Saturday, Mar 15, 2008
The city would like tax payers to pay for its bonus, cigars, lap dancers etc!
FT: Financial system must tap the taxpayer
US could suffer a deep and protracted recession like Japan. House prices are in free-fall, spreading losses through mortgage-backed securities and making it difficult for financial markets to stabilise. The US labour market is cracking, with three consecutive months of job losses in the private sector. Consumer spending is faltering. Financial markets have taken another lurch downward – triggering Fed emergency responses. A “financial accelerator” is taking hold as banks react to losses by pulling back on their capital at risk, intensifying the credit crunch and aggravating the economic downturn. Interest rate cuts have been largely offset by the rise in risk spreads. The challenge is to stop the financial accelerator. This requires additional capital from the tax man
7 Comments
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1. uncle chris said...
What a selfish view - so stuff the general public with runaway inflation and unaffordable housing, as long as the city (who created this mess in the first place) are bailed out with our money. I know that the city is the last vestige of serious industry in the UK, but I cannot believe the government would contemplate helping tory-voter companies at the expense of it's working class (blue-collar if you like) heartlands. They should let these fund managers and investment companies goto the wall, then maybe they will get decent jobs that actually create things or help people.
2. paul said...
Mervyn King has hinted that a re-alignment of the economy is in order. Let's home his political paymasters don't sabotage that effort.
3. bystander said...
......can't open the whole document, but if, as has been suggested in a previous comment, the financial world is "demanding" that we, 'normal' people must bail them out, otherwise the whole economic structure will fall, then "no way". SOME financial institutions have demonstrated nothing except moral hazzard for the past 10 years, in the UK, US and Europe if not Japan, China etc, in search of the huge bonus payments for creating mythical and highly dangerous bundles of 'DEBT'. The financial world needs to stop buying and selling things that do not exist, futures, bundling up crap in the form of triple AAA (whatever that is supposed to mean???) CDO's, CDS's etc and start to deal with the day to day, the bread and butter and make sure their millions of retail customers are properly protected from the likes of the whizzkids who develop these strategies and formulas, the brokers who sell them to literally anyone, and the Kerviel's of the hallowed financial world. These highly paid, "little" boys and girls need to be taken back to school and re-taught the necessity of hard graft and honesty. Watching these, 'bankers' acting like small children talking behind their hands, shouting out to see who could be heard the loudest and writing notes to 'teacher' to get the upper hand over their 'colleagues' is disgusting. Grow up, take the barrel full of medicine and come out the other side purged, but better for it................until human nature takes over and the whole shite starts again.
4. tyrellcorporation said...
'but I cannot believe the government would contemplate helping tory-voter companies at the expense of it's working class (blue-collar if you like) heartlands.'
WTF!!! This isn't the 19th Century Uncle Chris.
I think you'll find most working class people are fed up with mass immigration depressing their wages, declining social mobility, feral children terrorising their communities and paying for the vast army of people allowed by this government to sponge off their taxes and watch daytime TV and pick their noses.
5. whiteknight said...
Does anybody remember another type of financial accelerator. Namely:
"A “financial accelerator” is taking hold as banks react to losses (gains) and falls (rises) in the value of collateral backing loans by pulling back on (extending) their capital at risk, intensifying the credit crunch (bubble) and aggravating the economic downturn (upturn). The pull-back (extension)/B>in credit lines is transmitting distress from the banking sector to hedge funds – which are being forced to reduce (increase) leverage and sell (buy) assets into markets at firesale (red hot) prices to meet margin (return) calls in a classic case of financial contagion. As hedge funds cut (increase) leverage they are amplifying the effect of the contraction (expansion) in bank balance sheets on the economy. This “great unwinding (winding)” is putting enormous stress on the financial system, including the market for mortgages guaranteed by Fannie Mae and Freddie Mac....."
Turns out its part of the same system and both are as destructive as each other.
6. whiteknight said...
does anybody remember another type of financial accelerator. Namely:
"A “financial accelerator” is taking hold as banks react to losses (gains) and falls (rises) in the value of collateral backing loans by pulling back on (extending) their capital at risk, intensifying the credit crunch (bubble) and aggravating the economic downturn (upturn). The pull-back (extension)in credit lines is transmitting distress from the banking sector to hedge funds – which are being forced to reduce (increase) leverage and sell (buy) assets into markets at firesale (red hot) prices to meet margin (return) calls in a classic case of financial contagion. As hedge funds cut (increase) leverage they are amplifying the effect of the contraction (expansion) in bank balance sheets on the economy. This “great unwinding (winding)” is putting enormous stress on the financial system, including the market for mortgages guaranteed by Fannie Mae and Freddie Mac....."
Turns out its part of the same system and both are as destructive as each other.
7. harold said...
"What a selfish view - so stuff the general public with runaway inflation and unaffordable housing, as long as the city (who created this mess in the first place) are bailed out with our money."
Of course they expect to be bailed out by the public - it's their parasitic and atavistic system, created by them for them. Truth is however, that even many big city boys are getting burned. We have to ask ourselves the question: who, ultimately, is set to gain most by this mess?