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Heavy Objects (heavyobjects)

Momentarily weighty.

Bail-out 9/26/2008 1:59:00 PM

Yesterday, the U.S. saw the largest single bank failure in its history. Seized by the FDIC, its assets were sold the JP Morgan Chase for roughly 2 % of its valuation from a year ago.

Now, while WaMu had a lot of "bad debt", it wasn't worthless.  In fact, we really don't know what its value is or will be now or in 5 years.  In fact, JP Morgan's purchase of WaMu's assets, considering much of the "bad debt" is composed of mortgages on REAL HOUSES - real, tangible long-lasting assets - could amount to a FIRE SALE.

What's wrong with this picture? The bailout plan, as long as it has proper oversight built-in and essential protections against excessive CEO pay-offs, would allow TAXPAYERS to benefit from this upside.  If these assets can be purchased with TAXPAYER BAILOUT MONEY as shrewdly as they are sold to bank giants, WE ALL stand to benefit from the upside in terms of government revenues.

As it stands now, House Republicans are holding up a deal and instead are calling for MORE PRIVATE ENTITIES to purchase these assets at a discount, benefit from the upside.  AND, they want to fatten the wallets of the insurance industry requiring that those private entities purchase insurance for the debts (mortgage assets) that they puchase.  Besides serving insurance special interests, this will serve to create a group of just a few BANK GIANTS (JP, Wells Fargo, BoA) that takeover the financial industry  while killing off most of the regional banks across the country. If the takeovers don't kill them off, then their own depositors will, as many of them are pulling their money and heading for the giants already, for fear that their deposits are not safe unless they are with the giants.

The bailout makes me sick - these firms got into this mess and it is not the taxpayers' fault - however, the bailout plan does not reward the behavior, instead it allows US, the TAXPAYERS, to take advantage of this clearance sale of American assets rather than letting just a few wealthy banks grab them up and earn the upside.  If you are worried about executive compensation, a bailout plan is our only remedy since it would be WRITTEN INTO the legislation, whereas with private takeovers, the industry regulates itself.  As a matter of fact, one of the Chief officers of WaMu just earned himself a cool $8 million last night according to reports.

This economic "crisis" has people more scared than they should be.  But they should be more scared of the giant banks that will be standing than the little guys that will fall.

9/27/2008 11:40:00 AM
On an upside to this whole thing, it is going to benefit myself nicely now in my future. I work for JP Morgan Chase and was going to have to find a new job out in California as I am looking to move there next year. Now with the purchase of WAMU, I will have a place to get promoted and move into and keep all my benefits of working here at Chase.

From my side of what I do, I love my company and what we have to offer people. I am at the Retail level now & this aquisition is huge for my career
***Author response***
9/27/2008 2:43:00 PM
It is big for your career, but do you see the issue from a general taxpayer's perspective? The money that is squeezed out of the markets is squeezed from the decline in home values which has now been captured by your company. It is squeezed from the devaluation of the dollar, affecting all of us. And it is squeezed from the rising costs to purchase goods and services pretty much anywhere. Your CEO just made out like a bandit last week, and the profits come straight from our pockets.
d heck26
9/28/2008 11:32:00 AM
heavyobjects for city council.... then governor of Alaska. WOO HOO!
***Author response***
9/28/2008 8:10:00 PM
I can see Mexico from some relatives' houses...
9/29/2008 9:53:00 AM
My CEO did make out yes, but I don't see in any way his demise. Chase is very conservative and for the most part strict on who gets loans. It was companies like WAMU and the others who did not do there background checks and gave a loan to just about anyone who could say, "give me a house". That is why Chase was able to come in and buy b/c we did not take the big hits and have room to take over these so they don't go totally under.
***Author response***
9/29/2008 11:09:00 AM
Actually, WaMu's practices were more mainstream than that. Their issues came when buying loans that had been sold down the river by immoral brokers and subprime-lending scoundrels.

Just to be clear: your CEO should not be blamed for his shrewd action. He did what any financially-able corporate CEO could and SHOULD... he made a good business move. >>>
***Author response***
9/29/2008 11:12:00 AM
<<< But to say that the scenario which enabled this transaction is fair or OK and do nothing about it is a big problem. You think a few big oil companies with the help of government insiders control the energy industry? Just wait when three or four big banks, plus the Federal reserve, control our monetary landscape. Glad for the good move by your company, but I don't trust that they have our best interests at heart. "Absolute power ..."

NEW: Citi just purchased Wachovia after FDIC seizure.
Anonymous juice
9/29/2008 2:07:00 PM
"Pennies for the American people, and billions for bankers"
***Author response***
9/29/2008 2:10:00 PM
that's basically the scenario without this rescue plan...
9/29/2008 6:27:00 PM
700 billion dollars...that seems right out of a Austin Powers movie...too bad it is all too real.
Anonymous juice
10/8/2008 1:00:00 PM
What is really bad is the CEO and his buddies of AIG, about 60 of them spent 400,000 DOLLARS on a vacation. This money came from 85 billion used to "bail-out" AIG. Obama said it best last night " U.S Theasurary should take the money back and fire the CEO."
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