Cash Only Edition
Even worse, no one seems to knows what the heck these CDSs really are, not even the folks who cooked them up. "The massive credit-default-swap market became so complex that in some cases firms lost track of their stakes. AIG, for example, pleaded for capital from several private equity firms over the Sept. 13-14 weekend. After scouring the insurer's financials, the firms balked at a deal, concluding that even AIG management didn't know where all the skeletons were buried, according to a person familiar with the situation."
As the owner of Good Loans, you're not feeling so great anymore about your loan to Greasy Eats. In May, you persuade a local investment boutique, Got Yer Back Brothers, to buy the Greasy Eats loan for $900. So while you lose $100 in the transaction, you free yourself of a potential headache. Meanwhile, Got Yer Back has taken on $1,000 in shaky credit for a $100 fee, and the dubious prospect of getting paid back in full with interest.
Now repeat that process again and again, but this time on a much grander scale—to the tune of $45 trillion. That's how much some analysts are estimating is parked (off the balance sheet, of course) in the credit swaps market. Even if only 10% of these swaps default, trillions of dollars will have to be written down.
As this article in the New York Times describes it, "Used judiciously, derivatives can limit the damage from financial miscues and uncertainty, greasing the wheels of commerce. Used unwisely—when greed and the urge to gamble with borrowed money overtake sensible risk-taking—derivatives can become Wall Street's version of nitroglycerin."
Anyway, the question of the day now is, who are YOU going to Prom with? Morgan Stanley got The Call from Wachovia. Meanwhile, Washington Mutual (whose shares have cliff-dived 94% this year!) remains a wallflower. (I wonder if we should find a new bank?) And what of Goldman Sachs? Apparently everyone is nervously wringing their handkerchiefs.
The New York Times' Dave Leonhardt puts this bailout in the perspective using the lens of the Chrysler auto industry bailout of 1979-- how did that play and how has Chrysler fared since? "The Chrysler bailout may have saved the company, but it did nothing, after all, to stop Detroit's long, sad decline."
![](http://maryellenhunt.com/archives/Election2008/obama-ad-09-17.jpg)
Call it "talky" and "unsexy" if you like, but I LOVE Obama's new ad.It has, as Wonkette notes, actual words and thoughts! (By the way, I was curious as to what languages Obama speaks, and uncovered this one I missed, a Spanish language ad he recorded in May. BTW, he doesn't speak Spanish-- other than English he speaks Indonesian.)
McCain is still jostling with the fallout from his "from the gut" assessments earlier this week. Remember my comment about his pat statements opposing an AIG bailout with taxpayer dollars? Now the Caucus reports that "Senator John McCain acknowledging that a failure to intervene on the insurance titan's behalf would have jeopardized retirement incomes, savings and perhaps would have led to further turmoil." And apparently I wasn't the only one steamed by his glib superficial approach.Says Huff Po's Rachel Sklar, "McCain's answer yesterday on AIG was not an accident. Put bluntly, I can't see any evidence that he knew what he was talking about; nor any evidence that he wanted to try. This is a blatant moment, on tape, under urgent questioning from the media at a moment of crisis, and not only was his lack of preparation apparent but his attitude spoke volumes."
So congratulations. If you've made it this far in my Rant, you've probably spent more time learning about the world of derivative trading than John McCain has.
For Pete's sake, in yesterday's editorial page, even the Wall Street Journal took McCain to task with a cringe-inducing (even for me) jab at his ignorance (sadly not available online): "It sounds like this week's version of a McCain presidency would be more about restructuring private financial markets he doesn't understand, than fixing the Washington he knows." Ouch.
Gosh I always thought I was Liberal, but perhaps I'm actually Conservative.
Even Elizabeth Drew, who wrote the pro-Johnny Mac book Citizen McCain in 2002, is now weighing in with her piece on Politico "How John McCain Lost Me." "McCain's recent conduct of his campaign – his willingness to lie repeatedly (including in his acceptance speech) and to play Russian roulette with the vice-presidency, in order to fulfill his long-held ambition – has reinforced my earlier, and growing, sense that John McCain is not a principled man. In fact, it's not clear who he is."
Next week, Katie Couric of CBS is slated to interview Sarah Palin (airing Monday Sept 29 on the evening news). Could there be any hope that she'll actually ask all the questions that would be considered "too sexist" for a male journalist to ask?
BTW, seems like the Governor's daughter has had her shot-gun wedding, quietly, and if her Facebook entry is to be believed, she is now Bristol Palin-Johnston. (What? No copters from Us magazine hovering overhead to deliver us aerial snaps of the ceremony?)
So that' it for today. I'll head back to policy comparisons tomorrow --I just couldn't make my brain do any more after the credit default swap---zzzzzzttt...pffft. [Lights out]
A reminder that although they raised $66 million last month (!!), Obama's campaign says their goal is to have 50,000 new donors by Friday at midnight.
Labels: AIG, BabyGate, Barack_Obama, Bristol_Palin, Conservatives, Deregulation, Financial_Crisis, Fundraising, Joe_Biden, John_McCain, Katie_Couric, McCain_gaffes, Media_war, Palin_gaffes, Sarah_Palin
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home