[IWE] Galbraith's OpEd on what should be done about the Bailout.

Thu, 25 Sep 2008 18:51:30 -0700 (PDT)

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That brings up an interesting point that I have not seen addressed yet.
Which is, what is the real value of these securities?
That there is no good model for their value is one of the problem.
But I would love to see some breakdown of how much money one
might return over it's life.

There is the rather significant possibility that many of these things
are literally worthless. That they have already lost so much money
in foreclosures that even if the housing market where to turn around
they would never actually return any money.

I would expect the top rated trenches will eventually return
something, but the lower rated trenches might be underwater
no matter which way things go now.

It is a significant problem for the bailout plan if it's aim is to be
honest. So far though, I've been operating under the assumption
that one of the goals is to prop up Wall Street by buying them
at inflated value. In which case a good value model is not important.

Jay

----- Original Message ----
From: Ben Tilly <btilly@gmail.com>
To: iwe@warhead.org.uk
Sent: Thursday, September 25, 2008 4:28:44 PM
Subject: Re: [IWE] Galbraith's OpEd on what should be done about the Bailout.

On 9/25/08, williamoxley@aim.com <williamoxley@aim.com> wrote:
>  My purpose of an artificial floor for  buyout purposes would allow those
> who are afraid to buy these securities put a hard bottom price, the free
> market should be willing to buy these things at above the floor price
> knowing that the risk is measurable, and that they can be sold  at least the
> floor value to the feds. May promote some trading in these things. May be
> well wrong tho

Ah, I see your reasoning.

What I think would happen is that once you name a number, that sets
the effective price.  So Wall St would start trading the securities
for the floor, and then only to the government.  By contrast the
current plan has the advantage that the promise of government
intervention, even when not backed by particularly large purchases,
could drive the prices of currently misvalued securities up
considerably.

Cheers,
Ben
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<html><head><style type="text/css"></style></head><body><div style="font-family:times new roman,new york,times,serif;font-size:12pt"><div>That brings up an interesting point that I have not seen addressed yet. Which is, what is the real value of these securities? That there is no good model for their value is one of the problem. But I would love to see some breakdown of how much money one might return over it's life. There is the rather significant possibility that many of these things are literally worthless. That they have already lost so much money in foreclosures that even if the housing market where to turn around they would never actually return any money. </div><div style="font-family: times new roman,new york,times,serif; font-size: 12pt;"> I would expect the top rated trenches will eventually return something, but the lower rated trenches might be underwater no matter which way
 things go now. It is a significant problem for the bailout plan if it's aim is to be honest. So far though, I've been operating under the assumption that one of the goals is to prop up Wall Street by buying them at inflated value. In which case a good value model is not important. Jay <div style="font-family: arial,helvetica,sans-serif; font-size: 13px;">----- Original Message ---- From: Ben Tilly &lt;btilly@gmail.com&gt; To: iwe@warhead.org.uk Sent: Thursday, September 25, 2008 4:28:44 PM Subject: Re: [IWE] Galbraith's OpEd on what should be done about the Bailout. 
On 9/25/08, <a ymailto="mailto:williamoxley@aim.com" href="mailto:williamoxley@aim.com">williamoxley@aim.com</a> &lt;<a ymailto="mailto:williamoxley@aim.com" href="mailto:williamoxley@aim.com">williamoxley@aim.com</a>&gt; wrote: &gt;&nbsp; My purpose of an artificial floor for&nbsp; buyout purposes would allow those &gt; who are afraid to buy these securities put a hard bottom price, the free &gt; market should be willing to buy these things at above the floor price &gt; knowing that the risk is measurable, and that they can be sold&nbsp; at least the &gt; floor value to the feds. May promote some trading in these things. May be &gt; well wrong tho Ah, I see your reasoning. What I think would happen is that once you name a number, that sets the effective price.&nbsp; So Wall St would start trading the securities for the floor, and then only to the government.&nbsp; By contrast the current plan has the advantage
 that the promise of government intervention, even when not backed by particularly large purchases, could drive the prices of currently misvalued securities up considerably. Cheers, Ben _______________________________________________ IWE mailing list <a ymailto="mailto:IWE@warhead.org.uk" href="mailto:IWE@warhead.org.uk">IWE@warhead.org.uk</a> <a href="http://lists.warhead.org.uk/mailman/listinfo/iwe" target="_blank">http://lists.warhead.org.uk/mailman/listinfo/iwe</a> </div></div></div>

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