I'm all for it, if we tax the rich to pay for it. After the Iraq war, $124 billion seems like chump change...
On Mon, Jul 21, 2008 at 7:33 AM, Marvin Gandall <[EMAIL PROTECTED]> wrote: > Ahead of the Tape > By MARK GONGLOFF > > Like S&Ls? > Paying the Tab > For a Cleanup > Wall Street Journal > July 21, 2008 > > Get ready, American taxpayer -- you may be called on to solve the credit > crisis. > > So far in this debacle, now more than a year old, the government response > has been mainly designed to keep the markets and economy running, with the > Federal Reserve slashing interest rates and pumping cash into the financial > system. The fiscal response, similarly, has kept consumers spending with > tax > rebates. > > The next stage of the crisis won't be solved by easy money. It involves not > liquidity but the capital base of financial institutions that have > warehouses full of mortgage debt, leveraged loans and other toxic assets > fouling up their balance sheets. > > One approach for regulators could be to force these firms to either raise > new capital or get out of the game by liquidating their assets. > > "Our regulators have been lax in their enforcement of existing capital > rules," says Daniel Alpert, managing director at Westwood Capital. "When > you > have top institutions, such as Merrill Lynch, scrounging around for the > family silver to sell each quarter, clearly our financial institutions are > not adequately capitalized for long-term viability." > > At some point banks may run out of funding sources or willing buyers for > their misfit loans. A three-letter solution is already on the lips of many > investors: RTC. > > Resolution Trust Corp. was established during the savings-and-loan crisis > of > the late 1980s and early 1990s. The clearinghouse sold off some $394 > billion > in assets of 747 failed S&Ls, costing the taxpayer about $76 billion, > according to the Federal Deposit Insurance Corp. > > Potential losses in this crisis are far larger, with estimates of $1 > trillion or more being bandied about. Taxpayers won't be on the hook for > anything close to that. But their bill could make the $124 billion they > paid, in total, for the S&L crisis seem a bargain. > > The alternative might be worse. If regulators wait too long to clean up the > mess, the U.S. starts to resemble Japan in the 1990s, allowing "zombie" > banks to shuffle along, unable to raise capital or lend while the economy > lingers in purgatory. > > In a speech earlier this month, Treasury Secretary Henry Paulson hinted at > this when he proposed a "resolution process," a morgue of sorts where big > banks can go to die without infecting the rest of the system. That's where > the RTC idea comes in. > > "Everybody's waiting for another Resolution Trust solution," says James > McGlynn, managing director of equities at Summit Investment Partners. "The > perfect part of that is the 'resolution' -- we want a resolution to the > financial abyss we're in right now." > > The RTC wasn't established at the start of the S&L crisis, but when the > government's morgue was overwhelmed with dying banks. Election-year > politics > could delay the cleanup this time; candidates likely don't want to discuss > the costs ahead. > > Any taxpayer solution will only worsen already troubling fiscal problems. > But that's the price for a system that -- as New York University economist > Nouriel Roubini and others put it -- privatizes profits and socializes > losses. > > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l > -- Robert Naiman Just Foreign Policy www.justforeignpolicy.org [EMAIL PROTECTED] Ambassador Pickering on Iran Talks and Multinational Enrichment http://youtube.com/watch?v=kGZFrFxVg8A
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