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So, where does Canada fall in the bailout?
- Thread starter nonameo
- Start date
moshquerade
No Lifer
The government is only stepping in to prevent financial chaos.
EKKC
Diamond Member
exactly,
while many people don't like a bailout, it is definitely necessary to prevent an absolute financial meltdown
i still don't understand why people are complaining, the alternative is a lot worse than this. yes our dollars value with go further south, and it wont be better, but i sure as hell don't want a Greater Depression in my lifetime.
everyone who's complaining now are saying "me me me" "no one bails me out", the government is not bailing out these companies (look at all those that folded: Bear, Lehman, WaMu, etc etc) they are just trying to prevent a depression. it's not capitalism, it doesn't seem fair, but again, it's necessary.
and this problem can be blamed both ways
you can blame the big financial companies for lending to every american with no or bad credit
they can also blame the average american living beyond their means and was too greedy in a housing market poised to pop. just because someone lends you the money doesn't mean you will have to take it.
the cause of our economy's woes right now is idiotic financial management by both the average american and big corporate america.
/tirade
dennilfloss
Past Lifer 1957-2014 In Memoriam
Regulations are much stricter here but a few of our banks (e.g. CIBC) may feel some effect because they bought some American banks.
dennilfloss
Past Lifer 1957-2014 In Memoriam
You could blame the government for not regulating the banks. You could blame the banks for needing to be regulated. You could blame the average joe for voting people in who aren't willing to plan ahead.
You could blame any one for anything. The point is that the bail out is only relieving the symptoms of the disease, it does NOTHING to fix the cause. Maybe instead of just throwing money at the banks and telling them it is okay we should do SOMETHING to prevent this from happening again.
Right now we are trying a quad bypass. For years we have been eating shitty, smoking, not exercising, laying around and not seeing our doctor. When we started getting a little sick we were put on a hand full of meds to live with the disease and suggested to fix our diet, exercise, etc. We ignored it. We had a doctor more interested in making money off the visits and the drugs and not in our health. Now we had a major MI and we're fucked. The only option is dangerous surgery and more pills.
And the kicker is with a little effort and planning (visit your doctor, eat right, get a few scans, think ahead, etc.), this whole mess could have been prevented.
Unfortunately American economics, like American health care is focused on relieving symptoms and managing rather than preventing disease.
No. I'd rather we make the banks accountable for their actions. Take the 700 billion dollars and give it to people. Fuck the investors. After the bailout they will still be rich and Americans will still be ridiculously in debt to them.
EDIT: BTW this is flirting dangerously close to being P&N and IMO should probably be moved there. Not to mention my comments are a little off the original topic. I just am upset that the moronic move our government is about to make might very well be copied around the world.
imported_Imp
Diamond Member
What are they going to do, lower the chequing accounts interest rate from 0% down to negative🙂? I think ING had a quarter billion in Lehman's though, so that's not good.
There's no doubt that some sort of intervention is required. However, there are much better ways to address the problems, bad assets are just one part of it.
The idea of a government simply buying up crap to prevent banks going under has been tried several times before around the world - in fact, this strategy has by far the worst track record of any type of intervention. Japan did exactly this in the 90s - it took 16 years to get out of the recession that followed because the bailout did nothing to address poor business models, and only served to catastrophically increase the public debt. Similar experiences were had in Mexico.
In addition, this process of buying crap bails out the wrong people - it doesn't bail out the borrowers, it bails out the shareholders. It strikes me as totally inappropriate that shareholders should be bailed out - they knew the risks - they chose to invest in a fscked company.
A more preferable approach would be a form of nationalisation of failing companies, similar to what happened with Fannie/Freddie - the govt injects money in return for senior preferred stock - this allows the company to keep doing business, it seriously hurts the shareholders, and allows the govt to change the management of the company.
Now, the majority of companies are not in imminent dangers of failing - for these, urgent action is needed to reduce risk and restore confidence. Indeed, even a bailout as described above is terribly destructive.
What is needed is urgent regulation. Force banks to assign values to all their toxic crap, whether that be by sale, or by some form of published calculation. Give the banks 6 months to find sufficient cash to ensure that all loses on these are fully covered - whether's it's by sale of good assets, merger, issuing new stock, halting of dividend payments to shareholders, etc. If the bank can't find sufficient cash, then it gets shut down or taken over.
The other big issue is all the obscure derivatives - no one really knows just how much these are worth. These are obscure, opaque, private transactions with virtually no regulation. These need to be regulated in an open derivatives exchange - Big investors have been warning of this for years: Buffet, Soros, etc. These derivatives are potentially as big as the sub-prime problem, and are a method for bank failures to ripple out and topple other banks. No one can estimate the risk at present, because these transactions are private, and they are only worth what the other party to the trade can pay.
Every possible attempt should be made to sort the current problem which is FUD - only once the uncertainty has gone, can the fundamental problem of solvency be addressed. And removing the uncertainty will go a long way to allowing a private sector solution to work.
I know I mentioned Fannie/Freddie above - that's not to say I approve of the bailout or how it was done. In fact, it was a disaster, performed completely wrongly - and borders on outright theft of money from the shareholders. It's not appropriate to lie like Paulson did. Not 2 weeks before the take over, Paulson publicly stated that Fannie and Freddie were safe, strong companies, and would remain under full shareholder ownership. Then suddenly, with no warning - the shareholders lose everything when Paulson does the exact thing he says he would never do.
If Paulson pulls anymore stunts like that, he'll kill what little hope of a private sector rescue remains. How do you think the investors that put money into Freddie/Fannie after Paulson told them to fell now? Do you think they'll be investing in any other banks in an attempt to save them?
Bignate603
Lifer
Personally, I think a bailout is necessary. However, I'm worried that companies will try to take advantage of it when it becomes available just to make a buck, not because its needed. There should be some very serious requirements for getting any bail out money. This could be severe limits on executive pay, giving the government stock and some control over their business (similar to Fannie Mae and Freddie Mac), some sort of payment over time for the bailout, or any combination of the above. Basically, they should make the bailout good enough to keep the money flowing because the banks know its there to fall back on if they are risking bankruptcy, but it should be harsh enough that they only turn to it as a last resort.
Because the banks aren't spending the money? The Federal Gov. is taking a controlling stake in these companies by providing them these loans to save the company.
The Fed. Gov. didn't simply just give AIG, Fanny May, Freddy Mac and others money to try and solve the problem. They gave the money to bail them out, and in turn, take a majority equity stake in the company.
AIG, Freddy Mac, Fannie Mae and others were simply too big to fail. Had they all failed, what do you think would have happened to the stock market?
This doesn't belong in P&N, it's just some idiot who doesn't understand the consequences of what is going on.
mrSHEiK124
Lifer
BURN!
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