Castle on the Bailout
Last night I was able to take part in one of the things that make Delaware a wonderful place to live. I got to spend a few minutes having a one-on-one conversation with Michael Castle (He of the House Financial Services Committee) on the subject of a huge corporate bailout with a 1 liter beer in my hand. I spent about 5 minutes discussing the AIG/Bear Stearns/Sub-Prime debt bailouts.
He believes that we will get some of this money back, which is different from GWB today that said we would get most of the money back. He did not have much info on the bailout that is being developed as I write this, although I think he probably should be more involved in the issue, and thus know more about it.
One of the people that he was most critical of was Hank Paulson and his poor communication. He said “Ya know, he comes in and talks to us and we just don’t understand what he’s talking about.” This could be because Paulson is purposely keeping these guys in a state of confusion, like Ken Lay used to do at Enron. Or is it that the instruments that make this economy hum has surpassed the ability of our leaders to grok it?
If there is something else to be taken out of my conversation, it is that this is still a gamble. We don’t know if this will work. We don’t know whether or not the next 2 weeks will completely crush the effects of these bailouts. We just don’t have all of the information or a model for the steps we are taking. It’s a bet.
The good news is, beer helps.
What ever the line is, I’m taking the “under.”
As for Castle, what a useless waste of space. But we all know that.
I hope it was really really good beer.
It was, and there was a lot of it. I did my 2 liters and called it a night.
Um, did Castle say how we’re getting money back? They are proposing to buy up bad debt, not the failed banks, so where are the assets to sell?
Oh, and I really should have identified myself as a blogger on DelawareLiberal, but I was afraid that one of his assistants would hit me in the head with a stein before I could get out that my name wasn’t Jason…
Cassandra – no, he did not say.
We really should be asking for details on how we’re supposed to making money on bad debt. The RTC was essentially a bankruptcy liquidator and had something to actually sell. I keep hearing about this deal maybe making us money and I am afraid this is going to become an article of faith that no one questions.
By the way, I did the math. $700 billion is about five percent of GDP.
We should definitely contact Castle. The deal in its form released today is absolutely unacceptable. It gives Paulson a lot of power and very little oversight. It’s saving the banks but not the taxpayers.
700 Billion and not one cent to help home owners.
Hallelujah Truth Teller… would not want to help the homeowners, that would be communist… best to bail out banks…
All I know is that the foxes are trying to put out the fire in the henhouse and that can’t be good. Barney Frank gives me hope but the rest of this crowd has demonstrated they are totally incompetent. I don’t have high hopes for this.
The NYC Mayor was all Hank all the time this morning on MTP.
I miss the old Castle bashing Jason. LG getting cozy with Mikey is nothing short of whack.
No pointed questions? No sharp elbows? No Hey Mike, WTF are YOU doing about it and when did YOU first get the inqling that things were heading south on Wall Street?
NOTHING but Hank speaks with a marble-filled mouth? No why have you been avoiding the devastation of hedgers for years now Mike? NADA?
Yeesh, the Delaware Way in action.
Cassandra, “Bad Debt” does not equal “Zero Value”
A) If you owe $200,000 on a house worth $260,000 at auction, but haven’t made a payment in 4 months, that is a bad debt, that when taken to foreclosure will recoup the principle($200K) the intrest due for the period you weren’t making payments and the cost of forclosure ($30-50K).
B) If you owe $200,000 on a house now worth $190,000 at auction, and haven’t made a payment in 4 months, that is a bad debt, that when taken to foreclosure will recoup 95% the principle($200K) none of the intrest due for the period you weren’t making payments and none of the cost of forclosure ($30-50K)
In case B, you have a DEBT with a face value of $200K But a net Value of $160-$140K
A reason for the Big Problem is that both A and B are bundled together into Bond issues with good (performing) loans and there are More A’s and B’s in the mix than predicted/expected by the market.
I understand all of that, but if this stuff is toxic enough that the only people left to buy it is the government, then you already know it has little value now. Or, best case, is that no one can adequately value it anymore.
Getting any value out of these assets will depend upon how much the government pays for these assets, how much they pay for some firm to do the work to unwind the mess (and this won’t be cheap), and the current state of the real estate market when the Government tries to resell the better parts of the toxic stuff.
I assume that Mike was willing to vote for the $ 700 Billion .However I think the House and Senate should add Universal Health care and the Nationalization of the Oil Companies to it. As long as the Repuk president and his cabinet members want to take us down the path to Socialism we might as well go all the way . After all this appears to be a failure of a free market society
well LG, if they had hit you I would have had it on film. I’ll be sending you the video shortly. It’s a little too large for me to send to your gmail account.