RTC II

awgee_IHB

awgee_IHB

New member
The US Congress is going to legislate into existence a new Resolution Trust Corporation.



It worked last time. Why not this time?
 
Last time they took control of the assets held by S&L's that had failed. Those assets had a real value that could be determined on the open market and were liquidated over a span of more than 9 years.



This time they are looking to buy assets with an unknown value from solvent financial firms who refuse to even *try* to find a market value in open trade. What's more, we don't when (or if) these assets will ever be marketable for more than what this new RTC will pay for them, nor do we know exactly what this new RTC will be buying, or who gets the benefit of the profits, if any. This isn't RTC2, it's MLEC (Slight Return).
 
[quote author="awgee" date=1221827620]The US Congress is going to legislate into existence a new Resolution Trust Corporation.



It worked last time. Why not this time?</blockquote>


It won't work because they don't realize the scope and size of what's ahead.



If they manage to keep the markets afloat and the housing market at its current prices, you will have some very core and fundamental problems in the US economy.
 
[quote author="awgee" date=1221827620]The US Congress is going to legislate into existence a new Resolution Trust Corporation.



It worked last time. Why not this time?</blockquote>
It's just a knee jerk reaction of putting a band-aid on a gash to the neck. Now if they were able to go into these banks and force them to sell their assets at some low value then it might work, but just image the backlash from the banks.
 
Hmmm-m-m. Asked a question I thought I knew the answer to, and got some answers I had not even thought of.



My guess is that it will work for awhile. And it will bail out the financial institutions who are carrying tier 3 toxic waste.



The original RTC purchased loans ... for which there was collateral. Given enough time and dollar devaluation, (price inflation), it appeared the RTC sold it's assets for a profit.



This RTC II will be purchasing derivatives of mortgages. Ya know, those OTC derivative things I keep harping about. A BBB tranche of a CDO, if bought for 30 cents on the dollar today will be most likely be worth zero cents three years from now. Buying the toxic derivatives of mortgage securties is <strong>NOT</strong> the same as buying the mortgage itself. The mortgage is backed by collateral which can be sold. A BBB tranche of a CDO has <strong>NO COLLATERAL</strong>. It is a contract based on a pile of mortgages which says that the holder <strong>ONLY</strong> gets paid if there are no defaults in the pile. If there are any defaults in the pile, the AAA tranche gets paid 100% and the BBB tranche gets whatever is leftover.



Guess what the financial institutions will be selling to the RTC II? It sure as heck won't be the performing AAA tranches. And they can't sell the mortgages. The mortgages are bundled, securitized, and used in Collateralized Debt Obligations, CDOs.



Everything Paulson is doing is a farce, designed to bail out Goldman Sachs and the other banks who are the owners of the Federal Reserve, and make the taxpayers the fall guys.
 
They nearly had a Battle Royle fistfight on CNBC between Steve Leieman, John Harwood, Mark Faber, and a couple of others. Even Erin Burnett got in it................never seen it so heated before on CNBC.



Somebody made the comment "why does the little guy have to get screwed here?" and John Harwood made the observation the little guy was part of the problem because he'd been living beyond his means for sometime and this was a direct unwinding of it.



Erin just interviewed a trader who I heard a trader say "I've heard everything from 'This is the US market standing up to the world' to 'We're changing horses in midstream', for me chaos is good so I'm gonna just keep plugging along............"



Why can't they just bring back the uptick rule?



I would say I don't care that much because I'm going to get a huge rally in my long portfolio this morning, plus Erin has a cute outfit today, but I honestly don't know what to think.



If that wasn't enough wierdness, today is a quadurple witching day too. Good times.
 
Peter Schiff on Comrade Bernanke:



<a href="http://www.321gold.com/editorials/schiff/schiff091808.html">Comrade Bernanke</a>
 
It'll work for one simple reason.



The banks will off-load four trillion dollars worth of toxic waste and the Fed will take it at a trivial discount. The Taxpayers will then service until the end of time the additional $3 Tillion dollars of national debt.



It is that simple. Just like the home owners that bought at peak, the banks can't sell it for more than a couple pennies off or they can't maintain reserves. The market for the product and actual underlying products are lucky if they are worth 50%.



I just hope the Fed is smart enough to make the banks feel it and give up perferred stock with every POS asset the Government takes, much like the AIG deal. The Fed takes $100 billion of junk, they also take $80 billion of perferred stock for free as part of the deal.
 
[quote author="ukyo116" date=1221863733]The implementation of this plan is highly inflationary.</blockquote>


Yup, it is. The plan will work. It will serve to free up the credit markets and prop up the housing market and economy, at least for a time. Feds don't give a crap about losing on this deal. It's a near-term stop gap, meant to create a soft landing, which it will. Buyers that have been waiting to buy just saw the "real" bottom, assuming we return to capitalism someday, get stretched out considerably.
 
It turns out that not only is Paulson going to get the banks' toxic waste off their books for them, but he is going to give them the US government's gold also:



<a href="http://www.moneymarketing.co.uk/cgi-bin/item.cgi?id=173208">gold for bad ABS</a>
 
This plan hinges on one thing only: confidence.



If the public believes that housing will go up again, and starts buying houses at current prices to unfreeze the current market, then the PPT achieves their goal. Stock Market goes up, troubled banks go back to business as usual, jobs are saved. The flow of credit returns and we go back to our consuming ways. The price of everything from water, coffee, oil, to college tuition will skyrocket. You're also going to have social upheaval from the lower classes as they will be priced out of everything. Retirees who saved for retirement will also have been shortchanged as their life savings will be good enough to buy them some TV dinners and canned foods.



Anyone getting angry yet?
 
[quote author="skek" date=1221879889]This morning I bumped into an old friend at Starbucks. He works for a top tier investment house and has forgotten more about the financial markets than I'll ever know. I asked him how he was holding up. He said that his firm was doing fine, in part because they made some bets against mortgage backed securities awhile back. Then he paused, and said: <strong>"You know, skek, this week we came closer to total systemic collapse than any time since the Great Depression. It was like the Cuban Missile Crisis for the financial markets. When AIG went down, we weren't sure if the banking system would survive the next 24 hours. We're OK now, but it was touch and go there for a while."</strong>



Yikes. I'm an optimist about America and her future. I still think we'll pull through this in the end (although not without some pain), but it's hard for me personally to process that here we are on Friday after a week that is going to end up written about in economic textbooks for future generations to study. Pretty amazing, really. "Historic" was the word he used, too.</blockquote>


And why some here think this "Bailout" was the worst possible outcome still perplexes me. I guess some prefer street wide looting and lines around the corner of their local banks? :down:
 
[quote author="skek" date=1221879889]This morning I bumped into an old friend at Starbucks. He works for a top tier investment house and has forgotten more about the financial markets than I'll ever know. I asked him how he was holding up. He said that his firm was doing fine, in part because they made some bets against mortgage backed securities awhile back. Then he paused, and said: "You know, skek, this week we came closer to total systemic collapse than any time since the Great Depression. It was like the Cuban Missile Crisis for the financial markets. When AIG went down, we weren't sure if the banking system would survive the next 24 hours. We're OK now, but it was touch and go there for a while."



Yikes. I'm an optimist about America and her future. I still think we'll pull through this in the end (although not without some pain), but it's hard for me personally to process that here we are on Friday after a week that is going to end up written about in economic textbooks for future generations to study. Pretty amazing, really. "Historic" was the word he used, too.</blockquote>


I was just trying to explain this very same thing to some friends of mine last night... Average Joe has no friggin' idea how close we have been to cataclysmic economic disaster over the past week or two. It's amazing that the government taking over huges companies to save them doesn't register more strongly with people. They'd pay a lot more attention if people they knew were losing their jobs or gasoline cost $6 per galloon, but on a day-to-day basis, things are mostly peachy for people right now.
 
[quote author="ipoplaya" date=1221880320][quote author="skek" date=1221879889]This morning I bumped into an old friend at Starbucks. He works for a top tier investment house and has forgotten more about the financial markets than I'll ever know. I asked him how he was holding up. He said that his firm was doing fine, in part because they made some bets against mortgage backed securities awhile back. Then he paused, and said: "You know, skek, this week we came closer to total systemic collapse than any time since the Great Depression. It was like the Cuban Missile Crisis for the financial markets. When AIG went down, we weren't sure if the banking system would survive the next 24 hours. We're OK now, but it was touch and go there for a while."



Yikes. I'm an optimist about America and her future. I still think we'll pull through this in the end (although not without some pain), but it's hard for me personally to process that here we are on Friday after a week that is going to end up written about in economic textbooks for future generations to study. Pretty amazing, really. "Historic" was the word he used, too.</blockquote>


I was just trying to explain this very same thing to some friends of mine last night... Average Joe has no friggin' idea how close we have been to cataclysmic economic disaster over the past week or two. It's amazing that the government taking over huges companies to save them doesn't register more strongly with people. They'd pay a lot more attention if people they knew were losing their jobs or gasoline cost $6 per galloon, but on a day-to-day basis, things are mostly peachy for people right now.</blockquote>


Cuz they're f-ing idiots....who for the most part help cause all this (not your friends specifically but Joe Schmoe who makes $50k buying $1mm homes)



I guess when you feed pigs their own crap, they eat it by the truck load.
 
[quote author="optimusprime" date=1221880035][quote author="skek" date=1221879889]This morning I bumped into an old friend at Starbucks. He works for a top tier investment house and has forgotten more about the financial markets than I'll ever know. I asked him how he was holding up. He said that his firm was doing fine, in part because they made some bets against mortgage backed securities awhile back. Then he paused, and said: <strong>"You know, skek, this week we came closer to total systemic collapse than any time since the Great Depression. It was like the Cuban Missile Crisis for the financial markets. When AIG went down, we weren't sure if the banking system would survive the next 24 hours. We're OK now, but it was touch and go there for a while."</strong>



Yikes. I'm an optimist about America and her future. I still think we'll pull through this in the end (although not without some pain), but it's hard for me personally to process that here we are on Friday after a week that is going to end up written about in economic textbooks for future generations to study. Pretty amazing, really. "Historic" was the word he used, too.</blockquote>


And why some here think this "Bailout" was the worst possible outcome still perplexes me. I guess some prefer street wide looting and lines around the corner of their local banks? :down:</blockquote>


I do, as long as the FDIC makes good on my money, no one gets hurt in the looting, and it meant the cost of housing, stocks, etc. came spiraling down. Sadly, that will not be the case and a golden buying opportunity will not materialize.
 
[quote author="optimusprime" date=1221880035][quote author="skek" date=1221879889]This morning I bumped into an old friend at Starbucks. He works for a top tier investment house and has forgotten more about the financial markets than I'll ever know. I asked him how he was holding up. He said that his firm was doing fine, in part because they made some bets against mortgage backed securities awhile back. Then he paused, and said: <strong>"You know, skek, this week we came closer to total systemic collapse than any time since the Great Depression. It was like the Cuban Missile Crisis for the financial markets. When AIG went down, we weren't sure if the banking system would survive the next 24 hours. We're OK now, but it was touch and go there for a while."</strong>



Yikes. I'm an optimist about America and her future. I still think we'll pull through this in the end (although not without some pain), but it's hard for me personally to process that here we are on Friday after a week that is going to end up written about in economic textbooks for future generations to study. Pretty amazing, really. "Historic" was the word he used, too.</blockquote>


And why some here think this "Bailout" was the worst possible outcome still perplexes me. I guess some prefer street wide looting and lines around the corner of their local banks? :down:</blockquote>
I don't prefer it. I fear it. But this "bailout" doesn't solve the problem, it delays the consequences until another day. I'd rather have a massive amount of hardship for a short period of time then a protracted miserable existence that leaves a broken system on life-support.
 
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