Gone in 60 Days: Citi and BoA Won’t Live to See May
Submitted by Michael Nystrom on Fri, 02/20/2009 - 00:01
in
Citigroup (C) and Bank of America (BAC) won’t live to see May. The government will take them over within the next 60 days. The announcement may come as soon as tomorrow evening...
The US government has already committed half a trillion dollars to these two firms which is more than 10 times the amount it would cost to buy and control both companies. The market doesn’t believe that $500 billion is enough to save these companies...
All the kings horses and all the kings men can’t put humpty dumpty back together again.
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Citi gone today?
http://online.wsj.com/article/SB123535148618845005.html
Apparently Mr. Lewis was screaming "We are not Nationalizing" on his way to go beg to be nationalized.
Truth exists, and it deserves to be cherished.
jzneff, are you an
jzneff, are you an economist?
No
Why, do I sound like one?
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CH 11 not really applicable to banks...
Since banks liabilities are mostly to depositors (and most of those are protected by the FDIC) then CH-11 which typically wipes out shareholder equity, and some liabilities is not really applicable to banks. Banks would have to be liquidated.
Dont get so caught up in the "Nationalization" rhetoric. Every bankrupcty is a form of nationalization when the Government (judge) takes over the company and decides which contracts will be followed and which ones will not......as long as the culprits who ran the company and the owners are wiped out.... and hopefully the company completely liquidated in the end....then a Nationalization of insolvent banks would be a good thing...
Where you would have to hold on to your wallet is if there isnt enough money to cover FDIC covered deposits, in which case the "full faith and credit, ie us" will cover what is left......
Well, and so...
I would NEVER endorse government's taking over any business. If that business--bank or other--can't fold its figurative napkin, let them go down in flames. Have these outfits (or Barry and his gang) not heard of Chapter 11?
As far as BoA, I would be happy to see BoA "gone in 60 days." IMO, it could be gone tomorrow, if what I've read and heard is true about their giving credit cards and checking accounts to people who are not citizens. No Chapter 11; no this; no that--just gone.
I wish Greenspan would have stuck to his principles...
The article below could have well been writtin by Dr. Paul. What the hell happened to him?
H:\» Print Gold and Economic Freedom by Alan Greenspan The Big Picture.htm
http://www.ritholtz.com/blog/2008/11/gold-and-economic-freed...
Right On Cue
The call for nationalization:
Dodd Says Short-Term Bank Takeovers May Be Necessary
How many believe it will truly be "short term"?
"Nothing is so permanent..."
"Nothing is so permanent as a temporary government program." -Milton Friedman
I think you're wrong here
I think it isn't a simple balancing act the Fed is doing...what would be cheaper, to nationalize or to continue to reflate...
Right now, they are fighting very hard for inflation to come back. More deflation will be quite harmful. I think that having BofA and Citi fail, be nationalized, or any other drastic measure would get the deflation ball rolling again.
Continuing to pump money into these banks would be inflationary.
I think the correct course of action (playing the Keynes game, don't bite my head off) would be to inject these banks until the dollar gets some serious weakness.
Dollar weakness would be a godsend to the Fed right now...they're praying for inflation.
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It seems that they are
It seems that they are trying to re-inflate the bubble economy for another 5-10 years
I see some sense in this.
If the dollar loses its value while you hang onto it, you're going to want to spend it quickly before its purchasing power diminishes. That would increase money velocity. Of course, once the inflation kicks in will they be able to slow it by raising interest rates?
New Hampshire and Ecuador
If there really is a multi
If there really is a multi trillion capital shortage at these banks if their 'assets' are marked to market, all money handed over will simply sit there. Even doubling or tripling the monetary base won't ignite lending. But it will send dollar zone interest rates through the roof, essentially Zimbabwefying America, by blocking treasury from debt markets and having them rely on printing for funds.
If these banks' books are really that bad, the Fed will eventually accept that they must be taken out back and shot, so that inflation will be provided via healthier institutions where more normal multiplier calculations apply.
Contrary to what some seem to think, Bernanke actually does care about the economy, about America, and even if nothing else, about his own legacy. Transforming the economy from one of $1trillion base dollars supporting $40 trillion total money and credit to one with a $20 trillion junk collateralized base supporting the same, but with laws allowing the $20 trillion to, without friction, support $400 trillion, just won't do it. No one will buy dollar debt in such an environment, capital will flee, and we're stuck in Zimbabwe. And Bernanke knows it, so he won't try.
Of course, maybe the 'stress tests' will reveal the banks really aren't in that bad shape. In that case, who knows.
My guess is eventual Nationalization and liquidation of at least the worst offenders. Either following dismal economy wide spring earnings, or continued dismal ones for summer.
Word for the day
"Zimbabwefying" - great word!
There's A Special Place in Hell for you.
There's A Special Place in Hell for me...
Still several cards left to play
Ben is playing watch and see right now...but he is certainly not out of options.
He could immediately suspend mark to market...which would unfreeze the markets very quickly...but push us back into the same problems that got us here. They have the authority to suspend mark to market and I thought they would use it in November, but just the threat of them doing it seemed to help enough.
There's always the nuclear option that they can deploy at any time too. They have the legal authority to either drop the reserve ratio to 20, or even eliminate it entirely. This would be disasterous eventually and would flush us down the river...but they can also do it arbitrarily by bank (they can suspend reserve ratio only for banks that received TARP funds for instance).
I want to read more about these stress tests...a unexpectedly positive result would back up my instinct that they have WAY overblown this liquidity crisis.
What do you think about the war on drugs?
How about Operation Wall Street?
Shout it today!
http://www.youshouts.com/index.php
You are right on
They have lots of tricks before their gig is up. Dow 10,000 before August.
Each of their moves is running up against
a more vociferous wall of righteous indignation.
I would rather go through the pain associated with getting back to a Constitutional system, than go through the pain associated with saving this swamp creature.
At some point "what they want" becomes meaningless. That point is coming very soon.
_________________________________
My liberty-minded home base of thought:
www.ponderthis.net
_________________________________
Freedom - Peace - Prosperity
Righteous indignation
Man was there ever some righteous indignation this fall, when the congress was going to give the banks 700 billion dollars with no strings attached. Something like 97% of American disagreed, marched on Wall Street, clogged congressmen's phone lines, took to the streets, threatened them with voting against them.
They passed the bill
Mark my words...if they want inflation...they will get inflation. Ben Bernanke has said himself that rather than allow this country to sink into a deflationary depression...he would throw money from a helicopter.
We need to convert this righteous indignation into the only currency that our congress respects...their jobs. We have to use this momentum to dethrone as much of Capital Hill as possible...and put some rational and honest people in those slime covered chairs.
What do you think about the war on drugs?
How about Operation Wall Street?
Shout it today!
http://www.youshouts.com/index.php
Bank Stocks Going Under The Bus: All Down 24 - 33%!!
This is horrible!
I agree
The fraudulent zombies are going down.
_________________________________
My liberty-minded home base of thought:
www.ponderthis.net
_________________________________
Freedom - Peace - Prosperity
Greenspan
He's a strange cat. Hard to pin him into a category.
He was a libertarian...or more accurately, he was a card carrying objectivist and devout follower of Ayn Rand.
Did he go wrong, or is he just soulless?
One interesting aspect about objectivism is a focus on "rational self interest". Keep that in mind.
One might find contradiction that a man who was once so dedicated to the free market would become the market manipulation czar.
No contradiction exists...for by becoming the Fed Chairman, he has enriched himself beyond belief. It is a very well paying job, and now in retirement he can charge 6 figures for a 30 minute talk, and have a booked schedule.
Yes, he was one of us and sold out to the highest bidder.
But...it was in his rational self interest to do so.
I think he knew the destruction he was causing (say what you like, the man is not a fool).
Perhaps he was throwing this movement a bone...by embellishing what can occur when markets are manipulated, he gave the moral high ground back to libertarians.
Maybe Greenspan was playing double agent
Maybe Bernanke is doing the same.
What do you think about the war on drugs?
How about Operation Wall Street?
Shout it today!
http://www.youshouts.com/index.php
I have for a long time had
I have for a long time had the suspicion that Greenspan will release a posthumous memoir saying "see, I told you, even the 'Greatest Central Banker in history' can't help but stoking bubbles and creating busts absent a gold anchor. Should'a listened!"
That would be funny
What a way to prove a point, but point well proven.
What do you think about the war on drugs?
How about Operation Wall Street?
Shout it today!
http://www.youshouts.com/index.php
ahh but if not for you
ahh but if not for you having to pay taxes and having to use devaluing dollars to purchase items, you would not care about this movement.. REMEMBER?
"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson
I am more concerned about the return of my money than the return on my money. --Mark Twain
“A prudent man foreseeth the evil, and hideth himself: but the simple pass on, and are punished.” (Prov. 22:3; 27:12 KJV)
Hey McCain-----┌П┐(◣_◢)┌П┐
Welcome to second base
That comment came straight out of left field...and it couldn't have been any more off subject.
What do you think about the war on drugs?
How about Operation Wall Street?
Shout it today!
http://www.youshouts.com/index.php
the point being is this..
the point being is this.. why should you even care.. you have stated that if not for the above you wouldn't be in this movement.. secondly Greenspan is not a hard cat to figure out.. he was't appointed head of the most corrupt organization in the history of the United States because he was honest or libertarian.. what do you expect from him? You think the big bankers are going to put a guy in their to head that organization who does not have their best interests at heart?
"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson
I am more concerned about the return of my money than the return on my money. --Mark Twain
“A prudent man foreseeth the evil, and hideth himself: but the simple pass on, and are punished.” (Prov. 22:3; 27:12 KJV)
Hey McCain-----┌П┐(◣_◢)┌П┐
Yes...if not
Yes, I would hardly find interest IF we had no income tax and IF we had an honest money system and a stable dollar.
If I wasn't having my money stolen, you're right, I wouldn't care.
Once the government decides to run with honest money, and once the government decides to get their hand out of my wallet...that will make me happy.
Some people are in this for different reasons...but I'll never hide, nor apologize, nor run from one simple fact. I don't like being stolen from, and if they were to stop, I'd focus my time and energy elsewhere.
Keep trying to throw it in my face if you like, I will not apologize.
What do you think about the war on drugs?
How about Operation Wall Street?
Shout it today!
http://www.youshouts.com/index.php
You know I read an article
You know I read an article last year some time...I think it was from Solon.com....that pretty much said that Greenspan secretly wanted to destroy the world banking system and return the world to sound money. If that is the case, I would say that he definitely got the ball rolling.
I have had similar thoughts
But in the end, I think he just sold his soul.
_________________________________
My liberty-minded home base of thought:
www.ponderthis.net
_________________________________
Freedom - Peace - Prosperity
You're probably right
I often wonder myself how deep my convictions run.
A nice thought experiment:
The IRS contacts you, and offers you a 7 figure salary to be an auditor. On one hand, it would turn my stomach to become part of the problem, but on the other, you could do it for a few years and retire.
It would be in your family's best economic interest to take the job (which would arguably be permissable) but you would be working contrary to your beliefs.
I can't say I would take the job, because I would have a hard time looking in the mirror...but I'm not ready to say no either.
Quite a quandary...
What do you think about the war on drugs?
How about Operation Wall Street?
Shout it today!
http://www.youshouts.com/index.php
Greenspan an Libertarian-
Greenspan an Libertarian- only if he sold his heart and soul for a job. At best, he is owned by the devil and knows it.
The only reason these banks keep getting loans back is because the credit worthiness of the loan. Many, the owners, have never defaulted one payment on. But there debt to capital is miserable by solid banking standards. Getting worst as the economy tanks.
The only way to get out from under. Is strengthen your financial status. Paying off credit, raising income, and saving more. So libertarian.
If America was doing that. Government would have been harnessed to do likewise.
Jack of all trades--libertarian motivated