Libertarian ping! To be added or removed freepmail me or post a message here.
Posted on 03/30/2008 9:16:48 PM PDT by bruinbirdman
The US Federal Reserve is examining the Nordic bank nationalisations of the 1990s as a possible interim solution to the US financial crisis.
The Fed has been criticised for its rescue of Bear Stearns, which critics say has degenerated into a taxpayer gift to rich bankers.
A senior official at one of the Scandinavian central banks told The Daily Telegraph that Fed strategists had stepped up contacts to learn how Norway, Sweden and Finland managed their traumatic crisis from 1991 to 1993, which brought the region's economy to its knees.
It is understood that Fed vice-chairman Don Kohn remains very concerned by the depth of the US crisis and is eyeing the Nordic approach for contingency options.
Scandinavia's bank rescue proved successful and is now a model for central bankers, unlike Japan's drawn-out response, where ailing banks were propped up in a half-public limbo for years.
While the responses varied in each Nordic country, there a was major effort to avoid the sort of "moral hazard" that has bedevilled efforts by the Fed and the Bank of England in trying to stabilise their banking systems.
Norway ensured that shareholders of insolvent lenders received nothing and the senior management was entirely purged. Two of the country's top four banks - Christiania Bank and Fokus - were seized by force majeure.
"We were determined not to get caught in the game we've seen with Bear Stearns where shareholders make money out of the rescue," said one Norwegian adviser.
"The law was amended so that we could take 100pc control of any bank where its equity had fallen below zero. Shareholders were left with nothing. It was very controversial," he said.
Stefan Ingves, governor of Sweden's Riksbank, said his country passed an act so it could seize banks where the capital adequacy ratio had fallen below 2pc. Efforts were also made to protect against "blackmail" by shareholders.
Mr Ingves said there were parallels with the US crisis, citing the use of off-balance sheet vehicles to speculate on property. All the Nordic banks were nursed back to health and refloated or merged.
The tough policies contrast with the Fed's bail-out of Bear Stearns, where shareholders forced JP Morgan to increase its Fed-led rescue offer from $2 to $10 a share. Christopher Wood, chief strategist at brokers CLSA, says the Fed's piecemeal approach has led to "appalling moral hazard".
"Shareholders have been able to lobby for a higher share price only because the Fed took over the credit risk on $30bn of the investment bank's dubious paper. The whole affair also amounts to a colossal subsidy for JP Morgan," he said.
Absolut Socialism.
Damn, that’s good!
If this advocated to be in the USA, it will NEVER happen.
"Two of the country's top four banks - Christiania Bank and Fokus - were seized by force majeure. "
If those "purged" senior management were transfered with benefits to new positions...a deal could be made!
On its surface, this doesn't sound entirely unreasonable. If the entity is worthless and has no way to ever make good on its obligations without a bailout, why should the stock be worth anything?
When you invest in equities, 100% of your capital is at risk. That is the nature of the game.
Shareholders like voters need to start throwing the bums (elites) out aka feckless politicians and management. Lesser of the evils as long as it doesn't effect me thinking is suicide.
Just because an entity is illiquid does not mean it is insolvent. Bear Sterns may have been worth more than $10 per share in an orderly liquidation by the bankruptcy court. Most of those mortgage securities for which there is currently no market are not worthless. Since the government thought it important to avoid the disrupting effect of a bankruptcy proceeding, it would not have been reasonable to expect Bear shareholders to pay the full price of that policy decision. Where true fairness lies is a thoroughly murky subject, not clear cut as this article implies.
I remember when Republicans used to stand for small government solutions.
Doesn't sound too different from the actions taken in the aftermath of the last US real estate bust in the late 1980's/early 1990's when the Resolution Trust Corporation took over control of insolvent American banks.
No one has claimed that the original, pre-crisis value of that basket was $30 billion.
It is entirely possible that the Bear mortgage securities will be worth more than $30 billion in a calmer market, in which case the Fed will actually make a profit on this alleged bailout.
The Fed should have loaned Bear Stearns the money - 0% for the first 12 months, then 6.99% - and if they're a day late, 39%.
Am having a kind of ‘de ja vu’ but it is only the ‘Truman Story’ - and those ‘master manipulations’ I am thinking of. Nonetheless, this all has a strange quality about it. . .
Evans-Pritchard has been edging out to the loony fringe for a while, but this takes the cake.
Maybe under Obama or Clinton. But unimaginable otherwise.
yitbos
“I remember when Republicans used to stand for small government solutions.”
That was a loooooong time ago.
We are soooooo dead!
http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/v5SLFncnzYHc.asf
I very much enjoyed this Bloomberg interview with Jim Grant, publisher of Grant’s Interest Rate Observer, who is pretty widely regarded as a most astute observer/commentator on interest rate policy. And, I agree with virtually all he’s saying. For those who care about such things.
And for those who care about such things, I highly recommend listening to Don Coxe’s weekly conf. call here:
http://events.startcast.com/events/199/B0003/#
What has always frightened me so much about Bush is how he turns every crisis into a government power grab. It always takes me back to “1984” and “Brave new world”. Americans keep giving up there freedom in the name of Government is going to fix everything. When in fact Government is destroying everything that America was founded on. Even this current crisis was caused by relaxing rules and regulations for the sake of wall street and bankers. It gave them the chance to create this whole mess. Is the federal government now proposing to ban these types of ponzi get rich quick schemes- No they are not. They just want more power to watch over it. They never used the power they already had. The financial “Geniuses” made all the money from it. They get to laugh as the American tax payer gets to try and bail them out. How far we have fallen.
It...it seems SO LONG ago....sniff.
prisoner6
I echo your sentiments.
Hillary!(TM) has already suggested freezing mortgage rates for 5 years. How long until she suggests freezing the sale of stocks and bonds too.
Is it just me, or are we all sliding towards living in Ayn Rand's "Atlas Shrugged" world?
Mark
Yep. An article here a couple of days ago explained it. The Fed gets almost all the upside. JP Morgan would lose the first billion if it goes down in value, the Fed the rest. My guess is in the long run it will go up in value.
Long term holders lost almost everything. Only the people who bought below $10 in the past few days made money.
>>>>>I remember when Republicans used to stand for small government solutions.
Haven;t you heard?
We’re now about anti-Abortionism and social values
For a Capitalist country, I think this is way beyond reasonable, even on the surface. If a publicly owned firm mismanages it's assets, and it doesn't matter if it's a bank or an airline or whatever, we have a system to deal with it. It's called "bankruptcy".
Given the complete and utter failure that gubmint is at all levels, I cannot fathom why anyone would want more gubmint control....
“I remember when Republicans used to stand for small government solutions.”
Yeah, all those conservatives kept us from doing these big things. Those folks were a pain in the butt. Fortunately, now we Republicans just have to say things like “small government” around election time - and pretty soon we won’t even have to bother with that.
In theirs upside down banks were allowed to fail. Shareholders lost equity, bad bankers lost jobs. That's pretty much the free market ideal. In our Socialist system the government (Fed) steps in, jiggers things around so that the bankrupt entity gets a taxpayer bailout and calls it good. Tagline: (optional, printed after your name on post): I have already previewed or do not wish to preview this composition. Please: NO profanity, NO personal attacks, NO racism or violence in posts. Absolut Socialism.
Our system seems more socialist than theirs.
In theirs upside down banks were allowed to fail. Shareholders lost equity, bad bankers lost jobs. That's pretty much the free market ideal. In our Socialist system the government (Fed) steps in, jiggers things around so that the bankrupt entity gets a taxpayer bailout and calls it good.
I have no idea how I managed that post. Maybe there is something going on with the servers?
Much more accurate.
Goerge W Bush = = = Counterfeit Conservative
There’s no real difference among the top of the ladder other than name.
This is a coup.
btt
They are nationalizing the mistakes of the elites.
They will be siezing billions of taxpayer dollars to support their own actions.
The new regulations that Bush will implement will take the power ever further away from the people, just as if he was a Clinton.
If you think such actions are unthinkable when done by your guy, then you need the meds.
“Haven’t you heard? We’re now about anti-Abortionism and social values”
So I’ve heard. And when the GOP had control of all three branches of Government, you’ll recall that they made great progress in reversing Roe-v-Wade. Well, they were going to make great progress. Well, actually they were going to do something. Some day. Promise. Well, maybe they didn’t actually promise, but they certainly gave us some subtle hints.
Now that the GOP is out of power, they won’t be able accomplish the pro-life, social values agenda that they ever so subtly hinted at. They’re now forced to reach across the aisle and work with the Democrats on those areas where they’re in agreement. As this proposal would indicate, those areas of agreement would seem to be anything that vastly increases the size and power of government, or serves to loot the treasury.
We have full blown socialism.
The coup is by the oligarchy,against the citizens. Bush is one of them, not one of us.
Libertarian ping! To be added or removed freepmail me or post a message here.
Don'tcha know..."Compassionate Conservatism" is Texan for "Nanny-State Socialism"
I used to say that America was like a fun-house mirror image of the Soviet Union. People used to think I was strange. They are probably still clueless and still think I’m strange. But at least I know I was correct.
Bush is the Connecticut Cowboy. A walking gimmick who fooled all of us into thinking he’d be anything more than his father... a big government internationalist hack who doesn’t care one damn bit about most of us.
Subject: Justice
To: MLee [at] innercitypress.org
From: [Name withheld]
Sent: Thu, 21 Sep 2006 1:23 AM
Dear Mr. Lee: I was previously employed by Argent Mortgage for two and a half years and managed, among other areas, the corporation's fraud investigation, borrower complaints and repurchase departments. There are currently over 568 open fraud investigations involving hundreds of brokers and hundreds of millions of dollars in fraudulent loans that are being covered up by top executives in the company. If a broker sustains a certain monthly volume, Argent management looks the other way and, not only does not suspend the bad brokers, but knowingly sells these fraudulent loans on the secondary market to unwitting investors.
I was terminated today and left with just my purse in tow, but I have names of individuals in the company who need to be served with subpoenas to enable them to turn over their spreadsheets and boxes full of documentation and evidence of all the fraud they have found that is being covered up by Argent Mortgage's executive management. The state regulators need to know the truth about the blind eye Argent turns to the fraud perpetrated on innocent consumers by high volume brokers. They also need to be aware that Argent knowingly bundles these fraudulent loans and sells them as mortgage-backed securities on Wall Street, thereby compromising the SEC, as well as our country's economic stability.
At a recent fraud seminar attended by hundreds of mortgage lenders in Washington D.C. a week ago, an attorney who works for Argent's retained law firm, Buchalter Nemer, stood up and told the seminar attendees that the wholesale lenders in the audience had better beware, unless their name is Argent. Argent is safe from investigation because the government got their $325 million settlement from Ameriquest and won't be looking into Argent, per the settlement agreement. I hope this isn't true because Argent Mortgage funded over $50 billion in 2005 and is gearing up to fund well over $80 billion dollars of fraudulent loans in 2007.
Did congress force them to commit fraud?
What's it called when government merges with corporatism? We're almost there.
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