sorry daniel gross (and slate) . . . the non-bailout of fannie mae and freddie mac isn't the big news, and won't have a lasting impact on the market (the dow went up for 30 minutes yesterday, then back into negative territory for the rest of the day . .. see what i mean?)

i should correct myself - its not that slate doesn't actually want you to have the facts - its that they enlist the same 2 "experts" over and over, no matter what the economic topic, no matter whether its good times or bad.

as i trash daniel gross's advice (and put forth my equally worthless viewpoints) i remind my readers they should be asking (cursing?) yeah - damnit! neither that asshole gross or that bitch baltimore aureole predicted the current crisis, so why should i listen to either of them?

that disclaimer out of the way, here are my top 10 factoids slate isn't evidently going to print anytime soon:

10 - if you create a giant, government controlled lending institution (fannie mae, and freddie mac) - then you get a giant, government controlled case of risk mis-mangement. no they didn't invent subprime mortgages, but for everyone who believes that more government involvement is the answer, the FM/FM situation is a counterpoint - government doesnt actually invent anything, it simply takes private sector ideas and carries them to extremes, requiring a bailout itself

9 - fannie mae / freddie mac were never going to collapse. but bernanke's rush to "reassure the markets" made people continue to question FMFM health

8 - there's more risk, by far, in the "150 midsized regional banks" than in FM/FM. bernanke, thankfully, has so far been (mostly) silent on them. every time he opens his effing mouth the wall street traders take down whowever he's talking about. reality check - would you buy the stock of "3rd national bank" if bernanke told america in a radio press conference that they were "well capitalized and well managed", or would you become suspicious that he found the need at all to learn their name, and apprise himself of their situation?

7 - depositors money is safe - its insured by "an agency of the federal government" hurray! but thats not where your pension is invested, or your 401K. why aren't you still cheering? your 401K is invested in citibank, GM, general electric, exxon, etc. in other words, its sinking along with the market.

6 - its dumb to insure bank deposits anyway. if the government wants to insure anything it should be loans. and charge a higher insurance premium on a subprime or liar loan, than a conventional mortagage, so when the borrower defaults, you have an adequate reserve to make good on the loss. the depositors are sill make whole, but the this way the risk premium of the insurance is matched to the crimes of the bank's lending officers, not the innocence of the depositors. the depositors in fact present NO RISK AT ALL to banks, so its dumb to assess an insurance premium on their deposits. bill the premium against the loans, by risk level.

5 - in fact, its dumb to have the government insure banks at all. government doesn't insure your car, or your driving record, do they?. we have to buy insurance on the open market. why shouldn't banks have to insure their loans the same way? oh, i remember - congress likes to have political control over its campaign contributors. my bad also, the government provides federal flood insurance - and all that means is that the flood program loses money because people are allowed to keep rebuilding in coastal hurricane zones, and new orleans suffered for decades with shitty levees which no private insurer would have stood still for

4 - gas prices. a drop in gas prices will change market psychology. but there are a bunch of dumb people who are getting "cold called" by oil futures traders, with the promise of easy money if they buy crude oil contracts. these are people who can barely spell "petroleum", and now they think they're going to get rich buying oil today at $147 a barrel and delivering it in 2009 at $200+ a barrel. does this sound like dumb money piling into a bubble? it does to me

3 - margin calls. this is the big secret driving stocks down. professional traders and dumb little investors both had borrowed against their stock shares. when the stocks decline 20%, what had been a 50% loan to asset becomes a 70% loan to asset, and the stock brokers (like merrill lynch, who popularized subprime loans) make "margin calls" telling investors "you have sell your mutual funds to pay back your loans". this daily cycle of selling drives the market lower.

2 - do you have a home equity line from a bank (or S&L)? if you do, start worrying about THAT, instead of your frigging deposits there. you'll get your deposits back if they shut the banks doors for a few days to sort things out. what about your home equity line, though? you might have it cut off, or be told to pay it back instantly. to pay it back instantly you'll have the onerous task of finding another lender (if you can) and paying much higher interest rates and fees (stand by for congressional hearings on "exhorbitant interest rates, in 2009)

1 - "we lose money the old fashioned way" - in panic crashes, that is. remember the crash of 2001 (dot coms and arab terrorists?). how about the crash of 1987? the carter crash in the mid 70's? these things happen periodically, when good money chases bad ideas, driving stock valuations, home valuations, crude oil futures, never-had-a-chance vaporware companies, and tulip bulb prices to ridiculous levels. stand by for normalcy to return.

we just don't know when, though

in my book. Not batting 1,000, but I will take you on my All Star Team.

10. Home run!

9. Base on balls--this is a Mr. Obvious statement, but you had the courage to take that walk with a full count.

8. Bernanke is not Tall Paul or Greenspan, but then again, how many Tigers or Michaels are there? Solid single up the gap.

7. Strike out on called third strike. (Hey, even Ruth struck out 1,000 times). No, your 401k is not insured, but leaving your money in insured instruments means the principle gets eroded by inflation. If you're gonna score runs (Peter Lynch used to refer to an investment that tripled in value a "three bagger"--another baseball analogy for you) you need to reach out past CD's and T bills. So swing away.

6. Another "K"--you chased a bad ball on this one. The reason to insure banks is to provide liquidity--a "run" on the bank feeds panic and forces institutions to close even if they might be able to cover their deposits. This is the lesson from the bank closures in the 30's.
What we might do, however, is LOWER the 100k that is covered--this would force people to spread their savings/CD's around--diversification not in asset class but at least who is managing your money.

5. They call this "moral hazard" in the insurance biz, stand up double.

4. Another homer! Old Wall Street saying, bears make money, bulls make money, pigs get slaughtered. The oil options market is useful to those industries who use a lot of fuel--airlines, trucking companies, etc.

3. Long fly ball that drops in the corner for another double. Hell, yes, increase the margin requirements. Prior to the Great Depression, stocks could be bought for 10 cents on the dollar. I think it's 17 cents on the dollar for oil options. As for selling mutual funds to cover the margin calls, I don't know what percentage of the options are held by small traders, but I would suggest we increase the size of the contracts, too. It shouldn't bother American Airlines too much, but it might chase some of the day traders out of the business.

2. Don't know about this one, don't know the legalities of the contract that you had (probably specifies in the fine print you didn't read when you signed for your equity loan.) You and the ump are arguing about whether or not the "brush back" pitch actually hit you or not. League office (Congress) might come to your aid, but temporary, you're ejected! (Hey, at least you didn't question his paternity or sexual preferences!)

1. I think you just hit an RBI, though you're out at first. Market always goes down faster than it goes up, and you cannot win by market timing. The good thing about bear markets is that you can buy equities, etc., more cheaply. Buy and hold.

Know I am treating you like an Oriole rather than a Aureole...

my reasoning here . . .

the government trumpeting that "depositors money is insured" is a bellweather of how out of sync they are with how citizens actually live.

the majority of people don't keep their life savings in a bank account, like they did in the 1930's when banks were failing droves.

rather, the majority of your wealth is likely to be found in 3 places:

• home equity, if you're part of today's "ownership society"
• your 401K or IRA
• your accrued pension benefits

for almost everyone these dwarf what we have on deposit at "3rd national bank" on any given day. and no, i'm not lamenting the lack of FDIC type insurance here.

in fact, your accrued pension benefits are insured (by an agency of the federal government - i believe its called the pension guarantee insurance corporation). if your company goes bankrupt, presumably the PGIC will ensure you get something (they cap payouts at $40,000 a year per worker, though). but when a company goes bankrupt, you never hear the government or the media tout the pension insurance as a safety net for the now distressed former workers.

regarding 401K and IRA - these are generally insured by the SIPC, and insurance fund that guards against bankruptcy of your broker, or his malfeasance. good to know, but thats not how most 401K's lose money - they're dragged down in the undertow as the market dives. I don't get the sense that the average 401K user is aware his principal is at risk

home equity - everybody is aware that's at risk, these days. but about 3 years ago, when there were 10 cable reality shows called "flip that house", "double your money in 6 months" and "i've got mine" the whole world seemed to think it natural for real estate prices to go up 20% a year, and that trees grow to the sky without falling down.

this home equity thing gets to the heart of my criticism of daniel gross, slate, the WaPo, the WSJ, the senate and house . ..

everybody got this one wrong. after 9/11 people all shouted in unison "i'm putting my money in real estate - it doesn't fall 40% in 2 days".

yeah - thats true - it takes about 8-10 months, evidently. but whats worse is that home equity is ALWAYS highly leveraged, unless you paid in cash in full for your house. even if you put 20% down on your home (and less than 10% of buyers do), a 20% erosion in market values wipes out all your own equity.

nobody told us "there's irrational exuberance in the housing market, and we need to stop the zero down liar loans before people get hurt".

what they told us, instead, was "flip that house"

"If it sounds too good to be true, it probably is too good to be true." If it can make money for you, it can lose money for you.

You didn'tpresent "facts"; you presented your own opinions, as usual. As someone who DID predict the current housing crash and recession back in 2005, under my old nic diogene, maybe my opinions would be worth more than the opinions of someone who didn't. Regardless, I'll rebut your opinions with FACTS.

9- fannie mae / freddie mac were never going to collapse. but bernanke's rush to "reassure the markets" made people continue to question FMFM health.

According to ex-Fed govenor Poole, Fanny and Freddie are already insolvent; they owe more than their net worth. Of COURSE they were going to collapse.

7--depositors money is safe - its insured by "an agency of the federal government" hurray!

The FDIC is rapidly going broke. How long do you think it would take for you to get your money back that was held in a bank which went bust? In how much more worthless dollars?

5 - in fact, its dumb to have the government insure banks at all. government doesn't insure your car, or your driving record, do they?. we have to buy insurance on the open market. why shouldn't banks have to insure their loans the same way?

Banks already DO buy insurance on the open market: ever heard of Ambac or MBIA? Seems like they're going bust, too.

1 - "we lose money the old fashioned way" - in panic crashes, that is. remember the crash of 2001 (dot coms and arab terrorists?). how about the crash of 1987? the carter crash in the mid 70's? these things happen periodically, when good money chases bad ideas, driving stock valuations, home valuations, crude oil futures, never-had-a-chance vaporware companies, and tulip bulb prices to ridiculous levels. stand by for normalcy to return.

For some FACTS on why the Bush bear markets are different from the Carter "crash" and the 1987 crash, see my latest posting at BOTF.

There's going bust and going bust. Fannie, Freddie and FDIC are not really going to be insolvent, ever...because Uncle Sam will get his checkbook out and solve the problem. Remember the Savings and Loan crisis from the Carter era? You might not, since you this the Bush economy and the Carter economy are so different. We tax payers footed the bill on that one, and if my least favorite Uncle says so, we'll do it again.

Bernanke is trying to reassure the markets in the hopes that a white knight(s) will rescue Fannie and Freddie and the government won't have to do so. Probably a vain hope, but its worth a shot. See #10 from BA's original post.

"Remember the Savings and Loan crisis from the Carter era?"

I hate to break this to you, Truth Decay, but the Savings & Loan crisis occurred in Reagan's second term. Had nothing to do with Carter. Bush's father's people bailed out the busted S&Ls. Bush's brother Neil ran one of them into the ground.

right at the start, i was careful to assert:

"as i trash daniel gross's advice (and put forth my equally worthless viewpoints) i remind my readers they should be asking (cursing?) yeah - damnit! neither that asshole gross or that bitch baltimore aureole predicted the current crisis, so why should i listen to either of them?"

regarding opinons on FM/FM insolvency - well, opinions vary. people who are running hedge funds which are shorting those stocks have a megaphone and are shouting that those stocks will go bust,in order to stampede the public and drive prices even lower, so they can cover their short positions.

this is a bit disingenuous, in my book. spreading disinformation for personal profit. at least thats how the feds see it, and they announced rules overnight to make it illegal to short fannie mae and freddie mac.

if i have to chose who to believe (a) day tradering sharks who make money by trying to force the "target of the day" into insolvency, or (b) investors and regulators who tell people to buy and hold for the long term, don't try and double your money overnight, and don't sell stocks you don't own, who do you think i'm going to believe?

was the one who deregulated the S and L's. Thus, he set the stage for the crisis. It just took a while for the chickens to come home to roost.

As always, the truth is a bit more complex than just a time line.

if i have to chose who to believe (a) day tradering sharks who make money by trying to force the "target of the day" into insolvency, or (b) investors and regulators who tell people to buy and hold for the long term, don't try and double your money overnight, and don't sell stocks you don't own, who do you think i'm going to believe?

Do you think ex-Federal Reserve governor Poole is a Day-trader? A naked short? He has no axe to grind, so I'll believe him. I choose not to believe Paulson when he has been wrong so many times before. As for Dodd & Co. they have been bought and sold long ago; that's what the 110th Congress is all about.

6 - its dumb to insure bank deposits anyway. if the government wants to insure anything it should be loans. and charge a higher insurance premium on a subprime or liar loan, than a conventional mortagage, so when the borrower defaults, you have an adequate reserve to make good on the loss. the depositors are sill make whole, but the this way the risk premium of the insurance is matched to the crimes of the bank's lending officers, not the innocence of the depositors. the depositors in fact present NO RISK AT ALL to banks, so its dumb to assess an insurance premium on their deposits. bill the premium against the loans, by risk level.

Do you have any idea what a run on even a perfectly healthy bank will do, not just to the bank but to an entire community? One of the key reasons to insure deposits is to prevent panics from causing runs on banks that will only fail if they get a panic run. Panic runs used to be a serious problem.

Fixed.

I hate to break this to you, Truth Decay, but the Savings & Loan crisis occurred in Reagan's second term. Had nothing to do with Carter. Bush's father's people bailed out the busted S&Ls. Bush's brother Neil ran one of them into the ground.

Silverado Savings & Loan.

Carter deregulated the S and Ls. 1979.

When he left office in Jan of 1981, about 90% of the S and Ls were losing money.

Reagan had to deal with the mess, and the bail out began in 1986 and ran through 89. So Bush would have been around for part of the debacle, but he was batting clean up. You can look it up.

As Casey Stengel used to say. Or maybe it was Durocher, maybe I should look that up. Think I will.