muck Posted October 14, 2008 Share Posted October 14, 2008 Click this for new info Quote Link to comment Share on other sites More sharing options...
CaP'N GRuNGe Posted October 14, 2008 Share Posted October 14, 2008 So, good approach? Quote Link to comment Share on other sites More sharing options...
Outshined Posted October 14, 2008 Share Posted October 14, 2008 At some point in time, I would hope they sell those shares for profit. Quote Link to comment Share on other sites More sharing options...
wiegie Posted October 14, 2008 Share Posted October 14, 2008 So, good approach? yes Quote Link to comment Share on other sites More sharing options...
dmarc117 Posted October 14, 2008 Share Posted October 14, 2008 this could possibly just be more throwing away more good money. who knows what these banks have on the books with credit default swaps. but the market loves it. hold on tight!!! Quote Link to comment Share on other sites More sharing options...
Cunning Runt Posted October 14, 2008 Share Posted October 14, 2008 Click this for new info I'm curious - is there a way to mandate that those banks use the money as intended? How is it ensured that the banks don't hoard it? Quote Link to comment Share on other sites More sharing options...
AtomicCEO Posted October 14, 2008 Share Posted October 14, 2008 Is this 250 bil out of the original bill passed by congress, or is this a new 250 bil? Quote Link to comment Share on other sites More sharing options...
wiegie Posted October 14, 2008 Share Posted October 14, 2008 Is this 250 bil out of the original bill passed by congress, or is this a new 250 bil? out of the original bill Quote Link to comment Share on other sites More sharing options...
AtomicCEO Posted October 14, 2008 Share Posted October 14, 2008 (edited) out of the original bill cool. I like this idea better than buying bad assets. I think that investing in banks right now has a good chance of actual turning a profit since everyone is scared of them right now. ETA: But I'm no economist. Edited October 14, 2008 by AtomicCEO Quote Link to comment Share on other sites More sharing options...
muck Posted October 14, 2008 Author Share Posted October 14, 2008 One feature that I don't like is that the investment will be structured in such a way so that the common stockholders are not diluted. Apparently, the deals will be structured similarly to the way Buffett structured his recent transactions. One feature I did like is that the banks do not have a choice about whether or not to acept the capital; this eliminated the requirement of the banks to come to the Fed and have to ask for $$s, which would have (probably) killed the bank on the spot. Since so much of the problem is an issue of market confidence, eliminating that hurdle (to the extent possible) is a good thing. That said, I REALLY hate the idea that a beurocrat could come into my business and force me to take his money and become my business partner. ...while the market is only down a little bit (vs. yesterday's closing prices), it is down nearly 6% from where it was trading overnight... Quote Link to comment Share on other sites More sharing options...
westvirginia Posted October 14, 2008 Share Posted October 14, 2008 ... I REALLY hate the idea that a beurocrat could come into my business and force me to take his money and become my business partner... It's kind of a Corleone, "make him an offer he can't refuse" deal. But hey, that's how taxes started - the fuedal lord "protection" tribute. Everything old is new again. Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted October 14, 2008 Share Posted October 14, 2008 One feature that I don't like is that the investment will be structured in such a way so that the common stockholders are not diluted. Apparently, the deals will be structured similarly to the way Buffett structured his recent transactions. One feature I did like is that the banks do not have a choice about whether or not to acept the capital; this eliminated the requirement of the banks to come to the Fed and have to ask for $$s, which would have (probably) killed the bank on the spot. Since so much of the problem is an issue of market confidence, eliminating that hurdle (to the extent possible) is a good thing. That said, I REALLY hate the idea that a beurocrat could come into my business and force me to take his money and become my business partner. ...while the market is only down a little bit (vs. yesterday's closing prices), it is down nearly 6% from where it was trading overnight... If Buffett structured his deals that way, it's likely correct and therefore the government is likely correct too. This should return the money to the taxpayer eventually. The banks are in absolutely no position to argue about their individual selves - the focus is on the whole system, not each bank. The idea of forcing them all to take the money as you pointed out has helped a lot. Quote Link to comment Share on other sites More sharing options...
Cunning Runt Posted October 14, 2008 Share Posted October 14, 2008 I'm curious - is there a way to mandate that those banks use the money as intended? How is it ensured that the banks don't hoard it? No comment? Are these stupid questions? Maybe so. Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted October 14, 2008 Share Posted October 14, 2008 No comment? Are these stupid questions? Maybe so. They are good questions but one of our economist folks will need to answer them definitively. I imagine the government will monitor loans made by the banks. Quote Link to comment Share on other sites More sharing options...
Cunning Runt Posted October 14, 2008 Share Posted October 14, 2008 They are good questions but one of our economist folks will need to answer them definitively. I imagine the government will monitor loans made by the banks. Ya - I was kinda thinking Wiegie was gonna answer, but he jumped over mine to answer Atomic's cupcake. Quote Link to comment Share on other sites More sharing options...
muck Posted October 14, 2008 Author Share Posted October 14, 2008 No comment? Are these stupid questions? Maybe so. New capital will allow the (est.) $500 billion of bonds issued by banks to get refinanced between now and the end of the year. Absent the new capital, these bonds were NOT getting redone and our capital system would have really imploded (i.e., Dow = 1000). So, what will the new capital get used for? For issuing new senior and new subordinated debentures which will be used to pay the debentures that are currently oustanding and are due to mature in the next few months. Beyond that, I'm assuming that they will be used to eat losses, dispose of assets in a timely manner, be opportunistic about trying to increase market share, etc. PS -- Once this is behind us, I do hope that someone will take a pen and re-write the definition of "monopoly" so we no longer have institutions that are "too big to fail". Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted October 14, 2008 Share Posted October 14, 2008 (i.e., Dow = 1000). PS -- Once this is behind us, I do hope that someone will take a pen and re-write the definition of "monopoly" so we no longer have institutions that are "too big to fail". Are you serious? Dow at 1,000 would effectively mean total collapse of pretty much everything and likely spark insurrections worldwide. Agree about the too big to fail thing - that is anti-capitalistic in that it is an impediment to competition as well as an impediment to good business practice. Quote Link to comment Share on other sites More sharing options...
tonorator Posted October 14, 2008 Share Posted October 14, 2008 i'm not sure how this helps in the long term. what's been done to reform all the bad practices that got us here in the first place? also, borrowing money from foreign investors to pump into our financial institutions so that they in turn can extend yet more credit to our people and businesses worries me as well. all of these moves, along with the moves that got us here, assume that our economy will rebound and we will return to a position of strength at which time we will be able to repay all this debt. that may happen, but i have to think that we are years and years away if indeed we are entering an extended recessionary period as many believe. i don't see how borrowing more money to create more debt really helps, other than to inject some short term liquidity into very bad scene. i would think it would dry up quickly and we will be right back where we started. Quote Link to comment Share on other sites More sharing options...
CaP'N GRuNGe Posted October 14, 2008 Share Posted October 14, 2008 i'm not sure how this helps in the long term. what's been done to reform all the bad practices that got us here in the first place? also, borrowing money from foreign investors to pump into our financial institutions so that they in turn can extend yet more credit to our people and businesses worries me as well. all of these moves, along with the moves that got us here, assume that our economy will rebound and we will return to a position of strength at which time we will be able to repay all this debt. that may happen, but i have to think that we are years and years away if indeed we are entering an extended recessionary period as many believe. i don't see how borrowing more money to create more debt really helps, other than to inject some short term liquidity into very bad scene. i would think it would dry up quickly and we will be right back where we started. Richard Cheney: Deficits don't matter. Quote Link to comment Share on other sites More sharing options...
muck Posted October 14, 2008 Author Share Posted October 14, 2008 (edited) Are you serious? Dow at 1,000 would effectively mean total collapse of pretty much everything and likely spark insurrections worldwide. Agree about the too big to fail thing - that is anti-capitalistic in that it is an impediment to competition as well as an impediment to good business practice. Yes, I am/was. What happens if the $500 billion of bank bonds that are due to be paid off / refinanced in the next three months cannot be? Absent government intervention, the global banking system fails. Dow 1000 may be generous in that scenario. ...then again, this is not news and it is not an extraordinary comment...the global banking system is built on trust, and if that trust is gone, then the economy that is supported by the banking system fails to exist too...this is not new information. There is too much vested interest in the status quo to really give a ton of credence to the idea of a complete meltdown ... except in the case of a global thermonuclear war (or similar) where jihadists everywhere (Muslim or otherwise) simply blow everyone else up who does not agree with them on whatever topic they feel passionately about. Coke v. Pepsi, anyone? Edited October 14, 2008 by muck Quote Link to comment Share on other sites More sharing options...
wiegie Posted October 14, 2008 Share Posted October 14, 2008 I'm curious - is there a way to mandate that those banks use the money as intended? How is it ensured that the banks don't hoard it? no, to the best of my knowledge, there is nothing that will force banks to lend. However, my guess/hope is that the quest for profits will encourage lending again. Quote Link to comment Share on other sites More sharing options...
wiegie Posted October 14, 2008 Share Posted October 14, 2008 Here are some other thoughts from economists: http://blogs.wsj.com/economics/2008/10/14/...he-ivory-tower/ Quote Link to comment Share on other sites More sharing options...
AtomicCEO Posted October 14, 2008 Share Posted October 14, 2008 Ya - I was kinda thinking Wiegie was gonna answer, but he jumped over mine to answer Atomic's cupcake. I like cupcakes. Quote Link to comment Share on other sites More sharing options...
Cunning Runt Posted October 14, 2008 Share Posted October 14, 2008 I like cupcakes. Me too. I just downed a pack of Zingers which are very cupcake-like in taste. Hadn't had those in a while. Yummy. Quote Link to comment Share on other sites More sharing options...
dmarc117 Posted October 14, 2008 Share Posted October 14, 2008 By Oliver Staley Oct. 14 (Bloomberg) -- For most Americans, $700 billion is a large amount. Not in University of Chicago professor Casey Mulligan's classroom, where he says the sum, pledged for a bailout of financial institutions, represents only 1.75 percent of an estimated $40 trillion in U.S. and European liabilities. ``A small change in market conditions can erase $700 billion,'' Mulligan told 60 sleepy students hunched over steaming cups of coffee in a macroeconomics lecture on Oct. 2. ``It's not out of the question that $700 billion will buy you a couple of months and nothing more.'' this is what is worrisome, the unknown. what do these banks really have? Quote Link to comment Share on other sites More sharing options...
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