What I don’t understand is why the taxpayer is being slayed prior to the “at risk” parties (common/preferred stockholders, bondholders, other unsecured creditors, etc) in many of the recent bailouts. I must be missing something. Just look at the balance sheets of the top banks. There are plenty of parties that should be in line for absorbing damage PRIOR to the taxpayers. Can someone enlighten me as to why this is not happening? Is it all related to the unknown risk created by credit default swaps and the like?

Anyway, I am contacting you because I would really appreciate if you keep hammering the point about forcing a bankruptcy of insolvent banks along the lines of WaMu. I only wish I could reach as many people as you do with your blog. That is why it is important that you keep making the point. In fact, if you think it is a good idea, could you please make a comment about my basic plan?

1. FDIC mandated forced bankruptcy of insolvent banks that can not obtain capital in the capital markets and require government assistance where all owners, both debt and equity, are wiped out
2. Senior management and board of directors are replaced with both management from outside and inside the bank and with independent/knowledgeable board of directors outside and inside the industry
3. Then the government immediately IPOs each bank separately where the new bank is essentially the same but with out its debt, senior management, and board of directors
4. All funds generated from the IPO minus any transaction costs go to the previous owners starting with the most senior in the capital structure all the way down the line if funds are available

I understand that in this environment an IPO of a bank would not result in the “most” value, but the alternative is a disorderly bankruptcy or our government’s current approach.

This could all happen virtually overnight. I will post this on your site as well.

Marcus

I always appreciate your technical insights. How likely do you think is a bounce to 977-984 considering the S&P met strong resistance at 780 today? You seemed to have changed your mind about a quick trip down to the 600’s. What’s looks new to you? Thanks in advance.

Smor och brod gor kinder rod !!!

(Butter and bread makes cheeks red !)

This was on a little wooden sign in our kitchen while growing up.

Gold bugs….”tis but a scratch…”

The action down from the highs now looks like a very ominous five wave type structure on my intraday charts. We may get a bounce now as we’re on a trendline from the 1/15 lows and it looks like a completed “initial” move down. If we do get a bounce, we might see the 977 – 984 zone which would be a terrific risk/reward SHORT.

Play at your own risk.

It should be interesting for folks to observe that when the SP500 looks terrible, gold goes up. When the stocks look better, gold gets hit. So, if you’re long stocks and long gold, you might be spinning your wheels a bit. If you’re in the Peter Schiff school of thought and you’re short stocks/long gold, then you’re very much leveraged for the end of the world as those two assets have seen some nice inverse correlation. Something to ponder…

February 25th, 2009 at 11:11 am
Agreed, but the limit is now $250K. The only entities likely to be affected would be small to medium-sized businesses, and they, too, should know how to manage their exposures

……..You’re right, I’d forgotten they’d raised to $250k recently

Bruce N Tennessee Says:

February 25th, 2009 at 11:58 am
“What if you are a small business with 20 employees? or 50?
And why should we want anyone doing business with a bank to lose their money? The bank leaders made the mistake, not the depositors…
You don’t care that the people who earn the money lose it, but you want to bail out people who went to Vegas on easy money and the housing bubble with higher taxes?”

……Non sequiturs must be a house speciality in TN……..I don’t want anyone to lose their money, but that doesn’t mean a small business owner doesn’t have to act prudently……And in any case I don’t see many businesses with 20 employees having 250k sloshing around in one account….most businesses maintain several different accounts……

Dr. Kenneth Noisewater Says: February 25th, 2009 at 11:18 am
ya but .. some countrys dont honor bankruptcy

Bruce N Tennessee Says: February 25th, 2009 at 11:58 am
I thought FDIC went to $250K or was that offer temporary / squashed / or ad campaign only?