Tuesday, 23 September 2008

Will they, won't they: US Bail-out up for grabs

Ben Bernanke and Hank Paulson are in front of the US congressmen and Senators today trying to push their emergency rescue package. After huge gains on Friday, the S&P and FTSE are back down heavily as people realise that this is no done deal.

There is a huge dilemma at the centre of this; save the banks and buy off the bankers. or screw the banks and take the Western Economies down too.

Not an easy choice to have to make. Some changes need to be made to the $700 billion package, perhaps enough to get it through the US system.

Meanwhile on planet Brown, he is saying that he is off to Washington to negotiate about the future of the World Financial System! Think he is a day late, the US will be telling him what they already decided to do.

Deluded is not strong enough a word for this....

26 comments:

Anonymous said...

C@W: "There is a huge dilemma at the centre of this; save the banks and buy off the bankers. or screw the banks and take the Western Economies down too."

No real dilemma, simply ask yourself this question. Am I a capitalist, or am I a fascist?

How you answer that question, will give you the answer to your first question.

Anonymous said...

Do you have any comments about the school of thought that says in fact the $700 billion is only the maximum he may have on his books at any one time, and that if he sells it on (at a price he instructs others to buy at) he can do it all again, and again, and ... ?

Sackerson said...

"After huge gains on Friday, the S&P and FTSE are back down heavily as people realise that this is no done deal."

Not only no done deal, but according to some a deal that should not be done at all.

Anonymous said...

This is going to cost a lot more than 700 billion. I'm used to those clowns screwing up.

I'm now looking at the European governments. How will they decide to bailout their own systems?

Which government will get first prize in the banker enrichment contest?

CityUnslicker said...

Anon - I don't want to reward failure and I don't want a depression. I am asking too much.

Yokel - It may well be more money, it certainly is worded that way currently. Hopefully this will be one of the things they change, for the sake of US taxpayers.

Sackers - interesting times. at least my gold is back up to nicer levels!

Matt- They will copy the US, they always do.

Anonymous said...

C@W: "I don't want to reward failure and I don't want a depression. I am asking too much."

Believe me, I don't want a depression either, but it seems to me Paulson's plan would lead to hyper inflation which would ultimately destroy America as a force for good.

Then there are all sorts of things about the plan, the legislation going before Congress, that is extraordinary. In short it's a grab for ultimate power. No democratic scrutiny, no restriction on authority to mint money. No restriction on authority to confiscate private property.

You are right there are no easy options, but I don't think we ought to take what appears to be the soft option, simply because is looks to be the soft option.

I thought one of the principles of Capitalism is the concept of constructive destruction leading to renewal?

Paulson seems to be offering the state planned economy, that together with destruction of the concept of private property leads somewhere I don't want to go!

Anonymous said...

Or: save the banks and buy off the bankers, bugger up the dollar and so take the Western Economies down too.

Letters From A Tory said...

It's hilarious to think that Brown believes he has any control over what happens in world financial markets.

Unsworth said...

Just what does the idiot Brown think he's going to 'negotiate' - apart from a piss-poor piece of PR for himself?

Maybe and as usual he's just avoiding having to talk about other more pressing matters - such as the loss of Kelly today, for example, the cabinet reshuffle, and how he's going (or we are) to pay for all these new 'initiatives'. He's an economic moron.

Paulson's proposal to wander around buying up bad debt is simply a licence for the Feds to print money. And we all know where that goes.

CityUnslicker said...

dearime - I have a hunch that buggering the dollar will destroy china and petro-dollar countries first unless they are very savvy.

Which is why this is the plan.

Ed said...

Instead of bailing out the banks, how about the US taxpayer bails out consumers and mortgage holders? Divvy that $700,000,000,000 between householders and let them pay off their own debts?

Anonymous said...

Blue eyes, the toxic debt is so toxic leaving it in the system is just too dangerous, banks have had now a year to state their loses and all they come up with is guesses, a market cannot run on guess work.

It sickens me to see this done and I hope the FBI make a good case against the people involved and are put in jail for a long time, but when push comes to shove its the only deal on the table.

James Higham said...

They can't answer that question.

CityUnslicker said...

I am unsure as to whether the banks can't or won't answer the question.

re the $700 billion; lehmans went bust owing $646 billion, so we can assume for a fact that $700 billion won't cover it all.

As long as it covers enough to stave off world financial collapse is the key.

Ed said...

CU - why is giving the cash to the banks at the top better than giving it to taxpayers so that they can sort the problems out from the bottom up? Either via a massive tax cut or printing money for consumers?

CityUnslicker said...

how could you gaurantee the taxpayers will pay the loans?

they may just buy tv's and holidays and still default on the loans.

Also, not all loans are bad, there would be still moral hazard in rescuing the people with crappy mortgages they should not have at the expense of those who are diligent. or vice versa to that.

The easiest way is to buy the debt and save the banks. without functioning banks we will have a global depression - as I said above. I hate the answer, but it is right.

Anonymous said...

Which is why this is the plan.

Yup.

But.

It's the other parts of the plan that stick in the craw.

The easiest way is to buy the debt and save the banks.

Also need a playing field with a good ref., to balance all the derivatives off. - Globally, - and that's the problem!

Ed said...

How do you know the bankers won't just use the money to pay themselves a handsome bonus at the end of the year?

Unsworth said...

Paulsen is reported as refusing to meet Brown.

http://www.telegraph.co.uk/news/newstopics/politics/labour/3074014/US-Treasury-Secretary-Hank-Paulson-rejected-Gordon-Brown-meeting.html

Yep, that's our boy.

Jeeze, it's just so bleeding awful watching the cretin damaging our reputation as well as the economy (if that's what it is these days).

Anonymous said...

Of course they are going to send the Cash its Washington's Piss up.

Here is the explaination of the US Problem.

http://www.youtube.com/watch?v=AHj8-HSi5AA

Its not a bail out of capitalism at all, Its dud investments underpinned By Washington. Another shit up by socialism.

CityUnslicker said...

BE, they can, the bonus' are peanuts.

Also the bankers are rich anyway, we can't take their ill gotten gains off them as (or if...) they made it legally. They would rather keep their banks going.

CityUnslicker said...

Unsworth - quite predictable, he is an idiot of the first order.

Anyway, if we wait around the US taxpayers may pick up the bill, yeah UK!

Brown ain't much of a machiavelli

Ed said...

Sorry, I find myself hoping that rather a lot of the people at the top of the industry lose their shirts as so many "ordinary" people will further downstream. I don't want to be paying them bonuses out of my relatively meagre salary packet any more than I want Ed Balls to get a free house out of me.

Unsworth said...

B E

Yes, yes. But the difference is that Balls is (in theory, at least) an elected representative, whereas the others are traders.

The matter hinges on our expectations of a) politicians and, b) traders.

And I supppose it might also be said that one can move one's cash around at whim, whereas governments (if that is what it is) are in the driving seat for four years. In my view governments are in many ways even less accountable than capitalists.

That said, I'd agree with your sentiments. In fact I hope that both kinds of bastards get severely burned. It's about time that 'lessons will be learned'.

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