So I read that Ben Bernanke, speaking at the London School of Economics, wants ANOTHER bank bailout:
Ben Bernanke, chairman of the US Federal Reserve, has warned Barack Obama to be ready to take fresh action to bail out America's banks if the world economy is to recover.
This is just daylight robbery, in my opinion and Warren Buffet's...
Here was Henry Blodget quoting Warren Buffet way back in September 2008:
Warren recommends that the government buy the trash assets at market value. Even this is a gift, since banks have no doubt done everything they can to avoid taking the full losses they should. But paying market value is a heck of a lot better than paying some theoretical "hold-to-maturity" value that rewards the banks for making dumb-ass bets. Why don't Bernanke and Paulson want to pay market? Because they don't think the banks will sell their assets at that level. To which I say, "tough."
The entire economy is suffering, not just banks. Banks made bad bets: they lost. Why should the taxpayer bail them out? Many other industries have been doing regular business, not gambling. And they are suffering too. So why single out banks for ANOTHER bailout? The scary thing is, the last bailout is already down the drain and flushed (Financial Times):
Clearly, Q4 of 2008 was the worst period so far in terms of security downgrades by a country mile (graph: rating agency downgrades). The effect of those Q4 downgrades, estimates Whitney, will be to more or less drain all TARP money pumped into the system so far.
Unfortunately, Obama seems to want to prop up a system that is dead.
(CNN) -- President-elect Barack Obama will go to Capitol Hill on Tuesday to meet with Senate Democrats and make his case for how he wants to spend the second half of the $700 billion bailout, two Democratic sources said.
Why not make Credit Default Swaps null and void and let the chips fall where they may (Billmon)?
To spend taxpayer money to buy up some MBS that lost value will do little to avert the coming CDS crash. A $700 billion bailout can not save a unregulated $70 trillion CDS market that is under severe stress.
There is precedence that decisive legislative action can solve this really big problem. Unless this is done, all money to prop up the markets by whatever means is simply wasted and will make no difference in the final outcome of the crisis. After CDS' are gone, Congress should set up a new Home Owners' Loan Corporation to solve the foreclosure problem and stabilize housing prices. This will then stabilize the MBS/ABS markets. Losses will have to be taken, but the catastrophe would be avoided.