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Quote of the day: TARP not based on any facts

I caught this quote via Political Wire. It reminds me of Paul Wolfowiz’s quote for why the Bush Administration used WMDs as the rationale for war in Iraq. Some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy. “It’s not based on any particular data point,” a Treasury spokeswoman […]

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How to tackle systemic malaise

Marshall Auerback here. Ed has had a few posts on the Swedish bailout plan with which I agree. I think the main political argument (made by Bo Lundgren in yesterday’s NY Times) is that you have ZERO political legitimacy unless everybody is perceived to be making sacrifices and getting some long term benefit via equity. Therefore, I have my own […]

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News round-up: 25 Sep 2008

The big news is about Paulson’s Economic Patriot Act, which looks set to pass Congress. The ultimate question is in what guise the plan passes. Will it give the U.S. Treasury carte blanche or will Congress have oversight? What provisions for homeowners will be connected? Will pay restraint be associated with the bailout? These are all important questions. In addition, […]

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Gateway Bank sold, hurt by Frannie preferreds

When Fannie Mae and Freddie Mac went bust, a number of major players were stung as the value of Fannie and Freddie preferred shares plummeted. Principal amongst these players was Gateway Bank, which had a huge percentage of bank capital tied up in the preferreds. Now Gateway has arranged a takeover by a rival smaller bank, Hampton Roads Bankshares. Given […]

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Jim Chanos: short sellers are heroes

Jim Chanos: short sellers are heroes

I just watched a great clip of an interview Jim Chanos, the famous head of hedge fund Kynikos Associates, did with the FT’s Gillian Tett (Hat tip FT Alphaville). Chanos does a very good job of arguing hat short sellers are being unfairly victimized by government. Basically, he and other hedge fund managers like John Paulson have been warning al […]

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Paulson’s Economic Patriot Act is about marking to market

The interesting thing about the Paulson proposal is that it gives the U.S. Treasury carte blanche to buy any of these toxic assets at any price it chooses. This is relevant because of mark to market rules in FAS 157. I have posted a few times on the mark to market rules of FAS 157 that have caused a ton […]

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Durable goods orders down 4.5%, double expectations

Economists had expected the durable goods report for August 2008 to be weak, but the report showing durable goods orders down 4.5% was much weaker than expected. While I do believe that the United States is in recession and the durable goods report is considered a key indicator of future manufacturing activity, I do not put that much weight in […]

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Covered bonds are not the answer

As Hank Paulson looks to push through his Economic Patriot Act, it bears remembering that just a few months ago he saw Covered Bonds as a potential solution to U.S. problems with declining home prices. They are not the solution. This market is now cratering and is having it’s worst month since 1999. Covered Bonds are just another instrument in […]

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Libor-OIS spread at an all-time high

Further proof that the credit markets are on the brink of systemic collapse is the fact that the widely followed risk spread Libor-OIS is at a record high. In the year before August 2007 when the credit crisis began, this spread averaged 8 basis points (hundredths of a percentage point). It is now 200 basis points.

If Congress wants more reason to deal with Paulson’s Economic Patriot Act or to devise a reasonable plan of their own as soon as possible, this is it.

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US unemployment claims way up: consistent with recession

US unemployment claims way up: consistent with recession

U.S. jobless claims registered an increase to 493,000, bringing the widely followed 4-week average to 462,500, its highest level since just after 9/11. Recently, the jobless claims numbers have been creeping up indicating the labor market in the U.S. is contracting. While further analysis may show that Hurricane Ike created this huge spike, this particular report does not change the […]

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Congress does need to act on the Economic Patriot Act

If you hadn’t been following it, credit markets are still seized up — even more than when Paulson first presented his bailout plan the Economic Patriot Act for Congressional approval. The fact of the matter is Paulson has shown leadership. I don’t like his plan. Most Americans don’t like his plan. And we can all sit here and debate the […]

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The Paulson plan is not going to make it

The uproar by American taxpayers about the Paulson Bailout plan is likely to torpedo this plan. Even amongst Republican lawmakers, the plan is looking like a complete bust. Just moments ago, President Bush was on TV asking for American support for the plan. He claimed that if we do not support Paulson’s proposal, America would face a severe and protracted […]

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