US Banks: Nationalization? Pre-privatization?

[msj]

At this point, bankruptcy, nationalization, pre-privatization, receivership or trusteeship all amount to the same thing.

Well no kidding, Sherlock.

[jdobbin]

He organized the sale the sale of Bear Stearns at $2. In either case, it may now prove to have been the best long term policy.

Well, it actually told the financial institutions that they were all in trouble. Many on the right wing just don't get that. Liquidity was tightening at such a rate that there was likely going to be a run on the banks and Depression-like results.

Throwing money at these organizations is like jumping into the upper Niagara to save a corpse. They're going over. Should we go over with them? More pointedly, for anyone upstream, should we give them a false sense of hope? Maybe they should start swimming, fast.

The right wing solution was to let AIG, Citi and others crash along with GM and Chrysler. Nothing like a good die off.

This is a common meme on the left.

And one that Greenspan now sees was a problem in retrospect. The right wing solution is even more regulations eliminated.

Oversight/regulation is not easy because it's hard to prevent speculative bubbles. When people want to believe, it's hard to stop them. We should at least be thankful that Americans no longer have panics. (A bubble is when people wrongly believe the value of their savings will make them rich. A panic is when people wrongly believe the value of their savings will disappear completely.)

Paulson was about to let a panic sweep the U.S. It was breathtaking how chastened he was after Lehman Bros went down and it looked like several others were about to topple right behind it.

The right wing solution of even greater deregulation even now is out of touch.

The right's argument against regulation is not that the principle is bad, it's that regulation won't solve the problem. Markets are not perfect and when they fail, it's often because we have no other institution available to solve the problem.

The market will always follows cycles for the most part but when there is no oversight, we have seen the level of corruption and incompetence rise exponentially.

Government regulation simply makes things worse. (In many ways Dobbin, that is the anti-Greenspan argument. If Greenspan had left alone and simply been a straightforward monetarist who didn't twist the knobs, as I put it, we would have avoided this mess.)

So you think complete deregulation would have made this situation better? How?

[bush_cheney2004]

Paulson was about to let a panic sweep the U.S. It was breathtaking how chastened he was after Lehman Bros went down and it looked like several others were about to topple right behind it.

The right wing solution of even greater deregulation even now is out of touch.

This is pure speculation on your part, with zero understanding of what would constitute "panic sweeping the US". Melodrama mixed with politics is even funnier.

[GostHacked]

The banks will never be nationalized any more than the Federal reserve will ever be federal - label it as you will...those that hold the money are just shifting it - kind of putting it in protective custody --- you can't take that it belongs to the people it's a nationalized bank....

The wealth did not just disapear, nope nope nope. It simply changed hands.

Taxpayer money is still taxpayer money.

[August1991]

Well, it actually told the financial institutions that they were all in trouble. Many on the right wing just don't get that. Liquidity was tightening at such a rate that there was likely going to be a run on the banks and Depression-like results.

And this was an unknown fact?

I think that it is fair to say that nothing the US government could have done would stop the collapse of a speculative bubble. (Greenspan, with his nonchalant confusion, might have achieved it - thgis time.)

There is reality. And then there is Hollywood and financial paper, the image of reality.

Well no kidding, Sherlock.

Check out Google usage for receivership and trusteeship.

Anyway, how will the US government regulate stress tests? Curious minds watch.

The wealth did not just disapear, nope nope nope. It simply changed hands.

If a thief steals your $100, the money doesn't disappear. True.

But what does disappear is your faith in humanity.

Paulson was about to let a panic sweep the U.S. It was breathtaking how chastened he was after Lehman Bros went down and it looked like several others were about to topple right behind it.

The right wing solution of even greater deregulation even now is out of touch.

No, Paulson saw a bubble collapse. (Panics and bubbles are different.)

Dobbin, credible governments can prevent panics but no government can regulate bubbles. When people want to believe mere paper will make them rich, no existing institution on earth can stop them.

At the moment, the best way to prevent bubbles is to ensure people are informed. If government regulations can inform people, that's good. But I have my doubts.

----

The US is facing a serious financial crisis. Barack Obama is a smart man, cautious, and surrounded by smart advisors. He takes counsel. This crisis requires something different. Stephen Harper was right in reference to Obama. Harper's problems are small compared to those on the shoulders of Obama. The world is about to find out what Barack Obama is made of.

Edited February 24, 2009 by August1991

[msj]

Well, it actually told the financial institutions that they were all in trouble. Many on the right wing just don't get that. Liquidity was tightening at such a rate that there was likely going to be a run on the banks and Depression-like results.

Oooh, doom and gloom!

For some reason, I find this story about Amex using TARP funds, which are supposed to help reflate the credit system, to deflate the system, rather amusing:

Tim Duy: Billions of Dollars Later...

As one person has stated - "American Express, don't leave home with it."

And one that Greenspan now sees was a problem in retrospect. The right wing solution is even more regulations eliminated.

He's not the only former-Fed who's having second thoughts:

Former Fed Governor Feels "Accountable"

I admit seeing the work "accountable" in the context of banking and the Federal Reserve just seems odd.

I didn't realize that these people would even remember what that word means.

Paulson was about to let a panic sweep the U.S. It was breathtaking how chastened he was after Lehman Bros went down and it looked like several others were about to topple right behind it.

The right wing solution of even greater deregulation even now is out of touch.

The market will always follows cycles for the most part but when there is no oversight, we have seen the level of corruption and incompetence rise exponentially.

So you think complete deregulation would have made this situation better? How?

I don't think it is necessarily a matter of "more" regulation as much as it is about coordinating regulation and ensuring that it is proper - i.e. effective, up-to-date, and as efficient and pragmatic as possible.

Canada comes to mind (although Canada isn't perfect - at least we got lucky in that this crisis forced Harper to back off his deregulation plan as put in the 2006 budget).

In a recent speech, Volker mentioned Canada quite a bit. I admit that that kind of thing worries me.

[August1991]

On the cusp of a major US banking collapse, let me philosophize.

I don't think it is necessarily a matter of "more" regulation as much as it is about coordinating regulation and ensuring that it is proper - i.e. effective, up-to-date, and as efficient and pragmatic as possible.

Canada comes to mind (although Canada isn't perfect - at least we got lucky in that this crisis forced Harper to back off his deregulation plan as put in the 2006 budget).

Dream on.

We are not talking about bank theft; we are talking about markets. Smart people don't rob banks or work for governments. I think you two (msj/dobbin) misunderstand markets. As Adam Smith wrote, markets are a phenomenal invention. Rather than fight wars, evil people prefer to fight in markets - and markets lead them to good.

It is hard to regulate evil people. Free markets are an impressive way to direct their energies, but markets are not perfect.

Canada comes to mind (although Canada isn't perfect - at least we got lucky in that this crisis forced Harper to back off his deregulation plan as put in the 2006 budget).

In a recent speech, Volker mentioned Canada quite a bit. I admit that that kind of thing worries me.

Our government has nothing to do with the question. It's not because we regulate more.

Rather, we're Canadian - we're conservative, par nature.

Edited February 24, 2009 by August1991

[msj]

Dream on.

We are not talking about bank theft; we are talking about markets. Smart people don't rob banks or work for governments.

Apparently "smart" people don't work for banks either.

We are talking about a failure of markets - a failure of the predominantly private banking market which now requires the government to step in to fix the mess that the shadow banking system created (and for which Greenspan and other responsible, but fundamentally flawed ideological twits, allowed to happen right under their "smart" noses).

[August1991]

Apparently "smart" people don't work for banks either.

On the contrary, I think they do.

What did managers at Bear Stearns get? What will managers at Citibank get? As a career choice, given the risk, I think bank guy in New York is better than movie guy in LA.

We are talking about a failure of markets - a failure of the predominantly private banking market which now requires the government to step in to fix the mess that the shadow banking system created (and for which Greenspan and other responsible, but fundamentally flawed ideological twits, allowed to happen right under their "smart" noses).

Greenspan caused this failure of humanity?

msj, I think you fail to understand markets.

It is hard to organize many people together and achieve co-operation. Markets with prices, a recent invention in human history, manage to do this. They don't always work perfectly.

Markets, as a method to co-operate, are a work in progress.

[jdobbin]

Oooh, doom and gloom!

I am referencing what Bernanke and Paulson were telling the Whitehouse in the aftermath of Lehman Bros. They were the ones stating that they were looking over the abyss to Depression-like conditions.

It is hard to say what would have been better: the collapse of AIG, Citi and others or the the bail-outs they have received.

Certainly Paulson was indicating a very pessimistic outlook because the Whitehouse supported the move to shovel money in to finance.

I don't think it is necessarily a matter of "more" regulation as much as it is about coordinating regulation and ensuring that it is proper - i.e. effective, up-to-date, and as efficient and pragmatic as possible.

Canada comes to mind (although Canada isn't perfect - at least we got lucky in that this crisis forced Harper to back off his deregulation plan as put in the 2006 budget).

In a recent speech, Volker mentioned Canada quite a bit. I admit that that kind of thing worries me.

I don't disagree that effective regulation should be in place rather than just an overall increase.

Some on the right are still supporting no oversight at all.

[jdobbin]

I think you two (msj/dobbin) misunderstand markets. As Adam Smith wrote, markets are a phenomenal invention. Rather than fight wars, evil people prefer to fight in markets - and markets lead them to good.

Even Adam Smith didn't believe that self-interest was always good. His conclusion was that it was not always bad. I think you misunderstand that and believe it is good all the time.

Free markets are an impressive way to direct their energies, but markets are not perfect.

It is why the markets should be free to operate openly most of the time. The absence of government regulation that you advocate seems to invite chaos in ways that you just don't seem to realize.

[jdobbin]

I think that it is fair to say that nothing the US government could have done would stop the collapse of a speculative bubble. (Greenspan, with his nonchalant confusion, might have achieved it - thgis time.)

I disagree that regulation would have been ineffective in this case of mitigating the worst of what we have seen.

No, Paulson saw a bubble collapse. (Panics and bubbles are different.)

Paulson also saw the fear and imminent panic on Wall Street about the direction he was taking.

Dobbin, credible governments can prevent panics but no government can regulate bubbles. When people want to believe mere paper will make them rich, no existing institution on earth can stop them.

So then you agree that Paulson injected money to stop a panic?

At the moment, the best way to prevent bubbles is to ensure people are informed. If government regulations can inform people, that's good. But I have my doubts.

Why? Tell me what are the ineffective regulations that you believe are in question?

Edited February 24, 2009 by jdobbin

[Topaz]

I came across the following on YouTube.com and the government official is telling what started the down turn of the US and the world. I was surprised that the event wasn't out there in the media unless I missed it but he was saying that back in Sept.08 the Feds had a run on the money markets and that 550 BILLION was taken out of the US banking system and I don't think they know today who took the money out in less two hours using the web. http://www.youtube.com/watch?v=INAGMSARPYw Sorry the link didn't link, but you have to listen to this official, some group or someone did this to try to destroy the US economy.

[Topaz]

I came across the following on YouTube.com and the government official is telling what started the down turn of the US and the world. I was surprised that the event wasn't out there in the media unless I missed it but he was saying that back in Sept.08 the Feds had a run on the money markets and that 550 BILLION was taken out of the US banking system and I don't think they know today who took the money out in less two hours using the web. http://www.youtube.com/watch?v=INAGMSARPYw Sorry the link didn't link, but you have to listen to this official, some group or someone did this to try to destroy the US economy.

FINALLY IT WORKED!!!!!!

[GostHacked]

http://vimeo.com/3261363 I posted this in another thread. Take a look.

[Huston]

Why? Tell me what are the ineffective regulations that you believe are in question?

The regulations that make it possible for central banking. Central banks are the lender of last resort. It made it possible for banks to take risky loans... although apparently in the US, back in the days of Carter, banks were forced to make risky loans. There's two ineffective regulations. It should also be noted that under the establishment of the FED, the USD has massively devalued. For a hundred years, five dolar bought the same amount of good.. like say a weeks worth of food. Now it can barely buy one meal. Central banks have ruined countries all over the world.. so much for that Rothchildian idea.

[jdobbin]

The regulations that make it possible for central banking. Central banks are the lender of last resort. It made it possible for banks to take risky loans... although apparently in the US, back in the days of Carter, banks were forced to make risky loans.

The idea that that the regulation forced the market to make sub-prime mortgage lending possible is laughable. It was the lack of regulation that made that possible.

Central bank do more than lend money. If you want no central bank, you will have to explain how that would benefit nations.

There's two ineffective regulations. It should also be noted that under the establishment of the FED, the USD has massively devalued. For a hundred years, five dolar bought the same amount of good.. like say a weeks worth of food. Now it can barely buy one meal. Central banks have ruined countries all over the world.. so much for that Rothchildian idea.

That's inflation. Wages also went up.

[Huston]

The idea that that the regulation forced the market to make sub-prime mortgage lending possible is laughable. It was the lack of regulation that made that possible.

Oh? I have yet to see it was the lack of regulations. Again, the Carter administration forced banks to take on risky loans.. aka subprime loans. Community Reinvestment Act of 1977. Notice the word regulation. The Clinton administration made it even worse.

http://newsbusters.org/blogs/noel-sheppard...-bush-or-mccain

Damn socialism. We got to help people out! FFS!

Central bank do more than lend money.

Of course.

If you want no central bank, you will have to explain how that would benefit nations.

They have done more harm than good, so they don't benefiet any nation.

That's inflation. Wages also went up.

Of course it is inflation. Inlation of the money supply. Why do you think prices never changed before that. if you used gold, it will still buy the same amount as a hundred years ago. As for wages, ff course wages went up. Obviously not enough though, and actually decreased in the US.. not sure about Canada. But of course, in the end it would create an endless unsustainable cycle.. like Weimar Germany.. Argentina or Zimbabwe.

Edited February 24, 2009 by Huston

[jdobbin]

Oh? I have yet to see it was the lack of regulations. Again, the Carter administration forced banks to take on risky loans.. aka subprime loans. Community Reinvestment Act of 1977. Notice the word regulation. The Clinton administration made it even worse.

And yet we didn't have a sub-prime crisis until Bush was in power.

Damn socialism. We got to help people out! FFS!

You must have been furious with the socialist overspending and deficits of the Bush administration.

They have done more harm than good, so they don't benefiet any nation.

Then again you should be angry at Bush who didn't use his 8 years to get rid of the Fed.

You must be equally furious about Harper since he hasn't done anything about getting ride of the Bank of Canada.

Of course it is inflation. Inlation of the money supply. Why do you think prices never changed before that. if you used gold, it will still buy the same amount as a hundred years ago. As for wages, ff course wages went up. Obviously not enough though, and actually decreased in the US.. not sure about Canada. But of course, in the end it would create an endless unsustainable cycle.. like Weimar Germany.. Argentina or Zimbabwe.

So you think we should go back to the gold standard? Who would set the standard? Individual banks?

Edited February 24, 2009 by jdobbin

[Huston]

And yet we didn't have a sub-prime crisis until Bush was in power.

If you want to think short term. But that is obviously flawed thinking. Things happen right away... always? You will have to be very careful in supporting this. there are various factors, each making it worse and worse. At some point, it will fail. How unfortunate for Bush, huh? Actually.. how unfortunate for Alan Greenspan.

You must have been furious with the socialist overspending and deficits of the Bush administration.

Huh?

Then again you should be angry at Bush who didn't use his 8 years to get rid of the Fed.

Huh?

You must be equally furious about Harper since he hasn't done anything about getting ride of the Bank of Canada.

Huh?

Have I ever made a comment on Harper or Bush? They are somehow different? WTF? Stop making up fake arguments. I hate people who attack strawman, especially the ones they constructed themselves. The crows are smarter than you farmer man.

So you think we should go back to the gold standard? Who would set the standard? Individual banks?

Another strawman.. fuck! However, I don't see why we went off the gold standard, however when ever gold has been manipulated, or debased, it has been the state for war profiteering. The Lincoln greenback was purely a confidence back note for the sake of the war machine. Currency devaluation or debauching has always been a wartime move. The end of the gold standard under Nixon, the artificially lowering of interest rates and borrowing cheap money from around the world for the war on terror, Rome debasing their gold coins. You name it. Obviously currency should be by private organizations that are not given the power to use force like governments. Individual banks that have no security blanket to fall back on will make smarter decisions when it comes to risk. States always resort to fake growth, whether it is through direct slavery or fiat money or other forms currency devaluation. It is all power, and the more centralized it is, the risks of failure are greater. Which is worse: A localized flood, or a global flood?

If you cannot back up your argument, why bother misrepresenting your opponent by making things up? You apparently are black and white, I am not. I am not a statist, so playing the false left right paradigm will do you no good. You were a waste of my time. How unfortunate.

Edited February 24, 2009 by Huston

[GostHacked]

We are not talking about bank theft; we are talking about markets. Smart people don't rob banks or work for governments. I think you two (msj/dobbin) misunderstand markets. As Adam Smith wrote, markets are a phenomenal invention. Rather than fight wars, evil people prefer to fight in markets - and markets lead them to good.

Madoff, Standford to name just a couple recent

It is hard to regulate evil people. Free markets are an impressive way to direct their energies, but markets are not perfect.

Not hard to regulate evil people, unless the evil people are in positions that dictates regulation.

[msj]

Oh? I have yet to see it was the lack of regulations. Again, the Carter administration forced banks to take on risky loans.. aka subprime loans. Community Reinvestment Act of 1977. Notice the word regulation. The Clinton administration made it even worse.

From your link:

The Community Reinvestment Act is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound banking operations.

This is why this line of "reasoning" is flawed - no one bothers to consider the facts.

You know, like understanding the difference between a bank loaning money prudently to low and moderate income people versus a bank encouraging its officers to have the thinnest files possible.

Once again the links are available in this article:

What Didn't Cause the Crisis?

[msj]

On the contrary, I think they do.

What did managers at Bear Stearns get? What will managers at Citibank get? As a career choice, given the risk, I think bank guy in New York is better than movie guy in LA.

Oh, I see. So now a person is smart to the extent that they make money. Never mind how they made it.

If only busy whores could get such respect.

Greenspan caused this failure of humanity?

msj, I think you fail to understand markets.

I think you fail to understand Greenspan's role and the Fed's role.

As the lender of last resort the Fed is supposed to be there as a "lender of last resort" which means that it isn't supposed to actually lend under the circumstances of the past 18 months.

That is, it is supposed to be symbolic - yes, the Fed (effectively the government) will backstop the economy as a last resort but only in extreme emergencies of market failure.

To the extent that the Fed has had to become a lender of last resort is a massive failure and while Bernanke may be the guy to come in at the wrong time so that people look at him as the culprit, well, that's just the blinders on.

To the extent that Greenspan allowed bubbles to inflate, to the extent that Greenspan did not properly step in to regulate the banking industry (one of the Fed's jurisdictions, apparently - oh, but Greenie only seems to have realized that in hindsight now that he realizes his world view is "flawed") all helped to lead up to the Fed actually becoming the lender of last resort.

From symbol to practice is the ultimate sign of failure.

That failure is Greenspan's legacy. (Well, that and some cool skateboarding in California).

It is hard to organize many people together and achieve co-operation. Markets with prices, a recent invention in human history, manage to do this. They don't always work perfectly.

Markets, as a method to co-operate, are a work in progress.

Markets are not a recent invention.

As long as there has been trade there has been markets.

As long as there have been market failures there has been government. BFD - get used to it.

[jdobbin]

If you want to think short term. But that is obviously flawed thinking. Things happen right away... always? You will have to be very careful in supporting this. there are various factors, each making it worse and worse. At some point, it will fail. How unfortunate for Bush, huh? Actually.. how unfortunate for Alan Greenspan.

How unfortunate for conservatives who take no responsibility for their very major part in the outcome of the crash. Blaming the law from the Carter years after how many Republican administrations in power is just deflecting.

You'll have to show how a law with that says sound banking practices must be adhered to is responsible.

Huh?

You are the one who criticized socialism. Better take a shot at Republicans and Bush who started the bail out last year.

Have I ever made a comment on Harper or Bush? They are somehow different? WTF? Stop making up fake arguments. I hate people who attack strawman, especially the ones they constructed themselves. The crows are smarter than you farmer man.

Stop blaming today's debacle on the Carter years. It's as embarrassing as your insults.

If you cannot back up your argument, why bother misrepresenting your opponent by making things up? You apparently are black and white, I am not. I am not a statist, so playing the false left right paradigm will do you no good. You were a waste of my time. How unfortunate.

Think you were the one that shouted socialist. What paradigm is that? If you feel I am wasting your time, make use of the ignore button.

As for wanting to go back to the gold standard or for private banks to be the issuers of currency, I doubt very much that many in any circle right or left would find that a wholly acceptable or even practical.

Edited February 25, 2009 by jdobbin

[Huston]

This is why this line of "reasoning" is flawed - no one bothers to consider the facts.

You didn't point out any facts. Do you really think they will say or even realize that such things may have risks.

You know, like understanding the difference between a bank loaning money prudently to low and moderate income people versus a bank encouraging its officers to have the thinnest files possible.

You must not forget that under Clinton, the commercial banks were allowed to merge with investment banks. This is the source of this article. They took those loan made indescriminately to the poor and then repackaged them into a wall street.

Once again the links are available in this article:

What Didn't Cause the Crisis?

The article spends most of its time criticizing Austrian economists. They were the only ones who saw this thing coming. The article is just playing the typical state good private bad. The state never saw this coming. At this moment the Austrian have gained by confidence.