My company has purchased loans before. We sent people to the selling bank, parked ourselves in a conference room stocked with coffee and snacks, and did something called “due diligence.” This means we spent a week analyzing the loan files and repayment history. Sound exciting? Guess again. But before we bought a portfolio, we wanted to understand the fundamentals of each loan, and decide which ones we wanted, and which ones we didn’t. 

My understanding is this $700 billion dollar bailout is to purchase distressed assets from financial institutions, to reduce the pressure on their reserve for loss provisions, reduce pressure on credit default swap (CDS) buyers so that they won't need funds to fulfill them, reduce market pressure to sell mutual funds that purchased collateralized debt obligations (CDOs) with these assets as the underlying security, prevent a further deflation of M3, and thereby restore short-term credit market stability. Fine.

But what exactly are we, the taxpayers buying here?

There isn’t a single mention of any due diligence in these bailout proposals. There isn’t even a discussion as to how they came up with $700 billion. Why not? Folks, this due diligence process is what the regulators did in the S&L crisis. This is what JPM Chase may do with the WAMU assets they were forced to buy by the regulators.

First, let’s assume those assets are primarily distressed mortgages. So let’s just play with numbers for a moment to understand what I’m asking and how much it might cost – at least I can provide a concrete example, which is more than I can say for our leadership.

Let’s say there are 2.8 million homes now in the foreclosure process. Let’s start there, then we can go to the ones that are 60-90 days delinquent later. 

In my due diligence trips, I look at 5-10 files per hour. These were commercial mortgages and loans, with more complex cash flows, multiple borrowers, and environmental reports to skim as well as appraisals. I’ve also reviewed consumer mortgage files – they take much less time, once you know where things are in the loan file. Let’s say a typical reviewer can analyze 10 per hour. 80 per day. Let’s assume a 20-day working month; a single person ought to be able to review about 1,600 files per month. To review 2.8 million files in a month, you’d need 1,750 people working at this pace. I bet you can find that many in the financial sector right now who have been laid off this year. So pay them $20 per hour; it would cost $5.6 million bucks.

Want it done in two weeks? Hire about 3,500 people.  Etc.

Where to start?

The easiest place would be the bank(s) with both the highest number of foreclosures and the highest dollar amount of foreclosures. Then the bank(s) with highest dollar amount of foreclosures, then largest number of foreclosures.

So what would we get with this little project? Is it worth more than $3.2 million paid to Alaska to study the mating habits of King crabs? I bet it is.

We should get:

1. The repayment history – vital, because it paints a picture of what the borrower can handle and gives the reviewer an idea of how to work the loan out.
2. Credit report – know how the borrower handled their past credit
3. Collateral value estimate, i.e. an appraisal – likely a high estimate, but this along with www.zillow.com or a tax assessment, you get an idea of what the home would sell for
4. Debt coverage  - this tells you what the lender thought the borrower could afford
5. Source of repayment – was it one income, or two? (hint – if the lender gave two people a mortgage they can barely afford, and one loses a job…)
6. Are there other liens? (if the borrower got a purchase money second mortgage, for example)
7. Liquidity – how much the borrower had to cover bad times (likely zero)
8. type of property – was it a rental property? Vacation home? Primary residence? The disposition of the property could vary depending on the answers here.
9. If it was a rental, was it rented? Is it now? For how much? Are the rent payments on time? How much of a vacancy has it had?

Once you have this data, you’ve got something real to go back to the regulators with. You can see which mortgages may need a deferment, so the borrower can get back on their feet, and which ones truly are due for foreclosure. Put it in a database, and analyze it. Are there concentrations? (We already know there are – California and Florida have the highest number of foreclosures, Arizona, Ohio and Michigan, etc.)

{Here is an aside – many of these mortgages were done from institutions regulated at the state level. So what are these states going to do here? Can’t they foot part of this bill? If South Dakota has the lowest number of foreclosures, why should their taxpayers pay a proportionately higher share of the bill?}

OK, now for the other assets. Like I said about the mortgages, we need to get to the core assets that are a problem. I have no direct experience with what information changes hands when a CDS is sold or a CDO is packaged and sold. Since the initial buyer of these swaps or CDOs can (and frequently) does trade them, we’d need to get to the core of the problem – the original seller. So can any TPM member with experience here comment if a similar due diligence program can cut to the chase with these derivatives? What are we being asked to pay for here?

Why hasn’t the President or the Fed or the regulators issued an order to get this done? I don’t see the problem. If my company can buy hundreds of loans this way, why can’t the Feds do the same thing here while the bailout negotiations are in process. Even if it costs $20 million, that’s a drop in the bucket compared to what they’re asking. This isn’t rocket science. It’s in the trenches analysis. And it would seem that the legislators would have a much better chance at crafting a bill that actually would work if we knew what we’re getting.

So again, what are we buying here?

How about some real information instead of bloviation and doom prognostication?

C’mon. Get cracking.

As Letterman so adroitly put it, you can't suspend the Presidency if there is a crisis. For those independents who didn't already know McCain makes hasty and rash decisions, they ought to have a pretty clear picture by now, and that appears to be evident in the polls. Survey USA polled on it, and most Americans think the debate should go on.
Well, if McCain is too busy being in DC to help with a bailout when he is not even on the senate committee tasked with it to debate tomorrow, I say let him - with one caveat.

Obama should have this opportunity to answer the moderator's questions himself, with full airtime from the media. If McCain isn't there to counter, too bad. 

I've posted before about the bailout, and I do think there are some genuine reasons to do it, but absolutely not without oversight, and additional regulation. Reclamation of corporate bonuses/pay might also be a part of the price tag too.
I spent a good part of today looking at the TED spread, M1, M2, and the commercial paper market as well as looking at business news. And I can't conclude there is a rush to get this done, though it sure looks bad for large banks. Look at the increase in the non-financial commercial paper market volume - Microsoft, for example, just announced a program to lend about $2 billion in commercial paper. So perhaps, even when large lenders collapse, other stronger ones step in to fill the gap.
So let me go outside of my area of expertise and ask, what would you do if you knew you were going to lose the election this fall? Not just lose, but lose congress as well?
Would you try to get a bailout so large it effectively inhibits your opponents' ability to implement their plans, without any ability to regulate the results?
Usually, I'm fairly sanguine about the economy, despite the sub-prime mess. But what I am forecasting right now is a drop in consumer spending leading to a recession. 
IMO, the way out is for the government to spend us out of it on things we need (for example by increasing domestic spending on health care, infrastructure, alternate energy) and cutting spending on things that don't directly improve the domestic economy (i.e. the Iraq war, etc.)
Finally, I'm no expert, and I believe that different opinions must be heard - so by all means weigh in on this. Do you read the commercial paper volume charts differently than I? Do you see something different in M1 and M2 that shows runs on banks? Is your company in a non-financial industry and planning to cut operations because they can't borrow?
Or is there something political behind the smoke and mirror show being put on by Paulson?
If you disagree, where is the data that shows we need to act now? 

This may be buried under the avalanche of Econ/Palin posts today, but in in light of the Federal Reserve bailout package granted to AIG, I can't help but comment.
$85 billion is a staggering sum to bail out a company; there is precedent for this, of course, such as Chrysler and others. Yet the government has also, in the past, acted to break up corporations when they have become too powerful - i.e. monopolies (Standard Oil, AT&T).
One of the planks in Nader's platform is to end corporate "personhood" as determined in the US body of law. Perhaps a compromise that may eliminate some of the massive losses we saw in 2000 (Enron) and now this year:
Once a corporation has become large enough that its failure can bring down the financial system, isn't it time to break that corporation up? Similarly, once a corporation gets large enough that it is deliberately avoiding providing the services in its mission (health care companies), isn't it time to break it up? Or providing a product that flat out is addictive and responsible for long-term health problems and death? 

TPM and other outlets seem to think there is a tiger by the tail in the "Palin" Rape Kit story. Please be careful to get the facts straight first as that is both a serious and incendiary charge.
I just spoke to one of the editors of the Wasilla Frontiersman, the publisher of the frequently cited newspaper. He noted he wasn't aware of Palin herself commenting on this issue, but also hedged - he hadn't searched.
The official quoted is the chief of police, who backpedaled and later said the criminals should be charged. 
Wondering yourself?
Here is the original article:
http://www.frontiersman.com/articles/2000/05/23/news.txt

I think it is perfectly fair to hit Palin for her stand on women's issues. But unless someone has something else, directly from Palin, this should not be an issue. Is the Obama camp raising this issue? Take a page from their playbook and hold yourself to a higher standard. 
However, if you've got facts, and Palin quotes, and I'm wrong here, by all means, open up the can!

I need to throw in my two cents worth on Sarah Palin. My friends and family had enjoyed the VP speculation on both sides. I'd stated that McCain could make things difficult for the democrats by selecting a woman as his vice president - might draw disaffected Hillary voters. We enjoyed discussing Palin, but all of us had ruled her out due to the experience issue. (We'd thought Hutchison would be more likely). Several republican friends of mine had told me their primary reservation about voting for McCain was age, unless he had a solid VP choice. This choice will no doubt thrill many Alaskans.

OK, now a few comments about Palin.

Despite her apparent lack of experience, Palin has been very successful in the AK political arena - she knocked off two of the most longstanding and familiar politicians in the state. (Knowles and Murkowski). Why? Here's a hint: she has a well-earned nickname - Sarah Barracuda - from her Wasilla high basketball days. She can throw an elbow. She also had alot of bipartisan support - and she is practical as well as pro-life. As a VP selection, I think she will fit well with McCain's base. It may make Biden's job difficult - he'll debate her, and can't look like he's "beating up the girl."

Alaska's primary state tax base is from oil. This means that state politicians tread carefully. They must manage the budget and not burn political bridges with the oil companies, but also steward the environment (vital after the Prince William Sound spill). As those of you already familiar with Stevens and Young, who have been in the US legislature for over 30 years each, the relationship with the oil companies also snares many AK politicians with bribery/etc. Palin has genuinely fought this, both at the local and state level. She got rid of alot of Murkowski people linked to oil and got rid of some of the perks as well. That's a strength for McCain.

A word of caution to the democrats - Alaska is full of real people, and Sarah Palin is one of them, not like media manufactured singers.  When you see photos of her fishing, it's because she fishes. 

I have no information about the state trooper scandal, but will post if I do. My gut sense is she's fired alot of people, and it wouldn't surprise me if the one fired had an axe to grind. It also wouldn't surprise me if she or a loyal staffer did dig around with the Troopers for some information. Let's see what French comes up with.  (That's the special prosecutor, and a former ADA with a decent local rep). 

Let me be clear - I am supporting Obama/Biden, and will enjoy voting for Obama twice in one year. 

But choosing Palin as his running mate should cause democrats some genuine concern. Though I think it neuters McCain's experience argument, I think she'll draw support from women voters. 

Palin brought change to entrenched Alaska politics. If McCain decides to put on a "change" show, this is the VP pick who has done it in her state. That's an ominous sign.

This is a lady who can govern, and can handle
contentious local politics with a firm and fair hand.  Now we'll see how
she looks on the national stage. This will be interesting, for sure. I think
well of Palin, but hope to be proven wrong in November.

I need to throw in my two cents worth on Sarah Palin. My friends and family had enjoyed the VP speculation on both sides. I'd stated that McCain could make things difficult for the democrats by selecting a woman as his vice president - might draw disaffected Hillary voters. We enjoyed discussing Palin, but all of us had ruled her out due to the experience issue. (We'd thought Hutchison would be more likely). Several republican friends of mine had told me their primary reservation about voting for McCain was age, unless he had a solid VP choice. This choice will no doubt thrill many Alaskans.
OK, now a few comments about Palin.
Despite her apparent lack of experience, Palin has been very successful in the AK political arena - she knocked off two of the most longstanding and familiar politicians in the state. (Knowles and Murkowski). Why? Here's a hint: she has a well earned nickname - Sarah Barracuda - from her Wasilla high basketball days. She can throw an elbow. She also had alot of bipartisan support - and she is practical as well as pro-life. As a VP selection, I think she will fit well with McCain's base. It may make Biden's job difficult - he'll debate her, and can't look like he's "beating up the girl."
Alaska's primary state tax base is from oil. This means that state politicians tread carefully. They must manage the budget and not burn political bridges with the oil companies, but also steward the environment (vital after the Prince William Sound spill). As those of you already familiar with Stevens and Young, who have been in the US legislature for over 30 years each, the relationship with the oil companies also snares many AK politicians with bribery/etc. Palin has genuinely fought this, both at the local and state level. She got rid of alot of Murkowski people linked to oil and got rid of some of the perks as well. That's a strength for McCain.
A word of caution to the democrats - Alaska is full of real people, and Sarah Palin is one of them, not like media manufactured singers.  When you see photos of her fishing, it's because she fishes. 
I have no information about the state trooper scandal, but will post if I do. My gut sense is she's fired alot of people, and it wouldn't surprise me if the one fired had an axe to grind. It also wouldn't surprise me if she or a loyal staffer did dig around with the Troopers for some information. Let's see what French comes up with.  (That's the special prosecutor, and a former ADA with a decent local rep). 

Let me be clear - I am supporting Obama/Biden, and will enjoy voting for Obama twice in one year. 
But choosing Palin as his running mate should cause democrats some genuine concern. Though I think it neuters McCain's experience argument, I think she'll draw support from women voters. 
Palin brought change to entrenched Alaska politics. If McCain decides to put on a "change" show, this is the VP pick who has done it in her state. That's an ominous sign.This is a lady who can govern, and can handle contentious local politics with a firm and fair hand.  Now we'll see how she looks on the national stage. This will be interesting, for sure. I think well of Palin, but hope to be proven wrong in November.

I need to throw in my two cents worth on Sarah Palin. My friends and family had enjoyed the VP speculation on both sides. I'd stated that McCain could make things difficult for the democrats by selecting a woman as his vice president - might draw disaffected Hillary voters. We enjoyed discussing Palin, but all of us had ruled her out due to the experience issue. (We'd thought Hutchison would be more likely). Several republican friends of mine had told me their primary reservation about voting for McCain was age, unless he had a solid VP choice. This choice will no doubt thrill many Alaskans.
OK, now a few comments about Palin.
Despite her apparent lack of experience, Palin has been very successful in the AK political arena - she knocked off two of the most longstanding and familiar politicians in the state. (Knowles and Murkowski). Why? Here's a hint: she has a well earned nickname - Sarah Barracuda - from her Wasilla high basketball days. She can throw an elbow. She also had alot of bipartisan support - and she is practical as well as pro-life. As a VP selection, I think she will fit well with McCain's base. It may make Biden's job difficult - he'll debate her, and can't look like he's "beating up the girl."
Alaska's primary state tax base is from oil. This means that state politicians tread carefully. They must manage the budget and not burn political bridges with the oil companies, but also steward the environment (vital after the Prince William Sound spill). As those of you already familiar with Stevens and Young, who have been in the US legislature for over 30 years each, the relationship with the oil companies also snares many AK politicians with bribery/etc. Palin has genuinely fought this, both at the local and state level. She got rid of alot of Murkowski people linked to oil and got rid of some of the perks as well. That's a strength for McCain.
A word of caution to the democrats - Alaska is full of real people, and Sarah Palin is one of them, not like media manufactured singers.  When you see photos of her fishing, it's because she fishes. 
I have no information about the state trooper scandal, but will post if I do. My gut sense is she's fired alot of people, and it wouldn't surprise me if the one fired had an axe to grind. It also wouldn't surprise me if she or a loyal staffer did dig around with the Troopers for some information. Let's see what French comes up with.  (That's the special prosecutor, and a former ADA with a decent local rep). 

Let me be clear - I am supporting Obama/Biden, and will enjoy voting for Obama twice in one year. 
But choosing Palin as his running mate should cause democrats some genuine concern. Though I think it neuters McCain's experience argument, I think she'll draw support from women voters. 
Palin brought change to entrenched Alaska politics. If McCain decides to put on a "change" show, this is the VP pick who has done it in her state. That's an ominous sign.This is a lady who can govern, and can handle contentious local politics with a firm and fair hand.  Now we'll see how she looks on the national stage. This will be interesting, for sure. I think well of Palin, but hope to be proven wrong in November.

The question, of course, is what time?
Here is a proposal from BustedTees.
One wonders if Roosevelt would have endorsed McCain over Taft. Probably not. McCain is a lightweight.

Well, isn't this interesting:
http://current.com/items/89088467_an_open_letter_to_all_airline_customers_from_12_airline_ceos

Airline CEOs are petitioning for limits on oil price speculation...

It's not the lavish coverage, or tributes, some of which were due. Josh Marshall hit it squarely in his poignant post here. There is a much deeper issue to ponder, and the MSM is busy with blades of grass.
This isn't to say that Russert didn't deserve the accolades and praise. With the power and reach of the media, it should be kept short; the media should more quickly move on to the big picture.
Heart disease is the cause of death for more than one in about 4 Americans who die this year. It's an experience millions of us have experienced or faced. It's the visceral reason people identify with the story, excessive or not.

A couple years ago I heard the president of Costa Rica and Nobel Prize winner Oscar Sanchez speak; one of his primary themes was this very issue, and what it reflected on our society - that we had lost touch with our hearts, and this was a major sign.

If this year's theme is change, then looking at the #1 cause of death and asking what we as individuals and as a society can do about it - differently than what is done now - is worth the media coverage.
As TPM is an election/public policy site, what public policies will help?

I've been too busy lately to more deeply analyze this yet. But something smells like a flat skunk on a Texas highway here. Last year, oil was about $70 per barrel. This year it's closing quickly on $140. 
Is there a bubble building up in the oil commodities markets?
I'm asking this question, because based on anecdotal evidence, demand for oil hasn't doubled in a year. We were in India last January, my wife was in China, and we've been on their roads (worse than any US jam I've ever seen!). Although they are growing fast, that's not enough. Despite the evidence of world peak production, it doesn't seem likely that world oil production has fallen in half. There has certainly been instability in key oil producing nations - Iraq, Nigeria, and Venezuela to cite a few. But that's nothing new - it happened in the 90's too. 

There is often a "flight to safety" when the economy, stock market or bond market is doing badly, and there can also be a flight to commodities, as investors put their money in investments that hold more value -  like gold and oil. And when speculators pile on...

So what is the remaining explanation for the spike in oil prices? I think there may be a bubble brewing here as well. That's usually very, very bad. But this one might not just be a lemon we can turn to lemonade. Could be a gateway to something truly progressive.
Don't misunderstand me  - this is no excuse for us to continue public policies running in the opposite direction of energy independence. Quite the opposite, so as Obama told his own staff, we've got some work to do. Don't forget about the house and senate races in your home states - that's where Federal public policy legislation starts. 
While the MSM is doing stories on the velocity of the falling sky, the rest of us can be buying more locally produced whole foods and goods, reducing our own energy use, requesting where possible to telecommute, riding bikes, walking, taking care of ourselves and our immediate environment. 
Change seems like a small thing for those who have millions. Want to see what will happen when millions of people make some changes?

Too priceless not to post:
http://www.nbc.com/Saturday_Night_Live/video/play.shtml?mea=250052

Enjoy...

Too priceless not to post:
http://www.nbc.com/Saturday_Night_Live/video/play.shtml?mea=250052

Enjoy....

I don’t live in New York or Washington, DC so I challenge one of you intrepid reporters there. I’d be astonished if Mr. Baker (http://tpmcafe.talkingpointsmemo.com/2008/04/21/george_will_moves_to_the_left/index.php)

was correct that the Fed bailed these banks out without substantial strings. This is not free money – they are allowing investment banks to borrow at the discount window, which means they have to pay it back the next day. When normal banks do this, the Fed requires them to hold more cash in reserve, and fix themselves – find new money or else. 

So, reporters, what did the Fed require of
JPM Chase and Bear? What are they requiring of the other investment banks? How
are they protecting the taxpayer’s investment from turning into a giveaway or mugging?