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   Twenty years after the fall of the Berlin Wall, Gnter Grass still thinks reunification was a bad idea.
 Forty years of writing from Taylor Branch, James Fallows, Katherine Boo, Marjorie Williams, Joshua Micah Marshall, and more.
 With help from Washington, the for-profit college industry is loading up millions of low-income students with debt they'll never pay off.
 The best recent memoir from republican Washington is a hoax. That should tell you something.
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May 5, 2009
By: Resolution Matthew Richardson and Nouriel Roubini have an op-ed on the stress tests in the WSJ. It makes a number of good points, but this one is particularly important:
It's never a pleasant experience when a large firm goes bankrupt. But the real problem with Lehman Brothers was not that it went bankrupt; it was that it went bankrupt in a completely unforeseen and disorderly way. Likewise, the reason why it's not a catastrophe when the FDIC takes over a bank isn't just that the banks it takes over are smaller than Lehman Brothers; it's that it has a very well-defined and orderly procedure that allows things that need to happen to go on happening while the bank is being taken over. As long as we do not have such a procedure for dealing with insolvent banks like Citi or Bank of America, they will have a gun to our collective heads, and they will be able to go on extracting money from us. We might not like it, but the alternative will be worse. For this reason, we obviously need to create a new alternative: a mechanism for taking over insolvent large banks that allows us to deal with them in an orderly fashion. Thomas Hoenig, President of the Kansas City Fed, proposed one such mechanism yesterday. I am not competent to say whether his version is best. But I do know that we need some such mechanism in place, and we need it immediately. Relying on improvised deals and ad hoc solutions might have been necessary right after the crisis hit. But it is long past time to give ourselves the tools we need to do it right. Comments
We desperately need creative solutions. These "solutions" might be most propitious, and effective, if they incorporate visions - extreme or subtle. Few points in either scenario will be measurable. However they will lay ground for many questions: Do you feel "Markets" or "State Solutions" will be most effective at creating an ideal society? We're reduced to asking good questions and implementing them in principle or letting our experts guide us, whatever may come. Posted by: Dan B on May 5, 2009 at 4:31 AM | PERMALINKYesterday on NPR (Diane Rehm Show) there was a professor of law and finance who was asked about the stress tests, and he did not think that they would be of much use. He pointed out that the assets in question do not have to be marked to market (are there other industries that can mythologize their assets?), and that the "stresses" applied were determined a while ago, and that things got worse since the stress parameters were decided upon. So the "worst case scenario" stresses may simply be more like reflections of a current reality, and not a future, potential stress situation at all. Posted by: Bobbi on May 5, 2009 at 5:43 AM | PERMALINKa mechanism for taking over insolvent large banks that allows us to deal with them in an orderly fashion. Why not simply accept that these mega-banks are insolvent---and let them die their ignominious deaths? 1.)Freeze their assets (the government already has this power; it's called the Justice Department). 2.) Give insured account-holders the opportunity to move their accounts to other, solvent banks. 3.)Assist those with loans to transfer their secured debts to (again) other, solvent banks---probably at better rates, too. 3.) Provide assistance in relocating institutional account holders (pension funds, group savings accounts, municipal accounts, etc.) into safer institutions. 4.) Let everything else die. "Fast-tracking" a new "law" that does nothing more than give the government "new-and-improved" authority to use taxpayer monies to rescue a bunch of high-rolling risk takers is absolutely nothing more than the legalization of theft. These mega-banks are "in Dutch" to us for how many hundreds of billions already? (Don't forget that Paulson and Bernanke started opening the vaults to these money-pits more than two years ago.) And it'll cost HOW MUCH to cover all the expenses for every last stockholder? It has never been, it is not now, nor should it ever be the responsibility of the taxpayers to protect the "flim-flam-men" of the investment banking industry who've lived far beyond the means of their stockholders' investment portfolios from the righteously-wrathful mob that those investors have become.... Posted by: S. Waybright on May 5, 2009 at 6:59 AM | PERMALINKIf you really believe the canard that things go on properly and orderly after a takeover by the FDIC, look no further than the recent takeover of the The Bank of Clark County in Vancouver, WA. That bank had become entangled with toxic loans to developers and real estate speculators. So, FDIC took over the bank. Several local small business entities which had nothing to do with the toxic loans and were in good standing with the bank had their lines of credit denied. Without credit, they had to lay off workers as they couldn't make payroll. In addition it affected their purchasing and even paying their creditors. So, the FDIC is not, necessarily, the White Knights of the Seventh Cavalry bringing truth, justice and the American Way to misguided banks. Posted by: berttheclock on May 5, 2009 at 8:39 AM | PERMALINKWhere did the WSJ get the idea that "government must come up with a plan" and specify the terms of that plan? Doesn't the WSJ believe in the power of business to regulate itself and deal with these tragically unforeseen consequenses? No, underneath the "save us, please!" language lies the dirty truth: the WSJ and its readers subscribe to one idea: socialize the risk and privatize the gain, then lie about how you did it. Posted by: igorthemag on May 5, 2009 at 9:25 AM | PERMALINKNote: FDIC has authority to take over commercial banks. They don't have authority to take over bank holding companies. The problem here is at the holding company level (think AIG). The powers that be want the public to believe that this is a commerical banking problem. Its not, its a holding company (think trust) problem. The government should take over the banks to assure their independence. The holding companies should go away. Posted by: steve on May 5, 2009 at 9:34 AM | PERMALINKAnd please let it involve breaking "too big to fail" companies up into companies small enough to die. Posted by: toowearyforoutrage on May 5, 2009 at 1:05 PM | PERMALINK
November 2009
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