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[quote author="no_vaseline" date=1222425351]Attn Knife Catchers: JP Morgan says home prices to decline 44% peak to trough, 58% if we get a 'severe recession'.

</blockquote>


Wary Gatts says, "It's in the bag!"
 
Interesting article in The New York Times: <a href="http://www.nytimes.com/2008/09/26/business/26bailout.html">Talks Implode During Day of Chaos; Fate of Bailout Plan Remains Unresolved</a>



My favorite quote: ?If money isn?t loosened up, this sucker could go down.? President Bush, Sept 25, 2008.



Hat tip to CR.
 
http://messages.finance.yahoo.com/Business_&_Finance/Investments/ETFs_(A_to_Z)/ETFs_S/threadview?bn=45991&tid=58014&mid=58014





It may seem like a long time ago, but it was only on Monday of last week (Sept. 15) that Lehman Brothers filed for bankruptcy; the equally big news was that the Federal Reserve declined to bail Lehman out.



I've read several details regarding Lehman's demise and learned some interesting facts. The bankruptcy filing was "pre-dawn" on the 15th, according to Bloomberg. The filing document is available in PDF form on the internet: it names Lehman's largest unsecured creditors, and the dollar amounts of their claims.



"Citibank, N.A., as indenture trustee" is listed as Lehman's largest unsecured creditor, with a claim of "Approximately $138 billion" in "Bond Debt."



Following Lehman's filing, J.P. Morgan transferred $138 billion in two payments to Lehman Brothers -- $87 billion on Sept. 15th and $51 billion on Sept. 16th. Bloomberg reported that the transfer of funds was "to keep financial markets stable," and to settle Lehman's "securities transactions with customers...and clearance parties, according the [court] filing."



After these transfers, also according to Bloomberg, the Federal Reserve Bank of New York made two subsequent payments to J.P. Morgan: $87 billion on Sept. 15th and $51 billion on Sept. 16th, for a total of $138 billion.



Lehman's bankruptcy court filing said that J.P. Morgan's $138 billion transfer to Lehman was "At the request of... the Federal Reserve Bank of New York." I have not been able to find an explanation -- in media reports or from the Federal Reserve -- of why J.P. Morgan needed to be a party to the $138 billion that Lehman received, and that the Fed transferred.



I'm also unable to find an announcement from the Fed that it was making the transfer.



One could infer that J.P. Morgan was used as a third party in order to avoid the perception that, despite statements regarding not bailing out Lehman, the Fed was indeed assuming $138 billion in obligations that were in default upon Lehman's bankruptcy.



Once could also infer that such an action by the Fed amounted to a $138 billion bailout of Citibank, which was the dollar value of the Lehman-issued bonds Citibank held. Citibank issued a Sept. 15 press release saying that its "role in this issue is administrative in nature and does represent exposure for Citi to Lehman." The statement did not identify who or what owned the $138 billion in bonds.



I hope that more facts become available showing that the inferences are mistaken, and I invite journalists and others to bring any such relevant facts to light.
 
[quote author="WestparkRenter" date=1222428704][quote author="zovall" date=1222416724]<a href="http://money.cnn.com/2008/09/25/news/companies/JPM_WaMu/index.htm?postversion=2008092520">JPMorgan to buy WaMu - report</a></blockquote>
Can someone please explain to me why would this make WaMu safer? Wasn't JP Morgan in trouble and that's why it became a bankholding and not an investment bank.</blockquote>


Trouble? Nah. Vunerable.



Tune in next week for "Busto to Robusto in 10 days" by JPM.
 
[quote author="ocrebel" date=1222432456]http://messages.finance.yahoo.com/Business_&_Finance/Investments/ETFs_(A_to_Z)/ETFs_S/threadview?bn=45991&tid=58014&mid=58014

Following Lehman's filing, J.P. Morgan transferred $138 billion in two payments to Lehman Brothers -- $87 billion on Sept. 15th and $51 billion on Sept. 16th. Bloomberg reported that the transfer of funds was "to keep financial markets stable," and to settle Lehman's "securities transactions with customers...and clearance parties, according the [court] filing."



After these transfers, also according to Bloomberg, the Federal Reserve Bank of New York made two subsequent payments to J.P. Morgan: $87 billion on Sept. 15th and $51 billion on Sept. 16th, for a total of $138 billion.



Lehman's bankruptcy court filing said that J.P. Morgan's $138 billion transfer to Lehman was "At the request of... the Federal Reserve Bank of New York." I have not been able to find an explanation -- in media reports or from the Federal Reserve -- of why J.P. Morgan needed to be a party to the $138 billion that Lehman received, and that the Fed transferred.



I'm also unable to find an announcement from the Fed that it was making the transfer.



One could infer that J.P. Morgan was used as a third party in order to avoid the perception that, despite statements regarding not bailing out Lehman, the Fed was indeed assuming $138 billion in obligations that were in default upon Lehman's bankruptcy.



Once could also infer that such an action by the Fed amounted to a $138 billion bailout of Citibank, which was the dollar value of the Lehman-issued bonds Citibank held. Citibank issued a Sept. 15 press release saying that its "role in this issue is administrative in nature and does represent exposure for Citi to Lehman." The statement did not identify who or what owned the $138 billion in bonds.



I hope that more facts become available showing that the inferences are mistaken, and I invite journalists and others to bring any such relevant facts to light.</blockquote>


Your answer is <a href="http://www.financialsense.com/Market/kirby/2008/0922.html">here</a>
 
[quote author="WestparkRenter" date=1222428704][quote author="zovall" date=1222416724]<a href="http://money.cnn.com/2008/09/25/news/companies/JPM_WaMu/index.htm?postversion=2008092520">JPMorgan to buy WaMu - report</a></blockquote>
Can someone please explain to me why would this make WaMu safer? Wasn't JP Morgan in trouble and that's why it became a bankholding and not an investment bank.</blockquote>


You are confusing JP Morgan and Morgan Stanley
 
[quote author="no_vaseline" date=1222434060][quote author="WestparkRenter" date=1222428704][quote author="zovall" date=1222416724]<a href="http://money.cnn.com/2008/09/25/news/companies/JPM_WaMu/index.htm?postversion=2008092520">JPMorgan to buy WaMu - report</a></blockquote>
Can someone please explain to me why would this make WaMu safer? Wasn't JP Morgan in trouble and that's why it became a bankholding and not an investment bank.</blockquote>


Trouble? Nah. Vunerable.



Tune in next week for "Busto to Robusto in 10 days" by JPM.</blockquote>
[quote author = From WSJ]

Instead, J.P. Morgan agreed to pay $1.9 billion to the government for WaMu's banking operations and will assume the loan portfolio of the thrift, which has $307 billion in assets. The full cost to J.P. Morgan will be much higher, because it plans to write down about $31 billion of the bad loans and raise $8 billion in new capital. All WaMu depositors will have access to their cash, but holders of more than $30 billion in debt and preferred stock will likely see little if any recovery.</blockquote>


<a href="http://online.wsj.com/article/SB122238415586576687.html?mod=special_page_campaign2008_mostpop">http://online.wsj.com/article/SB122238415586576687.html?mod=special_page_campaign2008_mostpop</a>
 
In case any of you were inching twords the edge....



<span style="font-size: 14px;"><strong>Safety on the sidelines

Commentary: You don't buy a house in uncertain times</strong></span>



http://www.marketwatch.com/news/story/you-dont-buy-house-uncertain/story.aspx?guid=85E6AF56-AF5F-4897-A6AC-D05B849466D9&dist=SecMostRead&ref=patrick.net
 
I was reading the Wikipedia articles about the Great Depression and the Black Tuesday today, and was amazed to find that the history repeats itself, here is the relevant quote:

"further."[6] William C. Durant [READ-WARREN BUFFET] joined with members of the Rockefeller family and other financial giants to buy large quantities of stocks in order to demonstrate to the public their confidence in the market, but their efforts failed to stop the slide." Eerie, huh?http://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929



Highly recommend to read both articles, if you are interested in what is coming in the next few years...
 
[quote author="blackacre-seeker" date=1222585420]I was reading the Wikipedia articles about the Great Depression and the Black Tuesday today, and was amazed to find that the history repeats itself, here is the relevant quote: "further."[6] William C. Durant [READ-WARREN BUFFET] joined with members of the Rockefeller family and other financial giants to buy large quantities of stocks in order to demonstrate to the public their confidence in the market, but their efforts failed to stop the slide." Eerie, huh?http://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929Highly recommend to read both articles, if you are interested in what is coming in the next few years...</blockquote>


The FDIC and other protections were put in place to help prevent another Great Depression. Bank failures were much worse during this time and insured deposits didn't exist. We're in a serious financial crisis that requires action (i.e. bailout) but the worst case scenario in my assessment is a severe recession, more bank failures, and higher unemployment. None of these are good for housing. Did you know that Ben Bernanke did his Ph.D studies on the Great Depression? I'm glad he's helping lead us during this difficult time. While, $700 billion is a lot of money, a Great Depression II would have a much bigger impact and cost the government much more money. We're not even officially in a recession so why would you say that what happened post-1929 is coming again in the next few years?
 
[quote author="columbussquare.com" date=1222588496][quote author="blackacre-seeker" date=1222585420]I was reading the Wikipedia articles about the Great Depression and the Black Tuesday today, and was amazed to find that the history repeats itself, here is the relevant quote: "further."[6] William C. Durant [READ-WARREN BUFFET] joined with members of the Rockefeller family and other financial giants to buy large quantities of stocks in order to demonstrate to the public their confidence in the market, but their efforts failed to stop the slide." Eerie, huh?http://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929Highly recommend to read both articles, if you are interested in what is coming in the next few years...</blockquote>


The FDIC and other protections were put in place to help prevent another Great Depression. Bank failures were much worse during this time and insured deposits didn't exist. We're in a serious financial crisis that requires action (i.e. bailout) but the worst case scenario in my assessment is a severe recession, more bank failures, and higher unemployment. None of these are good for housing. Did you know that Ben Bernanke did his Ph.D studies on the Great Depression? I'm glad he's helping lead us during this difficult time. While, $700 billion is a lot of money, a Great Depression II would have a much bigger impact and cost the government much more money. We're not even officially in a recession so why would you say that what happened post-1929 is coming again in the next few years?</blockquote>


Depression numbers:

For 1932, GNP falls a record 13.4 percent; unemployment rises to 23.6 percent. ...
 
Taxpayers are against bailout, something like 20-1.



Bailout aimed at handing goodies to the people who caused

this.



Bailout should be directed at unfreezing the short term paper

market and reimbursing banks for cramdowns.



The derivatives market is unsaveable.



Also as I've been saying since last fall, we need to ramp up

spending for infrastructure, roads, dams, bridges, levees,

alternate energy. This takes time. Had they started last fall,

there will be projects beginning now which could have taken

up the slack in unemployments.



By the way, the blogsters on CR are saying Calpers is in the

soup with lots of investments--I suppose that should be a quote--

in WaMu and Lehman.
 
[quote author="columbussquare.com" date=1222588496]

The FDIC and other protections were put in place to help prevent another Great Depression. Bank failures were much worse during this time and insured deposits didn't exist. We're in a serious financial crisis that requires action (i.e. bailout)</blockquote>
A financial crisis does not require government action. Bailouts do not help. Bailouts only give money to those who have already feasted off the existent regulations at the expense of those who can least afford it, postpone a necessary contraction, and make the problem worse and the end result worse. Government intervention is not the solution. Government intervention is the problem.



[quote author="columbussquare.com" date=1222588496]

but the worst case scenario in my assessment is a severe recession, more bank failures, and higher unemployment. None of these are good for housing. Did you know that Ben Bernanke did his Ph.D studies on the Great Depression?

</blockquote>


Yes, we all know B-52 Ben did his Ph.D studies on the Depression, and his conclusions are 100% <strong>WRONG</strong>. B-52 Ben has never worked in private enterprise and all his experience is as an academician.

</blockquote>


[quote author="columbussquare.com" date=1222588496]

I'm glad he's helping lead us during this difficult time. While, $700 billion is a lot of money, a Great Depression II would have a much bigger impact and cost the government much more money.

</blockquote>
What in the world makes you think that giving trillions of dollars to bankers will prevent a depression?

[quote author="columbussquare.com" date=1222588496]

We're not even officially in a recession so why would you say that what happened post-1929 is coming again in the next few years?</blockquote>
Officially? Are you serious? The Fed used a PCE deflator of 1.2% to calculate the GDP last quarter. If you would like to know what an accurate assessment of the GDP and CPI are, refer to shadowstats.com .
 
That's interesting, I really didn't know that FDIC insurance did not exist during the Great Depression.

Still, if the runs on the banks continue at this rate, Fed. Res. will run out of money soon. They have 2 options: print more money or increase our taxes. I don't like either of these options.

Besides, failing banks are only a part of the problem (not sure if I should categorize them as cause or effect). From my layperson's point of view, if people are unsure about what is going to happen, they are going to hoard cash, if they have any and cut down on spending. Less spending=less demand for any kind of product or service there is, so many businesses will fail=more people unemployed=more cuts on spending. I honestly don't see any way out of that vicious circle... What appears to have helped during the Great Depression was government spending on public projects to create jobs for the unemployed, like building dams and roads, but yet again, the government is going to take this money out of my taxpayer's pocket, either through inflation or through higher taxes.

And my view on bailout is simple-I'm against it, because there is not a shadow of doubt in my mind that all this money is going to rain down on banks CEO's, congressmen, senators, and whoever will be put in charge of distributing the money. I can be sure of one thing: I won't see a dime of it and the situation we are in now will only be getting worse.
 
And they prepare to vote on the <a href="http://www.house.gov/apps/list/press/financialsvcs_dem/ayo08c04_xml.pdf">Fantasy Accounting and Bailout Act of 2008</a> Going by the politically correct name: Emergency Economic Stablity Act of 2008.



Gotta love section 132. At the discretion of the SEC, Mark to Market can be suspended and everybody has to pretend the asset on the balance sheet is whatever the holder wants to pretend it is...
 
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