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Posted on 03/13/2008 1:32:20 PM PDT by BenLurkin
NEW YORK (Fortune) -- With a vicious storm pelting the markets, Treasury Secretary Henry Paulson is urging bankers to batten down the hatches - possibly foreshadowing an expanded government role as a financial-sector investor.
Paulson spoke Thursday morning in Washington as the President's Working Group on Financial Markets unveiled its suggested policy responses to the past year's credit market unrest. Paulson said the group's recommendations - including stronger oversight of players in the mortgage industry - aim to make markets more transparent and less prone to breakdowns such as the one that began last summer, when investors began fleeing mortgage-related securities.
But the process of devising new regulations will inevitably take months and years to play out, as legislators and securities watchdogs debate which measures to adopt. In the meantime, financial institutions are under considerable stress. Bank and brokerge stocks have suffered steep declines over the past year, as asset prices have fallen and some leveraged players have been forced to sell at fire-sale prices.
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Feds may step in A federal purchase of Fannie or Freddie debt could make sense for all involved if the securities convert into common stock or carry equity warrants. Merkel says a government purchase of, say, convertible subordinated debt would help the companies reliquefy their balance sheets while allowing taxpayers to participate in the gains of an eventual market recovery.
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The sight of the government taking a stake in a private company will raise hackles among those who believe the feds should minimize their involvement in the economy. But the feds have done so before: several airlines that filed for Chapter 11 bankruptcy protection after the Sept. 11, 2001, terror attacks issued warrants to the government as part of their plans to re-emerge as public companies.
(Excerpt) Read more at money.cnn.com ...
I’m quite the optimist in regards to the economy but this is really starting to creep me out. Maybe I should start buying yen or the swiss franc.
Is this their way of saving the Carlyle Group?
That sure as hell doesn't make it right. The gov't should stay out of this one. These are private parties who privately negotiated bad deals. Both parties should pay the consequences. I fail to see why two private risk-takers who made a bad business judgment should now expect me to step in a bail them out. Your problem, not mine. The fact that your risky behavior is sending chills through ALL financial markets is because private people like me know it's going to end up costing us money even though we were party to it. Enough's enough.
Boy, are we screwed.
Yep, and we didn’t even get a kiss first.
You and I should have bought gold at $400. ;-)
My grandpa is still mad he didn’t buy it at around $200 when my Mom was in middle school.
Stronger oversight?
Past congressional hearings that pressured the expansion of minority and low-income lending are exactly what caused this debacle. It’s the very existence of government oversight that’s the real problem.
It’s one of those things ya can kick yourself all over.. good thing my wife is into jewelry (did I say that?), but we actually have a pretty good hoard of it here.. ;-)
That sounds good, but we’re not talking about a single bad deal or even a thousand bad deals, but a couple million bad deals up and down the financial pipeline. If they go south a good many people far beyond the original participants are going to suffer.
The gubmint is only bailing out the participants because the consequences of not doing so are very, very bad for everyone else.
Seems to me that these articles consistently give the impression that the Federal Reserve is somehow a department of the U.S. government. Whether it’s deliberate, I can’t say but it’s very annoying.
The Federal Reserve is a privately-owned bank that has the unconstitutional right to issue ‘money’.
Maybe that’s why they named it ‘The Federal Reserve’, huh?
It was $35/oz when I purchased my senior ring for high school. That was 1973. My ring cost $42. By the time I graduated from UCSD in 1976, my ring cost $120. I just checked the Josten's site to see what a similar ring costs today. They won't reveal the price.
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I still don't think the Federal gov’t has any business bailing out private transactions. If it does, the hard lesson to be learned isn't learned and the same sector will do it again because they know they can “fall back on the gov’t”. Well, people, that's you and me and I'm tired of supporting people who consistently make bad choices, both in their business and personal lives.
I don’t know. Exactly how far does the Trickle Down Effect go? While we haven’t felt the end of it, how much is left?
It goes all the ways down to guys who hangs drywall in office buildings or drives a forklift in distribution centers for plumbing fixtures. That far down.
Smart people I’ve talked to say that we’re not even 25% into the whole subprime thing yet.
Just think what the same amount of money would be worth in the S&P 500 today (probably 20x that of gold).
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