Looks like I picked the wrong week to stop sniffing glue.
Posted on 10/06/2008 7:02:37 AM PDT by TigerLikesRooster
October 6, 2008
Worst-case scenario is approaching rapidly
David Wighton, Business and City Editor
The credit crisis, which has been building slowly for the past year, is now moving so fast that governments around the world are finding it impossible to keep pace.
On Saturday Angela Merkel, the German leader, criticised last week’s decision by the Irish to guarantee all deposits in their leading banks without consulting other European countries. The Irish Government said that the move was forced on it by the threat of a run on one of its banks. Only a day later Ms Merkel was forced to take almost the same action in almost the same circumstances.
In the longer term, this clearly raises questions about the hopes for (or fears of) European financial integration. In the short term, it presents serious challenges for other European governments.
A week ago the British Government was hoping that it had coped with its immediate banking headache after the bailout of Bradford & Bingley. With the proposed rescue takeover of HBOS by Lloyds TSB, this stabilised the two big British banks that looked most vulnerable.
Then came the shock move by the Irish Government to guarantee not only individual savings but also the large deposits held by companies. Downing Street was furious because British banks feared they would see a flight of money towards Irish banks.
Downing Street decided merely to accelerate the planned increase in the ceiling on guaranteed deposits from £35,000 to £50,000, although the decision remains under review.
(Excerpt) Read more at business.timesonline.co.uk ...
Jason, if we could only monetize metaphors, you could rescue the whole thing yourself, without breaking a sweat.
Banks have been piling on penalties and fees for quite some time now. They also lend out money at what seem to be reasonable interests rates for them to make a decent profit.
Corporations that are well run can hold off on expansion plans for the near term and pay most of their bills using working capital.
Corporations that have gotten used to keeping most of their working capital invested in risky high-return ventures while borrowing for their short-term needs will be hurt.
Banks that have been depending on making money by selling loans rather than keeping and managing loans will also be hurt.
People and organizations that on the wrong side of CDS's and don't have the financial wherewithal of an insurance company will be hurt.
that was my first thought as well.
Looks like I picked the wrong week to stop sniffing glue.
>>Nonsense, it was the chaotic unwind of
>>Lehman that set it off,
LOL. By Dick Fuld’s own admission, it was sub-prime that caused Lehman to “unwind”.
>>Finance isn’t fraud,
Falsifying FICO scores is.
Jason - what if there's no long term collapse - but just a nice process of bad banks being bought out by responsible banks? Personally, I'm happy the rip-off banks are being bought out.
I hate to ask, but is that a nipple on that woman?
Rule Number One: Whenever the government tells you it must do something for your own good, do not believe them.
You either let bondholders get return of principle when lending to financial names, or you go straight to hell. Law of physics.
I can borrow from Bank of America at a lower rate than I can lend to it. Why should it exist?
The government is the underwriter of the entire banking system, through the FDIC. The people are the senior creditors, as depositers. They bear all the costs from this point out, by a law of physics. Any attempt to put those costs elsewhere, only increases the overall costs by far more than it collects.
Example - the Washington Mutual bankruptcy avoided a $25 billion hit to the FDIC, by wiping out all the bondholders. All bonds of banks sold off instantly. The Fed has since spent 24 times as much as the FDIC saved trying to restore the state available before that decision, without success. The bond markets remain closed to all but 6 US banks, and those can only borrow at a penalty rate. Consequently, they don't. They borrow from the Fed, and it is on the hook instead. No more bondholders to nuke for you.
When the debt of a bank is a worthless certificate of confiscation because the authorities, under populist pressure, just decide so, then the Fed gets to provide all the bank capital there is going to be.
You *will* pay, and pay in full, for the services of capital. Or you flat will not get them.
[The government is the underwriter of the entire banking system, through the FDIC]
FDIC was supposed to be a safety net, not a cash cow.
Of course the problem with working capital is that few corporations have it. The retards that are now giving us the Great Credit Bubble Burst of 2008 gave us the Great Leveraged Buyout scams of the late 20th century.
Any well run company that was naive enough to have sufficient working capital on hand to pay its daily bills was a buyout target. Similar scumbags would claim the companies were poorly run so they could buy them out merely to award themselves the working capital as severances as they moved on to the next victims.
I wish it were true that a free market was a stable equilibrium point that the world economy would gravitate to. Unfortunately it appears that corporations purchase government mismanagement in the free market and use it to undermine the economy for their own selfish gains.
That is all the real side of working capital is. You are living in the 19th century. Even then, overtrading happened and required a lender of last resort.
But you *WILL* pay.
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