March, 2009 archive

David Weidner at MarketWatch discusses what would happen if you were under water on your mortgage and went to the bank to apply for a second mortgage. Yeah, you’d get invited to leave after the laughter died down. But . . .

Here’s the difference between you and financial institutions. They want to rewrite the rules and say their house of mortgages is worth something, generally whatever they say it’s worth.

You can’t avoid the reality that your house isn’t worth anything in this market. If you should have a financial crisis — say, lose a job, for instance — that house does you no good.

The banks are in the midst of a financial crisis and their assets — all those mortgage securities and other junk — are doing them no good. Mark-to-market is forcing them to write that stuff to zero and get some real assets, preferably cash, into their coffers.

Banks don’t want to accept the truth homeowners have faced about their assets. The banks want to say their assets are worth something even though no one will buy them — at any price.

In a capitalist economy, and, despite the Republicans’ bleating about “socialism” (which does little more than reveal that they don’t know–or don’t want to admit that they know–what socialism is), this is a capitalist economy, things are worth what persons are willing to pay for them.

Assets should not be valued for today based on what somebody thinks someone else might be willing to pay for them at some mythical future date (computing the value of assets based on what someone may pay for them in the future is speculation, not valuation).

There is more to this than Wall Street Banks’ financial concern for not wanting to admit that they have rendered themselves insolvent.

There is the desire of Wall Street Bankers to continue thinking and trying to convince the world that they knew they are doing.

After all, who wants to willingly admit that they have been getting all those bonuses for all those years for blowing it?

The Booman, over there.

But not accountability, not in their rarified world.

“Is this America — when you do what your government asks you to do and then retroactively you also have additional conditions?” (Wells Fargo & Co. Chairman Richard) Kovacevich said. “If we were not forced to take the TARP money, we would have been able to raise private capital at that time” and not needed to cut the dividend to preserve cash, he said.

And just who “forced” them to take the damn money. They want the candy bars, but still don’t want to clean their damned rooms.

I must end this before violating my own ban on extreme profanity.

To other Masters of the Universe:

American International Group revealed on Sunday details of $105 billion of government funds that it paid to U.S. and international banks including Goldman Sachs, Deutsche Bank and Societe Generale.

The cash paid to AIG’s so-called counterparties was used to cover collateral payments, cancel derivatives contracts and meet obligations at its securities lending business.

Now majority-owned by the government, AIGhas received
more than $170 billion in bailout funds to keep it in operation since mid-September, when it found itself on the verge of collapse.

Back in the boys’ locker room in high school, we had a word for this.

Warning: Language

Oh, my goodness. Citi is helping Iraq learn how to do banking.

Beyond education and culture, in the field of economy and services, it’s worth noting that representatives of U.S. banks, JP Morgan and Citibank and others came to Baghdad on January 28th, participated in an international banking conference that explored correspondent banking relations that would deepen commercial ties between Iraq and the international community, business community. Citibank has already established correspondent relationship services agreement with Iraq’s Warka Bank that allows clients of both banks to execute cash payments, wire transfers and trade transactions to both corporate and retail entities in all Iraq’s cities and provinces.

That’s like learning how to hunt roadrunners from Wile E. Coyote.

Via Harry Shearer.