Comments on: "Financial system must tap the taxpayer"

By: Alan

Alan — Sun, 16 Mar 2008 06:49:00 +0000

Just capitalize them? You have to be kidding. If there is any capital flowing that way, it has to be targeted. Too big to fail has failed. Now these guys are too big to bail out.

They showed what they do with capital. Without structure and regulation, what confidence will throwing money at them create?

Better to lop off the investment arms, the securitizing offices, and capitalize the consumer and business credit operations. Repealing Glass-Steagall was a major mistake. Rectifying that ought to be first.

By: S

Sat, 15 Mar 2008 22:52:00 +0000

THis guy also argues in the piece that inflation is GOOD becasue it reses the nominal prices closer to the price of houses. Oh great so everything but wages go up. Unless this guy is imnplying that becasue companies are just going to raise wages to meet the inflating costs at a faster clip then how exactly does that help the problem? The only thing missing in this screed is to tell the public that their being systematically devalued. Off base on so many levels

By: Anonymous

Anonymous — Sat, 15 Mar 2008 18:21:00 +0000

What is the economic meaning of this de-leveraging? On a macro level it means that holders of assets are re-evaluating whether or not these assets will provide the returns expected in the future. The deleveraging is action to prevent future disappointment (losses) . To support efforts by the FED (and Fannie, the FHA, Congress, etc.) to slow the pace of deleveraging is to trust that a few politicians have greater insight into this crisis than do millions of market participants. Do we really want to believe this? Let us consider that the present crisis had its origins in the vanity of one man. He simply didn't want his star diminished by being known as the man who pumped up the stock market bubble (and cost Al Gore the Presidency). Of course, he did succeed in limiting that stock market collapse. At what cost? Five years later millions must confront the same issue, viz. that they are much more poorly provisioned for the future than they thought. Seen in this light, it is the continued high price of income producing assets and long term consumerable durables (i.e. houses) that diminishes confidence.

By: The Hube

The Hube — Sat, 15 Mar 2008 16:26:00 +0000

Why the F should the taxpayers give these Aholes any bailout when they are still paying dividends and bonuses, and even changing bonus formulas to prevent the perps from having to feel the consequences of their actions.
Let these free market champions deal with a free market.

By: Anonymous

Anonymous — Sat, 15 Mar 2008 15:47:00 +0000

Public money is only going to drive commodity prices higher and the dollar lower the only way out of this mess is let prices fall, let firms go under and let this hit bottom the more they try to stop it the worse it will get.

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”
Human Action: A Treatise on Economics
Ludwig von Mises (1881-1973)

By: Mel

Mel — Sat, 15 Mar 2008 15:16:00 +0000

If we left Iraq asap, we would free up $12 billion/month to shore up the banks. If we “stay the course,” all our books are out of whack and there’s no way to put Humpty Dumpty back together again.

Part of the problem is the budget deficits the war and tax cuts caused, part is the lack of income growth for the average worker. If Joe Average doesn’t see an increase in his paycheck, he can’t afford to buy “things.” The banks found ways to lend him money by winking at assets, this won’t stop until Joe gets a raise and the robber barrons pay their share in taxes. Bushism must go!

By: Anonymous

Anonymous — Sat, 15 Mar 2008 12:38:00 +0000

Jay,one way to think about deflation/inflation picture is to distinguish capital markets from markets for goods, services and distribution. Deflation is happening in capital markets. Inflation in goods, services and distribution. And, this isn’t surprising given that the capital markets have de-linked from the goods, services, distribution markets — or, put differently, the capital markets bear too little relation to any ‘real economy’. They’re a a ponzi, casino, lottery game in which, it appears, the losers will be those who didn’t get rich quick enough. That is, the real economy will bail out the fake economy — and, in doing so, the two sides will become reconnected until the next wave of ‘free market ideology’ crashes down on the planet.

By: RK

RK — Sat, 15 Mar 2008 12:00:00 +0000

Henry Kaufman argued a few months ago that the
2007 bonuses equalled the amount raised from the sovereign wealth funds. In other words, they borrowed their bonuses by dilution of shareholder capital.

By: a

Sat, 15 Mar 2008 11:56:00 +0000

Should read: On the way *up* mark-to-market accounting let these executives pull out billions and gave themselves millions.

By: crmorris

crmorris — Sat, 15 Mar 2008 11:56:00 +0000

A clean repricing of asset values to sustainable levels will probably leave banks ~$200B or so capital short. We could fake the books with the LDC crisis in the 80s, but all the adjustment went on overseas in Brazil, Mexico et al. Won’t work now.
Impractical to raise that much without the swfs, which — you can argue about the rationality — will make too many people uncomfortable.
There are some $2T in treasuries sitting in the SS Trust Fund. Converting 10% of those holdings into bank equity/conv etc on terms like Dubai has been getting would probably be a great investment over the lt. Hard part will be to force the restatements and get it over with and do them on economic terms, instead of buying out the bad debt at near-face value as the Fed is starting to do.