Relevant:
- U.S. Collective Dictatorship Enlarges
- Doomsday clock for global market crash strikes one minute to midnight as central banks lose control
- Corporate savings: Dead money
- Bail-in Securities and the Current Equity Market Turmoil - Unintended Consequences
- Gold tallies a back-to-back gain after ECB unleashes basket of easy-money measures; Fed under pressure
2008-10-13 — ft.com
The recapitalisation scheme outlined here would suffer from none of the difficulties of reverse auctions for hard-to-price securities. It would help restart the economy and likely produce returns for taxpayers comparable to my fund’s. But time is of the essence. The authorities have lost control of the situation because they were constantly lagging behind events. By the time they acted, measures that could have stabilised markets were ineffective. Only by promptly announcing a comprehensive set of measures and executing them vigorously can the situation be brought under control.
There is not a lot new in here, but not a bad set of ideas, if saving money-center finance is your goal.
How could this fail to work? If losses continue to eat up most or even a sizeable portion of capital at the banks, they will not expand lending even remotely close to levels to bring back an economic expansion. Simply too much of the economy was based on credit expansion. That is the main reason I am against "bailout" proposals -- why are we even attempting to bail this system out?
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