The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: A Horse With No Name who wrote (109202)	3/11/2008 11:48:53 PM
From: patron_anejo_por_favor	Read Replies (1) of 306849

BTW, here's Lee Adler's response to that post (Lee is one of the guys who runs the Wall Street Examiner web site and before that the CapitalStool.com site. A very bright guy....): wallstreetexaminer.com Jesse- Russ and I are currently having the same conversation of the points you raised. You’ll have to forgive me for the “poor analysis” which I wrote in the first few moments after the release. At this point I would agree in part with what you’re saying, however, based on what I read on the Fed’s discussions of what collateral they accept, they never accept face value of a security as collateral for anything, so I would assume that this applies to the securities swap. The Fed performs an analysis of some kind to establish the value of the collateral, and they lend on some portion of that. There was no information in the documentation of this announcement that the Fed will accept collateral at face value rather than market value. So is this a means of swapping bad collateral for good? I highly doubt it, but we’ll see. If information becomes available that says the Fed will accept the securities at face value I would have to change my current thinking accordingly. I don’t think that this frees up $200 billion for lending and speculating. The PDs are currently short about $95 billion in Treasuries. Last August, they were short about $180 billion. They have gotten absolutely killed. At the same time their long positions in the stuff that has been going down in value have ballooned from around $400 billion to around $590 billion. So they have been on the wrong side of both trades to the tune of hundreds of billions and their positions have been constantly deteriorating and getting bigger at the same time, for 6 months. The $200 billion in securities lending is like giving a transfusion to a corpse. I don’t see the connection between this action and stopping the deterioration of mortgage paper. If you can provide some evidence of how you think that would work, I will certainly consider it. Until then I will stick with my poor analysis. I think it’s the correct poor analysis, but it was hasty, and I may have to think it through some more. Of course, the proof is in the pudding.I suspect that the outcome of this clearly desperate action will be the same as to the other Fed actions. Posted on 11-Mar-08 at 11:39 am \| Permalink

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