[davelj]

UPDATE:

It looks as though JP Morgan is taking on all the assets of WaMu as well (Yay for taxpayers!!) and the “mark” to the assets will come out of the hides of everyone below the depositors on the balance sheet. That means common equity, preferred, sub-debt, etc. all goes to ZERO. Ouchtown: Population Texas Pacific Group and Others!! David Bonderman phone home!!

OK, I feel better about this.

[davelj]

UPDATE:

It looks as though JP Morgan is taking on all the assets of WaMu as well (Yay for taxpayers!!) and the “mark” to the assets will come out of the hides of everyone below the depositors on the balance sheet. That means common equity, preferred, sub-debt, etc. all goes to ZERO. Ouchtown: Population Texas Pacific Group and Others!! David Bonderman phone home!!

OK, I feel better about this.

[davelj]

UPDATE:

It looks as though JP Morgan is taking on all the assets of WaMu as well (Yay for taxpayers!!) and the “mark” to the assets will come out of the hides of everyone below the depositors on the balance sheet. That means common equity, preferred, sub-debt, etc. all goes to ZERO. Ouchtown: Population Texas Pacific Group and Others!! David Bonderman phone home!!

OK, I feel better about this.

[davelj]

UPDATE:

It looks as though JP Morgan is taking on all the assets of WaMu as well (Yay for taxpayers!!) and the “mark” to the assets will come out of the hides of everyone below the depositors on the balance sheet. That means common equity, preferred, sub-debt, etc. all goes to ZERO. Ouchtown: Population Texas Pacific Group and Others!! David Bonderman phone home!!

OK, I feel better about this.

[davelj]

[quote=underdose]”The first thing to realize is that the single biggest issue in the financial system is confidence in the system itself. I think we can all agree on that. ”

Actually, no, we can’t all agree on that.

I think one of the biggest issues is that for too long we’ve had too much confidence in confidence. People we’re confident as hell that housing prices would go up forever. When people are confident in a fallacy, they can push markets into an imbalance, but only for so long. Ultimately, regardless of people’s perceptions, fundamentals win.

Which leads to the bigger issue, that the fundamentals are terrible, and have been for years. Any bailout plan might bouy people’s confidence temporarily, but the horrid fundamentals will win. And since bailouts actually serve to worsen the fundamentals, IMO confidence and perceptions be damned.[/quote]

Having “too much confidence in confidence” is what I’d call “misplaced confidence,” which is very different from generic confidence. 75% of all of the FDIC-insured lending institutions will survive without incident even if we have a deep, long recession in this country. These institutions deserve your confidence. Once folks no longer have confidence in prudent, healthy institutions, the system goes down. (I think we’ve all seen “A Wonderful Life”.) Confidence in these institutions is necessary. Now, perhaps you’d like a system with no fractional reserve lending. OK. So long as you don’t have a problem with 20% interest rates, that’ll serve you well.

[davelj]

[quote=underdose]”The first thing to realize is that the single biggest issue in the financial system is confidence in the system itself. I think we can all agree on that. ”

Actually, no, we can’t all agree on that.

I think one of the biggest issues is that for too long we’ve had too much confidence in confidence. People we’re confident as hell that housing prices would go up forever. When people are confident in a fallacy, they can push markets into an imbalance, but only for so long. Ultimately, regardless of people’s perceptions, fundamentals win.

Which leads to the bigger issue, that the fundamentals are terrible, and have been for years. Any bailout plan might bouy people’s confidence temporarily, but the horrid fundamentals will win. And since bailouts actually serve to worsen the fundamentals, IMO confidence and perceptions be damned.[/quote]

Having “too much confidence in confidence” is what I’d call “misplaced confidence,” which is very different from generic confidence. 75% of all of the FDIC-insured lending institutions will survive without incident even if we have a deep, long recession in this country. These institutions deserve your confidence. Once folks no longer have confidence in prudent, healthy institutions, the system goes down. (I think we’ve all seen “A Wonderful Life”.) Confidence in these institutions is necessary. Now, perhaps you’d like a system with no fractional reserve lending. OK. So long as you don’t have a problem with 20% interest rates, that’ll serve you well.

[davelj]

[quote=underdose]”The first thing to realize is that the single biggest issue in the financial system is confidence in the system itself. I think we can all agree on that. ”

Actually, no, we can’t all agree on that.

I think one of the biggest issues is that for too long we’ve had too much confidence in confidence. People we’re confident as hell that housing prices would go up forever. When people are confident in a fallacy, they can push markets into an imbalance, but only for so long. Ultimately, regardless of people’s perceptions, fundamentals win.

Which leads to the bigger issue, that the fundamentals are terrible, and have been for years. Any bailout plan might bouy people’s confidence temporarily, but the horrid fundamentals will win. And since bailouts actually serve to worsen the fundamentals, IMO confidence and perceptions be damned.[/quote]

Having “too much confidence in confidence” is what I’d call “misplaced confidence,” which is very different from generic confidence. 75% of all of the FDIC-insured lending institutions will survive without incident even if we have a deep, long recession in this country. These institutions deserve your confidence. Once folks no longer have confidence in prudent, healthy institutions, the system goes down. (I think we’ve all seen “A Wonderful Life”.) Confidence in these institutions is necessary. Now, perhaps you’d like a system with no fractional reserve lending. OK. So long as you don’t have a problem with 20% interest rates, that’ll serve you well.

[davelj]

[quote=underdose]”The first thing to realize is that the single biggest issue in the financial system is confidence in the system itself. I think we can all agree on that. ”

Actually, no, we can’t all agree on that.

I think one of the biggest issues is that for too long we’ve had too much confidence in confidence. People we’re confident as hell that housing prices would go up forever. When people are confident in a fallacy, they can push markets into an imbalance, but only for so long. Ultimately, regardless of people’s perceptions, fundamentals win.

Which leads to the bigger issue, that the fundamentals are terrible, and have been for years. Any bailout plan might bouy people’s confidence temporarily, but the horrid fundamentals will win. And since bailouts actually serve to worsen the fundamentals, IMO confidence and perceptions be damned.[/quote]

Having “too much confidence in confidence” is what I’d call “misplaced confidence,” which is very different from generic confidence. 75% of all of the FDIC-insured lending institutions will survive without incident even if we have a deep, long recession in this country. These institutions deserve your confidence. Once folks no longer have confidence in prudent, healthy institutions, the system goes down. (I think we’ve all seen “A Wonderful Life”.) Confidence in these institutions is necessary. Now, perhaps you’d like a system with no fractional reserve lending. OK. So long as you don’t have a problem with 20% interest rates, that’ll serve you well.

[davelj]

[quote=underdose]”The first thing to realize is that the single biggest issue in the financial system is confidence in the system itself. I think we can all agree on that. ”

Actually, no, we can’t all agree on that.

I think one of the biggest issues is that for too long we’ve had too much confidence in confidence. People we’re confident as hell that housing prices would go up forever. When people are confident in a fallacy, they can push markets into an imbalance, but only for so long. Ultimately, regardless of people’s perceptions, fundamentals win.

Which leads to the bigger issue, that the fundamentals are terrible, and have been for years. Any bailout plan might bouy people’s confidence temporarily, but the horrid fundamentals will win. And since bailouts actually serve to worsen the fundamentals, IMO confidence and perceptions be damned.[/quote]

Having “too much confidence in confidence” is what I’d call “misplaced confidence,” which is very different from generic confidence. 75% of all of the FDIC-insured lending institutions will survive without incident even if we have a deep, long recession in this country. These institutions deserve your confidence. Once folks no longer have confidence in prudent, healthy institutions, the system goes down. (I think we’ve all seen “A Wonderful Life”.) Confidence in these institutions is necessary. Now, perhaps you’d like a system with no fractional reserve lending. OK. So long as you don’t have a problem with 20% interest rates, that’ll serve you well.

[davelj]

[quote=larrylujack]what’s funny is that none of your opinions matter one bit, and none of you even recognize that! the folks with money have already decided how to use taxpayer money.

better luck next time.[/quote]

Stating one’s opinion on national issues is rarely a matter of being taken seriously by the Establishment; it’s merely cathartic. If we only stated our opinions in those circumstances in which we would be listened to, precious few opinions would ever be voiced. If that’s funny to you, then so be it.

[davelj]

[quote=larrylujack]what’s funny is that none of your opinions matter one bit, and none of you even recognize that! the folks with money have already decided how to use taxpayer money.

better luck next time.[/quote]

Stating one’s opinion on national issues is rarely a matter of being taken seriously by the Establishment; it’s merely cathartic. If we only stated our opinions in those circumstances in which we would be listened to, precious few opinions would ever be voiced. If that’s funny to you, then so be it.

[davelj]

[quote=larrylujack]what’s funny is that none of your opinions matter one bit, and none of you even recognize that! the folks with money have already decided how to use taxpayer money.

better luck next time.[/quote]

Stating one’s opinion on national issues is rarely a matter of being taken seriously by the Establishment; it’s merely cathartic. If we only stated our opinions in those circumstances in which we would be listened to, precious few opinions would ever be voiced. If that’s funny to you, then so be it.

[davelj]

[quote=larrylujack]what’s funny is that none of your opinions matter one bit, and none of you even recognize that! the folks with money have already decided how to use taxpayer money.

better luck next time.[/quote]

Stating one’s opinion on national issues is rarely a matter of being taken seriously by the Establishment; it’s merely cathartic. If we only stated our opinions in those circumstances in which we would be listened to, precious few opinions would ever be voiced. If that’s funny to you, then so be it.

[davelj]

[quote=larrylujack]what’s funny is that none of your opinions matter one bit, and none of you even recognize that! the folks with money have already decided how to use taxpayer money.

better luck next time.[/quote]

Stating one’s opinion on national issues is rarely a matter of being taken seriously by the Establishment; it’s merely cathartic. If we only stated our opinions in those circumstances in which we would be listened to, precious few opinions would ever be voiced. If that’s funny to you, then so be it.

[davelj]

[quote=CA renter]Let’s assume we go along with the above bailout (FDIC, MM funds, SIPC, PBGC, etc.) and let the rest fall.

What do you two think the consenquences will be? Who, exactly, will be hurt, and for how long?[/quote]

I think if this is handled correctly, we do a “Half Japan.” A couple of years of deep recession followed by 5 years or so of “below trend” real GDP growth as the ratio of debt-to-GDP drops.

If it’s handled incorrectly we get “Japan 2.0” which is something on the order of exactly what Japan when through in the 90s. Long recession, low growth, followed by recession, followed by low growth, etc. for a dozen years. We can’t get out of our own way.

We don’t have to go down the Japan 2.0 road because our bubbles (property and stock), although large, were small (as a % of GDP) compared to the Japanese property and stock market bubbles (which also both occurred at the same time). Also, I think our economic system, despite its many flaws, is better able to cope with these problems than was Japan’s. But, of course, I could be wrong.

[Author]

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