On Jan 22, 2009, at 7:39 AM, Julio Huato wrote:
raghu wrote:
If by "bankers", you mean the common shareholders, they are probably
not benefiting much from the TARP handouts. But debt-holders of banks
do get a huge payout. And not just that: anyone who [bought] those
infamous credit default swaps on bank debt (including I suspect many
hedge funds) also get a big payout. And the extended banking system
of
hedge funds, private equity etc that depend on leverage provided by
the banks get to continue to do business as before (more or less -
subject to risk-averse partners redeeming their capital etc) on a
heads-I-win-tails-the-taxpayer-loses basis.
...By far, the bulk of bank debt holders are called
"depositors" or "investors" (mostly households but also businesses;
nonprofits; local, state, federal, and foreign governments). But,
precisely, the rationale of propping up the banks is to keep the
assets of all these bank debt holders safe...
There was and is absolutely no need to "prop up the banks" to keep
household and business depositors safe, because their deposits are
already insured by the government and any present "limit" on that
insurance can be instantly increased without limit as it was for the
S&Ls. State and local governments need a huge direct federal bailout,
far exceeding any bondholdings still remaining in their reserves.
What remains are the domestic and international super-rich through
their hedge funds, private equity, "nonprofits," etc., (not to mention
their top managements' tens of billions in bonuses and options based
on fraudulent accounting of profits and stock buy-backs during the
bubble years). So those are the only beneficiaries of the decision to
"prop up" banks on a heads-I-win-tails-the-taxpayer-loses basis rather
than let them go bankrupt and take over their continued operations as
receiver-in-bankruptcy.
Shane Mage
This cosmos did none of gods or men make, but it
always was and is and shall be: an everlasting fire,
kindling in measures and going out in measures."
Herakleitos of Ephesos
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