Friday, August 10, 2007

Good Point

Cartledge makes this point in a comment:

I find it bloody curious that our governments staunchly refuse to regulate poor business practices yet bail the bastards out when they get into the shit.
Yup - when it's poor people who get into shit, we hear how the government can't bail them out cuz' it's socialism.

But somehow, the Fed bailing out the stupid, arrogant motherfuckers running the banks and hedge funds embroiled in the subprime mess isn't socialism.

Funny how that works.

Seems to be a recurring theme. I posted something similar along those lines today too.
Also, that last point about the infusion causing it's own fears is a good one (from the original comment). I heard one trader say today that if the the Fed were to step in and drop rates right now, it would cause a full blown panic.
I think it would too, pt. By the end of the trading day here, the furor over the liquidity crisis seemed to have abated. I sense Monday will be an up day unless something else subprime related comes out first.

But that's the thing - it seems like their whistling through the graveyard. They keep saying this isn't a major economic event, it will pass, blah, blah, blah...but they also said the subprime problem was well-contained. hell, the French bank said last week they had no exposure to the subprime mess...until Thursday they had to shut down some funds.

Lots of denial on this.
Thanks RBE. I wish I really understood economics. Markets are indicators but as one economic commentator here said recently; the markets has predicted three out of the last seven slumps.
The greed must be the real issue, greed supported by the compliance of various governments.
I agree with PT about dropping the rate; but why give the greedy bastards more encouragement?
Yeah, plenty of denial, and what is more, there are people who are exposed who don't even know it. With the worst of the debt being cut up and sold in tranches, no one even really knows the extent of their exposure.

The French bank is a perfect example. They are exposed, but say they aren't so if you are holding them, you think you aren't exposed, but you are.

I really like this idea of a circular feedback effect. As liquidity dries up, people start trying to cash in certain assets only to find that that money isn't there. The circle continues and the momentum builds. The spreading of risk that has floated this market so long will create major losses for everyone as it slowly unwinds and is shown to permeate everything.

I saw the CFO of ING say they were only exposed to about 50m EUR of American Subprime (actually very little for them, they are huge).

Yeah, officially. We will see.
Pt, I saw that story about ING too. And I thought the same thing - maybe the CEO really thinks their exposure is minimal, but I bet he doesn't really even know.

You know, I always here how major events can never happen anymore because of all the protections put into place in markets. But the clever way in which the subprime mortgages were cut up and sold really spread the risk and perhaps short0-circuited some of the protections put into place - because nobody knows just how much of this "toxic waste" their holding!

Cartledge, I agree that dropping the rates would just encourage the bastards more - It's true that some homeowners will get here, but even their behavior needs to be changed. After all, when did it become okay to lie about your income and credit history in order to buy a house you can't afford for an interest rate that is going to adjust in a few years to a really high rate?
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