July 10 2008
Paulson: “Homeowners should not anticipate a government bail-out. Banks should not expect to be bailed-out by government, despite intervention by the Federal Reserve in the near-collapse of Bear Stearns in March.”
Translation: Critical banks and GSEs must not be allowed to fail.
Paulson: “For market discipline to be effective, market participants must not expect that lending from the Fed, or any other government support, is readily available. For market discipline to effectively constrain risk, financial institutions must be allowed to fail.”
Translation: Expect the mother of all bailouts at taxpayer expense.
July 10 2008
Former Fed Governor William Poole: “Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer”
Translation: “Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer”
July 11 2008
Paulson: “Today our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission”
Translation: We are working behind the scenes to address the inevitable failure of Fannie Mae and Freddie Mac. There is no conceivable way that Fannie and Freddie stay in their current form.
July 11 2008
Fed spokeswoman Michelle Smith: “There have been no discussions with the GSEs about access to the discount window”
Translation: We have plans to discuss the discount window with the GSEs as early as Monday, July 14.
July 13 2008
Paulson: “Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies.”
Translation: There is not a snowball’s chance in hell that Fannie and Freddie survive in their current form. We are working on contingency plans right now.
July 17 2008
Merrill Lynch: Don’t forget the salt
Merrill Lynch CEO John Thain: “Right now we believe that we are in a very comfortable spot in terms of our capital.” (July 17, 2008 — Thain on a conference call after posting Merrill’s second-quarter results)
Translation: We have nowhere near enough capital. If you believe we do, then you are a complete fool. After all, I have stated Merrill has no need to raise capital 8 times this year only to immediately raise capital. (See above link).
July 20 2008
Paulson: “Our banking system is a safe and a sound one.”
Translation: Our banking system is on the verge of collapse. (Please see You Know The Banking System Is Unsound When…. for more on this theme)
Washington Mutual CEO Kerry Killinger: “The capital that we have in place is sufficient to manage through this period. We have no plans at this point to raise additional capital.”
Translation: We desperately need to raise capital. Unfortunately, death spiral financing and low share price prevents us from doing so.
August 19 2008
Treasury Department: The Treasury has no intention of using its newly authorized power to invest in either the debt or equity of Fannie and Freddie.
Translation: We have every intention to invest in the GSEs, and far sooner than anyone thinks. We never would have asked for a blank check if we did not think we needed it. Boy do we need it.
August 22 2008
Warren Buffet: “Fannie Mae and Freddie Mac, the two largest mortgage finance companies, don’t have any net worth. The game is over as independent companies.”
Translation: “Fannie Mae and Freddie Mac, the two largest mortgage finance companies, don’t have any net worth. The game is over as independent companies.”
September 4 2008
Bill Gross Wants Treasury To Buy Assets To Prevent Tsunami
Bill Gross: “Unchecked, it can turn a campfire into a forest fire, a mild asset bear market into a destructive financial tsunami. If we are to prevent a continuing asset and debt liquidation of near historic proportions, we will require policies that open up the balance sheet of the U.S. Treasury.”
Translation: Please rescue PIMCO. I bet the farm on a bailout.
Take A Load Off Fannie
The video is very enjoyable with a great song throughout.
My analysis of what’s at stake for the taxpayer can be found in Paulson Rolls The Dice At Taxpayer Expense.
Mike “Mish” Shedlock
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