Friday, October 17, 2008

Banks Admit Bailout Won't Work

See this story. I have to admit that I didn't predict this -- more specifically I didn't predict that bankers would be so quick to admit what supply and demand predicted from the beginning!

3 comments:

Don said...

“This is the people’s money. They’re giving it out with no rules.”
It doesn't get clearer than this that TARP is off track. Via the NY Times:

http://www.nytimes.com/2008/10/17/business/17bank.html?pagewanted=1&adxnnl=1&adxnnlx=1224217409-VQRrYXDhRDQm/ZtGavgNzw

"Bank of America said in a statement that the money “will add to our capital, which will increase our capacity to expand our balance sheet and make more loans.” It did not say if it was willing to increase its lending.

Indeed, observers point to the growing well of bank losses, deeper by the quarter, as reason to question whether the government funding will be used as a financial Band-Aid, instead of an engine to move forward.

“It is the government’s responsibility to set the terms and conditions on this money,” said David M. Walker, the former federal comptroller general and now president of the Peter G. Peterson Foundation. “This is the people’s money. They’re giving it out with no rules.”
Bank executives, meanwhile, said on conference calls this week that it was premature to discuss their plans. "

A credit stimulus package without the stimulus. Perfect.

Don the libertarian Democrat

Don said...

"Banks Admit Bailout Won't Work"

For the taxpayers. The banks, they'll do okay.

Don the libertarian Democrat

Don said...

http://www.nytimes.com/2008/10/18/business/worldbusiness/18bank.html?pagewanted=1

"sending the message that they expect more of them to turn to government shelter before the crisis is over."
An incredibly revealing post on the NY Times:

"Barclays cited several reasons for turning down government help, but its chief executive, John Varley, said the biggest was a desire to remain competitive by retaining flexibility to react to market conditions.

“The key for me is to be in a position where we can have freedom of choice and maneuver,” Mr. Varley said. “The others will be constrained.”

So, as in the U.S. with small banks, some European banks don't want the money. It's important to remember though that the constraints in the U.S. aren't nearly as onerous as in Europe. The point being, that if we wanted to get banks to finance their problems themselves, then maybe we should have offered them a worse deal. That would also better insure the interests of the taxpayer.

But this quote is gold:

"But investors, by pounding financial stocks lately, notably the Dutch banking and insurance group ING, are sending the message that they expect more of them to turn to government shelter before the crisis is over."

I've said all along, this is what investors and banks have been counting on.

Don the libertarian Democrat