Remember the bank bond fund? Forget it.

Remember that big fund the banks were putting together back in October to pool and bail out various bad investments they had made? You remember, the $80 billion super duper fund? Well, forget about it.

This from CNBC.com this afternoon: "Major banks have abandoned plans to set up a bailout fund for subprime-related debt, mainly because not enough banks were willing to participate."

More: The fund, "... was intended to buy the assets of ailing so-called "Structured Investment Vehicles" in order to prevent a fire sale of billions of dollars worth of shaky debt.  But a source close to the situation told CNBC that the fund is being dropped because of a lack of interest from banks in contributing to the fund and a lack of high quality assets that these SIVS were willing to sell."

Thoughts? Analysis? Email story tips to peter.viles@latimes.com.

Comments

[Cal]

Lou Barnes has his bailout proposal up:
http://www.boulderwest.com/news/1828.html

[Eric Solis]

Are you Smarter than a Fifth Grader?

Many have sold their homes because they could not afford them and have not bought a new one because they can not afford the payments given the high prices, especially in Southern California. Many free market minded folk may have also come to believe that the housing market has been out of control and has behaved more like a leveraged bond portfolio as apposed to a family dwelling and that eventually the massive boom created by an artificially low inflation rate, inflated pricing (due to ill-advised tax laws), coupled with stagnant personal incomes and loose funding standards would soon come to an end with a popping sound that would echo tulip bulbs bursting.

Then these families that delayed gratification and made tough choices would be in position to buy a home at a price that made sense.
But, along with the fact that communist regimes have been snatching up our banks, these folks also failed to anticipate the Governments bizarre behavior as they (Federal Reserve banks) would so ignorantly rush in to rescue speculators from losing money.

FACT: Money that central banks are putting in the hands of speculators and risk takers is at the expense of those of us who applied good money management principals. This exercise/reaction in monetary policy is not Capitalism, it is Bank Monism. The Central bank and the U.S Government are placing a tax on prudence and good risk management principals, which in the long run will end with grave consequences. This is a grotesque example of rewarding bad behavior.

The flawed fiscal and monetary policies being considered in response to the sub-prime debacle is the same sort of thinking that got us into this mess to begin with. As Albert Einstein once said (paraphrasing)... "You can not continue in the same behavior that created the problem in the first place".

This is so elementary that my fifth grade daughter gets it. How about you Ben and George...Are you Smarter than a Fifth Grader (Franklin and Washington you are not)?

For Gods sake, let free markets work.

[MyLessThanpPrimeBeef]

Eric Solis, good post and I like the irnoic touch there at the end with the connection between religion and Capitalism.

Tom Petruno says it best in today's LA Times: this may be "the tipping point of a monumental shift in global power shift.'

http://www.latimes.com/business/
la-fi-petruno22dec22,0,2780149.column?
coll=la-home-center

It's like the passing away of Marcus Aurelius and we are witnessing the onset of the decline of the Roman Empire. They had their illegal Goths and we have our illegal immigrants. We are over extending ourselves like they did. Money bought the army who put their candidates on the throne. Today, we vote for the president three times - the first time the rich vote with their money, and it's not one vote per one rich person. No, the more money you have, the more votes you get. We call this raising campaign funds This is in fact an election and it is the real one. The guy or gal voted the most popular by the rich is anointed the leading candidate.

Then we have our primaries where party members vote. And then we have the general election where every eligible citizen votes. Often the winner in the first round, i.e. Big Money's choice, is the eventual winner. Such winners remind one of Hermes Trismegistus - Hermes Thrice the Great. But I digress.

In any case, Big Money has made its moves like NAFTA and WTO. Yes, they, meaning people outside our empire, have bought into out Blackstone, our Citicorp, our Merrill Lynch and our Morgan Stanley, but arrangements like WTO reciprocate by allowing Big Money to transfer their wealth to their new Constantinople and buy faster growing companies elsewhere beyond the frontiers. THe only thing left to be done is to ensure our status as the sole military superpower in the world, a sort of Praetorian Guard of Big Money, in order to enforce treaties and protect their investments.

[Jason Hoppe]

MyLessThanpPrimeBeef

A good post and a lot I agree with, with exception of the military. They can't be looking at us to be the soul army superpower when we're over in Iraq with plywood for armor on our vehicles. And that's just the tip of the Iceberg on that subject, just like subprimes are the tip of the iceberg on doomed loans. There are plenty of armies out there right now that can more than give us a run for our money in battle.

Just my opinion.

[Uncle Billy]

After complaining for quite a while that we need some folks outside of government and private industry to figure out how to fix our economic woes on a long term basis -- I had a little talk with the mother of an MIT student who is studying "econophysics." Apparently, the student was part of a contest sponsored by Bernanke. The students were to come up with solutions to the "sub prime" crisis. The mother's comment was something like: "Great, we have a bunch of grad students directing the direction of our economy." I think the contest might have some value despite the fact that it is probably a dog and pony show.

But what is "econophysics" and what is it doing for us lately. Here is a link to an overview: http://tinyurl.com/2ew337

From what I gather, the big brains have figured out that we can't look at the economy in mechanistic terms, but that we have to look at it more like physicists study nature currently. The concensus seems to be that there's not a whole heck of a lot we can do with government intervention. Paulson's top feeders don't care a whit about how to stabilize and economy and distribute wealth; they thrive un instability and inefficiences and want to concentrate wealth in their own pockets, as most of us do as well.

So we're in a situation where the we have a vast ocean, with whales lumbering in the abyss, opening up their ginormous (credit to my kids) maws and ingesting millions of krill at a time, leaving much fewer krill for the other fish to feed on. They become the lonely feeders as this leaves much less food for the rest of the chain to feed on. Or something like that. With an even distribution of the food chain, it seems to me that the whole chain is in better health. I don't buy the warren buffet argument that the very wealthy are more efficient at distributing wealth than society as a whole.

Hugely disproportionate wealth created by those who can feed very effectively on our natural competitiveness and greed. For many years the "problem" was due to an elite that were taught to read, (clergy and nobility) while the others worked the fields for them and went to war for them to fill up the coffers. Then, after a few revolutions, we placed the gift of book learnin' in the hands of many. This became less and less important, it seems, with the rise of credit and the increasing ability for a small group of people to suck up the new wealth that went hand in hand with greater education. We're backsliding, education wise, and self discipline wise. This of course fattens the barons.

Thinking out loud again, but maybe there's something of value in there.

[Uncle Billy]

While looking back through the blog to see when it began, I ran across the following post from april about Bill Gross' "Plankton Theory" from the early 80's. He says it much much better of course, focuses on real estate, and uses plankton instead of krill, but pretty cool any way you slice it. Interesting as well to use the time machine and study how he was on top of the 80's bubble.

http://latimesblogs.latimes.com/laland/2007/04/
the_bill_gross_.html