Dedicated to Tanta:

Audience - Raviolé 

Tanta vive!

Thank God they will stop showing that Vermont teddy bear commercial on teevee. Isn't the viewing public bonkers enough?

http://www.vermontteddybear.com/

Joanna | Homepage | 02.14.09 - 8:14 pm | #
It may prove helpful if you post a photo on your site for moral purposes and ease the pain of the depression.

Livin' the vida Tanta!

IMF chief Dominique Strauss-Kahn warns second wave of countries will require bail-out - Telegraph
IMF chief Dominique Strauss-Kahn warns second wave of countries will require bail-out
A "second wave" of countries will fall victim to the economic crisis and face being bailed out by the International Monetary Fund, its chief warned at the G7 summit in Rome.
Dominique Strauss-Kahn's warning comes amid growing concern that at some point in the next year a major economy could have to seek support from the Fund. Mr Strauss-Kahn, who was yesterday attending the Group of Seven leading finance ministers' meeting in Rome, said: "I expect a second wave of countries to come knocking."

Werner,how is Douche Bank doing?

£30 billion loss at RBS prompts savage job cuts - Times Online
£30 billion loss at RBS prompts savage job cuts
ROYAL BANK OF SCOTLAND boss Stephen Hester is to unveil a brutal cost-cutting exercise, alongside record losses of close to £30 billion, that are expected to lead to a further 10,000 to 20,000 job cuts.

(Anybody find Citi's enforcement action yet?)

Ireland ‘could default on debt’ - Times Online
More bad news from across the pond where Sunday papers are burning on-line...

Ireland ‘could default on debt’

Ireland ‘could default on debt'
FFDIC | 02.14.09 - 8:42 pm | #

Getting closer to home.

House Financial Services Committee Fails to Instill Confidence in Nonbank Lenders - WSJ.com
Committee on Doubt and Uncertainty
WSJ - A day in the life of House Financial Services.
Anyone trying to understand why the credit mess keeps getting messier needs only to have sat through Wednesday's hearing of the House Financial Services Committee. The eight bank CEOs were mere props. The stars were the politicians, who managed to demand more loans for consumers while simultaneously giving lenders new cause to wonder if they'll ever be repaid. This gathering of the esteemed Committee on Doubt and Uncertainty occurred as markets desperately need less of both.

Some will die in hot pursuit
And fiery auto crashes
Some will die in hot pursuit
While sifting through my ashes
Some will fall in love with life
And drink it from a fountain
That is pouring like an avalanche
Coming down the mountain

I don't mind the sun sometimes
The images it shows
I can taste you on my lips
And smell you in my clothes
Cinnamon and sugary
And softly spoken lies
You never know just how you look
Through other people's eyes

Enjoy every ham sandwich, peeps.

By the time leaders from Riverside, Los Angeles, Orange, San Diego, Imperial and San Bernardino counties come together, the revolt could be at full steam.

In the double-dip '80-'82 recession reduced local income combined with services withheld by the state resulted in a CA 'organization of disassociating counties', which faded with the 'Reagan recovery', but this to me is an idea whose time has come, again, and hopefully leads long-term to smaller big government. Knew it would never happen without a collapse.

Either way, the tool (wait, is that spelled t-r-o-l-l?) insists he lives in Germany.
Dieter from the block | 02.14.09 - 8:47 pm | #

There is no reason to believe that Werner is not from Germany.  He said that he lives in Southern Germany and based on his posts I believe him.  Based on his outlook, I think he very well might be a member of the FDP, definitely on the conservative side. 

Werner is simply a good reflection of a lover spurned.  I wouldn't be at all surprised that he even supported the intervention in Iraq.  The German right was just about fully in support of the U.S. policies up till this latest fiasco.  However, losing the German right is not very helpful for the U.S. in advancing its foreign policy objectives towards Russia as well as in Asia.

This gathering of the esteemed Committee on Doubt and Uncertainty occurred as markets desperately need less of both.
FFDIC | 02.14.09 - 8:50 pm | #

Committee members are so addicted to the high-quality national tv face-time in these good guy-bad guy charades I believe they're no longer touching the ground, and market triggers come to mind.

peAk | 02.14.09 - 9:16 pm | #
This committee may with any luck be the undoing of Mr. Frank everywhere except of course his MA district...

ce, thanks for the article. That should encourage my drinking this evening...

Comrade Byzantine Rules: Nice Butthole Surfer lyrics for a Saturday night.

Morons hang themselves. I do not have to help them.

Obviously he has not heard that canadians banks are on the hook for at least a trillion of CDSs. Knowing the canuck mind and attitude, there are many more roaches (and other pests) under the rug.

//I think you need to send Fareed Zakaria some hate mail
Zakaria: The Canadian Solution | Newsweek Voices - Fareed Zakaria | Newsweek.com 
alybaba | 02.14.09 - 9:23 pm | #//

Sorry, failed to trim. Doh.

Some country is going to lose it, and soon. I'm not saying this week or even this year, but a helluva lot faster than I think even most here thought. Two years ago the thought of some country (not African) defaulting was really not that discussed except in lofty post-midnight conjure talk. Now, you're telling me that little Green Shiny Rock is ready to roll and mother Russia is not looking so paternal...

Just seems things are shifting multiple gears at once. I used to think it was going to be a slow, long road to hell. I'm becoming much more of the mind it's going to be a cliff dive. Maybe CR has been subliminally trying to say that all along with his nifty charts.

As interesting times would say,
interesting times.

Continue to harbor your smoldering class-envy. Continue to believe that you can prod the government into taking wealth from those who have more than you, and to redistribute it in some hypothetical fairy-tale "equitable" way, and that somehow you will benefit. Keep your faith. We shall see how it ends.
some weathly dude. | Homepage | 02.14.09 - 9:30 pm | #

Bingo. SWD speaks truth.

The average bozo thinks that high income is the same as being wealthy. But the truly wealthy already have their fortune. They do not think in terms of income, but in terms of managing their assets. They like income taxes; it keeps the competition down. With a deft push here or there they keep the debate right where they want it, on differences of income. The real inequity is in the disparity of net worth. But nobody in the MSM will ever seriously debate that...the owners don't like it. But watch the focus on income as the debates unfold. Income taxes are going up, soon, fast, and high. "Because it's only fair." That'll keep the pretenders out of the upper strata.

Failure to save East Europe will lead to worldwide meltdown

Anybody else getting deja TARP?

Isn't the pieta where Ayn Rand cradles his poor abused bank statement touching?

But nobody in the MSM will ever seriously debate that...the owners don't like it. But watch the focus on income as the debates unfold. Income taxes are going up, soon, fast, and high. "Because it's only fair." That'll keep the pretenders out of the upper strata.

When the Republicans proposed the arcane inheritance tax changes that give wealthy people 1 year to shelter all their assets from future taxation, Feingold proposed instead dropping the inheritance tax on anybody with an estate smaller than 100 million.

It was voted down.

That tells you how narrow a segment has a death-grip on the political system. I can't help but wonder how much of the "we-have-to-save-the-banks" hysteria is staged by these people to salvage their investments.

Some people must be working very long nights keeping the soft currency countries afloat.

Yes of course. At the top levels a great deal of money is made by market manipulation. Entities at risk from an East Europe meltdown have undoubtedly been burning the midnight oil to prop up the currencies, and remember they're good at it or they wouldn't be at the top. It's the analogy to foot-dragging on foreclosures, which slows price discovery AND reduces modeled losses on MBS further by reducing the percentage of recent high-loss transactions.

EHP

Where in Van are you?

I went to high school in Burnaby - lived in those townhouses overlooking Deer Lake off Royal Oak. I remember in 2000 it was going for around 390-400k, checked a few months back to see the neighbor selling his at 880k or something ridiculous like that.

best Marvin ever...what's going on?
brushes9 | Homepage | 02.14.09 - 9:49 pm | #

Great music.  Funny how we're still asking the same question 35 years later.

Fed Chief's Boyhood Home Is Sold After Foreclosure

MICHAEL M. PHILLIPS

DILLON, S.C. -- Travis Jackson walks through his modest ranch house, admiring the kitchen's built-in spice rack and the red-oak floors. He draws back the curtains, and sunlight illuminates the pride on his face.

The young banker just bought Federal Reserve Chairman Ben Bernanke's childhood home at a foreclosure sale.

"This is where it all happened," marvels Mr. Jackson, a 27-year-old loan officer at First Citizens Bancorp, which is down the street from the old Bernanke place. "Kind of a surreal feeling, isn't it?"

Mr. Bernanke's family sold the property more than a decade ago. It ended up on the block late last year after its former owners fell behind on their mortgage payments.

Fed Chief's Boyhood Home Is Sold After Foreclosure - WSJ.com

To your point: if his attitude is representative of a wide-spread international opinion of the U.S., then perhaps I should reconsider my criticism of Werner's comments.
Dieter from the block | 02.14.09 - 9:45 pm | #

I think that Werner is reasonably representative of Western European opinion.  However, he expresses it not very diplomatically which is even more telling, IMO.  Some of it is personality but IMO there is the "lover spurned" element.

BTW, I suspect that Werner was a long term IBM employee during the good times of IBM.

Denniger has a whopper of an error. He says:

Most importantly the PBGC only covers people already retired. That's right - if you're a worker in the UAW and you have 38 years in, your pension funds are GONE.

from the PBGC:

If you have not yet retired, we will pay you an estimated benefit when you become eligible and apply to PBGC to begin payments. About four months before you are ready for your benefits to begin, contact PBGC by calling the Customer Contact Center toll-free at 1-800-400-7242.

The claim is crucial to his argument that the UAW is screwing its own members.

"to absent friends
to those we have met
to those we have yet to meet
to those who have left us for a while
and to those who have left us forever

let us lift our glasses
and drink a toast
that they may abide in our hearts
forever

to absent friends"

Is this going to be a reverse dustbowl where people pack the jalopey and move the frak out of Cali?
Have a Great Depression! | 02.14.09 - 10:38 pm | #

If so, it won't be because of the extra taxes.  They are regressive, but insidious.

citizen energyecon(Excellent) writes:
Nice link alybaba, those policy choices might impact the legitimacy of the state for the proles, no?

Byz?

Dude, I have wondered why anyone with the slightest mobility lives in California for years, and I come from a bankrupt and misadministered region of a bankrupt and misadministered rust belt state.

No water, overpriced RE, taxes are astronomical, citizens from outer space. Oh yah, and Arnold indebt the state at least once a year for supplemental borrowing to fund some pet project. Ask Rob Dawg or CR why they continue to abide within those precincts, I can't figure it out for the life of me.

Well, the solutions to the rest of the world defaulting and devaluing are going to be brutal until we hit our huge devaluation- does anybody seriously think that we won't be printing $3 trillion by next October, and $9 trillion by November 2010?

Think about it folks, the only way to save our entire economy is to massively jumpstart federal spending, and nationalize the banks.

Now we just wait for the reality to hit, and the money to flow...the longer it takes the deeper the bottom.

Anybody think this gets better without this massive bolus?

Someday this war's gonna end...

No water, overpriced RE, taxes are astronomical, citizens from outer space.

I live in the OC. I can (and often do) run the shower as long as I wish, my house is mostly paid for, we have plenty of money, and I like the people.

energy econ and EHP,

I am not saying that the gas issues did not negatively affect Eastern European economies.  I also agree that it doesn't take much at this point to unhinge these teetering economies.

My point was that the major danger to the Austrian and other European banks comes from the property sector and the countries affected by the gas issue were not the major ones where European banks have their highest exposure with the exception of Poland. However, Poland hasn't been hit as hard as other European countries, at until very recently.

I have read that Obama's plan will be to seek legislation putting the 2009 tax rate and exemption amount into effect for future years. That will eliminate the current law providing for the absence of any estate tax at all for persons dying in 2010. It will also allow more appropriate rates and exemptions.

For 2009 the exemption amount is $3.5 million per spouse. That means couples who plan and are worth less than $7 million pay no tax at all. The rate after that is 45% which strikes me as about right.

I have the same opinion, except that I think a graduated approach would be fairer, like a 20% bracket at 2-5 million or so. When the law was passed the Dems proposed several alterations which would be far more generous than that actually, and were denied in favor of the one year free proposal.

RE!

Thank you very much for the gas embargo impact factbox!

Can you do that magic trick with Eurobank exposure to E. European property markets?

When the law was passed the Dems proposed several alterations which would be far more generous than that actually, and were denied in favor of the one year free proposal.
Fair Economist | Homepage | 02.14.09 - 11:08 pm | #

I never did understand that legislative process at the time.  They actually came up with a law that said "Here's a year where you get to do the right thing by your progency by dying, but if you don't pull the trigger at the right time, they're screwed."

Can you do that magic trick with Eurobank exposure to E. European property markets?
Comrade Byzantine_Ruins | Homepage | 02.14.09 - 11:12 pm | #

Byz,

Give me a little time.  I definitely will give it a try even if I post it in the next thread.

Audience - Raviolé

Tanta vive!
RE | 02.14.09 - 8:10 pm | #

BTW, RE, that was a very nice piece of music.  I think Tanta would have enjoyed.

I'm sure the people in the former site of the Colorado River thank you.

Like most natives, the Cocopah were genocided and ethnically cleansed long before I got here. That particular shame is hardly restricted to California though.

Home ownership is so basic to the "The American Dream" that every citizen should know and trust that our government will protect and defend Home Ownership."

Wrong now and wrong 10 years ago.

Our government has done everything to protect their corporate patrons by taking the near-worthless mortgage-backed securities off their books, at taxpayer expense, while refusing for over a year to help existing homeowners in any meaningful way from choking on their fed-promoted ponzi mortgages. Nationalize the banks bad mortgage asset, ignore the defaulting homeowners and isolate and bully those remaining owners into wasting what's left of their income paying a mortgage 3 to 5 times any reasonable future expectation of the home's value. This is the part where you hear "With this kind of protection who needs enemies?"

What we need is government protection of home equity, by avoiding decades-long, binge-like exponential credit growth and lax regulation of lending and securities fraud. Kind of need a government that can do just about the opposite of what ours has delivered and is now unrealistically promising to deliver.

Counterpointer,

Can't help with Symphony No. 6, but here's a quiet version of what he seems to be doing:

Glenn Branca: Symphony No 13 :Hallucination City (excerpts)
Well, quiet compared to some other stuff.

Here's an interesting link, by way of Dnninger:

http://www.cnbc.com/id/29163525

Possible BS warning - it's Gasparino.

How worried was Wall Street about a lack of clarity in Treasury Secretary Tim Geithner's plan to save the banking system by buying toxic debt? So worried that Goldman Sachs called a meeting to figure out how to fix the problem.

Goldman sachs says the meeting was planned well in advance. But people who attended tell CNBC that they received the invitation after the speech and decided to attend because of the speech. Goldman Sachs initially denied that the meeting, hosted by co-presidents John Winkelried and Gary Cohn, took place. cnbc_quoteComponent_init_getData("gs","WSODQ_COMPONENT_GS_ID0ESFAC15839609","WSODQ","true","ID0ESFAC15839609","off","false","inLineQuote");

Fair Economist(Excellent) writes:
Orange County gets half its water locally.

Isn't that kinda like earning half your income and borrowing the rest? It works til it doesn't?

If worst comes to worst the HOA would have to let me xeriscape the lawn.

It's not the delta, it's the delta/time that kills.

musician...  I posted it before.

Sorry, delta sourcing the aquaduct fails to your north. Aquaduct could be easily repaired. Delta not so much.

Out now. Thanks all for the conversation and insight.

"A house of cards is supported by the cards at the bottom.
Butch Ragland"

And if the cards at the bottom had any common sense they would be renters...not stuck in some overpriced box in a town or city with diminishing employment prospects.
in an economic downturn, mobility is everything.

I mean you live in a place with a population astronomically over the land's fundamental capacity to provide water. Turn the tap off and you'll die like flies, as ren says.

In the worst case scenarios we'd have to cut back on water-intense agriculture. We do grow rice here; we have a lot of slack. Nobody would die.

If I were your neighbors, I'd be Putinizing your water supply every planting season until I had wrung every penny of economic rent out of you I could. I surely wouldn't live there.

That's not an option for them. There is something called the "federal government" which enforces water rights. It's not like the distribution is wildly unfair anyway. CA gets about 1/3 of the Colorado and it DOES go past the state. Most of our water is in-state, from the Sierras.

Re Sierras drying out: Yes, if we lost most of the Sierras that would be a worst-case scenario and our agriculture would have to switch to things like pistachios and date palms. Climate change is dangerous to many other areas too - ask Atlanta.

If LA needs water, I'll take short showers. We have three different sources (Delta, Eastern Sierras and Colorado) plus local stores so an accident would hardly be the end of the world.

"That would be the the Declaration of Independance, actually.
bobn "

You are right. My mistake.

Economist Moe Howard(Unrated) writes:
I am prepared and wait to see if the masses come to their senses and act accordingly. I will not be extorted by them.

LOL. Tell me how that works out for you.

Economist Moe Howard(Unrated) writes:
As I remember that during the last Colorado drought the Feds would not allow CO to keep all of their water under the treaty. The reason was CA AZ NE people first. Water wars are also coming.

Moe has, as they say, "got the shot".

Thanks RE!

It won't be long (10 or 12 generations) before most of the world is multiracial.

Yes, and beautiful kids they'll be, too. For my part, it's really nice living somewhere where people have largely gotten over that race thing. It's no fun spending your whole life en garde.

The rest of the world likes to beat on Californians. I say, thank you for welcoming me and mine.

Because everyone knows, the red hot banking sector is full of staff poaching in these days of go-go finance and seemingly unbounded growth.

basel too,
f'n unbelievable!

Any German opinions on how the politics will play in Berlin on an Irish bailout? How will German savers react when their deposits are used to bail out Irish speculators?

Basel Too writes:
Obama to Work on Executive Pay Limits After Industry Complaints

The Obama administration said it would work with Congress on limiting executive pay at banks that get federal bailout money after critics said tough new restrictions in an economic stimulus plan would prompt talented managers to leave....

I thought getting rid of those talented managers was the objective, no? GM and Toll Brothers would be finally able to hire them away from Wall Street.

RE, thank you for the interesting document. I had no idea that these reports were available in English.

Forgive me for my ignorance, but are stress tests performed by different entities standardized or equivalent in any way? Thanks in advance.

Pretty good guitar for a polio survivor.

Dang.

Yes, and beautiful kids they'll be, too. For my part, it's really nice living somewhere where people have largely gotten over that race thing. It's no fun spending your whole life en garde.

The rest of the world likes to beat on Californians. I say, thank you for welcoming me and mine.

Ah yes, how could I forget the mellower attitude towards race in the reasons to live here? Quite a relief to somebody from the South. And people do look good here for a number of reasons, including both the mix and the mixture of races. I'm too middle-aged and too married to really enjoy that but the eye candy is nice.

There's a certain "we're all in it together feel" I get much more in California that elsewhere. Not that there aren't divisions, but it's sure not like the South. I think it's mostly that the mix of everything - race, culture, religion - is so complex here you can't come up with good "us vs. them" groups.

1 currency almost yogi writes:
There is only one solution. The commentariat must create a bank.

Thoughts:
1) Easier to buy one. You would want a banking person to help you jurisdiction shop. GA seems like a good prospect, there will be a lot of distressed shops there and they are probably lender-friendly.

2) Easier to work in a self-selected group. The commentariat is effective because it differs with itself. Often resolutely. That's a bad management team. Also too large. Cream off people, both investors and grunts, don't try to run with the whole group.

3) If it was steerable, it'd be CR's to steer, this is his house. Probably okay to recruit pals from here, but best done off site so CR's not on the hook for the depredations of the unruly mob of robbers and mountebanks who have set up shop in front of his premises.

I'd crank a business plan with a "money needed" and "talent needed" list, see about creaming off this locale, and then fill your other needs with more conventional recruitment.

Just thinking off the cuff. Headed to bed shortly.

isn't there the potential of just building desalinization plants?

Sure, they have one on Catalina Island. But we'd have to build a few more nukes.

Look, if people here would just forego the frickin' lawns and golf courses, we'd have plenty of water. Even with Fair Econ's endless showers.

sportsfan - BINGO!!

Nap time...

C

PS the new Ricky was charging it tonite.

Very nice, Sportsfan, but since I went to HS with the guy who founded Tesla, I'll have to save a few more nickels for one of those.

Summers and Geithner were not very happy about the 11th hour slip into the stimulus bill.

...and somehow Geithner will have a change of heart and start nationalizing banks.

Look, if people here would just forego the frickin' lawns and golf courses, we'd have plenty of water. Even with Fair Econ's endless showers.

I do NOT take endless showers. I have to stop to post here!

(agreed on the absurdity of English lawns in a semi-arid to desert region).

...and somehow Geithner will have a change of heart and start nationalizing banks.

Some day my prince will come...

lol! It's just a continuation of "Tinkerbelle economics" from the previous administration. The unified Disney approach to governance.

Brian Pretti from ContraryInvestor:

(Deleveraging) We've Only Just Begun? 

I got a mailing from WaMu/Chase offering me $100 if I open up a checking account with at least $100.  The extra $100 will be deposited within 12 weeks.

Anyone see any reason not to get 100% ROI for $100, then close the account?

I believe it is time for America to take responsibility for it's part in instigating the worldwide economic catastrophe. We are most to blame and we are sorry...suckers.

'I for one will be dammed to allow redistribution of my wealth to the undisciplined who have brought us to our financial collapse.'

The Debt collapse is a Tragedy of the Commons. Your statement is as defensible as the man exposed to Ebola who refuses to be quarantined because of "his rights".
.

I'm getting the notion that despite the perceived shortcomings of places such as wide unpopulated, mud bound and poverty stricken Louisiana, Arkansas, Missouri, Kentucky, Tennessee, etc., there may well be more in migration over the coming years, especially from areas hardest hit--such as California, Nevada (already have met a few from there), Florida (just a hop away) and even New York (God forbid).

Low housing costs.

Small cities

Brain drain (any influx of new brain matter will raise the cumulative IQ)

Opportunity, opportunity, opportunity

Broward Horne writes: The Debt collapse is a Tragedy of the Commons.

This wouldn't be so bad, except that what is common keeps getting redefined. As usual a moral collapse preceded the material one. More of what used to be private property is now common. This calamity began in earnest with the passing of the 16th amendment in 1913. When a man's labor became part of the commons the collapse was inevitable.

My favorite new jokes:

What's the capital of Iceland?

2 Sheep and 25 kilos of fresh herring.

{rimshot}

Do you know the difference between Iceland and Ireland?

One letter and ten weeks!

{rimshot}

Thanks, you've been great. Don't forget to bailout your waitress...

Counterpointer(Excellent) writes:
Gretchen said "bailout haiku"...
I smell theft of CR Board IP.

Did you see this?

link

You gotta wonder, does he post or lurk?

Byz - we used to have a poster from Savannah who related a story that he was going around saying that GD2 was coming and people said "well, the last one never left"...

C

Counterpointer(Excellent) writes:
Byz - we used to have a poster from Savannah who related a story that he was going around saying that GD2 was coming and people said "well, the last one never left"...

Heh. The late 70s/early 80s collapse never really ended here.

Well, it sorta did, we recently bulldozed all the brownfields at state expense and gave them to politically connected developers for a song to build malls and condos so we could have plenty of cancer clusters.

Gotta replace the white elephants of yesterday with the white elephants of tomorrow, dontcha know.

This eyeblink of "recovery" did nothing more than crap another few hundred square miles of sprawl onto the landscape and convince pretentious suckers to buy big houses in Far Exurbia for California RE prices.

It will be worth enduring the coming hardships just to watch those fools suffer.

As Bill Moyers said, FDIC should step in and sell pieces of broken down banks to private investors.

IMO, If we preprivatize/nationalize, every loan these banks hold will be modified.

.....you can't sell if there are no buyers. That might be the problem the FDIC is experiencing already. The same might hold true for the Fed and bonds - the remainder of this month will be interesting

Volker: I'm getting the notion that despite the perceived shortcomings of places such as wide unpopulated, mud bound and poverty stricken Louisiana, Arkansas, Missouri, Kentucky, Tennessee, etc., there may well be more in migration over the coming years, especially from areas hardest hit--such as California, Nevada (already have met a few from there), Florida (just a hop away) and even New York (God forbid).

Esp in LA, there are people who can make a fabulous dinner, dahhhhlin, from anything with fur, hooves, scales, or wings (personally, I can't wait for dove season!)--it'll be fried, of course, and the veggies will be a leaf of salad for decor.

"If Mad Max happened I'm quite sure I'd rather be in the mountains"

....I'm kind of partial to this desert; easy food production, clear lines of sight, water, and like minded people.

....and Geithner is in over his head.

....wait - I'm sorry, it's a "death-trap already with the shootings, home invasions, empty crack houses.....you never hear about that on MSM...

Paul Krugman is in agreement with the CR Commentariat and also seems to believe/hope that the announced stress testing will provide a good set-up for the nationalization of the mega banks (apologies for the longish quote, but hey - this place looks empty anyway!)

Aha — the Times’s dealbook blog supplies exactly the numbers I was looking for. It cites a CreditSights report on the potential losses of major banks — which gives us a guide to the amount of capital the federal government needs to put in to make these banks viable.

Focus just on the big four money center banks: Citi, B of A, Wells Fargo, JPMorgan. According to this estimate, they need around $450 billion. Meanwhile, their combined market cap is only about $200 billion — and part if not all of that market cap surely represents the “Geithner put,” the hope that stockholders will in effect get a handout from the feds.

Given these numbers, it’s extremely hard to rescue these banks without either (a) giving a HUGE handout to current stockholders or (b) effectively taking ownership on the part of we, the people. Of these, (a) would be politically unacceptable as well as bad policy — but the Obama administration isn’t ready to go for (b), because it’s not in our “culture”.

Hence the perplexity of policy. Our best hope right now is that the “stress test” will make (b) inevitable — that Treasury will declare itself shocked, shocked to find that the banks are in such bad financial shape, leaving government receivership unavoidable.

Great post!

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