High Cost of Lies
Over the weekend, a lot of scuttling around has been going on as the government tries to insure that an offering from Freddie Mac - scheduled for sale on Monday - will not be shunned. If buyers are not assured, the government well may be forced to take over that institution.
There has been a somewhat unsettling accumulation of evidence of desperation. The worst administration ever is trying to place blame for Freddie's loss of value on Sen. Schumer, who mentioned it. That is the Grand Old Propaganda that a 'self-fulfilling prophecy' attaches to any public statement that financials are not 'fundamentally sound'. Truth is as usual much despised by the occupied White House.
Unfortunately, a lot of difficulty arises from being known to tell lies. There is no faith left in the U.S. financial world, and that makes it very hard to sell our institutions like Freddie and Fannie Mae.
Underlying the value of the mortgage holders are a lot of perfectly safe, 30-year mortgages, as Sen. Dodd told us in his press conference Friday. This is hard for investors totally to credit, however, as it is vital information from the same source that gave us WMDs and AAA ratings for bundled investment packages that contain a lot of mortgages that are simply not AAA-quality, and in many cases are not worth the paper they're printed on.
In those immensely wealthy Arab nations that we have turned to before for some money, interest in these overvalued financial investments is definitely lukewarm.
From the United Arab Emirates, an analysis was made of investment prospects in our giant financial corporations. It took a hard look at the Abu Dhabi buyout of Citigroup, and came to some conclusions, as follows:
We are trying to keep our economy afloat, and the high officials handling that job are known mainly for being dishonest. No wonder there's a real question in the minds of the wealthy interests being asked to take a leap of faith. If they lose money,it's going to undermine their trustworthiness.
Sadly, this country will not be able to trade in good faith until January 21, 2009 - and not after that if we are still led by the same failed representatives.
The mantra that telling the truth is undermining our economy may have worked to keep the right wing from blaming the White House for a failed economy. It has only deepend the doubts that the financial community, here and abroad, have learned they must have, when it comes to acting on information given out by this executive branch.
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Sorry, some of that language is going to be clear as mud, and I have been hearing a few complaints about my getting too obscure. If you like, let me know in comments and I will try to explain any questions you have. Talk of real worth as opposed to potential is like Equity - what you have invested in a house, that you can use for a loan - as opposed to the house's potential value when paid off.
There has been a somewhat unsettling accumulation of evidence of desperation. The worst administration ever is trying to place blame for Freddie's loss of value on Sen. Schumer, who mentioned it. That is the Grand Old Propaganda that a 'self-fulfilling prophecy' attaches to any public statement that financials are not 'fundamentally sound'. Truth is as usual much despised by the occupied White House.
Unfortunately, a lot of difficulty arises from being known to tell lies. There is no faith left in the U.S. financial world, and that makes it very hard to sell our institutions like Freddie and Fannie Mae.
Underlying the value of the mortgage holders are a lot of perfectly safe, 30-year mortgages, as Sen. Dodd told us in his press conference Friday. This is hard for investors totally to credit, however, as it is vital information from the same source that gave us WMDs and AAA ratings for bundled investment packages that contain a lot of mortgages that are simply not AAA-quality, and in many cases are not worth the paper they're printed on.
In those immensely wealthy Arab nations that we have turned to before for some money, interest in these overvalued financial investments is definitely lukewarm.
From the United Arab Emirates, an analysis was made of investment prospects in our giant financial corporations. It took a hard look at the Abu Dhabi buyout of Citigroup, and came to some conclusions, as follows:
The Gulf lifeline to Citigroup has come at a price, though, with the US giant offering 11 per cent to the Abu Dhabi Investment Authority (Adia) for a convertible loan stock, which Adia can convert into a 4.5 per cent stake in Citigroup in 2010 and 2011, at a conversion price slightly above the current share price, which is now at a five-year low. The rate paid by Citigroup is a couple of notches above junk bond rates and must be a humiliation for such a prime financial name.
(snip)
The troubling thing about white knight rescues such as Adia’s is that analysts have led us to believe that, unlike previous banking crises, this time the financial institutions most affected by the subprime implosion were well capitalised and had a large cushion to weather any losses.
It seems that some of the prime US banks are now reaching the bare minimum of their Basel Tier 1 capital requirement (editor's note: Capital Requirement is the amount of actual worth on hand that is real, not potential) of eight per cent levels. Citigroup’s Tier 1 capital ratio – a ratio of financial strength – stood at 7.3 per cent in the first quarter of last year, below its target of 7.5 per cent, but the Adia lifeline will take it back above target. This move might stabilise the fall in Citi stock prices, but it is coming at a hefty price and makes some wonder why the American bank could not raise these funds in its backyard at better terms.(Emphasis added.)
We are trying to keep our economy afloat, and the high officials handling that job are known mainly for being dishonest. No wonder there's a real question in the minds of the wealthy interests being asked to take a leap of faith. If they lose money,it's going to undermine their trustworthiness.
Sadly, this country will not be able to trade in good faith until January 21, 2009 - and not after that if we are still led by the same failed representatives.
The mantra that telling the truth is undermining our economy may have worked to keep the right wing from blaming the White House for a failed economy. It has only deepend the doubts that the financial community, here and abroad, have learned they must have, when it comes to acting on information given out by this executive branch.
**************************************************
Sorry, some of that language is going to be clear as mud, and I have been hearing a few complaints about my getting too obscure. If you like, let me know in comments and I will try to explain any questions you have. Talk of real worth as opposed to potential is like Equity - what you have invested in a house, that you can use for a loan - as opposed to the house's potential value when paid off.
Labels: Bush Legacy, Credit Crunch, Cronyism, Economy
posted by Ruth at 9:02 AM
4 Comments:
It was Senator Schumer...not Rep. Schumer who "caused" IndyMac to fail. The good senator was speaking truthfully about the bank's condition, and the market reacted accordingly. You have to admire the impressive power and influence of his words. Now if we can only get him to speak about the crimes of the Bush administration...
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Jm Et Al
Thanks, I knew I needed to check on something, appreciate the correction, Yeh, would love them all to start speaking just the truth about the crimes, stop mollycoddling the war criminals.
Thanks. You are plenty clear to a non economist like me.
And it was schumer who brought us mukasey on a silver platter. I wouldn't expect anything from chuckie other than pleasing his Wall Street overlords, and sucking up to the doj.
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