Financial News

[NorthSideSox72]

http://www.slate.com/articles/business/mon...ut_scheme_.html

Holy crap. Forget about TARP trying to hide something (which was a red herring anyway)... How the f*** did the public not know about this $7 TRILLION dollar loan program until now? Did I miss something?

 

[NorthSideSox72]

Holy crap. Forget about TARP trying to hide something (which was a red herring anyway)... How the f*** did the public not know about this $7 TRILLION dollar loan program until now? Did I miss something?

And another thing... I am not seeing this reported anywhere else in the major outlets yet. How did Slate manage to break this?

 

[southsider2k5]

And another thing... I am not seeing this reported anywhere else in the major outlets yet. How did Slate manage to break this?

 

Its Eliot Spitzer, so I am sure it is legit in concept at least.

[StrangeSox]

Wow. Thanks for the link, ss.

 

In addition to the secrecy, what is appalling is that these loans were made with no strings attached, no conditions, and no negotiation to achieve any broader public purpose. Even if one accepts the notion that the stability of the financial system could not be sacrificed, those who dispensed trillions of dollars to private parties made no apparent effort to impose even minimal obligations to condition the loans on the structural reforms needed to prevent another crisis, made no effort to require that those responsible for creating the crisis be relieved of their jobs, took zero steps towards the genuine mortgage-reform that is so necessary to begin a process of economic renewal. The dollars lent were simply a free bridge loan so the banks could push onto others the responsibility for the banks’ own risk-taking.

 

I'm not sure that our current economic and governmental structures are actually sustainable. Sometimes I get strongly in favor of the band-aid approach.

[max power]

And another thing... I am not seeing this reported anywhere else in the major outlets yet. How did Slate manage to break this?

They didn't. Bloomberg did. The size of it is mentioned in the bloomberg article as well as 7.77 trillion.

 

The size of the bailout came to light after Bloomberg LP, the parent of Bloomberg News, won a court case against the Fed and a group of the biggest U.S. banks called Clearing House Association LLC to force lending details into the open.

 

http://www.bloomberg.com/news/2011-11-28/s...-in-income.html

 

[Jenksismyhero]

So, who approves that sort of thing? Members of Congress? Or the Obama Admn?

[southsider2k5]

So, who approves that sort of thing? Members of Congress? Or the Obama Admn?

 

The Fed operates completely independent (in theory). It is entirely possible that no one in the administration knew. It is also entirely possible that Obama directed the Fed to do it, and they agreed.

[StrangeSox]

The Fed operates completely independent (in theory). It is entirely possible that no one in the administration knew. It is also entirely possible that Obama directed the Fed to do it, and they agreed.

 

Or you can reverse the last situation, that this was the Fed's idea and that the Obama admin. agreed or was at least aware. I don't know that it makes any difference but it's a possible scenario.

[max power]

Or you can reverse the last situation, that this was the Fed's idea and that the Obama admin. agreed or was at least aware. I don't know that it makes any difference but it's a possible scenario.

It was in dec of 2008.

 

"The secrecy extended even to members of President George W. Bush’s administration who managed TARP. Top aides to Paulson weren’t privy to Fed lending details during the creation of the program that provided crisis funding to more than 700 banks, say two former senior Treasury officials who requested anonymity because they weren’t authorized to speak. "

 

http://www.bloomberg.com/news/2011-11-28/s...-in-income.html

Edited December 1, 2011 by MAX

[southsider2k5]

Or you can reverse the last situation, that this was the Fed's idea and that the Obama admin. agreed or was at least aware. I don't know that it makes any difference but it's a possible scenario.

 

That could be as well. The big thing is because of the independent nature of the organization, they do not need any authorization to do this. It doesn't mean they didn't get it, but they don't have to do so,.

[max power]

That could be as well. The big thing is because of the independent nature of the organization, they do not need any authorization to do this. It doesn't mean they didn't get it, but they don't have to do so,.

That's why its not that big of a story I suppose. However, because lawmakers did not have all of the information about the true magnitude of the bailout, they made decisions based on what they knew that are likely far different from what they would have done.

 

 

The banks on the other hand, are obligated to share this information with their shareholders. And they won't be punished because they are so fragile.

Edited December 1, 2011 by MAX

[NorthSideSox72]

That's why its not that big of a story I suppose. However, because lawmakers did not have all of the information about the true magnitude of the bailout, they made decisions based on what they knew that are likely far different from what they would have done.

 

 

The banks on the other hand, are obligated to share this information with their shareholders. And they won't be punished because they are so fragile.

It is still absolutely a big story. The fact that the Fed can even do something this big without approval is scary as hell.

 

And here is a really simple question... where does this money come from? I mean, when they need a quick injection of a few billion, they can do things like bond sales and repos, or cash swaps... but $7.77T? You can't squeeze that much out of the market that quickly, it just isn't possible. Which means what they really did was raid the Fed balance sheet. And what that further means is, there is a LOT more currency in circulation than people think. Or at least there was. Even if it all came back and zeroed out the balance sheet for that loan, the money was still "created", before it was destroyed. The fact alone that the Fed could even do that should, and likely will, have a significant negative effect on the value of the US Dollar.

 

[max power]

It is still absolutely a big story. The fact that the Fed can even do something this big without approval is scary as hell.

 

And here is a really simple question... where does this money come from? I mean, when they need a quick injection of a few billion, they can do things like bond sales and repos, or cash swaps... but $7.77T? You can't squeeze that much out of the market that quickly, it just isn't possible. Which means what they really did was raid the Fed balance sheet. And what that further means is, there is a LOT more currency in circulation than people think. Or at least there was. Even if it all came back and zeroed out the balance sheet for that loan, the money was still "created", before it was destroyed. The fact alone that the Fed could even do that should, and likely will, have a significant negative effect on the value of the US Dollar.

It was an emergency measure.

 

The money came from the Federal Reserve, yes. You answered your own question. That currency is not in circulation, as almost all of the loans have already been repaid. So there almost certainly won't be an effect on the market like you suggested.

[southsider2k5]

It is still absolutely a big story. The fact that the Fed can even do something this big without approval is scary as hell.

 

And here is a really simple question... where does this money come from? I mean, when they need a quick injection of a few billion, they can do things like bond sales and repos, or cash swaps... but $7.77T? You can't squeeze that much out of the market that quickly, it just isn't possible. Which means what they really did was raid the Fed balance sheet. And what that further means is, there is a LOT more currency in circulation than people think. Or at least there was. Even if it all came back and zeroed out the balance sheet for that loan, the money was still "created", before it was destroyed. The fact alone that the Fed could even do that should, and likely will, have a significant negative effect on the value of the US Dollar.

 

I would bet it was created money.

[southsider2k5]

It was an emergency measure.

 

The money came from the Federal Reserve, yes. You answered your own question. That currency is not in circulation, as almost all of the loans have already been repaid. So there almost certainly won't be an effect on the market like you suggested.

 

It also explains why lending has stayed at minimal levels as banks paid these funds down.

[southsider2k5]

Keep in mind the number is the average...

 

http://www.cnbc.com/id/45507581

 

Foreclosures are setting new records again, this time not in their overall numbers, but in the time it is taking for all of these properties to be processed through the legal system. The average loan in foreclosure has now been delinquent a record 631 days, according to a new report from Florida-based Lender Processing Services.

 

Daniel Grill | Getty Images

The after effects of the so-called "robo-signing" foreclosure paperwork scandal, now more than a year old, continue to plague states which require these cases to go before a judge.

 

The differences in processing times are blatant when you compare judicial versus non-judicial states. Non-judicial state foreclosures inventories are less than half those of judicial states, and foreclosure sale rates in non-judicial states are four to five times that of judicial states. Judges are starting to ramp up the process.

 

Bank repossessions actually surged in October in many judicial states, up 48 percent in New Jersey and up 73 percent in Indiana month-to-month, according to RealtyTrac. Still the backlog is still enormous. Overall foreclosure inventory is at an all-time high, 4.29 percent of all active loans, according to LPS.

 

"The discrepancy will go on in perpetuity, as there always has been a difference between judicial and non-judicial timelines," said Kyle Lundstedt, managing director of LPS Applied Analytics. "Even prior to the worst of the crisis, loans were 4-5 months more delinquent in judicial states at time of foreclosure sale. The number today is more like 8 months, but will return to the 4-5 month difference depending on when and how fast foreclosure sales occur.

 

A record-high inventory of foreclosures in process does not bode well for the near future of the housing recovery. All those distressed properties will sell at a deep discount, likely bringing down the prices of surrounding homes.

 

They will also add to already historically high existing home inventories, while demand is still weak. While there is considerable investor demand for distressed properties, new foreclosures are still outnumbering foreclosure sales by over 3:1.

 

In addition to the "robo-signing" delays, we are now beginning to see the effects of ineffective loan modifications. Repeat foreclosures made up nearly 45 percent of new foreclosures in October. Of the 2.1 million modifications since the start of 2008 more than 10 percent were in foreclosure with another 27.4 percent delinquent 30 or more days, as of the end of the third quarter of this year, according to the Office of the Comptroller of the Currency.

 

Lundstedt said foreclosure moratoria, process/documentation reviews, evaluation for loss mitigation and bankruptcies make up the rest of the repeat foreclosures.

 

As the mortgage market continues to work through the backlog of troubled loans, looking forward, loans originated in 2010 and 2011 are now the best performers on record, thanks to tighter credit requirements.

 

Of course that begs the question: Did the pendulum swing farther than necessary to the conservative side? Is underwriting now unnecessarily restrictive?

[NorthSideSox72]

It was an emergency measure.

 

The money came from the Federal Reserve, yes. You answered your own question. That currency is not in circulation, as almost all of the loans have already been repaid. So there almost certainly won't be an effect on the market like you suggested.

 

 

I would bet it was created money.

 

But you see, by using the money (which was real, then gone) that way, you bring into question the full faith and credit behind US currency. If the currency in actual circulation can be bent THAT dramatically without public knowledge, that has substantial effect on US debt and currency value to the world. We're not talking a few billion dollars here - we are talking about an amount that would substantially increase, albeit temporarily, the amount of USD in circulation.

 

I'd bet there will indeed be a market effect, because the rest of the world will take this into account when dealing with US currency and debt now.

 

[max power]

I would think that the Fed holds trillions of dollars for situations like this, just as the Bank of Japan does for example. The money that the Bank of Japan holds is not in circulation, until they try to manipulate their currency. The major players (granted not the entire public) are aware that the fed is holding trillions, or the power to create trillions, and that is already priced into the value of the dollar, just as it is priced into the value of the Yen. With that in mind, the fact that trillions were loaned out, and are now repaid, doesn't really change the current value or future outlook.

 

That's how I see it.

 

 

[Balta1701]

Wow, you guys have a problem with that? I can complain about the fact that the fed did not extract a pound of flesh from those banks, firing and bankrupting their execs, but I have no problem with the fed doing that. That is literally its most important job and the fact that the ECB won't do that is why Europe is facing a continent wide bank run.

[max power]

Wow, you guys have a problem with that? I can complain about the fact that the fed did not extract a pound of flesh from those banks, firing and bankrupting their execs, but I have no problem with the fed doing that. That is literally its most important job and the fact that the ECB won't do that is why Europe is facing a continent wide bank run.

The action the fed took seemed appropriate and timely. I have a problem with the fed and especially the banks trying to hide all of the information about it until a court forced them to release the documents. The heads of those banks lied to their shareholders by omitting loan details.

 

 

[NorthSideSox72]

I would think that the Fed holds trillions of dollars for situations like this, just as the Bank of Japan does for example. The money that the Bank of Japan holds is not in circulation, until they try to manipulate their currency. The major players (granted not the entire public) are aware that the fed is holding trillions, or the power to create trillions, and that is already priced into the value of the dollar, just as it is priced into the value of the Yen. With that in mind, the fact that trillions were loaned out, and are now repaid, doesn't really change the current value or future outlook.

 

That's how I see it.

 

You are working on what I believe is a false assumption here. The Fed does not hold $8T for situations like this. That money has to be created in some fashion. And adding $8T in total open USD is enough to have a material effect on currency valuation, not to mention this opens a door for a lack of risk floor in the eyes of foreign holders of US debt.

 

Wow, you guys have a problem with that? I can complain about the fact that the fed did not extract a pound of flesh from those banks, firing and bankrupting their execs, but I have no problem with the fed doing that. That is literally its most important job and the fact that the ECB won't do that is why Europe is facing a continent wide bank run.

 

I don't disagree that the Fed has a role to help protect the currency. I also think an argument can be made that it plays a role in maintaing a stable financial industry. But I do not think that creating a created-money slush fund of $8T was a good thing, nor do I think it was a good thing that their balance sheet is non-public, nor do I think it is a good thing that the Fed can do such a thing without executive or legislative authority other than its own. And finally, I sure as hell don't like that the banks were able to access that kind of capital and put the entire country at that level of risk, with apparently no negative consequences.

 

And even if you think this was necessary, how is it I am the only one who seems to see what this revelation means to the status of US currency and our foreign-held debt???

 

[max power]

It doesn't really change what I said if they are physically holding it or have the known power to create it (which I also mentioned).

Edited December 2, 2011 by MAX

[southsider2k5]

But you see, by using the money (which was real, then gone) that way, you bring into question the full faith and credit behind US currency. If the currency in actual circulation can be bent THAT dramatically without public knowledge, that has substantial effect on US debt and currency value to the world. We're not talking a few billion dollars here - we are talking about an amount that would substantially increase, albeit temporarily, the amount of USD in circulation.

 

I'd bet there will indeed be a market effect, because the rest of the world will take this into account when dealing with US currency and debt now.

 

I would bet their defense would look something like it was never a part of the money supply, it was literally for reserves to hold the banks up from collapse because of their change in asset valuations.

[southsider2k5]

I would think that the Fed holds trillions of dollars for situations like this, just as the Bank of Japan does for example. The money that the Bank of Japan holds is not in circulation, until they try to manipulate their currency. The major players (granted not the entire public) are aware that the fed is holding trillions, or the power to create trillions, and that is already priced into the value of the dollar, just as it is priced into the value of the Yen. With that in mind, the fact that trillions were loaned out, and are now repaid, doesn't really change the current value or future outlook.

 

That's how I see it.

 

The difference being that Japan has a self-financed debt, and probably has real reserves to use.

[NorthSideSox72]

It doesn't really change what I said if they are physically holding it or have the known power to create it (which I also mentioned).

Those two are polar opposites in terms of effect on currency value and assessed risk levels. One uses real money, the other creates new money. Adding money to the supply is accretive, it absolutely has an effect on the fair value of the currency - but of course no makret correction occurred because no one knew about it.