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sojourner1
Joined: 17 Apr 2007
Location: Where meggi swim and 2 wheeled tractors go sput put chug alugg pug pug
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 Posted: Sun Nov 30, 2008 3:31 pm Post subject: |
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I believe capitalism has ran it's ground and is now defunct due to the rich abusing the freedoms it allowed them. I say let's shut it down, let the government take over, and restart these entities as social institutions serving the people, state, and country.
So much for big wigs flying around on private jets and raking in 7 or 8 figure incomes while millions struggle for basic survival. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Sun Nov 30, 2008 3:34 pm Post subject: |
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| sojourner1 wrote: |
I believe capitalism has ran it's ground and is now defunct due to the rich abusing the freedoms it allowed them. I say let's shut it down, let the government take over, and restart these entities as social institutions serving the people, state, and country.
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Please.
The Fed, the government'ish monopoly of money, caused this. This is as much the fault of capitalism as smoking is the outcome of cancer. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Thu Jan 15, 2009 5:25 pm Post subject: |
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| BofA down almost 19% today, and is demanding money from the Fed. CitiBank of America might not be such an extreme prediction. |
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RJjr
Joined: 17 Aug 2006
Location: Turning on a Lamp
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| Posted: Thu Jan 15, 2009 9:18 pm Post subject: |
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| Do you think there will be a bank "holiday" at some point this year? |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Thu Jan 15, 2009 9:28 pm Post subject: |
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| RJjr wrote: |
| Do you think there will be a bank "holiday" at some point this year? |
It isn't at all out of the realm of possibility. At all. I suspect it won't happen, but if either BofA or Citi goes *beep* up (they can't be stabilized... Citi is leveraged 88/1 and BofA 134/1 ----- I didn't make that up---) then I suppose it is likely. It would probably be beneficial in the long run, though very disruptive in the short run.
I live in a major city in North America, and in the downtown area. If I walk one block north to a major pedestrian and vehicular intersection there is a Wachovia, BofA, a real estate office and a gas station on the 4 corners. If I walk one block west there is a Citi, a smaller regional bank, a real estate law firm and a fast food joint. This is repeated at every intersection on my walk to work. I don't suspect my walk to work in 1.5 years will have similar scenery. There are too many banks, too many estate agents, too many people employed in the FIRE economy (finance, insurance, real estate). A bank holiday could help speed this up..
But I dunno.. What do you think? |
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Beej
Joined: 05 Mar 2005
Location: Eungam Loop
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| Posted: Fri Jan 16, 2009 12:28 am Post subject: |
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I dont think banks will become nationalized at least not permanently. Banks will become like utility companies. Performing an important service, steady stock prices, and reliable moderate dividends. Not the wildly profitable entitities ( to the tune of 40% of corporate profits) they became.
If banks are nationalized, an idea i love is to have the interest on an individual's mortgage go towards some type of retirement account. |
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Ya-ta Boy
Joined: 16 Jan 2003
Location: Established in 1994
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| Posted: Fri Jan 16, 2009 6:29 am Post subject: |
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| I'm afraid to read about it. My IRAs are in Smith-Barney and it's somehow wrapped up in all this Citibank stuff. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Fri Jan 16, 2009 6:34 am Post subject: |
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| Ya-ta Boy wrote: |
| I'm afraid to read about it. My IRAs are in Smith-Barney and it's somehow wrapped up in all this Citibank stuff. |
The IRA won't vanish if Smith-Barney does. And anyways, Smith Barney is the only profitable wing of Citi (I think) and is being sold off to raise capital. Also, we're very near the bottom. Your portfolio will recover (but not to 100% from peak, for a long while) in the coming years, provided it was not financials heavy. |
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RJjr
Joined: 17 Aug 2006
Location: Turning on a Lamp
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| Posted: Fri Jan 16, 2009 8:49 am Post subject: |
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| mises wrote: |
| RJjr wrote: |
| Do you think there will be a bank "holiday" at some point this year? |
It isn't at all out of the realm of possibility. At all. I suspect it won't happen, but if either BofA or Citi goes *beep* up (they can't be stabilized... Citi is leveraged 88/1 and BofA 134/1 ----- I didn't make that up---) then I suppose it is likely. It would probably be beneficial in the long run, though very disruptive in the short run.
I live in a major city in North America, and in the downtown area. If I walk one block north to a major pedestrian and vehicular intersection there is a Wachovia, BofA, a real estate office and a gas station on the 4 corners. If I walk one block west there is a Citi, a smaller regional bank, a real estate law firm and a fast food joint. This is repeated at every intersection on my walk to work. I don't suspect my walk to work in 1.5 years will have similar scenery. There are too many banks, too many estate agents, too many people employed in the FIRE economy (finance, insurance, real estate). A bank holiday could help speed this up..
But I dunno.. What do you think? |
Your city sounds a lot like Charlotte.
I agree that it probably won't happen, but is still possible. If things get much worse, I guess I'll just take my safety deposit boxes on a camping trip in the deserts in the Southwest and let Hoffa hang onto them for me. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Fri Jan 16, 2009 9:17 am Post subject: |
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Oh Charlotte.. Poor poor Charlotte, if BoA tanks.. It already was hit from Wachovia.
Last edited by mises on Fri Jan 16, 2009 10:35 am; edited 1 time in total |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Fri Jan 16, 2009 9:28 am Post subject: |
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| Beej wrote: |
| I dont think banks will become nationalized at least not permanently. |
http://www.ritholtz.com/blog/2009/01/the-45-billion-dollar-club/
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The United States of Wall Street just added another major holding to its portfolio of financial garbage: Bank of America.
Like Citi, BA has now received more MORE IN BAILOUT MONEY than its actually worth. (BAC = $53B; C = $21B) How this can ever be a profitable investment, as some mathematically challenged Congress-critters have suggested, is all but impossible to imagine. |
It would be cheaper to take it over, clean it up and sell it. Already dumped in twice the worth.
| Beej wrote: |
| Banks will become like utility companies. Performing an important service, steady stock prices, and reliable moderate dividends. |
I agree entirely. NNTaleb talks up this idea quite often:
http://www.time.com/time/business/article/0,8599,1853531,00.html
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| I think that we've got to progressively become a society where banks are deemed to be too precious for us, for our currency, to take too much risk. We need to have a banker who is just as responsible as someone working for the water company. Banks are going to become a utility. And banks probably will not have a lot on their balance sheet, and the risks taken will be borne by individuals like myself who have capital, and who know the risks, with their own money. Otherwise you're going to keep having a cycle that's deeper every time. |
His book Black Swans explains well what has gone wrong in these banks. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Mon Jan 26, 2009 8:34 am Post subject: |
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http://www.ritholtz.com/blog/2009/01/nationalize-now/
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We�ve been repeatedly noting that the fastest, fairest, cheapest, most efficient way out of the current credit and financial mess is Nationalization.
As we have seem over the past few weeks, the country�s biggest banks � Bank of America and Citigroup � are deteriorating rapidly. They will need far more bailout money beyond the $350 billion of taxpayer cash and guarantees they have already received.
Note that the money already dumped into the black holes of these two financial institutions far exceeds their net worth. And in exchange for this foolish investment, taxpayers have received just 6% of Bank of America, and 7.8% of Citigroup. This is absurd. How a 120% of a company�s market cap yields a single digit ownership stake is beyond my comprehension.
The solution to the banks problems, as well as this ridiculous investment posture, is relatively simple: Nationalize the banks, appoint new management, give them 6 months to spin out 10% of each of the separate viable pieces, with the taxpayer retaining the rest as passive investors. For Bank of America, they can spin out 5 major pieces: BoA, Merrill, Countrywide, a Toxic holdings company, and a Good holdings company. The derivative exposure gets wiped out, put into the toxic holding section.
Stock holders get nothing; Since bond holders would receive some pro-rata share in a liquidation, they get a convertible preferred in the new debt free firm, as well as an opportunity to lend to the new banks at an generous convertible rate.
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The current bailouts have shown themselves to be expensive, ineffective, and replete with Moral Hazard and other corrupting abuses. Not only are we wasting vast sums of money, but all too often, we are rewarding the incompetent management teams that created the mess in the first place. Its time to move past them. |
http://www.nytimes.com/2009/01/26/business/economy/26banks.html
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WASHINGTON � Only five days into the Obama presidency, members of the new administration and Democratic leaders in Congress are already dancing around one of the most politically delicate questions about the financialbailout: Is the president prepared to nationalize a huge swath of the nation�s banking system?
Privately, most members of the Obama economic team concede that the rapid deterioration of the country�s biggest banks, notably Bank of America and Citigroup, is bound to require far larger investments of taxpayer money, atop the more than $300 billion of taxpayer money already poured into those two financial institutions and hundreds of others.
But if hundreds of billions of dollars of new investment is needed to shore up those banks, and perhaps their competitors, what do taxpayers get in return? And how do the risks escalate as government�s role expands from a few bailouts to control over a vast portion of the financial sector of the world�s largest economy?
The Obama administration is making only glancing references to those questions. In an interview Sunday on �This Week� on ABC, the House speaker, Nancy Pelosi, alluded to internal debate when she was asked whether nationalization, or partial nationalization, of the largest banks was a good idea.
�Well, whatever you want to call it,� said Ms. Pelosi, Democrat of California. �If we are strengthening them, then the American people should get some of the upside of that strengthening. Some people call that nationalization.
�I�m not talking about total ownership,� she quickly cautioned � stopping herself by posing a question: �Would we have ever thought we would see the day when we�d be using that terminology? �Nationalization of the banks?� �
So far, President Obama�s top aides have steered clear of the word entirely, and they are still actively discussing other alternatives, including creating a �bad bank� that would nationalize the worst nonperforming loans by taking them off the hands of financial institutions without actually taking ownership of the banks. Others talk of de facto nationalization, in which the government owns a sizeable chunk of the banks but not a majority, with all that connotes.
That has already happened; taxpayers are now the biggest shareholders in Bank of America, with about 6 percent of the stock, and in Citigroup, with 7.8 percent. But the government�s influence is far larger than those numbers suggest, because it has guaranteed to absorb the losses of some of the two banks� most toxic assets, a figure that could run into the hundreds of billions of dollars.
Many believe this form of hybrid ownership � part government, part private, with the responsibilities of ownership unclear � will not prove workable.
�The case for full nationalization is far stronger now than it was a few months ago,� said Adam S. Posen, the deputy director of the Peterson Institute for International Economics. �If you don�t own the majority, you don�t get to fire the management, to wipe out the shareholders, to declare that you are just going to take the losses and start over. It�s the mistake the Japanese made in the �90s.�
�I would guess that sometime in the next few weeks, President Obama and Tim Geithner,� he said, referring to the nominee for Treasury secretary, �will have to come out and say, �It�s much worse than we thought,� and just bite the bullet.�
So far the Obama administration has signaled that it is trying to avoid that day, and members of its economic team � among them Mr. Geithner and the president�s top economic adviser, Lawrence H. Summers � made the case during the Asian financial crisis in the 1990s that governments make lousy bank managers.
Indeed, the risks of nationalization they warned about then apply equally to the United States now. The first is that nationalization can prove contagious. If the Obama administration took over Bank of America and Citigroup, two of the largest banks in the United States, private investors could decide to flee from the likes of JPMorgan Chase and Wells Fargo, or other major banks, fearing they could be next.
Moreover, Mr. Obama�s advisers say they are acutely aware that if the government is perceived as running the banks, the administration would come under enormous political pressure to halt foreclosures or lend money to ailing projects in cities or states with powerful constituencies, which could imperil the effort to steer the banks away from the cliff.
�The nightmare scenarios are endless,� one of the administration�s senior officials said.
The argument in favor of nationalization, even a brief nationalization of a few months or years, is straightforward: It might be the only way to pull America�s largest financial institutions out of the downward spiral that makes it enormously difficult to raise the capital they need to keep operating. |
My tongue-in-cheek prediction of CitiBank of America might not really be so far off.. |
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ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
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| Posted: Mon Jan 26, 2009 8:46 am Post subject: |
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The government created this problem. The greatest factor being the creation of the Federal Reserve and going off the gold standard in 1913.
Now, the more money the government pours down this rathole, the worse the problem becomes.
Keynesianism is just another form of socialism. It has been proven in theory that it does not work. It does not explain the business cycle. It offers no hope in getting us out of this recession. It will make matters worse. It has also been proven empirically that Keynesianism, and all forms of socialism, always fail.
Now, the Obama administration is following the Bushites in using the entire world as a giant experiment, trying to save a failed ideological dogma.
Hold on to your assets and get ready for the next big crash.
The worst has yet to come. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Mon Jan 26, 2009 8:51 am Post subject: |
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| Well, yeah, I agree. These banks are dead dead dead. But there has to be a balance between short term stability and long term sustainability. The TARP didn't work - couldn't work -. What might work is declaring by fiat that all CDS contracts are void, nationalizing the banking system (suck it in, fix it up and push it out) and then when things are somewhat stable, deal with the underlying problems in the economy. |
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bacasper
Joined: 26 Mar 2007
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| Posted: Mon Jan 26, 2009 8:52 am Post subject: |
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| ontheway wrote: |
| Now, the Obama administration is following the Bushites in using the entire world as a giant experiment, trying to save a failed ideological dogma. |
Now which poster was it who said there was not a dime's worth of difference between Obama and Bush/McCain? Oh yes, that would be ME!!! |
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