No Runny Eggs

The repository of one hard-boiled egg from the south suburbs of Milwaukee, Wisconsin (and the occassional guest-blogger). The ramblings within may or may not offend, shock and awe you, but they are what I (or my guest-bloggers) think.

Archive for October 7th, 2008

Drunkblogging The Presidential Debate

by @ 16:10. Filed under Miscellaneous, Politics - National.

While Steve is off drinking in a public establishment, I’ll be here handling the drunkblogging responsibilities and drinking by myself at home!   We should start about 7:30 or whenever I get cleared by Mrs. Shoe.   Come join me for what should be a very animated debate.   Bring your best Snark!

R&E (4:11 pm 10/7/2008, steveegg) – Embed code added and post bumped to the top.

Bring Out Your Dead!

by @ 10:01. Filed under Economy.

In an offline conversation with one of our regular readers, Dad29, this bit came to mind. Many of you have seen this umpteen times. Watch it once more. When you do, imagine that the guy banging the gong is the FDIC, the guy with the body is a short seller and the knight riding through at the end, oblivious to all going on around him is SEC chair Cox.

Wait, watch it again and imagine that the guy with the gong are Fannie Mae and Freddie Mac, the guy with the body is a mortgage broker who knows the applicant can’t make the payments and the Knight is Barney Frank.

There are probably numerous other analogies that can be drawn to this bit from the current problems…take your try at it and leave a comment.

Government Knows Best

by @ 5:31. Filed under Economy.

As the economic events of the past few weeks have unfolded we’ve heard continuing cries from the Democrats that unregulated markets are bad and that the reason this “melt down” has occurred is that there wasn’t enough government intervention.   Now I know our regular readers are smart enough to know this not to be the case.   However, if pressed, could you provide specific examples where excess government interference has actually been a negative?  

Throughout this crisis, the government has taken an unusual role in picking winners and losers.   The picked Bear Stearns to be a loser and JP Morgan to be a winner.   The chose Lehman to be a loser but picked AIG to be a winner by virtue of the guarantees it provided to keep AIG afloat.   Most recently, the government chose Wachovia to lose and Citi bank to win….except it didn’t.

After determining that Wachovia was about to implode, the FDIC negotiated a deal for Wachovia to be sold to Citi for $1/share.   Along with the sale, the FDIC agreed to provide loss protection for anything in excess of $42billion, on Wachovia’s $312 Billion dollar mortgage related securities.   This approach had been similar to how the FDIC and other government agencies had been operating since May so no one questioned their logic, until……

Wells Fargo looked at the Wachovia assets and said “We’d like some of that!”   Wells Fargo liked it so much that they offered a stock transaction originally worth $7/ share.   How the heck did that happen?

The “funny” part about this is that Citi is now suing to get their governement approved deal.   I’m sure they view Wachovia as getting a $12 billion gift from the government!

Every one of the governments actions in this financial crisis has been as the weak side of a negotiation.   Imagine negotiating for the purchase of a house where you have cash, are ready to close and the seller is on the verge of losing the house to the bank.   I’ve done that a few times personally and I can tell you that you will find the lowest price possible on that house at that time because the seller has few, if any, options.   That is the situation that the government has been in, they’ve been negotiating forced sales and those will always garner the lowest bid.

It’s fairly obvious that the “crisis” we were all warned of in the last two weeks has not been  abated by securing the magic elixir of the bailout plan.   If anything, the markets have either laughed or yawned at the effort and have returned taking their ques from other stimuli, real and imagined.   Wells Fargo showed us that if the government stays out, there may be temporary pain but ultimately, quality assets will find buyers.

Oh, and did I mention that with the Wells Fargo deal, the government isn’t guaranteeing $280 billion dollars of mortgages?   Wells Fargo is buying Wachovia “As Is.”   Tell me again what good the government is doing in these deals?

[No Runny Eggs is proudly powered by WordPress.]