zalo

Hey, Congress, Guess What? WaMu's Toast

There are only two ways to stop a crisis like this. One is that the government steps in and backs every institution out there (with tax payer money of course) and work things out in time and the other is that everything is so collapsed and destroyed that the only way value of things can go is up. Financial crisis has existed in developing markets and governments has always worked them out by bailing out the whole system. Financial crisis has cost between 12% to 30% of GDP when they happened in other countries, i feel that $700bn is a cheap bargain to pay for the US taxpayer to get rid of the 12% GDP fall that is the alternative, best of cases.

Paulson/Bernanke: $700 Billion at 'Hold to Maturity' Pricing

Alternative 1) The government should buy the troubled assets but pay for them with 100 years, non tradeable, treasury bonds. In this way the taxpayer will not feel the pinch.

Alternative 2) The government provides 50 year loans to the banks at treasury plus a lot. This loans can be used as regulatory capital.

Bernanke Gives Up on Reverse Auction Idea

Kill the shareholder, recapitalize the system with the $700bn and take then the banks public again.

Two Types of Speculation: One Harmful, One Not

I quite disagree with the article as uncertainty to a certain degree is part of almost every decision in life. People speculate to grab benefits or cover from risks (both things are good to have ) arising from this uncertain situations. Yo take a view and "speculate" in order to win something which you expect will be higher than the cost of speculating, implying that any speculating activity must have a positive NPV. And this positive NPV is not measured in economic terms necessarily. An example is the Lottery which is economically a negative NPV transaction. But certainly the "pain" assumed for the cost of buying the lottery ticket is quite insignificant compared to the "happyness" you feel of having the opportunity for being a potential millionaire.
So, there can be many views regarding whether speculation is done under the correct or incorrect technical fundaments on any issue, even if it is socially good or bad, but it is difficult to think that for the "speculator" the speculative operation has a negative implication.