I caught this line this morning:
Professor Black says Tim Geithner’s plan includes a secret list of institutions that are too big to fail and that will always be bailed out no matter what. This explicit protection, even if kept secret (keep dreaming), will distort the market and create the worst form of moral hazard: Bank executives will know that no matter how much risk they take, they’ll always be bailed out, and they’ll therefore be encouraged to take crazy risks in the hope of scoring huge short-term gains.
And the video that goes along:
I offer no prediction for when the next shit storm will arrive, but clearly it is coming.
November 3rd, 2009 at 5:09 pm
I thought this bailout was supposed to alleviate credit issues. Now you have banks charging more fees, providing less interest on deposits and jacking up interest rates on credit cards as the dollar is dropping. Slowly we’ll get used to this while they play with our tax money with no repercussions.WSJ reported that most pensions for executives have gone up this year. Who cares if you screw up if you have your golden parachute.The shit storm is already here masked under rose scented reports about number of jobs saved and created by taking from Peter to pay Paul. The American taxpayers have just decided to use their blinders and not worry about it for a while.
November 4th, 2009 at 12:01 am
I totally agree! John Hussman of Hussman Funds made the point a while back that all these “too big too fail” banks should have been restructured in bankruptcy and that bond holders should have been turned into stockholders (and of course, the original stockholders should have been wiped out). Instead the US Government bailed everyone out!
Not pretty - sooner or later someone will have to pay the piper!
November 4th, 2009 at 11:28 am
I agree that the shit storm is coming. I agree that, since we can’t predict the future, we don’t know precisely when. But I will add this (a quote from the first page of my favorite novel) “It’s later than you think.”
November 5th, 2009 at 6:00 pm
I keep hearing about the US tax payer being on the hook for bailouts of Wall Street millionaires. Let’s be clear: the US is BROKE. The government now borrows what it spends. Tax revenue is down substantially. It is the Chinese and the Japanese who have bailed out the US financial system because they lent the bailout money to the US government — directly or indirectly.
So all the usual suspects yelling and screaming about their entitlements from America can sit down…thanks for stopping by, and please go back to sitting in the easy chair watching the game on the plasma while waiting for the credit card bill.