The administration of President Barack Obama put the biggest U.S. banks on notice Monday that the government could become their major shareholder if regulators decided they were not strong enough to survive a deeper than expected downturn in the economy.And
US insurance giant AIG indicated Monday it was in talks with the authorities to cope with its "financial challenges" despite a massive bailout last year that prevented its collapse. ... American International Group's statement came after cable network CNBC reported that the company would report a 60 billion dollar loss next Monday and was seeking more government support.That's on top of the $150 billion that has already been poured into AIG.
Let's tell the truth about this: AIG, CitiGroup, Bank of America and others are now not just underwater, they are rapidly sinking into the financial equivalent of the Marianas Trench. The amount of money that the Treasury has poured into AIG alone dwarfs the money for the Big 3 in Detroit. AIG has lost close to a quarter of a trillion dollars. For comparison, that's almost twice what it cost to put a dozen astronauts on the Moon. That kind of money makes national health insurance look like chump change.
Let's just get it over with: Take them over and be done with it. Stop worrying about shareholder value, that's gone. Bank of America has lost close to 95% of the value of its shares ($54 in 2006 to less than $4 today, at one point it was below $3). The loss in value of CitiGroup is not much different. AIG's stock is worth about fifty cents a share or so, down from a high of $100 at one point and in the last year, AIG has lost 99% of its value.
14 banks have failed so far this year, 8 this month alone (and February is not even over yet). 25 failed in 2008.
It very rarely profits a person to put off doing distasteful things, for the evil chores have to be done sooner or later and it is most often harder to do the longer one waits. If nationalizing the banks is the way out, then I fail to see what we gain by farting around.
6 comments:
I can't get my mind around why we "must" bail out or nationalize banks. Broke is broke. No one sends me cash when my budget gets thin at the end of the month. The bankers supported the changes to bankruptcy law. It's time they have to live with it.
Picture this: You have a car. You are on top of a 1,000' high cliff. The road is at the bottom. There is no way to drive down. But you have to get down there.
Your choices are to have a very expensive crane service gently lower the car to the bottom or just push the car off the cliff. Do you want to be able to use the car in the future or is it OK to just smash it all to pieces and hope that something can be rebuilt from the debris?
The car is the banking system. The crane is a very expensive rescue plan. Pushing the car off the cliff is the idea of the party of Hoover.
If the banks are nationalized, the shareholders will likely be zeroed out. Just as in a bankruptcy. But we can save the banking system or smash it into rubble.
I choose saving it. If we let it get smashed, I fear the resulting economic chaos will make the Great Depression look like a tea party. And given how close we came to the loss of our democracy last time, I am not willing to chance it.
Thanks for your reply.
If no one profits from the bail out or nationalization, and the management of said banks loose their jobs, I would be more inclined to agree. The free ride is what sticks in my craw.
If there are no consequences for this huge mess. . .
I explain a bit further about why we can't just push the car off the cliff over on my own blog. Capitalism requires a stable money supply. Banks create money every time they lend, via the wonders of fractional reserve lending. If we smash the banks, we smash the money supply and put the nation into a deflationary spiral that has us inside that car as it plummets.
We got ourselves a zombie problem, but looks like the best way to deal with the zombies, in this case, is to skin them and encase fresh human beings in the zombie skin (i.e., nationalize them and create new banks under the skin of the old banks).
As for the idiots running the banks right now, I suggest that we impose a Final Solution upon them: take all their assets as payment for having to bail their shit out, take all their possessions other than the clothes on their back, take their wallet and empty it of everything but their picture ID, SS card, and $10, then toss them out on the streets to live under a bridge the way they want us to live. That's the most fitting solution to the problem of idiot bankers and brokers, methinks.
- Badtux the Vicious Penguin
BadTux's post on this issue.
Badtux,
Read your post at your place.
Thanks. That helped.
Like your proposal for dealing with the idiot bankers.
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