0 chance of it passing.
Posted on 09/27/2008 11:32:07 AM PDT by Petronski
I've received phone calls in the last hour from two economists I respect, one of them Larry Lindsey, the other in a position where he'd prefer not to be named. Both have government experience, neither is alarmist by nature, and they say this:
The huge European bank Fortis is apparently about to fail. The ripple effect on the American banking system could be disastrous, with bank runs, liquidity crises, and stock sell offs possible Monday. Wachovia may well fail next week. As Larry put it, this really will be 1933 soon if we don't move rapidly to stabilize the banking system.
And here's the bad news: the current bailout bill, whatever its merits and likelihood of passage, does nothing to address this.
Congress should pass by Monday simple legislation doing two things:
1. Giving the FDIC authority to provide unlimited deposit insurance through the FDIC for transaction accounts in banks.
2. Authorizing the Secretary of the Treasury to provide unlimited protection of principal in money market funds through the Treasury's exchange stabilization fund.
Maybe my acquaintances (and I) are too worried; maybe this legislation wouldn't quite be the right solution. But I wanted to sound what may be, unfortunately, a needed alarm.
William Kristol is editor of THE WEEKLY STANDARD.
‘The huge European bank Fortis is apparently about to fail.’
Gee, Will, do you think this will help Fortis, or do you want to bat clean up for Charles Schumer?
This is Saturday. The world didn’t end Friday as had been predicted by the “national news media.”
Think ING will buy them up? We are now starting to witness the quickest consolidation of any industry in the history of time. 6 months from now, the landscape of financial co’s/banks will look completely different than it did 1 yr ago. Wow.
I don't remember people predicting a meltdown for Friday specifically.
However, it could happen...and soon.
I missed those predictions.
Hmmmmm. All I’ve been hearing for the past two weeks is that this fiasco HAD TO BE DONE by Friday. Guess I was wrong.
Still cheerleading the bailout, a bailout you have no clue about, you don’t know any of the details, other than the fact that the same people who engineered the problems in the first place are in charge of distributing the bailout money. And Bill Kristol is just another soft-ass wuss republican, part of the eastern ‘elite’ pusses who are in bed with so many of these Wall Street crooks that I won’t believe anything he says.
The solution is simple, it is elegant, and it will work.
- Force all off-balance sheet "assets" back onto the balance sheet, and force the valuation models and identification of individual assets out of Level 3 and into 10Qs and 10Ks. Do it now. [Denninger calls this 'transparent balance sheets']
- Force all OTC derivatives [i.e. credit default swaps] onto a regulated exchange similar to that used by listed options in the equity markets. This permanently defuses the derivatives time bomb. Give market participants 90 days; any that are not listed in 90 days are declared void; let the participants sue each other if they can't prove capital adequacy.
- Force leverage by all institutions to no more than 12:1. The SEC intentionally dropped broker/dealer leverage limits in 2004; prior to that date 12:1 was the limit. Every firm that has failed had double or more the leverage of that former 12:1 limit. Enact this with a six month time limit and require 1/6th of the excess taken down monthly.
Once 1-3 are put in place then send in the OTS and OCC examiners and look at every financial institution in the United States. All who are insolvent and unable to raise private capital immediately are forced through receivership where the debt is converted to equity and existing equity is wiped out. With the CDS monster caged the systemic risk is removed, the bondholders provide the cushion for recapitalization (as it should be) and the restructured firm emerges with no debt while the former bondholders are now the owners (of the equity) in the resulting firm.
This will also help with the coming bad car loan crisis and bad credit card debt crisis.
The problems actually hit the ground last summer, have been intensifying ever since, and people are just beginning to wake up and notice. Things are coming to a head, and soon.
We’ve been taking small amounts of cash out for weeks(Wachovia) and keeping it in case of an emergency...we’ve left a substantial amount in, also. I’m not worried about eventually getting our cash, I just am not one who would enjoy standing in a queue waiting to make a withdrawal if there should be a run on the bank. We have enough cash squirreled away to tide us over until the panic passed. We have a 20 year old who’s in college and he never has cash always uses his debit card. We advised him to have a little stash for gas/groceries, etc. should his bank fail and he not be able to use his debit card. It’s just like preparing for a hurricane, IMHO, the preparations include having cash on hand, it only makes sense.
If it melts down, it melts down.
How long do we think we can continue to artificially prop-up a broken system?
The more doomsaying I hear, the more convinced I become that we need to just let it burn to the ground and sift through the ashes later.
But there were no predictions on a market meltdown as far as I know. But that can't be put off forever...the sooner something is passed, the better.
You bring nothing but personal insults and lies.
Ironic that you’re telling me what I don’t know, but you’re wrong about it.
He had that kind of attitude.
bttt
What an astoundingly bad idea.
I’ll stick with the basics of the Paulson plan.
I was going to link that here. Thanks.
0 chance of it passing.
bttt
One that hits everywhere, almost simultaneously, with a predilection for destroying things financial.
Re-inflating the bubble is the Paulson plan.
Anybody who doesn’t know that the FDIC limit is $100,000, and is at risk of losing funds over that, deserves to lose it. When somebody runs through the gates and gets run over by the train, I can’t feel that bad about it. Sorry.
Bzzzzt. No points for you.
Send it to everyone in your email box. I got it that way and I sent it that way.
we took 5k cash out of the bank this morning and hit the mattresses. i'm in the southeast with long gas lines/shortages, food prices continually rising - have you checked the cost of toilet paper lately?
if this trickle up/down/sideways continues - i'm ready for the short term at least. but i don't like the way this country feels right now - nothing i've ever experienced before in my 57 years. say a prayer for our side - we are who we need right now - not them.
No.
2. Authorizing the Secretary of the Treasury to provide unlimited protection of principal in money market funds through the Treasury's exchange stabilization fund.
No.
At most, offer an easy way to refinance loans back into local banks to get them all out of the speculative market- They don't belong there in the first place.
“I’ll stick with the Paulson plan...”
Tell me, genius, what exactly is the Paulson plan you speak of? Gimme some details since you’re so tuned in to what’s going on behind the closed doors.
Do you imagine I’m on your witness stand? Under your interrogation?
Do you truly think I’m going to engage in a colloquy with someone who brings only personal insult and lies to the table?
LOL
Yep, housing prices are always going to go up. What a crock. Thanks for sharing this touching story.
Thanks for the document link. I’d laugh if it wasn’t so tragically true. That’s why I hope against hope that the Congress will actually follow their Constitutional mandate and regulate interstate commerce to fix the fraud. When the whole thing collapses the congresscritters better have some tough body guards because the “bitter people who cling to God and their guns” will know who they want in their sights first...
Some fires are just too big to put out: you can hose them down all you want, but they are going to burn until there’s no fuel left.
To stretch another analogy, once the Titanic hit the iceberg, it was only a matter of time before the ship was on the bottom: there was simply no intervention available after that point that could change that outcome. It’s a waste of time trying to fix the hole in the hull, you just have to focus on getting all of the lifeboats into the water.
Rep. McCotter's (R-Mich) Forceful Rebuke of Bailout Plan on House Floor
View it then come back.
He’s long on populism, short on economics. His response is a great plan six months ago. Did he propose it then?
Interesting class-warfare rhetoric too.
Funny I thought we were on the precipice last week?
Same precipice. The credit markets are only getting worse.
http://www.reuters.com/article/marketsNews/idUSN2532149120080926
Unbelievably brilliant!
Personally, I would like to see the only OTC derivatives remain valid if the owner is also the debt/bond holder, and any outstanding credit default swap cannot exceed more than 110% of the original purchase price of the bond if there was a credit default.
It is supposed to be insurance for the bond holder, not paying more odds than a Vegas crap table!!!!
Belgians, Dutch battle to bolster confidence in Fortis
7 hours ago
THE HAGUE (AFP) — Belgian and Dutch officials are keeping in close touch in the fight to maintain confidence in financial group Fortis as liquidity concerns hammer its shares, officials said Saturday.
Dutch Finance Minister Wouter Bos is in “regular contact” with his Belgian counterpart Didier Reynders, ministry spokesman Jilles Heringa said, as were the respective financial watchdogs of each country.
But Heringa said he could neither confirm nor deny reports of a crisis meeting between Bos, Renders and the head of the Eurogroup, Luxembourg’s prime minister and finance minister, Jean-Claude Juncker.
In Brussels, a spokeswoman for the Belgian financial sector supervisor, the CBFA, said that along with the Belgian national bank, “we are working on initiatives to restore confidence in Fortis.
“We are in frequent contact with the prime minister and the finance minister,” as well as “anyone else who can play a role in these initiatives.”
She said that while it was too early to give details, further statements might follow during the weekend.
Fortis late Friday said it had replaced its chief executive, Herman Verwilst, with Filip Dierckx, head of its banking division.
After two days of steep slides in its share price, the Belgian-Dutch banking and insurance group hastily arranged a news conference to assure clients that their deposits were safe and that it had ample funding.
But shares in the group only fell further, sliding nearly 21 percent Friday — down 71 percent since the beginning of the year.
The group, burnt by turmoil on the credit markets, insisted that its “solvency is solid and well above the regulatory minimum.”
Nevertheless, it increased the amount of non-core assets it planned to sell, with plans now to raise from five billion to 10 billion euros (14.6 billion dollars) through disposals both inside and outside its main Benelux operations.
However, it said that there were no plans for a new capital increase and that its capital needs were covered for the next 12 to 18 months.
The share slide comes even though Belgian and Dutch authorities have placed restrictions on short-selling, a technique used to speculate on a drop in a stock price that has been blamed for driving struggling financial shares lower worldwide.
Belgian Finance Minister Reynders appealed Friday “for calm and responsibility from all market participants.”
He also insisted that the group’s customers should not worry about the situation, saying “as everywhere in Europe, we will not leave any client in Belgium in difficulty.”
As the markets closed Friday, Fortis’s market value stood at 13 billion euros — one third of what it was at the end of 2007. Despite assurances, some banking analysts said the group was looking increasingly vulnerable to a takeover.
“A takeover by ING (of the Netherlands) or BNP Paribas (of France) is more and more possible,” Dresdner Kleinwort analyst Jaap Meijer said Friday, adding that BNP Paribas had already shown interest in Fortis in 1999.
Other potential buyers include Spain’s Santander, Germany’s Deutsche Bank or Britain’s HSBC.
Fortis’ Belgian rivals Dexia and KBC refused to comment on a report by the De Tijd newspaper that they could be involved in a rescue deal for the beleaguered bank.
Wachovia isn’t gonna go “poof” - the FDIC would seize it and resell it immediately like with Wamu.
Yeah things have gotten so bad and liquidity so frozen the the Dow spiked 300+ points in the past two days alone...
By the way, I don’t think Ceterpillars situation is worth being a drama queen over. Something tells me that a construction equipment supply company probably won’t excel in this market.
I’m disappointed in you Peter, I remember when you weren’t such a socialist. And now here you are advocating a massive redistribution of wealth, big government intervention, unchecked powers, and welfare.
You should be in those photos standing shoulder to shoulder with Nancy Pelosi and Barney Frank.
I read somewhere that a lot of “rich” are taking their money out of the banks. I’m talking half million at a time. That will cause the banks to shut down pretty quick.
I’m afraid this is going to get scarry....survival of the fittest. Now all of a sudden those “nuts” who bought land in the hills and stored fuel, food and ammo aren’t looking so dumb. Guess all I can do at this point is buy a gun and try to find some Mormons. They’ve all got 2 years of food put away.
[Snip][This is not an attempt, to engage in an argument with the president. I have admiration for the president; and I have supported the president, as have house Republicans when he has been correct.But he is in error now.House Republicans stood and supported the Petraeas Surge so our troops would have victory in Iraq.Today, House Republicans oppose the Paulson Splurge, so that we can have prosperity in the long run. And make no mistake we understand the gravity of this situation; but we will not engage in a miss-rush to judgment, that destroys the possibilities of a free market and prosperity for American families for decades to come.We will not walk out of this room after a forced vote, waiving a piece of paper in our hands, claiming "Fleece in our Time". We will do the job we were entrusted and we will get the job done.]--Rep. Thaddeus McCotter, R-Michigan, 11th District.
Oh Bull, comrade petronsky. Nothing of the sort.You want to see class-warfare, take a look at Dick Fuld and his merry band of NY Fedster/Fraudster "Robin Hood" foundation "philanthropists". It is what it is; and, unlike Dick and Co., Robin Hood didn't steal from the middle class.
Neil talking about it again now- Fortis has gone down 75%.
FOX is doing a good job of covering everything today..
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