The Corpus Callosum

Quote, and Question, of the Day

Quote of the day, attributed
to President Bush:

“If money isn’t loosened up, this
sucker could go down.”
–President Bush, 25 Sept 2008

He’s an idiot.  Liquidity is not the problem.  If it
were, the whole mess would have been solved by now.   href="http://www.rgemonitor.com/blog/roubini/241162">The
problem is insolvency, href="http://market-ticker.denninger.net/archives/2008/09/17.html">not
illiquidity.  

So here’s the question of the day:

Is the US Government too big to fail?

What’s the answer, folks?  You’re all bright people.

Comments

  1. #1 KAS
    September 26, 2008

    Better Quote of the day – about Bush

    “He’s an idiot.” by Joseph j7uy5

    The government is too big NOT to fail!

    It’s absurd that our greedy government (which is the cause) who took the money from the bank institutions in order to support deregulation (that could have stopped this) so the financial institutions could go about making money (essentially) off of the same securities twice as opposed to once. And now we are left with the choice to allow our country to take the resources into their own hands and we are to trust that the same government whose greed put us in this situation will get us out. This is what is going to happen. The money will be loosely managed (many hundreds of millions unaccounted for) but it will lift us a bit, keeping a depression away though I think we will still have a lengthy light recession. And then, when those securities start being of value again the government will sell them get money back that they took from us and use it for something else (as opposed to mailing us refunds) the tax increases will stay (because once they have the money in the budget, it stays) and the government will realize how profitable helping the financial institutions turned out to be and they will end up ‘getting into business’ in that manner; turning this buy out into a ‘financial assistance’ type program that will buy out other industry’s as well & then turn them for profit… I think, though it would hurt, that this all would work itself out, without interference, in time. All things come due sometime; this save may just be putting of an inevitable breakdown and re-setup of the financial system in a young country- that would eventually work out for the better.

    KAS

  2. #2 stumpy
    September 26, 2008

    The government needs to fail. Then maybe we can work our way back to something resembling a representative democracy.

  3. #3 Joseph j7uy5
    September 27, 2008

    Here is a partial answer:

    It is not so much a question of whether Wall Street should be bailed out. The fact is, we already are bailing out Wall Street. The way this works, is that the Federal Reserve Banks are taking assets of questionable value, and swapping them for Treasury bonds. That is a fait accompli, Bailout 1.0. (Note that the Federal Reserve is not part of the government, but any excess that the Fed makes is returned to the Treasury, which is part of the government. So if the Fed takes a loss, the taxpayers lose.)

    So why Bailout 2.0? Some are speculating that it is because the Fed is at risk of running out of Treasury bonds. See London Banker:
    http://londonbanker.blogspot.com/2008/09/brad-setser-extraordinary-times.html

    For a graphical representation, see the (PDF) at Cumberland Advisors:
    http://www.cumber.com/home/Factors.pdf

    I’ve been speculating all week that the pressure being used on the Congress to pass the Paulson Plan is the threat of Fed illiquidity. As of two weeks ago, the Fed had lent out more than $600 billion of its $800 billion balance sheet Treasuries against crap MBS collateral.

    So Bailout 2.0 would enable companies to return Treasuries to the Fed, which could then use them to keep Bailout 1.0 going. Two Bailouts for the price of four!

    Bailout 2.0 is limited to $700 billion at any one time. But if they keep shuffling things around, they can move a lot more than $700 billion. Having two games going at once will keep the whole circus going for a little longer.

  4. #4 JayDenver
    September 27, 2008

    The government has failed. It will just take a little more time for people to notice.

    Bigger news: Chinese spacewalk. Welcome to “The New American Century–Made in China.”

The site is undergoing maintenance presently. Commenting has been disabled. Please check back later!