Posted on 09/22/2008 8:39:44 PM PDT by djsherin
Given last week's dramatic events — the bankruptcy of Lehman Brothers, the end of Merrill Lynch's independence, and an $85 billion US-government bailout of insurer AIG — most financial institutions are likely to become more sensitive to the state of their net worth.
For instance, all it takes for a financial institution that has a net worth of $30 billion and assets of $600 billion to go under is for the value of assets to fall by 5%. In the current financial climate, it can easily happen; hence, most financial institutions are not immune from the potential threat of going belly up.
One of the major reasons why the Fed rescued AIG was to prevent a fall in the value of bank assets, a fall that would in turn expose their true net worth and cause (it is generally believed) a run on banks that would decimate the entire banking system. As long as the AIG can keep paying the banks' losses for their suspect (but insured) investments, those banks don't need to reappraise their true values.
But there is always the lingering fear that at some stage banks will be forced to disclose market-related valuations and that this could set in motion a financial tsunami.
(Excerpt) Read more at mises.org ...
The national fascination with overspending has led to instability in financial institutions.
No, not unless we all give up extra spending “cold turkey.” Many of us are addicted to the goody high.
bump for later
The Republicans are being offered a golden opportunity here to savage the Democrats. Right now the Dems are trying to steal the rescue bill for petty politics.
“Democrats to destroy economy just for politics”
“What matters more, staving off an economic collapse or Democrats making Brownie points by interfering with the rescue plan?”
etc.
This is what happens when you promise and then give EVERYBODY “the American Dream” without making them work for it. I see this same kind of crap happening with “universal healthcare.” Fraud is going to have a field day! We’re going to let them do it and then WE will be the ones that get screwed again.
Thats what I’ve been asking all night - sorry but lurk in the day....
Is it the bailout or we enter a depression like period in our economy???? THAT is what the Dems want. THAT is their October (sept) surprise.
They could care LESS about the destruction this is doing to the bank acounts, 401 accounts, savings accounts of Ma and Pa out in the country.
They figure they will get theirs and they will be ok - why not believe that? Nobody has stopped the FM and FM crooks yet, have they????
And if we do have an economic “crash” - who do you think will be blamed????
Who do you think will then be a shoo in for this election???
So is it bailout or be killed in the elections of 2008 ???
That’s what I am trying to find out...
Uncle Sugar ain’t got the sugar.
People have rationalized that CEOs and executive staff deserve high salaries and the golden parachute. Okay, that sounds fair when a company is doing well.
But what about when the CEO and execs have drive the company into the ground?
After all Capitalism punishes the stupid and rewards the smart.
And now we taxpayers are about to bail out some banks which include some very rich severance packages for some well-to-do executives.
Well I say NO! And if they don't like it they don't have to take the money.
We are after all the new stockholders and as stockholders have the right to review their compensation.
People have rationalized that CEOs and executive staff deserve high salaries and the golden parachute. Okay, that sounds fair when a company is doing well.
But what about when the CEO and execs have drive the company into the ground?
After all Capitalism punishes the stupid and rewards the smart.
And now we taxpayers are about to bail out some banks which include some very rich severance packages for some well-to-do executives.
Well I say NO! And if they don't like it they don't have to take the money.
We are after all the new stockholders and as stockholders have the right to review their compensation.
Like most here, my knee-jerk reaction is to oppose the bail out. No one’s going to bail out my company if I make bad decisions.
Plus, I loathe most I-banks based on personal experience that comes from speaking at their conferences and interacting with their people (but that’s another story). They’re not capitalists. They don’t want free markets. They want to game the system. They want a form of socialism that tilts the market in their favor. They would rather make a sure buck off manipulation than earn a dollar. They create nothing and have abstained from their traditional roles and purposes of providing capital to industry. Instead, they fuel speculative bubbles and try to game the market, calling on Washington when they get caught betting wrong. It should be no surprise that most of these scum support the left financially.
I could care less for the lot. However, the loss of financial liquidity terrifies me. This means companies that are otherwise profitable might fail because they run out of cash temporarily. It might mean that potentially lucrative and profitable ventures fail to secure funding, styming job growth and economic development.
Let’s do the bailout if that’s what it takes to avoid a liquidity crisis that could lead to depression. Let’s just make sure that the government exits the business as soon as possible.
Oh, but what I would give for a responsible press to expose the links. People shouldn’t be scared. We should be outraged about Dodd, Obama, Frank, Cuomo, et al and their cronies in Fannie Mae and Freddie Mac. We should have a little revolt and send Pelosi to a back bench, which is still above her “pay grade.”
Sounds reasonable to me - thanks!
Fixed it.
I would like to know who is responsible for this fustercluck, who is going to jail and how we will be paid back.
What I am certain of is that this bailout will be a better gamble than the 60 billion to Africa for dictator walking around money, er. I mean fighting aids.
Having a depression means that the market is correcting itself. Yes it would suck. There would be deflation (which in itself isn’t a bad thing) which would lead to a period of unemployment.
The reason the Great Depression lasted so long was because the government got involved in the market and tried to “help” people thus preventing the market from correcting itself as soon as possible. What should have lasted a year lasted 15. If the government were to take its paws off the economy and let the these institutions fail, yes it would be painful, but it would correct and we would no longer be living on a bubble of credit and loose money.
This is of course assuming that the government stops manipulating interest rates, cuts taxes and spending, doesn’t set price controls, and gets rid of minimum wage laws.
We have been living far beyond our means encouraging consumption over savings with unnaturally low interest rates and eventually this will come to an end. Whether its on our terms (by letting these institutions fail) or by the laws of the market being pushed too far when we continue with our socialist policies.
One way or another we’re going to get some kind of recession/depression and the longer we wait the worse it’s going to be.
For a short period of time it will.
Without addressing affirmative action it will reoccur repeatedly.
The unstated issue there is that no one actually achieves the American Dream through government redistribution. That is conveniently left out of the debate. If you support welfare, you’re automatically “for” the little guy.
The only thing that will "fix" this, of course, is a huge dose of inflation.
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