Don't allow private profits and public losses. Don't pass the stimulus bill which simply prints money and increases debt, both of which will harm the RE market and the general economy through inflation and interest rate hikes.
Remove the disincentives from the marketplace like SOX, quarterly reporting (makes the short term more important than the medium/long term), Mark to market rules should be eliminated, etc.
Eliminate tax disincentives like corporate taxes, capital gains taxes, and all double taxation. Make wealth creation easy and everyone gains. Locally, eliminate licensing requirements, minimum/living wage requirements, work requirements on young people and teens.
Split up banks that are allegedly too big to fail. Sell their assets. Bankruptcy works. All this will be painful, but freeing credit markets and getting government out of the way is best and the markets will respond. People will find a way and survive. Eventually, once the dead weight is removed they will thrive.
Roubini advised Argentina, but not Chile. Compare the results. Roubini as an adviser is a menace to America.
Roubini pretends to know and acts smart for the cameras, but his prescriptions are: 1. $700B stimulus package (now trillions) 2. Recapitalization of banks (bad banks) 3. Reducing the debt burden of households (socialize the losses) 4. Ease money supply and restore liquidity (the cause of the original problem)
The largest banks in America are in trouble. Citi and BoA are insolvent. Zombies. There are probably others. AIG also seems to be nothing more than a black hole which is beyond help.
There seem to be three schools of thought as to how we deal with this.
1) Nationalization. The school of which Roubini is a member. In fact, many of our banks including Citi are already effectively nationalized. The arguments against this are that firstly, it will likely lead to a more widespread nationalization. Once one or more banks are nationalized, short selling will completely undermine the rest, their stocks will crater and they will all become moribund. Secondly, the exit strategy. How long will they remain nationalized and who will buy them if and when they are privatized? Anybody?
The pluses to the nationalization argument are that the toxic assets can finally be ripped away, the banks broken down into their working parts, reorganized and given a new lease on life so they can begin working again.
2) Recapitalization. Keep pouring money down the same hole. This seems to be the current strategy. Nobody seems to know how much money will be required nor if it will work and so far, it hasn't. There are several variations on this theme including the "bad bank", buying toxic assets etc. It doesn't involve nationalization, so that's a plus for some but the negatives seem to far outweigh the positives. These banks are too big to fail but also too big to save.
3) Let 'em die. Let the bad banks crater and good banks will emerge to take their place. This sounds fine until one remembers what happened when Lehman went under and the convulsions it caused in the world's financial markets. Citi, AIG and BoA going under simultaneously would dwarf Lehman and would likely deliver a fatal blow to the world economy. Big banks account for about two thirds of our banking system right now.
I posted this thread in the interests of the furtherance of this debate. I'm not a socialist, nor a Roubini shill, nor am I necessarily sold on option #1. There's a real debate going on in government, the media and the finance world about how to do this and we should be able to toss around ideas on FR without calling each other names.