October 10, 2008

You knew this day would come. HousingPANIC calls on the Bush Administration to nationalize and recapitalize the banks

It's time.

It's time for the US taxpayer to take on the banks, fire and prosecute their executives, recapitalize them, and move on. And maybe one day sell them off at a profit.

It's time for us to arrest the guilty (hello Angelo Mozilo), seize their ill-gotten gains, and move on.

It's time for us to admit what we all know is true. The banks in the United States are insolvent. They got that way because of lack of regulation, a bastardization of the tax code that over-encouraged home purchases, the incompetence and corruption of the auditors and ratings agencies and FDIC, a gaming of the system by the investment banks, appraisers, realtors and mortgage brokers, and outright bribery of the US Congress.

So let's admit what happened, take over the banks, fire and arrest the executives and associated guilty parties, and move on. Exchange capital for equity, wipe out the shareholders, replace the leadership, and move on.

Now.

And yes, this will happen. Whether you want it or not. We either recapitalize them, or they fail. It's only a question of when.

It hath been foretold.

40 comments:

Anonymous said...

Roubini is just another Keynesian inflationist. Sure he saw the crisis coming but his prescriptions are the same old lower rates, print money, flood the economy with hmore liquidity bunko.

The problem is NOT a lack of liquidity. It is a loss of trust in financial institutions because there is a total lack of TRANSPARENCY.

And for all you dumbass socialist Obama lovers out there (I'm looking at you Bitterrenter):

It's not capitalism that is the problem. Every fancy little trinket you have today and the fine food you eat and all the other luxuries you enjoy could not have happened without capitalism.

The problem is corruption and fraud and lack of transparency. With transparency the individual investor can judge the inherent risk in any investment without relying on some flawed, lazy and corrupt regulatory body to do the due diligence for them!!

Capitalism is NOT the freaking issue you numbnuts!! It is corruption and fraud that is the problem!

Do you think that in your imaginary socialist utopia there would be no corruption or fraud? Every example of socialism in history would prove otherwise!

So take your Obama, Chairman Mao and Kim Jong Il coffee mugs and shove them up your ass, Bitterrenter!!

Anonymous said...

Oh yeah, great, now all we need is marxist/parasite unions at the banks too, like goes on in Latin America and Europe, with Barney Frank giving executive positions to his boy-toys. That's a horrible idea.

Anonymous said...

Why does the government even bother about paying a controlling share in these banks? Can't they just step in and say : "I own this place"?
Since we're gonna be communists, let's do it the hard way!

keith said...

I'm telling you what's going to happen, and if it doesn't, the country will face Armageddon.

If you want Armageddon, then let this panic go to its natural end.

The banks will be closed, there will be no commerce, no lending, no jobs, no food. True Armageddon.

But if you have hope for America, the first step to recovery is admitting you have a problem. Our problem is our banks are insolvent.

So this is what we will do, and what we have to do.

It just is.

If we do take over the banks, the government takes an equity stake, and works to rebuild them. It will cost us far far far more if we don't, since there will be no commerce and no tax revenues for years.

Think it though, then hit me with your argument.

keith said...

You got it. The government doesn't buy the banks. They take them over. They push the management and shareholders aside, they recapitalize them, they sell off their crap, and they work to bring them back to assets with value that can then be sold off down the road.

I'd say 5 years.

One key is arresting the management and seizing their assets. Anyone who was involved in liar's loans should be immediately arrested.

Start at the middle-manager ranks, make them squeal, then go after the big boys. The fines alone might pay for the whole mess.

Get popcorn. This will be the next chapter.

I know.

Anonymous said...

But if you have hope for America, the first step to recovery is admitting you have a problem. Our problem is our banks are insolvent.


Wrong.

Not all of the banks are insolvent. Let the banks that need to fail do so. Their assets will be bought up by banks that were not reckless.

Denninger Has The Right Idea

You sound like a representative for Goldman Sachs these days, Keith. And a rabid socialist like Bitterrenter.

Anonymous said...

Wells Fargo bought out WAMU. Did Wells Fargo turn into our government after I went to sleep last night?

DOPES

Refuse to buy overpriced said...

Wait a minute - aren't there some banks out there which aren't incolvent? The most prudent banks? Don't they deserve to have their reckless competition eliminated?

keith said...

To not be taken out, a bank would have to prove they were not insolvent.

And those 2 banks could go on

Capiche?

Lamaria said...

There are a couple of problems with that idea.

1) Many roads lead to hell and Good Intentions is one of them. Taking over the banks would be the precise starting point of Armageddon.

2) This will not just result in Armageddon, but will (and I think you completely miss this) permanently destroy our economy. NOBODY will ever have faith in it again, or respect it.

3) You assume that since banks enabled this fall of our economy, that just repairing them will restore the economy. I don't think so.

4) This puts America personally in too numerous and severe risks. Essentially we would be holding the bag for whatever those banks have to pay out, and I am not entirely sure that America can handle that.

Bottom line, what you're suggesting actually sounds like a guaranteed immediate Armageddon that would destroy America. I would rather face a Great Depression.

keith said...

You guys still aren't getting it

The banks are insolvent. They will close.

Got it?

So, we let them close, and we enter Armageddon.

Or we take them over, fire their corrupt managers, recapitalize them, hit the reset button, and sell them off when we can (at a profit)

Like pretty much everything else, I'm just telling you how it's going to be.

Deal with it.

Anonymous said...

You got it. The government doesn't buy the banks. They take them over.
What????
Government takes them over?
Do you mean the US Government? Congress?
The US Congress?

Ok So the US Goverment Is going to save Us.

I see the group that just raped us is going to make sweet love to us now.

All banks run like the DMV...

Anonymous said...

The "credit crunch" is merely being engineered to justify measures that are facilitating a massive transfer of wealth; a new oligarchy is being formed. The banks are taking the capital and investing in safe economies and hard assets, anywhere but here. They're fleecing us - "third world-ing" us - before they move on.

Anonymous said...

In the end the government will do the right thing and take a stake in the banking system. The banking regulations will become terribly limiting and the banks will only be able to lend money in support of resource production, manufacturing and infrastructure rebuilding. No more levered ponzi schemes.
Once the basics are financed the economy will eventually grow again.
Instead we know McBama will throw money at the retarded masses using the printing press. And the underlying problems will go unaddressed.

Anonymous said...

You're right, Keith. But unfortunately, the people need to do it by themselves. Their government does not represent them and hasn't for some time.

Lamaria said...

"Like pretty much everything else, I'm just telling you how it's going to be. "

Oh I absolutely know that its coming, in the same way that the bail out bill was a sure thing.

But I think I see your actual message here, I think I get it. By any chance, do you believe there is any merit to this NWO and amero stuff? :)

k.w. - Southern Ca. said...

No possiblity. Things will continue to decline for quite sometime - there's still too much rot in the stock markets alone to wash out.

So far as GM. Ford, Toyota, etc... be prepared for massive layoffs.

This is what happens when the greed of the few outways the interests of the many.

Anonymous said...

You guys still aren't getting it

The banks are insolvent. They will close.


No, you don't get it, Keith. Not ALL of the banks are insolvent.

keith said...

"No, you don't get it, Keith. Not ALL of the banks are insolvent."


Wanna bet?

k.w. - Southern Ca. said...

I tend to lean toward the natural order of things - what's most logical - how things are continually playing out.

This will get a whole lot worse before it gets better.

There is no choice about the matter, no amount of intervention will work at this point, things will get bleaker before they get better - and they must get bleaker to wash out most of the rot we've seen for too many years throughout our economy.

As someone pointed out earlier on this blog, it's the lack of transperancy and trust within American citizens that is causing them to pullback - they finally see just how rigged this entire mess really is, and how the cards are stacked against them.

We're on the verge of a major change within our country, whether you or I like it or not - it's happening.


keith said...
I'm telling you what's going to happen, and if it doesn't, the country will face Armageddon.

If you want Armageddon, then let this panic go to its natural end.

The banks will be closed, there will be no commerce, no lending, no jobs, no food. True Armageddon.

But if you have hope for America, the first step to recovery is admitting you have a problem. Our problem is our banks are insolvent.

So this is what we will do, and what we have to do.

It just is.

If we do take over the banks, the government takes an equity stake, and works to rebuild them. It will cost us far far far more if we don't, since there will be no commerce and no tax revenues for years.

Think it though, then hit me with your argument.

October 10, 2008 9:56 PM

Anonymous said...

"No, you don't get it, Keith. Not ALL of the banks are insolvent."


Wanna bet?



Well if you want to be anal about it, all fractional reserve banks are insolvent and always will be. The scheme only breaks down when there is a run on the bank and their capital reserves are drained.

In the current environment not all banks are being run on or hold this toxic "mark to fantasy" debt but if you have other information that proves me wrong then please provide it.

JR said...

Keith,

Care to explain how Uncle Sam's going to nationalize insolvent banks and recapitalize them? How? Oh, I think I get it . . . I love the smell of ink in the morning.

KEITH - OUR GOVERNMENT IS INSOLVENT!! You think the Chinese and Arabs are gonna pony up for this adventure. No, this is one escapade they'll be sitting out.

Anonymous said...

Keith, I think you are over generalizing in this comment. Yes, there are several hundred very large scale banks who got caught up in the idiotic debt based securities racket and need to be taken over, revamped, and then resold. But there's also lots of much smaller banking organizations who never participated in the madness. I do my local banking at a bank that has one branch and is owned by a very wealthy family that isn't about to piss away their hundreds of millions on foolishness. Even during the craziest portion of the local real estate boom, which I would say occurred around here in late '05 and early '06, they never wrote a mortgage without at least a 20% down payment and a full credit check, careful appraisal of the property, etc. Those kind of banks survive come what may, and they might be expanded in scope as the insolvent giants are liquidated.

Paul E. Math said...

Sorry, Keith, you've lost me on this one, buddy.

Our executive and legislative branches of government are every bit as corrupt and incompetent as wall street leadership. And then some.

The last words you ever want to hear in your life: "We're from the government and we're here to help."

Hurricane Katrina, anyone?

Some people have stored wealth whereas others would be willing to rent (ie: borrow) that wealth. Transactions happen. Banks spring up to facilitate transactions.

The only role for government in this is to prevent fraud and deception.

Paul E. Math said...

“Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.” Andrew Mellon, Treasury Secretary in 1929.

No, we should not nationalize the banks.

Eric said...

Interesting bit I just heard on Market Place. Where is all the money going that is fleeing stocks right now? Its going into banks. Bank deposits have increased four fold this week. This is helping the banks out by pumping much needed cash into the banking system. Albeit, not nearly as much as they probably need by a long shot.

Pay Lay Ale said...

Keith said,

"You guys still aren't getting it

The banks are insolvent. They will close.

Got it?"

Of course they're insolvent, and they all need to be shut down. We need a new currency, one that's not born and conceived in sin. A currency that's not a debt-based currency that enriches the banks.

Bill in St. Aug said...

keith,

I see a couple of things wrong with what you are saying:

1) You say that nationalizing the banks is a good thing. Ok, the same government that gave us the Iraq war, the patriot act, et. al. is going to do the right thing with the banking system. OK. Whatever.

2) We can't survive without our current banking system. Again, I call BS. I can go months without banking. If I can do it, you can do it. If you can do it, we all can do it. FUCK the banks! Banking is not eating, breathing, or even doing business. Let the current banking system fail and something else rise up in its place... people have money... if you need a loan and can PAY the loan, you'll get the loan.

We NEED to get off this gravy train of cheap credit and the government doesn't want us to do that!

Anonymous said...

Keith is Deep Throat. Don't question him.
He KNOWS.

Anonymous said...

Here's the question I have.

The banks are "borrowing" from the Fed at 0% and refusing to lend out the money except to each other at LIBOR premiums.

In that situation, why do we need banks at all? Just get rid of them as the middleman and have the Fed fund lending directly. We as borrowers save LIBOR, the overhead of the banks (including big cash payments to executives), and we get a more efficient and fluid economy where ACTUAL PRODUCTIVE ACTIVITY is profitable (as opposed to exotic derivative paper-pushing).

Anonymous said...

U.S. Proceeds With Plan for Equity Stakes in Banks

http://tinyurl.com/477mtw

It IS happening

Anonymous said...

Keith,
I think no one really knows what will actually happen, there seem to be a number of curve balls coming our way. I am not much of an economist and by no means a democrat or a republican. I don't belong to any religion and the only thing I have followed in my life so far has been your blog. I'd can't remember anything you said that did not happen and you are obviously a very smart man, both book wise and street wise. I can tell you that so far you've saved me from buying a condo in Miami and I can't begin to tell you how I appreciate your blog!!

Anonymous said...

I have accounts in 3 different banks, none of them are insolvent. Why should we have Schummer, Dodd, and Barney Frank running banks with his fag boyfriends as executives. You know that's what's going to happen if the Democrats put the hands on private banks. Then in a matter of 10 years, the banks are insolvent again and Barney Frank's boy-toys go back to pottery, while the taxpayer picks up the tab.

Anonymous said...

So… the answer is a bankrupt government buying shares of insolvent banks to keep us from Armageddon? Is this true?

Anonymous said...

So far as GM. Ford, Toyota, etc... be prepared for massive layoffs.

This is what happens when the greed of the few outways the interests of the many.


You mean the union parasites, right?

Anonymous said...

I wouldn't waste my time listening to Roubini. He's like a broken clock which tells the right time 2x a day. Same goes for that old geek who live in Singapore and talks up commodities. His 15 minutes of fame are up and I care about what he says so little I'm too lazy to try and remember his name.

That said,
-Partial nationalization through buying shares in banks is a given at this point.
-I'd not worry about the Chinese or Arabs dumping dollars...they'd get hurt probably worse in the long run.
-If Obama wins and he sticks to his campaign promise of "off" foreign oil in 10 years (its doable) the US still has a way out of this mess and can lead the world again.
-That said, I fear for Obama's life right now. I give it a 50/50 shot at the oilmen or some other conservative group going after him before the election. Better than 50% chance during his presidency. Sad but true. The power brokers aren't about to let him shake things up the way they need to be.

Alex3191 said...

Let them die ! they deserve it ! i rather live in a whole new world without (fractional reserve) banks . no more (unsecured) loans. first save for it, and then buy it. cash baby, cash. what's so bad about being responsible with your finance ?!
And Keith, CUT THE DRAMA ! I dont give a s*** about the (failing) banks.
If we let them ALL FAIL, the history (hundreed years from now) will say "that system has been proven to be wrong, rotten to the bone. we can not use it !" . We save the banks somehow (reset buton etc), and the future generations will try using it further. NOT A GOOD IDEA.
"Maybe it's your time to lose" said the devil (lose what ? this financial system ).
And dont worry Keith, we'll be fine ! sooner or later, it's a matter of time ..

Anonymous said...

Keith is right ,in order for a modern day society to function ,you have to have functional banks for commerce ,bill paying .money storing, short term credit making ,you name it .

We don't need the investment banks as much ,and we really don't need the unregulated Hedge Funds ,they can eat it as far as I'm concerned .

It's a pick and choose who fails and who doesn't at this point because the government doesn't have enough money to bail out all
over-leveraged Companies that are in the red . New companies will emerge to pick up the slack and some companies will need to merge to survive , and some must fail .

Eventually any company that must get the assistance of the government will need to go back to being a private business again ,but that is after the emergency is over with .

The danger is that the government involvement will continue after the emergency is over and we don't go back to the capitalism ,but move more toward socialism .

There is no question that a entire
purging is needed and the corruption must be addressed .

At this point nobody has any faith in the corrupt companies and Banks don't trust each other and banks certainly don't want to lend to flakes anymore . So the corruption must be addressed in order for the
system to regain any kind of trust
again . In fact the public is outraged that the same parties that created this mess are benefiting from the Bail Outs . The street needs some blood . The
liar loan speculators can't be rewarded either or the whole system goes into revolt and the good people start walking to .

Current Politicians days are numbered and the real economy must get productive again .I believe that at least a 10 year period of time needs to go by for this Nation to pay for its folly .

Right now its a very dangerous time in history and the exact right solutions need to be
applied . Justice must take place on many levels or you lose the Nation and it will remain corrupt .
There is nothing wrong with capitalism ,but unregulated capitalism and lack of enforcement of the rule of law is the killer of well functioning capitalism .

And finally the blame for this
meltdown does need to be sorted out . It was a Black Swan event in the sense that the corruption was so widespread . The people just went along with the game that was created for them by the Market Makers . The innocent parties that
didn't have anything to do with this mass brainwashing and greed
debt leverage game should be spared punishment the most ,but
highly unlikely . During the Great Depression even people who never even bought stock were pulled down by the Stock market crash and the failure of many banks . It wasn't fair at all ,but it happened . Some people will fare better than others during the future days of this correction .
God help us all .

white trash said...

I don't know who said it but it sure rings true these days:

The Republicans have become Democrats, and the Democrats have become Communists.

We're in for a treat because everyone knows how well Socialism and Communism work in solving real world problems and creating wealth. The greenies will especially love the reduction in populations that seem to accompany Communist ideology. Will they grind the bones to make my bread?

Anonymous said...

certainly they will have to pay a premium price for a name like Bank of America.......