Experiments in TARP Reverse Auctions

Reverse auctions modeled by Peter Cramton and Larry Ausubel at the University of Maryland are described here.

The Birds and Bees of Bonds and Fees

Modeling the Meltdown

Andrew Odlyzko on the Financial Meltdown here.

He argues that the main beneficiaries of the real estate bubble were not brokers and financiers, but home sellers who reaped tremendous gains by selling long-owned properties at the peak, and who then banked their profits rather than plowing all the proceeds back into the inflated market.

They did not do anything wrong, all their actions were perfectly legal and moral. But they were the beneficiaries of the real estate bubble, and at least in the short run they are likely to escape unscathed, and without any blame attached. In the long run, of course, they will have to help pay for the cleanup, either through higher taxes, or through inflation.

I would imagine that developers who built and sold new homes also profited mightily from the circumstances. But that conjecture begs questions about differentials in the valuation of land and structures during the bubble.

Nouriel Roubini Describes “Voodoo Finance”

For the past several years, Dr. Nouriel Roubini of New York University has been exceptionally pessimistic and notably prescient about the troubles in the US and the global economy. He is a strong critic of the initial TARP design, characterizing it as the toxic asset bailout plan, and preferring the UK-styled approach of direct capital injection.

His New York Times profile from August 15, 2008 is here.

His speech to the Inter-American Development Bank is  here.

He recently answered questions on CSPAN’s Washington Journal here.

His blog at Nouriel Roubini’s Global EconoMonitor is now a member of TARPData’s Blogroll.

NPR Report on Reverse Auction Planning

The report by David Kestenbaum can be heard here. It’s a very basic discussion that briefly touches on the problems of how to establish the value of the auctioned assets.

Neel Kashkari Profiled by New York Times

Access to the October 8, 2008 New York Times article, Bailout Role Elevates U.S. Official, may require registration.

TARP will be led by 35 year old Neel Kashkari who switched from an engineering career to finance six years ago, and has been working closely with Treasury Secretary Paulson since Paulson took the post in 2006.

From the article:

Mr. Paulson hired [Kashkari] as his special assistant, a kind of handyman position for which he took on a series of projects that caught the secretary’s interest…

Mr. Paulson soon put him in charge of an effort to have mortgage holders voluntarily change financing terms in order to prevent foreclosures. The program met with only mixed success, but a Treasury spokeswoman said that it was never intended to be a “silver bullet,” given the complexity of the overall problem.

This summer, Mr. Kashkari was promoted, winning Senate confirmation to be assistant secretary for international economics. Among other things, he has focused on working with American banks toward adoption of a less-risky system of mortgage-based bonds that is popular in Europe.

The SubPrime Primer

This clever portrayal of how the financial mess developed is a good place to start.  I think it’s definitely worth viewing if you haven’t seen it already. Unfortunately, SCRIBD doesn’t embed as elegantly as YouTube, but you can find the original here.

(c) TARPDATA 2008