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

To: Dan3 who wrote (169209)	12/5/2008 8:07:36 AM
From: butschi2	Respond to of 306849

It's just obscene that the brokers and bankers, who caused this mess by loaning out other peoples money to the ignorant poor (and charged huge fees to vet the transactions) get a $700 billion blank check. Rescueing Citi without penalizing shareholders, firing management or even put management in jail is just money thrown down the derivatives armageddon looming. Citi will come back for more and wasnt penalized/seized as other banks on the brink. The governement money thrown around should be hugely penalizing, because now the government is the easiest and cheapest rescue left in town and therefore the only attractive one and all companies come running for their first or second round of easy money. The FED/SEC/OCC/.. should ban Citi/JPM/BAC from writting new derivatives until leverage is down sharply from around x1000 nominal to tangible capital to x10 nominal to tangible capital. If they would have to put up some reserves on the nominal of the derivatives and not only on the fair value perhaps starting from 0,1% to 1%-3% of nominal over a time of a few years would greatly reduce excessive risk taking. If banks as Citi/JPM/BAC cant even price "easy" things as MBS,CMBS or CDO for a very short livetime of some years they shouldnt be allowed to trade CDS at all or write/buy SWAPS with sometimes 10-30 years lifetime, thats simply nuts and incalculable for this long time horizont and just to use past numbers from boom 10-14 boom years with only a mild recession in 2001 is simply nuts, dangerous and unforgiveable. The market is in total disarray and interest rates swing around wildly and should have huge or even dangerous influence on the pricing of long running interest rate swaps. Many CMBX will hit the wall in the next 3-18 month, because interest reserves will be used up and prices have been far above the normal cash flow/price relations even with boom time rents and rents will go in a steep decline. This have been the same bets on rising prices as from residential investors. Most LBOs from 2007 will explode, because prices and leverage have been far above normal prices and would have been very hard to pay back/justify even if the boom would have continued. Chrysler/GMAC/.... Cerberus just dumped here a lot of money they want to recoup now from governemnt subsidies or from sueing Daimler. CDS will get more dangerous through recession/depression and and if GM/F/Chrsyler explode CDS payouts could be huge and coupled with "normal" losses for hedge funds they should be unable to make the payouts. GM going in default will cost the CDS writers dearly due to GM in most indexes and huge positions in GM CDS.