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: JBTFD who wrote (182402)	2/8/2009 11:28:37 AM
From: MulhollandDrive	Read Replies (2) of 306849

It's also funny to hear them say "what if the market price isn't the real price?" I thought the market was always right. But I guess that's only for those who don't have a product that they want to sell for more than the market wants to pay. yep. there is a market for these assets (although some are probably truly worthless) it's as karl said, every step taken in the process has been an effort to obfuscate and deny the clearing of the bad assets to take place....the monied elites will NOT assume their losses....of course to do so renders the banksters insolvent...actually it should be stated as 'their current insolvency will be demonstrated due to mark to market' (of course the stock prices have been telling this story for nearly a year)....these people are in denial and are doing their best to convince the tax payer that what we are witnessing is some inexplicable 'market glitch' that must be remedied by the taxpayer...but not to worry, it will eventually all be a-ok as the 'real price' is eventually 'discovered'......what's happening now is apparently geither is going to try to 'create' a market (given to the hedgies) by guaranteeing the price and allowing them to lever up yet again, and charade continues.....the loser in this will be of course the taxpayer quote: "Let's say Sir Hedgie has $100 million of these "assets"; he requires only $10 million in cash. Let's further assume that these "assets" kick off an aggregate coupon of 10% at their current discounted acquisition price. If Sir Hedgie gets one year of performance in payment of that coupon before it all goes boom, he's ahead because if the explosion occurs later he simply doesn't care. The important part is that he is ahead even if a year from now the securities turn out to be worth exactly nothing, since he can only lose his $10 million in original capital he gives to The Fed, not the levered amount he has in securities. So who eats the $90 million in losses? The Fed does, and guess what - it flows through (see the top of this post) to Treasury, which means you eat it. The problem with this scheme is that if they put $100 billion into it through the leverage they're allowing there could be a full trillion of assets in this pool, yet the Hedge Funds only have $100 billion at risk (10:1 leverage) and no recourse. So if the paper goes bad there's $100 billion in capital held by The Fed against the loss, but if recovery ends up being 50 (against the discounted purchase price) then the other $400 billion in losses is taken directly by The Federal Reserve and passed through - without a spending bill allocating that $400 billion. The Fed and the rest of the Banksters (including Treasury) are counting on you and Congress both to be too stupid to understand the risk exposure here and why this is both unconstitutional and must not be permitted. They obfuscate what they're doing through multiple layers of BS and bluster, when in the end the bottom line is that they're trying to restart leveraged lending against trash, where they have every reason to believe that the ratings on these securities are worthless and in fact the paper is contaminated at best."

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