Nuts...

Posted by: Michael Mandel on September 26

….just nuts

WaMu going under…punishment of the greedy (I just hope JPMorgan Chase is getting a good deal)

The so-called bailout deal being submarined by politics? I’m so not surprised. Fighting a major financial crisis requires political legitimacy, because the government has to break contracts and allocate losses coercively. Coming up on a presidential election, our current administration unfortunately lacks political legitimacy.

I’m going to write more on this.

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Reader Comments

Mike Reardon

September 28, 2008 01:01 PM

This bailout exercise can be seen as a substitute for an IMF decree to the Nation to increase saving held long term in US banks.

The bailouts effect on Main Street is that savings be amassed by the purchaser of a house to pay upfront a real significant down payment.

That solid financial market going into place from our total consuming economy without any savings is the picture that scares me, it will be a hard workout to the whole economy.

Rob

September 28, 2008 07:01 PM

It looks to me like the "financial crisis" is only a "crisis" for certain big companies that, in a fair market, would be forced into bankruptcy. They don't want bankruptcy so they whine to the government and ask for a bail-out.

The core "problem" is that they don't want to sell their assets for their fair market value (which they should be forced to do in order to pay their debts).

If they did sell, the real estate market would take a larger immediate hit and the companies might eventually be forced into bankruptcy anyway, but the price of companies would realign closer to their actual worth and the larger market would recover.

Honestly, that's what the market needs. Speaking as someone who doesn't own stock b/c I think the market is insanely overvalued, I've been waiting for bullish investors to get their comeuppance and for the company prices to realign closer to their actual value before I get into investing.

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Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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