Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

A Genuine and Immediate Crisis (What Congress has to do now)
The Weekly Standard ^ | 9/27/8 | William Kristol

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.


TOPICS: Business/Economy; Front Page News; Government; News/Current Events
KEYWORDS: 110th; bailout; banks; financialcrisis; foreignpolicy; globalism; kristol; wallstreet
Navigation: use the links below to view more comments.
first 1-2021-4041-6061-8081-96 next last
Hat tip: Kathryn Jean Lopez, NRO's The Corner
1 posted on 09/27/2008 11:32:07 AM PDT by Petronski
[ Post Reply | Private Reply | View Replies]

To: Petronski

‘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?


2 posted on 09/27/2008 11:34:03 AM PDT by BGHater (Democracy is the road to socialism.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Petronski

This is Saturday. The world didn’t end Friday as had been predicted by the “national news media.”


3 posted on 09/27/2008 11:38:28 AM PDT by FlingWingFlyer ("Old age and treachery will overcome youth and skill")
[ Post Reply | Private Reply | To 1 | View Replies]

To: Petronski

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.


4 posted on 09/27/2008 11:41:58 AM PDT by Nascar Dad (Nobama!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: FlingWingFlyer
The world didn’t end Friday as had been predicted by the “national news media.”

I don't remember people predicting a meltdown for Friday specifically.

However, it could happen...and soon.

5 posted on 09/27/2008 11:42:08 AM PDT by what's up
[ Post Reply | Private Reply | To 3 | View Replies]

To: FlingWingFlyer

I missed those predictions.


6 posted on 09/27/2008 11:44:06 AM PDT by Petronski (Please pray for the success of McCain and Palin. Every day, whenever you pray.)
[ Post Reply | Private Reply | To 3 | View Replies]

To: what's up

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.


7 posted on 09/27/2008 11:44:15 AM PDT by FlingWingFlyer ("Old age and treachery will overcome youth and skill")
[ Post Reply | Private Reply | To 5 | View Replies]

To: Petronski

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.


8 posted on 09/27/2008 11:45:40 AM PDT by raptor29
[ Post Reply | Private Reply | To 1 | View Replies]

To: Petronski
No. No. No. How can one insure something when one does not have an accurate understanding of the risks and the value of the holdings???. The person with the correct answer is Karl Denninger
The solution is simple, it is elegant, and it will work.
  1. 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']
  2. 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.
  3. 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.

9 posted on 09/27/2008 11:46:27 AM PDT by RochesterFan
[ Post Reply | Private Reply | To 1 | View Replies]

To: FlingWingFlyer

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.


10 posted on 09/27/2008 11:46:35 AM PDT by RegulatorCountry
[ Post Reply | Private Reply | To 3 | View Replies]

To: Petronski

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.


11 posted on 09/27/2008 11:46:49 AM PDT by Dawn531
[ Post Reply | Private Reply | To 1 | View Replies]

To: what's up

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.


12 posted on 09/27/2008 11:46:58 AM PDT by Zeddicus
[ Post Reply | Private Reply | To 5 | View Replies]

To: FlingWingFlyer
Well, they were saying Congress had to come together and agree on a bill. Some were saying Friday, some Monday.

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.

13 posted on 09/27/2008 11:47:40 AM PDT by what's up
[ Post Reply | Private Reply | To 7 | View Replies]

To: raptor29

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.


14 posted on 09/27/2008 11:49:26 AM PDT by Petronski (Please pray for the success of McCain and Palin. Every day, whenever you pray.)
[ Post Reply | Private Reply | To 8 | View Replies]

To: Zeddicus
Yeah, that's kind of what Pol Pot said.

He had that kind of attitude.

15 posted on 09/27/2008 11:49:45 AM PDT by what's up
[ Post Reply | Private Reply | To 12 | View Replies]

To: Petronski
Quick, lets use taxpayer money to re-inflate the housing bubble!
16 posted on 09/27/2008 11:50:15 AM PDT by Mark was here (The earth is bipolar.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Petronski

bttt


17 posted on 09/27/2008 11:50:50 AM PDT by 1035rep
[ Post Reply | Private Reply | To 1 | View Replies]

To: Petronski

A must watch video!

http://www.youtube.com/watch?v=H5tZc8oH—o


18 posted on 09/27/2008 11:51:01 AM PDT by narses (...the spirit of Trent is abroad once more.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Mark was here

What an astoundingly bad idea.

I’ll stick with the basics of the Paulson plan.


19 posted on 09/27/2008 11:51:07 AM PDT by Petronski (Please pray for the success of McCain and Palin. Every day, whenever you pray.)
[ Post Reply | Private Reply | To 16 | View Replies]

To: narses

I was going to link that here. Thanks.


20 posted on 09/27/2008 11:51:34 AM PDT by Petronski (Please pray for the success of McCain and Palin. Every day, whenever you pray.)
[ Post Reply | Private Reply | To 18 | View Replies]


Navigation: use the links below to view more comments.
first 1-2021-4041-6061-8081-96 next last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson