Letters to the Editor
i_like_tuesday
Published Letters: 32 Editor's Choice: 4
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Travesty
[Read the article: Bear Stearns proves tantrums work]
[Read more letters about this article: Here]In return for sweetening the deal for Bear shareholders, the fed got JP to agree to absorb the first $1B of losses from the $30B portfolio of "hard-to-value" (read: worthless) assets. So $29B of these assets are now owned by the US taxpayer under an LLC formed by the Fed for the purpose. That comes out to about $100 per capita - straight from ordinary working class taxpayers into the pockets of Bear Shareholders. Ain't "free-market" capitalism wonderful?
Inexplicably, Bear is trading at around $12 after being above $13 today. It is completely unjustifiable that shareholders should get ANYTHING before the taxpayer is completely off the hook for their socialized losses.
And as for Bear employees who had their life savings in Bear stock - that really doesn't say much for the grasp Wall Street's "best and brightest" on even the most basic financial planning advice. These people "advise" others on what to do with their money? No wonder they created this mess.
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@Tyler_Mason
[Read the article: Bear Stearns proves tantrums work]
[Read more letters about this article: Here]Some of that $29B indirectly goes into the pockets of shareholders if they get a sweetened deal while the taxpayers remain on the hook. Today the fed effectively nationalized those $30B in assets (funny I don't hear any outcry?). The Fed guarantee of those assets is the only reason Bear has any value left over at all.
The structure of the deal was changed in a misleading a paeon to the taxpayer - the Fed now actually owns the $30B of hard to value securities so in theory the taxpayer now stands to benefit from any future profits... except that is just a nice theory when those assets are worth pennies on the dollar.
The shareholders should be wiped out as a precondition to the fed smoothing the deal, bottom line. Instead, the taxpayer is lining the pockets of the speculators who kept Bear well above the $2 mark.
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"And monkeys could fly out of my butt"
[Read the article: Nagourney: "At least one scenario where Clinton could win"]
[Read more letters about this article: Here]We're into revisiting the Clinton 90s here, right?
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This makes me nervous...
[Read the article: A boom in Democratic registrations]
[Read more letters about this article: Here]The Limbaugh Democrats?
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Obama/Bloomberg 08 please
[Read the article: Obama's plan to change the economy]
[Read more letters about this article: Here]I'm very pleased with Obama's speech, and the fact that Michael Bloomberg introduced him. Obama/Bloomberg is my dream ticket.
As far as I’m concerned, questioning the GLB Act's repeal of Glass-Steagall gets to the very core of this crisis. Without GLB, this crisis is at the very least far more contained but most likely would simply not have happened. The reality is that it took less than 10 years from the repeal of Glass-Steagal to create a new financial crisis of historic proportions. Further, GLB directly created the conditions that necessitated a bail out of Bear Stearns. While Bear Stearns itself wasn't TBTF, GLB created a situation where its liquidation had the potential to bring down the 3 largest US depositories along with it.
Most bank derivatives exposures are highly concentrated among the three largest commercial banks - Citigroup has $33T notional exposure, JPMorgan Chase $85T, BoA $32T. All 3 of these could have potentially failed simultaneously in the fallout from a BS bankruptcy. If the counterparty on the losing side of a derivatives trade can’t make good on the contract, the trade was made to close or hedge against a losing position and if pledged collateral is insufficient, large losses can materialize where there was supposedly no market exposure. If Bear, with $11.4 Trillion in notional exposure, had been unable to make good on some trades in a liquidation, it could have created a series of unexpected market exposures and losses cascading across all market participants, ultimately bringing down the entire system.
Given the size of the figures involved, this situation had the potential to make the subprime related losses look small. For instance, the BIS estimate of notional value of derivatives worldwide is $516 Trillion yet only $11 Trillion of that is market exposure. While the notional numbers are astronomical (they express a sort of sum of all worst case scenarios), the figure gives an idea of the potential scale at which such exposure could arise. It could’ve been financial Armageddon or it could’ve been not so bad - We really don’t know. The Fed, at least, thought it would’ve been bad enough where it had to bail out a non-bank financial institution that it didn’t regulate because it presented an unacceptable level of risk to the entire financial system.
So, do financial institutions with direct access to a federal backstop have any business having these kinds of astronomical exposures to derivatives contracts with largely unregulated institutions as counterparties? Very good question, Sen. Obama.
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Dotted with Poison Pills
[Read the article: Paulson's bogus plan to regulate the markets]
[Read more letters about this article: Here]There is a long and winding road any reform of financial regulation must travel, therefore I wouldn't put much stock in what is actually here. This particular proposal would not be taken seriously if it weren't for the current crisis. It is worth remembering that this initiative had nothing to do with the credit crunch. The Treasury's review of financial regulatory structure was started back in the halcion days when dealers in subprime securities still had a license to print money. So please remember that this is nothing more than an ideological document, rebranded as a response to the crisis to give it more traction.