Worst-case scenario is approaching rapidly (crisis growing at Warp 9)

Times of London ^ | 10/06/08 | David Wighton

[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.

[JasonC]

The rate on the T-bill is zero, the rate that matters is what banks have to pay to borrow in the bond markets. That is 20-30% for some of them right now, and 7-9% for even the strongest.

The Fed ought to wade in open market operations style and buy up all that stuff. It'd make a killing and stop this. The weak tea crap they are doing instead isn't going to cut it.

For those in Rio Linda, there are two critical issues right now. One, the European banks are falling apart. Two, bankers have now read the red tape Dems added to the Paulson bill, and specifically see how unworkable (even, financially illiterate) the warrant and pay cap provisions are. And are concluding that no one still solvant is going to get a dime from it, unless tiny, and that it will not buy all the bad mortgage debt and remove it from the system --- because as written, anyone who takes the Treasury's dollar is signing away the bank. The treasury secretary can practically say "and oh, we own you", if they touch a penny.

Until the treasury explains how it is going to finesse those idiotic requirements, nobody believes they will see a dime.

[ArrogantBustard]

Worse news:

Dig For Grubs (DFGRB) is down 23.85 (-76.19%)

[PapaBear3625]

That $700B? it was just to bail out the “connected” folks at Goldman Sachs and elsewhere. It was never going to be enough to stop the impending train-wreck.

[RSmithOpt]

Thanks for the links...interesting times now, fer sure.

[rightwingintelligentsia]

You’ve been sprung?

[SE Mom]

Derivatives are Warp 9 instruments. Now they are set in reverse, and crisis are spreading at phenomenal speed.

And if I'm correct- aren't they deeply imbedded in hedge funds/401Ks/pension funds?

[JasonC]

You don't get it - the solvant banks simply won't take the deal, the result is the bill does nothing. Have you read the bill? The salary cap rules chase the individual bankers around whatever happens to them or their bank. The warrant requirement says nothing about the amount, leaves that up to treasury discretion, then instructs the secretary to exercise that discretion for the maximum gain of the treasury. Meaning, only bankrupts will play. Then also, no one can sell to the treasury unless at a loss --- in the bill.

This was meant to be a way of getting this gunk out of the banking system. Instead it is an offer to nationalize the entire banking system if any takes a dime. They aren't going to.

[txhurl]

Laz was born sprung.

[silverleaf]

I hear the North Koreans have some great recipes for tree bark, and also for grass

Anyone want to share?

Personally I hope the Saudis have their own recipes for sand soup

[nina0113]

In northern climates, you can grow your own hops.

I actually bought a hops rhizome last spring, but my slackness putting in a garden killed it. But NEXT year, next year will be better. The way the economy's going, it'll have to be.

[Lazamataz]

Dig For Grubs (DFGRB) is down 23.85 (-76.19%)

Running In Circles With Your Hands In The Air Screaming Like A Little Girl (SCREAMGIRL) is up 4.35 (87.31%).

[Lazamataz]

Laz was born sprung.

Born Sprung (BSPR) is down 5.34 (-98.43%)

[alloysteel]

Noooo, we ain’t gonna DIE....

But the pucker factor is WAY up.

Some people may require correctional surgery, however, to restore their gonads to the proper position.

[Lurker]

In theory the answer is folding money under your mattress.

That would actually fall under the 'panic' rubric. Money needs to circulate, or it's just pretty colored paper.

And aren't you one of the chuckleheads who only last week was telling us that this Trillion dollar government boondoggle was going to make things all better?

L

[Notary Sojac]

Then also, no one can sell to the treasury unless at a loss --- in the bill.

If no one knows what these assets are really worth, how can you be sure that they are selling them to the treasury at a loss??

They could be selling something to Paulson at 60% of face value which might truly be worth only half that.

[martin_fierro]

REMAIN CLAM!

[jcharmony]

Tobit 12:8 “It is better to give alms than store up gold”

[Judith Anne]

We’re all gonna be digging grubs out of the ground with sticks, I tell ya.

Saute in a little garlic and salted butter, make sure interior temperature is above 160F before removing from heat. Or, coat with a flour mixture, and deep fry. Cajun seasoning covers up the green blood.