I don't like what's in the stimulus bill at all. However, you can't just sit back and do nothing. We've let the financial system become an incredibly unstable house o' cards. You have a behemoth like Citi, either the government sorts through it and keeps the "public utility" aspects of the bank humming along, or you get old-fashioned bank runs, panic, and unpredictable cascading failure throughout the system. Meanwhile it'd take the bankruptcy court ten years to figure out who owes what to whom. I would much rather see the govt sieze all the failed banks, replace management, and inject the minimum amount of capital necessary to keep things solvent. If liquidation is called for than it can be accomplished in an orderly fashion. Pay back the taxpayer before anybody else...
Yes, and I would be remiss if I did not point out that ET is the GREATEST contrary indicator and FADE known to mankind! If you don't believe me, feel free to take a look at all of those polls in the Trading Forum over the years.
Under capitalism the government can allow almost any industry to fail BUT NOT BANKS. The capitalist system is built upon banks. The current crisis may not have been avoidable but it noticeably deteriorated after the fall of Lehman. Rather than lots of opinion not backed by facts people should look at the results of past financial crises for an idea of what is the most successful way to deal with them. Systemic Banking Crises: A New Database
They did do something. They reduced the amount of money, credit available and that prolonged the crisis.
FDIC - explicit taxpayer guarantee - would go bust in trillion dollar fashion. PBGC - explicit taxpayer guarantee - would go bust in half-trillion dollar fashion There would be no mortgages longer than 15 years and less than 9% interest because Fannie and Freddie would be gone, along with their implicit taxpayer guarantee that greatly subsidizes mortgages. Guess what that does to housing prices - instant, as in literally overnight - across the board 40% haircut from current home price levels. Approximately 1M additional folks would be on the unemployment lines from GM and F going bankrupt (no way those two get DIP financing without a gov't bankstop). Probably $0.5T in deposits would leave the country for "warmer climes". I'm sure there's more, but that seems a reasonable start. It seems the most important questions now are (a) how do we survive this mess and (b) how do we keep from having this happen again?
Productivity drives a nation, not consumption. And banking is the one common thread that glues the whole show together. From the currently under performing non-productive gov. to the shrinking productive class. Unless productivity and banking are treated as seamless, you are bound to eventually wind up in the sort of mess you are currently in. regards f9