Crocodilian

Obama - Stop the Bailouts, We Want to Get Off

On Jan 08 05:36 PM axelrod608 wrote:

> Since the gummint started trying to fix things, they've comitted
> about $8Trillion to the fight. And the results ? Earnings, propertiy
> values and employment continue to drop. Credit is still tight.
> Foreclosures are increasing.

Today, you have a banking system that is still working. Given were we were in August-October, that was something that was very much in question. The bailout hasn't fixed everything that's wrong with this very sick system, but its kept it from coming apart.

Outside of a few IndyMac accounts, I'm not aware that anyone has lost any money in a banking failure. You're not considering where we were in late summer/early fall. The price of "letting the chips fall where they may" was extremely high.

Here's a for instance: WaMu. WaMu was undergoing a "slow run" at the time the Government created the deal for it. WaMu was not a small bank . . . Had the Feds just stepped aside WaMu going bust could easily have propagated into a run on other institutions. We know that Lehman and Bear Stearns busted. AIG, Merrill, Morgan Stanley, and potentially even Goldman could have done so too. There was also tremendous worry about GE, which was apparently experiencing difficulty rolling its enormous commercial paper positions.

One argument is: "that's what should have been allowed to happen".

And that argument might be right; but you can't argue that that course would have been without cost. The estimate of the cost of allowing Lehman to collapse as it did are not cheap, as a Reuters story noted

"We're still licking the wounds of Lehman," said Jochen Sanio, president of the German Federal Financial Supervisory Authority, at an international banking conference. "It caused international damage of $300 billion outside the U.S."

Estimates of losses from Lehman's failure in the US run in the $100 billion range as well.

The bailout isn't cheap, but neither is the failure of a major financial institution.