It will take a lot of political courage for governments to kick enough weak banks to the curb. And they need to do it this week at the latest.

(I see David Habakkuk has already basically said this but I will post anyway)

It is said to be based upon upon the approach taken by the Swedes back in the early Nineties, which Yves and others have noted is the most successful treatment of a financial crisis.

As I understood it, however, a crucial part of the Swedish approach was that at an early stage decisions were made on which banks one could realistically expect to save, and which were past praying for. And the latter were allowed to go to the wall.

Is the assumption behind the approach being taken in Britain that none of the major banks are past praying for? If it is not, how do the British authorities propose to do the triage which appears to be universally regarded as indispensable to the successful handling of a financial crisis?

the distinction of course is the GS has the cash while the others still have assets being carried at inflated prices

The financial technocrats in the government know what they need to do: nationalize all the insolvent fiancial institutions, drop the bad assets into a big pot for winding up, and capitalize the banks worth saving with enough money to provide financing to the real economy.

The stumbling blocks have been political because resolving the issues will force someone to absorb major losses and know one wants to do it. The shareholders don’t want to be diluted. The buyers of puts and short sellers want to make money by having the shareholders wiped out. The debtholders don’t want to be repaid less than par. The holders of credit default swaps want the bondholders wiped out, so they can collect under CDSs. And last, but certainly not least, all the players want cheap financing that hurts the little guy sitting in cash, and government subsidies that hurt the little taxpayer who doesn’t feed at the trough.

Once the credit crunch hurts joe and jane 6 pack enough to force the politicians to decide how the losses will be divided up, that’ll calm the markets. Until then, a lot of social programs like social security, disability, welfare, school lunch programs, medicare, COBRA, etc, will act as a safety net to prevent things from getting too bad. So will loan extensions, loan purchases, or loan guarantees provided by fannie mae, freddie mac, the FDIC, the FHLA, the export-import bank, the overseas private investment corp, and other federal agencies.

That isn’t to say things won’t be painful. The 73-74 and 80-82 recessions were painful, but people survived. It won’t all be bad. A lot of bright people were forced out of finance in the 70’s, the same will happen now, and we’ll benefit by having these people get jobs in the real economy.

So, is it my imagination or are the countries in the G-7 saying:

No one has any idea just how big or how bad the problem is. No one has a handle on the entire scope. All they know is yes it’s really bad.

If that’s really the case, then if they don’t get a handle on the problem, they can’t work towards a solution. And to me, that means the global economy is about to splinter and shatter into a thousand million pieces of isolationist policies because absolutely no one trusts anyone else to tell the truth.

I would absolutely love to hear that I’m wrong and that’s not what’s going on.

I suppose it’s good that Arby’s can feed Hobos.

The B4 auditors will of any seller will know about the sale prices, and they may use this information to help financial firms book assets at inflated prices, even though Treasury’s purchases are limited.

And to the guy who complained about the stock market as a promotion scheme, the good value investing goods I’ve read (there aren’t many) all recommend calculations of intrinsic value based on what a promoter could sell the company for.

You want your house? Come get it.

They tried to liquidate out of the housing market, that can’t work, then they move on to commodities, and finally the stock market. They are selling everything they can.

I’m sorry, this is our problem? Right.