Notable day tomorrow--Financial crisis

It's funny, watching all these experts steer the economy is like watching the Corps of Engineers steer the Mississippi River. They try, but they make a huge mess and spend fortunes and eventually the river goes where it wants to go regardless. I'm just trying to figure our if it's arrogance or stupidity that makes them try, because historically, they haven't got the greatest of track records.
 
Not a sufficient data point, but a client of mine had her credit line, not in default, called. Caveat: she is in the process of winding-up the business, perhaps they began to feel insecure? Did not make a lot of sense to me.
Yeah, certainly my info isn't sufficient data to draw a conclusion either, but it would seem to me that we'd be seeing more of that kind of thing if the credit market were really hosed... But then again, :dunno:
 
I already asked this in a SZ thread, but I thought I'd ask it here too: Has anybody really seen first-hand or heard even second-hand of any real tightness in the credit market? I ask because I haven't heard of anybody having any problems with revolving or commercial loans, and some folks I know in the mortgage biz have indicated that they're not having trouble finding funds. Is it just me, or wouldn't it make sense that if there were such a major squeeze that we'd see issues in those areas? Or are we just not seeing it because we're not to that point yet but could be soon?

I have, in many fronts. All commercial level stuff; I know of one story (that I believe will be published soon) through a firm I consulted at. They have a very beautiful balance sheet, lots of synergy opportunities, huge cash reserves, are well capitalized -- basically your good old corporate 850 FICO -- that couldn't draw on $115MM in commercial paper last week. No one would touch them.

We're smashing and grabbing capital at work right now, and have already cut $2MM from our cap plan (we are a net borrower) because of commercial tightness. I expect our FY09 $60MM cap plan to be at least halved, if not quartered, within the next few months.

To go one step further, I have one vendor that is crawling all over my case to get a $3MM payment (deal we did a few weeks ago) in on-terms (it was written to pay before their quarter close). Our vendor rep relayed to us, apologetically, they their corp (a $HUGE_CORPORATION) is driving all sales people to get things recognized and received before quarter closes in a few days. Now, that's MO for most places, but this person is even calling the $30k places.

Cheers,

-Andrew
 
I have, in many fronts. All commercial level stuff; I know of one story (that I believe will be published soon) through a firm I consulted at. They have a very beautiful balance sheet, lots of synergy opportunities, huge cash reserves, are well capitalized -- basically your good old corporate 850 FICO -- that couldn't draw on $115MM in commercial paper last week. No one would touch them.

We're smashing and grabbing capital at work right now, and have already cut $2MM from our cap plan (we are a net borrower) because of commercial tightness. I expect our FY09 $60MM cap plan to be at least halved, if not quartered, within the next few months.

To go one step further, I have one vendor that is crawling all over my case to get a $3MM payment (deal we did a few weeks ago) in on-terms (it was written to pay before their quarter close). Our vendor rep relayed to us, apologetically, they their corp (a $HUGE_CORPORATION) is driving all sales people to get things recognized and received before quarter closes in a few days. Now, that's MO for most places, but this person is even calling the $30k places.

Cheers,

-Andrew
And that jives more with what I've heard just a little while ago from a former colleague at $BIG_A55_BANK: It seems to him (he works in technology) that their commercial lending biz has been basically at idle this week... there's been hardly anybody around in that unit's work areas and those that are there look like they're more or less killing time. Circumstantial and maybe misleading on its own (this particular $BIG_A55_BANK was bought not too long ago), but... :dunno:
 
Yes, I'm seeing lines of credit pulled in and commitment letters canceled or reduced. A guy in the car business today told me he needed buyers with much higher credit scores than before to even be considered.

Let me ask a simple question. If you were Mr. Banker and the capital in the bank met minimum requirements; you knew you had loans that wouldn't appraise right now if marketed to market and the auditors were scheduled to visit before year end, what would you do to try to get your balance sheet in better shape? Can't sell loans as they will make you recognize a loss. And, oh, the FNMA and Freddie preferred stock you purchased a few years ago thinking it was golden isn't paying dividends.

Those are the questions most bankers are asking themselves today. Not how they can make more loans.

Best,

Dave
 
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I already asked this in a SZ thread, but I thought I'd ask it here too: Has anybody really seen first-hand or heard even second-hand of any real tightness in the credit market? I ask because I haven't heard of anybody having any problems with revolving or commercial loans, and some folks I know in the mortgage biz have indicated that they're not having trouble finding funds. Is it just me, or wouldn't it make sense that if there were such a major squeeze that we'd see issues in those areas? Or are we just not seeing it because we're not to that point yet but could be soon?

Caterpillar sold some 5-year notes today. The interest rate on them is 325 basis points above that of a 5-year "safe" Treasury. It is also 150 basis points more than the same-length notes issued just six weeks ago. There's your tightness. And that's for a boring industrial company.

Anyone know how much corporate debt is due to reset by the end of 2008?
 
I already asked this in a SZ thread, but I thought I'd ask it here too: Has anybody really seen first-hand or heard even second-hand of any real tightness in the credit market? I ask because I haven't heard of anybody having any problems with revolving or commercial loans, and some folks I know in the mortgage biz have indicated that they're not having trouble finding funds. Is it just me, or wouldn't it make sense that if there were such a major squeeze that we'd see issues in those areas? Or are we just not seeing it because we're not to that point yet but could be soon?

Yep. I've seen it first-hand. I'm working on financing a deal. Credit is essentially unavailable.... we're looking at an all-equity play. Consumer stuff seems to be less of a problem, although I am aware of a couple of folks that have had dormant credit cards pulled or limits reduced... and I am aware of at least one that had a HELOC pulled.

The issue right now is in the commercial sector where there is little or no hard asset base to back up the loan. Loans secured by receivables, contracts, etc. are a problem. Basically, the lenders are 1) hoarding cash because they think there will be more runs like there were last week on money market funds, and 2) they don't trust they will get paid (because most businesses have credit from several lenders, if one loan is pulled or reduced, it could force the business to restructure or default). Things backed by substantial assets - like real estate - are not affected as badly, although the commercial secondary market is a problem, Freddie and Fannie are still buying loans as federal facilities.
 
I already asked this in a SZ thread, but I thought I'd ask it here too: Has anybody really seen first-hand or heard even second-hand of any real tightness in the credit market? I ask because I haven't heard of anybody having any problems with revolving or commercial loans, and some folks I know in the mortgage biz have indicated that they're not having trouble finding funds. Is it just me, or wouldn't it make sense that if there were such a major squeeze that we'd see issues in those areas? Or are we just not seeing it because we're not to that point yet but could be soon?

Yes. Some of the automotive dealerships I have done business with through the years are losing their floor plan. (For those who don't know...dealerships don't own their new vehicle inventory, the bank does [floor plan]. As such, the dealership pays the note monthly). To add complexity, many companies are reducing or getting out of the business (5/3 and GMAC) just to name two.
 
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Late 80's deja vu all over again. Banks make loans to locals. Some were obviously fringe credits, but many (I'd guess most) of the loans were carefully underwritten and adequately collateralized, based on values at the time the loans were booked. When the value of the collateral changed significantly over a short time, causing loan-to-value ratios to fall outside of the range necessary to satisfy the examiners, that obviously had to be somebody's fault. Mr. RTC, meet Mr. FIRRERA.

What can bankers do when it happens?. Same thing as when a wing falls off. Pull their head between their legs and kiss it goodbye.

Yes, I'm seeing lines of credit pulled in and commitment letters canceled or reduced. A guy in the car business today told me he needed buyers with much higher credit scores than before to even be considered.

Let me ask a simple question. If you were Mr. Banker and the capital in the bank met minimum requirements; you knew you had loans that wouldn't appraise right now if marketed to market and the auditors were scheduled to visit before year end, what would you do to try to get your balance sheet in better shape? Can't sell loans as they will make you recognize a loss. And, oh, the FNMA and Freddie preferred stock you purchased a few years ago thinking it was golden isn't paying dividends.

Those are the questions most bankers are asking themselves today. Not how they can make more loans.

Best,

Dave
 
Maybe I am off base...but I say GOOD on the tightening of "credit".

I think we have gotten way, way, way overboard with credit in our market systems, at least on the consumer end of things.

Perhaps now people will start living within their means.
 
Maybe I am off base...but I say GOOD on the tightening of "credit".

I think we have gotten way, way, way overboard with credit in our market systems, at least on the consumer end of things.

Perhaps now people will start living within their means.

I don't agree with the entire assertion. Some folks have lived beyond their means, some not.

Penalizing folks that use credit wisely is a bad thing. Increasing the cost of borrowing (or eliminating credit entirely) is harmful to large, creditworthy customers who must constrict ordinary operations (working capital) or capex. That, in turn, harms shareholders.

On a personal level, I'd rather a RESPONSIBLE individual use a bit 'o credit to buy a car or house as opposed to depleting retirement savings. On the other hand, the tightening of credit is probably a good thing for folks that buy groceries on credit. APPROPRIATE use of credit is like any other tool.... you don't (shouldn't) use a screwdriver to install a nail.
 
Mark Zandi at Moody's give his view on the proposed bail out and economy. Explains the need to establish mortgage securities value. He sees a deep recession with the bailout; worse without it.

http://tinyurl.com/3nxm3m

If this doesn't work, it's on Bloomberg.com as a video.

Best,

Dave
 
One of the fellas on AvSig posted this:


Dear American:

I need to ask you to support an urgent secret business relationship with a
transfer of funds of great magnitude.

I am Ministry of the Treasury of the Republic of America. My country has had
crisis that has caused the need for large transfer of funds of 800 billion
dollars US. If you would assist me in this transfer, it would be most
profitable to you.

I am working with Mr. Phil Gram, lobbyist for UBS, who will be my replacement
as Ministry of the Treasury in January. As a Senator, you may know him as the
leader of the American banking deregulation movement in the 1990s. This
transactin is 100% safe.

This is a matter of great urgency. We need a blank check. We need the funds
as quickly as possible. We cannot directly transfer these funds in the names
of our close friends because we are constantly under surveillance. My family
lawyer advised me that I should look for a reliable and trustworthy person
who will act as a next of kin so the funds can be transferred.

Please reply with all of your bank account, IRA and college fund account
numbers and those of your children and grandchildren to
wallstreetbailout@treasury.gov so that we may transfer your commission for
this transaction. After I receive that information, I will respond with
detailed information about safeguards that will be used to protect the funds.

Yours Faithfully Minister of Treasury Paulson
 
Just tell them to turn those &#(%ing boats around and haul all that **** back to China and sell it to somebody over there. And the goat they rode in on.

It's Here!

The DAY THE ECONOMY DIED




:(
 
It'll be Bank of America by the end of the month.

Naw, not too worried about that.

But I'd prefer keeping my money in a jar in the back 40 over BofA. They're the bastids who refuse to cash a check drawn on their bank.
 
Naw, not too worried about that.

But I'd prefer keeping my money in a jar in the back 40 over BofA. They're the bastids who refuse to cash a check drawn on their bank.

They're the bastids who have you arrested if you ask if a check you're depositing is good.
 
Naw, not too worried about that.

But I'd prefer keeping my money in a jar in the back 40 over BofA. They're the bastids who refuse to cash a check drawn on their bank.

That is the reason I quit using them 20 years ago, my employees couldn't go in and cash their checks when there was well more than sufficient funds to cover them...WTF???
 
That is the reason I quit using them 20 years ago, my employees couldn't go in and cash their checks when there was well more than sufficient funds to cover them...WTF???

They didn't make all of these fees to let them buy up everything by letting people have their money, ya know?
 
Yep; and another one bites the dust! While Congress argues about whose fault it was. Wish they could just scrap parties altogether and have people run. I'm so tired of Dems blaming Reps and visa versa. I think I'll get away for a few days and try not to think about it since there isn't a thing I can do but watch the bill increase.

Best,

Dave
 
Why isn't anyone (like the President or one of the hopefuls) saying that Main Street Americans are going to pay for this one way or another. So the most productive, and the most honorable, is to PAY OFF YOUR OWN DEBT. This situation gets worse everytime a homeowner walks away and lets the bank foreclose. If you can't pay the entire sum this month, pay some. Talk to your bank to get the debt or the payments reduced.

Then, while still on the subject of honorability, someone should be talking about greed and suggesting that selfishiness and greed need to be curbed. Do we really have to bring the country and the world to its knees again? This is how the Great Depression got going -- stock market greed and loan failures.
 
Why isn't anyone (like the President or one of the hopefuls) saying that Main Street Americans are going to pay for this one way or another. So the most productive, and the most honorable, is to PAY OFF YOUR OWN DEBT. This situation gets worse everytime a homeowner walks away and lets the bank foreclose. If you can't pay the entire sum this month, pay some. Talk to your bank to get the debt or the payments reduced.

Then, while still on the subject of honorability, someone should be talking about greed and suggesting that selfishiness and greed need to be curbed. Do we really have to bring the country and the world to its knees again? This is how the Great Depression got going -- stock market greed and loan failures.

Because that would require personal responsibility and we all know that character trait has been diminished to the few.:(
 
Why isn't anyone (like the President or one of the hopefuls) saying that Main Street Americans are going to pay for this one way or another. So the most productive, and the most honorable, is to PAY OFF YOUR OWN DEBT. This situation gets worse everytime a homeowner walks away and lets the bank foreclose. If you can't pay the entire sum this month, pay some. Talk to your bank to get the debt or the payments reduced.

Then, while still on the subject of honorability, someone should be talking about greed and suggesting that selfishiness and greed need to be curbed. Do we really have to bring the country and the world to its knees again? This is how the Great Depression got going -- stock market greed and loan failures.
If the problem was really (soley) homeowners...but Wall Street needs to PAY OFF YOUR OWN DEBT.

I'm thinking that those who got ARMs that adjusted to make the payments triple just need to get an apartment, move, try to sell, and as Dave Ramsey says "pay the stupid tax" - learn the lesson - and next time READ AND UNDERSTAND the contract.

Somehow, the "smart" guys on Wall Street - including Paulson and Bernake - are in the bizzaroworld where that doesn't apply to them. They think the U.S. can just buy the worthless paper they been playing with, letthem come out whole, and they still should get the bonuses. :no:
 
That is the best, clearest, balanced explanation I've found. My response is:
Yes, people were coaxed into unwise purchases.
Yes, investors are culpable for their greed.
I also still say that borrowing to pay the greedy off is not a solution. We can only get out of this bind by curbing the greed and getting people to pay off their loans.

As far as the mortgage "victims" I say, maybe, see if they can refinance into a 50 year fixed or some such (bet even THAT would have payments too high for most of them) or just move, people, and make it a lesson learned.

The investors in the paper can take their losses, too.

Did anybody go after the bond rating agencies for criminal malfeasance in all this mess? Why didn't they get made into rubble?
 
If there was any accountability at all Paulson and Bernanke would be out of jobs on Monday.
 
Why isn't anyone (like the President or one of the hopefuls) saying that Main Street Americans are going to pay for this one way or another. So the most productive, and the most honorable, is to PAY OFF YOUR OWN DEBT. This situation gets worse everytime a homeowner walks away and lets the bank foreclose.

Yeah, but if you pay off your own debt, you have to pay for it. If you walk, OTHER PEOPLE have to pay for it! :rolleyes: :(
 
Why isn't anyone (like the President or one of the hopefuls) saying that Main Street Americans are going to pay for this one way or another. So the most productive, and the most honorable, is to PAY OFF YOUR OWN DEBT. This situation gets worse everytime a homeowner walks away and lets the bank foreclose. If you can't pay the entire sum this month, pay some. Talk to your bank to get the debt or the payments reduced.
:rofl::rofl::rofl::rofl::rofl: I believe if anyone from the government had the audacity to suggest such a thing, millions of people in a murderous rage would descend on Washington DC, declare open season on hypocrites and open freaking fire...:rofl::rofl::rofl: (I just want to sell tickets to the event.)



Then, while still on the subject of honorability, someone should be talking about greed and suggesting that selfishiness and greed need to be curbed. Do we really have to bring the country and the world to its knees again? This is how the Great Depression got going -- stock market greed and loan failures.

I brought this up, though it may have been on a purple board thread. The funny thing is you bring up the Great Depression (very apropos). After the GD, congress instituted regulations to prevent it from happenning again, regulations which McCain has for years been working away at getting rid of. Slowly but surely they did, and in typical laisez faire style, this was abused by the criminally and stupidly greedy to make a "quick buck" with no foresight into (or more likely, no concern for) the future, even when three years ago, it was apparent to anyone that it was creating an economic Ponzi scheme that was unsustainable. We can't go blaming this on "Them", whomever "them" may be. It is due to us; we, you, me, and the rest of everybody. It is an issue of culture in this country. It's due to our values. It's due to our "I'm getting mine, screw you" attitude. It's the culture of competetiveness and "keeping up with the Jonses". We may want to blame the anks for writing irresponsible loans, but what about all the people who irresponsibly (and more than occassionally, fraudulantly) applied for loans? How many people 4 years ago when they were refi-ing and pulling out all that increadible equity they "earned" in the prior 2 years considered, "Damn, real estate value increases like this don't last and will swing back down in a year or so?" Anyone old enough to own a home has seen this cycle before at least a couple of times in their life. So, when we go looking for whom to place the blame upon, we collectively need look no further than the mirror.

Personal Responsibility, that is what we lack, and it's not just this country, it's us as a species.

People like to spout off about smaller government and less regulation, people, I've gotta say it in all honesty, collectively, we are too stupid to make that work.
 
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People like to spout off about smaller government and less regulation, people, I've gotta say it in all honesty, collectively, we are too stupid to make that work.
Henning I agree with a lot that you have said in your post. The problem with the part I quoted is that the government is too stupid to regulate us correctly.

Look no further than the governmental mandate to bring the American Dream (a house of your own) to everyone. Banks were mandated to make loans to those who never qualified before. Presto, Alt-A loans, no doc loans, subprime loans. Discrimination! We can't have only those qualified to be borrowers be borrowers. We have to make loans to the unqualified.. Wait! We don't want to hold these in our portfolio... OK, just sell them. Non recourse.

If you can sell the loan, make the loan. That is a sad, government approved business plan.

-Skip
 
The "government" isn't some secret entity (for the most part) but rather our fellow citizens. My point is that people are the government in the same fashion as people are "big business". Sans people, there is neither.
 
:rofl::rofl::rofl::rofl::rofl: I believe if anyone from the government had the audacity to suggest such a thing, millions of people in a murderous rage would descend on Washington DC, declare open season on hypocrites and open freaking fire...:rofl::rofl::rofl: (I just want to sell tickets to the event.)





I brought this up, though it may have been on a purple board thread. The funny thing is you bring up the Great Depression (very apropos). After the GD, congress instituted regulations to prevent it from happenning again, regulations which McCain has for years been working away at getting rid of. Slowly but surely they did, and in typical laisez faire style, this was abused by the criminally and stupidly greedy to make a "quick buck" with no foresight into (or more likely, no concern for) the future, even when three years ago, it was apparent to anyone that it was creating an economic Ponzi scheme that was unsustainable. We can't go blaming this on "Them", whomever "them" may be. It is due to us; we, you, me, and the rest of everybody. It is an issue of culture in this country. It's due to our values. It's due to our "I'm getting mine, screw you" attitude. It's the culture of competetiveness and "keeping up with the Jonses". We may want to blame the anks for writing irresponsible loans, but what about all the people who irresponsibly (and more than occassionally, fraudulantly) applied for loans? How many people 4 years ago when they were refi-ing and pulling out all that increadible equity they "earned" in the prior 2 years considered, "Damn, real estate value increases like this don't last and will swing back down in a year or so?" Anyone old enough to own a home has seen this cycle before at least a couple of times in their life. So, when we go looking for whom to place the blame upon, we collectively need look no further than the mirror.

Personal Responsibility, that is what we lack, and it's not just this country, it's us as a species.

People like to spout off about smaller government and less regulation, people, I've gotta say it in all honesty, collectively, we are too stupid to make that work.

Henning for President. Although you're too smart to run AND you'd never get voted in with the above.
 
The "government" isn't some secret entity (for the most part) but rather our fellow citizens. My point is that people are the government in the same fashion as people are "big business". Sans people, there is neither.

Our fellow citizens don't spend their time in breaks at work and in meetings and parties every night with lobbyists pushing the agendas of various entities.

I'm sure right now the biggest dilemma the congresscritters have is seeing that the citizens are paying attention and te;ling them loud and long they don't want the fricking bailout, while every lobbyst they're talking to personally wants some other aspect to keep the gravy train on the track for the very people who looted the U.S. already.

The citizens are staging a revolt. I have no faith at all that it'll matter. :mad:
http://money.cnn.com/2008/09/25/news/economy/bailout_protests/?postversion=2008092517
 
Henning I agree with a lot that you have said in your post. The problem with the part I quoted is that the government is too stupid to regulate us correctly.

Look no further than the governmental mandate to bring the American Dream (a house of your own) to everyone. Banks were mandated to make loans to those who never qualified before. Presto, Alt-A loans, no doc loans, subprime loans. Discrimination! We can't have only those qualified to be borrowers be borrowers. We have to make loans to the unqualified.. Wait! We don't want to hold these in our portfolio... OK, just sell them. Non recourse.

If you can sell the loan, make the loan. That is a sad, government approved business plan.

-Skip


Do you think all that would have happened if WE hadn't been pushing and complaining? Remember this at all times, the government is comprised of.....US! People in gov't are not a separate species.
 
Don't try to lump me into that bunch, Bubba. And what problem do any of us have that we honestly think (if we're smart enough to pour **** out of a boot) the government can solve better than we can?

Do you think all that would have happened if WE hadn't been pushing and complaining? Remember this at all times, the government is comprised of.....US! People in gov't are not a separate species.
 
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