Friday, Sep 26, 2008
No bailout, so BIG banks get Bigger and more Powerful
Wall Street Journal: WaMu Is Seized, Sold Off to J.P. Morgan, In Largest Failure in U.S. Banking History
"In what is by far the largest bank failure in U.S. history, federal regulators seized Washington Mutual Inc. and struck a deal to sell the bulk of its operations to J.P. Morgan Chase & Co." Government intervention would stop this sort of thing. What kind of a world will we be left with if laissez-faire capitalism allows the powerful to make a killing in the boom and then gobble up the small players in the bust? We need intervention now and strict regulation of the banking system like Germany has.
Posted by mountain goat @ 02:40 PM (593 views) Add Comment
9 Comments
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1. beartil2010 said...
I am afraid I disagree with your summary there Goaty - these sorts of takeovers are only possible with the supervision of the major players, they do not happen with any kind of free market principle. The Fed bailed out JP Morgan and gave them Bear Stearns; their sticky fingers are almost certainly all over this as well. And they're the ones who caused the massive asset bubble in the first place. And this latest bailout intervention is also their work, and would enable things like this, except with even less visibility and at the taxpayer's sole expense.
We do need intervention, I agree with that, but it must not be politically motivated short term, nor allow these major playeres to set the rules. It needs to be sensible, long-term-economics based. Unfortunately pigs might fly before we see either the US or the Gordmoron and Darling combo allow that to happen.
2. whiteknight said...
This is the completely wrong conclusion in my opinion.
Things have been getting on fine where it was strictly free market. Where they have been going less well is where certain players got themselves "helped" out of trouble.
One of the major problems throughout this debacle has been the designated credit ratings agencies. Again, the CDS market indicated problems in many firms whilst they were still classed AAA by those sanctioned by government and agencies to pronounce on such matters.
Many of the problems since have been caused by the regulators and the government agencies who now want to intervene to show they are doing something. They should have been doing something earlier and doing little now. Instead it is the reverse situation.
Why has the federal regulator sold it into JPM ? This is the regulators activity not the markets.
By restricting the free market people are also restricting the other essential activities of free markets which are spontaneous creation, innovation and invention. These are the processes that are being held up.
3. icarus said...
Was Blair very prescient in his choice of banks or did he have an inside track? Answers on a postcard.
The Bear Stearns deal was probably a rescue of JPM Chase and this deal gives the latter big expansion possibilities.
4. beartil2010 said...
The most cursory examination of history about central banking, the Rothschilds and JP Morgan will give you your answers. No coincidences in this story - JP Morgan and Goldman Sachs are so plugged into the fed and the treasury that this is all one big, incestuous, self-interested family.
5. mountain goat said...
Well guys I know my opinion is not shared widely. There seems to be a resigned "leave it alone and let it all go to hell" attitude which is leading to a very ugly world down the line. Sure these take-overs are being arranged by authorities. If your views are that government are not to be trusted then you see this as sinister. If you are like me, prepared to give them some credit, you think US government is dead-scared of the consequences of a bust because they have to guarantee every deposit to $100,000 and the disastrous counter-party risks to the wider economy. If US government has to take on debts then Congress will demand more regulation in future. But if we allow this ridiculous consolidation into huge banks their ability to manipulate the system in future will only get worse.
6. beartil2010 said...
I don't agree with doing nothing either - try Mish's Blog or some of the other solutions people have posted links to. There are lots of ways out of this mess; they all involve pain, but with proper planning it can be minimised and the future made brighter.
This bailout is simply more of the same from the key culprits, adding extra taxpayer burden whilst relieving no-one's debts and enabling further profiteering from banks along with significant moral hazard.
The only encouraging thing at the moment is that the US population is getting mobilised, and with enough pressure they may actually force congress to really think properly about this plan and put something into effect that has positive ramifications both short and long term.
7. planning4acrash said...
Correction, this is neither laissez-faire, nor capitalism. That would have involved no state bailouts and Wa Mu would have been auctioned off to the general public via their receivers. Capitalism isn't government agencies printing money for hedge funds to buy banks for pennies on the pound. This is Marxist economics, blended with fiat western capital.
8. mountain goat said...
p4c point taken, although it was laissez-faire capitalism when the bubble was inflating. I see the housing debt bubble mainly as a failure of regulation of debt rating, although there are so many other causes as well, like keeping interest rates too low for too long by Greenspan.
PS I enjoy your survivalist tips, I have an allotment myself so believe in the grow your own approach.
9. mountain goat said...
beartil2010 yes there are other good intervention ideas about. I like the "Swedish model" and I enjoy reading the Big Picture Blog ideas on this. He keeps ranting on about the need for regulation of the CDS market.