dolmar said:Beckles said:I'm not sure that's all that accurate. These instruments have already been heavily written down, but even at their drastically reduced values they're still illiquid. Many institutions will be more than happy to dump them for a fraction of face value for cash, the problem right now is no one is willing to pay cash for them, in particular because everyone is in the same boat and can't take on more of the same risk.


Bank have to mark to market there assets each month because Sec rule FAS 157. Mark to Market is really BS in most cases. Think of it this way. You have a brokerage account in that brokerage account you have 10k shares of XYZ Stock that you bought last month for $45 per share. Today that stock is valued at $10 per share. If you don't sell the stock today what have you lost?

Coffee, meet keyboard.

We have a respected FW member that subscribes to the "You dont lose until you sell" crock and pretends that margin calls do not exist.

Well, in combination with protecting our money market funds, and protecting our financial institutions by banning short selling against them temporarily, it sure as heck is having a huge positive impact on the market. I am very pleased, personally, with the short term extraordinary pop we are going to have today. Insuring money markets will be done at a fee, as all insurance is done. And premiums usually cover losses in the insurance business. We shall see.

Dealguy123 said:The last one dealt with assets of banks that went bankrupt. This RTC 2.0 looks to be dealing with banks THAT AREN'T EVEN BANKRUPT?!That's what I don't understand. The government is supposed to establish a set of rules and ensure everyone play by the rules honestly, and ensure orderly unwinds of failed companies. This RTC2.0 seems to be a result of very hasty decision making processes.

I am going to the track today.

I will bet $2 to win on every horse in every race. I will keep all of my winnings. I expect everyone on this board to give me a dime toward every bet I make, you will cover every one of my losing tickets. A 30% tax on my winnings will be returned to you.

Today's bets will cost you collectively $100. I should win roughly $90 today. I will return $27 back to you. I will keep the other $63 to do with as I please.

Tomorrow, we will do it again.

It is the new American way, reward with no risk.

Beckles said:EvilCapitalist said:That's not the issue. The issue is that the cashflow from the mortgage has been repackages via MBS and derriviative instruments. The underlying may mortgage cashflow may change just a bit, but the devastation it would create in the financial instruments based on it is much higher.You still can't get more than $100,000 in losses on a $100,000 mortgage. The repackaging means that if the mortgage is paid 90% there may be derivitives with that mortgage that absorb the entire 10% that is lost while other derivitives remain whole, but a $100,000 mortgage can not create more than $100,000 in losses across all its derivitives, even if it becomes completely worthless.

How uncreative. Margin is your friend ( or in this case, your enemy ).

EvilCapitalist said:Bank have to mark to market there assets each month because Sec rule FAS 157. Mark to Market is really BS in most cases. Think of it this way. You have a brokerage account in that brokerage account you have 10k shares of XYZ Stock that you bought last month for $45 per share. Today that stock is valued at $10 per share. If you don't sell the stock today what have you lost?

Coffee, meet keyboard.

We have a respected FW member that subscribes to the "You dont lose until you sell" crock and pretends that margin calls do not exist.

I am not claiming margin calls do not exist but margin call issue is another issue and has nothing to do with the banks current positions or credit crunch. Commercial Banks have a limited amount of capital and can only create a limited amount of credit against that capital. If they are unable to sell the current mortgages on there books they are unable to underwrite and fund new mortgages.

Margin calls did not put the commercial banks in the current position. Margin calls might effect hedge funds, investment banks and private individuals who levered up there positions because they made bets larger than they could afford but they are just as guilty as the home buyer who bought homes they could not afford thinking there equity would increase and they would either be able to refinance there home after a year into a new teaser rate mortgage or a fixed rate product.

So not sure about your point of trying to compare margin consequences to FAS 157 requirements. Commercial banks made a large chunk of there money underwriting mortgages and then selling them and not buy holding them to maturity as they underwrote those mortgages with 20-50 bps spread over what there cost of funds are. So in banks opinion holding those mortgages till maturity is a waste of capital and takes away profit from the bottom line going forward.

ClaimsGuy said:DavidScubadiver said:And premiums usually cover losses in the insurance business. We shall see.

Wrong. Very few companies make an underwriting profit.What are you talking about? The entire insurance industry is based on premiums covering losses, that the premiums are paid before the losses are incurred and the insurance company profits on the use of the money in the interim.

nycll said:Dealguy123 said:The last one dealt with assets of banks that went bankrupt. This RTC 2.0 looks to be dealing with banks THAT AREN'T EVEN BANKRUPT?!That's what I don't understand. The government is supposed to establish a set of rules and ensure everyone play by the rules honestly, and ensure orderly unwinds of failed companies. This RTC2.0 seems to be a result of very hasty decision making processes.Yes, it was hasty. But the haste was necessary. People have no idea what it would mean for a company like Goldman to go under. Business was going to come to a screaming halt. They took emergency measures and sure, some people got hurt and got hurt real bad as a result. These were the people taking advantage of the fact that they could drive prices down by selling declining stocks short and by spreading rumors about the financial health of these companies, further exasperating the problem.

Was it a perfect solution? No. But did it keep Goldman's stock from disappearing? Seems to have done the trick. These Goldman guys are great people. They make a lot of money but that is no reason to hate. They fund great businesses. People need them to raise capital. This was all needed.

Edited: They should never have lifted the uptick rule. Put it back so this does not happen again. And again.

DavidScubadiver said:nycll said:Dealguy123 said:The last one dealt with assets of banks that went bankrupt. This RTC 2.0 looks to be dealing with banks THAT AREN'T EVEN BANKRUPT?!That's what I don't understand. The government is supposed to establish a set of rules and ensure everyone play by the rules honestly, and ensure orderly unwinds of failed companies. This RTC2.0 seems to be a result of very hasty decision making processes.Yes, it was hasty. But the haste was necessary. People have no idea what it would mean for a company like Goldman to go under. Business was going to come to a screaming halt. They took emergency measures and sure, some people got hurt and got hurt real bad as a result. These were the people taking advantage of the fact that they could drive prices down by selling declining stocks short and by spreading rumors about the financial health of these companies, further exasperating the problem.

Was it a perfect solution? No. But did it keep Goldman's stock from disappearing? Seems to have done the trick. These Goldman guys are great people. They make a lot of money but that is no reason to hate. They fund great businesses. People need them to raise capital. This was all needed.

Another brainless post. I don't give two s**ts about the "no shorting" rule, we weren't even discussing that. If you didn't see that coming yesterday, sucks for you. What we were talking about wasn't the "no shorting" but the bailout plan, which hasn't passed yet. The government is literally raining down money on everyone. Bail out money market funds, RTC 2.0, Freddie/Fannie, Bear Stearns, AIG, etc. The list goes on and on. I could careless about the no shorting! The REAL problem is the "printing" of money to bail everyone out, and WE THE TAXPAYERS EAT THE LOSS!

I get a lot of red, and I understand that people think this is unfair. But think for a moment what life would be like if the government let the last of the independent investment banks fail -- one that was not stricken by the toxic housing losses, one that made it possible for business to take place. It would have been bad. Thousands of people would have lost their jobs, we'd go into a deep deep recession and the stock market would have collapsed. Goldman is the ONE company that is synonymous with sound investing, and if they fail, nobody succeeds.