Fed Must Buy Securities to Halt Crisis, Cambiar's Barish Says

[NeoConsSuck]

Source: Bloomberg.com

March 16 (Bloomberg) -- The U.S. Federal Reserve must start buying or borrowing mortgage-related securities from banks and brokers to forestall an economic disaster, said Brian Barish, who helps manage $8 billion at Cambiar Investors LLC.

``The Great Depression was caused by a failure by the Fed to respond to a crisis of somewhat similar character,'' Barish, president of Denver-based Cambiar, said in an interview yesterday. ``We better get the right policy real quick or you could just have a situation that should have been a run-of-the- mill recession turn into something worse.''

Credit markets have seized up because of uncertainty over the value of securities backed by mortgages, which have already led to more than $195 billion in writedowns and credit losses at banks and brokers. The Fed said on March 11 it would start lending Treasuries in exchange for debt including mortgage- backed securities for the first time beginning March 27. Still, market confidence continued to erode, and by March 14 the Fed was providing emergency funding to Bear Stearns Cos.

<snip>
Barish said the question that's ``unanswerable'' is how much of these securities the Fed needs to buy or borrow. He estimated it could be $400 billion or $500 billion. The Fed's March 11 statement said it would make up to $200 billion available through weekly auctions, and officials told reporters the program may be increased.

Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=a76lxAm5blPI&refer=home

---

So, these worthless pieces of junk, that were created by investment bankers, for investment bankers to make them rich, are now worthless, so the Fed (American taxpayers), should now buy and own them??

This is another case of privatizing the profits, but socialize the risks. Were they clamoring for the Fed (American taxpayer) to buy these risky investments when they were creating windfall profits a few years ago? Of course not.

The golden rule of capitalism can be summed up as: Don't meddle in the free market system, unless the capitalists start losing big time, then the American taxpayer should be forced to bear the brunt of their bad investments.

[fasttense]

1. Well if they are going to buy crap from

the ignorant financial corporations who created this depression, why not buy our crappy homes that we are about to lose? Instead of letting the homes go into foreclosure and causing all sorts of pain for these ignorant corporations, buy up the crappy homes. At least they will have an overpriced real asset to show for their bailout instead of a worthless piece of paper.

[dkf]

2. Once they buy the crappy homes, what do they do with them?

Make the former home owner pay rent?

I'm kind of pissed at home owners who lied to get their loans. A lot of people bought way too much home IMO.

[Vincardog]

3. Thats the ticket blame the people these PARASITIC financial companies steered into bad financial

decisions. That is the GOP way BLAME THE VICTIMS.

[dkf]

4. I have been waiting to buy a house because I know how much

I can afford.

All the while I see people who make less than me buy houses that I can't afford with a 30 year fixed mortgage and 20% down.

I see stories about gardeners making $20k a year buying $700k homes.

I see stories about felons in jail buying $300k homes.

The financial institutions aren't making money, they are losing money. Get real.

[Vincardog]

8. It depends on which financial institution you are talking about. Someone made money when they

originate the loan.

Some one made money when they bundled the loan and sold it to other "Financial Institutions" as mortgage backed securities.

Someone made money when the used hocus pocus "derivatives" to leverage their "Profits" at the hedge funds.

Now you want me to "Get real" and cry a river for the parasitic financial companies who are starting to feel a little of the effects of their fraudulent business practices?

Excuse me while I
ROLMAO
:rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl:

[dkf]

10. Well the US hardly manufactures stuff anymore, only financial products.

Sad but true.

[Vincardog]

11. That trend was also foisted upon us by the very financial institutions you are defending.

Sad but true. Do you have a point or do you just post shit you hear on the radio?

[dkf]

13. Oh, I'm not defending financial institutions.

I think both sides caused these problems and I wonder how we will get out of it.

I am very worried that liquidity is seizing up and yes, I have no confidence in the value of mortgages that are on the books.

My solution would be to ferret out the status of each mortgage and figure out which ones have value, and make this transparent throughout the system.

Good mortgages are being tainted along with the bad ones, and no one wants either anymore.

With the US being such a debtor nation we are in great danger that the world will pull out so yes I am very nervous.

[sarcasmo]

24. I used to ask friends and family who could afford these three hundred thousand dollar homes.

Well now I know no one could afford them.

[nashville_brook]

26. oh dear -- you've ingested some bad information

it comes back up stinky.

[krkaufman]

29. That's been my concern for years, now.

Long before the sub-prime shenanigans, the banks first loosened the guidelines for how much of a loan one could qualify. Banks have been loosening their policies and shifting to a pull approach in order to get their "share" of the mortgage market, effectively creating the housing bubble.

[PSPS]

27. Victims?

The trouble comes from "house flippers" (speculators) as well as Wal-Mart employees being able to "buy" a $750,000 house. In each case, this artifical demand created by easy (undeserved) credit drove up the prices of homes out of reach of almost everyone. Instead of an average house selling for about 2-1/2 times median income, it has now soared to five times or more.

The answer isn't to bail out the bad securities. Eventually, this will collapse and drive housing prices down where they belong, about 50% of what they are now.

[Robbien]

5. Reports shows that three out of four loans were pushed on borrowers by fraudulent predators

You are pissed at the wrong guys. Media is telling you don't look at the brokers, investments banker, hedge funders, etc.

"Look at the little guy who was lied to and blame him. Look at the little guy who we rich folks all preyed upon. Look at the little guy and spit on him. Ignore the fact that we made tons of money when we set the predators after him, get pissed at the little guy."

[dkf]

7. Just because someone offers you a loan doesn't mean you should take it.

Sometimes you gotta look at your own financials and realize what you can afford and understand what kind of payments are involved.

If a person doesn't understand it, get someone who does.

A house is the hugest purchase a person will make. If they don't take the time to understand how mortgages work what am I supposed to do?

[Robbien]

12. When everyone in the closing meeting is lying to you

and telling you that what you are signing is completely different than what the contract says, you still stand there on your high horse saying I hate that little guy who was so stupid to believe his lawyer, his broker, his banker and his realtor.

Everyone who lied are the good guys you say.

The guy being lied to is the bad guy and should be kicked and spat upon and thrown out on the street.

You support giving this bailout to the lawyer, the broker, the banker and the realtor. Throw the little guy in debtors prison, you snidely shout.

[dkf]

14. Hey, I am constantly telling my brother and sister to save their money

don't buy this and that and stop using those credit cards.

I hate debt and am very very leery of using it.

And I definitely do not condone lying to clients.

But that is why people have got to understand their own situation.

You can't count on anyone but yourself, especially when everyone who is talking to you is making money off your transaction.

It beats me why people don't understand conflict of interest.

[Robbien]

15. In poor areas, predatory loans were as high as sixty percent

While in richer middle class areas, less than 10% were predatory loans. The poor, the aged, the minorities got hurt and hurt bad.

Predators knew who to prey upon and had a feast. But still you sit there and look down your nose, not at the Predators but at the Preyed Upon.

Your attitude of superiority is disturbing. But since it the the same attitude GOPers, Chambers of Commerce and our media elite engage in, you have many very questionable people who share your scorn of the Preyed Upon.

[dkf]

17. The people that made out like bandits were the real estate brokers

and flippers who got out in time.

The people suffering are the bag holders, and the people who now own all this lousy debt.

All I know is that if our mortgages have no value, this country is screwed.

[Robbien]

20. The mortgages have value

You are getting confused. The mortgages have value.

The instruments not having value is the creative debt instruments which have been created based on the mortgages.

For every dollar loaned out in mortgages, ten dollars of CDOs were created by banks. Then on top of that $32 dollars were created by hedge funders for every bank CDO dollar. Then on top of that, swap derivatives grew.

So the base mortgage could be good, but it is buried under a mountain of debt created by these Predators who you admire so greatly. The Predators who you want to bail out.

[dkf]

21. CDOS are based on the original Mortgages.

All they do is create tranches to figure out who gets the $ if the mortgage defaults. I'm guessing you are talking about how they leveraged through hedge funds. I would appreciate knowing where you got these numbers, because I was not aware that the CDO entities were themselves leveraged.

And yes, there is value behind the mortgages, but no one knows how much because all the good stuff and bad stuff is all mixed together. Who wants to buy something like that? And when nobody wants to buy it, then what is the value really?

[Robbien]

23. Right now with Bear

The original $1 in original mortgage may still be good.

The ten dollars in bank leverage built on the $1 mortgage may still be good (or may not be, who knows).

But all faith has been lost in the $320 Bear created in CDOs built on top of the bank's ten dollar leverage.

[FreakinDJ]

19. Your making WAY TOO MUCH Sense

Just not allowed in a Bush Economy

Would not be prudent at this juncture

[roamer65]

This much debt monetization will drive inflation through the roof.

[Demeter]

6. They Should Put the Fraudsters in Jail!

So that future generations of B school graduates are deterred from doing it again.

[Vincardog]

9. No they should let the share holders sue and recover their losses from the personnel finances of the

fraudsters, Then send them to debtors prison until they have paid back the balance.

Let the free Market work its' magic.

[Demeter]

25. The US Doesn't Generally Use Prison for Debtors

In 1833 the United States reduced the practice of imprisonment for debts at the federal level. Most states followed suit. It is still possible, however, to be incarcerated for debt: debts of fraud, child-support, alimony, or release fines can land a citizen in jail or prison, or prevent one’s release.

Prominent Americans who spent time in debtors' prison include inventor Charles Goodyear, and Robert Morris, a signatory of the United States Declaration of Independence.


http://en.wikipedia.org/wiki/Debtor%27s_prison


But in this case, if asset stripping isn't an option (although they set a precedent with drug crime), I'm willing to make an exception!

[natrat]

16. this whole thing is a plan made long ago-the total rape of america

[Neshanic]

18. The RTC to end all RTC's. The Grand RTC with new 50 story building coming soon.

[sarcasmo]

22. With money from who's A$$hole? I mean this is why the dollar is falling faster than chicken little

can say the sky is falling.

[NashVegas]

28. Crisco to Barish - Go Jump Out a Fucking Window

[Ichingcarpenter]

30. This is a stupid way of fixing the problem

Jim Rogers on the Bear Stearns bailout:

'You know the reason they did it this way was because, if Bear Stearns had to declare bankruptcy, you'd realize that Bear Stearns paid out billions of dollars in bonuses in January - six weeks ago. If he let them go into bankruptcy, they all would have had to send back their bonuses. This is what they're doing, they're doing it so they don't have to give back their bonuses.'

This is a criminal affairs

[NeoConsSuck]

32. Here's the link to Rogers

http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vpsp3dpnTUuA.asf

[Ichingcarpenter]

33. thanks n/t

[Why Syzygy]

31. The FED is NOT the same thing as the American Taxpayer.

Far from it. The American taxpayer finances the Fed with labor. All they do is print fake money and rake in profits in fake money. If some of their bogus money turns out to be bogus, well well.