Jim Rogers: Let AIG Go Bankrupt, Not America
AIG, BANKS, BANKING, INSURANCE, INSURER, BANKRUPT, BANKRUPTCY, RUIN, RECESSION, JIM ROGERS, INVESTMENT, MARKET OUTLOOK, WALL STREET, CITY OF LONDON
CNBC.com
| 03 Mar 2009 | 04:24 PM ET
American International Group should be allowed to go bankrupt because keeping it and other sick financials alive on government support risks ruining the US economy, legendary investor Jim Rogers told CNBC Tuesday.
AIG , whose $61.66 billion fourth-quarter loss was the largest ever for a US company, received $30 billion more in government funds Monday. The insurer's financial health hasn't improved despite getting as much as $150 billion from the government last year.
"Suppose AIG goes bankrupt, it is better that AIG goes bankrupt and we have a horrible two or three years than that the whole US goes bankrupt," Rogers said. "AIG has trillions of dollars of obligations, let them fail, let the courts sort it out and start over. Otherwise we'll never start over."
On Monday, CEO Edward Liddy told CNBC that the insurer is far more stable and secure than it was last fall but acknowledged that it was "difficult to say" if AIG will need even more money from the government in the future.
Bailing out the banks is going to increase the debt spiral and finally cause the destruction of the world's biggest economy, Rogers said.
# Slideshow: Origins of the Financial Crisis, Then and Now
"I think it's astonishing, they're ruining the US economy, they're ruining the US government, they're ruining the US central bank and they're ruining the US dollar," he said.
"You are watching something in front of our eyes, very historically, which is basically the destruction of New York as a financial center and the destruction of America as the world's most powerful country."
Japan's economic "lost decade" was caused by trying to bail out the banks, and the West risks running out of money if it doesn't let the bad banks fail now, Rogers warned.
Systemic risk is going to be the same in 10 months, 5 years of 10 years if the fundamental problem is not solved, he added.
"The idea that you have too much debt, too much borrowing and too much consumption and you're going to solve that problem with more debt, more consumption and more borrowing? These people are nuts."
Wall Street and the City of London are going to be "disastrous" for years, like in the 1950s and 1960s, and in 30 years, finance will "dry up and wither away" as we are entering a "long period of hard times," he said.
"Power is shifting now from the money shifters, the guys who trade paper and money, to people who produce real goods. What you should do is become a farmer, or start a farming network," Rogers said.
© 2009 CNBC.com
URL: http://www.cnbc.com/id/29476319/site/14081545/
Sunday, March 8, 2009
Who Gained from AIG BAILOUT
Even though I often take on the Wall Street Journal's depiction of new stories, the flip side is that it does break significant news stories. Today is one of those days, although I wonder about an item this juicy hitting the wires on a Friday evening.
Remember that the reason for shoring up AIG was its credit default swaps portfolio, in which it had written lots of unhedged guarantees on the cheery assumption that there was tantamount to no risk. Insurers are state-regulated in the US, and subject to a host country requirements overseas (and AIG has substantial foreign operations). Uncle Sam has no regulatory responsibility for AIG, but was hit up nevertheless as the most logical deep pocket that could prevent a financial train wreck.
Gretchen Morgenson reported in September that Goldman was the only financial firm that had a seat at the table during the AIG rescue talks. We noted at the time:
This is special dealing, pure and simple. Even if AIG needed to be salvaged (there was considerable agreement on this point), having Goldman deeply involved in the process is cronyism. But that's been a staple of this Administration.
Another reason for the bailout was that AIG's guarantees allowed European banks to circumvent minimum capital requirements, which means the AIG salvage operation was a backstop to European financial firms.
The Wall Street Journal story, "Top U.S., European Banks Got $50 Billion in AIG Aid" peels back another layer in this sorry affair:
The beneficiaries of the government's bailout of American International Group Inc. include at least two dozen U.S. and foreign financial institutions that have been paid roughly $50 billion since the Federal Reserve first extended aid to the insurance giant.
Among those institutions are Goldman Sachs Group Inc. and Germany's Deutsche Bank AG, each of which received roughly $6 billion in payments between mid-September and December 2008....
The names of all of AIG's derivative counterparties and the money they have received from taxpayers still isn't known, but The Wall Street Journal has identified some of them and is publishing others here for the first time....
In a Senate Banking Committee hearing in Washington on Thursday, Fed Vice Chairman Donald Kohn declined to identify AIG's trading partners. He said doing so would make people wary of doing business with AIG.
But Mr. Kohn told lawmakers he would take their requests to his colleagues. The Fed, through a new committee led by Mr. Kohn to discuss transparency concerns, is now weighing whether to disclose more details about the AIG transactions.
Yves here. One would infer that someone who was privy to the details is mighty unhappy with what went down.
The story also includes this text box:
Some banks that were paid by AIG after it was bailed out by the government
Goldman Sachs
Deutsche Bank
Merrill Lynch
Société Générale
Calyon
Barclays
Rabobank
Danske
HSBC
Royal Bank of Scotland
Banco Santander
Morgan Stanley
Wachovia
Bank of America
Lloyds Banking Group
Source: WSJ research
Update 10:50 PM: Readers suffering from bailout fatigue are wondering why this is a biggie. By the time you are talking AIG level numbers, does it matter where the money went, really? Willem Buiter begs to differ (hat tip Ed Harrison). Bottom line: covert subsidies were given to bank via AIG. Remember, Henry Paulson, who had perilously few inhibitions about shoveling money at banks, even when the pretexts were often dubious and the checks non-existent, nevertheless was afraid to overpay openly for dud assets, which is why he retreated from his original conception of the TARP as as way to hoover up bad debt.
But AIG? No problem. CDS are arcane, and these were bi-lateral contracts (while the dud TARP asset were in most cases securities, so in many cases, third parties could formulate a rough view as to where they might trade).
Wake up and smell the coffee. The public purse is being looted and we the great unwashed are being fed pablum. Just because the perps work for once esteemed institutions and are typically treated with deference does not change the nature of the undertaking.
From Buiter:
The reports on the evidence given by the Vice Chairman of the Federal Reserve Board, Don Kohn, to the Senate Banking Committee about the Fed’s role in the government’s rescue of AIG, have left me speechless and weak with rage. AIG wrote CDS, that is, it sold credit default swaps that provided the buyer of the CDS (including some of the world’s largest banks) with insurance against default on bonds and other credit instruments they held. Of course the insurance was only as good as the creditworthiness of the party writing the CDS. When it was uncovered during the late summer of 2008, that AIG had nurtured a little rogue, unregulated investment banking unit in its bosom, and that the level of the credit risk it had insured was well beyond its means, the AIG counterparties, that is, the buyers of the CDS, were caught with their pants down.
Instead of saying, “how sad, too bad” to these counterparties, the Fed decided (in the words of the Wall Street Journal), to unwind “.. some AIG contracts that were weighing down the insurance giant by paying off the trading partners at the full value they expected to realize in the long term, even though short-term values had tumbled.”
An LSE colleague has shown me an earlier report in the Wall Street Journal (in December 2008), citing a confidential document and people familiar with the matter, which estimated that about $19 billion of the payouts went to two dozen counterparties between the government bailout of AIG in mid-September and early November 2008....With the US government (Fed, FDIC and Treasury) now at risk for about $160 bn in AIG, a mere $19 bn may seem like small beer. But it is outrageous. It is unfair, deeply distortionary and unnecessary for the maintenance of financial stability.
Don Kohn ackowledged that the aid contributed to “moral hazard” - incentives for future reckless lending by AIG’s counterparties - it “will reduce their incentive to be careful in the future.” But, here as in all instances were the weak-kneed guardians of the common wealth (or what’s left of it) cave in to the special pleadings of the captains of finance, this bail-out of the undeserving was painted as the unavoidable price of maintaining, defending or restoring financial stability...
I am deeply worried that other people may, as a result of this, be willing to do business with other U.S. financial institutions on the same ludicrous terms that brought us the current crisis,,,,
Unless the counterparties pay the full price for their hubris and recklessness, they will be back for more. It is therefore tragic that central banks and governments everywhere are going out of their way to protect and shelter the unsecured creditors of the banks (holders of junior and senior debt among them), by raiding the tax payer or the credit and reputation of the central bank. Significant mandatory debt-to-equity conversions and large write-downs of (haircuts on) the claims of other unsecured creditors should be an integral part of any financial assistance package. (Reprinted from Naked Capitalism March7th-09)
Remember that the reason for shoring up AIG was its credit default swaps portfolio, in which it had written lots of unhedged guarantees on the cheery assumption that there was tantamount to no risk. Insurers are state-regulated in the US, and subject to a host country requirements overseas (and AIG has substantial foreign operations). Uncle Sam has no regulatory responsibility for AIG, but was hit up nevertheless as the most logical deep pocket that could prevent a financial train wreck.
Gretchen Morgenson reported in September that Goldman was the only financial firm that had a seat at the table during the AIG rescue talks. We noted at the time:
This is special dealing, pure and simple. Even if AIG needed to be salvaged (there was considerable agreement on this point), having Goldman deeply involved in the process is cronyism. But that's been a staple of this Administration.
Another reason for the bailout was that AIG's guarantees allowed European banks to circumvent minimum capital requirements, which means the AIG salvage operation was a backstop to European financial firms.
The Wall Street Journal story, "Top U.S., European Banks Got $50 Billion in AIG Aid" peels back another layer in this sorry affair:
The beneficiaries of the government's bailout of American International Group Inc. include at least two dozen U.S. and foreign financial institutions that have been paid roughly $50 billion since the Federal Reserve first extended aid to the insurance giant.
Among those institutions are Goldman Sachs Group Inc. and Germany's Deutsche Bank AG, each of which received roughly $6 billion in payments between mid-September and December 2008....
The names of all of AIG's derivative counterparties and the money they have received from taxpayers still isn't known, but The Wall Street Journal has identified some of them and is publishing others here for the first time....
In a Senate Banking Committee hearing in Washington on Thursday, Fed Vice Chairman Donald Kohn declined to identify AIG's trading partners. He said doing so would make people wary of doing business with AIG.
But Mr. Kohn told lawmakers he would take their requests to his colleagues. The Fed, through a new committee led by Mr. Kohn to discuss transparency concerns, is now weighing whether to disclose more details about the AIG transactions.
Yves here. One would infer that someone who was privy to the details is mighty unhappy with what went down.
The story also includes this text box:
Some banks that were paid by AIG after it was bailed out by the government
Goldman Sachs
Deutsche Bank
Merrill Lynch
Société Générale
Calyon
Barclays
Rabobank
Danske
HSBC
Royal Bank of Scotland
Banco Santander
Morgan Stanley
Wachovia
Bank of America
Lloyds Banking Group
Source: WSJ research
Update 10:50 PM: Readers suffering from bailout fatigue are wondering why this is a biggie. By the time you are talking AIG level numbers, does it matter where the money went, really? Willem Buiter begs to differ (hat tip Ed Harrison). Bottom line: covert subsidies were given to bank via AIG. Remember, Henry Paulson, who had perilously few inhibitions about shoveling money at banks, even when the pretexts were often dubious and the checks non-existent, nevertheless was afraid to overpay openly for dud assets, which is why he retreated from his original conception of the TARP as as way to hoover up bad debt.
But AIG? No problem. CDS are arcane, and these were bi-lateral contracts (while the dud TARP asset were in most cases securities, so in many cases, third parties could formulate a rough view as to where they might trade).
Wake up and smell the coffee. The public purse is being looted and we the great unwashed are being fed pablum. Just because the perps work for once esteemed institutions and are typically treated with deference does not change the nature of the undertaking.
From Buiter:
The reports on the evidence given by the Vice Chairman of the Federal Reserve Board, Don Kohn, to the Senate Banking Committee about the Fed’s role in the government’s rescue of AIG, have left me speechless and weak with rage. AIG wrote CDS, that is, it sold credit default swaps that provided the buyer of the CDS (including some of the world’s largest banks) with insurance against default on bonds and other credit instruments they held. Of course the insurance was only as good as the creditworthiness of the party writing the CDS. When it was uncovered during the late summer of 2008, that AIG had nurtured a little rogue, unregulated investment banking unit in its bosom, and that the level of the credit risk it had insured was well beyond its means, the AIG counterparties, that is, the buyers of the CDS, were caught with their pants down.
Instead of saying, “how sad, too bad” to these counterparties, the Fed decided (in the words of the Wall Street Journal), to unwind “.. some AIG contracts that were weighing down the insurance giant by paying off the trading partners at the full value they expected to realize in the long term, even though short-term values had tumbled.”
An LSE colleague has shown me an earlier report in the Wall Street Journal (in December 2008), citing a confidential document and people familiar with the matter, which estimated that about $19 billion of the payouts went to two dozen counterparties between the government bailout of AIG in mid-September and early November 2008....With the US government (Fed, FDIC and Treasury) now at risk for about $160 bn in AIG, a mere $19 bn may seem like small beer. But it is outrageous. It is unfair, deeply distortionary and unnecessary for the maintenance of financial stability.
Don Kohn ackowledged that the aid contributed to “moral hazard” - incentives for future reckless lending by AIG’s counterparties - it “will reduce their incentive to be careful in the future.” But, here as in all instances were the weak-kneed guardians of the common wealth (or what’s left of it) cave in to the special pleadings of the captains of finance, this bail-out of the undeserving was painted as the unavoidable price of maintaining, defending or restoring financial stability...
I am deeply worried that other people may, as a result of this, be willing to do business with other U.S. financial institutions on the same ludicrous terms that brought us the current crisis,,,,
Unless the counterparties pay the full price for their hubris and recklessness, they will be back for more. It is therefore tragic that central banks and governments everywhere are going out of their way to protect and shelter the unsecured creditors of the banks (holders of junior and senior debt among them), by raiding the tax payer or the credit and reputation of the central bank. Significant mandatory debt-to-equity conversions and large write-downs of (haircuts on) the claims of other unsecured creditors should be an integral part of any financial assistance package. (Reprinted from Naked Capitalism March7th-09)
Friday, February 27, 2009
Nick L Comment to NYTimes on Obama a LIAR
February 27, 2009 1:48 am NY Times Nick L Comment to NYTimes on Obama a LIAR Feb 27_09_148am
http://community.nytimes.com/article/comments/2009/02/27/us/politics/27web-budget.html?s=1
February 27, 2009 1:48 am
Mr. Obama, spoke of "breaking from a troubled past of profound irresponsibly", yet he is seemingly acting much like his predecessor, regarding irresponsibility, as it relates to continuing the second 1/2 of the TARP program. It is delusional to think that Obama is breaking from the past,atleast regarding handing out tax payer money and bailouts to the very same institutions that previous administrations were guilty of doing. Further he is no less a liar and a thief then previous offenders when he says that he is proud that not a single dollar of the stimulus package was not used for earmarks. When in fact.Barney Frank is quoted as saying he is proud to have received special earmarks.Or that John Kerry from Massachusetts also commented that while he didn't specifically ask for certain earmarks that he was thankful to his colleagues. ....
..So goes the same old drill of government Crime .This is not Change. This is not an honest assessment by Obama of no earmarks. According to Barney Frank John Kerry and the Boston Globe front page yesterday. There still is NO real wording in the 2md 1/2 of the TARP that requires or forces banks to perform in certain ways. Further regarding breaking irresponsibility from the past how can anyone blank out from there vision that Obama is giving money to the same irresponsible institutions that he said he would "brake from the past". This is the biggest rip off to the common man that has ever occurred, in modern History. Yeah some Change ! Here is some words that should never Change --- NEVER TRUST THE FEDERAL GOVERNMENT..Don t rely on the Federal Government. Us folks and citizens of the USA have the power to get us out of this mess. Ignore the president- Hi is a LIAR !!
Signed ,
NickLaudani- Boston, Ma.
http://community.nytimes.com/article/comments/2009/02/27/us/politics/27web-budget.html?s=1
February 27, 2009 1:48 am
Mr. Obama, spoke of "breaking from a troubled past of profound irresponsibly", yet he is seemingly acting much like his predecessor, regarding irresponsibility, as it relates to continuing the second 1/2 of the TARP program. It is delusional to think that Obama is breaking from the past,atleast regarding handing out tax payer money and bailouts to the very same institutions that previous administrations were guilty of doing. Further he is no less a liar and a thief then previous offenders when he says that he is proud that not a single dollar of the stimulus package was not used for earmarks. When in fact.Barney Frank is quoted as saying he is proud to have received special earmarks.Or that John Kerry from Massachusetts also commented that while he didn't specifically ask for certain earmarks that he was thankful to his colleagues. ....
..So goes the same old drill of government Crime .This is not Change. This is not an honest assessment by Obama of no earmarks. According to Barney Frank John Kerry and the Boston Globe front page yesterday. There still is NO real wording in the 2md 1/2 of the TARP that requires or forces banks to perform in certain ways. Further regarding breaking irresponsibility from the past how can anyone blank out from there vision that Obama is giving money to the same irresponsible institutions that he said he would "brake from the past". This is the biggest rip off to the common man that has ever occurred, in modern History. Yeah some Change ! Here is some words that should never Change --- NEVER TRUST THE FEDERAL GOVERNMENT..Don t rely on the Federal Government. Us folks and citizens of the USA have the power to get us out of this mess. Ignore the president- Hi is a LIAR !!
Signed ,
NickLaudani- Boston, Ma.
Thursday, February 26, 2009
TARP _ 7 Facts youshould know
Did you know that the TARP application is only 2 pages? I mean, is it 2 separate pages with fields on the front and page of each page? Then I found the official TARP form, and all was clear. It is 2 pages with 20 fields to fill out, half of which are things like company name, signatures and contact information!
This got me to research a little more and here are 7 interesting facts about the beloved TARP.
1. Application for banks to receive tax payers money (TARP funds) is only 2 pages while we mail 30+ (at least) page packages each year to pay taxes.
2. No banks provided specific answers to where the TARP money was spent when Associated Press asked 21 banks that got at least $1 billion in TARP money. Some banks just say “I don’t know” (according to wikipedia)
3. Ken Lewis (CEO of Bank of America) wanted to back out of the Merrill Lynch deal and was told by Bernanke and Paulson that BofA had to close the deal. Those two even told Lewis that renegotiating a better price for BofA is not an option (according to Fortune magazine)
4. NY Times is keeping tabs on who is getting TARP funds, while the government doesn’t have a list publicly. (The government does sent out notices, but not when funds are committed. They just let the public know in batches.)
5. Before the Obama administration ever took office, $379.8 billion of the whole TARP fund has already been committed. (see NY Times link)
6. I thought any funds over the first 350 billion was supposed to be voted and approved by congress before the treasury department can use it, but for some reason I never heard of news on that. (I could’ve missed it, so could someone point me to mentions of it?)
7. Last week, Eizabeth Waren of the Congressional Oversight Panel said that the government paid $254 billion for assets that were worth only $176 billion in 2008. So much for making money on these things.
Maybe we should just sit back and relax because it’s not like we can do anything about it anyway. I wonder if they can at least streamline the unemployment application because at least more people can benefit from that. A 2-pager would be nice.
This got me to research a little more and here are 7 interesting facts about the beloved TARP.
1. Application for banks to receive tax payers money (TARP funds) is only 2 pages while we mail 30+ (at least) page packages each year to pay taxes.
2. No banks provided specific answers to where the TARP money was spent when Associated Press asked 21 banks that got at least $1 billion in TARP money. Some banks just say “I don’t know” (according to wikipedia)
3. Ken Lewis (CEO of Bank of America) wanted to back out of the Merrill Lynch deal and was told by Bernanke and Paulson that BofA had to close the deal. Those two even told Lewis that renegotiating a better price for BofA is not an option (according to Fortune magazine)
4. NY Times is keeping tabs on who is getting TARP funds, while the government doesn’t have a list publicly. (The government does sent out notices, but not when funds are committed. They just let the public know in batches.)
5. Before the Obama administration ever took office, $379.8 billion of the whole TARP fund has already been committed. (see NY Times link)
6. I thought any funds over the first 350 billion was supposed to be voted and approved by congress before the treasury department can use it, but for some reason I never heard of news on that. (I could’ve missed it, so could someone point me to mentions of it?)
7. Last week, Eizabeth Waren of the Congressional Oversight Panel said that the government paid $254 billion for assets that were worth only $176 billion in 2008. So much for making money on these things.
Maybe we should just sit back and relax because it’s not like we can do anything about it anyway. I wonder if they can at least streamline the unemployment application because at least more people can benefit from that. A 2-pager would be nice.
Sunday, February 8, 2009
NYTIMES-Feb9 - Obamama threatening catastrophe if we dont act now
“The time for action is now,” Mr. Obama said. “If we don’t move swiftly to put this plan in motion, our economic crisis could become a national catastrophe.”
Really Mr Obama ? why?Just because you say it will be a catastrophe , then therefore it will be ?
Well Why Mr Imperial King ? Nobody, defined as any Democrat or Republican has challenged this premise. !!!
Instead of bickering over a mere 50 billion here or there the Congress doesn't even bother to bicker over the substantive deeper questions.Specifically that question being, What would be so wrong with not acting immediately to pump money into a society that cannot ever pay back this stimulas/spending package?
What about the other alternative to just let the dust settle? What if printing fake money to get people buying cars and houses they cant afford might be afar worse outcome?
What if this printing press bailout only simply continues what the American economy and consumer have been relentlessly doing for the last 20 if not 30 years?
Would it be worse to just let this painful rescission finally bring back down to earth all of the ridiculous bubbles that are at the root of this problem?
Another words please question the idea that the pain of the USA consumption addiction and its withdrawal symptoms might be far better than the Obama idea to pump out so much money that the American Dollar might completely collapse? Remember the only way to fund this continued consumption addiction is to borrow more money !!
Eventually the world is going to start to question lending money to a Bankrupt Country !!!
That will mean goodbye to the USA greenback!!!
Which would be better?Take a couple of years or even perhaps a decade of painful recession or this insane Obama/Polosi/ apocalyptic final end to the USA economy. When the world figures out that our Lending and funding is a gigantic ponzi scheme based on nothing but to quote ,"The Good Faith of the USA Government". then game is over !!!. I think the game is already over. It seems the world appetite for Funding "Change" - "choke" is slowing .We might actually implode within the next 2 years !!!!!!!
Nobody in Congress including the Super Human Obama has offered a real different concept of Change !!! He offers no change. Real Change would be to re -set our economy based on Production. _NOT Consumption. Now thats Change. Really think for a minute. Did our country become the greatest super power ever on the earth by becoming the fattest consumers of Big Macs? Or did we get on top by once being a productivity power house !!!
Does the so called OBAMA genius actually look in the mirror with pride to day that the solution to the over weight donut eating pig is to give him more money to buy more donuts. !!!!!
No way. If the donut eating pig wants to loose some financial weight- it is obvious that the American Fatso simply has to stop buying donuts !!!!
Instead of eating donuts- we need a better way to invent/produce donuts !!!! Thats the only American solution.Its always been the American solution.!!!! We Will Find A Way- But it wont be a rescue from the imperial Federalists. Historically it has never been government that saves us .!!!
We are bankrupt.Let me repeat - WE ARE BANKRUPT!!! We have been here before. And its only been over come by the amazing unprecedented experimental Constitution of the unleashed collective power of the USA individual.!!!No system on earth has what me and you have. Well until this new frightening Fascist philosophy seems to have emerged
We need a reality check. Not a rebate check. And frankly even after we get the rebate check it will never be fixed until we get a reality check, and start producing products and getting back to work !!!!
Governments don t create wealth, they only redistribute it at best and thats very generous of me. Really governments only take wealth. They steal it. Just like this horrific T.A.R.P. proves.
It does not matter if its Republican or Democratic.They are both part of the same machine which seems to be Ok with this newly emerging concept of Federal and Business partnership.
Oh by the way in places like Nazi Germany or Russia this concept is called Fascism .!!!
And so do i need to yank your heads out of the sand and remind you how those Criminal corrupt entities ended ?
My God, Thomas Jefferson was so brilliant -
........."I believe that banking institutions are more dangerous to our liberties than standing armies . . . If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] . . . will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered . . . The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." -- Thomas Jefferson -- The Debate Over The Recharter Of The Bank Bill, (1809)
That was 200 Hundred years Ago based on 2000 years of Historical study. This concept is a constant. But yet in contrary to our new congress and man of change we must give the government(in bed with the business) our future grand children s hope for not being a slave to the state!!!
Call me crazy...But Thomas Jefferson was far more educated than anybody that is reading this soap box babble of mine !!!!
Really Mr Obama ? why?Just because you say it will be a catastrophe , then therefore it will be ?
Well Why Mr Imperial King ? Nobody, defined as any Democrat or Republican has challenged this premise. !!!
Instead of bickering over a mere 50 billion here or there the Congress doesn't even bother to bicker over the substantive deeper questions.Specifically that question being, What would be so wrong with not acting immediately to pump money into a society that cannot ever pay back this stimulas/spending package?
What about the other alternative to just let the dust settle? What if printing fake money to get people buying cars and houses they cant afford might be afar worse outcome?
What if this printing press bailout only simply continues what the American economy and consumer have been relentlessly doing for the last 20 if not 30 years?
Would it be worse to just let this painful rescission finally bring back down to earth all of the ridiculous bubbles that are at the root of this problem?
Another words please question the idea that the pain of the USA consumption addiction and its withdrawal symptoms might be far better than the Obama idea to pump out so much money that the American Dollar might completely collapse? Remember the only way to fund this continued consumption addiction is to borrow more money !!
Eventually the world is going to start to question lending money to a Bankrupt Country !!!
That will mean goodbye to the USA greenback!!!
Which would be better?Take a couple of years or even perhaps a decade of painful recession or this insane Obama/Polosi/ apocalyptic final end to the USA economy. When the world figures out that our Lending and funding is a gigantic ponzi scheme based on nothing but to quote ,"The Good Faith of the USA Government". then game is over !!!. I think the game is already over. It seems the world appetite for Funding "Change" - "choke" is slowing .We might actually implode within the next 2 years !!!!!!!
Nobody in Congress including the Super Human Obama has offered a real different concept of Change !!! He offers no change. Real Change would be to re -set our economy based on Production. _NOT Consumption. Now thats Change. Really think for a minute. Did our country become the greatest super power ever on the earth by becoming the fattest consumers of Big Macs? Or did we get on top by once being a productivity power house !!!
Does the so called OBAMA genius actually look in the mirror with pride to day that the solution to the over weight donut eating pig is to give him more money to buy more donuts. !!!!!
No way. If the donut eating pig wants to loose some financial weight- it is obvious that the American Fatso simply has to stop buying donuts !!!!
Instead of eating donuts- we need a better way to invent/produce donuts !!!! Thats the only American solution.Its always been the American solution.!!!! We Will Find A Way- But it wont be a rescue from the imperial Federalists. Historically it has never been government that saves us .!!!
We are bankrupt.Let me repeat - WE ARE BANKRUPT!!! We have been here before. And its only been over come by the amazing unprecedented experimental Constitution of the unleashed collective power of the USA individual.!!!No system on earth has what me and you have. Well until this new frightening Fascist philosophy seems to have emerged
We need a reality check. Not a rebate check. And frankly even after we get the rebate check it will never be fixed until we get a reality check, and start producing products and getting back to work !!!!
Governments don t create wealth, they only redistribute it at best and thats very generous of me. Really governments only take wealth. They steal it. Just like this horrific T.A.R.P. proves.
It does not matter if its Republican or Democratic.They are both part of the same machine which seems to be Ok with this newly emerging concept of Federal and Business partnership.
Oh by the way in places like Nazi Germany or Russia this concept is called Fascism .!!!
And so do i need to yank your heads out of the sand and remind you how those Criminal corrupt entities ended ?
My God, Thomas Jefferson was so brilliant -
........."I believe that banking institutions are more dangerous to our liberties than standing armies . . . If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] . . . will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered . . . The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." -- Thomas Jefferson -- The Debate Over The Recharter Of The Bank Bill, (1809)
That was 200 Hundred years Ago based on 2000 years of Historical study. This concept is a constant. But yet in contrary to our new congress and man of change we must give the government(in bed with the business) our future grand children s hope for not being a slave to the state!!!
Call me crazy...But Thomas Jefferson was far more educated than anybody that is reading this soap box babble of mine !!!!
Tuesday, January 13, 2009
Force Banks to Write down Debt Before TARP
originally authored posted yahoo finance
Posted Jan 13, 2009 12:17pm EST by Aaron Task
It's no coincidence President Bush has requested the second $350 billion of TARP funds at the same time Wall Street is grumbling about how Citigroup, and possibly Bank of America and others, may need additional capital.
But before the government puts another dollar of taxpayer money into the banks, they must force these firms to "lift the kimono" and write-down their bad assets, says Joshua Rosner, managing director of Graham Fisher and one of the first analysts to warn of a pending crisis in the mortgage.
"Because the assets continue to get worse, the capital [banks] are given just gets hoarded," Rosner says. "They need to hold capital in order to meet regulatory capital requirements instead of using it to make loans that seek productive economic returns."
Treasury could act as a clearinghouse for bad debt and hold open market auctions to determine the "true price" of those assets. Once those market prices are established, we can determine which banks are still viable and which aren't, Rosner says. "Then the FDIC can come in in a traditional way [to seize troubled banks] or the government could then use TARP money to institutions free of bad assets."
Forcing banks to take write-downs before the government injects capital is how
But even if the "Swedish solution" were adapted, Rosner says the structured finance market remains broken, which is preventing all this government money from making its way into the economy in a meaningful way. He compares it to opening a water spigot without having the pipes to take the water where it needs to go.
If this market isn't fixed, the risk of a deflationary spiral intensifies because the "velocity of money" has slowed to a standstill.
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