Bank Bail Out Planned

Financial Times reports that the Feds are ready to bail out the big banks:

Large US investment banks will be able to access emergency cash from the Federal Reserve into next year if market turmoil persists, Ben Bernanke said on Tuesday in a sign of the growing concern among policymakers that financial strains could continue for some time.

The signal from Mr Bernanke is likely to soothe Wall Street, in that it confirms Fed support for investment banks through the credit crisis. US stocks rose on Tuesday, the dollar rallied against the euro and oil prices staged their biggest retreat in months.

But, who’s going to bail out the little people who up to their ears in the credit crunch caused by the corporate giant banks? It certainly won’t be John “‘I Would Imagine We Are’ in a Recession” McCain. That’s for damn sure. My money’s on Barack Obama to get us out of this mess.

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3 Responses to Bank Bail Out Planned

  1. Darrell Prows says:

    As is usual with this Administration, the real action on this issue is behind the scenes. The real bailout is far more massive than indicated here, and is going completely unreported. In part, I guess, because things are so murky that I can’t tell who all of the main players are, or how they are getting the dirty deed done.

    What is impossible to hide, however, is that the difference between the cost of money to financial system participants, and what they charge consumers for borrowed funds, is now at a level unprecedented in the fifteen years that I’ve been involved in that industry. People borrowing money now, and all outstanding debt that was issued on adjustable terms is now carrying profit margins that are at least 1% to 1.5% higher than would be the historical norm in any given interest rate environment. In the mortgage area, because of fees and costs imposed from the top (Fannie and Freddie and whoever is preventing competition from intervening to bring the cost of funds back into line), new loans that should be going for no more than 5% are being closed at as high as 7%. But everything from credit card balances on is subject to this same disconnect.

    As I understand it the two policy choices available for handling the problem now being faced would be to openly take taxpayer (consumers) dollar and hand them to the financial industry as a subsidy meant to keep these giany institutions solvent, or to take consumer (taxpayers) dollars as quietly as possible and hand them over to the big boys.

    Well, the route being followed is clearly the second one, and this multi-billion dollar handout has successfully flown beneath radar for a substantial period of time now.

  2. There really are some common sense new restrictions on certain types of new loans and practices. Combined with the Senate version there is something for everyone.

    This is an unprecedented act by the FED for general use by money-center banks. This has only been done once before to cushion the failure of Bear Sterns. Bringing Down Bear Sterns is an article in Vanity Fair about what may have been a deliberate attack on one of the biggest financial centers on Wall Street.

    This action is taken to avoid a true burn down, which nearly happened with Bear Sterns, of our financial system. This is evidence that the Fed and Secty of Treasury take this situation very seriously indeed. If a true meltdown were to happen the financial system, potentially world wide, would begin to fail. it nearly happened with Bear Stearns. Ride the article. It’s pretty amazing. Healthy company, more or less, brought down. It’s scary.

    It’s actually a very possible development. There is no bad guy in this mess. Just 8 years of an Admin that was devoted to ‘market forces’ not regulation when necessary. People and companies did what was legal and encouraged.

    The attack on Bear Sterns is an entirely different story. Frankly I believe the possibility that there was a group that deliberately attacked using illegal tactics. It nearly collapsed Wall Street. What’s worse, it could happen again.

  3. BJWhite says:

    I can’t give you the particulars, but there was a bill pushed by HRC which would have directly helped homeowners with bad loans; Obama was against it. His alternative was in the same sphere as his Universal Health Plan.

    Also, thought you might like to know that Barack just voted
    ‘yes’ to allowing FISA spying on the US. Hillary voted no.