/watch?v=Wj_JNwNbETA

[Ddrak]

I know we Americans tend to be incredibly myopic, and sometimes we think the world begins and ends at our borders, but have you guys been tracking the world markets, and what is happening to the banking systems in other countries? England has already nationalized a failing bank, France had to intervene to save a bank, and the Euro has fallen dramatically against the dollar.

Yeah, I've been watching that. The Aussie market has been taking a bullet too. I don't get that the USD has been gaining overall against most currencies during this crisis. Makes no sense at all to me. The world's financial systems just seem to be jumping around with no particular sense at all.

Dd

[Harlowe]

Overnight lending markets still flashing red

http://blogs.wsj.com/marketbeat/2008/09 ... shing-red/

I too hope people are lulled into a false sense of "maybe this isn't so bad" because of the 250 recovery today.

[Ddrak]

Uh, 485 recovery (probably one of the biggest single day rises ever), but yeah. The market is in overcompensate-kneejerk mode. Confidence is completely shot (and I'm not just talking about the US markets). It's really not good at all.

Dd

[Harlowe]

Banks are so desperate for funds that they paid 11% for $30 billion in overnight funds from the European Central Bank, up from 3% just Monday.

Yeah, that's not a lot of confidence.

[Tarfang_Trubasher]

Senate gets a shot tonight to pass a $700 Billion "rescue" bill.

So, it's down $50 Billion...and it's not a bailout, it's a rescue.

The "people" spoke in the house, guess that wasn't good enough.

Call your Senators!

-TF

[Harlowe]

I don't think there is much hope of a call campaign changing the course of the vote tonight. I'd be shocked if it didn't pass - after the stock market dump after Monday's failed vote in the House and party leaders from both sides seriously advocating for it this time.

But more power to ya! I certainly wouldn't discourage people from letting their elected officials know how they feel. I just hope they are basing it on actual knowledge of what is in the bill and being against it rather than "don't give Wall Street Fat Cats my money!!" hysteria.

[Tarfang_Trubasher]

Yeah - I know, there's very little hope, but...

It's still just seems "too soon" for any real adjustment. I fear a "Patriot Act" style law that isn't well thought out may happen. People are still discussing ways to "fix" or "slow" this issue - yet, legislation is ready to be voted upon. Add to that, the problem is a global one, not just in the US. I wonder how much we really know right this second. Is the number $750 billion, or $700 billion? If $50 billion is the difference between pass/fail...isn't that a red flag for anyone else? I also don't like the amount of pressure that's being applied. It just reeks of something shady and forced.

I still wonder if there wasn't a "smarter" way to approach this crisis. Perhaps an "emergency lift" of red tape to increase refining abilities, to offset the cost of oil. Or a gag order on certain special interest groups that are blocking innovations like wind power from being implemented. Maybe the members of Congress could take a pay cut or get downsized like the rest of us

-TF

[Harlowe]

I liked the give all homeowners $5,000 to either pay on their mortgage or put into a CD. Don't think it would have worked, but I liked it!