Saturday, January 24, 2009

More on TARP

Joe Nocera argues that the first formulation of the TARP was correct. The basic problem is to get the bad assets out of the banking system. Recapitalization made Gordon Brown a hero, and it prevented a deepening of the crisis, but lending will not start till the toxic assets are removed. I thought that this was the lesson we learned from Japan in the 90's.

The only quibble is that what we have to do is not the original TARP. The problem there was that they wanted to buy toxic assets. The correct solution is to take over the problem banks and corral the assets in a new RTC. Nocera actually argues this. But the important point seems to be that nobody was comfortable with an RTC-type solution in September. That is because there was not a wide enough recognition of the size of the losses.

Now that Nouriel Roubini has further revised upwards his estimate of total writedowns it may finally convince the powers that be that RTC is the way to go. Here is the money shot:
We have now revised our estimates and we now expect that total loan losses for loans originated by U.S. financial institutions will peak at up to $1.6 trillion out of $12.37 trillion loans . Our estimates assume that national house prices will fall another 20% before they bottom out some time in 2010 and that the unemployment rate will peak at 9%. If we include then around $2 trillion mark-to-market losses of securitized assets based on market prices as of December 2008 (out of $10.84 trillion in securities), total losses on the loans and securities originated by the U.S. financial system amount to a figure close to $3.6 trillion.
Will people start to believe Dr. Doom now?

1 comment:

MC Shalom said...

You Bail Them Out, We Opt Out.


Dear [May Be Too Much to my Taste, OK!, It will rather be:] Expensive Chairman Ben S. Bernanke,


All of Our Economic Problems Find They Root in the Existence of Credit.

Out of the $5,000,000,000,000 bail out money for the banks, that is $1,000 for every inhabitant of this planet, what is it exactly that WE, The People, got?

If my bank doesn't pay back its credits, how come I still must pay mines?

If my bank gets 0% Loans, how come I don't?

At the same time, everyday, some of us are losing our home or even our jobs.

Credit discriminates against people of lower economic classes, as such it is unconstitutional, isn't it? It is an supra national stealth weapon of class struggle.

Credit is a predatory practice. When the predator finishes up the preys he starves to death. What did you expect?

Where are you exactly in that food chain?

Credit gets in the way of All the Principles of Equal Opportunity and Free Market.

Credit is a Stealth Weapon of Mass Destruction.

Credit is Mathematically Inept, Morally Unacceptable.

You Bail Them Out, We Opt Out

Opting Out Is Both Free and Strictly Anonymous.

My Solution: The Credit Free, Free Market Economy.

Is Both Dynamic on the Short Run & Stable on the Long Run, The Only Available Short Run Solution.

I Am, Hence, Leading The Exit Out of Credit:

Let me Outline for You my Proposed Strategy:


My Prescription to Preserve Our Belongings.

Our Property Title: Our Free, Strictly Anonymous Right to Opt Out of Credit.

Our Credit Free Money: The Dinar-Shekel AKA The DaSh, Symbol: - .

Asset Transfer - Our Right Grant Operation - Our Wealth Multiplier.

A Specific Application of Employment, Interest and Money.
[A Tract Intended For my Fellows Economists].


If Risk Free Interest Rates Are at 0.00% Doesn't That Mean That Credit is Worthless Already?

Since credit based currencies are managed by setting short-term interest rates, on which you have lost all control, can we still say that they are managed?

We Need, Hence, Cancel All Interest Bearing Debt and Abolish Interest Bearing Credit.

In This Age of Turbulence The People Wants an Exit Out of Credit: An Adventure in a New World Economic Order.

The only other option would be to wait till most of the productive assets of the economy get physically destroyed either by war or by rust.

It will be either awfully deadly or dramatically long.

A price none of us can afford to pay.

“The current crisis can be overcome only by developing a sense of common purpose. The alternative to a new international order is chaos.”

- Henry A. Kissinger


What Else?

Until We Succeed the Economy Will Sink Into a Deeper and Deeper Depression


You Bail Them Out, Let's Opt Out!

Check Out How Many of Us Are Already on Their Way to Opt Out of Credit.



Let me provide you with a link to my press release for my open letter to you:

Chairman Ben S. Bernanke, Quantitative [Ooops! I Meant Credit] Easing Can't Work!



I am, Mr Chairman, Yours Sincerely [Like do I have really the choice?],

Shalom P. Hamou AKA 'MC-Shalom'
Chief Economist - Master Conductor
1 7 7 6 - Annuit Cœptis
Tel: +972 54 441-7640
Fax: +972 3 741-0824