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The Problem with Illiquid Assets (Credit Freeze) – NOT Private Enterprise / Banks…

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posted on Feb, 17 2009 @ 11:16 AM
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This video by Karl Dennenger is by far the best and most succinct I’ve seen on this issue of the credit freeze. It’s worth the 8 minutes 43 seconds.


"Illiquid Assets" are not an act of the markets, nor are they an accident. They are in fact created by GOVERNMENT INTERFERENCE in the marketplace.

In 10 minutes you'll "get it" - why the government - not the markets - has led to the credit freeze. Why the market cannot clear. And why it is in fact explicitly the things that the government has done and is doing that has led us to have a "credit crunch", where assets that normally would trade won't.”






posted on Feb, 17 2009 @ 11:16 AM
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“This is a manufactured crisis. Nobody believes that the government will come up with set rules and shut up and step back. And until that happens, buyers and sellers cannot agree on a price. It’s that simple.

Do not think for a minute this is private enterprise that is causing this problem, it is not. The government can, tomorrow, stop the problem with illiquid assets. All Tim Geithner and Barak Obama have to do is step up to the microphone and say, ladies and gentlemen, these are the rules. We’re going to do X, Y, and Z and we’re not going to change it. This is going to be how it’s going to be for the next [insert number] months. If you do that the market clears immediately.”



posted on Feb, 17 2009 @ 11:44 AM
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reply to post by Iamonlyhuman
 


Sounds simple enough...'cept...how do you gank yer girlfriend without a big ol' fight...somebody gonna be PO'd...



posted on Feb, 17 2009 @ 11:49 AM
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reply to post by Hx3_1963
 


better to be PO'd than BK and out of business

ya know?



posted on Feb, 17 2009 @ 11:49 AM
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B.S on the derringer line .... the market doesn't "clear immediately"........the key missing from the derringer post (and i like the guy) is what is "x y z" that he says "all obama and staff have to do is xyz"

the problem is that *when a institution is too big to fail...it should be pieced apart .....because it is to big to exist in a sustainable econmic system*

The fundamental problem is that the banks are not willing to sell these securities for the current MKT price ........no private investors are buying this crap ....which should tell you there is a huge difference between what they are willing to pay and what the bankers are willing to sell for

The bankers know they are worth crap (appox 25-cents on the dollar) is what the lehman toxic crap/ bear stearns toxic crap was offered.....yet they are playing a game of don't ask/ don't sell.......and this is where the geithner bank plan comes in

THE sleight of hand is that most say at least the bank plan will establish a current mkt price since we are using private investors to buy the stuff (and that has supposedly been the problem all along) ....the BIG RED FLAG is that the gov't is loaning the private investors up to 95% of the financing costs for the purchases and should the private investors take a loss they don't have to pay the loaned money back!!!! This distortion of risk/reward has some private equity firms lined up .......and this distortion of risk reward creates a ARTIFICAILy high mkt price since investors can get way with not paying back (over 90% of the purchase price) should they take a loss.....gee what a way to find a "fair mkt price"


here's the other crux to quote simon johnson -current teacher at MIT's sloan business school


There comes a time in every economic crisis, or more specifically, in every struggle to recover from a crisis, when someone steps up to the podium to promise the policies that — they say — will deliver you back to growth. The person has political support, a strong track record, and every incentive to enter the history books. But one nagging question remains. Can this person, your new economic strategist, really break with the vested elites that got you into this much trouble?"


www.itulip.com...

[edit on 17-2-2009 by cpdaman]



posted on Feb, 17 2009 @ 11:52 AM
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Originally posted by Hx3_1963
reply to post by Iamonlyhuman
 


Sounds simple enough...'cept...how do you gank yer girlfriend without a big ol' fight...somebody gonna be PO'd...


Yep and it's logical that if Dennenger knows this then others in government do as well. So, I guess this is proof that politicians don't really want to solve this problem... except of course when they're talking about it.

We really are SUKAAAAS!!!!!!!!

Politicians => blah, blah, blah, blah....



posted on Feb, 17 2009 @ 11:54 AM
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I agree that government interference is just "part of the problem" but not all the problem.

The government is now creating a new crisis when is borrowing trillions of dollars to pay for the deficit and bank institutions and corporations that are falling.

This is not the job of the government this banking institutions and falling corporations need to declare bankruptcy and regroup.

We are heading for more bail outs and more crisis as long as the government keep rewarding failure.



posted on Feb, 17 2009 @ 11:56 AM
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Originally posted by cpdaman
B.S on the derringer line .... the market doesn't "clear immediately"........the key missing from the derringer post (and i like the guy) is what is "x y z" that he says "all obama and staff have to do is xyz"

the problem is that *when a institution is too big to fail...it should be pieced apart .....because it is to big to exist in a sustainable econmic system*

The fundamental problem is that the banks are not willing to sell these securities for the current MKT price ........no private investors are buying this crap ....which should tell you there is a huge difference between what they are willing to pay and what the bankers are willing to sell for

The bankers know they are worth crap (appox 25-cents on the dollar) is what the lehman toxic crap/ bear stearns toxic crap was offered.....yet they are playing a game of don't ask/ don't sell.......and this is where the geithner bank plan comes in

THE sleight of hand is that most say at least the bank plan will establish a current mkt price since we are using private investors to buy the stuff (and that has supposedly been the problem all along) ....the BIG RED FLAG is that the gov't is loaning the private investors up to 95% of the financing costs for the purchases and should the private investors take a loss they don't have to pay the loaned money back!!!! This distortion of risk/reward has some private equity firms lined up .......and this distortion of risk reward creates a ARTIFICAILy high mkt price since investors can get way with not paying back (over 90% of the purchase price) should they take a loss.....gee what a way to find a "fair mkt price"


here's the other crux to quote simon johnson -current teacher at MIT's sloan business school


There comes a time in every economic crisis, or more specifically, in every struggle to recover from a crisis, when someone steps up to the podium to promise the policies that — they say — will deliver you back to growth. The person has political support, a strong track record, and every incentive to enter the history books. But one nagging question remains. Can this person, your new economic strategist, really break with the vested elites that got you into this much trouble?"


www.itulip.com...

[edit on 17-2-2009 by cpdaman]


I think you just made Dennenger's point very nicely.



posted on Feb, 17 2009 @ 12:01 PM
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reply to post by marg6043
 


You got it...they're trading their worthless paper for everything we've worked 237+ Yrs for...sad times...and yet no one cares/acts...



posted on Feb, 17 2009 @ 12:02 PM
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if you say so

gov't interference is only part of the problem (it's the revolving door between wall street and gov't and regulatory bodies that is the kicker)

the only free markets that wall street and the gov't (i.e the establishment party") like are those FREE from serious regulation (which we have)

[edit on 17-2-2009 by cpdaman]



posted on Feb, 17 2009 @ 12:03 PM
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Originally posted by marg6043
I agree that government interference is just "part of the problem" but not all the problem.

The government is now creating a new crisis when is borrowing trillions of dollars to pay for the deficit and bank institutions and corporations that are falling.

This is not the job of the government this banking institutions and falling corporations need to declare bankruptcy and regroup.

We are heading for more bail outs and more crisis as long as the government keep rewarding failure.


First, so-called "Stimulus" is not bailout and vice versa. The bailouts WERE/ARE interference and the banks had no motivation to sell at the price that buyers were willing to buy. That's because they knew the gov't would interfere and rescue them.

Second, you are correct that the bailouts AND the so-called "Stimulus" is being funded by debt that the gov't will not be able to pay back.

Third, NOTHING we have discussed (bailouts OR so-called "Stimulus") has anything, whatsoever to do with deficit. The gov't hasn't even considered dealing with that in many years.



posted on Feb, 17 2009 @ 12:07 PM
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Iamhuman you are making some valid points

but do you acknowledge the revolving door problem is at the crux

The gov't and regulators are made up of Wall street (CITI, GOldman former employees) who have a web of interest that isn't you, me , or your neighbor....it is WALL STREET FINANCE......most of these public officials will be running back to the private sector....and they are not burning their bridges while they are in the public sector



posted on Feb, 17 2009 @ 12:09 PM
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Originally posted by cpdaman
if you say so

gov't interference is only part of the problem (it's the revolving door between wall street and gov't and regulatory bodies that is the kicker)

the only free markets that wall street and the gov't (i.e the establishment party") like are those FREE from serious regulation (which we have)

[edit on 17-2-2009 by cpdaman]


Did you even watch the video? Interference, in the context of the credit market, is defined there quite nicely.



posted on Feb, 17 2009 @ 12:12 PM
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reply to post by cpdaman
 


That is something that many do not understand, how linked together our government so call "public"servants really are.

Look at the former Secretary of treasury and the Federal reserve governor, look at many of the so call Lieutenants that the new Secretary of treasury is surrounding himself with, and so the financial advisor's of the the president.

They all private sectors big wits, like you said the American people is not what they have at hart right now and never will.



posted on Feb, 17 2009 @ 12:17 PM
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Originally posted by cpdaman
Iamhuman you are making some valid points

but do you acknowledge the revolving door problem is at the crux

The gov't and regulators are made up of Wall street (CITI, GOldman former employees) who have a web of interest that isn't you, me , or your neighbor....it is WALL STREET FINANCE......most of these public officials will be running back to the private sector....and they are not burning their bridges while they are in the public sector


If we're still talking about the illiquid asset problem then I would only agree with you up to the point of saying that the revolving door is only a part of the problem with getting Obama/Geithner to step up and say what the rules will be and then step back, shut up and let the credit market correct itself.

But I don't think you're talking just about the credit freeze. If that's the case, and you're talking about, the whole economy problem, then I absolutely agree 100% with the revolving door thing.

But, really, there's already PLENTY of threads here talking about the economy in general... illiquid assets in particular will start becoming more and more of a BIG problem with the American people.



posted on Feb, 17 2009 @ 12:20 PM
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Originally posted by marg6043
reply to post by cpdaman
 


That is something that many do not understand, how linked together our government so call "public"servants really are.

Look at the former Secretary of treasury and the Federal reserve governor, look at many of the so call Lieutenants that the new Secretary of treasury is surrounding himself with, and so the financial advisor's of the the president.

They all private sectors big wits, like you said the American people is not what they have at hart right now and never will.





Yes, and that exactly is why Obama/Geithner will NEVER fix the credit crisis.



posted on Feb, 17 2009 @ 12:32 PM
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Originally posted by Iamonlyhuman

Originally posted by marg6043
reply to post by cpdaman
 


That is something that many do not understand, how linked together our government so call "public"servants really are.

Look at the former Secretary of treasury and the Federal reserve governor, look at many of the so call Lieutenants that the new Secretary of treasury is surrounding himself with, and so the financial advisor's of the the president.

They all private sectors big wits, like you said the American people is not what they have at hart right now and never will.





Yes, and that exactly is why Obama/Geithner will NEVER fix the credit crisis.


well there's always a chance...should the public DEMAND IT

like lloyd from dumb and dumber said "so your saying there a chance"

it comes down to this

"There comes a time in every economic crisis, or more specifically, in every struggle to recover from a crisis, when someone steps up to the podium to promise the policies that — they say — will deliver you back to growth. The person has political support, a strong track record, and every incentive to enter the history books. But one nagging question remains. Can this person, your new economic strategist, really break with the vested elites that got you into this much trouble?"

-simon johnson MIT professor at sloan school of business

Geithner does not want to step up and say what the rules will be because it is LOSE/ lOSE politicaly in a sense ... between screwing over the taxpayers and transfering the liabity's from the banks to the taxpayers (since taxpayers take most of risk in a highly leverage public private partnership fund) and providing some (connected) private equity sweet heart deals.... and standing up to the Creditors who made bad decisons yet have political influence and want there bad loans to be made whole at taxpayer expense

[edit on 17-2-2009 by cpdaman]



posted on Feb, 17 2009 @ 03:42 PM
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i watched the video...

problems of 'spin'... he focuses only on MBS mortgage backed securities.

problem 2, he says that because the gov't bailout -
Which Might, value the ill-liquid assets (MBSs) at 100% valuation
the banks in turn refuse to budge on unfreezing the credit market
using those same MBSs as monetized capital.


big BS!!

the problem is that the big-banks/investment-banks back then,
created multiple millions of these derivatives And gave those
derivatives a price the bank itself determined... and sold that
overvalued toxic-waste Paper to the public.


It's all about the banks being stubborn & plundering... they want/demand
the price for these they alone chose...
the 'market' of buyers, in its present correction-mode of giving a more proper valuation of this 'paper' is being dismissed as irrelevent !
The banks & CEOs want only their valuation...as obtuse a it is...
to be the benchmark price... instead of the 30-50 cents on-the-dollar
these securities are worth. !

Its not the government,,,, its the money hungry capitalists in the financial sector causing the freeze! They don't give a dam about the economy
or the country or the social system survival... they are the sharks sniffing blood-in-the-water (whch they created)

Send all those ex-GS top executives over to China... they know how to deal with that type of individual that has effectively trashed the Soverign Wealth of China's exports from $2Trillion to $1Trillion already


Paulson & Geithner even Bernanke should be given a free Asian Junket
to enjoy



posted on Feb, 17 2009 @ 05:49 PM
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yes send the gang to china........they will be crying like little school girls.......we should set up a donation to that fund.....or as a Ytube topic


then maybe this will increase the political capital enough to make the vested interest that got us into the mess in the first place take a haircut and break these too big to fail agency's up into smaller more efficient pieces as a first step to a recovery we can believe in



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