Financial firms are turning to their governments for a bailout. Perhaps this will cause a slight pause in the screams that this is entirely the fault of the Bush administration gutting the SEC--whatever Fortis' problems, it's hard to attribute them to a lax SEC. We clearly need better regulations. But bank runs are complicated creatures. There is no single cause of this, and there will not be a single solution, either.
As goes the most powerful economy in the world, so goes the world.
is it no wonder they've made the same mistakes, seeing we wern;t paying a price (yet).
I see your point, but I have to say, in hindsight, all the media frenzy over McCain saying he would fire Cox seems kind of misplaced.
Isn't it the SEC's responsibilty to regulate and oversee the U.S. portion of the capital markets? Isn't it the SEC that failed to take any action on sub prime mortgage ratings, default credit swaps, leveraging and capital requirements, short selling....
This is a securities and exchange problem, so why wouldn't the blame lie with the head of the securities and exchange commission whose job it is to regulate same?
Why isn't temporarily nationalizing insolvent companies, like the Swedish government did in the 1990's, a "single solution" to the crisis? To quote Krugman:
Krugman is a reluctant supporter of the current bailout because he doesn't think any Republicans would support a temporary public takeover of insolvent companies. However, AIG was already nationalized and Freddie Mac and Fannie Mae were put into conservatorship. No new legislation is needed as far as I can tell. Congress just has to keep their power dry — i.e. don't spend $700 billion on a reckless bailout proposal — and put up the money to takeover insolvent companies as the Treasury needs it. As a plus, the Treasury Department will buy these distressed companies at much better prices once they are on the brink of insolvency.
Letting companies fail is bad for people who bought equity in these companies and other companies being hammered in the stock market, but why should the US government borrow more money to subsidize your bad investment decisions? Also, why does anyone think banks & thrifts will start lending again, just because the government bails them out? They will be looking for safe investments and may simply buy Treasuries being sold to finance the bailout. Wouldn't that be ironic…
No new legislation is needed as far as I can tell.
I think this is quite correct, although if we're going to follow the Swedish model (IMO that's the way to go), it would be reassuring to financial markets to actually have a plan in writing.
Letting companies fail is bad for people who bought equity in these companies and other companies being hammered in the stock market, but why should the US government borrow more money to subsidize your bad investment decisions?
Why indeed. Moreover, I strongly suspect in most cases government direct equity purchases will not necessitate wiping out shareholders. It will merely mean the government is a minority equity holder, and your shares are therefore watered down, but may rise in value again in the fullness of time (or else your shares in XYX bank will get traded in for shares of Citi, or whatever; anybody know if Wachovia shareholders are wiped out or not?).
Well, if this is a chain reaction, and SEC regulation was the first domino to fall, then you can blame subsequent falling dominoes on the first. Don't know if lax SEC regulation really was that first domino, but the logic of the post doesn't really help shed much light on that either way. You'd have to say more about the connection between foreign banks and US banks loaded down with these crappy MBS's.
I thjought the single solution was the bail-out? Isn't that what you said in the last comment thread?