Sunday, November 16, 2008

Channeling Tanta

While Tanta is hopefully recovering someone has to keep kicking away with the pink bunny slippers of certitude.

"Poor Gretchen" is at it again.

A Rescue Plan Without Taxpayer Money
Published: November 15, 2008
HELLO, taxpayers. Worried about the fate of the $350 billion that the government has asked you to fork over so far to help rescue financiers from themselves?

One interesting idea was conceived by two veteran investment managers, Thomas H. Patrick, co-founder of New Vernon Capital, and Mac Taylor, a principal of the Verum Capital Group.

They propose refinancing all $1.1 trillion of the loans in securitization pools that are still performing but that may soon face punishing interest rate resets. Homeowners whose loans are in these pools would receive newly issued loans with fixed interest rates, currently 6.14 percent, and 30-year terms. Under this plan, Fannie Mae and Freddie Mac would issue debt to pay off the outstanding principal on the loans and then guarantee the new ones.

VoilĂ : Investors who own the underlying interests in the mortgages would be fully repaid and the securitizations would be closed out.

All I can say is "Poor Gretchen."
Expanding commentary:
First, it should be obvious that Patrick & Taylor are talking their book.

Second, if the loans are "performing" what is the problem? The problem is that they won't be performing and will need to be marked down. That's why they are desperate to get rid of them while still performing at performing prices.

Third, the theory of Net Present Value (NPV). If you have $1.1 trillion of soon to be prevailing rate mortgages and propose replacing them with below fixed prime borrower loans what is the hit to their value. Verum Capital Group is implying that the default rate reduction will balance out the effective NPV reduction. Fine, why involve Fannie & Freddie? Do it yourself dammit.

Fourth, F&F have already admitted to needed essentially perpetual life support. They can't issue new debt.

CR & Tanta on their world blogging tour.


Unknown said...

Pink Harvey Mursting Firsting.

Centipede said...

Gretchen is a moron. I miss Tanta.

Jean ValJean said...

Not only are banks getting bailouts and financial institutions turning into banks to get bailed out...

but now, companies are BUYING BANKS, then asking for a bailout:

And, of course not EVERYONE wants their piece of MY pie:

Even this shameless mayor from San Jose:

"Reed created a minor furor Friday when he told an Associated Press reporter he would seek 2 percent of the bailout, or $14 billion, for San Jose — an eye-popping figure, given that the city's entire annual budget is $3.3 billion. "

And right behind them are states, led by, who else? California. Because, in the end, "government is really at fault":

Speaking Wednesday before a Chamber of Commerce group in Fresno, Calif., Schwarzenegger said that "government is really at fault" and that Washington was obligated to "get us out of this mess."

Jean ValJean said...

However, THIS makes me feel strangely happy:

Jean ValJean said...

*typo. That should've read, in the third comment, as:

And, of course noW EVERYONE wants their piece of MY pie:

Jean ValJean said...


Rob Dawg said...

I was wondering the same thing. I was really disappointed that a thoughtful post with thoughtful replies (thanks) were being left uncommented upon.

Has EN outlived its usefulness?

Lost Cause said...

We can't really read the WSJ, since we don't want to give money to Rupert Murdock.

Jean ValJean said...


that's easily solved. read it the way *I* read it:

Peripheral Visionary said...

In other news, the Bank of the Peripheral Visionary will soon be open, and will be receiving an infusion from the Treasury; no word on whether management will be able to make the mandatory preferred dividend payments back to the Treasury. That decision will presumably be made in Monaco, where the management retreat is set to begin following the bank's opening, although oddly enough no end date for said retreat has yet been set.

Jean ValJean said...

You know, PV, I was wondering the same thing... how I could get my slice of the loot-- errm.. I mean, the "Rescue package"

My buddy Mark Cuban gave me the answer:

You all do realize that anyone who buys a new car is UNDERWATER the minute you sign the papers and drive off the lot ? That you get further and further underwater every single day ? Maybe thats why so few are buying new cars ? We havent instituted a bailout for their underwater car loans.

Jim the Realtor said...

Has EN outlived its usefulness?

I don't think so, but readers of all blogs may be suffering from fatigue - between the housing market and economy we've so accustomed to a train-wreck per day that we're whupped, mentally.

EN enjoys the freedom to touch on any topic, anywhere. Let it rip - it'll help keep us engaged.

Or at least keep the chick photos coming!

Jean ValJean said...

Good point.

How about a video?

Jim the Realtor said...

Wow - I don't know what she is selling, but I'm buying!

Jean ValJean said...

A lot more where those came from: