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TMFBent (99.84)

Attention Chris Cox, John McCain, and Other Knee-Jerk Automatons

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September 19, 2008 – Comments (10)

THIS is why financial stocks were dropping like rocks. The shorting you blame is the after effect. And yes, we know why you want to stick Americans with all the mortgage debt. It's because no one in their right mind would pay for debt while the following is happening:

The mortgage problems behind the havoc in financial markets climbed back last month, as delinquencies jumped at the fastest pace since last year for many loan categories.

Overall, 6.6% of mortgages were at least 30 days past due at the end of August, up from 5.8% at the end of June and 4.51% a year earlier, according to an analysis prepared for The Wall Street Journal by Applied Analytics, a unit of Lender Processing Services Inc.

"The disturbing thing is that mortgage quality is bad and getting worse," said Mark Zandi, chief economist of Moody's Economy.com,

This is exactly the right time for an uninformed, uncritical, poorly-supervised, panicked bailout of mortgage-backed debt, no? Get it onto the taxpayer balance sheet before it gets worse. Otherwise, the folks holding it might have to pay the real price for their idiocy.

10 Comments – Post Your Own

#1) On September 19, 2008 at 11:08 PM, ckfinance2003 (95.46) wrote:

6.6%? Good lord that blows my mind.

I don't mind paying taxes when it gets me neat things like schools and keeps mauraders off the streets

Not liking so much that today my taxes will be buying my moron cousin's crappy house for the idiots who loaned him money.  If they'd just have asked me they wouldn't have loaned him a nickle.  I know I wouldn't... 

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#2) On September 19, 2008 at 11:28 PM, jstegma (30.01) wrote:

Yeah, like folks holding money market funds, the greedy b*stards.  We could just let them pay the price for not being smart enough to pull their money out of money market funds before they implode as a result of commercial paper markets freezing up. 

But let's not just base our thinking on fairness alone.  Let's remember that the taxpayers would be a lot better off if the financial system were allowed to crater.  I mean think how much less taxes you'd have to pay if you didn't have a job any more.  You'd be like totally tax-free.  Awesome.

Really well though out post.  A lot better than just some knee-jerk reaction like some people who shoot off their mouths before they think.  

I apologize for the sarcasm if you typed this in the doctors office while he was checking your reflexes.  After all, a reflex action is triggered without any input from the brain whatsoever, and I wouldn't want to call you stupid on the basis of something like that.

:) 

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#3) On September 20, 2008 at 1:30 AM, FleaBagger (31.07) wrote:

:)

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#4) On September 20, 2008 at 1:15 PM, TMFBent (99.84) wrote:

Backing money market funds is a cheap and easy thing to do, and there weren't many in danger anyway, unless there was a run on the bank.

And the tone of your post "cratering of the financial system" suggests you believe the story being told by the folks who are pushing this. They are, of course, begging the question. We will never know if the financial system would have "cratered" without this (still vaporware) bailout, but they've all got a vested interest in making sure everyone believes it would.

These mortgages, as that article clearly shows, are already garbage, and are getting worse. But you'll know all about that soon enough (if you live in the U.S.) because you'll own them.

What you'll be paying for them, of course, is the question. My guess -- given the panic in the government and the knee-jerk need to do something, rather than think first -- is that we'll pay too much. When's the last time a legislature got the better of those Wall Street rubes in a business deal?

Yeah, I don't remember either.

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#5) On September 20, 2008 at 1:44 PM, TMFHelical (98.95) wrote:

Seth:

You wrote:

 It's because no one in their right mind would pay for debt while the following is happening:

And I would only change that to 'no one in their right mind would pay 'full price' for debt while the following is happening:

It is though an important distiction.  As a taxpayer, I don't like the bailout, but we are where we are, and we are either going to pay for a mortgage bailout or for 'insured' deposits at failed institutions.  Niehter would be cheap but I don't see a column C. It also looks like the fed and treasury are fully out of ammunition now.

TMFHelical

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#6) On September 20, 2008 at 7:29 PM, No1aerobic1 (51.04) wrote:

As I understand it, it's not only the CDO's but the $60 trillion in Credit Default Swaps that are still out there. If they all fail, I can kiss my job and paper stock goodbye.

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#7) On September 20, 2008 at 8:52 PM, MKArch (99.65) wrote:

http://www.bankstocks.com/ArticleViewer.aspx?ArticleID=3730&ArticleTypeID=2

But hold on. The delinquency rate ought to be a lagging indicator of credit quality, not a leading one. Why? Arithmetic. The way the calculation works, the denominator is constantly falling as loan principal is paid down and loans are refinanced. But the delinquencies in the numerator stick around until the foreclosure process is completed. In most states, that can take a year or more. Result? Delinquency rates can seem to worsen as the overall portfolio shrinks, even though the amount of delinquent loans in dollar terms may have stopped rising. So the widely published past-60-day delinquency plus foreclosure rate can be misleading.

 

Have you accounted for this Seth? I'm not sure if the delinquency rates you posted are calculated the same way but if they are they might be misleading.

 

Mike

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#8) On September 20, 2008 at 9:54 PM, MKArch (99.65) wrote:

http://www.bankstocks.com/ArticleViewer.aspx?ArticleID=5218&ArticleTypeID=2

 

Most recent data from tom Brown.

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#9) On September 20, 2008 at 9:54 PM, MKArch (99.65) wrote:

http://www.bankstocks.com/ArticleViewer.aspx?ArticleID=5218&ArticleTypeID=2

 

Most recent data from tom Brown.

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#10) On September 22, 2008 at 11:46 AM, jstegma (30.01) wrote:

The source of the problems in the financial markets wasn't so much the garbage paper itself, but the lack of transparency.  Looking at financial statements, you can't see who has this garbage and how much.  So based on the general fear that some of a company's assets could turn out to be this infamous garbage, lenders were reluctant to make loans to anyone who *might* even have this stuff.  The result is that the whole financial system works a lot less efficiently because this stuff is gumming up the works.  And having the financial system gummed up costs us all as it permeates the entire business world to some extent.

I'm not crazy about this stuff ending up on the government's balance sheet, but I think it's probably the best place for it.  If the bailout hadn't happened, it would eventually have worked its way through, but it would have taken years.  Those years of inefficient debt markets would have cost a lot more than having the government simply buy up the garbage just to get it out of there.  It might not be an ideal situation, but it should speed us along toward economic recovery. 

Bernanke and Paulson finally came to the realization that until this sh*t was cleaned up we would be having various blowups and bank runs that would end up costing the economy a lot more in jobs and lost savings than simply buying it up.

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