From The Financial Ninja, Oct 2, 2008 8:19 am
“This exercise illustrates the difficulties in measuring fair value. It will be interesting to see how and whether the Fed chooses to apply fair-value accounting principles.” –Bank of America report
Fed May Lose $6 Billion on Bear's Assets, Bank of America Says: “The U.S. Federal Reserve may lose as much as $6 billion on a portfolio of mortgage-backed assets it took over from Bear Stearns Cos., according to Bank of America Corp. analysts.
The Fed will today announce its quarterly estimate of the fair value of Maiden Lane LLC's $30 billion of holdings that JPMorgan Chase & Co. considered too risky when it acquired Bear Stearns in March, Bank of America analysts Jeffrey Rosenberg and Hans Mikkelsen wrote in a client note. The central bank valued the assets at $29 billion as of June 30, according to the report.”
So, what do you REALLY think the odds are of the TAXPAYER making money off the bailout bill that the senate just passed? If the Fed can lose $6 billion on $30 billion… how much do you think Paulson can lose on $700 billion that can be indefinitely recycled?
“About half the portfolio is backed by commercial mortgages and half by residential loans. About 80 percent of those are so- called Alt-A mortgages, a step higher than subprime in terms of quality, with the remainder prime mortgages, Bank of America estimates.”
The Bear portfolio is actually far more conservative and of far higher quality than the TOXIC JUNK that Paulson intends to purchase. Naturally, only the worst paper will be sold to him by the banks.
The US taxpayer will end up being the proud bagholder all of the worst securitized paper in the world.
“The valuation of the $12 billion of Alt-A mortgages varies by as much as $5.4 billion depending on whether the analysts use estimates that Goldman Sachs Group Inc., Lehman Brothers Holdings Inc. or Morgan Stanley apply to their own portfolios, the analysts wrote.”
That is one hell of a range on $12 billion. Imagine the random fun an army of accountants could have with a $700 billion portfolio of this stuff? I can’t wait for the Fed itself to dispense with fair value accounting…
Just to add insult to injury, the senate managed to sneak into the bailout all sorts of random and insulting things...
The people get SHAFTED. AGAIN.
via Calculated Risk (Curious About Wooden Arrows for Children?) and Naked Capitalism (More on the Oinking Bailout Bill):
"SEC. 503. EXEMPTION FROM EXCISE TAX FOR CERTAIN WOODEN ARROWS DESIGNED FOR USE BY CHILDREN.
(a) IN GENERAL.—Paragraph (2) of section 4161(b) is amended by redesignating subparagraph (B) as sub301 paragraph (C) and by inserting after subparagraph (A) the following new subparagraph:
(B) EXEMPTION FOR CERTAIN WOODEN ARROW SHAFTS.—Subparagraph (A) shall not apply to any shaft consisting of all natural wood with no laminations or artificial means of enhancing the spine of such shaft (whether sold separately or incorporated as part of a finished or unfinished product) of a type used in the manufacture of any arrow which after its assembly—
(i) measures 5⁄16 of an inch or less in diameter, and
(ii) is not suitable for use with a bow described in paragraph (1)(A).
(b) EFFECTIVE DATE.—The amendments made by this section shall apply to shafts first sold after the date of enactment of this Act."
The Fed loses about $6 billion. The Senate passes the worst bailout bill ever and the people get shafted again.
Just another day in Amerika.
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