What the FED & Treasury Were Up To

[tabs]

My evil little Machiavellian mind is at work again.

If the Uptick Rule and Naked Shorts are going to be reinstated or be enforced in short order the following is true.

The Fed and Treasury saw that a bubble was being created by speculation in commodities. It was being done by the same people that brought you the sub prime mess. This was not going to be tolerated, so they let the wolves prey upon the wolves. Thus Lehman, Merill and AIG have fallen. Their might be a coupla of others out there but they are chastened and have to look out for their very survival. Namely CITI. I doubt Morgan. With the speculation and speculators out of the market the price of oil should fall to the $70 range.

BTW: The price of oil and commodities was what was proping up Lehman, Merrill and AIG. Once the price started downwards their source of easy money dried up and they were forced to sell off their good assets namely stocks to keep themsleves afloat. Once that was gone well the wolves set in and finished them off.

When Governor Paterson (D) of NY called the FED and pleaded with them to bail out AIG because of the Public Employee Pension Funds that cleared the political way of any Democratic opposition to lending money to AIG. Which was too big to fail and the Fed had to act as lender of last resort.

There is also a feeling here that the Dems gave up something else. Namely who is in charge of the economy...The FED, Treasury and SEC. If the Dems get in they are going to be one whipped puppy, and gone will be their grandiose plans for reform. Because not only is the money gone, but they can see first hand that it hits their prime constituency where it hurts in the wallet eg Pension Fund.

One might say a revolution or coup d'etat has taken place. For the Dems have seen just who wields the power in the USA and world.

[Rich76_911s]

Tabs,

Can you explain this further?

"BTW: The price of oil and commodities was what was proping up Lehman, Merrill and AIG. Once the price started downwards their source of easy money dried up and they were forced to sell off their good assets namely stocks to keep themsleves afloat. Once that was gone well the wolves set in and finished them off."

I really don't see the connection between Lehman, Merrill, and mostly AIG and oil. Not that you are wrong, I'm just asking what is the connection? Or how are you connecting the dots. I mean AIG likely had NO position in oil, weren't clearing oil trades, and had no direct connection to oil. I don't know what is on their books, but I didn't ever think it was oil. As far as I know credit default swaps on FNM and FRE sank AIG.

Rich

[tabs]

The DOTS are who was trading in Oil Future Contracts on the commodities market? Was it AIG, Lehman and Merrill, were they the ones doing the speculating. Let us add CITI to the mix. Once the oil price broke about a month ago it does seem that they fell in short order. It was a source of easy money to keep afloat by ever pushing the commodities.

It doesn't matter that the dead credit bonds did them in, that was just the gun.

[David]

I know virtually nothing about buying commodities, but I was discussing this with a buddy who does.

Someone please correct me if I'm wrong, but here goes: These banks buy commodities on margin, say 10%, meaning they don't actually have all the money to buy the commodities, just 10%. This is all well and good as long as the price goes up. If the price goes down, they must come up with the difference between the full purchase price and the current lower price. So as the price drops they have to come up with more and more money and far more than the original 10% they put up.

I heard some banks invested even more as the price dropped, hoping this would boost the price so they wouldn't loose money, but instead lost even more.

[turbo6bar]

+1 to rich76. IF AIG was banking profits on oil prices, the taxpayers were fleeced twice: once at the pump and once at the cookie jar.

[tabs]

Daddy something big has just happened before the election. The Republicans still control the Treasury with Hank Paulson, (ex Goldman Sacs) and the FED is being headed by a guy who is an expert on the Great Depression.

The fact that Demo Govenator of NY Paterson cried uncle means something. They gave up something BIG. It came down to playing chicken with the nuclear winter option for the economy. As you know the price of oil was slowing the economy which was favoring the Dems, this might have been orchestrated by the Dems on Wall Street speculating on Oil.

Check the party affilation of some of these guyz it might surprise. And one thinks the Dems are all about the little guy.

[turbo6bar]

Wow, you would think Wall Street was smarter than that. Speculating in a bubble. Wow!

[tabs]

Originally Posted by turbo6bar

+1 to rich76. IF AIG was banking profits on oil prices, the taxpayers were fleeced twice: once at the pump and once at the cookie jar.

Your thinking is too static. The FED got a "solvant" company for their money. One with a Trillion in assets.

[Jim Richards]

tabby, keep the politics out of this thread. Otherwise, it's pretty interesting.

[tabs]

How do you take the politics out of it??????? This is not partisan by any means. This is about what has happened and why.

[Jim Richards]

No problem, tabdula. I'll ask the mods to move this to PARF. Bye!

[911teo]

There is nothing political my friend. It is all about greed. And pressure to perttform to stay afloat.

Anyway I see it the other way around. These institutions were so laden with toxic assets that they were desperate to score a profit wherever they could.

Commodity speculation had just postponed the inevitable. Then that also went south and there was other way but to take the losses and hope someone came to the rescue...

At least in the US there is a little more trasnparency.... I wander how bad the situation is for German, French, Italian, Spanish banks... little has been written down here, as if the subprime debacle is something that limited to the US shores....

[Bill Verburg]

Originally Posted by 911teo

There is nothing political my friend. It is all about greed. And pressure to perttform to stay afloat.

Anyway I see it the other way around. These institutions were so laden with toxic assets that they were desperate to score a profit wherever they could.

Commodity speculation had just postponed the inevitable. Then that also went south and there was other way but to take the losses and hope someone came to the rescue...

Agreed!

Originally Posted by 911teo

At least in the US there is a little more trasnparency.... I wander how bad the situation is for German, French, Italian, Spanish banks... little has been written down here, as if the subprime debacle is something that limited to the US shores....

Now that is an interesting comment, I always felt that the Community Reinvestment Act was one of the root causes for the whole sub-prime mess here in the states,

How did Europe get sucked in, buying the CDOs? or are the same sort of shnanigans going on iver there too?

[911teo]

Yes... the mkt was huge. Everybody was demanding higher returns, from your bosses if you were a trader, to the shareholders, to the investors. 10-15% return on capital. With Fed fund rates at 2-3%.

Somehow people though it was ok to borrow money at 3% from the Fed and invest it in these sub-prime bonds/funds and make 20%. Super easy.

But if Merrills offers that then Deutsche and Bank Paribas need to follow suit? And what about Banco Santander aand/or Banca Intesa?

They are all in it. All sitting on HUGE losses that nobody has disclosed. In Europe it is much easier to do that. Company gobvernance is not so transparent. Multi-partecipation is common.
With a small % of the stocks u control (throught the board) a whole company... so it is easier to mask losses.

The flip side is that the real economy will be hit much harder than the local financial mkt would make you assume...

[tabs]

Gold up $70 to $850,,,cause the Chinese newspapaer article said that the Chinese were going to start drawing down on the US $ as a reserve currency. Whoops they see trouble ahead for the US government.

3 Month US Treasurys at .66% interest..the news said that in actuality at one point you had to pay to own the security. Safe haven


The FED has used half of its capital in bailouts. However that is not fair, they are loaning 85B to AIG at 12%.

WAMU is up for sale

Morgan Stanley....wants to merge

Barclays just bought Lehmans Brokrage unit

Lloyds or is Barclays is going to by HBOS..

CALSTERS....said they would not allow their shares to be shorted....OUUUU guess they see themsleves going down in a death spiral if they didn't act.

NO More Naked Short...well that was yesterdays prediction

NAV MOney Market at LEHMAN....broke the buck rule. I always said your MOoney market accounts were not safe.

[the]

Originally Posted by tabs

Your thinking is too static. The FED got a "solvant" company for their money. One with a Trillion in assets.

I watched Hank Greenberg on Charlie Rose last night. He mentioned that AIG as a whole is a very solvent profitable company, with a trillion in assets.

I haven't been following it super closely, and don't understand the intricacies of what AIG even is (an insurance company? a holding company? etc.).

But if they are truly solvent and profitable, with a trillion in assets, why do they need an $85B bailout. Why not just draw down on some of their trillion in assets?

[the]

Originally Posted by Bill Verburg

Agreed!

Now that is an interesting comment, I always felt that the Community Reinvestment Act was one of the root causes for the whole sub-prime mess here in the states,

How did Europe get sucked in, buying the CDOs? or are the same sort of shnanigans going on iver there too?

I was on the road today, listening to the radio. I heard some reporters from Russia and Spain, apparently things are getting pretty bad over there? The guy in Russia was saying they expect their largest of banks to be ok, but many of their "second tier" banks will go under.

The guy from spain was talking about the housing price collapse there. And banks being so terrified now, they are demanding 40-50% down to buy a house, so very few can get in.

[tabs]

Well today I got half of what I said.....the SEC has stopped the naked shorts...that is going to cause alot of people to have to cover

The Uptick rule should be put back in shortly if they are smart....only half the horses have left the barn.

As Hugh says...Greed then Fear followed by more Greed.

Today was a bad day. I was hoping that AIG would have gotten us over the hump. As AIG is left to fall would have lit the barn on fire.

However the market is looking for its next victim.

Panic sure TABBY feels the panic, but so far he has not ***** nor pissed his pants. I assure you that is coming....

Right now the world is on the knifes edge...it is not out of the question that everything you and I have ever known will disappear. Will it happen probably not., but the risk is there.

Will this change the face of the world you bet. Things are going to be different from now on end.

Since 2001 and 911 I have been saying over and over again on this Board that with another Terrorist attack a CRISIS OF LIQUIDY could bring the world economy down. As it in reality is a house of cards, that was what 911 exposed. Well today we have done it to ourselves. Maybe 911 and the low interest rate environment that it caused set off the Greed that will bring the system down and Al Qaedea wins. In other words 911 cracked the system and it just has taken some time for the cracks to spread and the system to crumble?

[tabs]

Originally Posted by the

I watched Hank Greenberg on Charlie Rose last night. He mentioned that AIG as a whole is a very solvent profitable company, with a trillion in assets.

I haven't been following it super closely, and don't understand the intricacies of what AIG even is (an insurance company? a holding company? etc.).

But if they are truly solvent and profitable, with a trillion in assets, why do they need an $85B bailout. Why not just draw down on some of their trillion in assets?

They need cash to post as collateral as their bad sub prime bonds can't be priced. They are still collecting interest on them, they just don't know what the rate of default on the mortgages in that bond package will be.

AIG is aholding company and our Sun is a holding company for the planets. All those planets are PROFITABLE for AIG. But the holding company has so much in Mortgage bonds that it sank the company once the shorts decided it was their turn to loot.

[jyl]

Russian stock market has fallen -50% since April. Investors pulling money from emerging markets, soaring political risk as Western businesses/investors see blatant Russian govt seizures of private capital, oil price down >35% and energy is about all that Russia actually produces, the idiot war in Georgia - Putin appears to believe that today's Russia is like the old USSR which could manage with hardly any international trade or capital, he's now going to see that belief tested.

Spain had a huge housing bubble, house prices soared far more than in the US, and it is blowing up now.

Originally Posted by the

I was on the road today, listening to the radio. I heard some reporters from Russia and Spain, apparently things are getting pretty bad over there? The guy in Russia was saying they expect their largest of banks to be ok, but many of their "second tier" banks will go under.

The guy from spain was talking about the housing price collapse there. And banks being so terrified now, they are demanding 40-50% down to buy a house, so very few can get in.