Everett M. Dirksen was said to have made that comment to fabulously successful oil tycoon, H. L. Hunt.
I quote Senator Dirksen to make the same point he made so sarcastically well. We’re talking about real money here people. Imagine a 11.5 billion stars. Now make the stars dollars. Kind of a lot, isn’t it?
40 banks combined to loan $11.5Bil to a lender they all know is clearly in trouble. Are they all stupid? Have they been hoodwinked? Is there some grand conspiracy?
Or are they all completely unaffected by the pabulum put out by most so-called journalists? Could it be because they know the facts, and the facts aren’t even in the same universe as what’s being reported?
Uh, ya think?
These banks are not Red Cross volunteers. They lend money to borrowers who come through their risk analysis looking as if they might just be able to pay it back. (Yeah, I know, pretty ironic to say the least.) This decision was made by some very serious folks. This isn’t a game to them.
This isn’t a home loan with no docs to a middle school teacher claiming to make a $150,000 salary.
They didn’t just get a phone call asking them to send over a guy with a huge bag of money.
Will Countrywide default on this loan? 40 votes are in. So far the vote is unanimous — no. Now we all know of many cases where the majority just knew something was true, but turned out to be dead wrong. This could be one of those cases. This isn’t about believing the earth is flat though. This is about 40 humungous banks making what I’m sure we can all agree, was a pretty objective decision here — and not made lightly.
Was self interest a factor? You bet. They probably factored in how bad it would be if they didn’t loan them the money. Still, if they thought Countrywide was already floating face down in the water, that same self interest would have caused them to pass. They charged an interest rate they judged would cover the risk factors they perceived.
Bottom line? Unless you seriously think these banks are either colossally stupid, or have all signed a financial suicide pact — you have to believe they thought it made financial sense to part with the dough. We tend to become somewhat numbed by big numbers these days. They loaned billions of dollars — and they ain’t playin’ Monopoly folks. Every single one of those dollars has a picture of a dead president on it.
So, as I’ve been saying for a couple days now — step back and look at the facts, the reality, and not the hype. Journalists are not interested in the facts first. So many want glory, to see their name in the byline, and the recognition. I’m not trying to lump them all together here, but you see my point.
Here’s an example of journalistic financial acumen.
A friend of mine was contacted this week by one of the most respected 
financial newspapers in the world. Their questions were so inane, and so devoid of any real knowledge of the current Countrywide situation, they should have been embarrassed. The problem? They didn’t know enough to be embarrassed. My friend just shook his head and chuckled as he told me the story yesterday while in my office on business.
The answers to the questions they’d asked him were dang near public knowledge already, or could have been gleaned from what’s been well known for almost a week now. It was classic. I’m guessing it wasn’t a call the reporter talked about at the bar after work. They literally asked him, after he’d given them some pretty solid information to back his answers — “Do you have insider information?” I’m not kidding. That’s just too silly to make up.
People read these reporters on a regular basis, and believe everything they write, based on the paper publishing their stories.
When are we gonna realize the mainstream media has been printing money by crying wolf? At what point do we, the public, begin to deeply discount their words?
It’s my contention most of them couldn’t organize a one man picnic, much less report on something as complicated and sophisticated as what’s going on now. I don’t mean this post to be either unkind, or mean spirited — but enough is enough already. There are some incredibly smart, honest, and hard working journalists out there. There’s just not enough of them to go around.
I realize this is somewhat out of character for me. And it’s not my intention here to offend anyone. (OK, maybe mainstream media) But my audience is you, regular folk. And I’m sick to death of the careless writing passing for objective journalism. I realize nothing’s gonna change. But I sure wish the public would start calling them on the carpet a lot more often.
There — I feel better now.
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About BawldGuy
Being a cockeyed optimist, a flower child and “being stuck like a dope with a thing called hope”
, I think the world can change, one person at a time.
.
I posted for about a year on a Landlord line with some different ideas… like treating the tenant with respect…gasp! I was asked to speak at a convention and wondered if I would be stoned by the pillars of the board. At the end, someone come up to me and said, “You’re the voice of reason on this board”. It encouraged me to do more posting and now there are several of us taking on the “statis quo”. We have made a dent in some of the misinformation and negativity on that board. Once in a while I hear former nay sayers posting a positive post. So, I am encouraged that people CAN learn from the wise ones. (I consider myself a wise one “in training”)
As computers give us access to intelligent blogs like yours, to people in different countries and news on-line, people have the resources to be more informed.
I especially like that you share other’s blogs with us.
But, I think that the majority of people, like you stated, are like sheep and the quality of the shepards is unlikely to change. Understanding the financial world takes years of study and understanding. You need to understand domestic and world markets, ecomomics, R.E., stocks, bonds, politics, the role of public opinion, what the rip off artists are doing, the world situation..on and on. It’s too much for most people buried in work and raising their families to take in. So they go to the newspapers and especially sound bite t.v. for their daily pablem of information.
I have a feeling allot won’t change, as you have stated, but at least we have each other
Glad you feel better. Feels good to rant. I know a software designer who yells at least once a day in his office, “Idiots, idiots,….idiots everywhere”.
Ummm, there is one detail you left out. Those credit line agreements were put in place over a year ago, when Countrywide was in a different position. So, it may well not be that case that the 40 banks took a look up Countrywide’s arse and decided all was well on Friday.
I certainly don’t want the walls to cave in and I agree that the press is pretty weak. But, if the banks extended the credit on Friday because of prior arrangements (i.e. couldn’t back out), then that basically nullifies your entire post, doesn’t it?
Ron – Although I knew it was put in place long ago, they still had to have looked into Countrywide’s practices, and the lurking danger just around the corner.
Still, your observation could be spot on. They may have seen the danger, but underrated it.
The fact the loan was part of a prior commitment may or may not have changed their ultimate decision. But your point is very well taken.
Also, consider their edge in the actual facts, much of which is unknown to the likes of you and me. They knew, at least by extrapolation,
what might be expected. And who more than they would be looking for the downside?
What if my guess is correct, and they thought this was the perfect positive storm for B of A to acquire Countrywide? That scenario, among the dozens of others you and I could probably posit, would mean they would have their cake and eat it too. A relatively high rate of interest, but with less risk than appears on the surface.
Or…they just made a mistake.
But I doubt that.
Thanks for stopping by – please come back.
Cher – hope you’re not talkin’ about my geek.
Nope, not yours…ours
Jennifer – Good to see you again.
By the way, if Countrywide pulls off their survival strategy as laid out in the press release on your most recent post, it will be talked about for years to come.
It will also make my point about the mainstream media. Thanks again Jennifer.
There are alot of items in play with this company. Some do give me consern, but the one item that no one ever talks about is insurance and how these loans are backed. I would hope that these banks have this cash backed.
Apella – Me too. In their most recent press release, they talked of having just under $50Bil of liquidity before adding the $11.5Bil loan. Their insurance? Don’t know that answer. I would refer you however to the 40 fairly large banks around the world who probably do know, and lent them the money.
Come back soon Apella.
Thanks Sock Dude.
BawldGuy
Excellent post. One of the other blogs I had covered a national story that captivated the nation, and we took a lead roll in the covering of it. For many a night we would be talking to a producer of a national cable show to tell the host what to ask the interviewee as the interview was going on live. It was quite the out of body experience watching my worlds come out of the mouth of a guy being paid millions 20 seconds after I tell the producer what to say.
The people in the media do not have much knowledge, but they tend to look good saying it or writing it. Never expect an expert review but instead something written to convince the 95 percent of people out there that have no knowledge of the topic that they have done their research.
Thanks for the good review, Tom.
Your experience seems to underline what we both know about mainstream media — it’s more important how they look and what we think of them than the excellence of the content coming from them.
Thanks again.
Jeff- You are most welcome. Your blog is one of my favorite reads. I hope they pull it off. It will be interesting to see where things are a year from now.
Jeff, thanks a bunch for this post. Sure would be nice if papers would include the reporter’s qualifications for reporting on the subject in the byline. But I guess that might hurt sales…
Geoff – Now there’s an idea!
Hey Jeff–I was just doing some research on the “Billion here, billion there,” quote and found this post… What a different world we now live in, for instance, 11 billion doesn’t sound like much at all anymore. And I don’t mean to point to this post to make fun of it. To be honest I was more bullish than you were in August ’07. And perhaps. The underlying factors that cause this mess likely would have been bad no matter what, but I’d expect, if the media had been a bit more positive this would have a been a very shallow downturn. Housing prices wouldn’t have fallen as much, more sub primes could have refinanced, and we would have realized that sub prime wasn’t such a great idea and been able to fix it before too many more of these loans were issued.
I was actually on Fox Business around November of 2007 to talk about some of the macroeconomic indicators and I was just re-watching the clip the other day. It was somewhat like reading this post. Besides the egg on my face, watching the ticker was kind of amazing, The Dow was around 14,000, the financial stocks that are all now in the dollar bin, were floating over $100 a share, people were still referring to recessions as “the R word.”
Ahh the good ‘ol days
Hey Sean — Speaking for myself, after having removed most of the egg, I’ve concluded three basic factors for which I was unaware, or underestimated their impact.
1. The bill forcing Fannie/Freddie to make loans nobody in their right mind would ever make. I’ve called it the ‘Good Intentions Kumbuya’ bill.
2. Mortgaged backed securities was like a never ending fine spray of gas on the fire built upon make believe loan underwriting policies. It allowed lenders to turn their capital much more quickly to so many more borrowers.
3. The SEC’s criminal negligence. Their ‘see no evil’ approach to overseeing those under their power resulted in the crazies running the asylum.
Isn’t 20/20 hindsight wonderful? Don’t you wish Back To The Future was possible?
Have a good one.