Nouriel Roubini: The banking system is "effectively insolvent"

[2centsworth]

You do know that the total subprime market is just a crumb next to all the sideways bets, no? A washout in subprime is necessary, even salutary. That's not what to be afraid of.

The subprime market is the foundation of the collapse and that's why I agree with Obama's plan on helping stem forclosures.

That ins utions borrowed, purchased and sold derivatives is another matter. There will be a tremendous washout and pain through that the process, but the net sum total of those bets are zero excluding transaction cost.

The unwinding of this mess is inflationary on its own, but with the downside pressure placed on commodities this should hopefully be a wash. The trick is being able to recognize the recovery and reducing money supply at the same time. Irrational exuberance is just as bad as the irrational fear that we're suffering through now.

There is a huge en lement timebomb waiting to explode, but the federal government has done a very Enronesque job of creating off balance sheet liabilities to hide the bad news.

That's my 2cents, maybe too hopeful, but I'm not going to run with the heard neither.

[SnakeBoy]

The subprime market is the foundation of the collapse

Not just subprime. And we probably can't talk about "the collapse" in the past tense yet.

If you have 12 minutes to spare...

[SnakeBoy]

I guess the 3.6 trillion isn't an overstatement.

Timothy Geithner, President Obama's pick to head the Treasury Department, said Wednesday that the administration is considering setting up a "bad bank" to purchase toxic loans from troubled banks in a new program that could cost taxpayers $3 trillion to $4 trillion.
http://washingtontimes.com/news/2009...a-of-bad-bank/

[Winehole23]

Good to see both Bank of America and Citibank taking it up the rear on this one...always good to see a gouger and a corrupt lender getting effed and going under

Too big to fail.

We're the ones taking in the end:

Timothy Geithner, President Obama's pick to head the Treasury Department, said Wednesday that the administration is considering setting up a "bad bank" to purchase toxic loans from troubled banks in a new program that could cost taxpayers $3 trillion to $4 trillion.

[2centsworth]

Timothy Geithner, President Obama's pick to head the Treasury Department, said Wednesday that the administration is considering setting up a "bad bank" to purchase toxic loans from troubled banks in a new program that could cost taxpayers $3 trillion to $4 trillion.

that's what we were told about the original 700 billion. buy the toxic assets for 30 cents on the dollar, hold them and hope to get at least 30 cents later.

[RandomGuy]

I am with Whott on this one. Those companies sucked. I switched to Frost years ago and have not been disappointed. The regional banks are more responsive to customers.

Smaller and regional banks have also not relaxed their lending standards to produce marketable mortgages to sell to Wall Street.

I am going to guess that the larger of the regional banks will be absorbing quite a few of the more choice leftovers after the big banks are euthanized.

[Winehole23]

[/b]that's what we were told about the original 700 billion. buy the toxic assets for 30 cents on the dollar, hold them and hope to get at least 30 cents later.

They didn't need the TARP for that, because they could already do the same thing at the Fed pawnshops. So the TARP became a slush fund for crappy banks, while banks leveraged as much of their illiquid assets as they could at emergency facilities like the TAF against $2 trillion of real money. And they're not done yet. Not even close.

[2centsworth]

They didn't need the TARP for that, because they could already do the same thing at the Fed pawnshops. So the TARP became a slush fund for crappy banks, while banks fobbed off as much of their illiquid assets as they could unload at emergency facilities like the TAF in exchange for $2 trillion of real money. And they're not done yet. Not even close.

Fed can't own real estate notes without express authorization is my understanding. They can lend and create money.

TARP was sold as a fund to buy toxic assets. King Paulson sold us out and should do 2 years in a federal penitentiary because of it.

[ChumpDumper]

Timothy Geithner, President Obama's pick to head the Treasury Department, said Wednesday that the administration is considering setting up a "bad bank" to purchase toxic loans from troubled banks in a new program that could cost taxpayers $3 trillion to $4 trillion.
http://washingtontimes.com/news/2009...a-of-bad-bank/

Kind of an RTC redux, but we let the banks get too big to allow them to fail like we did the thrifts back in the day.

[Winehole23]

[/b]that's what we were told about the original 700 billion. buy the toxic assets for 30 cents on the dollar, hold them and hope to get at least 30 cents later.

Pricing is a . If we pay the mark to market (i.e., the fantasy value assigned by the banks; there is no market for these assets now; MBS's and CDO's are all presumptive turds at present), we lose our shirts. Too deep a discount, and the banks lose theirs.

My gut says we'll pay a price well over the true value of financial dark matter and sustain a heavy loss. Otherwise, the bailout won't work.

[Winehole23]

Fed can't own real estate notes without express authorization is my understanding. They can lend and create money.

The Fed has talked about getting authorization to issue its own debt.

TARP was sold as a fund to buy toxic assets. King Paulson sold us out and should do 2 years in a federal penitentiary because of it.

If Americans understood economics, the penalty might be much worse than that.

A trillion here, a trillion there, and pretty soon you're talking about serious money.

[2centsworth]

Pricing is a . If we pay the mark to market (i.e., the fantasy value assigned by the banks; there is no market for these assets now; MBS's and CDO's are all presumptive turds at present), we lose our shirts. Too deep a discount, and the banks lose theirs.

My gut says we'll pay a price well over the true value of financial dark matter and sustain a heavy loss. Otherwise, the bailout won't work.

we'll pay more than the current value which I hear is down to about 15cents on the dollar. If done wisely , we could break even.