Here is something that you may not think about often enough: Taking losses.

Its something that every rookie trader must learn to do — and all of the TBTF banks refuse to do. Even sovereign nations seem unwilling to accept this simple fact of financial life.

There will be losses. How you handle them determines your fortune, your fate and your future.

Seeing how people handle losses is revealing of their character and integrity. Hiding losses is what rogue traders do. Its also what rogue banks do, and apparently, rogue nations.

$2.3 Billion in losses hidden from UBS sights by a rogue trader is chicken feed. But ponder how many $100s of billions of dollars in mortgage losses are hidden from view? The real rogues are America’s largest banks, and their enablers in Congress. .

When the TBTF banks (via their purchased Congressman) forced the Financial Accounting Standards Board to pass a rule allowing them to hide their mortgage losses  — FASB 157 — it showed the dishonest nature of these entities. It was revealing of the lack of integrity of all of the institutions involved — from Congress to the banks to FASB.

When Bear Stearns first began to wobble in 2007, the initial error in this era of bailouts was in rescuing their bondholders. Instead, in 2008, they should have been forced to take the loss.

Its the same for creditors of Citi, Bank of America et. al. — instead of rescue packages, their creditors should have had to take the loss.

Mortgage delinquencies growing? More and more defaults in the pipeline? We can extend & pretend, or we can take the loss.

Note that via the FDIC, some bank lenders did take the loss. Washington Mutual’s collapse led it to being bought by JPM. Wells Fargo picked up Wachovia. Other examples abound, In each case where losses were forced to be realized, we ended up with a healthier few banks, and no moral hazard.

Zombie banks get created when they do not take the loss.

Now we have the European crisis, wherein all of the parties involved refuse to (say it with me) take the loss.

Greek debt piling up? You can restructure, renegotiate, reneg, or you can take the loss. Portugal’s balance sheet a problem? Well, the ECB can kick the can down the road, or they can force lenders to take the loss.

The model for not taking the loss has to be Japan. Look at their stock market since 1989 and you will see the net result of not taking the loss. The Japanese have suffered through lost decades as a result of their refusal to take any write-downs, propping up their Keiretsu.

Until we purge the bad debt from the financial system, we will be stuck with a long and painful de-leveraging.

Please, won’t someone in Washington or Brussels or Tokyo understand the importance of this simple trading rule? Take The Loss already!

Category: Bailouts, Philosophy, Psychology, Real Estate, Really, really bad calls, Trading

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

55 Responses to “Take The Loss”

  1. contrabandista13 says:

    Hey Barry: Yes you are correct….. Sadly, we had all the mechanisms to unwind, dissolve and prosecute. Unfortunately, we did not implement them….. We all know who is responsible and who has enabled this………….. On a different topic, check this out…..

    http://boingboing.net/2011/09/27/stephen-fry-and-brit-talk-show-participants-marvel-at-american-prison-systems-brutality.html

    With typical British understatement……

    Best regards,

    Econolicious

  2. MayorQuimby says:

    Why take losses wheyou can pass them on? They will obfuscate and bailout until it is too late. THEN they will take the loss.

    Absolute power corrupts absolutely and with Geithner at the Treasury their power is as limitless as the bailouts of Feddie and Fannie.

  3. VennData says:

    You’re playing an SEC school in football… take the loss.

    BCS limit reconsidered

    http://espn.go.com/college-football/story/_/id/7027726/sec-commissioner-mike-silve-expects-bcs-ask-commissioners-lift-two-team-conference-limit

    BCS to become the BCSEC

  4. BusSchDean says:

    MQ: Agree. Political and business leaders have walked away from a model of truly competitive markets — ones that constantly dole out losses and winnings. Of course, it isn’t really about the money; it is about the power. Money can only get you so far whereas power can always get you more money, and it looks nice on your resume.

    With the national C of Commerce drum beat, even small businesses have bought into the thinking that politicians who vote against keeping markets competitive and for helping established businesses are pro-business, and everyone else should be voted out of office. When in fact these are the very acts that hurt buyers. Adam Smith was not concerned with sellers; he was concerned with buyers. In his world sellers screwed buyers all the time and he wanted to change that.

    I told an established small business owner who was lamenting that only a small percentage of new businesses succeed that most businesses that fail should fail. By the look on his face you would have thought I was telling a four-year-old that there is no Santa Claus.

  5. cherub96 says:

    I am not sure that Japan would have been better off had they “taken the loss”. Their real estate and stock bubbles had been far larger than the recent ones in the US (real estate bottoming out at -87%) and the entire Japanese corporate sector was bankrupt.
    How do you deal with the bankruptcy of the entire economy? How do you restructure every large company, at the same time?
    A lost decade in Japan doesn’t look nearly as bad as the Great Depression, which is what Japan would have gotten (in my view) if they had taken the loss.
    I think a similar problem (if not nearly to that extent) would have presented itself in the US.

    I believe that it is a mistake to think that there is a “good” way we could have dealt with the systemic financial crisis. Most likely, all the options ranged from bad to calamitous.

    If you complaining about the bailouts, you are focusing on the wrong thing. For some reaseon people look at the aftermath of debt-fuelled asset bubbles, trying to find ways to ameliorate the damage, instead of looking at the run-up to the crisis in order to find out how to prevent them.
    When the bubble bursts, the damage has already been done, it was inflicted in the years before.
    The most depressing thing about Japan is that the question was always “What should they have done differently after the crash” instead of “What can we do to prevent debt-financed asset bubbles”.

  6. barniebrains says:

    Fundamentally, I agree with you that banks and bond holders should “Take The Loss”. But what are the practical implications.

    FASB 157 in particular seemed like a bad piece of legislation that lets banks be zombies without having to address their balance sheet deterioration. But what was the alternative? Forcing the banks to “Take The Loss” would have required them to recapitalize in the midst of a financial crisis. Its quite possible this could have led to the demise of several financial institutions causing massive negative effects to reverberate throughout the global financial system. Now maybe thats the way out of this, but simply saying “Take The Loss” seems to trivialize the situation.

    Likewise with forcing bond holders to “Take The Loss”. If it were as simple as just having bond holders take a haircut on bonds, perhaps European politicians wouldn’t be as reluctant to default. But the real problem is that major financial institutions hold massive OTC derivative positions that will likely take them down in the event of a default. Again, this may be the right course of action but what are the implications?

    “Take The Loss”… that could take down the financial system. Again, I don’t disagree with you that lying to ourselves about the health of our banks is getting us nowhere. But the more difficult question to answer is how to “Take The Loss” in an orderly fashion?

  7. Mike in Nola says:

    Don’t think the Euro banks get it eiither. Pretty funny title on cnbc.com:

    European Banks Innovate With Bonds to Fill Funding Gap
    http://www.cnbc.com/id/44696277

    Considering what’s happened, how can anyone expect to be taken seriously in today’s financial world if they use term “Innovate” or “Innovation” in an article about banking? What’s worse is that what the article describes is the same kind of sleight of hand that got us where we are now.

  8. zcwotun says:

    Or simply— “Losers average losers!!”

    (HT: Paul Tudor Jones)

  9. Francois says:

    This shit is so simple. In the end, trading/investing successfully is VERY difficult. Ego and the primitive brain gets in the way. Sucks, but that’s the way it is.

    There is only one surefire remedy against that; Professor Pain, who, equipped with his arsenal of fear, doubt, anxiety…and LOSSES, is the best teacher of risk management around, hands down, no contest. This mentor shall teach us either one of two things

    1) do we have what it takes to trade/invest or not? If not, select someone honest who can and go your merry way.
    2) If we got it, learn to do it correctly…in other words, experience losses.

    Sooooo! Give anyone the power to avoid losses and what do you think will happen? Learning to manage risk and trade correctly goes out the window.

    Is it any wonder Congress and the TBTF are so hated by non-purchased people? They’re so coward, so dishonest, yet, we’re the ones supposed to pay for all their mistakes and crimes.

  10. Why take the loss when Soros has shown us the way out? The exit to Pedro’s is clearly marked. You don’t want to miss this. The chairman even worked here. Imagine the great souvenirs you can pick up that will remind you of the forgone sovereignty of your Euro-nations.

    http://tradewithdave.com/?p=8032

    Dave Harrison

  11. wally says:

    Fine theory, but if you are working for a bank and your options are to either take the loss, thereby putting yourself out of work, or pleading for a bailout, it’s pretty obvious what you’d do. The decision here has to be top-down, not bottom up, and even at that level the same thinking applies. Just look at the original decisions in the US (the Bush-Paulson TARP) – why take the hit when you can wiggle through and pass the load off on the next administration?

  12. BusSchDean says:

    bbrains: Precisely. Stock and bond holders were winning in the process of building the TBTF banks. Size alone (and really short-sighted decisions) created colossal loses that apparently no one could figure out how to digest. So they found acceptable the privatized-reward and socialize-risk model. The Swedes gave us an example that we refused to follow.

  13. pjs170 says:

    Is there any real practical way to find where the votes came from for FASB 157? I don’t doubt the pressure from Congress, I’m just wondering where it came from since it can’t be tracked like a congressional vote.

  14. kenny powers says:

    “ASB 157 in particular seemed like a bad piece of legislation that lets banks be zombies without having to address their balance sheet deterioration. But what was the alternative? Forcing the banks to “Take The Loss” would have required them to recapitalize in the midst of a financial crisis. Its quite possible this could have led to the demise of several financial institutions causing massive negative effects to reverberate throughout the global financial system. Now maybe thats the way out of this, but simply saying “Take The Loss” seems to trivialize the situation.”

    No it doesn’t. This is the essence of the problem. You guys could have nationalized your banks and gotten it over with in 08/09, and followed the Scandinavian model of the early 90s, as Barry has correctly pointed out on numerous occasions. Quick, horrific recession followed by new growth. But you didn’t, for fear of imposing losses (gasp!) on professional risk takers who should have known better. Again, the bondholders in europe are supposed to be let off the hook at the expense of taxpayers. Fuck that, and fuck the financial system. Let it fail in its current form if it must. It is unsustainable, and utterly corrupt as it now stands.

  15. dead hobo says:

    You and I take losses occasionally. But, tell me, if you could stick someone else with your loss, make money in the process, and do it just with a little salesmanship and game playing, wouldn’t you do it? I would unless unless it brought public humiliation upon me. Then I would just game the situation up to the point of personal cost.

    Look, the banks have a problem. The governments have money and they have government employees with the need to remain employed via votes or employed via moving to better jobs in private industry.

    The banks also have the world’s best and slickest sales people, all of whom know how to get money out of people. You find people with cash. You figure out their needs. You figure out what they will respond to. Then you run your game. Government is a fixed target, like a sitting duck. Your game provides the proper motivation (“Sacre Bleu … zee world … she is going to end …. Aieee. Zee banks must print zee money and save us all”).

    Remember a couple of year ago … $700B now and no questions asked or else the unspeakable horrors start and everyone on Earth will lose all their money and be forced to live on dry dog food.

    Taking the loss is a sucker’s game once you get to the TBTF level. All you need is a variation of the long con combined with useless government officials and free money is yours. The world ending if there isn’t a bail out now is the motivation du jour and has worked exceptionally well to date.

    I like the tone and sentiment of your post, BR, but you are barking at the moon if you think TBTF will ever act any differently.

  16. BusSchDean says:

    dead hobo: In about 30 minutes I am going to talk with 25o business freshmen about the dynamics of competitive markets and how the different functional areas of business integrate. What you just wrote — as accurate as it may be — makes me wonder about this message.

    Perhaps instead I should tell them that at least in terms of increasing firm size Karl Marx was right. Markets will be increasingly dominated by winners who subvert the integrity of markets so they can keep winning, creating larger and larger firms until Adam Smith’s model becomes a joke. Gee…wonder what the students would tell their parents.

    BR: Please keep barking!

  17. [...] You can lever, but will you take the loss? (FT.com) the short answer: Take the Loss (TBP) • Don’t count on Markozy to save you as Greece falls (Market Watch) see also Tracking [...]

  18. dead hobo says:

    BusSchDean Says:
    September 28th, 2011 at 9:59 am

    dead hobo: In about 30 minutes I am going to talk with 25o business freshmen about the dynamics of competitive markets and how the different functional areas of business integrate. What you just wrote — as accurate as it may be — makes me wonder about this message.

    reply:
    ———–
    The market model makes more sense if you analyze it from the viewpoint of the psycopath as opposed to any classical economic model. I’m being completely serious, too. TBTF adds the muscle that enables a herd of like minded pyycopaths to get free money from government.

  19. Mangua says:

    Maybe they didn´t theach trading-fundamentals at The Western School of Politics & Banking.

    Or perhaps they did, but since people in the driving seat clearly can´t use “let your profits run” or “when in doubt, stay out”, and obviously didn´t learn how to cut their losses, they have nowhere else to go but to “when in trouble, double”…

  20. TizzyD says:

    Thought we kicked this thing off “taking the loss”.

    Believe it was called Lehman Brothers.

  21. louis says:

    It is the homeowers moral responsibility to take the loss. They were the only reckless party to the trade.

  22. Transor Z says:

    It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms. The masters, being fewer in number, can combine much more easily: and the law, besides, authorises, or at least does not prohibit, their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work, but many against combining to raise it. In all such disputes, the masters can hold out much longer. A landlord, a farmer, a master manufacturer, or merchant, though they did not employ a single workman, could generally live a year or two upon the stocks, which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year, without employment. In the long run, the workman may be as necessary to his master as his master is to him ; but the necessity is not so immediate.

    ———————-
    People overlook the moral philosophy in An Inquiry into the Nature and Causes of the Wealth of Nations
    ———————-
    The over-weening conceit which the greater part of men have of their own abilities, is an ancient evil
    remarked by the philosophers and moralists of all ages. Their absurd presumption in their own good fortune has been less taken notice of. It is, however, if possible, still more universal. There is no man living, who, when in tolerable health and spirits, has not some share of it. The chance of gain is by every man more or less over-valued, and the chance of loss is by most men under-valued, and by scarce any man, who is in tolerable health and spirits, valued more than it is worth.

    (Dude nailed the human tendency to discount downside risk a LONG time ago.)

  23. MBD1120 says:

    To me placing blame on FASB 157 is something of a red herring. Which is more relevant, fair value mark-to-market accounting or historical cost?

    Granted banks can play all sorts of fancy/insidious tricks with their version of “fair value”, but under the previous model, all of that crappy mortgage paper would have been held at 100 cents on the dollar in perpetuity. I jut don’t think that argument holds water here.

  24. KidDynamite says:

    I love this post, Barry, and you know that I agree with you 100% on this: lenders who make bad loans need to take losses.

    But isn’t the problem here, once again, TBTF? We can’t take the losses because it’s all become such a giant metastasized financial cancer that we can’t kill or we’ll kill the patient too? Isn’t that what Too Big To Fail is?

  25. budhak0n says:

    For a man in my position, thanks again BR.

    Some”things”… Some “trades” … Some “business Relationships” are just pure cancer.

    Couldn’t agree more that in certain situations it’s much better to simply take the loss and move on.

    Have a great week.

    Then again, I’m playing with my “own” hand which is pretty rare these days. Hope everyone had a good september.

    Ups and downs. Ya know ya know.

  26. dougc says:

    Our solution was terrible but look at what the Europeans are seriously considering, they want to bundle 200 billion euro in piigs bonds in a CDO, then allow banks to borrow money from the ECB and levarage it 9 to 1.
    Creating 1.8 trillion euros backed by 200 billion in D rated bonds. What could possibly go wrong.

  27. louis says:

    ” To be certain, the management of large investment banks missed the obvious lesson here; as soon as they were able, they willingly leveraged up nearly as much as LTCM had. When one considers the astonishing parallels between the past crisis and the current one, the missed opportunity for a dose of market discipline is all the more regrettable.” – Ritholtz.

  28. machinehead says:

    ‘I should tell [freshmen biz majors] that at least in terms of increasing firm size Karl Marx was right. Markets will be increasingly dominated by winners who subvert the integrity of markets so they can keep winning, creating larger and larger firms until Adam Smith’s model becomes a joke.’ — BusSchDean

    This is the reality of our mixed socialist, corpgov economy. It’s best analyzed from the perspective of ‘what is’ rather than ‘what should be.’ A minor in criminology would be a useful adjunct to a business education.

  29. heywally says:

    It’s easy to say ‘take the loss’ but when you’re trying to gauge the immediate disruptions to the global economy and you have to do it within a ‘no win’ political system — especially the EURO people — it becomes a whole other ballgame.

    Yes, I am ready for the Greece default and protection of the other EURO states too ….. in the mean time, I’ll day trade the dips on the stock index.

  30. Transor Z says:

    Creating 1.8 trillion euros backed by 200 billion in D rated bonds. What could possibly go wrong.

    Dougc wins today’s Internets.

  31. DrungoHazewood says:

    Germany’s Stark said it best in a rare moment of honesty

    We know the right thing to do, we just can’t figure out how to do it and get reelected.

  32. Bill Wilson says:

    Great post.

    It seems that not prosecuting criminal behavior goes hand in hand with with not taking the loss. What is the loss to society when there is no justice? Our leaders are hell bent on preservation of the status quo, no matter how much it conflicts with common sense.

  33. Ridge Runner says:

    @Dead Hobo (” Taking the loss is a sucker’s game once you get to the TBTF level. All you need is a variation of the long con combined with useless government officials and free money is yours. The world ending if there isn’t a bail out now is the motivation du jour and has worked exceptionally well to date.” )

    This week’s ECONOMIST has an interesting piece on applying utilitarian ethics:
    - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - –
    Moral philosophy
    Goodness has nothing to do with it
    Utilitarians are not nice people
    http://www.economist.com/node/21530078
    Sep 24th 2011 | from the print edition

    The punch line(s) :

    Dr Bartels and Dr Pizarro then correlated the results from the trolleyology with those from the personality tests. They found a strong link between utilitarian answers to moral dilemmas (push the fat guy off the bridge) and personalities that were psychopathic, Machiavellian or tended to view life as meaningless. Utilitarians, this suggests, may add to the sum of human happiness, but they are not very happy people themselves.

    That does not make utilitarianism wrong. Crafting legislation—one of the main things that Bentham and Mill wanted to improve—inevitably involves riding roughshod over someone’s interests. Utilitarianism provides a plausible framework for deciding who should get trampled. The results obtained by Dr Bartels and Dr Pizarro do, though, raise questions about the type of people who you want making the laws. Psychopathic, Machiavellian misanthropes? Apparently, yes.
    - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - -

    Perhaps the problem is with utilitarianism, unless living in a meaningless world is your cup of tea. As Glaucon would say, “A city fit for pigs, Socrates”. http://animalities.blogspot.com/2009/06/city-of-pigs.html

  34. dead hobo says:

    KidDynamite Says:
    September 28th, 2011 at 10:32 am

    But isn’t the problem here, once again, TBTF? We can’t take the losses because it’s all become such a giant metastasized financial cancer that we can’t kill or we’ll kill the patient too? Isn’t that what Too Big To Fail is?

    reply:
    ———–
    No, TBTF is a popular myth that’s used as a shield whenever anyone notices the scam. This is not to say there won’t be pain if a TBTF entity is found to be expendable without special treatment. It just won’t be anything even close to the end of the world, with the added benefit of a better world once the TBTF is gone.

    That being said, TBTF will always be with us because of the fractured operation of Congress and the incompetence of government, not to mention the avaricious talents of mega-finance.

    Some Natural Laws of TBTF:

    Bailouts expand to take all available capital.

    New capital can always be made available.

    Fear and confusion are natural, normal, and encouraged

    The largest banks must survive with the least cost

  35. dead hobo says:

    Ridge Runner Says:
    September 28th, 2011 at 1:48 pm

    That does not make utilitarianism wrong

    reply:
    ————-
    Absolutely true! Somebody has to work at the base of the pyramid. These fine people are yeomen and deserve an honest compliment.

  36. BusSchDean says:

    My talk to students went well. I told them that business is rewarding, fun, and competitive. I mentioned that ethics and organizational culture matter (without saying what happens when that culture values unethical behaviors like accepting unqualified buyers because the risk would be obscured and transferred to unsuspecting investors).

    dead hobo: I didn’t read your post in time to include mention of psycopaths. :-)

    TBTF reminds me of old Judge Gary. As Chairman of the Board of US Steel he organized the “Gary dinners” where competitors “announced” the future price of steel. Judge Gary saw this as a lawful way to stabilize prices, creating a less tumultuos market for steel – good for everyone. The government saw it as price fixing. Too bad he didn’t live longer; he would have liked this environment.

  37. Ridge Runner says:

    The article authors say: “That does not make utilitarianism wrong”.

    I say, “Perhaps, if you’re willing to settle for living in a city fit for pigs, ruled by Machiavellian psychopaths”.

    Since there is usually a substantial number who are not willing to settle for that, the fractured city, the city of perpetually warring factions, continues until replaced by a less porcine polity, either by internal revolt or internal collapse precipitated by an invading replacement culture.

  38. dead hobo says:

    Ridge Runner Says:
    September 28th, 2011 at 2:36 pm

    The article authors say: “That does not make utilitarianism wrong”.

    I say, “Perhaps, if you’re willing to settle for living in a city fit for pigs, ruled by Machiavellian psychopaths”.

    reply:
    ———–
    The psychopaths wouldn’t understand your question and most would not waste any time thinking about it. They would just want more, then go and get it. The highest functioning psychopaths would make sure the bottom of the pyramid was properly motivated to support them. If money was involved, they would try to see that others paid it. To the psychopath, the support person level are only objects that have the potential to provide benefit. Otherwise, they don’t exist. To properly motivate people without the ability to use coercion, you must be very personable.

  39. mcelus says:

    Barry, agreed. What happened to good old losses and recessions? It’s a healthy reset.

    Wanted to point out though, FAS 157 was the rule that forced mark to market. The REMOVAL of FAS 157 is what suspended. Paul Kanjorski and other congressional morons were the ones who thought they were saving the world by suspending it. Wonderful, now look where we are.

    FAS 157-D is what they are working on to remove the suspension and just implement the revised version which allows banks to PERMANENTLY NOT TO HAVE TO MARK TO MARKET when markets are “choppy and volatile”. Aren’t markets always that? Cut me a giant break.

    http://en.wikipedia.org/wiki/Mark-to-market_accounting

  40. readerOfTeaLeaves says:

    Great post.
    Agree with budhakon that some biz relationships are like cancer; take the losses and move on. (And the sooner, the better.)

    I admire the Silicon Valley view that a biz failure = a few more lessons learned, and a chance to get it right the next time out.
    But that SV mindset requires guts, resilience, and a little humor and humility. Also, the ability to self-reflect and learn from one’s mistakes. I have the sense that sociopaths are not particularly good at that trait…

    As for dougc: at 10:55 am
    Creating 1.8 trillion euros backed by 200 billion in D rated bonds. What could possibly go wrong.
    still chuckling… and cringing.

  41. santamonica says:

    Please copy/paste into Washington Post article column space…

  42. jsp9999 says:

    Sounds easy but takes very very good judgement with deep soul searching and above all discipline to execute. It’s not impossible but definitely against human nature to take a loss and move on unless one is forced upon.

  43. price4freedom says:

    take the loss,,,,, look at wachovia, they just swept the shit underneath wells fargos rug. the shit is still there. they are still on the hook for all of wachovias mortgages. in fact they paid money to get into a loosing proposition. granted we the tax payers are the ultimate back stop.

    Need a new dogma, where the reality is nobody owns real estate unless you live or work on that land. talk about some freedom

  44. [...] had an excellent commentary on the idea that we’ve repeatedly ignored a key trading axiom: Take the Loss. Late last year I wondered What Happens When the Glass Is Too Big? Almost a year later, we’re [...]

  45. ToNYC says:

    Like Edison didn’t say, the sooner you see the failing; the sooner you are back to sailing.

  46. andrewp111 says:

    Barry,

    You need to connect the dots between this story and your story on the concentration of derivatives in the 4 biggest banks. Those hundreds of trillions in derivatives are a deliberate Sword of Damocles that the banksters are holding over the entire world. It is the ultimate source of their leverage. They are saying, in effect ” if we have to take our losses and become insolvent, everyone goes down with us. There is no escape.” A really big bank that does just banking (deposits and loans) can be resolved by the FDIC without breaking a sweat. But that does not apply to institutions that hold a Sword of Damocles.

  47. formerlawyer says:

    @andrewp111 Says:

    So are you saying these banks are like this?

    http://www.youtube.com/watch?v=Z_JOGmXpe5I&feature=related

  48. [...] You see, you’re not alone in facing these “bawi” situations.  It is how we face and take these losses that determine our fate, fortune and future.  Sometimes, making bawi also means “retreating”, and taking a defensive stance.  (Read Ritholz again on Taking losses) [...]

  49. [...] Money, but it’s worth another mention here in case you missed it. The article was entitled Take the Loss and that imperative is repeated throughout the piece as Barry Ritholtz lists the numerous moments [...]

  50. [...] Harrisburg has numerous problems, and untenable union wages and benefits are a huge part of that problem. Once again, it’s time to stop Fantasyland dreams and Take The Loss. [...]

  51. [...] The Japanese approach — Save the Banks! — is a result of their Keiretsu, and is the model embraced first by the Bush White House, and the Federal Reserve, than by Congress, and lastly by the Obama White House. I have argued this approach is in large part why the post-crisis economy has been so moribund, with sub-par GDP and Employment the rule. It is based on a refusal to take the loss. [...]

  52. [...] that it may be salutary for an individual or a society to actually have a nightmare and to “take the loss” or experience loss is not necessarily, I want to add, to sadistically suggest that people [...]