RTC those days, a new plan today! Are you ready??

Resolution Trust Corporation, 1989 was proposed to solve insolvent savings and loans mainly to dispose the stockpile of rubbish real estate holdings. The spinning of foreclosures started with Home Owners Loan Corporation (1933) for the management in refinancing mortgages and foreclosure of mortgage defaults which include auction and selling of foreclosures. Then there was the Federal Asset Disposition Association (1985) to help sell and manage assets under the Federal Loans and Savings Insurance Corporations.

All that were concerning RTC were the tangible foreclosed real estate holdings, commercial loan papers, Non Performing Loans, Loan applications, defaults, equity interest , partnership, JV. The size of RTC those days were considered as huge as a junkyard full of metal parts that are gigantic and immobile. The treasury secretary disclosed that the 750 – 1000 S&L accountable to them amounts to anywhere from 408 billion to 560 billion and the amount of cost to them to dispose the entire holding would stand at about 89 – 132 billion.

5 hundred sixty billion dollar bailout those days would cost = (What cost $560,000,000,000 in 1989 would cost $925,317,102,574.91 in 2007) which is about close to a trillion dollar. If you compared to the terms today you might as well flip it around 50 times that figure and you are close to the total CDO and CDS plus mortgage backed securities being valued. But, all must realize that this is near the beginning of the storm, the hurricane has just uprooted the few tree and your neighbors’ home when it hits you, all you can do is hide in the basement or take shelter at safety room full of pillows and your important documents buried underground. It would be a long way for that storm to go on as we have not seen massive further devaluation of real estate and asset pricing, FDIC have not sounded the alarm, the feds are still picking money from all around him including from thin air.

Can you tell me if RTC was so successful, the Bush Administration had a sound policy making and economic hindsight, and then what are we doing here savoring the taste of subprime mess. Everyone is involved no matter you accepts the fact or deny. They are taking a route that has been taken in 1989 and if it failed you the last time, it probably gonna fail you another.
The only question is how long will it delay the process, are you going to start another government arm to cover the defaults and foreclosure of the post 1989 upcoming RTC. Stop dumping taxpayers money and start initiate in fiscal spending to boost manufacturing, agriculture, production. Give more exemption to local goods and incentives to boost the use of locally produced goods, take a look at boosting productivity in local corporations involved, start helping US producers sell their products, trade unions, government schemes, these are a better alternative to boost the economy instead of the MAY tax rebate, come on!!!!! Education funds, employment under government agencies, start to help those recently unemployed through seminar, employment opportunity, and mass employment schemes thru recruitment agencies.

That is just on top of the entire foreclosure scheme, how about the front line, these defaults would have been flipped a few times just to reach the top, if included valuations from FADA and HOLC the figures would have jumped. And I quote Bush to say this “he will take any actions necessary to stabilize markets in the face of a crisis that is shaking confidence in the nation's financial system.” And you would come to think that what if Trillions weren’t spend on the war, would crude oil jumped? Would deficits narrow down? And once again where will all the ammunition and war machineries go to?

The Feds are buying time, they need the support of the nation and all the time to wipe this mess up, the DOW rallied last night, but did your holdings surge a lot? And if you look at the chart last night, initially no one was confident about the plan and the Dow went to negative zone, only to see some short covering after SEC stepped up and the move of invisible hands, check the sell down of gold, would precious metal of such great demand being sparked with such great sell down regardless of intrinsic and extrinsic valuation, treasuries are still too near the OPR, Libor is still a mile away from the rates, we are still seeing bank not providing loan. The new plan was to buy hope and confidence, America needs hope, the rest of the world looking upon them needs hope.

This situation is like a family crisis, where the brother does not talk to the father but the father acknowledges that his son needs money for his home loan, he has no job anymore. So the father pushes the money to the sister to give to the brother to pay his loan. That is what the entire situation looks like, when the mess will end I would not know, but I am keen to look at how the big illiquid, immobile, insignificant papers and toxic derivatives being held by the government and FDIC has to clear. When the Real Estate market further demise, investors continue to look at areas to flea to and that would be none other than gold.