I say that when all is said and done, it is cheaper to just let all these banks go BK and let someone organize new banks. People will trust new banks a lot less, which would be good.
Actually, squeezed, the one I wonder about is USAA. It's different enough it doesn't use the standard measures, but large enough to worry me given it's my bank.
"Translation: "Soon, we'll probably have to forcibly transfer wealth from non-speculators to speculators.""
Which actually means that taxpayers will be putting up the cash to buy a lot of paper of questionable value!
There has to be a quid quo pro here to make this deal happen and that has to be some serious taxes on high income in exchange for bailing them out of the mess they made (again).
This is Bushworld where we put on the party so that high income people can build fortunes. Did you see Barrons thi9s weekend/ An article says that you have to have $500 million to be considered rich. Pay more taxes are you kidding?
Seriously tho, you have hit on a real problem in that if we forge a bailout, who will pay? I think the dollar would crash, if we did not raise taxes for a bailout. If a bailout is possible but will not happen due to Dumya's tax obsession, that does not bode well down the road. In my opinion we could not have a worse individual at the helm during a crisis.
Paul Krugman has the basic story of the financial meltdown right, but he would still like to see the Fed come to the rescue, even if it means handing over hundreds of billions of taxpayer dollars to the world's richest people.
I have a hard time following the logic. We know how to keep the financial system operating even as banks go into bankruptcy and receivership. Will there be some disruptions on the way down? Sure, but that would probably be the case even if we went the full bailout route.
We have too many custodians and waitresses who can't afford health care or child care for their kids, or to take a sick day from work, to rain hundreds of billions on the Wall Street crew who have yachts, vacation homes, nannies for their kids and teams of personal servants. These people and the institutions they run must be forced to pay the price for their own stupidity and the damage they have done to the economy. ..."
The question I'm asking myself is, which would be worse for people like me--the bailout of the rich that Dean Baker envisions, or just allowing the banks to reap what they have sown?
I suspect that the little guy is going to be hurting a lot either way.
As Krugman suggests--this isn't just a panic. This is a real disaster. The volcano is erupting. Capital that could have gone to productive investments has been squandered on granite counter tops and is not going to be paid back.
But the panic element (fueled by the blogosphere) is the "worst-case scenario" problem--the worst case imagined by highly imaginative people, including me. (In my experience the reality is never as bad as the worst-case scenario.) The fundamental question is what percentage of mortgages will go into default, and on that question we can only speculate. We won't know the answer in advance.
Circling back around to the beginning--what would the world look like if we let nature take its course--let major financial institutions crumble, no matter how big they are, let millions default on mortgages etc.? I'd like to hear some of you commenting on the merits of that vs. the big bad bailout approach that ties up hundreds of billions (more?) in government capital (my tax dollars) in keeping these financial geniuses afloat to deal another day. I can't figure out which scenario is worse.
From the article: A plan to restore the credibility of municipal bond insurance would be a start (how crazy is it that New York State, rather than the federal government, is taking the lead here?).
How crazy is it that Eliot Spitzer, the governor or NY who has been leading the charge has now been discredited for eledgedly visiting prostitutes? Coincidence? I say no.
How crazy is it that Eliot Spitzer, the governor or NY who has been leading the charge has now been discredited for eledgedly visiting prostitutes?
bofiz,
There is probably no more connection between Spitzer's bond insurance views and his pen-is as between your spelling skills and your pen-is, unless it was a case of multi-tasking gone astray...
It appears that along with credit standards deteriorating across a wide swathe of lending, another major factor was a vast range of borrowing short while lending/investing long. This factor has long been recognized as major risk for instability in banking, hence fairly tight regulation, reserve requirements, and capital adequacy ratios for banks.
The regulators apparently were happy to ignore the fact that SIVs, hedge funds, and even public entities like municipalities began to do this on a wide scale, posing huge risks to the financial system. While financial engineering in the form of securitization created distance between lenders and borrowers, other types of financial engineering supported short term lending for long term uses.
Several of the credit markets that have frozen appear to have been designed specifically for this purpose. Both the ABCP markets and the Auction Rate Security markets appear to have been developed to let entities borrow at short rates, and perpetually roll the debt over while using the money for long term investments or projects. As investors realized that their "short-term investments" were actually tied up in long term assets and thus were not very liquid, they began to refuse to loan "short-term" for this market.
Among other things, it looks like the market needs to unwind a lot of this activity and rematch the lending to real duration. Not easy when markets are this skittish and volatile.
Now this is a real conundrum.
Not like Mr. Greenspan's phoney one.
What to do, what to do?
Maybe it's a real crisi after all.
Idiots!
He says we need to bailout the system.
I say that when all is said and done, it is cheaper to just let all these banks go BK and let someone organize new banks. People will trust new banks a lot less, which would be good.
When someone panics, a slap in the face might snap them out of it.
It would be very smart and very prudent to mind the differences between someone who is in a panic and someone who has gone berserk.
The latter will try to kick your ass and take your wallet.
Market analogy? Maybe. Maybe not.
"Soon, well probably have to do something real about reducing the risks investors face."
I thought what we have to do is match risk to reward and let nature take its course?
WE CANNOT TRUST MANY OF OUR FINANCIAL LEADERS!
If Bank of America acquires Countrywide, I will cease being a customer of theirs.
"Soon, well probably have to do something real about reducing the risks investors face."
Translation: "Soon, we'll probably have to forcibly transfer wealth from non-speculators to speculators."
If there is anything else Krugman's statement could possibly mean -- anything at all -- I would love to hear it. Anyone?
Berkshire to acquire Freddie and Fannie, BOA to acquire Shittybank.
Is somebody running to the exits of a burning building panicing or prudent? Does it really matter?
Nobody wants to put taxpayers on the hook for the financial industrys follies. . .
. . .but we will.
I got out of BAC a year ago. A local conservative CU is the way to go, IMO.
The NCUA has FPR data on every insured credit union.
Options
Actually, squeezed, the one I wonder about is USAA. It's different enough it doesn't use the standard measures, but large enough to worry me given it's my bank.
"Translation: "Soon, we'll probably have to forcibly transfer wealth from non-speculators to speculators.""
Which actually means that taxpayers will be putting up the cash to buy a lot of paper of questionable value!
There has to be a quid quo pro here to make this deal happen and that has to be some serious taxes on high income in exchange for bailing them out of the mess they made (again).
Ed- Serious taxes on the high income people-
This is Bushworld where we put on the party so that high income people can build fortunes. Did you see Barrons thi9s weekend/ An article says that you have to have $500 million to be considered rich. Pay more taxes are you kidding?
Seriously tho, you have hit on a real problem in that if we forge a bailout, who will pay? I think the dollar would crash, if we did not raise taxes for a bailout. If a bailout is possible but will not happen due to Dumya's tax obsession, that does not bode well down the road. In my opinion we could not have a worse individual at the helm during a crisis.
Why not wrote down all mortgages?
Why only worry the ones which are going to FC?
The value of everything has declined.
Why not just issue pesos next Monday?
Dean Baker ...
"March 09, 2008
Face Slap or Punch to the Head?
Paul Krugman has the basic story of the financial meltdown right, but he would still like to see the Fed come to the rescue, even if it means handing over hundreds of billions of taxpayer dollars to the world's richest people.
I have a hard time following the logic. We know how to keep the financial system operating even as banks go into bankruptcy and receivership. Will there be some disruptions on the way down? Sure, but that would probably be the case even if we went the full bailout route.
We have too many custodians and waitresses who can't afford health care or child care for their kids, or to take a sick day from work, to rain hundreds of billions on the Wall Street crew who have yachts, vacation homes, nannies for their kids and teams of personal servants. These people and the institutions they run must be forced to pay the price for their own stupidity and the damage they have done to the economy. ..."
Beat The Press | The American Prospect
The question I'm asking myself is, which would be worse for people like me--the bailout of the rich that Dean Baker envisions, or just allowing the banks to reap what they have sown?
I suspect that the little guy is going to be hurting a lot either way.
As Krugman suggests--this isn't just a panic. This is a real disaster. The volcano is erupting. Capital that could have gone to productive investments has been squandered on granite counter tops and is not going to be paid back.
But the panic element (fueled by the blogosphere) is the "worst-case scenario" problem--the worst case imagined by highly imaginative people, including me. (In my experience the reality is never as bad as the worst-case scenario.) The fundamental question is what percentage of mortgages will go into default, and on that question we can only speculate. We won't know the answer in advance.
Circling back around to the beginning--what would the world look like if we let nature take its course--let major financial institutions crumble, no matter how big they are, let millions default on mortgages etc.? I'd like to hear some of you commenting on the merits of that vs. the big bad bailout approach that ties up hundreds of billions (more?) in government capital (my tax dollars) in keeping these financial geniuses afloat to deal another day. I can't figure out which scenario is worse.
From the article: A plan to restore the credibility of municipal bond insurance would be a start (how crazy is it that New York State, rather than the federal government, is taking the lead here?).
How crazy is it that Eliot Spitzer, the governor or NY who has been leading the charge has now been discredited for eledgedly visiting prostitutes? Coincidence? I say no.
How crazy is it that Eliot Spitzer, the governor or NY who has been leading the charge has now been discredited for eledgedly visiting prostitutes?
bofiz,
There is probably no more connection between Spitzer's bond insurance views and his pen-is as between your spelling skills and your pen-is, unless it was a case of multi-tasking gone astray...
Squeezed - I went and looked up my credit union, but how do I tell if it is in good shape? What kind of rations should I be looking for?
It appears that along with credit standards deteriorating across a wide swathe of lending, another major factor was a vast range of borrowing short while lending/investing long. This factor has long been recognized as major risk for instability in banking, hence fairly tight regulation, reserve requirements, and capital adequacy ratios for banks.
The regulators apparently were happy to ignore the fact that SIVs, hedge funds, and even public entities like municipalities began to do this on a wide scale, posing huge risks to the financial system. While financial engineering in the form of securitization created distance between lenders and borrowers, other types of financial engineering supported short term lending for long term uses.
Several of the credit markets that have frozen appear to have been designed specifically for this purpose. Both the ABCP markets and the Auction Rate Security markets appear to have been developed to let entities borrow at short rates, and perpetually roll the debt over while using the money for long term investments or projects. As investors realized that their "short-term investments" were actually tied up in long term assets and thus were not very liquid, they began to refuse to loan "short-term" for this market.
Among other things, it looks like the market needs to unwind a lot of this activity and rematch the lending to real duration. Not easy when markets are this skittish and volatile.
"I also suspect that the feds will have to get explicit about guaranteeing the debt of Fannie and Freddie, which really are too big to fail."
When people start saying things like this or that entity is "too big to fail", look out.