Comments on: Politiczing the Bailout

By: genes

genes — Fri, 26 Sep 2008 23:51:08 +0000

As with any Dem proposal I’ll side with Groucho.

By: steveegg

steveegg — Fri, 26 Sep 2008 21:04:11 +0000

Judging from the release from Ryan, only about half of the of the MBS are currently backed by the federal government. The plan would allow the feds to back the other half, with premiums paid by the holders (slight problem; they don’t have the cash to do that).

In order to free up that cash, as well as cash to restart the credit market, there would be as-yet-unspecified regulatory and tax relief.

By: Shoebox

Shoebox — Fri, 26 Sep 2008 20:43:26 +0000

I just heard Boehner. Yes, sounds like an insurance plan. I’m not sure how that helps as I thought that the bulk of these bonds were insured. Isn’t that why MBI was having so much trouble a while back? I’m confused!

By: steveegg

steveegg — Fri, 26 Sep 2008 20:22:15 +0000

I haven’t checked the details of the House Republican plan yet (I should because Paul Ryan’s the main sponsor), but from what little I know of it right now, it’s more of an insurance plan than a direct purchase.

With a straight bailout, we’re talking about government assuming ownership of between $1.75 tillion and $7 trillion of assets. Given that, combining real estate and stock market capitalization, there is something around $30 trillion of publicly-purchasable assets, that is a staggering amount of assets that suddenly jumps into the government’s grasp.

By: Shoebox

Shoebox — Fri, 26 Sep 2008 18:50:17 +0000

Oh, I’m with you. I still can’t tell what the right thing is. I know damn sure that all the crap that has been put into this bill doesn’t need to be there. If you think this is the right answer than do it but you don’t need to feather the nest of Acorn, force renegotiation of mortgage terms etc. If you think those need to be done, deal with them separately.

Yes, I’ve heard the $700B is 5%. I’ve heard that the estimate is that the loans would be bought anywhere from 10% up to 40% of par. That seems like a really big range but could be true. Paulson originally said he wanted to pay nearly par for the loans. That had me rigid against the approach. Brhenanke later said it would work via an auction…that makes me more hopeful.

The net of all of this is that there doesn’t seem to be any other options being discussed other than doing nothing. Nothing so far, has not been a solution. Of course the guys who told you that Bear Stearsn, Fannie and Freddie and AIG would work…and haven’t, are also telling you this is needed.

It’s a tough issue which brings me back to my final point…someone needs to show leadership, propose a course and make it plain to the public why that course makes sense. That hasn’t happened yet.

By: steveegg

steveegg — Fri, 26 Sep 2008 18:35:38 +0000

I am one of those that needs to be sold on a “rescue” package, especially one that puts into the government’s hands trillions of dollars of real estate less than 116 days before, at least potentially, an unreconstructed Socialist takes the oath of office to become President. If it were 2005, or perhaps 2006, I would have a lot more faith that this would follow the Resolution Trust Corporation playbook, with the government only holding onto the troubled assets until such time the private market has recovered enough to reabsorb them.

One thing I haven’t really seen discussed; how much in “distressed” loans are we talking about? I recall seeing something on CNBC during the noon hour yesterday putting the $700 billion in up-front costs at about 5% each of total market capitalization and total value of real estate, but I know enough that since we’re talking about “distressed” loans, those loans will be bought at a fraction of the value of the loan.