Cancellation of contracts is a necessary step to clear the
system. However, nationalization of failing casino players
(such as AIG) results in all other players at the craps table
getting paid. Obviously, a lot of Moral Hazard is involved.
On the other hand, you just can't nationalize strong players
at the craps table, such as GS or JPM.
Pushing for "expanded powers" of the Fed and the Treasury,
so that they can implement receivership for hedge funds
and insurance giants, is the right way to go, IMHO. Then
the contracts don't get paid, at least, not the full price,
and all players at the craps table who destroyed the system
ultimately get nationalized, broken up, and sold back to
public. As a result of such reform, hopefully, we will
no longer have "too big to fail" dangerous financial
institutions. If it is implemented well, that is.
I hope congress grants expanded powers to the Fed and
the Treasury similar to FDIC. Then the next step will
be... receivership for AIG, which has been used as
a tool to channel the government money to GS this Fall.
Was AIG a "plot" by the "criminals"? I doubt it. It failed,
so the government took it over to avoid the big "splash" from
derivatives, just as they did with Bear. They did not do
it to Lehman, the "splash" happened, TED spread got to 5 and
the DOW got cut in half. Lehman was a small player. <G>
We will look at the new BIS statistics for
December 2008 to see if there is any hope. Naturally,
as pessimists would say, the same people are running
the show, so ... are they all bought? My answer to
this is yes, the same people are there. However, this
does not mean necessary reforms won't be implemented as
the administration and the public anger keep pushing for it.
Simply put, they have no choice. |
