The Bailout

[wiegie]

aren't the very "securities" they sold the ones that are now viewed as toxic assets that nobody can accurately value? I believe they are.

I don't know. But this is something I would like to know as it doesn't make sense that they can't be valued if they are guaranteed to be paid off.

[tonorator]

toxic!!!

 

 

gotta love the media.

[CaP'N GRuNGe]

pretty good article here detailing many of the steps that got us here, and arguing finally that congress should stay out.

 

That was informative. Thanks.

 

I question the contention that this is a Wall Street only problem. Wiege or Muck, is there some place we can look to that easily quantifies how this is right now affecting Main Street via liquidity problems?

[wiegie]

That was informative. Thanks.

 

I question the contention that this is a Wall Street only problem. Wiege or Muck, is there some place we can look to that easily quantifies how this is right now affecting Main Street via liquidity problems?

I know of nothing that quantifies it (and I would love it if somebody provided such a link). This article is sort of what you are hinting at though:

 

http://www.time.com/time/nation/article/0,...1846040,00.html

[AtomicCEO]

uh, the oversight committee in the bill didn't have anybody from congress in it

 

Oh, so it had no power whatsoever? Where did it derive it's authority?

 

ok--by the way, what sort of plan did you advocate?

 

You have officially become H8Tank, dude.

"If you don't support war in Iraq, then I guess you support surrender to the terrorists!"

[wiegie]

You have officially become H8Tank, dude.

"If you don't support war in Iraq, then I guess you support surrender to the terrorists!"

And you have officially become a Nader-voter.

"I will stand by my principles even if it means that the country will go down in flames."

[muck]

Play nice.

 

Don't want to get the thread gun pulled on this...

[untateve]

And you have officially become a Nader-voter.

"I will stand by my principles even if it means that the country will go down in flames."

 

I'm just nicely walking down the street and wiegie jumps out of a doorway, slaps me in the head, and runs away.

[westvirginia]

I'm just nicely walking down the street and wiegie jumps out of a doorway, slaps me in the head, and runs away.

 

 

Singing "We represent, the lollipop guild, the lollipop guild....."

[Perchoutofwater]

I'm just nicely walking down the street and wiegie jumps out of a doorway, slaps me in the head, and runs away.

 

More like slaps you in the ass, he couldn't reach your head.

[The Holy Roller]

I'm just nicely walking down the street and wiegie jumps out of a doorway, slaps mewith the economist's invisible hand in the head, and runs away.

 

fixed

Edited October 2, 2008 by The Holy Roller

[wiegie]

This ain't good:

 

Bank Limits Fund Access by Colleges, Inciting Fears

By SAM DILLON and KATIE ZEZIMA

NY Times

Published: October 1, 2008

 

In a move suggesting how the credit crisis could disrupt American higher education, Wachovia Bank has limited the access of nearly 1,000 colleges to $9.3 billion the bank has held for them in a short-term investment fund, raising worries on some campuses about meeting payrolls and other obligations.

 

Wachovia, the North Carolina bank that agreed this week to sell its banking operations to Citigroup, has held the money in its role as trustee for a fund used by colleges and universities and managed by a Connecticut nonprofit, Commonfund.

 

On Monday, Wachovia announced that it would resign its role as trustee of the fund, and would limit access to the fund to 10 percent of each college’s account value. On Tuesday, Commonfund said that by selling some government bonds and other assets held in the fund, it had succeeded in raising its liquidity to 26 percent.

 

Still, Wachovia’s announcement sent shock waves through higher education, sending hundreds of college presidents rushing to check their financial vulnerability on every front.

 

Some smaller colleges that had not previously arranged lines of credit were feverishly seeking to negotiate those on Wednesday. And some large institutions said they were facing, at the least, a major financial inconvenience as a result of Wachovia’s action.

 

The University of Vermont, for instance, said that about half of its liquid operating assets — $79 million — were invested in the fund.

 

“It appears that the asset is secure,” said Richard H. Cate, vice president for finance and administration at the University of Vermont, because, he said, much of the $9.3 billion is held in securities that will become available when they mature. “But we’re not real thrilled with the fact that we can’t access all of our money when we want it.”

 

Wachovia’s action was perhaps the most tangible signal yet that the credit crisis could have a powerful impact on higher education. Another sign came on Tuesday as Boston University, saying it needed to respond to the financial crisis with cautionary steps, announced an immediate hiring freeze and a moratorium on new construction projects. That decision was unrelated to the action by Wachovia, where Boston University was not an investor.

 

On Tuesday, officers of Commonfund held a lengthy conference call to provide details of Wachovia’s action to representatives of more than 900 colleges and universities, many of whom were upset, said W. Judson Koss, a spokesman for Commonfund.

 

“The whole issue is liquidity,” Mr. Koss said. “This is a fund that has been in operation for over 35 years, and is invested in nothing but Triple-A government and corporate paper, all top-notch equities.

 

“We’ve been going along just fine, but Wachovia had a liquidity concern. They asked, ‘What if there’s a run on the bank and we can’t redeem these securities?’ So they were the ones who pulled the pin on the grenade.”

 

Colleges have used the fund, formally called the Commonfund Short Term Fund, almost like a checking account, depositing revenues including tuition payments and withdrawing funds daily to finance payrolls, maintenance expenses, small construction projects and other short-term needs, college officials said.

 

Nearly 60 percent of the securities in the fund are scheduled to mature by Dec. 31, and thereafter would be available to investors, Commonfund said in a statement. When the remaining funds would become available was unclear. The fund said it was seeking a trustee to succeed Wachovia.

 

To date, none of the securities have defaulted, and all were continuing to pay timely principal and interest, the statement said.

 

But for the time being, some institutions that have relied on the fund were scrambling to secure money for operating expenses.

 

Augsburg College in Minneapolis is one of more than a dozen Minnesota colleges with investments in the fund. Augsburg was fortunate, its president, Paul C. Pribbenow, said, because its holdings were just $13,392.

 

“But this certainly raises the specter that we can no longer take anything for granted,” Dr. Pribbenow said. “It shows just how vigilant we need to become about every financial relation we have.”

 

The University of Akron had $800,000 invested in the fund, a small part of the university’s total portfolio of operating funds, which typically range from $100 million to $150 million in a semester, said John Case, the university’s chief financial officer. Shortly before Wachovia’s announcement, the university withdrew $80,000, but has since been unable to withdraw any of its remaining money, Mr. Case said.

 

Matthew Hamill, senior vice president of the National Association of College and University Business Officers, said, “This is a pretty significant event, in the short run, because it’s going to cause dislocation and uncertainty.” Mr. Hamill added: “My estimate is that in the long run, investors will wind up with their money back. But they don’t have access to cash in the short run, so it’s going to cause significant financial and operational changes.”

 

Molly Broad, president of the American Council on Education, which represents 1,600 colleges and universities, said: “A widespread credit crisis will affect a large number of our institutions very quickly. Those folks who’ve been saying that the economy could be seized by a liquidity crisis, well, it’s unfolding before our eyes, and it’s having an impact on colleges and nonprofits.”

 

At Boston University, President Robert A. Brown sent an e-mail message to faculty and staff members on Tuesday saying that the university would temporarily freeze hiring, with the exception of public safety employees and professors whose hiring process was under way, and that it would postpone all capital projects that had not begun.

 

Joseph Mercurio, the university’s executive vice president who oversees its budget, called the steps pre-emptive.

 

“We have a lot of economic uncertainties that have to do with the national economy,” Mr. Mercurio said, “and in light of those conditions we’re going to take some prudent steps right now.”

[CaP'N GRuNGe]

This was all part of the plan...to keep the public unedumacated.

[Azazello1313]

 

and with that, wiegie's thoughts on this issue take on a whole other level of urgency.

[TimC]

:tapsshoulder: Is this the wiegie slapping line?

[AtomicCEO]

And you have officially become a Nader-voter.

"I will stand by my principles even if it means that the country will go down in flames."

 

I did vote for Nader.

 

I just feel that our government is incredibly poor... because of our low expectations of it. At least pretend to care. I sent a few emails. If everyone did that, maybe some people would care.

[Jimmy Neutron]

I just feel that our government is incredibly poor... because of our low expectations of it. At least pretend to care. I sent a few emails. If everyone did that, maybe some people would care.

I think you're right. I've been raging about that stupid bill the senate passed last night non-stop and not many people seem to care. Yeah, it's not really a surprise - but it is immensely disappointing in a time of reported crisis. The fact that Obama and McCain both voted for it further assured me that it doesn't really matter which one wins - both are beholden to business as usual. Change and reform my ass.

 

Still, I'm not giving up - I hope those that are not satisfied don't either.

[AtomicCEO]

I am more than a little disappointed that after voting down the first bad bill, they came back with a worse second bill that has a better chance of passage. That hurts me in my soul.

[wiegie]

I am more than a little disappointed that after voting down the first bad bill, they came back with a worse second bill that has a better chance of passage. That hurts me in my soul.

What did you expect?

 

 

In any case, fear not... I don't think this is the last bit of legislation that will be needed to fix this mess.

[AtomicCEO]

What did you expect?

 

 

In any case, fear not... I don't think this is the last bit of legislation that will be needed to fix this mess.

 

My Nader vote didn't work out so well either.

 

But on the bright side, I'll be able to say I was right in 5 years, again.

[wiegie]

I see Muck lurking, so let me ask: Muck, how exposed are hedge funds to credit default swaps? (Are we looking at a hugh wave of hedge fund collapses soon?)

[wiegie]

toxic!!!

 

 

gotta love the media.

uh, the term "toxic" has been used in the industry for a long time. The media didn't make up the term.

[muck]

I see Muck lurking, so let me ask: Muck, how exposed are hedge funds to credit default swaps? (Are we looking at a hugh wave of hedge fund collapses soon?)

 

Calling all private investment partnerships "hedge funds" is sorta like calling all carbonated beverages "Cokes".

 

With that said, some hedge funds have sold a TON of CDSs ... some have purchased a TON of CDSs ...

 

Personally, I think that quite a bit of the pricing of the CDS's that are really nuts are not only due to the underlying credit, but also to the credit quality of the counterparty on the other side of the CDS (i.e., AIG, etc).

[wiegie]

Personally, I think that quite a bit of the pricing of the CDS's that are really nuts are not only due to the underlying credit, but also to the credit quality of the counterparty on the other side of the CDS (i.e., AIG, etc).

I agree 100%.

[TimC]

For the 2nd time ever, I sat down and wrote my guy an e-mail telling him to vote NO for the bailout handout. He voted no last week also.