On Mar 10, 2009, at 2:19 PM, Chris Gehlker wrote:
No, they are hiding two things. One is who got the money. The
other is what happened to it. The latter will be harder to pin down
I am guessing because my hunch is it was poorly accounted.
Well, If you really believe that the banks simply lost track of the
money you need to explain why we should give them more as opposed to
arresting the executives and seizing their assets. If you personal
financial advisor told you 'Sorry, I seem to have misplaced your
money. I don't know what happened.' would your impulse really be to
cover it up?
I did not mean the banks. I meant the Bush admin.
Might it cause a run on the bank? Perhaps. OTOH, that may be
just what SHOULD happen if the bank is near failure anyway and we
could save the tax payers money
for FDIC coverage.
This is the core issue. The banks and the government maintain that
the
'toxic assets' are undervalued. No one argues that they are worth
what
the banks paid for them but they do argue that they are worth way
more
than what they would sell for now. So their solution is to keep the
banks afloat with public money until the market for 'toxic assets'
recovers. The market itself and a remarkable consensus of liberal
and
conservative economists outside the government think that the
current
market value of the toxic assets is about as high as it's going to
go.
This implies that the only reasonable course of action is to shut
down
the big banks and make new, smaller banks from the parts that
weren't
involved with gambling on derivatives.
Except you cannot just do that.
Obviously you *can*. Sweden did. Japan did. The US did to hundreds of
institutions after the S&L debacle and they do it to a smaller bank on
the average of twice a month. There was a documentary on TV last night
showing how they do it.
Sweden and Japan are not exactly stellar examples right now.
You really need to see how intertwined this has become in many
places. It's not just some bad investments. It's a confluence of
things that has caused this.
An example it looks like AIG was helping some european banks skirt
capital restrictions by loopholing. This has caused further
ramifications as AIG started having trouble.
The day wamu went down a lot of ppl went to pull their money out.
Considering the current structure of the banking system you can't
just break up the larger banks into pieces so simply. It's a lot
more than the toxic assets.
Nobody is arguing that there wasn't a lot of fraud going on. But fraud
alone is not sufficient to explain the crisis. It's also very
confusing when you say "It's a lot more than the toxic assets." and
then mention two forms of toxic assets in the next sentence as
"factors causing this". What do you mean by "shenanigans regarding
risk" if not CDSs CDOs and the like? But these things are precisely
"toxic assets".
What I mean is "creative accounting" to control how these looked and
the actual risk involved plus the use of various loopholes to let
other things happen. Sorry I did not think I had to spell that out.
You've had issues where loss was being seen but not reported in a
timely manner or just plain ignored for short term appearances of
profit. You also had lenders in essence double dipping with regards
to these bad loans and making money off the hope it would foreclose
when prices were high. You also had manipulation of various markets.
It's not just simply "cds was bad."
You need to tie this together, Larry. The question isn't 'Do you banks
have a lot fewer assets than you claim?' which goes to confidence.
The question is 'What did you do with the TARP money?'. To the latter
question I can't imagine a more confidence destroying answer than "I
won't tell you." unless it's "I don't know."
Well see if you publicly make every bank who got TARP money declare
what they did with it doesn't that mean saying who did it? Like I
said before do it in private for now, when the time comes make it
public. I am tying it together, you just are not listening beyond
your premise it must be made public now.
--Larry
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