Too bad silver dropped 50% since July.
Posted on 09/11/2008 2:52:43 PM PDT by Rufus2007
The fragility of the U.S. banking system puts the country in a more dire position than many people realize according to CNBC “Mad Money” host Jim Cramer.
Cramer, in his September 11 “Stop Trading” segment on CNBC’s “Street Signs” told host Erin Burnett the situation puts the United States in danger of “Great Depression, No. 2.”
Burnett questioned Cramer’s assertion that banks should be bailed out by the federal government, in turn passing the cost off to the taxpayer. “It’s obvious the bank system is falling apart,” Cramer said. “Let’s save it before it goes to zero.”
Here is the blow by blow:
...more (w/video)...
(Excerpt) Read more at businessandmedia.org ...
What do you think a gov’t backstop is as it relates to Bear?
Very interesting comment. Thanks.
The problem that the politicians don’t understand are the massive “derivative books” these large banks and brokerage firms hold. There are untold trillions of dollars of financial arrangements that aren’t in the form of “loans”. These derivative contracts go into jeopardy when a big shop like Bear (or now Lehman) goes down. These financial arrangements in the form of derivative contracts are crucial to the operations of many of our businesses across the US.
If I’m a manufacturer who has the interest rate on my $100 million dollar loan capped or fixed for 10-years by virtue of a Lehman SWAP, what happens when Lehman is no longer around to honor that as counter-party?
This whole thing has been on the verge of collapse now for the last 6-12 months. More to come.
Thank you for a very informative post.
I like the summary in the link below. What got me was the similarity to today’s events - the drip, drip of bad news that went on for years. Discounter Woolworth’s was one of the few retailers to make a profit in 1932. Change the name to Walmart and a few other name overlayed over events and you would be surprised at how much of a similar track we are on.
http://www.futurecasts.com/Depression_bottom-1932-1933.html
How bad can it get? below link is one Argentine’s experience. I do not think myself that it will get as bad a Argentina. The fed will print it’s way out, if they are lucky let everything deflate a bit then kickstart the economy with inflation and the dollar will be half or 1/4 of what it’s worth today. Inflation people get used to it. The dollar dropped 30% since 2001 ala Greenspan’s cure for dot.com bust, 9/11. They call it the soft landing. I am all cash and it’s out of the country and out of the USD. If it all works out I am OK if it does not work out at least I’ll have a shot at preserving something.
http://www.backpackfever.com/2008/01/21/survival-after-economic-meltdown/
That is something we can definitely agree on. A paper note has intrinsic value of a small fraction of a penny. A silver coin has value of something like $17 per ounce in the world market, which I think is mostly based on its intrinsic value as a metal for jewelry and for industrial uses. I don’t know of many, if any, countries that use silver as a unit of exchange. Some part of that value may be due to residual psychological impact of silver’s use as a coin metal. In other words, if people think that in hard times, silver will be needed to buy things, then it may raise its value over and above what its actual value is. But with that caveat, we agree.
Mr. ‘Pump and Dump’ is bloviating again. Cramer is just pushing for more bailouts. He made his megabucks as a highly paid shill for the big banks. Now he is just repeating the same old refrain: ‘Who needs money ? Banks need money! More money, more money and more money for meeeeeeee.”
The CEO was forced to hold a news conference and declare that BoA did NOT need capital and would NOT cut the dividend.
Of course, BoA reported POSITIVE earnings of $0.41 per share the next day, maintained the dividend and did not raise capital. It subsequently rallied 40% in a week. Cramer is a despicable, irresponsible, fear-mongering ass.
Well... It is pretty clear they aren't going to let some hillbilly in fly over country tell them how to run their banks..
You worded that much better than I did. Thanks!
Posted by Notary Sojac, FR member, Dec 17, 2007.
Yeah it hit me with the thought that most of the US might not be that bad...
Then again
I am 5 miles outside of the card carrying sanctuary of New Haven CT. I good times we have mild spillovers of crime from the city. What happens when the entitlements through inflation or cuts fail to subsidize the drug habits after a week or two? It would take just a few days for things to get out of hand.
It is not just a matter of judgment of many individuals who are employees of the bank, but of administrative controls and measuring and controlling various types of risk created throughout vast branching system as it is aggregated for the organization as a whole. They have to be able to steer assumption of risk and manipulate the magnitude of each source of risk to meet their tolerances and needs.
Full weight of truth would be quite a shock to many hitherto uninformed folks.
Wow! Sounds scary! Where did you get this info?
Too bad silver dropped 50% since July.
In other words, their reserves were the PROJECTED decrease in taxes they'd pay because of horrendous losses (If I understood this sort of machination correctly).
In other words, their reserves were the PROJECTED decrease in taxes they'd pay against expected profits but the tax credit reserves have been wiped out because of horrendous losses.
They won't get tax credits on net income if they have gross losses. Freddie's CEOs are arguing they'll hold the paper long enough that they'll end up with net gains and then use the tax credits, but that event horizon is now beyond the horizon line of Fed regulators.
And if they are taken over by the Fed Gov, the entire tax credit reserve disappears and then Freddie is no longer solvent due to lack of reserves, though Fannie still might be salvageable.
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