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They are now called “legacy loans and securities”. Sounds a whole lot better, doesn’t it?
Somewhat correct, but a _GROSS_ oversimplification. The fact is that the obfuscation of exactly who owns WHAT and exactly WHAT it MIGHT be worth caused by hugely convoluted synthetic investment instruments and the great remaining hazards from grossly over-leveraged Credit Default Swaps covering those instruments don’t make the resolution of the problem even _remotely_ this simple.
This guy needs to read this guy regularly.
I’m reposting this link because after reading it again, I see that it is the ultimate and surprisingly simple explanation of the fundamental problem which is simply _NOT_ being addressed.
Here are some notes on the Recession.
Things are much worse than they’re telling.
Hint: $1120 trillion in bad debts that have little to do with real estate.
The banks are correct in NOT writing off these “toxic assets”.
Most of the money does have some collateral, such as real estate or automobiles. While foreclosures and repossessions won’t recover all the loss, they will recover a large portion of it.
For unsecured losses, there are always collections. Even there, a small amount is collectible. Even a bankruptcy will garner some repayment.
Yes there will be a some losses, but the amount is grossly overestimated. What is not brought up is how much profit the banks earned off of these loans over the previous few years.
#5, Furtherless,
Once I read that Bush and Israel were responsible for 9/11 I knew you were just another effen nutcase.
And Karl’s follow-up to the “fundamentals” article linked to above.
#6, What is not brought up is how much profit the banks earned off of these loans over the previous few years.
Unfortunately, it doesn’t help them. That profit has already been divvied up. I suppose the banks could ask their investors for the money back . . .
Bankruptcy really is the only option.
#5 “9/11 (which was orchestrated by the Bush administration and the CIA and Israel) was used as an excuse by bankers to reduce interest rates to make money much too easy to get.”
I’ve said a lot of bad things about shrub and meant them but anybody that is insane enough to think he and his people wanted 9/11 to happen is completely delusional.
Okay for some reason Mr. Fusion and I appear to be in complete agreement about something. I suppose it had to happen sometime.
deowll,
I’m sure there are more than a few things we have in common. Such as, well, how do you feel about wiping your butt after taking a crap? How lame do you rate American Idol? How about “Even Nature’s own milk containers can be attractive?”
;P
OK, that smiley didn’t work, let’s try this one,
😛
What the HELL was that!? I don’t know if I was watching MSNBC or the food network.
#3
There’s a lot with your friend Karl that I agree with, but his conclusions are not correct. He would have a massive default take place so that we could “discharge” the “bad assets” and then start from a previous picture of the global economy. Kind of like a big do-over. But at the end of his massive do-over we will be in the same spot because you haven’t changed how global emerging (and oil) economies interact with global established economies, and the imbalances that this interaction created.
Also “discharging debt” can never really be done macro-economically anyway. Just like California can never really file for “bankruptcy” in the traditional sense. What is California going to do, sell Solana Beach Middle school to North Dakota? Hardly. This isn’t really a financial sector recession in as much as it is a macro financial imbalance recession which by definition takes the financial sector with it.
But he has some good points about the banking sector. And I agree that the fundamentals that caused the problem aren’t really being addressed. And I agree that nobody (except for geo-economist nerds) are really talking about it. And I agree that a lot of what Washington is doing is not going to help and may be hurting. And I agree that at some point “savings” coming into the US and Western Europe by surplus countries (mainly China and oil exporters) will need to be addressed. And I agree that those surplus countries won’t like the nature of that discussion.
What happened to them? -nothing, that’s the problem.. swept under the rug like everything else. -though i think most in the know collectively call them The [ticking] Derivative Time Bomb.
although, as #3 mentioned, the crashing CRE market and the second wave of ALT-A & ARM resets that will begin to pickup [even more] steam this August [through 2011] just might set the derivative bomb off.
btw, #3, about the resets you mentioned: may i refer you to this time honored IMF mortgage reset chart from 2007. (It was featured in a 60 Minutes prgm that year. I think it illustrates your points perfectly)
From what i’ve read most of the [toxic] derivatives are intermingled with just about ever “security” imaginable. including, but limited to car, student and mortgage loans.
i remember reading that almost half of the GMAC loans were littered with them..
anyway…no worries i’m sure when that bubble pops, all 17 parts of “the truth behind michael jackson’s death” will be aired in it’s entirety, so as to keep the mind-numbed masses in the dark as usual.
more likely, their will be 10 more celebrity deaths in the mean time for the lemmings to ponder…you know, the real important stuff that matters most here in America.. :s
-s
#125, Soundwash,
“the truth behind michael jackson’s death”
Michael Jackson died?
Legacy loans…. hmmmmm I may need to morph into a legacy asshead to keep current. 😉
Isn’t this EXACTLY what happened with the Japanese banks in the last 20 years? Back in the 1980’s when the Japanese went crazy, buying assets all over the place. Then it crashed.
The Japanese banks that held these overvalued assets refused to recognize it because doing so would require them to recapitalize.
So they just pretended their toxic assets where good assets. And it drove Japan into the situation they are in now, doldrums.