Jonathan, I have a slightly different take on the Mary Robinson fiasco. Whether it becomes a “tipping point” for the American Jewish community in political allegiance is not yet clear. But it marked a sharp departure in the behavior and, I think, perception of mainstream Jewish organizations. A combination of support for Obama’s liberal domestic agenda, a desire to maintain access to the White House, and a heavy dose of wishful thinking had contributed to an almost total absence of sharp public criticism of the White House’s increasingly hostile stance toward Israel.
No more. The inhibition has been broken with the recognition now dawning on Jewish Democrats that this is a president lacking in affection and respect for Israel and for the sensibilities of pro-Israel voters. The aversion to conflict with the administration has been overcome, and I suspect the administration won’t face as pliant a Jewish community in the future.
And for those Democratic lawmakers who present themselves as friends of Israel but remain mute when outrage is piled upon outrage, they will find themselves in an increasingly perilous spot. If they claim to be friends and defenders of the Jewish state, they too will be expected to speak up. And if not, supporters of Israel will look to others who don’t place partisan politics above principle.
As for the president, he shows no sign of self-reflection. His worldview is certain and his determination to create that “daylight” between Israel and the U.S. won’t be lessened by this episode. But thanks to Mary Robinson, there is also daylight between Israel’s supporters and the White House.
This crisis won’t work itself out on its own,however,Geithner doesn’t know the way.
“The U.S. government wants to clear as much as $1 trillion in soured loans and securities from bank balance sheets with its latest bailout plan.
That might prove a short-term respite. No sooner might the Treasury Department mop up those assets than $1 trillion or more in new ones spring up to take their place.
That is due to the potential return of assets held in so- called off-balance-sheet vehicles that banks may soon have to put back onto their books. The end result may be that banks are in no better shape to increase lending even after the government bailout”
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_reilly&sid=akv_p6LBNIdw
Clearing these instruments off the banks’ balance sheets is useless and ridiculous if they just get put on the balance sheet of some other financial institution. The bundled mortgages need to be bought up, disassembled, and reattached to the underlying real estate which is supposed to be the security for the damned things in the first place. Only then can the underlying mortgages be evaluated and, if necessary, renegotiated or foreclosed. Just moving these same opaque securities around from one balance sheet to another does nothing at all to solve the underlying problem. This is just flatly insane.
Uh-oh: Conservative NY-20, where party chairman Michael Steele bet his future and Republican registrations outstrip Democratic by 60%, looks to be going blue.
With less than a week to go to the special election, a new Siena Research Institute poll shows Scott Murphy (D) leading Jim Tedisco (R), 47%-43%. Tedisco was up by double digits just weeks ago.
I guess crowing about AIG and the stimulus and the budget is a losing hand for conservatives. This race should have been a lock for Republicans.
#2,
I’m sorry to say,but I believe that the only way to get rid of them is to negate them all-POOF;everybody ends up taking the hit-let the chips fall. If it takes weeks to unwind just one CDO,there’s not enough legal-accounting labor in the world that could unwind all of them.
Do you remember The Sorcerer’s Apprentice from Fantasia with Micky Mouse and the Brooms with the Water Buckets?-perfect metaphor.
The real outrage will come when it’s revealed how much the government spent buying up these toxic assets. The problem with buying toxic assets isn’t how to value them, because if you’re the government it doesn’t matter what they’re actually worth. You just pay whatever will keep the bank afloat because profit isn’t your concern. The Treasury doesn’t want to do that though because of the political consequences of what we all know is really a bailout. And unlike TARP, this won’t be a loan, but an honest to god bailout. Whatever the Treasury has to pay to keep banks afloat will likely be far more than what taxpayers will tolerate, and they’ll be a political backlash just in time for the midterm elections. The solution: outsource the purchasing to a private investor you can dump the blame on later. Just like the AIG bonuses. We’ll probably just slap a 90% tax on the private investors too.
The AIG outrage “thing”, the employees of AIG now quitting, and the growing number of banks that just can’t wait to return their TARP money have come together to yield a recovery that at least will be much slower as the government has now proven itself a “useless partner.” The Banks will now “grunt it out” rather than take any more money and the endless “strings” that goes with it. In fact, I expect at least one bank, in the next couple of weeks, to return the money .. even before the Treasury sets up a system to take it back .. embarrassing the hell out of Geithner et al.
Now, if O’Bama and Geithner can convince the remaining few “rich folks” out there that they won’t become poor in this scheme, and he can promise them a “get out of jail” card when they get pillaged by the Congress-critters, and if, in fact, they do make some money and are allowed to keep it, then I’ll believe the new “Geithner” Plan will possibly work.
For now, it’s a real hard sell and my money is … under my mattress. The waters appear to be so polluted that I expect this whole AIG episode to be the downfall of the “O”Bama Recovery” going down in the history books right next to Smoot-Hawley.
A “toxic asset” is like maybe some mortgages bundled up and some of the mortgagees aren’t making their payments, right? So, is there a list of these things? Me and some of my buddies that would ordinarily lay some cash down at the track might be interested in getting in on this. If there is a list and there’s something we like does the government help us out with the deal, maybe with some financing? Any pictures of the property? Names and addresses? Of course this can’t be a total mystery, we’re in the era of transparency and the information age, so everybody probably knows all about this, us horse players have just been looking at the wrong paperwork, getting excited about those three year olds. So, where do we go for the info?
#4, that could be, but I don’t know and you don’t either because the information isn’t out there to make the evaluation. What I do know is that a lot of people are still paying on their mortgages, and those payments have to be going SOMEWHERE. The checks aren’t just evaporating in the mail. I also know that at any given moment any mortgage is always worth at least the market value of the underlying property less the transaction costs to foreclose or renegotiate. Jeez, the last thing I thought I would ever hear is that America’s big problem is that we don’t have enough lawyers or accountants.
#8,
So they divided a paying mortgage into ten pieces and sold each of the ten pieces ten times,and then they wrote 100 CDOs for each of those pieces. Do really think that this Ponzi scheme was done honestly? And that’s why so much of this is “off the Books”. And when the taxpayer finds out about these games, well,well well.
Eppur Si –
Payments are being made, but they’re less than the expected yield, and thus less than investors originally paid for the securities, so they’re looking at guaranteed losses on their investment. Hence the “toxic” label. The problem is no one knows how bad those losses are. It it were just private investors, we’d all just say “Sorry buddy, you made a bad investment.” But since banks were also caught in this, simply allowing them to fail would have more serious impact throughout the financial sector. Congress and the administration have decided allowing that would be worse than running up huge debt. Which is open for debate of course.
The value of the real estate isn’t helpful in determining the securities’ price. A mortgage may be evaluated at the price of the underlying property, but that doesn’t mean the bank or investor or security administrator or whatever can actually get that value if the loan fails. If you’ve ever sold a house then you know it can take months to clear it even in a good market. In this one it’s estimated that there’s a year’s worth of housing inventory on the market. The value of these homes has fallen below the mortgage principle anyway, so even if you could sell it at full market price, you have a guaranteed loss. And you can’t get full market price for the home unless you’re willing to hold onto the house for six months to a year or more. And if you do hold onto it, you incur the expense of foreclosure, evicting the current residents, which alone can take up to a year, repairing damage done by angry former residents, property tax and utilities, real estate transaction costs, protecting the home from looters trying to break in to steal the toilets and copper wiring, and keeping ACORN from breaking in just for the hell of it. That’s why most banks that foreclose auction the house off, usually for half its value (although some really expensive property is selling for 1/5th of its value – Michael Vick’s $3.2 million home couldn’t draw the minimum bid of $160,000 at auction), and eat the loss, because the first loss is usually the best loss.
Most of you guys are looking through the wrong end of the telescope. Bernanke, Geithner, and Bair all realize that marking these assets to market is killing the banks’ balance sheets. They needed a way to let the banks use mark-to-model accounting (which is probably permitted under FAS 115) without actually letting the bankers do the modeling. So the three wizards created entities that will offer a mark-to-model prices for the assets, but will do so credibly because they have skin in the game. It’s not a lot of skin, but it’s skin enough.
That’s all this is – a way to get to mark-to-model accounting with a credible modeler. Everything else, as the man said, is commentary.