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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: patron_anejo_por_favor who wrote (151150)	9/27/2008 9:51:42 AM
From: mutulu	Read Replies (1) \| Respond to of 306849

For comparison, here's a good explanation from the FT of how the H. Paulson plan is intended to work: The whole point of the plan was to buy assets at more than the current distressed market price. In doing so the government would establish a new set of observed market prices, stemming the wave of mark-to-market losses and potentially allowing some banks to write back capital, easing the credit squeeze. The Fed chairman argued that it was a fundamental mistake to think of an asset as having only one market price. The unwanted mortgage-backed securities had at least two different prices: a "firesale price" and a cashflow based "hold-to-maturity" price. A well-designed government programme could exploit the difference between these two prices to help recapitalise the banking sector at little if any cost to the taxpayer, exploiting mark-to-market accounting rules to create a virtuous rather than a vicious cycle. Mr Bernanke said the $700bn plan would establish the price at which non-distressed sellers would sell their assets to a buyer who did not have to worry about liquidity risk and general market risk-aversion: the government. This price would be higher than the current firesale price - leading to a remarking of assets that would strengthen the financial system - but lower than the expected cashflow value of the securities, ensuring that the taxpayer was well protected. Amid a political backlash, the Fed chief was forced to clarify that he was not suggesting the government should overpay for these securities. But this did not change his logic at all, since the market price that would exist once the $700bn fund was in operation would be higher than the firesale price that exists in current conditions, where distressed sellers transact with only private buyers constrained by risk-aversion and access to liquidity. If the plan works, the US government buying would create information about asset prices and catalyse buying from those private sector entities that do have capital to deploy, since they would no longer have an incentive to wait for further forced sales.

To: patron_anejo_por_favor who wrote (151150)	9/27/2008 9:41:51 PM
From: DebtBomb	Respond to of 306849

Great Depression Survivors On Current Economy Reporting Mai Martinez CHICAGO (CBS) ? Many Americans are not sure how they will weather the current economic turmoil in our country, or even how the U.S. will fair, and for some it's the second time around. CBS 2's Mai Martinez talked with some Chicagoans who lived through the Great Depression about the state of the country then and now. Louise Hecht is one of them. She was a teenager at the start of the Great Depression, who went on to become a nurse, and 79-years later, she's still haunted by what she saw during that time. "I saw them in operating room. I saw them in the emergency room. They were committing suicide," Hecht, 97, said. "They were desperate, desperate, on the curb selling pencils." She and some of the other residents at Hallmark Retirement Community who also survived the Great Depression say it's disturbing that the country may be facing a similar situation. "I hoped I wouldn't see it, but I'm living too long," Hecht said. Hecht said what makes matters worse is that in her eyes the government is handling the situation even more poorly than it did during the Great Depression. She says she doesn't know what the answer is, but it's not bailing out banks and big business. "How can they give one person that much money, and then the other people sitting and watching and having nothing and going out of business," Hecht said. "The whole thing is upside down to me." Her friends agree, and they have a message for those in charge. "They're bailing the people who are causing the problems, instead of the ones who have been victims," Michael Beckers, 91, said. "Get your heads together. Beat one head against the other, but get it done tonight," 79-year-old Judge Mike Gomberg said. Gomberg and his friends all say their biggest concern right now is not so much how the "economic turmoil" will impact them, but what it means down the line for their children and their grandchildren. They are all hoping this upcoming election will really change how things are done in Washington. cbs2chicago.com