Open thread Nov.19, 2010
Premise: The difference between the Irish and U.S. situation is in the breadth of institutions (smaller financial institutions still intermediate and control capital usage), not the foolishness of the leaders in committing to make the banks whole.
Haven’t determined yet if this is the answer because I haven’t read all of them yet, but Naked Capitalism collects Yurp thoughts on Yurp.
Actually we have an example of the limiting case of banks taking over a country Iceland. It was noted that Switzerland also had a problem in that its banks were bigger than the GDP. Ireland would be where Iceland is right now if not for the Euro. Interestingly Ireland disproves the low tax meme with corp taxes at 12.5% and yet they had a real estate bubble. (Note that it went wilder in Ireland than the US with real estate going up 3x). What I wonder is who nominally owns all the money that is sloshing around the world. As others observed we need a transactions tax or I might term it a sloshing tax, designed to minimize the sloshing of money. The goal is to discourage trading and shove the gambling to Casinos where it belongs. But of course the point of the trading is thinking that you can beat the market all the time which is IMNO stupid. The best that can be hoped for is to keep even the market being like the laws of thermodynamics. In that you can’t get ahead, and you actually cant even stay even after the house takes its cut.
Research the defintions of M3 then let’s talk about terminating reporting of M3 and all the craziness in the banks.
I’ll take a shot at the thread question.
Ireland may be able to figure out whom to bail out, whereas the US cannot.
One of the guest nutcases at zero hedge came across a flow chart depicting how mortgages are securiturized. A block functional diagram of an Intel motherboard is much simpler so don’t look at this if you are easily confused. You will turn to stone.
I think this case is for private sector MBS, and maybe it works better with GSEs, tho I don’t know that for a fact.
Anyone following the subject at Naked Capitalism is aware that if the originals of the promissory note, endorsed step by step, don’t make it to the MBS trust fund within 90 days of fund launch, that breaches both NY trust fund law and IRS REMIC tax status. The remedy would be presumably that the trust funds get their money back.
This chart shows the way to the trust fund. Much anecdotal evidence so far that they don’t get to the trust fund.
There is something like $2 trillion in private MBS. That’s enough for MBS investors to foreclose on all the banks. Except that we can’t have that happen. Add another $5 trillion if GSE MBS are this messed up too.
The only open question is what will happen.
“The only open question is what will happen.”
Francophiles might roll out the guillotine, anglophiles prefer ropes. Other Euro ethnics might use a bullet.
I am not aware what the mob might do in an Aisan culture.
I was reading that in the Case of Anglo_Irish bank some of the same things that were done in the 1920s were done, in particular the CEO loaned money to buy the banks shares to his buddies. Clearly it should be forbidden for a bank to make a loan with its own stock as the collateral under any circumstances.
Things aren’t really quite that quaint and old fashioned. Ireland already did bank “assistance” that raised Gov debt to 100% of GDP from 25% of GDP. Much of that debt was sold to Euro and English banks. Hence the pressure from these banks to do the bailout. Irish banks also depend on foreign inter-bank lending and that has dried up. So the ECB has them on a liquidity drip.
Some theorize the Irish government is resisting the bailout to get better loan terms. Their leverage is the Eurozone fear of contagion with eurozone banks directly and also fear that if default is perceived as a real option, it will cause a run on the rest of the PIIGS.
Problem is the Eurozone set up a rescue fund, but they haven’t raised private sector cash for it yet.
It’s looking to me like the IMF gets stuck with the whole tab. (17% US taxpayer money). Next problem is the IMF doesn’t have enough to go around. Greece needs $150B, Ireland projected at $120B, then throw in Portugal plus Spain and we are talking real money. No one even wants to consider Italy, then England, plus all those significant others like Belgium. And since when did the Eastern Europe crisis go away?
About a year ago I read the IMF had about $100B, and wanted to raise it to $250B. Don’t know if the world chipped in all the money yet. Sounds like the IMF is bringing a knife to a Marshall Plan negotiation.
Some think the Chinese will just buy large parts of Europe, tho I really don’t know why they would. But if they do they might sell their stake in the US to pay for it. That will give Ben some more bonds to buy.
But still I hate to see the banks get a free pass on the whole mess.
The difference between Ireland and the US is that the US has its own money. In the end, if desired, the US can simply print more money and inflate the debts away. Ireland can’t. Thus, because Ireland is in hte euro, it has to go through this internal devaluation.
As to comparisons between Iceland and Ireland. Yes, very similar, except for this money/currency thing. Iceland has essentially said, look, there’s no money, we’re bankrupt. Ireland can’t do that (even though it probably should).
When bankrupt the thing to do is, well, declare bankruptcy.
I don’t know that this following is true but I strongly suspect that it is: Iceland will do better in a decade’s time than Ireland.
Should the ECB set up a TARP? Or should the ECB start confiscating property and sell it off. Is there no collateral in the Republic of Ireland? IMF come to the rescue!
Maybe the Germans look at Ireland as one big dairy farm in their liebensraum scheme for the west.
If they could have gotten Russia into the Euro……………….
The Nazis were different they preferred to enrich the Kruppes rather than use bankers to take over the world.
The Irish government is also resisting the bailout because they are being pressured to increase that low corporate income tax rate.
open thread — George Carlin:
Who Really Controls America?
Silence. Slaves must be obedient.
Is that you juan? Come back to share…??
Let me post a thought. The “prosperity” of the 2000 decade was all borrowed from the future, if we had not had the home atm machine (most subprime is evidently for cash out not purchase loans), then there would not have been as much spending. In essence we borrowed spending from the future to get a good growth rate then, and now we have to pay for the party with the hangover.
Yes it may have meant lower lifestyles than otherwise, including kids spending the first 2 years of college at the local junior college etc. But had that happened we would not be paying the bill for the party now. (Its much like charging Christmas presents and then comes January, the drearyness sets in along with the bill, and its psychological depression time)