I assume the is for the article- the numbers the guy quotes are for all outstanding loans. It tells us nothing about what the new loan market is like.

Dinki: I assume the is for the article- the numbers the guy quotes are for all outstanding loans. It tells us nothing about what the new loan market is like.

naysayer!

Everyone who had a brain knew this already. There are a million lenders in the world who will lend to people who have good assets, credit and jobs. It's the loans to the deadbeats that are a problem.

KIA: Everyone who had a brain knew this already. There are a million lenders in the world who will lend to people who have good assets, credit and jobs. It's the loans to the deadbeats that are a problem.

There's a lot more people with bad credit than good credit and, for better or worse, those people buying things keeps the economic wheels spinning.

My 40th greenlight!

/so proud

KIA: It's the loans to the deadbeats that are a problem.

Bailout or no bailout those loans are not coming back. So basically we just got the air in our tires changed for a measly $700 bil. Thanks for that.

Well I was taken in. I'm not listening to the Treasury Secretary, Fed Chairman, or Warren Buffet agian. Those guys are idiots. What am I going to do with all this gold, ammo, and canned food? I guess I'll put it on craigslist.

badhatharry: Well I was taken in. I'm not listening to the Treasury Secretary, Fed Chairman, or Warren Buffet agian. Those guys are idiots. What am I going to do with all this gold, ammo, and canned food? I guess I'll put it on craigslist.

I'll buy it. For the coming Zombocaylpse.

Duh.

TeddyBallGame: My 40th greenlight!

/so proud

thEIr

badhatharry: Well I was taken in. I'm not listening to the Treasury Secretary, Fed Chairman, or Warren Buffet agian. Those guys are idiots. What am I going to do with all this gold, ammo, and canned food? I guess I'll put it on craigslist.

I'll take it.

bicentennialman: badhatharry: Well I was taken in. I'm not listening to the Treasury Secretary, Fed Chairman, or Warren Buffet agian. Those guys are idiots. What am I going to do with all this gold, ammo, and canned food? I guess I'll put it on craigslist.

I'll buy it. For the coming Zombocaylpse.

Zombies? They're SLOW. You need something fast - say, a Segway.

...Uh, tell that to my business banker.

"Say, we need to reauthorize our 25K line of credit"

"Sure, no problem. Your new ceiling is 11K even though your company makes 2x what it did when we wrote the first loan. Good luck expanding your operations."

VinnyDelpusio: ...Uh, tell that to my business banker.

"Say, we need to reauthorize our 25K line of credit"

"Sure, no problem. Your new ceiling is 11K even though your company makes 2x what it did when we wrote the first loan. Good luck expanding your operations."

Go to another bank.

IStateTheObvious
Go to another bank.

Never before has a user name and comment went so perfectly together.

Here, have these:

/hotlinked

NarrMaster: IStateTheObvious
Go to another bank.

Never before has a user name and comment went so perfectly together.

Here, have these:

/hotlinked

wow, props. that's good. took me a second. Haven't heard that in a while.

/just helpin' the slowbies

dave ramsey has been saying this shiat for a year and a half

Oh, clever. If you look back at the period immediately before the credit crunch (the week ended September 17, on which the author bases his analysis), there wasn't a credit crunch. So we obviously have nothing to worry about, as long as time stopped two and a half weeks ago.

The other thing to note, as pointed out at this article from BusinessWeek, is that not all of this lending is voluntary: "Banks are being forced to take assets back onto their balance sheets and keep loans they once would have shed. "That's actually the crux of the problem," says Lou Crandall, chief economist of Wrightson ICAP, a Jersey City (N.J.) research firm."

This would be encouraging except for the fact that Steve Forbes is a raving farking lunatic who doesn't know shiat, except how to choose a rich person to be his father.

yeah, no shiat.

So Wall Street threw away $1.2 Trillion in stock value in just a day to get around half of that out of the government? Bankers have already written down and/or sold $588 billion in subprime assets alone, and are going to exchange another maybe $350b (market value) in assets in an attempt to get $700b from the government?

So Banks/Wall Street are simultaneously cunningly creating a huge conspiracy across hundreds of financial institutions to engineer the crisis, but they are stupid enough to be losing more wealth and profits than they can possibly expect to get out of the government(s). And the bankers behind it that have large amounts of stocks, options and bonuses tied up in their banks performance on the stock market have sacrificed billions in personal wealth in this Machiavellian scheme as the stock prices of pretty much all financial institutions have crashed faster than the rest of the listed companies, and of course numerous of them are going to get sacked, or already have done. And this is all being done by people that can't add up I guess.

Funsucker: There's a lot more people with bad credit than good credit and, for better or worse, those people buying things keeps the economic wheels spinning.

So what if the economic wheels slow down because all they spend is their paycheck? It's not a bad thing. This ought not be a reason for people who are idiots with their money to be rewarded.

Instead of bailing out the banks, the government should just buy the houses for whatever is left on the mortgage.

The residents can then apply for a new mortgage under better terms from the government, but that should be unescapable debt like federal student loans.

Those that really shouldn't have houses can return to renting. Individuals that want a first or second house will have an opportunity to buy them from the government. If the government is collecting the mortgage payments (and interest) they should more than make the money back.

This way, the investors get their money (via paid off mortgages), the homeowners get relief (a free chance out of their mortgage situation, whether it be that they can't afford their mortgage or want out of a house that would be worth less than what they owe), and the government has an additional income stream, via people paying these new mortgages directly to them.

badhatharry: Well I was taken in. I'm not listening to the Treasury Secretary, Fed Chairman, or Warren Buffet agian. Those guys are idiots. What am I going to do with all this gold, ammo, and canned food? I guess I'll put it on craigslist.

SOoooo, how much you looking for for it?


/Loves some bright shiny crap.

"So what if the economic wheels slow down because all they spend is their paycheck? It's not a bad thing."

If that were the problem you (and the article's author) would be right. There's a reason Paulson was saying everything would be OK on the 14th and was proposing a massive program on the 20th.

Lehman.

The system, and Paulson, and I (to be brutally honest with myself) thought Lehman was not too big to fail. It was.

The Lehman failure made institutional cash funds break the buck, it completely froze the financial system, suddenly and traumatically. Perfectly good industrial companies are finding it impossible to fund not because they have any problems but because of fire-sale prices on their existing securities from funds that suddenly find themselves half their prior size.

When Paulson proposed his plan, it was probably double the size it had to be - by design. Just a few days later, it's probably barely enough. That's how fast things are happening. If the House doesn't approve it tomorrow, there may be literally no amount that will do the trick. Only the happenstance of Rosh Hashana prevented the price from becoming infinite before tomorrow's payday. That's how fast things are happening.

This article is like claiming on December 8 that our forces are overspending and overreacting because we hadn't been attacked as of December 2. If we listen to the author, we'll lose Midway.

Curious to see what, if anything, would break if we did nothing.

Seems theres billions of dollars invested in giant computers to simulate nuclear explosions, maybe they should be put to use doing something actually worthwhile, like simulating the economy and situations like these.

AppleOptionEsc: NarrMaster: IStateTheObvious
Go to another bank.

Never before has a user name and comment went so perfectly together.

Here, have these:

/hotlinked

wow, props. that's good. took me a second. Haven't heard that in a while.


Or it could be "screw off". Twice.

bicentennialman: badhatharry: ...For the coming Zombocaylpse.

Zombocaylpse (pops)?

KIA: Everyone who had a brain knew this already. There are a million lenders in the world who will lend to people who have good assets, credit and jobs. It's the loans to the deadbeats that are a problem.

Yeah, but Wall St is probably just waiting to go:

you guys are so lost.
You don't realize what this is all about.

We are bailing out other countries. Go check it out.

nosajghoul 2008-10-02 09:12:42 PM
Curious to see what, if anything, would break if we did nothing.

Seems theres billions of dollars invested in giant computers to simulate nuclear explosions, maybe they should be put to use doing something actually worthwhile, like simulating the economy and situations like these."

// given the reputation of the corporate US govt.
i'd say they show signs of masterful computer simulations and planning. they can push things safely to the edge of tolerance to wring the last dollars from the public. They know exactly how to hack in & when to pretend nothing is happening[stalled bailout]. The 'market sentiment' follows that very faithfully.

before trying to increase controls on a rebellious population, it is good to exhaust their savings and resources. The middle classes must be weakened, the rich must be plundered and kept on the run. The poor will take to the streets to beg for governmental mercy [bailouts]
a few of the largest companies are retained as a 'retail front' of the govt.
the govt begins to become dominated in military interests, then THE WAR

This whole act is the Wood in hollywood, propaganda like the world has never seen before, and its awesome,
it works
theyre peeling billions & soon trillions off the taxpayers hides, and we all are so deceived that we ask for more [help]
from the govt. but the more they help the sicker the economy gets.

I'm sitting here waiting for the redneck to splatter the ole'

"It's a jewish conspiracy...everyone knows they control the banking system" nugget.

/Nope. I'm broke like the rest of you.
//just getting it out of the way
///ashkenazi and proud of it
////Happy Rosh Hashanah.

thedarkshadow: I'm sitting here waiting for the redneck to splatter the ole'

"It's a jewish conspiracy...everyone knows they control the banking system" nugget.

/Nope. I'm broke like the rest of you.
//just getting it out of the way
///ashkenazi and proud of it
////Happy Rosh Hashanah.

Let's just watch the American economy fall apart like there is no hope for this country.

/already broke
//grandfather's gradfather is Sephardic
///Happy Rosh Hashanah to you
////now learning Mandarin

obvious

JSTACAT: Seems theres billions of dollars invested in giant computers to simulate nuclear explosions, maybe they should be put to use doing something actually worthwhile, like simulating the economy and situations like these."

Heh. I predict that the kinds of folks who write those simulations will have a sudden and urgent recommendation that the plan passes as soon as possible. (new window)

Shomer shabbos

This is a bubble collapsing, made far worse than normal by the assumption of mortgage writers across the nation that Fannie and Freddie would buy their bad debt on the secondary market, and that the government would never let them fail. I'd be REALLY interested to hear from some small business owners (most of whom apparently rely on 30 day loans to make payroll) if there is actually a credit crunch, or if this is just affecting the government. C'mon, our elected representatives had to realize that the credit line would end at some point, right?

Right?

30 day loan to cover payroll?!? Not exactly a successful business model.

IamSoSmart_S_M_R_T: Shomer shabbos

Dammit Walter, you're Polish Catholic.

SurahAhriman: This is a bubble collapsing, made far worse than normal by the assumption of mortgage writers across the nation that Fannie and Freddie would buy their bad debt on the secondary market, and that the government would never let them fail.

In case you haven't been paying attention, Fannie and Freddie only held 10-15% of the shaky loans in the market (very little of the "subprime", a fair bit more of the "Alt-A"). 98% of Freddie and Fannie loans are paid up on-time (as of two months ago). Most of the bad loans made by Countrywide et al, the ARMs and balloons and interest-only loans *never* qualified for securitization under Fannie and Freddie. Rather, they went bundled out as high-risk high-reward mortgage-backed-securities directly to investment banks. These were then sold to Boomers who haven't saved enough for retirement and wanted big money, no whammies.

Manfred J. Hattan: The Lehman failure made institutional cash funds break the buck, it completely froze the financial system, suddenly and traumatically. Perfectly good industrial companies are finding it impossible to fund not because they have any problems but because of fire-sale prices on their existing securities from funds that suddenly find themselves half their prior size.

I think you only read headlines without looking at the real data. We hear things like Caterpillar can't get a loan! The reality is that they previously paid 5% interest and now they pay 6% interest. While I realize that's a 20% difference in the interest rate, it by no means is 'completely locked up.' The reason the commercial paper market locked up suddenly is, as you noted, because one money market fund 'broke the buck' and this caused a panic in all the MMs where people were pulling money out of them like crazy. Except now the government is insuring those MM funds and the money is trickling back in just fine. Something dramatic needed to be done and it was. Now that particular crisis is over. We may yet still need to massively devalue our dollar but IMHO this $700 Billion shot is premature. We aren't there yet.

Lawnchair: These were then sold to Boomers who haven't saved enough for retirement and wanted big money, no whammies.

Actually, they were largely sold to foreign investors. Do a search on NPR for the 'giant pool of money'. It explains where all that money came from and how it became mortgages. That's the strangest thing I can't believe the media hasn't picked up on. Most of these securities are held by foreigners and Bush, Paulsen, and Bernanke all about had a coronary when it was suggested that the bailout only be limited to assets owned by Americans. Make no mistake: The majority of these assets are owned by foreigners and that's who the majority of this money will bail out. Your tax dollars at work.

TMYK.

the_geek: Except now the government is insuring those MM funds and the money is trickling back in just fine.

I think you're the one only reading headlines. I trade this stuff. Do you know the money markets shrunk another 95 billion this week? (new window) The second week after Lehman wasn't as bad as the first -- that's because people thought the House would pass the plan and the Senate would follow the next day. Now that we're looking at tomorrow things are worse. God help us if Congress tries to extract another weekend out of it (though I admit that they might get away with it without armageddon as the quarter-end and payday crises have passed -- they'll merely tack on another couple of hundred billion or so to the ultimate cost).

We're there. There was wholesale selling of leveraged term loans in the markets this afternoon starting at about 1:00. Unleveraged term loans will follow in the next couple of days not because the loans themselves are bad but because the holders of those loans are leveraged and facing redemptions and credit tightening simultaneously. Great, solvent companies are pulling down their revolvers when they don't need to because they fear the money won't be there if they do need it. That amounts to basically a reverse run on the banks. Panic is causing a simultaneous massive increase in demand for short-term credit and a massive decrease in supply for it.

In the long run, this is a panic, not a depression. But that is good news for buyers like Buffett and JP Morgan, not the people whose paychecks won't clear.

I have zero understanding of how the credit industry works, so I have little doubt that I am oversimplifying this to the extreme, BUT:

Supply and demand. I keep hearing that if this whole thing collapses, businesses won't be able to get loans anymore. Why? If every grocery store in town tomorrow closed, a new one would be up and running within days, and that store would be raking it in.

Banks A-C go to hell. They won't give you a loan anymore. So why doesn't Bank D step in and offer you the loan?

Sure, the rate won't be as good (supply is down but demand is still the same) so it costs you more. But to suggest that an entire industry will collapse and disappear, and there won't be anyone there willing to step up and take advantage of the vacuum and offer credit -- I mean, you'd make a freaking KILLING.

We're facing the worst recession we have dealt with in a very long time. I don't think most people realize this.

We have to actually pay for this insane overspending and pricing of the last 10 years. There's no soft landing. That's a myth.

First the US Legal System was broken, now their financial system. What Next?

pvd021: First the US Legal System was broken, then their management in military affairs, so comes the diplomacy, now their financial system. What Next?

Added that for you. We're farked up very big time.

shower_in_my_socks: I have zero understanding of how the credit industry works

Don't worry, you'll fit right in!

Guelph35: Instead of bailing out the banks, the government should just buy the houses for whatever is left on the mortgage.

The residents can then apply for a new mortgage under better terms from the government, but that should be unescapable debt like federal student loans.

Those that really shouldn't have houses can return to renting. Individuals that want a first or second house will have an opportunity to buy them from the government. If the government is collecting the mortgage payments (and interest) they should more than make the money back.

This way, the investors get their money (via paid off mortgages), the homeowners get relief (a free chance out of their mortgage situation, whether it be that they can't afford their mortgage or want out of a house that would be worth less than what they owe), and the government has an additional income stream, via people paying these new mortgages directly to them.

That'll never work.

it's too easy.

Funsucker: KIA: Everyone who had a brain knew this already. There are a million lenders in the world who will lend to people who have good assets, credit and jobs. It's the loans to the deadbeats that are a problem.

There's a lot more people with bad credit than good credit and, for better or worse, those people buying things keeps the economic wheels spinning.

Yeah, but that may be about to change. This economy is a pyramid scheme - and those don't last forever. The Fed can't fix this by printing money - it's too little, too late.

Manfred J. Hattan: the_geek: Except now the government is insuring those MM funds and the money is trickling back in just fine.

I think you're the one only reading headlines. I trade this stuff. Do you know the money markets shrunk another 95 billion this week? (new window) The second week after Lehman wasn't as bad as the first -- that's because people thought the House would pass the plan and the Senate would follow the next day. Now that we're looking at tomorrow things are worse. God help us if Congress tries to extract another weekend out of it (though I admit that they might get away with it without armageddon as the quarter-end and payday crises have passed -- they'll merely tack on another couple of hundred billion or so to the ultimate cost).

We're there. There was wholesale selling of leveraged term loans in the markets this afternoon starting at about 1:00. Unleveraged term loans will follow in the next couple of days not because the loans themselves are bad but because the holders of those loans are leveraged and facing redemptions and credit tightening simultaneously. Great, solvent companies are pulling down their revolvers when they don't need to because they fear the money won't be there if they do need it. That amounts to basically a reverse run on the banks. Panic is causing a simultaneous massive increase in demand for short-term credit and a massive decrease in supply for it.

In the long run, this is a panic, not a depression. But that is good news for buyers like Buffett and JP Morgan, not the people whose paychecks won't clear.

I understand where you're coming from - you are in the industry, and like most humans, think your life should go on as always no matter what. You are a junkie, and you need another fix - at my expense. And when you get that fix, you'll be back again in a month, or three, or six, demanding another and making dire threats about what you'll do to us if you don't get it. But not too many of us are buying it anymore. Sorry about that. This fictitious joke of a "bailout" may make it past the yellow-bellies in the legislature this time - but I'm pretty sure it will be the last - and soon, you'll need another. You'd be better off facing the pain and cleaning up your mess now - the longer you put it off, the worse it will be.