Capitol Hill Blue Forums Political Issues Finance, the economy & Economics How will the financial crisis develop?

YES definitely!
I have a couple of art pieces done by Ed Ruscha and Jim Ganzer.
Both are key historical figures in post modern art, especially from the 1950's and 60's. They're appraised in the high five figure range but there is no way I will ever see that in my lifetime because, believe me I tried and since these paintings are from a disastrous first marriage I'd feel better with them out of here and me with a pocket full of money.

These are definitely "illiquid assets" even thought it's nice to have them hanging on the wall.
Jeff H in Occupied TX

Speaking of the bailout, I've decided to turn off CNN AND FOX News permanently. Both are engaged in a nonstop fear campaign which is racheting up by the minute.

End of quarter has hedge funds bracing for redemptions

But CNN(Live) did have the press conference after the Dem's hearing... but I can't find a recording. It was really informative, and I think cut through all the B.S.

So, why isn't it featured?

Or, did I answer my own question?

If anyone can find it, or has any suggestion where to look on CNN for earlier CNNLive pieces, please reply either here or PM... Thanks...

Kap, isn’t that the main problem we face—frozen credit markets and not necessarily mortgages gone sour?

If a money market fund loses money, that's called "breaking the buck." It's simply not supposed to happen. Except that it did, last week. On Monday, the Reserve Fund broke the buck. And people freaked out.Breaking the buck causes a little bit of panic. Frightened investors raced to escape money market mutual funds. It so happens that the main thing money market mutual funds own is commercial paper, the same financial short-term loans that make ordinary businesses possible. The system essentially shut down for about 12 hours.

The run on money market mutual funds is why, no matter how safe and trusted a company was, they couldn't borrow money last Wednesday. The people who usually loaned those companies money — meaning the many ordinary people with money market mutual funds — had hauled too much of their money out of the system.

This chain of events is part of what convinced Paulson and Bernanke that the situation had gone too far. If the panic had continued for more than a day, they reasoned, the wider economy would start to shut down.
What would happen is nobody would be able to borrow money, and how does capitalism work if you can't borrow money? You're back to bartering, pretty much. The extension of capital almost came to a halt — just ended, period.

I think a continuation and magnification of this is the biggest fear of Paulson et al. Whether US citizens like the system or not, it’s the system we have and it is currently in very real danger without willing creditors able to lend money, and large amounts quickly.

I was speaking with two stock investment firm friends last evening and they warned me that the real "bailout" was going to take the form of a simple change in the accounting rules.


Los Angeles Times

If thay does happen Phil we are indeed toast. We need more transparancy, not more smoke.

Ken, I was told that this change will happen whether legislated or not and will be the key to GOP support for the bill.

Upon closer reading of the article I do agree valuing those securities accurately is indeed difficult, as I was saying earlier. They are worth something and the market is currently valuing them at next to nothing since they are illiquid due to panic.

At the same token I am sure the bankers want to overvalue them since that is certainly in their interest to do so. And that is a big fear among many bailout detractors. They fear the government will overpay for them in their eagerness to make this crisis go away. Also, many people want to keep housing prices from falling further. As painful as that is, that needs to happen. Housing prices only got as high as they did because of four years of a free money giveaway.

Housing prices need to fall to a level where people can afford them with the wages they earn and they need to be financed in a way that requires a chunk of money from the buyers out of pocket. That is why I keep arriving at 2003 values—values that existed before all the lending shenanigans began.

I was reading about the likelihood of that change too, Phil, but it didn't quite compute in my not-too-savvy internal calculator until I read your post from the LA Times.

AHA!

An aha! moment occurred.

Of course! The ultimate solution to the whole mess. Just pretend the worthless instruments have value.