Wall Street Consolidation

[Gilding the Lily]

Morgan Stanley, the second-biggest independent U.S. securities firm, may sell a larger stake to China Investment Corp. and is in talks about a possible merger with Wachovia Corp.

This would mean, in just 9-months, we have gone from five large, independent wall street brokers to only one: Goldman Sachs. Notwithstanding the numerous issues in the financial sector, this is a classic industry shakeout... not entirely different than what has happened to the auto industry and steel industry in years past. The problems are different, the time-frame is different and the players are different, but there are many similarities. Just as Wilbur Ross came to the Steel Industry, someone will come to this industry, buy on the cheap, ride the storm, and rise from the ashes to the landscape of an industry that will never look or feel the same. Until then... enjoy the shakeout.

 

[UAL_TECH]

'enjoy' is probably not a vernacular I would use, but then again, it is probably just me!

The continued sell-out of M’erica will not be pretty or enjoyable.

B) xUT

 

[Gilding the Lily]

Britain's Financial Services Authority just banned short-selling of financial stocks and prohibited any increase in new bearish positions in the sector. Short-selling is what many people are blaming the latest drops in Morgan Stanley's and Goldman Sach's stock prices. Our SEC has placed some bans on naked short-selling (despite the term, the ban doesn't include short-selling while in the buff). Let's see if the SEC will follow suit and take a position similar to Britain's draconian measure.

 

[RDU Jetblast]

Shoot. We're going to have to learn Chinese without a single shot being fired.

 

[Gilding the Lily]

To help with the financial sector shakeout consolidation, the U.S. government is considering creating a new agency to handle takeovers and bailouts of financial firms.

"The Federal Reserve and the Treasury are realizing that we need a more comprehensive solution," Schumer said. Schumer said the new agency should not simply take over the bad assets of failed companies, but also modify mortgage loans to give homeowners relief.

 

[Gilding the Lily]

Let's see if the SEC will follow suit and take a position similar to Britain's draconian measure.

The SEC did, indeed. Let's see how long they keep this rule.

 

[delldude]

Shoot. We're going to have to learn Chinese without a single shot being fired.

Chinese and Spanish..... :blink:

What does one expect these days with every corporate entity doing the vendor out services thing...Might as well vendor out the whole frigging country.

 

[700IAM]

WASHINGTON - A half-trillion dollar bailout that the Bush administration and Congress are negotiating this weekend for faltering financial institutions could unload their bad debt on the government, and in turn the taxpayer.


http://news.yahoo.com/s/ap/20080920/ap_on_...ancial_meltdown

 

[Gilding the Lily]

WASHINGTON - A half-trillion dollar bailout that the Bush administration and Congress are negotiating this weekend for faltering financial institutions could unload their bad debt on the government, and in turn the taxpayer.


http://news.yahoo.com/s/ap/20080920/ap_on_...ancial_meltdown

Whether we like it or not, government intervention in financial crises is a huge part of our history; it is a tradition of America. Regardless of party in control, our government intervenes.

 

[Gilding the Lily]

Here is pertinent terms of the actual proposed bailout by Paulson and the Treasury. The remainder of the plan is found here.

LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY

TO PURCHASE MORTGAGE-RELATED ASSETS


Sec. 2. Purchases of Mortgage-Related Assets.

(a) Authority to Purchase.--The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.

(B ) Necessary Actions.--The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:

(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;

(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;

(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and

(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.

Sec. 3. Considerations.

In exercising the authorities granted in this Act, the Secretary shall take into consideration means for--

(1) providing stability or preventing disruption to the financial markets or banking system; and

(2) protecting the taxpayer.


(B ) Management of Mortgage-Related Assets.--The Secretary shall have authority to manage mortgage-related assets purchased under this Act, including revenues and portfolio risks therefrom.

© Sale of Mortgage-Related Assets.--The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.

Sec. 6. Maximum Amount of Authorized Purchases.

[b ]The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time[/b]
Sec. 7. Funding.

For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.

[b ]Sec. 10. Increase in Statutory Limit on the Public Debt.

Subsection (B ) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.[/b]

 

[Gilding the Lily]

In regards to the $700b "bailout" McCain believes that there must be a bipartisan oversight panel to ensure taxpayer's money is being used wisely. He wants the oversight panel to be made up of the "most-respected people in America." He suggests using Warren Buffett (supports Obama), Mitt Romney (supports McCain), and Michael Bloombers (Independent).

If a bailout plan were to be created/inititated as it is in its current form, I would welcome McCain's plan for an oversight panel.

 

[Cosworth]

I guess it depends on what type of authority the panel is given. If it is like the NTSB where recommendations are given and then ignored by the FAA then what use is the panel? Also, as I said in the other thread, if the CEO, CFO's and other 2nd/3rd tier execs are not put in front of a shooting squad, then I am not inclined to add an additional $1,000,000,000,000 to the deficit because of governmental/executive incompetence/greed/malfeasance.

 

[Gilding the Lily]

Yes, notwithstanding any rescues, I still hold strong to the fundamental maxim that those who reap the gains must also bear the losses. Where the maxim is breached is where any failures also create a significant loss to those who did not reap the gains (e.g., mainstreet). If it reaches the point where a rescue will limit the socialized losses to less than what failures would entail, a bold move is required. Such a move may change the landscape of capitalism for years upon years, thus it is important that we get it right. I pray for widsom and discernment for those in the decision-making process.

I sincerely hope they strongly consider other options, such as a debt-to-equity swap, as an alternative to solely using a massive bail-out (possibly consider a hybrid approach that uses both --or several -- approaches).

 

[Gilding the Lily]

Notwithstanding the numerous issues in the financial sector, this is a classic industry shakeout... not entirely different than what has happened to the auto industry and steel industry in years past. The problems are different, the time-frame is different and the players are different, but there are many similarities. Just as Wilbur Ross came to the Steel Industry, someone will come to this industry, buy on the cheap, ride the storm, and rise from the ashes to the landscape of an industry that will never look or feel the same. Until then... enjoy the shakeout.

So it looks like we may not need to wait long for our knight in shining armor. The Oracle of Omaha, Warren Buffett, will invest $5b in Goldman Sachs.

 

[Tug McGroin]

Student, car debt quietly added to bailout plan

In the dark of night over the weekend when most people were snoozing, the Treasury dramatically expanded its bailout plan to include buying student loans, car loans, credit card debt and any other "troubled" assets held by banks.

http://www.washtimes.com/news/2008/sep/23/...-quietly-added/