The Treasury Bailout Plan (A follow-up from last Friday)

[Care4all]

There may be capacity to handle it internally, I don't know. He didn't seem entirely confident it does. But even assuming it does, there no way to predict that they would. If they could they already would have. But the same runaway greed that caused the whole thing in the first place would come into play preventing them handling it internally. The problem is the system is frozen, or clogged up. The pipes are fine, they can handle the flow, but these people are now so deep into self preservation mode, to hell with anyone else, that nothing is moving at all. the pipes have a clog that has to be plungered out. The government is only one that can seemingly remove the clog.

The part about preventing executive windfalls could be a problem. So long as they forbid the outgoing, fired executive from getting windfall by exercising options or getting huge severances. No way should any person who had a part in making these bad decisions get any kind of package. But they cannot limit what the incoming guys are going to get. If a new class of executives gets it done, they should be rewarded with very nice bonuses.

the market would find a natural price for them, they have to give up their egos and greed...we should not get involved...

we shouldn't do it...

 

[editec]

One thing I don't hear much about is that underneath most this bailout are hard assets....houses. They aren't worthless. The government is now going to own interest in houses/paper secured by houses.....

All the more reason for the government to work with the homeowners to help them stay in those houses paying on their mortgages, eh?

 

[Toro]

naked capitalism: Banking Expert: Bailout Not Necessary, Industry Can Take Losses

Brian

I saw this when it was first posted.

But that is his opinion. I know others as qualified who say differently.

I'm not sure why the guy says the banks are well capitalized enough. Estimates I have heard are that the banking industry will have to re-capitalize to the tune of $200 billion based on current losses, let alone any that may happen in the future.

Most of the regional banks are still carrying mortgages at 90-95 cents on the dollar, which means there are more write-downs to come.

 

[gonegolfin]

I saw this when it was first posted.

But that is his opinion. I know others as qualified who say differently.

I'm not sure why the guy says the banks are well capitalized enough. Estimates I have heard are that the banking industry will have to re-capitalize to the tune of $200 billion based on current losses, let alone any that may happen in the future.

Most of the regional banks are still carrying mortgages at 90-95 cents on the dollar, which means there are more write-downs to come.

Then I assume you saw this as well ...

naked capitalism: Democrats Say "Breakthrough" Enables Them to Pass Bailout Bill Tomorrow

"We have also said that the eagerness to pass this measure is based on the faulty premise that this package will actually do something to solve the problem. It won't.

Trying to prop up assets at above market levels is DESTINED to fail, and worse, only digs us deeper in the debt hole in the process, making the ultimate resolution of our economic mess even more costly and painful

We are not alone in this view. Virtually no economist is in favor of the program (save Alan Blinder). University of Chicago even published an open letter with a long list of signatories against it. And commentary on econoblogs has been as close to unanimity as one sees in these parts against. it.

All it will do is provide a short-lived burst of confidence, then as market participants think through its operation and ramifications, the anxiety and stressed conditions will return. How long will the false euphoria last? Two weeks to six weeks, I'd hazard.

And worse, the existence of this program will block any other course of action being taken. It is so large and resource-intensive an approach that it precludes other remedies."

I agree that the banks need to recapitalize. But I think it needs to be a free market solution and the weaker financial institutions should perish. We should not prop up the entire system. The financial industry needs to contract significantly. I won't repeat everything I have stated concerning the reasons why this is bad economics and bad policy. But why do we think we can solve these problems by continuing to throw money (not to mention the efficiency factor of the Dollars we throw at the problem - there will be much overhead and waste in any bailout program, including mispricing to the upside) we do not have at these problems and continuing to create bubble after bubble? We are creating a much worse problem in the future. A problem that foreign creditors, at some point, will no longer be able to justify. That is, there will come a point in time (and I think we are close) that the Asian countries will cease to take our Dollars. Not out of choice, but out of necessity because they will be losing money on their exports.

Brian

 

[Paulie]

I'm betting they do something. They won't let it collapse. No political will to endure that much pain. I have been accelerating my stock purchases and using SALES of things like gold assets to finance that. Commodities have done all they are going to do in this cycle. the more stocks, in general, go down, the more, in general, I increase the rate of purchase. I am accumulating quality shares now for the inevitable boom in stock prices two to five years out (putting a good amount of bets on wind mill, battery technology, and solar cells)....just like I bought a little gold when it was running $350 and going nowhere and moving slowly out of my Euros position....

I have always been a contrarian investor. As soon the lemmings start to chase something in large numbers I do the opposite. As soon as the media declares a certain investment arena is "dead", that's where I go.

You basically sound like you're trying to position yourself early into the next possible bubble, which there will almost certainly be if we bail these bastards out.

Isn't time we did something that would PREVENT a new bubble? Do we just LIKE going through this pain every 10 years?