credit crisis: The solution to the banking crisis - 03/23/09 05:29 PM
The administration's new banking rescue plan was officially released this morning after the details of it had been leaked over the weekend. It sure didn't take long but pretty much every economist and financial blogger not connected with Wall Street has already ripped it to shreds calling it everything from a massive tax payer fraud, another big bank hand out and a massive government sponsored confidence game. Economist and former Nobel prize winner Paul Krugman spent no less than 3 posts since Saturday blasting it. While Mike Shedlock (Mish) went so far as to proclaim Treasury Secretary, Tim Geithner the architect … (29 comments)
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credit crisis: The treasuries "toxic asset plan" a massive taxpayer fraud - 03/21/09 04:32 PM
The details of the Treasuries much anticipated toxic asset plan to "cleanse" the banking system and restore financial stability are now public. My reaction posted on Twitter as I was reading it.
@timu_matt: Reading the Treasuries new toxic asset plan. Everytime I think they can't get more hell bent on destroying this country they surprise me again.
Yeah, that pretty much sums it up. In a nutshell the plan revolves around the Treasury and FDIC loaning private investors money to buy the toxic assets from the banks. These loans would be made at almost no money down, when you combine the … (21 comments)
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credit crisis: Fractional reserve banking and FED incompetence - 03/18/09 11:58 PM
Going off the reservation on another financial rant/post today...
The other day I saw this great post explaining Fractional Reserve Banking in really simple terms. It really lays the foundation for why our Federal Reserve and Treasury's policies not just now but over the last decade have helped lead us to where we are now and have actually been a main contributor to our worsening financial crisis.Without going into the details of how it works (follow the link if you want a clear explanation), fractional reserve banking is the type of banking system that the US and pretty much every … (7 comments)
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credit crisis: Breaking the silence, thoughts on stimulus - 02/16/09 08:38 PM
So I haven't written a blog post in what pretty much seems forever, after my massive barrage this fall on the bank bailouts and economic issues. Many people are surprised I haven't chimed in on the massive "stimulus" bill that every-bodies been talking about. Part of the reason is I've been way getting things ready to launch with Timu and haven't followed all the details as closely as I have in the past but also because I just got burned out, frustrated and cynical with everything, particularly anything that involves Congress.
But, ok here's a few quick thoughts...
First of all … (75 comments)
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credit crisis: Credit Market Update - A False Recovery??? - 10/21/08 12:21 PM
It's now been just over a week since the FED, treasury and central banks around the world made some massive interventions to try and stabilize the credit markets. My prediction is that these interventions would do very little to unlock the credit markets the main issue is trust, not liquidity. I've been watching many different indicators very closely for signs of recovery over the last week.
One of the main indicators of health in the credit markets is call the TED Spread. I've discussed it many times on this blog but it's basically the spread between three month treasuries and three … (11 comments)
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credit crisis: Hedge Fund Manager Who Bet Against Sub-prime Says Goodbye - 10/18/08 04:09 PM
In the past year hedge fund manager Andrew Lahde has become quite famous for correctly predicting and betting on the problems in the sub prime mortgage market and more recently in the commercial real estate market (these problems are just starting). His hedge fund produced a return of over 1,000% in only a year on these bets, at the vast majorities of hedge funds have literally melted down.
He sights several reasons for leaving the business, but one of the main ones is the risk going forward of a full scale financial system collapse. "Our entire banking system is a complete … (6 comments)
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credit crisis: The TRUTH Behind The Credit Market Lockup - 10/15/08 10:47 PM
The truth behind the credit market lockup has nothing to do with liquidity or lack of capital in the system, it is literally about TRUTH itself. Let me list a few examples that illustrate my point.
In March, Bear Stearns' CEO goes on national TV and claims they are well capitalized and don't have a liquidity problem. This statement is backed up from the SEC a regulatory agency in charge of monitoring Bear Stearns. Only a week later Bear Stearns collapses and we later learn, they did not just have liquidity problems but were in fact insolvent (effectively bankrupt) by a … (17 comments)
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credit crisis: You Call That a Bailout, THIS is a Bailout - 10/13/08 07:00 PM
Boy, it's Monday and there is already a years worth of news to report on the bailouts, credit markets and the global economy. The central banks the world game out of the G7 meetings with a real fire lit underneith them, some might say desperate and have been enacting financial measures almost hourly in an attempt to unstop the credit markets. There seems to be a lot of throwing *#$ against the wall to see what sticks, if the markets don't react something that is announced, forget about it and announce something different.
Lets start with the US
An updated bailout … (15 comments)
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credit crisis: The "Smart Money's" Take - Sequoia Capital Meeting Notes - 10/12/08 12:02 PM
I thought this was interesting enough to repost on my blog as it is Sequoia Capital's take on our current economic situation. For people that don't know Sequoia Capital is one of the most respected of the large VC firms. There portfolio of companies reads like a who's who of well known Internet firms, many of whom everybody here would be familiar with. I'd had this meeting described to me on Friday, and I was able to get a copy of meeting notes today from another source.
This is particularly relevant to me, as I am in the process of building … (9 comments)
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credit crisis: Credit Market Update For The Week - Bond Market Dislocates - 10/11/08 05:35 PM
Sorry, I didn't get a chance to do updates during the week, things were moving so fast that I barely had the time to keep on top of them myself. Pretty much everybody is fixated on the "crash" in the stock markets with major US indexes plunging about 17% on the week, but equity markets are just a symptom, it's important to look at the cause.
The deterioration in the credit markets on a daily basis was simply stunning, and resulted in a near lock down of both intrabank lending and financial commercial paper markets by the end of the week.
… (32 comments)
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credit crisis: Thursday Bailout and Credit Market Comments - 10/02/08 12:16 PM
I haven't given an update in a few days since I've been stuck in meetings all day. Here's where we stand with things, after Congress surprisingly rejected the bailout bill in front on them on Monday, Senate took the lead in reintroducing and yesterday voting for a revised bill.
The bill passed by the Congress by a vote of 74-25 on Wednesday night is now up to 400 pages, and at the core is the same bill, just now loaded up with billions and billions of additional sweeteners. These "sweeteners" include over $100B in tax breaks mainly to corporations to help … (12 comments)
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credit crisis: Monday Bailout Comments and A Solution - 09/29/08 05:54 PM
I got off my flight down to Los Angeles a few hours ago and was pleased to see that Congress had rejected the bailout bill, woops I mean Financial Stability Act. I would not be surprised though to see it come back from the dead, given the fear today's large stock market drop will put into many politicians.
In many previous posts I've talked about how this proposed bill simply was throwing money into a fire and would do nothing to solve the fundamental economic problems or even unfreeze the credit markets. I've referenced many alternative plans by various economists and … (25 comments)
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credit crisis: Sunday Bailout Update - Pretty Much a Done Deal - 09/28/08 10:48 PM
The last remaining significant resistance in Congress and the Senate has appears to have crumbled tonight and party leaders announced that they believe that the bailout is a done deal with voting in the house starting tomorrow. At 9:00 EST the Treasury department held a conference call with primary dealers to fill them in on the details and discuss implementation of the plan. According to reports from someone present on the call the treasury was very pleased with the final bill in that they got their money, with no real checks on their control and only token oversight. It was admitted … (24 comments)
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credit crisis: The WaMu Seizure and Capital Market Consequences - 09/28/08 05:01 PM
Outside of the bailout bill currently under debate probably the biggest news last week was the failure of the largest thrift in our nation, Seattle based Washington Mutual. On Thursday, the FDIC took the step of seizing WaMu due to them being vastly under-capitalized. The deposits and some other assets were firesaled to JP Morgan for $1.9B, depositors were protected while both stock and bond holders were declared wiped out. This represents a marked difference from how previous bank failures have been handled by the FDIC, a change to the game plan if you will. Not withstanding he potential sweet deal … (11 comments)
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credit crisis: What do Economists Think of The Proposed Bailout? - 09/28/08 01:57 PM
One of the most troubling aspects of the debate going on through the weekend over the proposed bailout bill is not a single independent economist or financial expert has been brought into testify in front of Congress or The Senate. True, they brought in Warren Buffet to testify the financial system was going to collapse without it to their closed door meeting last night. I would argue he's far from independent given he just invested $5B in Goldman Sachs last week (why would he do this is the system was in threat of imminent collapse?), has written nearly $5B in credit … (11 comments)
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credit crisis: Three More Massive Banks on the Brink - 09/27/08 05:42 PM
Today there are reports coming out of three massive banks currently on the brink of financial meltdowns. The situation at Belgium's Fortis bank with total assets of about $780 Billion appears most dire with Belgium's central bank trying to craft a rescue plan before Monday. Over in England talks to save one of the countries largest independent banks Bradford & Bingley are taking place throughout the night. More than likely B&B will end up being nationalized by the British government by the end of the weekend.
Back in the US the situation at our sixth largest bank Wachovia with assets of … (19 comments)
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credit crisis: Why I am so Livid About the Bailout - 09/24/08 09:18 PM
Anybody who's read my blog in the last week can probably tell what side of the fence I sit on as far as the bailout bill currently before Congress and the Senate. I'm not just flatly against it, I'm angry and pissed off. Angry, enough that I've probably made at least 100 phone calls, and faxes to various Congressmen, Senators, and other government officials in the past several days. Come to think of it, that's about the same number I made in the weeks following the Bear Stearns bailout.
Now here is why
I'm one of the many people that saw … (37 comments)
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credit crisis: Who Could Have Seen This Coming? - 09/23/08 07:43 PM
Much of the blame for the current financial crisis our country is suffering through can be traced back to de-regulation that occurred in the banking and finance industry over the last 20 years. The majority of this regulation was put in place in the 1930's to prevent a recurrence of the events that lead up to The Great Depression. The single biggest piece of deregulation that took place in 1999 was the repeal of the Glass-Steagall Act.
The Glass-Steagall Act created many banking reforms designed to control speculation and against a systematic event in the banking system, basically what we are … (13 comments)
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credit crisis: Monday Market Recap and Bailout Implications - 09/22/08 10:48 PM
I was trying to write a post about the what todays markets (stocks,bonds,commodities) are saying about the proposed $700B bailout and the implications. Alas, sleep deprivation is starting to get to me, and writing coherent sentances just isn't working right now. After not sleeping a whole lot the past four days due to Blog World, I've been wrapped up in a bunch of activism around the proposed bailout (faxing/calling/emailing various officials), and also working hard on my new and very exciting startup.
Luckily, a blogger Karl Denninger over at the Market Ticker Blog who I follow very closely did a great … (11 comments)
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credit crisis: Credit Crisis - So What is the Solution? - 09/22/08 01:39 PM
I've spent a lot of posting time on my blog lately talking about the problems in the credit markets and in particular the mistakes being made in desperately trying to come up with a "solution" I'm 100% convince the actions taken by the Federal Reserve, US Treasury and Congress over the last year have made the problem many times worse and the proposals being debated in Congress truly could lead to the downfall of our financial system.
While there isn't much discussion of alternatives in the main stream media there are a lot of smart minds out there, who correctly saw … (11 comments)
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