Discussion:The New RTC: How the TP pays for his own Bull Market

So, remember one thing, if you are glad the market is up today, don't be. You are actually paying for your own bull market. And I mean, really paying; real money, your money.

P.S... What do you think this debt is worth you are buying? .10 on the dollar, .20 on the dollar? What you wanna bet that once the politicians get involved, the TP will be paying .60 on the dollar? Don't think so? Remember the Medicare drug program, where the US Govt. passed a law saying that the govt. would not negotiate the price of drugs for beneficiaries? Talk about a gift to big PHarma. Oh Lord.

Using 3.5% as an estimate, of the final default rate, gives 315 billion dollars in potential defaults.

Using a recovery rate of 60% of the mortgage amount, gives a final of 40% of 315 billion dollars or 126 billion dollars.

Given that the Fed or somebody from Government is taking over Mae and Mac the interest earned from the part of the portfolio should help offset the losses. Say 5.5% on 95% of the total good loans is 427.5 billion dollars. One year's worth of interest covers the losses. Of course, Mae and Mac have a higher disproportion of bad loans. So say two years worth of interest covers the losses.

FFT.

http://pewsocialtrends.org/pubs/?chartid=542

Well, a good idea never last long when Washington gets involved

Roy, I don't dispute what you are saying, but think about this: if it's all that good, why don't the banks keep it, and do their job? It's part of a banker's job to work with slow pay/no pay situations.

No matter how you cut this, the American taxpayer paid for today's rally in the markets, and any continuing rally that germinates from it. So, what will our total return on investment be, once we subtract the future tax burden? Or are we to pretend that it costs nothing, like the war? Or, that we will actually make money on it (I ain't buying that).

Where is Kenneth Keating when you really need him?

Also, I just heard on CNN (if you can trust CNN these days) that the cost of this will be One Trillion, and this includes Fannie and Freddie. Now, could be that we might recover some of that cost, but I'll pretend like I'm from Mo., and say "Show me."

P.S. Don't you imagine that Keating's art collection is hanging in some other CEO's home now? lol.

Wall Street has no credibility when they go singing the praises of unregulated capitalism now, because they have turned themselves into the biggest welfare queens of all time.

Tom

Dont forget, the way I undertand this is, the US bought all of the bad loans for pennies on the dollar. Hell, surely my home mortgage is worth more than cents on the dollar?? Also, I believe, the big problem is liquitity, the mortgages may have a low value today, but over the long term (as Roy points out above) there is value there.

Crowe, to answer your question about why the banks did not keep the bad is that the banks must write down the bad on their books (expense)thus lowering their capital below the regulatory required minimums, thus they can not open their doors if capital is below regulatory minimums.

And one of my client just received notice that their investment fund will be liquidated because they (investment fund) hold a lot of debt instruments.