Did something happen with the Markets in the last few hours?

DriftingByTheStorm

WTF?

I was at the gym an hour ago and the market was around 20 to 50 points up.

I get home and turn on CNBC, and the DOW is up 350 points !?!

Is this on speculation of a Resolution Trust Corp like solution?
Or is this just a fast moving bounce?

I don't get it.
I've scoured the financial updates and don't see shit.

The only thing CNBC is on about is "Paulson talking about RTC like solution."

Thats awfully speculatory news to create a 300+ point rally out of nowhere.

Anyone got REAL news?

DriftingByTheStorm

Uh. Nevermind.
I guess it IS just speculation of an RTC-esque solution.

YAY. More bailout.
Woo hoo.
:cool:

norm

bargain hunters

Pacomc79

I know they moved AIG out.

It was trending up when I checked it this morning but not that much.

DriftingByTheStorm

Here is the establishment argument for an RTC style "solution" to this crisis, from the Wall Street Journal:

Resurrect the Resolution Trust Corp.

WSJ wrote:

We are in the midst of the worst financial turmoil since the Great Depression. Absent bold action, matters could well get worse.

Neither the markets nor the ordinary diet of regulatory orders, bank examinations, rating downgrades and investigations can do the job. Extraordinary emergency actions by the Federal Reserve and the Treasury to date, while necessary, are also insufficient to resolve the crisis.

Fannie Mae and Freddie Mac, the giants in the mortgage market, are overextended and now under new government protection. They are not in sufficiently robust shape to meet all the market's needs.

The fact is that the financial system needs basic, long-term reform, but right now the system is clogged with enormous amounts of toxic real-estate paper that will not repay according to its terms. This paper, in turn, is unable to support huge quantities of structured financial instruments, levered as much as 30 times.

Until there is a new mechanism in place to remove this decaying tissue from the system, the infection will spread, confidence will deteriorate further, and we will have to live through the mother of all credit contractions. This contraction will undercut the financial system, and with it, the broader economy that so far has held up reasonably well.

There is something we can do to resolve the problem. We should move decisively to create a new, temporary resolution mechanism. There are precedents -- such as the Resolution Trust Corporation of the late 1980s and early 1990s, as well as the Home Owners Loan Corporation of the 1930s. This new governmental body would be able to buy up the troubled paper at fair market values, where possible keeping people in their homes and businesses operating. Like the RTC, this mechanism should have a limited life and be run by nonpartisan professional management.

Such a stabilizing mechanism would accomplish four much-needed tasks:

- First, by buying paper that otherwise is effectively not trading, it would help restore liquidity to the marketplace and help markets to function more fluidly again.

- Second, by warehousing the troubled paper for a longer period than, for instance, the Fed's discount window typically should or could, it would allow for a more orderly liquidation of this paper, and the chance for much of it to recover a portion of its value.

- Third, by giving the agency the ability to manage mortgages with flexibility to keep people in their homes and businesses running, it should lessen the number of foreclosures. This, in turn, would help moderate the decline in real estate values and the deterioration of neighborhoods, thus supporting house prices that in fact lie at the heart of the crisis.

- Fourth, where necessary, like the RTC of the 1980s, this new mechanism can assist the Federal Deposit Insurance Corporation in resolving sick institutions that are so clogged with the troubled paper they cannot continue as independent entities. However, we would hope that purchasing the mortgage-related paper will minimize the need to provide emergency, short-term assistance to solvent banking institutions.

It is certainly the case that the new institution we are proposing will in the short run require serious money. That will involve a risk to the taxpayer; but the institution, administered by professionals, means that ultimate gains to the taxpayer are also possible.

Moreover, a failure to act boldly in the fashion we are suggesting would cost the taxpayer and the country far more. The pathology of this crisis is that unless you get ahead of it and deal with it from strength, it devours the weakest link in the chain and then moves on to devour the next weakest link. A deteriorating financial system, diminished economic activity, loss of jobs and loss of revenues to the government is enormously costly. And the cost to our citizens' well-being is incalculable.

Crisis times require stern measures. America has done well in the past to face up to economic turmoil, take strong measures, and put our problems behind us. RTC-like mechanisms have worked well in past crises. Now is the time to take a similarly forceful step.

The American economy still has enormous underlying strengths. What we need, and in part are proposing, is a road map to financial stability.

Mr. Brady was U.S. Treasury secretary from 1988-1993. Mr. Ludwig was U.S. comptroller of the currency from 1993 to 1998. Mr. Volcker was chairman of the Federal Reserve from 1979-1987.

My biggest worry with this is that the amount of money needed to purchase all this toxic shit off the market could put an unbearable strain on treasuries.

Shit, treasuries are ALREADY down on the mere speculation of the printing presses turning on full bore ...

As the reality of massive inflation kicks in, the treasury market (the ONLY market that REALLY matters) could unwind in a bad bad way ... and it will NOT matter if wall street is saved, or if credit flow is "restored".

We would be looking at a catastrophic global collapse, as countries like Russia and China dump their US treasury bills in a mad dash to get out before they lose everything (would YOU want to be holding on to an investment that is paying 1-3% in a world where inflation is running at 10-20% !?! You'd be LOSING 10-17% a year!) ...

the foreign treasury sales would very likely twist the hand of The Fed itself to sell ITS treasuries (instead of buying them up) ... well, sell what little treasuries they have left on their books (they are down already from around a trillion in treasuries, to about 300 billion) ...

it could be even worse than simply letting these institutions fail.

The government REALLY can't afford to go all out with the money printing (counterfeiting) game right now!

Yikes.