350zCommtech's Account Talk

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poolman said:
My Bad, You are Correct.. Thanks... That Sux... I don't think the Market's will wait that long.

Thanks 350Z,

Poolman :)
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Poolman,

My super duper, ultra accurate, never wrong, indicator is suggesting that a temporary low was just put in and the market should rally for a little bit.:D

It's killing me that I can't make an IFT.:D
 
350zCommTech said:
You're welcome Poolman.

I think you mean Thursday. I can't make an IFT until the first of the month, correct? Which means it would be effective Thursday at the earliest.
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I think you can enter an IFT on the last day of the month, that will be effective on the 1st of the following month.
 
Is it before noon on the 30th to be effective on the first or what? :confused:

I thought you guys had all this down... :toung:
 
KevinD said:
Is it before noon on the 30th to be effective on the first or what? :confused:

I thought you guys had all this down... :toung:
Click to expand...

kevinD & weatherweeniw,

If I may. An IFT done before noon on the 30th will count towards
a September IFT because it goes into effect at the COB on that day. You
would have to wait until October 1st (before noon) to do a IFT if you ran
out of September IFT's. That would become effective at the COB on the
1st and have your money reallocated for October 2nd's up or down affect.;)
 
Roubini: Treasury's plan is a disgrace.

The Treasury plan (even in its current version agreed with Congress) is very poorly conceived and does not contain many of the key elements of a sound and efficient and fair rescue plan. Like in my 10 step HOME plan many other economists and commentators (Charles Calomiris, Raghu Rajan, Kotlikoff and Mehrling, Luigi Zingales, Martin Wolf, Barry Ritholtz, Chris Whalen and twenty others whose views have been featured this week in the RGE Monitor group blogs) have presented ideas that would have minimized the cost to the US taxpayer of a resolution of this financial crisis. It is a disgrace that no professional economist was consulted by Congress or invited to present his/her views at the Congressional hearings on the Treasury rescue plan.

Specifically, the Treasury plan does not formally provide senior preferred shares for the government in exchange for the government purchase of the toxic/illiquid assets of the financial institutions; so this rescue plan is a huge and massive bailout of the shareholders and the unsecured creditors of the firms; with $700 billion of taxpayer money the pockets of reckless bankers and investors have been made fatter under the fake argument that bailing out Wall Street was necessary to rescue Main Street from a severe recession. Instead, the restoration of the financial health of distressed financial firms could have been achieved with a cheaper and better use of public money.

Moreover, the plan does not address the need to recapitalize badly undercapitalized financial institutions: this could have been achieved via public injections of preferred shares into these firms; needed matching injections of Tier 1 capital by current shareholders to make sure that such shareholders take first tier loss in the presence of public recapitalization; suspension of dividends payments; conversion of some of the unsecured debt into equity (a debt for equity swap).
The plan also does not explicitly include an HOLC-style program to reduce across the board the debt burden of the distressed household sector; without such a component the debt overhang of the household sector will continue to depress consumption spending and will exacerbate the current economic recession.

Thus, the Treasury plan is a disgrace: a bailout of reckless bankers, lenders and investors that provides little direct debt relief to borrowers and financially stressed households and that will come at a very high cost to the US taxpayer. And the plan does nothing to resolve the severe stress in money markets and interbank markets that are now close to a systemic meltdown.http://www.rgemonitor.com/roubini-m...okand_why_the_treasury_tarp_bailout_is_flawed
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Roubini's solution:

There are 10 steps in this HOME proposal to resolve this most severe financial crisis.

Here they are:

First, like in the Treasury TARP plan you need to buy illiquid/toxic assets and take them off the balance sheet of banks and financial institutions to reliquify them and allow new credit creation. The biggest problem here – as the debate between Bernanke and senators yesterday is one of the proper valuation and the proper price at which the government should buy these assets (the RTC did not have this problem as it was working out assets of failed S&Ls): if the government buys the asset at at price that is too high (too small of discount relative to face value) the fiscal cost will be huge and you massively subsidize reckless bankers and their shareholders. If you buy at a discount that is too high you minimize the fiscal cost in the short run but many banks could go bust and the eventual fiscal cost of bailing out the depositors of failed banks could be large. You can debate endlessly whether such assets should be bought at current market price or at prices closer to hold to maturity values (as Bernanke suggested). Given that these assets are impaired pricing the long run value of them is mission impossible. Thus, there is only one solution to this fundamental uncertainty: avoid the government overpaying by having the government having some of the positive benefits of an upside gain in case the banks’ values recover after the bailout. I.e. you need for the government to have some equity in the banks whose assets are purchased by the government. This leads to step 2 of the proposal.

Second, in exchange for the purchase of illiquid asset (at whatever price it is agreed) the government gets preferred shares in the financial institutions that senior to existing common and preferred shares and that are convertible into common shares to allow government to participate into any future upside.

Third, even if the government gets preferred shares as in step 2, the banks will need more capital if they are undercapitalized and they have not fully reserved/provisioned for the losses coming from writing down the asset being sold to the government. So you will need to inject further actual public capital in the form of preferred shares in the financial institutions ( this is what the RFC did during the Great Depression).

Fourth, given the risk to the government deriving from the public injection of capital in the financial system the existing shareholders of the banks need to take a first-tier loss to minimize the risks for the government share. How to do that? First, you need to suspend dividend payments on common share and possibly even existing preferred shared; you also need to force to partially match the public capital injection with new Tier 1 capital.

Fifth, public and private recapitalization of financial institutions unfairly benefits unsecured creditors (all creditors but insured depositors) of such institutions. So, you also need to convert some of this unsecured debt (the sub debt and other debt unsecured debt) into equity (a debt for equity swap). Such swap further reduce the leverage of the financial system (leading to a lower debt to equity ratio for financial institutions).

Sixth, after this crisis is resolved the banking and financial system may need lower capital than before this crisis so as to avoid new asset and credit bubbles; and if you recapitalize some banks that will be able to lend more (still with lower leverage ratios) you still need to let other insolvent banks and financial institutions to go bust and disappear. Only healthier institution should survive. So you need to a systematic triage between banks that are distressed, undercapitalized and illiquid but solvent once the private and public recapitalization occurs from those that are fundamentally insolvent and that need to be shut down. You need to destroy the bad apples to let the good ones or the sick but curable ones survive and thrive.

Seventh, as in the case of the RTC the assets of the banks that are bankrupt and are allowed to fail go to the HOME for workout (debt restructuring/reduction).

http://www.rgemonitor.com/roubini-m..._10_step_plan_to_resolve_the_financial_crisis
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Here's the rest of it:

Eighth, you need an HOLC-like program for debt reduction of the household sector. Households in the US have too much debt (subprime, near prime, prime mortgages, home equity loans, credit cards, auto loans and student loans) while their assets (values of their homes and stocks) are plunging leading to a sharp fall in their net worth. And households are getting buried under this mountain of mounting debt and rising debt servicing burdens. Thus, a fraction of the household sector – as well as a fraction of the financial sector and a fraction of the corporate sector and of the local government sector – is insolvent and needs debt relief. When a country (say Russia, Ecuador or Argentina) has too much debt and is insolvent it defaults and gets debt reduction and is then able to resume fast growth; when a firm is distressed with excessive debt it goes into bankruptcy court and gets debt relief that allows it to resume investment, production and growth; when a household is financially distressed it also needs debt relief to be able to have more discretionary income to spend. So any unsustainable debt problem requires debt reduction. The lack of debt relief to the distressed households is the reason why this financial crisis is becoming more severe and the economic recession - with a sharp fall now in real consumption spending – now worsening. The fiscal actions taken so far (income relief to households via tax rebates) and bailouts of distressed financial institutions (Bear Stearns creditors’ bailout, Fannie and Freddie and AIG) do not resolve the fundamental debt problem for two reasons. First, you cannot grow yourself out of a debt problem: when debt to disposable income is too high increasing the denominator with tax rebates is ineffective and only temporary; i.e. you need to reduce the nominator (the debt). Second, rescuing distressed institutions without reducing the debt problem of the borrowers does not resolve the fundamental insolvency of the debtor that limits its ability to consume and spend and thus drags the economy into a more severe economic contraction. So of the five possible uses of fiscal policy – income relief to households (the 2008 tax rebate), rescue/bailout of financial institutions (Bears Stearns, Fannie and Freddie, AIG), purchase of assets of failed institutions (an RTC-like institution), recapitalization of undercapitalized financial institutions (an RFC-like institution), government purchase of distressed mortgages to provide debt relief to households (an HOLC-like institution) – the last option is the most important and effective to resolve this severe financial and economic crisis. During the Great Depression the Home Owners’ Loan Corporation was create to buy mortgages from bank at a discount price, reduce further the face value of such mortgages and refinance distressed homeowners into new mortgages with lower face value and lower fixed rate mortgage rates. This massive program allowed millions of households to avoid losing their homes and ending up in foreclosure. The HOLC bought mortgages for two year and managed such assets for 18 years at a relatively low fiscal cost (as the assets were bought at a discount and reducing the face value of the mortgages allowed home owners to avoid defaulting on the refinanced mortgages). A new HOLC will be the macro equivalent of creating a large “bad bank” where the bad assets of financial institutions are taken off their balance sheets and restructured/reduced.

Ninth, we need to avoid a situation where the recapitalization of the banks and the resolution of this financial crisis leads to another credit and asset bubble. Many things need to be done to avoid this risk but a rapid change of the Basel II capital adequacy ratios to reduce their the pro-cyclicality would be essential.

Tenth, start implementing rapidly a reform of the system of regulation and supervision of financial institutions in a world of financial globalization. With the collapse of most of the shadow banking system most of these shadow banks are now being folded in the traditional banks and will be regulated like banks. Indeed all institutions of large size and that are systemically important (commercial banks, investment banks, non-bank mortgage lenders, hedge funds, private equity funds, etc.) should be supervised and regulated in a similar way. To make the financial system more stable over time and avoid severe financial crises like the current one will require that both banks and former shadow banks be regulated and supervised better than they have been in the last decade. After all traditional banks have performed as poorly – and some more poorly – and have lost more money than shadow banks during this severe financial crisis. So both the poor regulation and supervision of banks (as regulators were asleep at the wheel while the laissez fair ideology and voodoo-cult of self-regulation and market discipline and internal risk management became dominant) and the lack of sensible regulation of shadow banks lies behind the current financial disaster. Thus, folding shadow banks back into the traditional banking system will make the overall financial system more stable only if the proper reform of the regulation and supervision of financial institutions in a world of financial globalization will be undertaken. This important matter is the subject of the chapter (titled “Financial Crises, Financial Stability, and Reform: Supervision and Regulation of the Financial System in a World of Financial Globalization”) that I have written for the recently published World Economic Forum’s Financial Development Report.http://www.rgemonitor.com/roubini-m..._10_step_plan_to_resolve_the_financial_crisis
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350zCommTech said:
Roubini: Treasury's plan is a disgrace.
Click to expand...

Finally, finally, people are starting to provide workable real-world solutions to this mess instead of "save my friend so he can buy another trophy home" solutions!

350zCommTech said:
Second: in exchange for the purchase of illiquid asset (at whatever price it is agreed) the government gets preferred shares in the financial institutions that senior to existing common and preferred shares and that are convertible into common shares to allow government to participate into any future upside
Click to expand...

Notice the bolded words above! If you care that these companies are going to get your hard earned money, you'd better care that this provision is inserted in the bailout referencing these exact words, which are legal "terms of art" and will make a difference in a decade or two in what kind of budget deficit we're looking at!

IMHO,

Lady
 
squalebear said:
kevinD & weatherweeniw,

If I may. An IFT done before noon on the 30th will count towards
a September IFT because it goes into effect at the COB on that day. You
would have to wait until October 1st (before noon) to do a IFT if you ran
out of September IFT's. That would become effective at the COB on the
1st and have your money reallocated for October 2nd's up or down affect.;)
Click to expand...

This is the message I received off the TSP site when trying to do another IFT in Sept:
Because you have already executed two interfund transfers this month, you are eligible to transfer your money from the F, C, S, I and L Funds only to the G Fund. You cannot transfer among the other funds until after noon eastern time on the last business day of this month.
 
The eighth point above pisses me off.

I didn't buy more house than I could afford. I don't have more credit card debt than I can service. I will be debt free except for the house by this time next year but by then the wife will need a car. Wheres my hand out?
weatherweenie said:
You cannot transfer among the other funds until after noon eastern time on the last business day of this month.
Click to expand...

I'll give it a shot before noon on Tuesday, see what happens and report back.
 
KevinD said:
I'll give it a shot before noon on Tuesday, see what happens and report back.
Click to expand...

weatherweenie said:
This is the message I received off the TSP site when trying to do another IFT in Sept:
Because you have already executed two interfund transfers this month, you are eligible to transfer your money from the F, C, S, I and L Funds only to the G Fund. You cannot transfer among the other funds until after noon eastern time on the last business day of this month.
Click to expand...

KevinD,

The key word there was after noon, which is essentially the same as doing an IFT on the 1st before the deadline, making it effective for Thursday, the 2nd of Oct.
 
KevinD said:
But the eighth point still pisses me off.
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I'm with you. I didn't get a McMansion mortgage nor was I living on credit cards. That's why I'm against this bailout. Roubini has some good ideas. Yes, the eighth point sucks, but his plan is much better than the Paulson plan. Paulson is just looking to bailout his wall street friends. Why else would Paulson's plan include 2nd mortgages, car loans, credit cards, student loans, etc...?
 
Latest from Karl D.



CONGRESS: THINK BEFORE YOU ACT!
​

You are being asked to pass a $700 billion “bailout” or “rescue” package and are told by your leadership that it is “necessary” to prevent a catastrophe in the financial markets and, by extension, on Main Street. Please think carefully about the following facts before you vote:

Public opinion is running anywhere from 100:1 to 300:1 against passing this bill, according to sources on Capitol Hill. You must return home after you pass this package to ANGRY constituents with an election less than a month away. Given the massive size of this package, the fact that it rewards the guilty on Wall Street and does nothing to address the cause that anger is fully justified.

Non-financial private debt is $32.4 trillion dollars as of 2Q 2008. Household debt is $14.0 trillion. Households lost 400 billion dollars last quarter. You wish to add $700 billion more in losses (via government obligations that taxpayers must cover) this quarter; this package is insignificant against the total bad credit outstanding. Federal capacity to “bail the system out” is insufficient.
It will not and cannot work because the issue is trust, not money. There is lots of money (and credit) but it is being hoarded throughout the system. Consumer savings have gone from nothing to the highest rate ever in American history – in the space of a few months. Money is flying into Treasuries because of lack of trust, not lack of money. You must fix the cause of the problem, not apply band-aids.

Commercial paper is being cited as the “lockup” that threatens an imminent financial train wreck. The truth is that commercial paper rates for “AA” rated non-financial firms is placing at a rate half that of a year ago as the Fed Funds target has been dropped from 5.25 to 2% . With risk having increased the rate of return offered is lower? This is where the stress is coming from; at last summer’s rates this paper would roll. You are being gamed by Paulson and Bernanke; look at the table in the reference and you will see that even for “threatened sectors” rates are not materially higher than last year.

If you pass this bill and the market implodes you will be held directly responsible. There are records of thousands of signatures across seven petitions faxed to you (at my expense) dating back to October of 2007 on this topic. Many experts, including Nouriel Roubini, “Mish” Shedlock, Dr. Faber, The Weiss Institute and over 160 economists have warned Congress that this proposed plan will not work. Are you prepared to face a full-page ad in the Wall Street Journal and/or USA Today exposing these facts?

There are alternatives that will work; they all involve restoring trust and using existing market mechanisms to resolve insolvent institutions. While I am not particularly partial to my view on how we resolve “failed” institutions, addressing the root of the problem – lack of trust – is paramount. Three elements are involved here, they are obvious, and they must be fixed or you will FAIL.

We only get one more shot at this; we have spent over $1.6 trillion thus far (by some estimates; $500 billion by others) attempting the same thing over and over again and it has not worked. DO NOT PASS THIS BILL AS IT DOES NOT ADDRESS THE CAUSE AND WITHOUT DOING SO YOUR EFFORTS ARE DESTINED TO FAIL. THE VOTERS ARE RIGHT AND WILL HOLD YOU TO ACCOUNT SHOULD YOU THROW $700 BILLION INTO A FINANCIAL HURRICANE.
ihttp://www.federalreserve.gov/releases/z1/Current/z1r-1.pdf
iihttp://www.federalreserve.gov/releases/cp/
iiihttp://market-ticker.denninger.net/archives/593-CONGRESS-STOP-AND-THINK!.html
Click to expand...

DOWNLOAD AND FAX A COPY TO CONGRESS

You can locate your Representative here:The House​
​
You can locate your Senators here:The Senate
 
Last edited:
350,

I realize this has nothing to do with the current discussion; however, last week SD posted an economic recovery plan that sounded good...but had some arithmatic problems. I am not an economist and I didn't sleep in a Holiday Inn Express last night; but I had some thoughts on helping the economy and thought posting it for comments would be interesting. I decided to throw it in your thread b/c lots of smart folks seem to stop by.

Okay, so here is my solution to the US economy:

You allow companies (big and small) to reduce their federal tax owed in direct proportion to the costs of hiring new employees. For a big company (Microsoft for example), I could only guess how much they pay in federal taxes in any given year. If they were allowed to hire 500 new employees (full time, full compensation and healthcare) and have their yearly taxes reduced by that amount, why wouldn’t they? It would benefit the companies by increasing their output/services and lead to higher profits (assuming the company is ran competently); it would obviously benefit those new hires that would have jobs and have job training that would carry with them the rest of their lives.

This plan would initially reduce the taxes brought in to the federal government, but would be offset by these new additions to the tax rolls in the form of income tax and taxes on the increase in the number of products purchased by these newly employed people.

This plan would be limited to employees hired and working in the United States ; making American industries more competitive than their overseas rivals.

This plan would be significantly more efficient than whatever latest economic stimulus plan either party comes up with: it keeps things simple, big business benefits and so does John Q. Public. The economy gets a shot in the arm, Americans get employed, competition gets ramped up and businesses have incentive to modernize and rebuild our industrial base.

The Hammer: pass legislation that would absolutely crush company executives that cook the books in order to get the tax break without the addition of employees.

Alright…tell me why this wouldn’t work?

BigJohn
 
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