Comments on: Big Banks Lining Up to Stop Sell Off of Subprime Related Securities

By: Tim

Tim — Mon, 15 Oct 2007 16:48:18 +0000

I received an e-mail this morning indicating the disdain for this move. The idea of this group banking “huddle” being, “I know we enabled this garbage, but let’s use our depositors money to help bail us out. Let’s call the play, “20-glossy-eye-end-around,” on three…break!

By: russ

russ — Mon, 15 Oct 2007 16:11:56 +0000

Along that same line some other tricks are being used to try and stop the sell-off or at least stop that sale at market-determined prices. This one is a play straight from ENRON where loans were sold with a repurchase agreement just to get them off of the books. It is also from naked capitalism:

“”Some financial firms have sought in recent weeks to avoid write-downs by selling mortgage positions to hedge funds, with an agreement that allows the hedge fund to sell them back after a set period. A hedge-fund trader says his firm recently bought $1 billion of risky subprime mortgage loans from Bear Stearns with a one-year pact, known as a “mandatory auction call,” under which Bear agrees to participate in an auction for the loans that will provide the hedge fund with a minimum rate of return, according to a person familiar with the situation. “They didn’t want the mortgages on their books,” the hedge-fund manager says.

Such financial arrangements typically are considered proper if there’s an economic purpose to the trade and if risk is taken on by both parties. Legal problems could arise if such trades are part of an attempt to conceal a company’s financial picture, regulators say.”"

http://www.nakedcapitalism.com/2007/10/wall-street-journal-rewrites-financial.html
(down teh page)

This looks crooked as hell and I wouldn’t be surprised if the Bush administration lets this happen again.

By: Ann

Ann — Mon, 15 Oct 2007 01:05:38 +0000

Basically the banks are willing to use 75 Billion to save themselves HUNDREDS of BILLIONS….this is exactly what we would expect them to do…cover their own butts..as my mother has said hundreds of time..In today’s world..every person is on their own..save yourselves….

By: Todd

Todd — Sun, 14 Oct 2007 06:18:02 +0000

This is completely insane! I took my degree in Business/Finance and although I may not recall everything I learned; two things have and always will stick with me:

1) Economic policy and the implementation of same is really just the black art of pushing financial doomsday yet one day further down the road. IOW it all works on SWAG ;>)

2) Never, and I mean never, finance a long term deal with short-term money nor vice-versa. To do so is a recipe for disaster, i.e., “…SIVs, which issue short-term notes to invest in longer-term securities with higher yields, are often organized by banks but are not actually owned or held by them…”

IOW, let some other sucker hold the bag, and it’s all coming back to bite us YKW.