It looks like you're using an Ad Blocker.
Please white-list or disable AboveTopSecret.com in your ad-blocking tool.
Some features of ATS will be disabled while you continue to use an ad-blocker.
(visit the link for the full news article)
Asset sales may lead to write-downs, insolvencies, Orszag tells Congress.
The director of the Congressional Budget Office said yesterday that the proposed Wall Street bailout could actually worsen the current financial crisis.
During testimony before the House Budget Committee, Peter R. Orszag -- Congress's top bookkeeper -- said the bailout could expose the way companies are stowing toxic assets on their books, leading to greater problems.
"Ironically, the intervention could even trigger additional failures of large institutions, because some institutions may be carrying troubled assets on their books at inflated values," Orszag said in his testimony. "Establishing clearer prices might reveal those institutions to be insolvent."
Marc Faber, editor & publisher of 'The Gloom, Boom & Doom Report', told CNBC's Asia Squawk Box on Friday, he doubts that $700 billion would make any difference when you consider the size of U.S. credit markets. "Looking at the size of the credit market in the United States, the equities market, the housing market and then looking at the size of the credit default swap market, which is around $62 trillion now, and the world wide derivatives market which is now $1,300 trillion dollars, I very much doubt that $700 billion would make any difference at all. In fact, I think it's a bad proposal in the sense that it will distort market pricing," Faber said.
"The problem is that too much money was lent against homes at inflated asset values. In other words that means at the peak of the market, people went and lent them 120 percent against the value of the home. And that is the problem -- the leverage in the system," Faber said.
He added that the current bailout plan proposed by the Treasury and the U.S. Federal Reserve does not address this leverage problem in the markets.
This is what I am terrified of . . but I am not so much concerned about the big boys as opposed to us who really don't count for much when considering these matters aka the average person.
What I see happening is that the credit crunch is going to keep wages to stagnate for the foreseeable future and the cost oil high. This high oil prices and credit crunch will fuel even further inflation and then what happens is that loans previously considered safe will start failing because people will not be able to keep up financially and the downward spiral will continue.
posted by marg6043
I was reading also that, like you said the price will be inflated and the "toxic debt" could over pay. So how the fed in their bail out give away will not be overpaying for "securities" that their value is much less that what is listed? Isn't this another way that bankers or financial institution will do to scam the Fed and the tax payer?
No wonder the Fed doesn't want anybody breathing down their neck. And were does all this money will come from? it will come from the Chinese, Japan and any other nation that buy our debt.
So the truth is that is not tax payer money waiting in a vault to pay for this, what tax payer will be paying is for the interest of the debt as it will be added to the national debt.
Originally posted by grover
What I see happening is that the credit crunch is going to keep wages to stagante for the forseeable future and the cost oil high... This high oil prices and credit crunch will fuel even further inflation and then what happens is that loans previously considered safe will start failing because people will not be able to keep up financially and the downward spiral will continue.
Originally posted by Ravinsomniac
The question of who lent us the money is a good one.
What if the Country, say China, foreclosed on us.
Could Chinese soldiers come marching into the U.S. by the millions and evict every borrower from their homes ?
It's called stagflation - when inflation and interest rates rise while economic activity slows. It happened in the late 70's/early 80's, and I also believe it is happening now.
The solution was to crunch the economy and drag it down, which was the beginning of the end for our manufacturing sector, and the economic cleansing which made the later Reagan boom possible.
Today's Fed will face the same choice - deep recession or delay the inevitable. Since they have been delaying the inevitable for some time now, and they appear to want to continue, it seems that we may have that to look forward to sometime during the next president's administration.
This only shows how our nation that is not longer a "wealth producer" depends on "loans" and "credit" ot survive. Now isn't the credit bubble about to burst or it already busted with the financial institutions crash, or this is going to be perpetuated by more money that we actually don't have and will be taking it on "credit" to support yes our own "credit bubble" It makes no sense and is not going to end very pretty either . . “