Comments on: Stimulus, A Little Stimulus, No Stimulus http://www.ritholtz.com/blog/2009/02/stimulus-a-little-stimulus-no-stimulus/ Macro Perspective on the Capital Markets, Economy, Geopolitics, Technology, and Digital Media Tue, 14 Feb 2012 22:30:38 +0000 hourly 1 http://wordpress.org/?v=3.0.5 By: DL http://www.ritholtz.com/blog/2009/02/stimulus-a-little-stimulus-no-stimulus/comment-page-1/#comment-144739 DL Mon, 09 Feb 2009 17:31:38 +0000 http://www.ritholtz.com/blog/?p=18611#comment-144739 “If creative destruction would have been allowed to unfold uninterrupted the shares of [many financial institutions] would have ended up totally worthless. If that would have happened … every other major bank in the nation would be close too if not out of business, and the financial sector of the United States would essentially no longer exist” I’m not convinced that this is true. My understanding is that the vast majority of the so-called “toxic assets” are held by a small number of banks. Letting depositors with assets (above the $250K limit) take some loss would not be a good outcome. But stockholders and bondholders should get wiped out before any taxpayer money is given to the banks. Furthermore, the objective of making depositors whole must be balanced against the cost to the taxpayers; I think that depositors (above $250K) should have to pay some price at banks receiving bailout money. As for Fannie and Freddie, the government could have insured existing debt at a price of 85 cents on the dollar, and explicitly refused to insure any newly issued debt. “If creative destruction would have been allowed to unfold uninterrupted the shares of [many financial institutions] would have ended up totally worthless. If that would have happened … every other major bank in the nation would be close too if not out of business, and the financial sector of the United States would essentially no longer exist”

I’m not convinced that this is true. My understanding is that the vast majority of the so-called “toxic assets” are held by a small number of banks. Letting depositors with assets (above the $250K limit) take some loss would not be a good outcome. But stockholders and bondholders should get wiped out before any taxpayer money is given to the banks. Furthermore, the objective of making depositors whole must be balanced against the cost to the taxpayers; I think that depositors (above $250K) should have to pay some price at banks receiving bailout money.

As for Fannie and Freddie, the government could have insured existing debt at a price of 85 cents on the dollar, and explicitly refused to insure any newly issued debt.

]]> By: batmando http://www.ritholtz.com/blog/2009/02/stimulus-a-little-stimulus-no-stimulus/comment-page-1/#comment-144727 batmando Mon, 09 Feb 2009 16:55:21 +0000 http://www.ritholtz.com/blog/?p=18611#comment-144727 My estimation (of the Bush rebates, TARP, etc) all along has been that these measures have been at best and at most can only be palliative, rear guard, PR actions that help buffer the long term effects of disastrous policies. As Haelfling says, "The damage is done and it will take years to reestablish confidence and belief in our economic system." My estimation (of the Bush rebates, TARP, etc) all along has been that these measures have been at best and at most can only be palliative, rear guard, PR actions that help buffer the long term effects of disastrous policies.
As Haelfling says, “The damage is done and it will take years to reestablish confidence and belief in our economic system.”

]]> By: wally http://www.ritholtz.com/blog/2009/02/stimulus-a-little-stimulus-no-stimulus/comment-page-1/#comment-144674 wally Mon, 09 Feb 2009 13:51:14 +0000 http://www.ritholtz.com/blog/?p=18611#comment-144674 Carl seems to believe some institutions have been 'rescued'. Hmmmm.... Carl seems to believe some institutions have been ‘rescued’. Hmmmm….

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