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120 Comments
- kemp34, on 03/30/2009, -5/+63The investors who took the risks should take the losses, NOT innocent American taxpayers and savers.
The bad bank is a miscarriage of justice. - Karmashock, on 03/30/2009, -2/+20Picking up toxic assets was actually what we should have done in the first place instead of just give them money. Of course the means of this should come through bankruptcy. Many people don't understand that a company can continue to function almost normally even though in bankruptcy. It legally gives one the opportunity to nullify debts, divide the company into different healthy components, and let the bad portions mercifully die.
Most - emmettgolf, on 03/30/2009, -4/+22Toxic is another name for worthless. The thing is that banks, like the Fed, are also allowed to create 10 times the money that they have on deposit out of thin air and their deposits are insured by the Federal government. Unless their toxic assets exceed 90%, while they may not be making the amount of money that they would like to, it's hard to see what they are actually losing.
- duke_nate, on 03/30/2009, -4/+15Or just keep propping them up so the collapse is even worse?
- tmspecial, on 03/30/2009, -0/+111 + 1 = 5 in the US
1 + 1 = 2 everywhere else
That’s why US banks are in so much trouble. They do NOT deserve any bailout. American banks made up funny money and then used it in risky investments. - JasonCox, on 03/30/2009, -2/+12Damned if we do, damned if we don't.
- omgwtflawl, on 03/30/2009, -3/+13Interesting good bank/bad bank strategy proposed by Germany there. Maybe I can do that sometime. "Good me" will eat his veggies and do community service, while "bad me" will gamble and drink huge amounts of money on credit. Then I'll explain that I can partition myself into 2 separate people, and explain that you can't punish "good me" for the actions of "bad me".
- Karmashock, on 03/30/2009, -2/+11Sorry, editing timed out. :) Here is the rest:
Most bad institutions have large healthy and honest components that are a service to everyone. These should always be saved from liquidation. The bad portions however should not be subsidized at all and instead should be terminated along with their frequently corrupt staff immediately.
AIG is a good example of this sort of thing. Nearly all of AIG is a very good and prosperous company, but a small portion of it effectively borrowed against the credit of the whole to it's doom. Now, that small portion was extremely wealthy for a time while the bets paid off. But as it stands it has debts that are frankly silly. The Credit Default Swaps should in that case be nullified as most of them were not even entered into to insure assets but sold as "bets" that companies would fail. There is already a short market for that and those investors should at most be given their fee back and told their contract is void.
GM is another example as there are many core GM brands that are very strong while others consistently lose money. Liquidate the dying assets and move forward. Further, in bankruptcy GM could void it's unsustainable and uncompetitive union contracts. A good bankruptcy every so often is the only way for mismanaged companies to recover quickly. Clean of un-payable debt, clean of impossible contracts, clean of diseased divisions...
The "cost" of bankruptcy however is that the investors in them are generally wiped out. This is fair. You invested in a company to ride it's fortunes up and down... and it effectively died. If anyone owns it's stock it will be those that loaned it the money.
THis is the best way to handle the situation. You clean up the bad debt, get the company healthy quickly... and it actually doesn't cost the government anything at all.
The only toxic assets the government should buy are those securitized mortages... and that's fair since they effectively backed them. - thinkb4utype, on 03/30/2009, -1/+9The plan to dispose of the toxic assests is another give-away to rich investors. The plan works this way:
1. The Feds will invite select investors to invest on the toxic assets.
2. Investors will put up 7% of the money and the Feds provide the other 93% in a no interest guarantied loan.
3. Investors will bid on the toxic assets and presumably pay a price below the original value (probably 25% to 50%).
4. If the investment takes losses, then the investor takes the losses out of the Fed loan.
5. The only way the investor can loose is if the value of the investment falls below 7%.
Whoever gets to invest in these assets will make huge profits at the expense of the tax payers. It will be interesting to see who gets in on this deal and see if they also contributed large amounts to Democratic candidates. I expect the two to correlate closely. - kemp34, on 03/30/2009, -7/+15Here we go again with the willful admission of ignorance.
- jpbriggs, on 03/30/2009, -0/+7Artificially propping up the failed system may seem like it's helping in the short term, but will wind up being much worse for the "innocent" people in the long-run. This is all the result of governmental influence inflating the bubble that recently burst. The fix for malinvestment fueled bubbles is recession! By propping it up further to try and avoid a healthy, necessary recession will just make the inevitable recession/depression last much much longer. The surest fix for a recession is a recession! It's a necessary part of the business cycle. They're only so extreme because of government meddling.
- diggduggDOOM, on 03/30/2009, -2/+9My history's a little fuzzy, but I seem to remember learning that the lack of assistance to Germany after WW1 (and the resulting poverty) is part of what laid the foundation for the rise of the Nazis.
Please correct me if I'm wrong. - Quick2822, on 03/30/2009, -3/+10Comparing the failure of a German bank to the failure of an American bank is like comparing a server going down because of a faulty hard drive vs. the whole data center going up in flames.
Plus with all the regulations Germany (and others have) -- I can't imagine they would let them get this bad in the first place. - digg1520, on 03/30/2009, -0/+6Still, Berlin doesn't have any tent cities. You might also want to check out some crime statistics (murder rate is 4 times higher in the US). Bottom line, people in Germany are living better.
- durruticolumn, on 09/18/2009, -3/+9
Thing is, Germany would have never let their banks get away with the things we did, their banks are much more tightly regulated, and are more financially stable because of it. That's the biggest issue here. How we manage the crisis from a numbers perspective is one thing. But we absolutely cannot allow the kind of whiz kid wall street math magic to happen again.
I'm most surprised that nobody is talking about bringing back Glass-Steagall. I would hope that would be priority number one. - cyberdork, on 03/30/2009, -0/+6Actually most German banks are not exposed at all to the financial crisis. That's because most German banks are local or regional and focus on traditional banking and have nothing to do with the derivatives market.
However, there are a handful of very big banks in Germany which are in trouble.
Germany's biggest problem right now is that it is the main exporter of the world, and some of their best customers are doing very bad, like the US. - insomniacal, on 03/30/2009, -14/+20Americans don't need to listen. We do math differently over here.
- HallenbeckJoe, on 03/30/2009, -0/+6You are comparing the unemployment rate of one city (which was divided until 1989) to the whole US?
Let's compare Germany and the US, shall we?
US unemployment rate: 8.1%
Germany unemployment rate: 8.3%
http://en.wikipedia.org/wiki/Usa#Economy
http://de.wikipedia.org/wiki/Arbeitslosenstatistik ... - chthonical, on 03/30/2009, -6/+12I'm really about to stop even clicking into these stories. They all end up with political *****-flinging.
- bobjrn2, on 03/30/2009, -0/+5The government was not created to manipulate the economy. We are in some of this mess because the government gave out loans to people who couldnt afford them. Unfortunately the government isn't made up of economists/bankers, so why the ***** would you want to put them in charge of handling billions of dollars in assets? And "buying" up these bad loans costs the taxpayer money in SEVERAL ways (inflation and taxes). Let the economy run itself. The corporations that trusted the government and sold insurance for the loans that the government gave to the poor people deserve to crash and burn. The people who have money in these companies will learn to be smarter about where they invest their 401k's. It is a win-win for everyone, and this whole economic mess will be over in a year or 2. The alternative results in run away inflation and an extremely long depression...I think I'll take option A.
- Karmashock, on 03/31/2009, -0/+5Perhaps true, but you agreed to pay for it. That is your contract... your bond. You did not have to make that deal if you felt it was unreasonable. Complaining after the fact is more then a little convenient.
Pay your bills if you can. If you can't then accept you may lose your investment. If you expect to have your debt suddenly reduced for no reason besides you being upset... give that up.
The only way that will happen is through massive currency devaluation. You debt is in dollars... so the government might make you a deal by reducing the value of the dollar to half it's current value.
Then you'll get what you want, right?
Something is going to have to give here. If they had propped up the securitized mortage market at the start we might have been able to prevent this disaster without it costing anyone too much. But it's too late for that.
You'll have to make your choice here. There is no easy answer. If the government spends too much money then the value of the dollar... and EVERYONE's money will be reduced. But so will your debt. Choose.
Ultimately, I think it's rather odd that debts are subject to inflation. It gives people that don't want to pay their bills an incentive for inflation. Instead all debts should be linked to the inflation rate such that they're ultimately not effected by it. - GnralHavoc, on 03/30/2009, -2/+7ccccchhhhhaaaannnnnggggeeee
- kemp34, on 03/30/2009, -2/+7Also, be sure to acquaint yourself with the relatively new concept, "Sweep Accounts" which basically remove such accounts from reserve requirements by "sweeping" checking deposits into saving deposits overnight. Saving deposits do not have reserve requirements.
This means banks can create even more loans from even less actual deposits.
http://en.wikipedia.org/wiki/Sweep_account - Nodaki, on 03/30/2009, -4/+8No amount of education teaches better than experience.
I wonder why Germany is afraid of nationalizing their banking system? Maybe their experience with socialism left a bad taste in their mouth. - fishshogun, on 03/30/2009, -0/+4Well this American doesn't like the plan where Geithner insures hedge fund investments with taxpayer money. Why is it just the middle class that has to tighten up and lose more. Or hey just take it all then we can finally put an end to this game. I hope these people who are robbing us sleep well.
- borez, on 03/30/2009, -3/+7Jeez. What then, repackage the toxic assets and give them a AAA rating? They're worthless, tough, deal with it.
I'm beginning to think that the only reasons these banks are 'too big to fail' is that that's where the politicians and they're related stooges have a most of their own money tied up. - Wulfgang, on 03/31/2009, -0/+3Wasn't that exactly what the first $700 billion Paulson demanded with no strings attached was supposed to be for? Weren't we told that martial law would be declared and the world as we know it would end if they didn't immediately buy up these toxic assets?
And just so we're clear; were exactly is the too-big-to-fail threshold and who decides? My 410k is now a 101k and no one is offering to shore up my investment decisions.
Too-big-to-fail is too-big-to-exist.
The answer was right there all along: nationalize, liquidate, and break them up into not-too-big-to-fail entities.
We've gone to extreme lengths to avoid that obvious and rational solution. Why? - shutaro, on 03/30/2009, -0/+3Stop it. Stop pretending that you are scared of us.
- bobjrn2, on 03/30/2009, -3/+6Damned if we do, saved if we don't. As much as I wish we lived in the world of monopoly where we can infinitely bail out our friends when they go bankrupt, we don't. Before things get better, we need to let these corporations fail. Propping up corporations with paper money is as worthless as...paper money.
- apr400, on 03/30/2009, -0/+3The miscarriage is the moral hazard of the tax payer taking all the crap whilst the shareholders saunter off with the profits. Surely the thing to do is to acknowledge the bank in question is screwed. Zero out the shareholders (who, after all, oversaw the collapse), nationalise the bank and run it as a taxpayer funded institute until it has paid the taxpayer back for dealing with the toxic assets. It can then be sold back to private shareholders, generating a bit of a profit that can go towards re-balancing the government's books after the hit they've taken the last year or so.
- brim4brim, on 04/01/2009, -0/+3If nobody is willing to buy them the worth is extremely easy to calculate.
- zephc, on 03/30/2009, -2/+5Yes, and *they* learned from *their* mistake
- inactive, on 03/31/2009, -2/+5Obama is a reckless free spender who has no thought for the future. His only goal is to 'spread the wealth' to his idle constituents the short while he is in office. That he leaves the economy a wreck is of no concern to this liberal madman. The Euros are justified in their distrust of this charlatan.
- inactive, on 03/30/2009, -2/+5Ah
Amusing the left wingers find "Mark my words" as all the proof they need that your crystal ball prediction of the future is accurate.
Sadly you are mistaken because crystal balls don't work - atomheartmother, on 03/30/2009, -6/+9"Americans are cutting back. Americans need to make sacrifices." How is it that we're lectured by our political leaders on how to exhibit fiscal restraint in our own lives as they simultaneously exhibit none with regard to public matters?
- ninjaturtles1, on 03/31/2009, -0/+3Why is more lending the goal here? American's are already in debt up to their eye balls! How is lending them even more money going to solve this problem?
- lizard450, on 03/30/2009, -0/+3So... let me get this straight. The US congress does the same recommended approach to support the markets. The same thing the fed has done for decades to support the markets and the EU has done the same for years. The only difference is an absurd amount of money and and in the public arena. Don't worry though our hero representatives are being tough on those banks! Yeah make those banks give back that 1/1000th of a % show 'em you mean business!!! And CHEER Obama for not adding .000000025% more to the money that was spent in the first few months of this year. Ultimately the money will have been spent in vain. WOOHOO!!!
- Unreal030, on 03/30/2009, -0/+3@Getrtz1219
Well apparently Obama has told you his master plan that he has told no one else on how he is going to pull the rabbit out of the hat by cutting the federal deficit in half by the end of his first term by spending bucket loads of money at the same exact time.
Apparently no one in our government knows how to read a simple graph, because apparently they expect it to start looking like it is at the end of this graph:
(Sorry for the Obama picture, I am not a right-wing Obama smear freak, for proof see my other digg postings, but this is the fastest image I could find, I don't really have the time on here atm to grab one without it)
http://ronpaulblog.com/wp-content/uploads/2009/03/ ...
I also suggest you take something more advanced than Macro Economics 101.
While Europe is definitely in for some major trouble, we will most likely be worse off than them. It really depends on what they decide to do in regards to localized (country specific) economic action and what they decide to do as the value of the main global currency continues to tank. Either way, I am pretty confident that even if we are not worse off than them, we most likely not be much better by comparison. It also doesn't help that depending on how everything falls, China has a ridiculous amount of our debt and is trying to get rid of it but is being mostly unsuccessful in doing so. If they crash hardcore we will too because they are our biggest trading partner by far. Unfortunately that would also create severe circumstances for most other countries as well since the US and China are the two economic giants. - kemp34, on 03/30/2009, -0/+2Uh, they use the Euro now.
- chesterogilvie, on 03/30/2009, -0/+2How do you know what they are worth if nobody is willing to buy them? The government will make up a number that is above market value.
- chesterogilvie, on 04/04/2009, -0/+2Right, worthless.
- brim4brim, on 04/01/2009, -0/+2Germany isn't doing this just because of an election.
The ECB isn't engaging in quantitative easing either and it is not controlled by the German government nor does it act solely in their interests. - UselessTrivia, on 03/30/2009, -1/+3Yes, and the lack of regulation that allowed such practices to get so out of hand is the truest miscarriage of justice.
- brim4brim, on 04/01/2009, -0/+2Actually I'd add that the people politicians listen to have invested their money there. Too big to fail could just be from the advisor's
Either way, it is looking like a bigger and bigger mistake almost every day. - JobConcierge, on 08/10/2009, -0/+2Haha, this is the simplest causal explanation for the economic crisis.
- inactive, on 04/01/2009, -0/+2Essentially, I believe this is what happened when the assets of the dissolved Soviet Union were sold off. Only the Moscow in-crowd were invited. Bought for pennies on the ruble. And then it was gone.
- brim4brim, on 04/01/2009, -0/+2Not to mention if the government is invested in the property market they have an invested interest in trying to set regulations and conditions that would see the market go up to previous levels so they can sell their debt ridden assets.
Which will most likely be just another property bubble. - Unreal030, on 03/30/2009, -0/+2While a hybrid stance is preferable, the issue is figuring out what that hybrid stance is. However it is pretty certain that the current methodology is not even close to what the preferred stance should be and depending on how bad this thing turns out to be in the end and how we go about acting once the boom period begins again, yes we will most likely be right back here after some time. The bad thing is we probably will be even worse off next time.
- brim4brim, on 04/01/2009, -0/+2I'd go for Sweden over Germany. Germany has some problems. Sweden seems to be fine. They had a massive bubble years ago and said never again and introduced heavy regulations to ensure it would never happen again.
Sweden has its own problems, property bubbles aren't one of them. -
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