Bailout Bonanza

[DanS]

The increased insurance is just a way to give lawmakers an excuse to vote for the bailout.

As a practical matter, the FDIC has been working out deals lately that have preserved accounts over $100,000 anyway.

[Kidlicious]

Do people know that you can have more than one insured account? Do the democrats?

[Colonâ„¢]

Originally posted by Aeson
That's temporary isn't it, they said for about a month IIRC?

Doesn't it occur to you Wachovia and Washington Mutual went down regardless?

The Belgian regulator CFBA banned short-selling on financials on the 22nd, yet in days afterwards until the bailout Fortis stock lost over 30% of its value.

[Aeson]

Originally posted by Colonâ„¢
Doesn't it occur to you Wachovia and Washington Mutual went down regardless?

The Belgian regulator CFBA banned short-selling on financials on the 22nd, yet in days afterwards until the bailout Fortis stock lost over 30% of its value.

Um... I wasn't saying the fall of these companies (those that failed before the ban) were due to naked short selling. Just pointing out that the "ban" that is in effect is a temporary suspension.

[snoopy369]

Originally posted by Aeson
If the short selling loophole Oerdin was talking about does exist, it should be closed. It seems an artifact of days gone by... these days there should be virtually instantaneous exchange of stock and funds, and if one or the other is lacking, the transaction should just not go through.

Uptick rule is stupid. If people want to sell they can sell. If people want to buy they can buy. That's the ****ing free market... yes it's "irrational" sometimes, yes it can be gamed sometimes... but it works both ways. If they were proposing the uptick rule along with a downtick rule (for margin buying) then I'd at least respect the opinion.

I don't think raising the FDIC insurance limit achieves anything positive, and probably ends up a negative as far as depositor confidence. Raising the limit actually raises the risk to almost everyone that they'll lose their savings, since it raises the overall liability the FDIC potentially faces, and so raises the chance it can't cover those liabilities. Besides, qnyone with more than $100k in an account at a single bank is an idiot and/or has way more money than they need.

I tend to be on the other side of the mark-to-market debate. I think the problems stem from institutions leveraging up on hard to move assets, not that those assets are marked to market. It's a fundamental principal of our economy that something is worth what someone is willing to pay for it. And mark to market can avoid a whole host of problems with balance sheet transparency (for investors to feel confident) and unnecessary complexity of financial instruments (again, so investors can feel confident in assessing the value of a company). But I can see the other side of the argument, and would prefer an accounting change either way. So this bill at least has a +1 (even if it's not my preferred) to the "fix" column. Up from the 0 of Paulson's highway robbery bill.

#4 sounds like a much better plan than either insurance or buying securities. Though a lot will depend on what exactly is meant by, "Participating banks must be subject to strict oversight by the FDIC including oversight of top executive compensation and if necessary the removal of poor management. Financial records and business plans should be subject to scrutiny while participating in the program."

This pretty much makes sense to me and jives with what I thought upon reading that plan...

[Colonâ„¢]

Originally posted by Aeson


Um... I wasn't saying the fall of these companies (those that failed before the ban) were due to naked short selling. Just pointing out that the "ban" that is in effect is a temporary suspension.

I wasn't claiming otherwise. I'm trying to point out that it's hardly apparent that the ban helped matters.

A study by Bris on the emergency order of July 15th (banning naked short sales in 19 financial stocks) showed the the performance of the affected stocks was actually worse than that of comparable stocks that weren't affected.

http://www.imd.ch/news/upload/Report.pdf

[notyoueither]

How does this Senate measure work?

Pressure on the House? What else?

[DanS]

Bloomberg reports that GE's default swaps were trading at almost junk levels yesterday and today and that its commercial paper yield was in the 10% range. That's how Warren Buffett got such a sweet deal -- 10% perpetual preferred shares plus warrants at par for an equal amount.

Amazing to see these AAA-rated companies thrown around like rag dolls. Anything in the finance business is being punished severely.

So keep your money in unleveraged assets, y'all.

[notyoueither]

Originally posted by DanS
Amazing to see these AAA-rated companies thrown around like rag dolls.

Is this all due to GE finance?

[DanS]

Mostly. GE Finance's business is to borrow at a low rate and lend at a high rate. When you're paying 10% for your money, you won't be making much in the way of profit.

[notyoueither]

Is GE Finance big enough to tank the whole company?

[PLATO]

GE Finance is still very profitable. This is merely a sign of the rampant fear that has gripped the street.

[notyoueither]

I am missing the commentary of what caused today's setbacks.

You slackers!

[Colonâ„¢]

Mundane stuff like bad jobless claims and factory orders.

So Citigroup-Wachovia deal fell through. I wonder if some got second thoughts after Citigroup was put on the creditwatch by S&P.

[Dinner]

Link?

Edit: Found one and it seems Well Fargo of San Francisco wants Wachovia now. Supposedly Wells Fargo simply offered more money then Citi group and didn't ask for any government cash to help grease the deal while Citi's offer required the Fed to take on certain toxic assets and risk taxpayer money.

http://www.signonsandiego.com/news/business/20081003-0650-wellsfargo-wachovia.html