Citi (C) And Bank of America (BAC) Buying Distressed Mortgages
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Secretary Tim Geithner designed a plan to assist the largest banks to rid themselves of toxic mortgage assets, but now Citigroup (NYSE: C) and Bank of America (NYSE: BAC) are aggressively buying up those same securities in the secondary market, according to The NYPost.
Both Citi and Bank of America each have received $45 billion in federal rescue cash to help prop up the economy and increase their lending to businesses. But the banks' purchase of mortgage-backed securities, including some that use alt-A and option ARM as collateral, is having some traders question why they are buying those bad assets. Alt-A and option ARMs are widely recognized as the next mortgage type to see large increases in defaults.
An insider told The Post, "that what's been most puzzling about the purchases is how aggressive both banks have been in their buying, sometimes paying higher prices than competing bidders are willing to pay."
Citi declined to comment, but Bank of America said its purchases of secondary-mortgage paper are part of its plans to get the mortgage securitization market going again. "Our purchases in [mortgage-backed securities] increase liquidity in the mortgage market allowing people to buy a home," said BofA spokesman Scott Silvestri.
While some observers agree that the buying helps unfreeze the mortgage market, others argue the banks are throwing away taxpayer funds instead of lending.
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Banks get Toxic Assets Insured by Gov't
IF one bank uses the tarp money to sell their toxic assets to another bank, and they buy the toxic assets of another bank, fulfilling the sread of money {ha ha}, they then have changed the toxic assets they own so that they are no longer their OWN original toxic assets. Now the present toxic assets they have, not being the original ones, are insured by us the taxpayers through the gov't GGPIP program. IF the banks make money on them, they keep it for themselves, but if the lose the money, they still get their losses repaid by the government program. There is no way that both the banks and the government and it's leaders do no know that this is what is happening. We the taxpayer take the losses, and the economy FALSELY seems to be improving. The stock market is nothing more than a scam for those who make money from it. The profits are imaginary because the money that they say they make as the stocks go up does not exist, becuase on extra money is ever being printed. The total dollar amount of dollars in America remains the same, so how can the people make profit when no extra money is being printed. Why do we think the gov't has to MAKE UP or REPLACE the money that was lost? Who got the supposed LOST MONEY?? It never existed as cash except on paper and the trillions being added to the economy now is trying to make up what was never there and could never be a profit in dollars. Every one operated on the same debt, mor or less. Ten thousand of dollars was borrowed by many lenders for ONE thousand in actual existence. It is time for us as the public to quit trying to make imaginary money by supporting the fraudulent and dishonest market manipulators who we eventually give all our money to. Our own greed causes us to operate and include ourselves into an voluntary slavery system, us working to give all our money to some one else up the line. Why does the economy improvement depend on US GOING INTO DEBT and owing someone what we have not even earned yet. Imaginary money is what the system is. Fake. It must fall every ten years or so and can do nothing else ever. It is crooked.
self-inflicted wounds are invariably the most painful
It would be a different world today if they'd taken 2 simple steps that were obvious a year ago after the Bear Stearns debacle -- reinstitution of uptick rule, suspension of mark to market for illiquid assets
Giethner's Arm twisting
Here is what I think is going on. The new plan to remove toxic assets via private money participation hinges on banks willingness to put these toxic assets for sale. They are not willing. The assets which banks want to hold to maturity have not been marked down to level 1 mark to market prices (i.e. 0) but they are cash flow positive making them more a lot more valuable than the mark to market valuation. So what will happen is that Giethner will arm twist these banks to deliver these "toxic" assets to the auction. To counter this it would behoove banks to buy as much of these assets on the secondary market as possible to present them at the auction. Since they only payed 30c for them their losses from low bids on the auction will be small or none. If they had adjusted mark to market to allow for cash flow in valuation of assets, these billions of dollars sent to banks would not have been necessary. Such a waist. My 2c.
roll eyes
This is from the NY post.. try to find a more credible source please.
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Make Short Selling Entirely Illegal.
Don on May 24, 2009 12:54 AMThe original purpose of the market was for new companies that were short of cash to possibly be able to obtain financing to expand or fund their start up costs etc. If they failed, ONLY their stock would go down and the investors would lose ON THAT STOCK ONLY. But if it went up and was successul, then the original investors would make some money. If the new company failed, then only that stock would go down, not the whole market. NO ONE SHOULD BE ABLE TO MAKE MONEY FROM A STOCK LOSING CAPITAL POSITION. That was NEVER the original inent or purpose of the market. Shysterism took over, and I am speaking plainly about HEDGING etc. IT makes the market both manipulated and a casion game where mostly the "dealers" make money, knowing what they are going to cause the stocks to do, or what they know from their insider buddies what is going to happen re mergers and so on. The little man always is the goat and the source of the money supply that the "wealthy" get their wealth from. They need people to buy and borrow so they can make money by PUTTIN US IN DEBT and keeping us IGNORANT about the truth of economical facts. Ie.... the SPIN the results any way they want to make things look good when they are not. Case in point. Food prices in many areas, mine included, have increased by about 20 percent in the last 6 months, but they say inflation is DOWN. That is a lie, and what they want us prospective buyers and borrowers to believe. They benefit because THEY SELL what we buy, one way or the other. If short selling or making money on a market going down was illegal and not able to be done, the market would STABILIZE OUT IMMEDIATELY, and be far more consistently stable. Making money on a market going down is unAmerican and is un-nieghbourly. It is certainly not a Christ oriented system, yet many market investment fund managers and advisers say they are "AMERICAN" and Christian. Taking advangage of other Americans or countrymen and knowing they are doing so and doing so on purpose is UN-AMERICAN. Let's call it what it is and lets call those who do this "who they are". Just look at the ideas they present to us about their own "talent" as advisors etc., but what they really only know is what some one else told them about it's workings, and what those who told them were told by those "shysters" before them, ad infinitum. Mr Obama for instance, knew nothing about all the things he is now dealing with before he became president and anyone who thinks that the things he is agreeing with and is proposing and is trying to bring into law is his own ideas and wisdom is in need of an enlightening. Mr Obama, as one man who is yound and was not involved in most of the things he now has to picture the president as ruling over, is only going on what his advisors, who are old system, TELL HIM as if it was wisdom. They are supporting an economical myth that must fail miserably and completely eventually, no matter how long they try to shore it up. The way of all corruptible things is "death". by that corruption. This is the way things work in the physical creation, returning to dust or scattered source it began from, again, as it were. The economic fund advisors did not advise well, did they, and yet they now say they know what to do now. My goodness, are we mentally bliind as well as physically ignorant of the facts because of our own greed. The market, and most people who operate in it, PRODUCE NOTHING that you can take home, eat, or live in, by their jobs. Ie... no product produced. Their "work" produces nothing for the improvment of the world. People may buy a car that ends up being worth 3 percent of what they actually paid for it, but at least they did get to USE it to get themselves around for a while while it was losing money for them. Investment advisors etc. take a hefty pay package for using YOUR MONEY. This too is foolish because they sell US the idea WE can profit but they are the one's who profit most, doing nothing at all. END HEDGING and shorting of stocks immediately and use the trillions they are putting into existence to buy up any short posisitons and options etc. now in existence up to this date, and never mind giving the money to ;money managers and bankers and so on, and the market and economy will stablize almost IMMEDIATELY. But of course, all those who make their money, or many of them anyway, by investment counselling etc. will be unemployed like they should be. If you the reader does not believe or want to beleive this right now, look into this yourself. We are being manipulated all the time. Stores for instance, call in "marketing", but it is really a word that means manipulating the buyers to the sellers advantage. Unfortunately of course, the buyers are usually caught by their OWN DESIRES for things that are really of no real use. For example, sex and the supposed control of "horse" power and supposedly to be able to be seen by others in a spiffy new car etc. is what is used to sell the cars. Not value, but image and as a by product, get the girls by having a certain car and presenting a certain image. Can you eat that if you are hungry? No. They use our common greeds that they say are all right to have and follow, to entrap most of us into doing what they want us to do so they can benefit monetarily and also by "fame" etc. Lemmings do it too.