Another weekend, another bailout...

[GrGr]

Originally posted by: Wreckem

Originally posted by: Lemon law
Yes on balance, the republican party line of not regulating lenders is the proper policy, a mere 6 trillion dollars is a small price to pay to keep the no regulation mantra alive. Four more years eight more years, anything is better than Bill Clinton and a balanced budget. Ken Lay died an innocent man, a financial guru that should inspire us all, and the embodiment of the American dream.

Which President signed into law the looser restrictions?

Oh, thats right, your white knight, President Clinton...

Rubin is ex Goldman Sachs, just like Paulson and Bernanke.

If China gets cheated of it's investment in Fannie and Freddie things will go from bad to worse. China has warned the US in quite certain terms that they will not be best pleased if the US pulls any dirty tricks on them.

 

[ponyo]

Originally posted by: Thump553
The questionable thing to me is that both Freddie Mac and Fannie Mae appeared to be turning things around already. Both have been effectively selling their debt instruments at a lower cost (thus showing the market's belief in their continued viablility). Their stock prices had stablilized and even risen appreciably. Both Freddie Mac and Fannie Mac had very successful bond auctions just his week, showing investor confidence in their continuing viability. There was no immediate liquidilty crisis. As far as I could tell from my real estate practice, FNMA was functioning normally (with several significant reforms in place to prevent future defaults, including more rigorous underwriting and pre-loan manadatory borrower education).

It looked to me like both Fannie Mae and Freddie Mac had-with the backing of the federal government clearly behind them by the actions earlier this year-the ability to "muddle through" and solve their problems without the necessity and expense of a full-fledged governmental takeover.

It will be interesting to see how much politics was involved in this decision. If the takeover was eventually inevitable, the decision at the highest levels could have been made to do it now, get the bad news out well before the election so the public anger fades by election time. I have no evidence of this, it's just that the entire timing is suspect to me.

Disclosure-I hold a modest amount of FNMA stock (ironically bought earlier this week), now probably made worthless by this decision.

lol. You think the $2 billion Freddie financed last week was going to save them when Fannie and Freddie have $230 billion in debt coming due at the end of the quarter? Buffett has said Fannie and Freddie "don't have any net worth."

 

[smack Down]

Originally posted by: Naustica

Originally posted by: Thump553
The questionable thing to me is that both Freddie Mac and Fannie Mae appeared to be turning things around already. Both have been effectively selling their debt instruments at a lower cost (thus showing the market's belief in their continued viablility). Their stock prices had stablilized and even risen appreciably. Both Freddie Mac and Fannie Mac had very successful bond auctions just his week, showing investor confidence in their continuing viability. There was no immediate liquidilty crisis. As far as I could tell from my real estate practice, FNMA was functioning normally (with several significant reforms in place to prevent future defaults, including more rigorous underwriting and pre-loan manadatory borrower education).

It looked to me like both Fannie Mae and Freddie Mac had-with the backing of the federal government clearly behind them by the actions earlier this year-the ability to "muddle through" and solve their problems without the necessity and expense of a full-fledged governmental takeover.

It will be interesting to see how much politics was involved in this decision. If the takeover was eventually inevitable, the decision at the highest levels could have been made to do it now, get the bad news out well before the election so the public anger fades by election time. I have no evidence of this, it's just that the entire timing is suspect to me.

Disclosure-I hold a modest amount of FNMA stock (ironically bought earlier this week), now probably made worthless by this decision.

lol. You think the $2 billion Freddie financed last week was going to save them when Fannie and Freddie have $230 billion in debt coming due at the end of the quarter? Buffett has said Fannie and Freddie "don't have any net worth."

I would say buffet overestimated Fannie and Freddie net worth by about a trillion dollars.

 

[First]

Originally posted by: PC Surgeon

Originally posted by: Capt Caveman
First, you need to add some commentary.

Letting Fannie Mac and Freddie Mac fail will mean the Greatest Depression and thus the Gov't won't let that happen.

Surprised you're not also crying about the Gov't aid provided for natural disaster relief due to all of the hurricanes.

Yep, there are two sides to it. Let them fail and possibly suffer major economy slowdowns

No, guaranteed Depression. There is little to no doubt about it.

*or* have the taxpayers pay for a banking institutions bad loan investments. It's a moral clusterfuck either way you look at it. But I am of the group that would let the fuckers drown. Now these banks have government backing by way of taxpayer bailout. I guess I'm in the wrong business....

You don't understand the moral failings if you don't see how letting them drown would literally put millions of people on the streets.

 

[First]

Originally posted by: bamacre

Originally posted by: alchemize

Originally posted by: mAdMaLuDaWg

Originally posted by: alchemize
You do realize that the so called "$6 trillion liability" is backed up by some lesser amount of assets, right? And the variance between the two is the net exposure to the taxpayers.

Which of course is a trifling amount compared to the $53 trillion liabilities, backed up by zero assets, for medicare and SS.

And what, pray tell, would be your solution be - let Fannie Mae and Freddie Mac fail?

This is starting to smell Ron-paulish

I for one wouldn't mind starting out with a clean slate. Yes, I say let it go bankrupt and another financial institution absorb the assets along with the debt, and have it truly privatized. No more of this GSE nonsense and their free wheeling access to US taxpayer money... thats what caused the whole problem in the first place.

Yes, let's make the Great Depression look like a tea party. GO RON PAUL!

http://www.lewrockwell.com/paul/paul128.html

Note the date.

He was also saying that in 1982, and promptly got the next quarter century wrong.

 

[Jaskalas]

Originally posted by: bamacre

Originally posted by: Lemon law

Originally posted by: Engineer

Originally posted by: MadRat
Nothing funny about the U.S. tax payers being abused by the people whom blew the money.

Corrected that.

Profits - privatized
Losses - publicized

--------------------------------------------------------------------------------

At least Engineer seems to get it, what we have is a failure of government regulation of markets in the first place. The people who abused the system got in and got out packaging dubious loans as AAA risks. And that never should have been allowed to occur.

Now we have almost no choice but to bail out some of the major institutions who trusted an unregulated system.

It seems to me that the problem isn't a "lack of regulation," but government intervention in the market.

But this is typical mentality from the Left and the Right. Intervene in the market, and when it creates a problem, say the answer is more intervention. Health care is another perfect example.

Damn straight. Build a house of cards through government abuse of power, and then when it collapses the ONLY acceptable answer is to build a BIGGER house of cards.

 

[NoStateofMind]

Originally posted by: Evan Lieb

Originally posted by: PC Surgeon

Originally posted by: Capt Caveman
First, you need to add some commentary.

Letting Fannie Mac and Freddie Mac fail will mean the Greatest Depression and thus the Gov't won't let that happen.

Surprised you're not also crying about the Gov't aid provided for natural disaster relief due to all of the hurricanes.

Yep, there are two sides to it. Let them fail and possibly suffer major economy slowdowns

No, guaranteed Depression. There is little to no doubt about it.

*or* have the taxpayers pay for a banking institutions bad loan investments. It's a moral clusterfuck either way you look at it. But I am of the group that would let the fuckers drown. Now these banks have government backing by way of taxpayer bailout. I guess I'm in the wrong business....

You don't understand the moral failings if you don't see how letting them drown would literally put millions of people on the streets.

You don't see how its going to be much worse down the line.

Two scenarios:

We didn't prop up the banks = Failure of economy and we start to recover 6 months later

We prop up banks = Small failures but slow suffering. When the full force of the debased currency hit the American public the Depression sets in anyways and is made worse because of the weak dollar.

Your way delays the inevitable. What you pray for is some miracle market to come along to save us. The problem is, it doesn't exist. Instead of allowing the natural cyclical events to happen, the governments meddling is going to cause hell in the market. You watch and see. I'll be the first to stand in line to eat my crow. How about you?

 

[mAdMaLuDaWg]

Originally posted by: PC Surgeon

Originally posted by: Evan Lieb

Originally posted by: PC Surgeon

Originally posted by: Capt Caveman
First, you need to add some commentary.

Letting Fannie Mac and Freddie Mac fail will mean the Greatest Depression and thus the Gov't won't let that happen.

Surprised you're not also crying about the Gov't aid provided for natural disaster relief due to all of the hurricanes.

Yep, there are two sides to it. Let them fail and possibly suffer major economy slowdowns

No, guaranteed Depression. There is little to no doubt about it.

*or* have the taxpayers pay for a banking institutions bad loan investments. It's a moral clusterfuck either way you look at it. But I am of the group that would let the fuckers drown. Now these banks have government backing by way of taxpayer bailout. I guess I'm in the wrong business....

You don't understand the moral failings if you don't see how letting them drown would literally put millions of people on the streets.

You don't see how its going to be much worse down the line.

Two scenarios:

We didn't prop up the banks = Failure of economy and we start to recover 6 months later

We prop up banks = Small failures but slow suffering. When the full force of the debased currency hit the American public the Depression sets in anyways and is made worse because of the weak dollar.

Your way delays the inevitable. What you pray for is some miracle market to come along to save us. The problem is, it doesn't exist. Instead of allowing the natural cyclical events to happen, the governments meddling is going to cause hell in the market. You watch and see. I'll be the first to stand in line to eat my crow. How about you?

I agree, we are fvcked either way. People don't seem to realize that we got to this point because the government has continued to pump "liquidity" into the market. The worst thing about it is that once the government starts pumping money into something, it is almost impossible to stop. Heck prop up a Bear Stearns here and an IndyMac there , and soon enough every single corporation that is deemed to be "vital" to the economy is going to be demanding money.

The fact of the matter is that we are putting bandages on a leaking dam and it is going to implode anyways. The more we prolong it, the harder it is going to hit us.

 

[First]

Originally posted by: PC Surgeon

You don't see how its going to be much worse down the line.

Two scenarios:

We didn't prop up the banks = Failure of economy and we start to recover 6 months later

Ridiculous on multiple levels. How exactly is letting two banks fail that cover $6T (that's trillion with a capital T) going to recover in 6 months? That's lunacy at its finest. And if the Fed can't intervene in economic activities, how are businesses suppose to recover in that short time frame? Just completely far gone from reality.

We prop up banks = Small failures but slow suffering. When the full force of the debased currency hit the American public the Depression sets in anyways and is made worse because of the weak dollar.

Your way delays the inevitable.

Except I have proof that "my way" works; prosperity, GDP per capita, unemployment are all at historically good levels. While your proposed fantasy scenario where we are simply "delaying the inevitable" has never been empirically observed or proven to exist. It's layman fantasy. When we didn't have a Fed in the early 20th century there was a run on banks, the market was significantly more volatile then, and that was with far fewer assets and no where near the same complexity or globalization of markets that we see now. The Fed needs to exist to help take the burden off such ludicrous notions as complete free market spuriousness. There is no "natural" market, there are only people that by nature will take advantage of no regulation if they can. But that's why we have the SEC and the Fed, to help mitigate and thwart such circumstances. They are logical progressions, accepted nearly everywhere across the globe.

What you pray for is some miracle market to come along to save us. The problem is, it doesn't exist. Instead of allowing the natural cyclical events to happen, the governments meddling is going to cause hell in the market. You watch and see. I'll be the first to stand in line to eat my crow. How about you?

You and your ilk have been eating crow for the last century, particularly the last quarter century. You've been eating crow and you don't even know it.

 

[NoStateofMind]

Originally posted by: Evan Lieb

Originally posted by: PC Surgeon

You don't see how its going to be much worse down the line.

Two scenarios:

We didn't prop up the banks = Failure of economy and we start to recover 6 months later

Ridiculous on multiple levels. How exactly is letting two banks fail that cover $6T (that's trillion with a capital T) going to recover in 6 months? That's lunacy at its finest. And if the Fed can't intervene in economic activities, how are businesses suppose to recover in that short time frame? Just completely far gone from reality.

two things, its not just 2 banks. Secondly, allow another bank to buy up the assets. Simple. You're smarter than that. Try again.

We prop up banks = Small failures but slow suffering. When the full force of the debased currency hit the American public the Depression sets in anyways and is made worse because of the weak dollar.

Your way delays the inevitable.

Except I have proof that "my way" works; prosperity, GDP per capita, unemployment are all at historically good levels. While your proposed fantasy scenario where we are simply "delaying the inevitable" has never been empirically observed or proven to exist. It's layman fantasy. When we didn't have a Fed in the early 20th century there was a run on banks, the market was significantly more volatile then, and that was with far fewer assets and no where near the same complexity or globalization of markets that we see now. The Fed needs to exist to help take the burden off such ludicrous notions as complete free market spuriousness. There is no "natural" market, there are only people that by nature will take advantage of no regulation if they can. But that's why we have the SEC and the Fed, to help mitigate and thwart such circumstances. They are logical progressions, accepted nearly everywhere across the globe.

Don't try the GDP bullshit. LOL

Hopefully, being as educated as you are, you know how the GDP is derived. All the GDP shows is the amount of money spent (in basic terms). The more that is spent the more "growth". Total bullshit. The money spent to repair the damage of natural disasters, money spent on foreign cars, all added to the GDP. You tell me thats growth? GTFO! So don't use the "GDP growth" argument with me.

*Also, you must think I'm an idiot. The FED admitted (Bernanke) it withheld liquidity during the great depression. Ask yourself why they did that. You're smart enough, figure it out.*

*another topic all together

The logical progression is you don't reward an ignorant company with a bailout. Do you bail out joe schmoes down the street cause they let too many poor folk run up tabs? Hell no, so fuck the ultra rich too. Let them fail so we can get some real recovery in the market.

What you pray for is some miracle market to come along to save us. The problem is, it doesn't exist. Instead of allowing the natural cyclical events to happen, the governments meddling is going to cause hell in the market. You watch and see. I'll be the first to stand in line to eat my crow. How about you?

You and your ilk have been eating crow for the last century, particularly the last quarter century. You've been eating crow and you don't even know it.

Does that mean you'll own up when the time comes? Or is this your way of a cop out?

 

[LegendKiller]

Originally posted by: brencat

Originally posted by: brxndxn
I'd rather have another 'Great Depression' right now than a 'Super Holy Fuck Depression' when I'm ready to retire because we decided to postpone our Great Depression with even more credit..

+1 Exactly right.

Of course, we wouldn't have even had this serious a credit bubble had Greenspan hiked interest rates much earlier than 4Q04 and removed the froth that was so obviously building. Nobody wanted to face the music back then and now look at the size of the problem we have as a result.

This had less to do about interest rates and more to do about capital requirements, lending standards, and securitization accounting.

 

[LegendKiller]

Originally posted by: BoberFett

Originally posted by: bamacre
http://www.lewrockwell.com/paul/paul128.html

Note the date.

Hehe, he called the housing crash and resulting recession 5 years ago.

He must be a loon. Only loons can tell the future.

Big fucking deal. I called it 5 years ago too.

 

[LegendKiller]

Originally posted by: PC Surgeon

Originally posted by: Evan Lieb

Originally posted by: PC Surgeon

Originally posted by: Capt Caveman
First, you need to add some commentary.

Letting Fannie Mac and Freddie Mac fail will mean the Greatest Depression and thus the Gov't won't let that happen.

Surprised you're not also crying about the Gov't aid provided for natural disaster relief due to all of the hurricanes.

Yep, there are two sides to it. Let them fail and possibly suffer major economy slowdowns

No, guaranteed Depression. There is little to no doubt about it.

*or* have the taxpayers pay for a banking institutions bad loan investments. It's a moral clusterfuck either way you look at it. But I am of the group that would let the fuckers drown. Now these banks have government backing by way of taxpayer bailout. I guess I'm in the wrong business....

You don't understand the moral failings if you don't see how letting them drown would literally put millions of people on the streets.

You don't see how its going to be much worse down the line.

Two scenarios:

We didn't prop up the banks = Failure of economy and we start to recover 6 months later

We prop up banks = Small failures but slow suffering. When the full force of the debased currency hit the American public the Depression sets in anyways and is made worse because of the weak dollar.

Your way delays the inevitable. What you pray for is some miracle market to come along to save us. The problem is, it doesn't exist. Instead of allowing the natural cyclical events to happen, the governments meddling is going to cause hell in the market. You watch and see. I'll be the first to stand in line to eat my crow. How about you?

We recover 6 months later? How do you say that happens?

I'd love to see what you think of a reasonable timeline for "recovery". It should include how you think the financial markets, will respond to the financial crisis. How they will fund themselves, and at what rates. How those rates will affect the profitability of all institutions that lend, and how those reduced profits from increased borrowing costs will cause feedback into the whole system.

I love idiots who prattle on about "letting it fail", when they have no idea what that means. The utter crush of *ever* company coming under liquidity problems would be swift, and severe.

Even now, I know of a company that has a very stable business, but has $2.9BN of debt to roll over. The debt cost had an initial cost of 95bps, which ratchets up 25bps every quarter in which they don't refinance the conduit debt by 500M by doing term securitizations. They can't do term securitizations since the market is shut down (nobody has liquidity). Thus, they are now up to 145bps in costs. That's 50bps in increased costs, per quarter, on 2.9bn, which is real money.

That destroys their profitability, since they are a very stable low-margin business. How many jobs will be lost?

Now, if FF die, then how do you think that company will fund itself? Borrowing costs would go up to 300-400bps, or 3-4%, on a business that has a profit margin of 1-2%.

How many jobs would be lost? How many people would feed back into the crisis, resulting in more lost money?


Only an uneducated fool would believe that the affect of a massive credit contraction would be over in 6 months. It would throw the entire world into a depression, perhaps rivaling 1929, and it would last years.

It's no wonder people like you, PCS, can't even rally more than 3% to your "side".

 

[LegendKiller]

Originally posted by: PC Surgeon

two things, its not just 2 banks. Secondly, allow another bank to buy up the assets. Simple. You're smarter than that. Try again.

What other banks? Who the fuck do you think has $6T?

My own bank, one of the largest in the world, has only taken $750M USD in losses. Its capital ratio is very good. However, it is far too cautious in this market to take on that type of money.

YOu don't get it, THERE IS NOBODY ELSE.

It's a stupid point anyway, the vast majority of the $6T is already termed out.

*Also, you must think I'm an idiot. The FED admitted (Bernanke) it withheld liquidity during the great depression. Ask yourself why they did that. You're smart enough, figure it out.*

Enlighten me. Why do you think they did it?

 

[NoStateofMind]

Letting the banks fall would cause economic hardships. That I am not debating. What I am debating is that allowing them to fail now would be easier to recover from than to allow them to fail later. Do you think these steps by the FED will forgo any depression we would have seen if they had let them fail? How much worse will the depression be with a weaker dollar and MORE debt? From what I get from your posts is, you want the easy fix right now, just like the easy credit that was handed out in the first place. The buy it now pay for it later crowd.

You obviously think the recent moves by the FED were not only needed, but necessary. IMO this is not so. These actions only further on the irresponsible actions (loans to those that don't deserve it).

When a child steals, do you laugh and say its ok? Or do you make them take it back into the store and apologize? You and your FED agree with the former.

 

[bamacre]

Originally posted by: LegendKiller

Originally posted by: BoberFett

Originally posted by: bamacre
http://www.lewrockwell.com/paul/paul128.html

Note the date.

Hehe, he called the housing crash and resulting recession 5 years ago.

He must be a loon. Only loons can tell the future.

Big fucking deal. I called it 5 years ago too.

You're right, LK. Quite a few saw it coming. I posted that for a different reason though.

 

[LegendKiller]

Originally posted by: PC Surgeon
Letting the banks fall would cause economic hardships. That I am not debating. What I am debating is that allowing them to fail now would be easier to recover from than to allow them to fail later. Do you think these steps by the FED will forgo any depression we would have seen if they had let them fail? How much worse will the depression be with a weaker dollar and MORE debt? From what I get from your posts is, you want the easy fix right now, just like the easy credit that was handed out in the first place. The buy it now pay for it later crowd.

You obviously think the recent moves by the FED were not only needed, but necessary. IMO this is not so. These actions only further on the irresponsible actions (loans to those that don't deserve it).

When a child steals, do you laugh and say its ok? Or do you make them take it back into the store and apologize? You and your FED agree with the former.

You honestly think having the world go into a depression, would be better than taking the Japan solution? How great that you're more than willing to destroy the world's economy, force the whole thing into depression, have hundreds of millions lose jobs, all to satiate your desire to see a different system in place.

It's nice to know you're such a well-rounded thinker.

A better solution would be to allow the system to absorb the problems, then fix it so it can't happen again, followed by better proactive measures.

 

[NoStateofMind]

Originally posted by: LegendKiller

Originally posted by: PC Surgeon
Letting the banks fall would cause economic hardships. That I am not debating. What I am debating is that allowing them to fail now would be easier to recover from than to allow them to fail later. Do you think these steps by the FED will forgo any depression we would have seen if they had let them fail? How much worse will the depression be with a weaker dollar and MORE debt? From what I get from your posts is, you want the easy fix right now, just like the easy credit that was handed out in the first place. The buy it now pay for it later crowd.

You obviously think the recent moves by the FED were not only needed, but necessary. IMO this is not so. These actions only further on the irresponsible actions (loans to those that don't deserve it).

When a child steals, do you laugh and say its ok? Or do you make them take it back into the store and apologize? You and your FED agree with the former.

You honestly think having the world go into a depression, would be better than taking the Japan solution? How great that you're more than willing to destroy the world's economy, force the whole thing into depression, have hundreds of millions lose jobs, all to satiate your desire to see a different system in place.

It's nice to know you're such a well-rounded thinker.

A better solution would be to allow the system to absorb the problems, then fix it so it can't happen again, followed by better proactive measures.

LK, lets go your way then. We bailout the banks, the market slows down, the currency weakens, accrue more debt, then we have a depression anyways. Which depression is easier to recover from? The one with bank bailouts? Or the one with bank bailouts, weaker currency and a massive amount more of debt?

 

[smack Down]

Originally posted by: LegendKiller

Originally posted by: PC Surgeon

Originally posted by: Evan Lieb

Originally posted by: PC Surgeon

Originally posted by: Capt Caveman
First, you need to add some commentary.

Letting Fannie Mac and Freddie Mac fail will mean the Greatest Depression and thus the Gov't won't let that happen.

Surprised you're not also crying about the Gov't aid provided for natural disaster relief due to all of the hurricanes.

Yep, there are two sides to it. Let them fail and possibly suffer major economy slowdowns

No, guaranteed Depression. There is little to no doubt about it.

*or* have the taxpayers pay for a banking institutions bad loan investments. It's a moral clusterfuck either way you look at it. But I am of the group that would let the fuckers drown. Now these banks have government backing by way of taxpayer bailout. I guess I'm in the wrong business....

You don't understand the moral failings if you don't see how letting them drown would literally put millions of people on the streets.

You don't see how its going to be much worse down the line.

Two scenarios:

We didn't prop up the banks = Failure of economy and we start to recover 6 months later

We prop up banks = Small failures but slow suffering. When the full force of the debased currency hit the American public the Depression sets in anyways and is made worse because of the weak dollar.

Your way delays the inevitable. What you pray for is some miracle market to come along to save us. The problem is, it doesn't exist. Instead of allowing the natural cyclical events to happen, the governments meddling is going to cause hell in the market. You watch and see. I'll be the first to stand in line to eat my crow. How about you?

We recover 6 months later? How do you say that happens?

I'd love to see what you think of a reasonable timeline for "recovery". It should include how you think the financial markets, will respond to the financial crisis. How they will fund themselves, and at what rates. How those rates will affect the profitability of all institutions that lend, and how those reduced profits from increased borrowing costs will cause feedback into the whole system.

I love idiots who prattle on about "letting it fail", when they have no idea what that means. The utter crush of *ever* company coming under liquidity problems would be swift, and severe.

Even now, I know of a company that has a very stable business, but has $2.9BN of debt to roll over. The debt cost had an initial cost of 95bps, which ratchets up 25bps every quarter in which they don't refinance the conduit debt by 500M by doing term securitizations. They can't do term securitizations since the market is shut down (nobody has liquidity). Thus, they are now up to 145bps in costs. That's 50bps in increased costs, per quarter, on 2.9bn, which is real money.

That destroys their profitability, since they are a very stable low-margin business. How many jobs will be lost?

Now, if FF die, then how do you think that company will fund itself? Borrowing costs would go up to 300-400bps, or 3-4%, on a business that has a profit margin of 1-2%.

How many jobs would be lost? How many people would feed back into the crisis, resulting in more lost money?


Only an uneducated fool would believe that the affect of a massive credit contraction would be over in 6 months. It would throw the entire world into a depression, perhaps rivaling 1929, and it would last years.

It's no wonder people like you, PCS, can't even rally more than 3% to your "side".

Cry me a fucking river, some body call the whambulance how about the so successfully company try not being 3 billion dollars in the hole.

 

[OS]

Another take on the bailout

 

[BoberFett]

Originally posted by: LegendKiller

Originally posted by: BoberFett

Originally posted by: bamacre
http://www.lewrockwell.com/paul/paul128.html

Note the date.

Hehe, he called the housing crash and resulting recession 5 years ago.

He must be a loon. Only loons can tell the future.

Big fucking deal. I called it 5 years ago too.

That would make you a loon too.

 

[Jhhnn]

I think LK often makes some very legit observations, particularly when referencing the undesirability of a financial sector meltdown.

There's a fine line between avoiding that and sponsoring giveaways at the taxpayers' expense, however. So we're faced with the necessity of reducing (not eliminating) losses to Fannie and Freddie's bondholders to a manageable level. And I think the reasoning and methodology expressed in this article might be the best answer yet-

http://market-ticker.denninger.net/

Notice the bold type disclaimer on the Fannie Mae prospectus...

Beaten by OS while sleeping...

 

[BoberFett]

So what's the incentive for large institutions not to gamble on risky investments? If they get lucky, great, they'll be wiping their asses with hundred dollar bills. If they get unlucky, it's not their problem. They're "too big to fail" so the taxpayer will eat the losses.

That is unsustainable.

 

[First]

Originally posted by: PC Surgeon

Originally posted by: LegendKiller

Originally posted by: PC Surgeon
Letting the banks fall would cause economic hardships. That I am not debating. What I am debating is that allowing them to fail now would be easier to recover from than to allow them to fail later. Do you think these steps by the FED will forgo any depression we would have seen if they had let them fail? How much worse will the depression be with a weaker dollar and MORE debt? From what I get from your posts is, you want the easy fix right now, just like the easy credit that was handed out in the first place. The buy it now pay for it later crowd.

You obviously think the recent moves by the FED were not only needed, but necessary. IMO this is not so. These actions only further on the irresponsible actions (loans to those that don't deserve it).

When a child steals, do you laugh and say its ok? Or do you make them take it back into the store and apologize? You and your FED agree with the former.

You honestly think having the world go into a depression, would be better than taking the Japan solution? How great that you're more than willing to destroy the world's economy, force the whole thing into depression, have hundreds of millions lose jobs, all to satiate your desire to see a different system in place.

It's nice to know you're such a well-rounded thinker.

A better solution would be to allow the system to absorb the problems, then fix it so it can't happen again, followed by better proactive measures.

LK, lets go your way then. We bailout the banks, the market slows down, the currency weakens, accrue more debt, then we have a depression anyways. Which depression is easier to recover from? The one with bank bailouts? Or the one with bank bailouts, weaker currency and a massive amount more of debt?

No, we don't have a depression and haven't had one in over 70 years, so I'm not sure why you continue to parrot this line. Again, this stuff about delaying the inevitable has no factual basis in macro or micro economic principles. You're making multiple assumptions that make little sense; Congress has little incentive to accrue more debt limitlessly without end, the Fed is quite aware of this. Secondly, who says the dollar will continue to weaken? We know for a fact that interest rate cuts have stopped until the Fed feels out where the market is headed before they raise them to stop inflation. And again, this notion that debt is bad is overwhelming stupid; deficit spending and negative trade balance isn't a bad thing if it is achieved in moderation. Welcome to the New Economy.

 

[First]

Originally posted by: BoberFett
So what's the incentive for large institutions not to gamble on risky investments? If they get lucky, great, they'll be wiping their asses with hundred dollar bills. If they get unlucky, it's not their problem. They're "too big to fail" so the taxpayer will eat the losses.

That is unsustainable.

It is extraordinarily rare for the Fed to bail out firms on this level, so it's not a problem. Your point would be absolutely legitimate if it weren't for this simple fact; it just doesn't happen often, the Fed isn't anywhere near capable of bailing out a significant portion of financial institutions.