Another $1 Trillion Bailout
From Bloomberg:
The Obama administration unveiled its plan to remove toxic assets from the books of the nation’s banks.
The plan is aimed at financing as much as $1 trillion in purchases of illiquid real-estate assets.
The plan is based on the theory that removing the devalued loans and securities from banks’ balance sheets will help them start lending again and resuscitate the economy.
Tim Geithner: "This will allow banks to clean up their balance sheets. There is no doubt the government is taking risk. You cannot solve a financial crisis without the government assuming risk.”
Critics including Paul Krugman, a winner of the Nobel Prize for economics, have said the government should take over banks loaded with devalued assets, remove their top management, and dispose of the toxic securities.
James Baker, who served as Treasury secretary under Ronald Reagan, endorsed the idea earlier this month. Sweden adopted the temporary nationalization approach in the 1990s.
Krugman said that Geithner’s strategy won’t work because it “assumes that banks are fundamentally sound and that bankers know what they’re doing.”
“We are the United States of America, we are not Sweden,” the Treasury chief said.
White House National Economic Council Director Lawrence Summers said that he was “surprised” at Krugman’s article.
The Nattering One muses: The stock market jumped 500 points as ebbulient investors swallowed hook, line and sinker.
Here's a few reasons why the plan won't work...
the banks are not fundamentally sound; the bankers have already demonstrated that they don't know what they're doing;
we are not Sweden and the problems are far greater than the eye sees;
banks lending again will not resuscitate the emasculated economy; bank lending is what got us into the problem in the first place.
The durable economy has been outsourced to labor at the margin through free trade globalization.
What was left of durable activity was automotive and housing construction; those are now decimated and we have NOTHING to fall back on.
80% of all jobs created since 2001 were based on or reliant upon the housing industry; 70% of GDP is based on consumer spending.
The objective of this bailout is to generate new prices for securities backed by mortgages that are...
thinly traded because investors have little confidence about the underlying value of the home loans.
Those investors should have little confidence about the underlying value of the home loans as the homes are NOT and NEVER WERE WORTH 30% of what was paid for them.
The entire economy was based upon unjustified hyper inflated real estate; commodities and equities price speculation.
You never win a war fought on two fronts. Simple math for a war being fought on two fronts:
First front: 70% reduction in false home "values" = no housing ATM = bank insolvency = zero lending...
= no spending beyond one's means = less consumer spending = 80% of all jobs since 2001 vaporized.
Second front: Outsourcing = 80% of all manufacturing jobs vaporized = no decent paying jobs = no durable economy + First front = global economic disaster.
If these homes were worth the price paid, why can't people; nor investors; nor the banks afford them anymore?
It's all one big house of cards that is collapsing. Get it? If you do, your ahead of everyone on the hill for the last 8 years.
Reporting starts in another two weeks and it will be an absolute disaster, along with increasing foreclosures & corporate BK's, we are going to new lows.
We repeat again, with confidence in the extreme, NOTHING and NO ONE can stop this trainwreck.
The Obama administration unveiled its plan to remove toxic assets from the books of the nation’s banks.
The plan is aimed at financing as much as $1 trillion in purchases of illiquid real-estate assets.
The plan is based on the theory that removing the devalued loans and securities from banks’ balance sheets will help them start lending again and resuscitate the economy.
Tim Geithner: "This will allow banks to clean up their balance sheets. There is no doubt the government is taking risk. You cannot solve a financial crisis without the government assuming risk.”
Critics including Paul Krugman, a winner of the Nobel Prize for economics, have said the government should take over banks loaded with devalued assets, remove their top management, and dispose of the toxic securities.
James Baker, who served as Treasury secretary under Ronald Reagan, endorsed the idea earlier this month. Sweden adopted the temporary nationalization approach in the 1990s.
Krugman said that Geithner’s strategy won’t work because it “assumes that banks are fundamentally sound and that bankers know what they’re doing.”
“We are the United States of America, we are not Sweden,” the Treasury chief said.
White House National Economic Council Director Lawrence Summers said that he was “surprised” at Krugman’s article.
The Nattering One muses: The stock market jumped 500 points as ebbulient investors swallowed hook, line and sinker.
Here's a few reasons why the plan won't work...
the banks are not fundamentally sound; the bankers have already demonstrated that they don't know what they're doing;
we are not Sweden and the problems are far greater than the eye sees;
banks lending again will not resuscitate the emasculated economy; bank lending is what got us into the problem in the first place.
The durable economy has been outsourced to labor at the margin through free trade globalization.
What was left of durable activity was automotive and housing construction; those are now decimated and we have NOTHING to fall back on.
80% of all jobs created since 2001 were based on or reliant upon the housing industry; 70% of GDP is based on consumer spending.
The objective of this bailout is to generate new prices for securities backed by mortgages that are...
thinly traded because investors have little confidence about the underlying value of the home loans.
Those investors should have little confidence about the underlying value of the home loans as the homes are NOT and NEVER WERE WORTH 30% of what was paid for them.
The entire economy was based upon unjustified hyper inflated real estate; commodities and equities price speculation.
You never win a war fought on two fronts. Simple math for a war being fought on two fronts:
First front: 70% reduction in false home "values" = no housing ATM = bank insolvency = zero lending...
= no spending beyond one's means = less consumer spending = 80% of all jobs since 2001 vaporized.
Second front: Outsourcing = 80% of all manufacturing jobs vaporized = no decent paying jobs = no durable economy + First front = global economic disaster.
If these homes were worth the price paid, why can't people; nor investors; nor the banks afford them anymore?
It's all one big house of cards that is collapsing. Get it? If you do, your ahead of everyone on the hill for the last 8 years.
Reporting starts in another two weeks and it will be an absolute disaster, along with increasing foreclosures & corporate BK's, we are going to new lows.
We repeat again, with confidence in the extreme, NOTHING and NO ONE can stop this trainwreck.
Comments
If it does, is it worth it even if we know it is a sham?
Is that the plan, pump up the market to stop the bleeding then close out or restrict the CDS market?