350zCommtech's Account Talk

BSC heading for ZERO? LEH next?

Nouriel Roubini | Mar 14, 2008

And today the first one of these large broker dealers - Bear Stearns - in on the verge of bankruptcy. Let us be clear: given its massive exposure to toxic MBS and ABS product Bear Stearns is insolvent; the decision by the NY Fed to try to bail out Bear Stearns would make sense if this firm was only illiquid; the trouble that it is insolvent and thus such attempted bailout is altogether inappropriate. It is true that Bear is a large broker dealer; but its systemic importance is much smaller than that of much larger institutions. The world and financial market can survive if Bear disappears.

So the only possible justification for such Fed action is to engineer an orderly rather than a disorderly shutdown of this institution. But unfortunately the Fed is behaving as if Bear Stearns is illiquid but solvent. That is delusional and the official sector support of an otherwise insolvent institution will end up - like many other recent Fed actions - being paid for by the US tax-payer.

As discussed months ago in this column non-banks institutions don't have access - based on the Federal Reserve Act - to the lender of last resort support of the Fed unless a very special and unusual procedure and vote is taken. So for the first time in decades - possibly since the Great Depression - the Fed had to rely on this exceptional rule to bail out a non-bank financial institution. So what is next? Bailing out hedge funds, bailing out money market funds, bailing out SIVs? When is enough enough? This when the Fed has already committed this week to swap 60% ($ 400 bn) of its balance sheet of Treasuries for mortgage backed securities of dubious quality and value.

And Bear is only the first broker dealer to go belly up. Rumors had been circulating in the market for days that the exposure of Lehman to toxic ABS/MBS securities is as bad as that of Bear: according to Fitch at the beginning of the turmoil Bear Stearns had the highest toxic waste ("residual balance") exposure as percent of adjusted equity on balance sheet; the exposure of Bear was 54.5% while that of Lehman was only marginally smaller at 53.3%; that of Goldman Sachs was only 21%. And guess what? Today Lehman received a $2 billion unsecured credit line from 40 lenders. Here is another massively leveraged broker dealer that mismanaged its liquidity risk, had massive amount of toxic waste on its books and is now in trouble. Again here we have not only a situation of illiquidity but serious credit problems and losses given the reckless exposure of this second broker dealer to toxic investments.

We will leave aside for today the fact that a growing number of members of the "shadow financial system" have gone belly up in the last month alone: the entire SIV scheme is being wound down and brought back on balance sheet; a few hedge funds are now closing shops (for details see the web site The Hedge Fund Impode-O-Meter) ); a few money market funds that had exposure to toxic MBS have experienced runs and had to be bailed out; a highly leveraged private equity bond fund has gone belly up; a major near prime mortgage lender is bankrupt. In all these cases a poisonous combination of liquidity risk and credit risk was exacerbated by reckless leverage.

So the question is: if Bear Stearns screwed up big time - as it did - with huge leverage, reckless investments, lousy risk management and massive underestimation of liquidity risk why should the US taxpayer bail out this firm and its shareholders? First fully wipe out those shareholders, then fire all the senior management and have the government take over such a bankrupt institution before a penny of public money is wasted in bailing it out. Instead now the use of public money to bail out financial institutions is spreading from banking ones to non banking ones. The Fed should at least give a clear and public explanation of why such extremely exceptional - and almost never used - intervention was justified.

Unless public money is used on a very temporary basis to achieve an orderly wind-down or merger of Bear Stearns this is another case where profits are privatized and losses are socialized. By having thrown down the drain the decades old doctrine and rule that the Fed should not lend or bail out non-bank financial institutions the Fed has created an extremely dangerous precedent that seriously aggravates the moral hazard of its lender of last resort support role. If the Fed starts on the slippery slope of providing massive liquidity support to non-bank financial institutions that have recklessly managed their risks it enters into uncharted territory that radically changes its mandate and formal role. Breaking decades-old rules and practices is a radical action that seriously requires a clear public explanation and justification. http://www.rgemonitor.com/blog/roubini/
 
Wasn't there a rule after the depression of the 1930's prohibiting banks from merging with or doing the mortgage and/or insurance business? ... and, was this not done away with by the de-regulation trend of the 1980's?
 
There’s been quite a bit of discussion in various member’s Allocation Account talk threads about the threat of restricting members to mail only changes if a certain number of IFTs are exceeded in a given month. Like most, I scoffed at this – believing, as many did, that this would take too long to implement. Let me tell you what arrived yesterday via certified mail….

I got a letter from the Executive Director (Gregory T. Long) of TSP stating that because I had exceeded the number of trades in February, as of March 31st 2008 I will no longer be able to post trades electronically. All further trading will be done via mail. They were so kind to enclose 3 envelopes to assist me.

So you may want to rethink your strategies – you may be getting something soon if you don’t. I live in the DC area so perhaps I got my letter earlier than others. I’ll be curious to hear what happens to others. BTW, I probably made around 6 trades in February.

I won’t be sitting idly by, calls will be made and I’ll follow up with my local reps (I’ve already sent something to my Senators and Representative last month, we’ll see what happens now.

BTW, I subscribe to several different member threads so I am cross posting this message in those as well – sorry for the duplication but I think you should be aware that the threat was not idle.
 
jUST GOT MY LETTER ..THIS IS AN OUTRAGE..I WANT MY MONEY TO COME OUT OF THE tsP AND i CAN INVEST IN A MORE AMERICAN FRIENDLY FUND... THE COMMIES HAVE TAKEN OVER......... MIKE IN NH
 
We need to find out who these people are

1. Lt. Col. Thomas K. Emswiler, executive director of the Armed Forces Tax Council in the Office of the Assistant Secretary of Defense for Force Management Policy - 2001 that is the go to guy !!

2. On March 19, 2007 Chairman Andrew M. Saul announced the selection of Gregory T. Long as Executive Director of the Federal Retirement Thrift Investment Board. The Board members had convened yesterday for their monthly meeting. The Executive Director of the Board serves as the Chief Executive Officer and managing fiduciary of the Thrift Savings Plan (TSP) for Federal employees.
For the past year, Long has been the Director of Product Development for the TSP, serving as the Agency’s chief research officer and principal advisor for all product development and related policy matters. Before joining the TSP, Long spent seven years with CitiStreetwhere he served as Director of Marketing for the American Bar Association Retirement Funds. In that position he oversaw all marketing, sales and product development activities for a program that provides 401(k) services to over 4,000 law firms nationwide. Prior to CitiStreet, Long spent six years with Putnam Investments, most recently as the Regional 401(k) Sales Director in the southeast U.S.

THIS IS WHO WE ARE DEALING WITH !!!!!!!!!!!!!
 
We need to find out who these people are

1. Lt. Col. Thomas K. Emswiler, executive director of the Armed Forces Tax Council in the Office of the Assistant Secretary of Defense for Force Management Policy - 2001 that is the go to guy !!

2. On March 19, 2007 Chairman Andrew M. Saul announced the selection of Gregory T. Long as Executive Director of the Federal Retirement Thrift Investment Board. The Board members had convened yesterday for their monthly meeting. The Executive Director of the Board serves as the Chief Executive Officer and managing fiduciary of the Thrift Savings Plan (TSP) for Federal employees.
For the past year, Long has been the Director of Product Development for the TSP, serving as the Agency’s chief research officer and principal advisor for all product development and related policy matters. Before joining the TSP, Long spent seven years with CitiStreetwhere he served as Director of Marketing for the American Bar Association Retirement Funds. In that position he oversaw all marketing, sales and product development activities for a program that provides 401(k) services to over 4,000 law firms nationwide. Prior to CitiStreet, Long spent six years with Putnam Investments, most recently as the Regional 401(k) Sales Director in the southeast U.S.

THIS IS WHO WE ARE DEALING WITH !!!!!!!!!!!!!

Ironically he sends out these notices 1 year to the day he was appointed to his position. This must be part one of his 5 year plan and he is going to see just how far he can go. He is connected with 4000 Law Firms Nationwide so that immediate sets up a conflict of interest in any court or in front of any Judge. Impartial ???????????? Not a chance in hell.
 
doesnt seem right that they can penalize you before the ruling kicks in in Apr...

Even if you are put on the "mail in list" seems to me that you shouldnt have to stay there forever..

but i am just speculating.
 
doesnt seem right that they can penalize you before the ruling kicks in in Apr...

Even if you are put on the "mail in list" seems to me that you shouldnt have to stay there forever..

but i am just speculating.

There is no stopping this plan in my opinion unless it is taken right to the press CNBC etc. remember they set up the TSP and have made Billions on Government employees. They gave us the rules now something has changed they want to change their own rules because the game has changed. Botton line the TSP wants everyone back in the G Fund and they hand pick a guy connected with 4000 Law Firms to do it.
 
We need to find out who these people are

1. Lt. Col. Thomas K. Emswiler, executive director of the Armed Forces Tax Council in the Office of the Assistant Secretary of Defense for Force Management Policy - 2001 that is the go to guy !!

2. On March 19, 2007 Chairman Andrew M. Saul announced the selection of Gregory T. Long as Executive Director of the Federal Retirement Thrift Investment Board. The Board members had convened yesterday for their monthly meeting. The Executive Director of the Board serves as the Chief Executive Officer and managing fiduciary of the Thrift Savings Plan (TSP) for Federal employees.
For the past year, Long has been the Director of Product Development for the TSP, serving as the Agency’s chief research officer and principal advisor for all product development and related policy matters. Before joining the TSP, Long spent seven years with CitiStreetwhere he served as Director of Marketing for the American Bar Association Retirement Funds. In that position he oversaw all marketing, sales and product development activities for a program that provides 401(k) services to over 4,000 law firms nationwide. Prior to CitiStreet, Long spent six years with Putnam Investments, most recently as the Regional 401(k) Sales Director in the southeast U.S.

THIS IS WHO WE ARE DEALING WITH !!!!!!!!!!!!!

Quote:
Originally Posted by Braveheart
Ironically he sends out these notices 1 year to the day he was appointed to his position. This must be part one of his 5 year plan and he is going to see just how far he can go. He is connected with 4000 Law Firms Nationwide so that immediate sets up a conflict of interest in any court or in front of any Judge. Impartial ???????????? Not a chance in hell.

I say the hell with all of this the only way to expose them is right in the Press. The Wall Street Journal, CNBC every Media Outlet. :mad:Congress and the Senate only act when there is outrage. Imagine a Soldier in Iraq being sent a letter you made 4 transactions when we said 3 now you will pay and you must mail your form 50 to the TSP because you didn't listen to us and by the way sorry your home is forclosed, we decided to cut your benifits, you will have to wait 4 months for the DAV to see you and thanks for your service to our country.:mad:

I copied this from the other TSP Post for here since this is viewed more than most.
 
Or, they want everyone to be a buy and holder(bag-holder) for the real market crash.

Does the name Desperado ring a bell?

Quote:
Originally Posted by Paladin
That is an excellent point! Thanks for the idea. I will make this one of my sample complaint letters to the proposed rule.

Lt. Col. Thomas K. Emswiler should be ashamed of himself treating his fellow soldiers like that.

Quote:
Originally Posted by Braveheart
I say the hell with all of this the only way to expose them is right in the Press. The Wall Street Journal, CNBC every Media Outlet. Congress and the Senate only act when there is outrage. Imagine a Soldier in Iraq being sent a letter you made 4 transactions when we said 3 now you will pay and you must mail your form 50 to the TSP because you didn't listen to us and by the way sorry your home is forclosed, we decided to cut your benifits, you will have to wait 4 months for the DAV to see you and thanks for your service to our country.:mad:

That is an excellent point! Thanks for the idea. I will make this one of my sample complaint letters to the proposed rule.

Lt. Col. Thomas K. Emswiler should be ashamed of himself treating his fellow soldiers like that.

That was 2 minutes of searching I can did and find out what this Lt. Col. is all about now leak that to the press and imagine the firestorm of a debate they would have on their hands. It's like playing cards again find a weakness and expose it. The TSP needs to be exposed PUBLICALLY not in some closed door meeting. They have alot to answer for maybe that is why the man in charge is connected with 4000 Law Firms as well.:mad:


I pasted my post and a reply from the other thread I think we have something here solid factual information that would outrage this country even more. A Lt. Col Emswiler is part of a plan to take or punish Veterans even those in Iraq because they made an extra transaction. Remember Walter Reed, The DAV, No Health Care, Homeless PTSD that we left to die in the gutter but dammit Iraq is so important we may stay 100 years. This will be front page news !!!!
 
Does anyone know how long (processing time) it will take to request a loan to use it to purchse an IRA in the private sector, or to do a rollover transfer to a private sector brokerage house? Thanks in advance.
 
Does anyone know how long (processing time) it will take to request a loan to use it to purchse an IRA in the private sector, or to do a rollover transfer to a private sector brokerage house? Thanks in advance.

I did the application online. Printed it out. We both signed it. It took 10 days from when I mailed it to when it was deposited in my checking account.
 
The bottom is in. "BUY! BUY! BUY!":D

20 Canadian ABCP Trusts File Bankruptcy

The Québec Pension Plan (Caisse) and the Ontario Teachers' Pension Plan are on the hook for some $33 billion in ABCP as are 40 other trustholders, mining companies, paper companies, etc all of which thought they were buying short term easily marketable notes.

This story has been brewing since last summer (see Global Credit Crisis Canadian Style). However bailout plans have now blown up as deadline after deadline for coming up with a solution has been missed.

With the Bank of Montreal Missing Margin Calls earlier this month, what had to happen did: ABCP players to seek bankruptcy protection.

The committee working to untangle $33-billion of frozen commercial paper plans to ask an Ontario judge Monday to grant bankruptcy protection to the 20 trusts that issued the paper, as it works to restructure them.

Investors ranging from major corporations to provincial and territorial governments and private individuals have been stuck holding the paper since last August, when the U.S. subprime mortgage crisis tossed financial markets into a tailspin, causing the market for Canadian third-party asset-backed commercial paper to come to a screeching halt.

Three days after it nosedived, a group of major players, led by the Caisse de dépôt et placement du Québec, announced a plan to restructure the market. It involved converting the short-term paper into longer-term debt. To give the group time to hammer out the details and put the plan in place, the players agreed to a standstill period that essentially froze the market.

The committee, which has missed self-imposed deadlines, failed to unveil its final plan to investors yesterday, even though an agreement that was helping to keep the market frozen was to expire at midnight. A committee spokesman said they remained confident that the market would not descend into chaos.

The committee plans to file an application in Ontario Superior Court to put each of the 20 trusts under the protection of the Companies' Creditors Arrangement Act, a law that's normally used by companies that are trying to restructure under bankruptcy protection. CCAA prevents creditors from seizing assets and halts lawsuits against the company.

As the restructuring drags on, it's still not clear exactly how much money Canadian investors will recoup. While the committee had hoped that those who hold the long-term notes until they expire would receive most of their value back, it's believed that investors who need to sell the paper quickly once the market's unfrozen could lose one-third or more.http://globaleconomicanalysis.blogspot.com/
 
Bottom on Monday? C/S/I buy? Z, please post on Monday as soon as you have a plan..hopefully giving us enough time to decide to follow or not. I know you usually are close to deadline...as I am.:D

I'm itching to pull the trigger. Friday's sell-off had no sign of capitulation. The late day rally was all short covering. If I see a big spike in the VIX on Monday, I'm going C and/or S.

The I fund is totally out of the question
. The dollar is set to rally big time. Late last week, we heard a lot of comments from various people including the President. The one thing they kept saying was, "I'm supportive of a strong dollar". Some folks are speculating that a concerted effort by the various CBs to strengthen the dollar is about to happen. They can try to rally the dollar by buying it or cutting interest rates.

The BS CPI allows the Feds to cut as much as 1.00%. The one thing to keep in mind is Goldman Sacks reports Tuesday morning. They have already hinted at a weak report. But if the Feds cut 1.00%, the markets will rally.
 
The only thing I'm a bit confused about is that I thought rate cuts undermined the dollar, and that to strengthen it they would have to hold steady or raise rates.

That is another method, but the Feds don't have the balls to do that. Not in an election year.:D

So, as pointed out, they would need support from other CBs.
 
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