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Phoebe Loosinhouse Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 11:02 AM
Original message
Still not nervous? Then read THIS! The scariest one of all.

http://money.cnn.com/magazines/fortune/fortune_archive/...

Wall Street's money machine breaks down
The subprime mortgage crisis keeps getting worse-and claiming more victims. A Fortune special report.
By Shawn Tully, Fortune editor-at-large
November 12 2007: 12:13 PM EST

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In pure destructive power, the subprime mess has become Wall Street's version of Hurricane Katrina. It has wreaked havoc on the nation's iconic brokerage firm, Merrill Lynch (Charts, Fortune 500), and biggest bank, Citigroup (Charts, Fortune 500), which have announced billions of dollars in losses and parted ways with their celebrated CEOs, E. Stanley O'Neal and Charles Prince. Banks, brokerages, and lenders have announced thousands of layoffs, and more are sure to come.

The blow to shareholder wealth is staggering. Since June 29, Citi's share price has dropped 35%, from $51 to $33, while Merrill's stock has slid from $84 to $54, a 36% swoon. In the same period, the dozen biggest Wall Street firms and the commercial banks with the largest investment arms - a list that includes Bank of America (Charts, Fortune 500), J.P. Morgan Chase (Charts, Fortune 500), and Credit Suisse (Charts) - have lost more than $240 billion in market value. Dozens of smaller companies in the mortgage business have suffered huge losses or folded completely.

skip

The results could be devastating for the U.S. economy. "The subprime crisis and its fallout on commodity and foreign-exchange markets significantly raises the odds of a recession early next year," says Mark Zandi, chief economist at Moody's Economy.com.

And it's far from over. As stunning as today's losses are, more carnage lies ahead. Wall Street banks are holding tens of billions in risky securities on their books, and no one seems to have any idea what they're worth. In conference calls and press releases, banks have been changing their estimates of the value of these assets.



This is a longer read, but well worth it. It's NOT just the immediate tragedy of homeowners losing their homes because of subprime mortgages,(bad as that is) but the larger and more dangerous instability that lies still rotting in the banks and brokerages. As the article points out - this undermines the dollar, drives commodities higher and brings recession closer.

At this point, I think those saying "Recession" are being Pollyannas. We will see cascading failures of banks and brokerages for an indeterminate length of time.

What I would like now is some advice as to how to shelter from the coming storm.







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flvegan Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 11:06 AM
Response to Original message
1. Better default resolution and loss mitigation would've avoided a great amount of this.
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shadowknows69 Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 11:07 AM
Response to Original message
2. I'm starting to become more thankful that I'm a renter right now.
My luck such as it is house ownership wouldn't go well for me.
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iamjoy Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 11:21 AM
Response to Reply #2
7. You're No Better Off As A Renter
BUT, I'm glad my husband and I refinanced with a fixed rate mortgage. I'm glad we didn't try to jump into the real estate speculation game either. We didn't even buy our house as an investment, per se, we just wanted a place to live that was bigger/nicer/more private than an apartment and we are not subject to the whims of a landlord in raising our rent.

The only thing we have to worry about as far as home ownership goes is whether or not we'll get dropped from our Homeowner's Insurance (we're in Florida).
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TalkingDog Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 01:01 PM
Response to Reply #2
20. Let me know how that goes for you when rental prices inflate 3 or 4 decimal places.
Our mortgage is fixed. The house may lose value, but we moved in here planning to stay anyway.

All those folks who have been foreclosed on....they'll need a place to live and guess what? They don't qualify for loans. That means they'll be renting.

Rent prices have already gone up considerably in some parts of the country since this mess started snowballing. Supply and demand.

Triple your rent. Now consider that real inflation is about 12% (3%...give me a freakin' break) Food is going up daily. OPEC is meeting this weekend, rumor is they are dumping the dollar. If that happens, gas may go up as much as 2 dollars before the middle of next summer. I'll check in on you next Fall. See how you're doin'.


My Favorite Master Artist: Karen Parker GhostWoman Studios
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bunnies Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 04:50 PM
Response to Reply #20
27. Where that doesnt make sense is...
There would be no demand for an apartment thats priced at triple my rent. My rent is already as much as many mortgage payments in my area and if people are losing their homes for not being able to make those payments then how would you think they'd afford three times as much? :shrug:
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TalkingDog Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 05:28 PM
Response to Reply #27
33. Ummm...exactly. Okay, some hyperbole, but .....
Rent won't increase all at once and as I recall, goes up when leases are renewed.

But no hyperbole in the idea that more renters due to inability to buy will increase rent prices for everybody.

We had an influx to the area a number of years ago due to mfg. jobs moving through (eventually to Mexico, but they stopped here for a while). When the mgmt and middle mgmt. came down, many rented at first. Rent shot through the roof for 2 reasons: Jobs up north pay more so they could afford more and supply and demand. After a few years it started creeping back down because people were buying or building.

If your area is less affected by ARMS forclosures, you may be okay.



My Favorite Master Artist: Karen Parker GhostWoman Studios
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Neshanic Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 05:01 PM
Response to Reply #20
28. And those forclosed individuals will rent houses that have been foreclosed on.
You seem to think that there is a set pool of places to live at any given time. In Phoenix, people are getting booted out of their houses. They are not by a long shot moving en masse to apartments. They are moving into forclosed homes. Peruse Craigs List for Phoenix and see the supply and demand theory in action. There are so many homes and not enough renters. I just signed a new lease. My rent did not increase. In fact they gave me some concessions.

Next year at this time will be the bottom of the barrel home ownership wise, and then I will do a lease to own. There will still be desperate sellers and a huge pool of decimated homes that have lost 50% of their value.

This is what is happening in the 5th largest city, I don't know about anywhere else, but the apartment complex owners know they can lose tennants to a forclosed house rental.

Other things are inflating, but rents and forclosed homes are not. Not here.
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Turbineguy Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 11:08 AM
Response to Original message
3. I'm skeptical
people keep saying they don't know how much money is at stake. Baloney. These boys know precisely how much money they invested and what the leverage is. They are looking to scare the government into some sort of bailout.
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KansDem Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 12:13 PM
Response to Reply #3
17. Agreed
Edited on Sat Nov-17-07 12:13 PM by KansDem
They are looking to scare the government into some sort of bailout.

I remember Chrysler claiming that, if it were permitted to go out of business, something like 600,000 jobs would be lost (Chrysler workers, mechanics, suppliers, auto parts stores, etc). It was the prospect of a "ripple effect" of lost jobs that prompted the US government to bail out a US corporation.

Wait and see: the fat cats will get their money and the rest of us will be left holding the bag...
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patrice Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 11:08 AM
Response to Original message
4. How to shelter? In Local economic relationships. nt
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TwilightGardener Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 11:09 AM
Response to Original message
5. A couple weeks ago, I heard a clip of a radio interview of
my Senator, Chuck Hagel, on a local station and he was predicting a "perfect storm" of economic troubles--he mentioned the trillion-dollar debt, the mortgage problems, other stuff--it made me a little alarmed. I don't know if there's a shelter--all we've got is our house (which we have to sell in a couple years when we move) and a 401K and a future military pension.
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Spazito Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 11:17 AM
Response to Original message
6. Excellent article, very comprehensive and helpful....
in explaining what is going on. Thanks for posting this.

Recommended.
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Mayberry Machiavelli Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 11:23 AM
Response to Original message
8. Can someone PLEASE explain to me what was in it for banks to lend money to people who were VERY
likely to default, without checking them out, on things like adjustable rate mortgages?

How does the bank win if they get a year or two of payments and then a default?
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sam sarrha Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 11:41 AM
Response to Reply #8
11. it was a ReThug Ponzi scheme that went bad..remember when thug congress stopped bankruptcy couple
couple years ago... now foreclosures are being made by corporations who do not hold the paper.. judge just told them they could't do it

they are selling the paper to trusts for a dollar, then foreclosing

i hear a lot of these were predatory refinances ..people get hooked into refinancing time and again and never acquire any equity.

they tried to screw people into paying for a foreclosed house,that will be resold..and re-foreclosured again abd conger up a reason to get their fake losses subsidized with taxpayer's money..

this sounds like a RICO violation.. will it ever be investigated
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Phoebe Loosinhouse Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 12:31 PM
Response to Reply #8
18. It's because a secondary market was created for those loans
In the olden days if a bank made a loan, it probably had to qualify Fannie Mae, freddie Mac underwriting standards - income, documentation, down payment, etc. etc. If a loan didn't qualify for those standards, it couldn't be sold in the secondary bond market.

BUT, some sharpies decided to bundle sub-prime loans into a new bond instrument called collateralized debt obligations or CDO's which they sold to private investment groups like brokerage banks, investment funds, hedge funds, pension funds, etc. who were happy to buy them because they offered high interest rates and were secured by real estate, so they were deemed to be relatively safe.

So, the banks and mortgage companies wrote the loans because they made money on writing them in the first place, (points, origination fees, etc.) AND now they could still pass off any risk to the people buying the bonds.

So that's the reason. If the secondary bond market for the sub-prime loan had not been created, the loans would never have been written.
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distantearlywarning Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 12:49 PM
Response to Reply #8
19. They initiated the bad loans to customers they knew were not good for the money
Then they turned around and sold the loans to other companies, some of who in turn sold them to other companies, and so on. So the first lenders, or maybe the first and second, got their money and somewhere someone else down the line got screwed when the lendee defaulted. At least that's the way I understand it (not being an economics expert or anything).
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Kingshakabobo Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 02:00 PM
Response to Reply #8
23. Here is an EXCELLENT description written by DUer, HamdenRice



The collapse of the sub-prime market & the liquidity crunch explained through It's a Wonderful Life

http://www.democraticunderground.com/discuss/duboard.ph...

I wrote this as a post in another thread and it was suggested it might be useful to the general GD audience>

You can understand a lot about the current financial crisis surrounding the sub-prime mortgage market if you understand a premise of the movie, "It's a Wonderful Life."

And no, I'm not talking about the run on the bank scene, but it's a starting point on understanding what is going on. In one of my career guises, I used to draft mortgage backed security and credit card receivable security trust instruments for Wall Street investment banks.

In IAWL, you may recall, George Baily ran a small savings and loan, a kind of bank. George took in deposits from small depositors and lent the money to new homeowners as mortgage loans. There were two distinct banking sectors -- the thrift institutions (savings and loans associations, and savings banks) and commercial banks. Evil Mr. Potter ran the local commercial bank. Commercial banks dealt almost exclusively with business organizations, not with consumers. Many thrifts were so small, that, as in IAWL, they themselves deposited their money in commercial banks.

George Baily's problem was that he could only loan out as much money as he took in as deposits in his local community (actually, only a percentage of the deposits). So, during the New Deal, the Roosevelt administration created the Federal National Mortgage Association (affectionately known as Fannie Mae). The original system was designed to help George Baily if he found himself in this situation: that he had a bunch of homeowners paying their mortgages, but also had potential new borrowers, but had run out of deposits with which to make new loans.

Fannie Mae allowed George to sell his existing mortgages. In finance, this "paper" has value -- it is a promise by some homeowner to continue to make his monthly mortgage payments, and is backed by the right of the lender to seize the house if the payments stop, auction it off and use the sale to recoup his loan (that's foreclosure). It is easily valued using "discount to present value" calculations. The only thing that's hard to value is the risk that the homeowner will default and go into foreclosure. (There is also pre-payment risk -- banks don't like it when you pay off a loan early -- but that's a different and complicated story, and irrelevant to the crisis.) To eliminate this uncertainty, Fannie Mae guaranteed the mortgages.

So, Fannie Mae came up with this system. George would bundle his mortgages in convenient units, and send them to Fannie Mae. Fannie Mae would slap a guarantee on them (backed up by the credit of the US of A), and send them back to George. George could now sell the mortgages, and receive the money to make new loans. The homeowner wouldn't know the difference because George remained the "servicer" (ie collector) of the loan.

Fannie Mae was wildly successful. It financed a great deal of the explosive housing growth of the post war era. It helped little S&L's like George Baily's grow into very big banks, so that the difference between thrifts and commercial banks virtually disappeared.

Because of it's success, the government did two things: it created other similar organizations, while pushing them off the federal government's books. In other words, Fannie Mae became semi-private and although it continued to guarantee home loans, it did so by charging a fee, to originators, kind of like an insurance company.

By the 80s and 90s, some entrepreneurs realized that you didn't have to be a bank to act like a banker. You could really just skip the whole deposit side of the business. Developers were early alternative mortgage originators, for example. They would package their mortgages, get the guarantee and instead of selling them to banks, they would sell them to a trust or special purpose corporation that they themselves had created. This trust or spc would then sell trust certificates or shares that represented the right to receive a portion of the flow of mortgage payments from thousands of homeowners.

This was the birth of the "asset backed security" or "mortgage backed security" market. It was a process called "dis-intermediation," because it took banks out of the role of "mediation" between depositors (investors) and borrowers (homeowners).

The market for asset backed securities was vast -- almost unimaginable to the layman. A single tranche of asset backed securities was usually in the $500 million range in the 90s when I was doing this stuff.

All sorts of investors bought asset backed securities -- individuals, pension funds, insurance companies, commercial banks, thrift institutions, hedge funds, investment banks -- everyone and anyone.

Another thing that happened in the 90s is that mbs creators realized that they could reach new markets for home loan borrowers through "over-collateralization" and the use of derivatives. This was the "sub prime" market. In other words, keep in mind that whether it is a little George Baily operation or a billion dollar mbs trust, what makes the investment safe is that ultimately, behind every loan is a house. If the homeowner stops making payment, the bank (or mortgage holder) seizes the house, sells it and recoups the face value of the loan. There are delays and costs from foreclosure, but these are manageable. If it is a Fannie Mae guaranteed loan, there is also the guarantee, but the sub-prime market is largely un-guaranteed.

But if the borrowers are poor or have sketchy credit histories, the creators could allay their fears by putting more stuff into the trust than was being lent out ("overcollateralization" -- ie too much collateral, backing up the loan). (When the loans were all paid off, some lucky uber investor, usually the creator or an institutional investor, got all the extra stuff, and the trust bursted open with goodies like a Mexican pinata!)

The techniques of overcollateralization allowed banks and mbs creators to make loans to poorer people and people with poor credit histories, and allowed them to turn them into mortgage backed securities that investors felt comfortable buying.

Now, here is why there is a crisis.

Whether we are talking about George Baily, or a five billion dollar mbs trust, the thing that makes it work is that the value of the underlying property (someone's house) is always enough to recoup the loan if the homeowner defaults and goes into foreclosure.

But what if the value of the house is not enough? That sounds impossible and usually is, because real estate always goes up in price.

Until now.

When real estate prices decline, this puts banks (or mbs trust) "under water" -- that is, if they have to foreclose on a homeowner, and auction the homeowner's house, the value of the house will not be enough to cover the loan.

As more and more homeowners default, are foreclosed, and have their houses auctioned off, the price of houses in the area collapses even faster.

When this happens to banks, it causes bank failures -- eg during Bush I's S&L crisis.

When it happens to the fairly new, gigantic asset backed securities market, it causes something more grave. All those institutional investors may lose money. The uber investors who bought the "something extra" from the over-collateralizations are looking at being wiped out (no pinata goodies for you, my friend!).

This leads to an overall liquidity crisis. Institutions that thought they had money in the bank in the form of asset backed securities may have nothing, which causes them to sell other assets to get their balance sheets in order.

So, that's what's going on. So I guess in the end, it is a little like the run on George Baily's little savings and loan, except multiplied by a billion or so, and there is no beloved, trustworthy Jimmy Stewart character to explain that people can't get their money because it's in their neighbor's house, and there isn't a Clarence the angel making sure of a happy ending for all.

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Phoebe Loosinhouse Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 02:24 PM
Response to Reply #23
24. I remember this and it IS a great, understandable summary. nt
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Mayberry Machiavelli Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 08:54 PM
Response to Reply #23
41. Thanks for reposting this, very helpful.
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Canuckistanian Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 05:11 PM
Response to Reply #8
31. A VERY short sighted strategy
All those potentially bad mortgages are bundled up and sold up the line to super-bundlers in a bigger deal.

The first guys to bundle make a killing, leaving the big investors holding the bag.

It seems like NOBODY is calculating the RISKS of these bundles, only the very short term prospects of unloading them.
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Mike03 Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 05:13 PM
Response to Reply #31
32. You've got it
These loans are being bundled and rebundled, and in some cases the sellers end up as the guarantors because the collateralization process is so complicated.

The losses to the financial industries would have been far less if they had simply written off the bad loans rather than try to conceal them. Now we'll have a multi-Trillion dollar catastrophe instead of a billion dollar disaster.
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Richard Steele Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 06:53 PM
Response to Reply #8
39. They "win" by pocketing the few payments, and then handing the DEFAULTS to the taxpayers.
By the time the USA is actually AWARE of "Great Depression II",
they will have been in their luxury beachfront Brunei condos
for years.

This was NEVER intended to be a sound financial construct- it was
a "grab the money and run" scheme. An epically MASSIVE one.
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sam sarrha Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 11:25 AM
Response to Original message
9. Merril Lynch gave the fired ceo a $161 million exit bonus, new ceo gets $15 million bonus 1st week
Edited on Sat Nov-17-07 11:27 AM by sam sarrha
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lyonn Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 11:29 AM
Response to Original message
10. We could call this the Reagan/Bush/ Repub econ 101
If the repubs stay in office long enough they can screw up the economy and the masses seem to like it - lower taxes dontcha know...... After 8 years of a Clinton/Democratic economy everyone thinks that it must be easy to get the economy back on track. Sooo, lets vote in a "good man" like George and get the evil ones out of office.

The good old Reagan years, throw in 4 of Daddy Bush and we had a truly screwed up economy. The repubs tell us how great the Reagan years were. People need to start reading books, they might learn something instead of using their gut reaction. Clinton's affair was the perfect gift for the pure and godly repubs.
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Fovea Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 11:43 AM
Response to Reply #10
12. Clinton's affair
Was the apotheosis of right wing punditry, and their current lack of credibility and the whole freakin mess we have become needs to be hung around their necks like an albatross.

They had all the evidence they needed that Bush was a dry drunk and a total fool with some sadism issues.
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grasswire Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 11:52 AM
Response to Reply #12
13. to say nothing of an unresolved oedipal issue
A weak, failed man-boy with a strong, accomplished father and a cold mother. There never was a worse scenario for the people.
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smoogatz Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 12:03 PM
Response to Original message
14. Buy Krugerrands and Euros.
Also European government issued bonds. And a big-ass semi-automatic rifle, just in case.
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grasswire Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 12:04 PM
Response to Original message
15. is it time for tar and feathers? a congressional investigation?
Will this destroy the Republican Party?
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graywarrior Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 12:06 PM
Response to Original message
16. They're looking for a bail out.
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mrfixit Donating Member (137 posts) Send PM | Profile | Ignore Sat Nov-17-07 01:42 PM
Response to Original message
21. Interesting, considering the majority ownership of the FED...
Citibank, Chase Manhatten, Morgan Guaranty Trust, Chemical Bank, Manufacturers Hanover Trust, Bankers Trust Company, National Bank of North America, and the Bank of New York...

I
Smell
Burnt
TOAST.
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Pachamama Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 04:24 PM
Response to Reply #21
26. Coincidink?
Edited on Sat Nov-17-07 05:00 PM by Pachamama
Is it a coincidence that the majority of ownership in the Federal Reserve happens to be the very same banks that have been doing these loans and now writing off the huge losses?

I think not....Anyone else wonder why 2 years ago the Fed announced they were doing away with publishing the M3 money supply index? :shrug:

http://en.wikinews.org/wiki/US_Federal_Reserve_ceases_t...

Measuring the Money Supply and the Indexes and what they measure:

The most common measures are named M0 (narrowest), M1, M2, and M3. In the United States they are defined by the Federal Reserve as follows:

* M0: The total of all physical currency, plus accounts at the central bank that can be exchanged
for physical currency.
* M1: M0 - those portions of M0 held as reserves or vault cash + the amount in demand accounts
("checking" or "current" accounts).
* M2: M1 + most savings accounts, money market accounts, and small denomination time deposits
(certificates of deposit of under $100,000).
* M3: M2 + all other CDs, deposits of eurodollars and repurchase agreements.

NOTE on M3: "Repurchase Agreements" :eyes:
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Flabbergasted Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 01:47 PM
Response to Original message
22. The sad thing is our president should be working on the issue but isn't....
He is just hoping the economy go into recession while he is in office.
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mwb970 Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-18-07 06:32 AM
Response to Reply #22
43. Wouldn't a recession seal the Republicans' doom?
Voters are already down on the Republicans to an amazing degree. If the economy goes bad in an obvious way, I don't see how any Republicans will get elected to anything in 2008. They've done a remarkably thorough job of messing up America and everything it stands for, and the people are (slowly) catching on. A recession has a way of focusing the mind.

"It's the economy, stupid" still applies.
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Flabbergasted Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-18-07 11:32 AM
Response to Reply #43
46. The GDP may not drop over the next 14 months.
It is not that bad off (3.6%) at the moment and is being cushioned by the FED.
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Joe Chi Minh Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 03:32 PM
Response to Original message
25. I've heard many snatches of the purest most heavenly music, but few to match
Mr HamdenRice's words, ".... no pinata goodies for you, my friend!"

The other humdinger was Erin Bronkowicz's comment to the psychopathic corporate lawyer, "the water you've just drunk from that glass is from your site...."
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Mike03 Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 05:02 PM
Response to Original message
29. Sub Prime material is also in our money funds.
It's like an onion, and peeling away the layers to discover more and more intricacies.

There was just a story on Friday (or Thursday) about how the SAME loans were turning up in DIFFERENT instruments such as packaged or repackaged loans, Collateralized Debt Obligations, etc... Sorting all of this debt and leverage out will take years and years. It's a very, almost terminally serious issue. We are nowhere near finished with this.

Thanks for posts like this, by the way. More attention needs to be paid to what awaits us.
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PassingFair Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 05:48 PM
Response to Reply #29
35. "Tranches"
Love it!

French for "slices"
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Mike03 Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 05:02 PM
Response to Original message
30. Kick and Rec, by the way NT
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Mike03 Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 05:35 PM
Response to Original message
34. My Advice
Edited on Sat Nov-17-07 05:37 PM by Mike03
I'm not a professional investment advisor, but my strategy right now is:

Preferreds.
Foreign Currency funds
Cash and Money Market Funds yielding anything over 5%

I have usually tended to recommend petroleum ETFs, equities and funds, as well as commodity funds, Health care/Pharma, European funds, Oil Services, Gold, mining, Titanium, Uranium... But even those seem to be in doubt right now. Maybe Europe is still a good bet. Perhaps infrastructure/electricity/retrofitting coal fired plants (i.e., The Shaw Group, which has done well for me). U.S. companies that have contracts with China and India.

Watch the Yen Carry Trade. That is a real red flag right now.
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dysfunctional press Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 06:33 PM
Response to Original message
36. not all of these forclosures are about people losing their homes...
LOTS and LOTS of the foreclosures are happening to speculators...people who decided to invest in the red-hot housing market by flipping a condo in miami. or 6 or 12...or a house in vegas.

yes, lots of people are losing their homes- but lots are just losing their investment and their credit rating.
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Mike03 Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 06:39 PM
Response to Reply #36
37. You are absolutely right
That is very important to remember, and easy to forget. Here in Arizona, we are having a huge, huge number of land flippers who simply misjudged the market and are stuck with properties they cannot afford, and they can't sell them.
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Mike03 Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 06:41 PM
Response to Original message
38. Maybe a flipside question to this post is:
Is there some good or bright spot in this situation if you are an investor. I'm really not familiar with real estate, but would be curious to learn from anyone who has a wide perspective on this current situation and is willing to share his or her ideas.
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Ravy Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 07:01 PM
Response to Original message
40. NOTHING like "Hurricane Katrina"
Bushco will be trying hard to fix this.
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eridani Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-18-07 06:19 AM
Response to Original message
42. Pay attention to the economics of the real
Invest in your own survival skill base. If you can't eat it, drink it, wear it, build shelter with it, or burn it to keep warm, then to hell with it.
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sbyte Donating Member (205 posts) Send PM | Profile | Ignore Sun Nov-18-07 06:39 AM
Response to Original message
44. The System is Broke, Fix it. ... A solution found in the U.S. Constitution
Edited on Sun Nov-18-07 06:42 AM by sbyte
The real explanation here:http://www.youtube.com/watch?v=9JydrScfq7E
OR
http://www.youtube.com/watch?v=s4JOG9oVgh8

Yes, the We do not need the FED. In fact the opposite it proposed by the U.S. Constitution.
1. To Borrow Money on the credit of the United States
So what does that mean?

2. To coin Money, regulate the Value therof,...
So it is suppose to be a U.S. reserve note, Not a Federal Reserve Note.


Section 8 - Powers of Congress

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defense and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

To borrow money on the credit of the United States;

To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;

To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States;

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures
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Kip Humphrey Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-18-07 06:51 AM
Response to Original message
45. I moved to European government securities: +10.5% in last quarter
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