Economics

Will Wall Street Shun the Bailout?

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Add one more super-sized question mark to the bazillion-dollar bailout: Will Wall Street take the bait?

In the U.K. Guardian, James Doran says eh, maybe not so much:

One of the least attractive elements is a section designed to curb executive pay at banks that participate in the bail-out package. These include limiting stock-related pay and banning 'golden parachutes' for executives.

"I think this hodge-podge of regulations and rules will be enough to put many [chief executives] off participating," [Thomas] Caldwell [of Caldwell Financial, a billion-dollar fund] said. 

Sources close to Goldman Sachs and Merrill Lynch indicated the banks might choose not to participate in the bail-out as there is a growing view on Wall Street that the market may be bottoming out.

More here.

reason on the bailout here.

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  1. Hmm, I guess beggars can be choosers after all.

  2. That would be the feather in my cap for the year!!! Both candidates say the bailout is necessary. A yes votes takes 150 billion dollars in additional incentives and then Wall Street rejects it? AWESOME!

  3. Slack-jawed citizen: “Those greedy bastards are balking at the bailout because of the provisions on executive pay and golden parachutes!!! Their greed is getting in the way of the bailout!”

    Politician: “Screw ’em – we’ll FORCE them accept the bailout, their salaries be damned!”

    This will be a take-over, not a “rescue”

  4. Good point, anon. I was blinded by my hope.

  5. Bwahahahahahahahaha!!!!!

  6. They should.

    Why would I want to recognize billions of losses on my balance sheet by taking a chance on selling in a reverse auction?

    Now that the SEC has relaxed the rules on marking assets – a reasonable exec should wait it out without crapping on his balance sheet and triggering a capital ratio breakdown.

    The exec pay issue is just icing on the cake.

    UNLESS – the TARP is rigged for banks to sell assets at full contract value. Could be….

  7. Dow down 750 and all is well!

  8. Oh, yeah, the market’s bottoming all right, at maybe 5,000. I bet the guys at G-S and M-L wish they had signed up at 9 AM today, before the markets opened. Oy!

  9. My one hope is that this type of nonsense will finally steer us away from the ‘Government by Dow’ that has become the fashion in the past 30 years.

  10. Congress can’t even throw money out of helicopter with out fucking it up.

  11. Instead of wasting money trying to rescue these firms, we should be buying them up and taking them over.

  12. Instead of wasting money trying to rescue these firms, we should be buying them up and taking them over.

    I think you are conflating “we” with the “US government”

  13. 750 down? Good! I’m sick of overpaying for my stocks!

  14. No, I think the gov’t should become the investors here…Look at it this way, why should we purchase the these companies’ junk when we can take the whole fucking company and do whatever the hell we want with it! They want us just to take their junk.

  15. Congress can’t even throw money out of helicopter with out fucking it up.

    That’s because when you throw money out of a helicopter, it gets sucked up into the rotors.

  16. James,

    Are you looking for a job or something?

  17. Isn’t it interesting how the Masters of the Universe (TM) tell us the bailout must be approved or the whole world will go into the crapper, now are having second thoughts if nthere are going to be strings attached.

  18. James –
    why should we take their junk? Do you think we wanted that?

  19. nobody could have known…

  20. That’s because when you throw money out of a helicopter, it gets sucked up into the rotors.

    Use gold bricks. Aim for the head.

  21. You might have missed this:

    http://economix.blogs.nytimes.com/2008/10/04/will-paulsons-two-plans-unplug-the-liquidity-trap/

    “But Mr. Paulson’s fiscal-stimulus work didn’t end with the bailout bill.

    With hardly anyone noticing, on Wednesday he pushed through very technical and obscure changes to tax regulations that provide a “tax subsidy” for acquirers of troubled banks. Just as automakers stimulate car sales through rebate checks, the Treasury is providing a form of tax rebate to acquirers of troubled banks. Everyone can thank Hank Paulson and his stealth tax-driven fiscal stimulus for the astonishing news that Wachovia was being acquired by Wells Fargo and not Citigroup. It was Mr. Paulson’s tax subsidy to Wells Fargo that provided the fiscal grease to make this deal happen. Pundits who point to the deal and proclaim that the “free markets work without government help” don’t understand the motivating effect of several billion dollars of tax benefits to Wells Fargo.”

    Perhaps they’ll take the tax subsidy method.

  22. That’s because when you throw money out of a helicopter, it gets sucked up into the rotors.

    Use gold bricks. Aim for the head.

    “As god as my witness, I thought turkeys could fly!”

  23. 750 down? Good! I’m sick of overpaying for my stocks!

    Ha! It’s only down 600 now!

    Wildcard bitchez!

  24. “As god as my witness, I thought turkeys could fly!”

    One of the great moments in TV comedy.

    No, I think the gov’t should become the investors here.

    The one thing that could make this worse is if government ends up owning big chunks of these banks. The conflict of interest would be so huge, it would have its own gravitational field. The market distortions would bend light rays.

  25. The market distortions would bend light rays.

    We could have Senators from the Finance committee sitting on the board of actual banks.

    Advise and Consent, indeed!

  26. JW,

    If you keep rallying the market I won’t get my condo! Stop it, right now!

  27. 750 down? Good! I’m sick of overpaying for my stocks!

    Impossible. Congress saved us.

  28. You’re right, TWC. I should invest in some more index funds.

  29. Funny thing. It is far more likely that Wall street will just skirt all of the negative parts of the bailout by simply setting up secondary institutions to buy their bad papers and sell them to the government once they find out what the government is paying for the notes. Or sell them to already existing shady dealers, like California or New York.

  30. Impossible. Congress saved us.

    No TWC!
    They tried to save us, but the political party that you don’t belong to is responsible for delaying the much needed legislation by 4 days. If we’d have passed this important legislation the first time, confidence would have restored to the situation I don’t have any understanding of at all, and we wouldn’t be seeing these horrible market drops all around the world.

    Vote for me, ’08

  31. If you keep rallying the market I won’t get my condo! Stop it, right now!

    Only -547 now! You will know the horror of middle-class, suburban squalor! BWAAHAHAHAHA!

  32. Forgive my igorance, but if none of these people sell, then there is no bailout and the taxpayer is off the hook? Right? They are not off the hook for all of the pork but Congress would have done that anyway. I really can’t see this as a bad thing.

  33. The best way to bargain hunt for a house is to look for the ones with the owners crying on the lawn.

  34. I hereby conceed the 2008 election.

  35. No, I think the gov’t should become the investors here…Look at it this way, why should we purchase the these companies’ junk when we can take the whole fucking company and do whatever the hell we want with it!

    “The government” can’t become an “investor” because the government has no money to invest with. If “we” (the people) want to buy these companies, just wait until their stock tanks and buy it. But that means we have our own money invested, so we’ll try to run the companies to make a profit so we get a return on our investment. The government, however, having “purchased” the companies with taxpayer money, won’t care about return and will destroy the companies by enacting whatever “social justice” type rules they want to impose.

  36. What about all those poor saps who took out a home equity loan? Forgive me if I’m wrong, but didn’t a lot of people borrow additional money when the value of their house “increased?”

  37. there is a growing view on Wall Street that the market may be bottoming out.

    What was it, about six weeks ago that everybody knew gasoline would be $20/gallon by now? Instead the price is dropping, despite major Third Coast refinery damage.

    Maybe the MSM doesn’t always get it right?

  38. Larry –
    I believe Goldman Sachs predicted $200 a barrel. If I thought they weren’t just making an effort at market manipulation, there’s no way I’d ever consider buying their stock.

  39. Reinmoose,

    As a rule, I NEVER invest in financial institutions. They are a bit to subject to the whims of “the people”. You may read “the people” as their representatives in government. Local, state, and federal.

  40. Please please please shun this, Wall Street–it will make everyone who pushed and voted for it look like fools and liars.

    Please please please.

  41. Epi –
    Maybe Wall St is doing that thing that I used to do whenever my mom would tell me to do my homework (I always got my homework done on time and was a good student, without her help). That is to say, maybe they’re having a major sell-off as a punishment for the Government trying to prove that it can control them.

  42. I would be cool with that, Moose. Anything that punishes those who pushed and voted for the bailout–especially those who changed their vote. I want to see them with nothing left but Charlie work to do.

  43. Epi,

    I’d like to see them peeled, roasted, salted and used as rape-dummies for pit-bulls with acid-semen.

  44. So, how is Washington Mutual’s stock doing right now?

  45. SugarFree,

    I gotta get to work but I will drop some lingo on you before I’m off. Acid skeet. Dont’ think I have even heard the word semen used except in biology and when refering to Navy personel.

  46. Please please please shun this, Wall Street–it will make everyone who pushed and voted for it look like fools and liars.

    Nope. Spin it for maximum blameitude. *They* will be the coll headed, courageous and scrappy band of legislators who tried, desperately tried, to save the country, in a time of crisis and calamity. But alas, the forces of special interests were too strong and help arrived, sadly, too late to do any good.

  47. I’d like to see them peeled, roasted, salted and used as rape-dummies for pit-bulls with acid-semen.

    You’ve highly tempted me to use a quote that I’ve been saving, but this isn’t quite right.

    Instead, I’ll say that I’d like Mac’s dad to “rape them so hard the room will stink.”

  48. So, how is Washington Mutual’s stock doing right now?

    13.9 cents

  49. Naga,

    I like my insults and threats to be scientifically precise, you ulcerating granuloma.

  50. 2 more shares and you can buy a stamp!

  51. Steep fluctuations in the stock market are related to uncertainty. If there is uncertainty the stock plummets. Even good news, if uncertain, can cause dips. On the other hand, the end of uncertainty freqently causes rises to stock prices. (Of course, hese plunges/rises are below/above the trend line).

    Uncertainty about the bailout: plunge.
    Uncertainty that the no vote would hold: plunge.
    The bailout passes, but uncertainty about what it means causes a further plunge.

    So what will cause a rise? The election. It doesn’t matter who wins or loses, whether or not a pro-business president takes office, the stock market will rise. And it will rise again in January after the inauguration. That is, unless the winning candidate makes some speech that raises the spectre of uncertainty again.

  52. If Wall Street shuns the bailout, does the Treasury get the money back?

    (Rhetorical snark done)

  53. It doesn’t matter who wins or loses, whether or not a pro-business president takes office, the stock market will rise. And it will rise again in January after the inauguration. That is, unless the winning candidate makes some speech that raises the spectre of uncertainty again.

    Or gives a speech that makes certain that things will happen that are very bad for business/capital. Things like card check for unions, increases in the capital gains rate, etc.

  54. Instead of wasting money trying to rescue these firms, we should be buying them up and taking them over.

    Knock yourself out. They are publicly traded. See your broker if you’d like a piece of one of them.

    Oh, you want me to help pay for them?
    Fuck off.

  55. robc,

    If only it were worth that much! Along with the government shutdown of WM and generous transfer of WM’s assets to Chase, WM also filed Chapter 11.

  56. This wouldn’t be happening on wall street if the gubmint had throwed enough money their way. And not these loans and investment crap. Just a boatload, literally, of cold hard cash. Free. That would have fixed it fine but noooooooo. They had to go and screw it all up.

  57. What about all those poor saps who took out a home equity loan? Forgive me if I’m wrong, but didn’t a lot of people borrow additional money when the value of their house “increased?”

    Not necessarily ‘poor’ saps. If another bank has a prior lien, then they can (and have been) just defaulting on the HEL–the bank holding the second (or third) lien can’t foreclose. (At least, that’s been my understanding.)

    Whoever’s holding the HEL (the lender or some later investor) is the poor one, because the loan isn’t worth a damn.

  58. reinmoose and Marc,
    I remember some years ago, my ma in law getting an equity loan. (or some such thing) The loan company sent an appraiser. Mom in law told them all the great additions and improvements she intended to do with the loan. The appraiser gave future value after predicted improvements. Appraisal was about 60% higher than the local bank and a realtor gave. She borrowed a bunch of money and pissed it away on other things. Not sure how the whole fiasco ended.

  59. I was actually glad to see the limit on executive pay, because it would cause firms to “not participate”. If the government holds a bailout, and no one shows up, vs. no government bailout… what’s the difference?

  60. From an AP article published today, “Investors have come to the realization that the Bush administration’s $700 billion rescue plan and steps taken by other governments won’t work quickly to unfreeze the credit markets.”

    Well DUH. So tell me again, George: Why were we in such a hurry to pass this thing?

    We need some kind of legislative “lemon law” to protect us from buyer’s remorse in cases of hastily passed bills, such as the bailout and USA PATRIOT.

  61. # Paul | October 6, 2008, 6:09pm | #

    # I was actually glad to see the limit on
    # executive pay, because it would cause firms
    # to “not participate”. If the government
    # holds a bailout, and no one shows up, vs.
    # no government bailout… what’s the
    # difference?

    Well, as long as there aren’t any provisions in the authorizing legislation that give godlike powers and vast oversight authority to government officials, regardless of whether or not anyone takes the money, then I’m with you.

    It’s a good point, though: if you attach enough odious strings to welfare programs, only the exceptionally, desperately unfortunate will have great enough motivation or low enough motivation to take the cash. But between you and me, I’d rather hear a fire-and-brimstone lecture while slurping chowder at a private-sector soup kitchen, than submit to the authority of some czar-wannabe in government, in exchange for the corporate equivalent of a bowl of chowder. It’s not as if Sister Bettina or Brother Clayton at the Soup Kitchen thinks they now own your ass indefinitely. But Czar Henry, that’s another story entirely.

  62. JAM, oh it gets better. From the man himself:

    Earlier, in Texas, Bush emphasized that the program must be effectively designed and not rushed into action.

    “It’s going to take awhile to restore confidence in the financial system,” he said. “But one thing people can be certain of is that the bill I signed is a big step toward solving this problem.”

    Got that? The Emergency Stabilization Act that absolutely had to be passed right this minute or else the world would end…is going to take some time for its effects to be noticed.

  63. The fix is in. A Goldman exec will be running the bailout. Paulson is a Goldman man. He also happens to be friends with Buffett, who recently invested in Goldman.

    Goldman will sell their worthless securities to the government (price doesn’t matter, anything above $0 is gravy) and keep the rest.

  64. xxx “great enough motivation or low enough motivation to take the cash” from my previous posting should be “great enough motivation or low enough SELF-ESTEEM to take the cash…”

    cunnivore: When you put it that way, the bailout bill seems an awful lot like the authorization for use of force against Iraq, in the sense that there are a lot of details to be worked out in time, at the discretion, overwhelmingly, of ONE branch of government (and NOT the lawmaking branch).

    I say that Congress had better get the spine to repeal them both with a supermajority, or I urge my fellow voters to fire the incumbents in November. The congress will not assert its proper authority relative to the President because the people continually fail to assert their proper authority over congress. This year, more than any other in my lifetime, I think the people MUST show DC who is boss. Incumbents go home and let fresh blood take over, preferrably independents and candidates from third-parties.

  65. “It’s going to take awhile to restore confidence in the financial system,” he said. “But one thing people can be certain of is that the bill I signed is a big step toward solving this problem.” – Bush, per cunnivore

    And I’m sure his face bore the trademark “W” smirk and twinkle in the eyes. The used car salesman has just stuck us with yet another lemon. And he may be right: if we’re dumb enough to fall for things like this, over and over again, we ought to be treated like children by the great white father in Washington. Disgusting.

  66. Here is a thorough write up of why the big guys or anyone on the line won’t directly participate.

    http://www.hodakvalue.com/blog/2008/10/congress_overcompensates.html

  67. Or gives a speech that makes certain that things will happen that are very bad for business/capital. Things like card check for unions, increases in the capital gains rate, etc.

    I don’t think so. I’ve seen the stock market rise on otherwise bad news before. That’s because investors are human beings too, and prone to believing political rhetoric. An increase in the capital gains rate may cause the market trend to shallow in the long term, but if it’s pitched right the market will rally. If enough people believe the bullshit, they’ll buy stock.

  68. “UNLESS – the TARP is rigged for banks to sell assets at full contract value. Could be…”
    Paulson is authorized to buy assets at any price up to the original purchase value.

    More important:
    No financial institution can escape the “deputization” clause of the bill. Paulson can force any institution to participate, whether they like it or not.
    The only possible “out” is to divest all the junk in new (exceedingly broke) entities, run by some Joe Six Pack, willing to take the taxpayer’s money … golden parachute or not.

  69. Muahahahahahahahah! My plan worked!!!

    Did I not say, a couple weeks ago that the best option was to poison pill the damn thing but loading it with so many restrictions that it would be totally unpalatable to the banks? 🙂

    Okay, I’ll try to avoid getting too excited. they still might take it.

  70. Did I not say, a couple weeks ago that the best option was to poison pill the damn thing but loading it with so many restrictions that it would be totally unpalatable to the banks? 🙂

    A very good idea indeed.

    I am not fond of the idea of golden parachutes; if I served on a corporate board of directors, I would vote against golden parachutes.

    Now, of course corporations are free to offer golden parachutes to whomever they please. But then governments are free to bail out whomever they please.

  71. If Wall Street shuns the bailout, does the Treasury get the money back?

    Sure. But the taxpayers will never see it again.

    What about all those poor saps who took out a home equity loan? Forgive me if I’m wrong, but didn’t a lot of people borrow additional money when the value of their house “increased?”

    In addition: What about all those poor saps cities who took out a passed huge budgets based on rising home equity loan? Forgive me if I’m wrong, but didn’t a lot of people governments borrow additional money when the value of their house tax base “increased?”

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