US Weighing Plan to Set Up Facility for Bad Debts

US Weighing Plan to Set Up Facility for Bad Debts

www.cnbc.com

Treasury Secretary Henry Paulson is working on setting up a government facility to take on bad debts from financial institutions to prevent a worsening of the global credit crisis, Wall Street sources have told CNBC.

The facility would be similar to the Resolution Trust Corporation, which was set up in the late 1980s to take on all the failed thrift assets during the savings and loan crisis, these sources said.

(visit the link for the full news article)

Well, this is still a rumour but it is likely it is true.

A similar plan for the 1980s will be introduce to prevent further damaging during this financial crisis. It is believed the government has no choice but to do this to ensure the finanical system continues operating.

www.cnbc.com
(visit the link for the full news article)

My vocab in economics sucks.
I am going to look this up, but can someone give me an explanation on what this is and what it means?
Thanks

It means good news for the market - up 400 points since the news. For the taxpayer, we get all the delinquent mortgages and car loans I guess...

edit/ oh, and bad news if you bought gold, down about 4% now.

[edit on 9/18/2008 by mythatsabigprobe]

For what I understand is that this new "endeavor" to keep bailing out the elite is going to need "congress approval to set the new laws in order to survive".

Then to keep this new "entity" independent it will have a "governor" just like the federal reserve.

So the federal reserve wasn't enough now we are to have another new entity with his own power also.

What in the heck is going on in this nation People, I am the only one that is seen the deception of our own government splitting into smaller "entities"

reply to post by mythatsabigprobe


Hey somebody has to pay the bill after the central banks finish stabilizing the markets.

Nothing than more debt to the citizens and the unborn so the few can keep their wealth.

Hey guys.. I have a brand new bottle of KY, wanna try it out?

Just bend over and take it..

Remember tho.. the payment is your life.. You people dont listen, you deserve every second of what these idiots have in store for you.

i dont see why the people who run these companies and people that finance them (shareholders)

dont lose all their assets and money first before they are bailed out

Originally posted by bodrul
i dont see why the people who run these companies and people that finance them (shareholders)

dont lose all their assets and money first before they are bailed out

PLEASE!!! Let me know if you get a satisfactory answer to that question. I can't seem to squeeze the 'reality' into my head that once you are rich, you will always stay rich. I think it has something to do with 'trickling down'; but so far, that's not what I am seeing trickling down.

Financial terrorism?
CNBC: Financial terrorism?

WTF?

Seems someone is trying to scare us and make a profit in the process (buying broken institutions along the way)

So it's basically a gigantic bankruptcy arbitrator? I'm still waiting for a Joint Committee on Tracking Down the B@***rds Responsible For This Cr@p, but I'm not holding my breath. If we're lucky they'll take one or two big name CEOs to court. If we're lucky.

Re: Financial terrorism, who could possibly have the money/credit/collateral/ assets/connections to accomplish shorting any market to a such a degree? Prices may be down but we're still very far from talking chump change. These people or groups would have to be very well funded. There are plenty of opportunists looking to buy up companies while they're down, but is the story suggesting something like we saw with the Russian oligarchs in the 90s? A small group swooping in and buying up anything and everything?

reply to post by Maxmars


RICH does NOT EQUATE to EVIL!

I would rather live in a country where I can work hard and possibly achieve being wealthy then live in a country that prevents me from ever having a chance to set up my family and my descendants.

If I sacrifice and work to build wealth over my lifetime, with the intention of setting up my children so that they can have a better life, the last thing I want is the U.S. Govt, or some other entity swooping in and taking it away from my family! That should be criminal!

And forget about 'taxing the rich' that NEVER works. In the history of this country, our politicians (all parties) want more, more and more...they say they will only tax the rich, yet time after time, their programs cost more and the taxes always end up hitting all of us struggling little guys. Just pass the FAIRTAX (www.fairtax.org) and be done with it, we would all be better off.

Surely I am not the only one sick of getting taxed multiple times and then again in death! (When I earn a paycheck, when I purchase a good or service; when I invest my already taxed pay; when I benefit from my already twice taxed investment; when I die...please (I have already been taxed well over 3 times, probably 4, now you are going to come after me for yet another tax, I don't think so!

Imminent Domain (legal-dictionary.thefreedictionary.com...) must follow stipulations set fourth in the Fifth Amendment, "The Fifth Amendment to the U.S. Constitution requires the government to provide just compensation to the owner of the private property to be taken." In other words, city, county and state govt's must not abuse this...ever.

I agree that individuals responsible (good luck figuring out who) should be punished, whatever they have gained through activities that hurt the rest of us and/or are illegal should be taken away from them, before they are bailed out. I agree that they should be prevented from doing the same thing again and if they do repeat their behavior, they should most definitely be put into a prison work program (Arizona comes to mind) and forced to compensate the rest of us.

But please get off the kick of the 'rich' are bad. That dog stopped hunting long ago. Rich or poor, either you have a good heart and soul and care or you don't... There are plenty of poor evil people out there also. However the poor evil people are not providing jobs for others, where as many of the wealthier (even if evil) people are providing jobs for some, thus are NOT a total drain on the economy!

I am not rich yet, but hope to be one day. And when I do, if I chose to help out others, well that is MY choice and should NEVER be anything else! (Especially when you consider how HARD it is to acquire wealth!)

Freedom = choice. If you have no choice you are not free. If you have only two choices (current party system) then you still don't have a CHOICE.

Stop complaining and be part of the solution, that is what I plan to be! It starts with each one of us and one person CAN MAKE A DIFFERENCE!

So they are going to create an entity that will take on companies' bad debt. We as tax payers are already on the hook for $900 billion. If all the banks and investment firms unload their liabilities to this agency, I can't even begin to imagine how much money we as tax payers will owe.

We are so screwed it's not even funny.

reply to post by SeekingAlpha


The bad debts will be sold back to the market when the housing correction is over with. I believe the US made a profit during the savings & loans crisis when selling back assets.

Breaking news [[CNBC]]:

Money market funds are going to be guaranteed by the United States. Gold Reserve Act 1930, covers rule 2A-7 Fund and will be used to stabilize/guarantee money market funds. (note: I am paraphrasing the discussion on CNBC, so excuse the confusion. No source on website yet)

Apparently, this program came into force during the depression to allow the government to back the Dollar (via gold) and to buy assets too.

$50 billion is being made available(backed by US gold reserves, I believe)


[edit on 19-9-2008 by infinite]

Well, I can see setting up something that keeps an eye on things like this, but, when you set up something that is nothing more then pulling a corperate butt out of a fire, because of a bad risk they may have taken, when and where is it ever going to stop? I see it as nothing more then a go ahead for companies to take on more bad risks in the end. We foot the bill, and they can keep on doing it.

I think Wasington needs to down size first, before adding on more departments like this. The government is way to big now. Oh sure, let`s make it even bigger.

Originally posted by infinite

Money market funds are going to be guaranteed by the United States.

$50 billion is being made available(backed by US gold reserves, I believe)

the reason for 'insuring' Money Market funds
is because many big Institutional Investors, not the mom & pop savers,
were essentially making a 'run' on those funds...
which in turn would result in the lack of money needed to permit those funds to continue to operate.
they foresaw the possibility that the large-cap MoneyMarket redemptions would spread to the commercial & regional banks that operate MoneyMarket devices also..leading to a mass exodus from the markets.

~~~~

concerning the thread OP...

i opined earlier, somewhere else. that the Fed & Treasury is basically creating another dark-pool that exceeds the scope of the 2 private equity dark-pools called Project Turquoise & Project Baikal.


All that toxic paper, and credit swaps (CDS) and those counter party derivitives that have no markets to trade in... all all being rounded up and put into that 'pool'... appox. +$1 trillion has already been doled out to the corps that traded their bad debt for good US Treasury money already...
what isn't known is just how much more bad mortgage debt which had not been covered by Freddie & Fannie is still to be presented to the Fed/Treasury dark-pool...plus all that other toxic paper and CDSs, CDOs, SIVs, et al ( maybe another $2trillion????)


As far as holding all that credit & mortgage bad paper, along with those unmarketable CDSs & counter party bets, shorts...that will be held in the govt. dark-pool until such time, in 3-4 years, when some market value might be realized from all that presently dead paper..
I say that secnario is highly unlikely...all that bad paper created during the 200-2007 bubbles (which was partially greed, fraud, hubris, generated crud) will only have a value as a leverage instrument against the public financial firms that have weathered the culling storm.
iow... a truly fascist financial industry architecture/landscape.
with rigid control & regulation by the Fed/Treasury beast.


the markets & banking industries are going to be receiving a series of 30day long life extensions...by more liquidity injections, by more bans on short selling, until eventually when all the appropriate rules changes are enacted.

THE FED GOAL, TO MORE DIRECTLY CONTROL THE MOST LIQUID ASSET IN THE ECONOMY.

This power was already approved but will not be in effect until 2011, paulson wants it now to bring the economy back.

"Paying interest on bank reserves would allow the Fed to enlarge the asset size of its balance sheet without pushing the funds rate to zero," Stone explained. "The interest rate paid on bank reserves would effectively serve as the floor on the funds rate."

So if the Fed paid 1.75% interest on reserves, the effective federal funds rate couldn't go below 1.75%. Fed researchers believe monetary policy would be much more effective with this approach, because the Fed could more directly control the most liquid asset in the economy. The Fed would no longer have to worry that policy could become impotent as the target rate approaches zero.

www.marketwatch.com...

Now this is good if the financial institutions that has been bailed out will pay back the loans and we can not forget the good will of the tax payer of this nation.

Now the reserve will be in charge of providing with nations employemnt?

Despite lower funds, the Fed will not only be responsible for keeping inflation low and promoting full employment, but also for stabilizing the financial system and minimizing losses to taxpayers.

www.economyincrisis.org...

Ok so now the Fed will have a new role, I am so confuse I can no tell what is in the heck is going on.

It`s just a way of putting more power in the hands of a private company(the Fed), power that they have no real business in having. The power should be in the hands of the government( the people), that`s why we elect these people, or, did they forget that part? Oh, that`s right, you need a constitution to go by first, before the government can have that power. I`m sorry, I forgot they don`t like following the one we have now.(end sarcasm)

[edit on 19-9-2008 by FiatLux]

Let us evaluate the hypocrisy here:

For years, the United States has criticised many nations for socialising and nationalising institutions during financial crisis (i.e Mexico.) Europe has been on the receiving end of jokes and insults for not having Laissez-faire approach to economics.

And look at the fallout of American capitalism....

As one analyst said on CNBC, Wall Street will have to move to Washington for a while - socialising Wall Street could result in an exodus to London (regulation after Enron saw numerous American companies moving to the UK.)