US Talks of Pumping $1 Trillion into Banks

[Seeker]

Note:

Based on the decline in imports to China from other countries, the China official stats must now be as BS as American official stats.

Who will win the great lie-off? Mr. President, there is a Lie Gap!

There is NO WAY that China currently has the growth they report. So the China 'decoupling' theory is wrong.

Now, you have people like Jim Rogers predicting the next century will be Asian...well I agree with some things the guy says but I think he's right out here. Why?

1) There has been an impending bad loan banking crisis due to cronyisim and corruption brewing in China for years, a la Indonesia/Malaysia. It will come out eventually.

2) The Chinese economy is, depending on your perspective, either tremendously inefficient, or tremendously efficient. It is efficient at gearing up to export crap. It is inefficient at using that wealth to create long term jobs in the domestic economy, what I would call 'long term capital formation'.

3) All the big Asian countries have a currency/central banking regime like the US these days, except for some very tiny ones like Bhutan, etc. It is true that the Asian countries have a big advantage right now over Americans in that they have large personal savings, but they are following the same retarded pseudo-Keynesian consensus that has evolved, i.e. they are ALL gradually lowering interest rates to zero, giving "loans" to banks and flagship corporations, etc.

The policies of most Asian countries must eventually result in competitive currency devaluations at an increasing rate as in the 1930s, because they just don't have the political will to take the necessary damage and job loss to reorient (lol pun) themselves to a more local and less global economy.

That SAID...Jim Rogers may still be right over the long term. Asians in all countries have more savings, and often have more savings in currency metals (especially India) then Americans do. It's not a question of them 'leaping ahead' of us, but simply of them being able to do less damage to themselves as we all continue to eviscerate ourselves on the sword of the failed and/or criminal policies of our global elite.

[Heresson]

I'm just a simple minded fool, but would it not be better to just give the money to the people and let them spend the money to stinmulate the economy?

I thought exactly the same thing,

but then I recalled that our miners, when receiving giant money for stopping mining, mostly didn't invest them, but went on glorious vacations abroad.

The idea I guess is that the banks will use this money for investments in USA.

but I guess they'd rather use it for giving themselves raises etc
so it has to be written that they have to use it for investments.

But if we do that, they will be forced to invest, they will have to invest in risky stuff, just to invest in SOMETHING

and the circle is closed.

[kittenOFchaos]

Why don't they give the taxpayers $1 trillion, they can spend it, bank it, whatever, but at least it wouldn't be going to the guys who got it into this mess without giving us abit of fun.

[Thue]

Krugman points out that the current plan is to give the banks large amounts of money for free, instead of actually making then pay for it by giving the government ownership share.

The argument is apparently that taking an ownership share would be socialism, and that the state is bad at running banks, so the preferable option is to just give the money away for free.

If the government did take an ownership share then it could just sell it again in a few years. IMO the US is insane if it does not take an ownership share for the money it gives.

http://www.nytimes.com/2009/02/02/opinion/02krugman.html

Question: what happens if you lose vast amounts of other people’s money? Answer: you get a big gift from the federal government — but the president says some very harsh things about you before forking over the cash.

Am I being unfair? I hope so. But right now that’s what seems to be happening.

Just to be clear, I’m not talking about the Obama administration’s plan to support jobs and output with a large, temporary rise in federal spending, which is very much the right thing to do. I’m talking, instead, about the administration’s plans for a banking system rescue — plans that are shaping up as a classic exercise in “lemon socialism”: taxpayers bear the cost if things go wrong, but stockholders and executives get the benefits if things go right.

When I read recent remarks on financial policy by top Obama administration officials, I feel as if I’ve entered a time warp — as if it’s still 2005, Alan Greenspan is still the Maestro, and bankers are still heroes of capitalism.

“We have a financial system that is run by private shareholders, managed by private institutions, and we’d like to do our best to preserve that system,” says Timothy Geithner, the Treasury secretary — as he prepares to put taxpayers on the hook for that system’s immense losses.

Meanwhile, a Washington Post report based on administration sources says that Mr. Geithner and Lawrence Summers, President Obama’s top economic adviser, “think governments make poor bank managers” — as opposed, presumably, to the private-sector geniuses who managed to lose more than a trillion dollars in the space of a few years.

And this prejudice in favor of private control, even when the government is putting up all the money, seems to be warping the administration’s response to the financial crisis.

Now, something must be done to shore up the financial system. The chaos after Lehman Brothers failed showed that letting major financial institutions collapse can be very bad for the economy’s health. And a number of major institutions are dangerously close to the edge.

So banks need more capital. In normal times, banks raise capital by selling stock to private investors, who receive a share in the bank’s ownership in return. You might think, then, that if banks currently can’t or won’t raise enough capital from private investors, the government should do what a private investor would: provide capital in return for partial ownership.

But bank stocks are worth so little these days — Citigroup and Bank of America have a combined market value of only $52 billion — that the ownership wouldn’t be partial: pumping in enough taxpayer money to make the banks sound would, in effect, turn them into publicly owned enterprises.

My response to this prospect is: so? If taxpayers are footing the bill for rescuing the banks, why shouldn’t they get ownership, at least until private buyers can be found? But the Obama administration appears to be tying itself in knots to avoid this outcome.

If news reports are right, the bank rescue plan will contain two main elements: government purchases of some troubled bank assets and guarantees against losses on other assets. The guarantees would represent a big gift to bank stockholders; the purchases might not, if the price was fair — but prices would, The Financial Times reports, probably be based on “valuation models” rather than market prices, suggesting that the government would be making a big gift here, too.

And in return for what is likely to be a huge subsidy to stockholders, taxpayers will get, well, nothing.

Will there at least be limits on executive compensation, to prevent more of the rip-offs that have enraged the public? President Obama denounced Wall Street bonuses in his latest weekly address — but according to The Washington Post, “the administration is likely to refrain from imposing tougher restrictions on executive compensation at most firms receiving government aid” because “harsh limits could discourage some firms from asking for aid.” This suggests that Mr. Obama’s tough talk is just for show.

Meanwhile, Wall Street’s culture of excess seems to have been barely dented by the crisis. “Say I’m a banker and I created $30 million. I should get a part of that,” one banker told The New York Times. And if you’re a banker and you destroyed $30 billion? Uncle Sam to the rescue!

There’s more at stake here than fairness, although that matters too. Saving the economy is going to be very expensive: that $800 billion stimulus plan is probably just a down payment, and rescuing the financial system, even if it’s done right, is going to cost hundreds of billions more. We can’t afford to squander money giving huge windfalls to banks and their executives, merely to preserve the illusion of private ownership.

[Dinner]

Krugman points out that the current plan is to give the banks large amounts of money for free, instead of actually making then pay for it by giving the government ownership share.

The argument is apparently that taking an ownership share would be socialism, and that the state is bad at running banks, so the preferable option is to just give the money away for free.

If the government did take an ownership share then it could just sell it again in a few years. IMO the US is insane if it does not take an ownership share for the money it gives.

http://www.nytimes.com/2009/02/02/op...02krugman.html

Amen brother man!

This isn't really about America being insane but more that the Bush Administration was all about funneling resources to their supporters (mostly big business). Campaign donors literally can buy anything they want in America, that's how corrupt we are, so Bush was literally giving away hundreds of billions of the taxpayers dollars for nothing in order to cement the loyalties of big business to the Republican party.

[Thue]

This isn't really about America being insane but more that the Bush Administration was all about funneling resources to their supporters (mostly big business). Campaign donors literally can buy anything they want in America, that's how corrupt we are, so Bush was literally giving away hundreds of billions of the taxpayers dollars for nothing in order to cement the loyalties of big business to the Republican party.

Read the article again. While Bush may have done the same thing, this is about what the Obama administration plans to do. So it is not just the Bush admin that is the problem.

[Jon Miller]

Why do we need to prop up the rich/etc?

JM

[Thue]

Why do we need to prop up the rich/etc?

JM

You do need to keep all the banks from collapsing, for the self-interest of the normal USian. The existence of banks helps the normal economy, which helps you.

For example, too many banks collapsing was allegedly part of what turned the 1929 crash from a recession to a depression.

But by nationalizing you can take joy in virtually wiping out the prior rich share owners of the banks . They do richly deserve that, but failing to keep the banks they own in check.

[Dinner]

i would not hold my country as an example of how to deal with the banking crisis...

How ever bad you think it is it is still 10 times better then what the US did under Bush.