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To: Chispas who wrote (77728)	4/15/2008 3:45:02 PM
From: Elroy Jetson	Respond to of 116555

Reserve Bank of Australia takes hard line on bail-outs . Sydney Morning Herald -- Jessica Irvine -- April 16, 2008 -- business.smh.com.au GOVERNMENTS around the world must not bow to pressure to bail out the private shareholders or managers of troubled financial institutions, the Reserve Bank of Australia governor, Glenn Stevens, said yesterday. Glenn Stevens, RBA Governor But they should be prepared to step in, via central banks, to act as a "lender of last resort" to protect financial systems if key institutions were to wobble as a result of the credit crunch. While insisting the Australian banking system remained "in good shape", Mr Stevens said there were several lessons to be learnt from the near-collapse of British bank Northern Rock and the hasty marriage arranged by the US Federal Reserve of the crippled investment bank, Bear Stearns, and JPMorgan Chase. Mr Stevens said in a speech at the Australian National University that ultimately it was a decision for governments, not the central bank, to decide whether to bail out a bank or financial institution. But once that decision was taken, governments and central banks should communicate their intentions quickly and clearly to avoid a "run" on bank funds, as happened with Northern Rock. To this end, he said, it was important for prudential regulators to have a clear idea of the solvency of lenders at any time. Ideally, rescue loans would be provided as bridging finance only. If it became apparent longer-term funding was needed, this could be a big drain on public funds. If this were to happen, it was important that organisers and shareholders of troubled institutions wore some of the pain. "Any such support should … come at considerable cost to the private owners and managers of the troubled entity. Public-sector support should not be used to 'bail out' private shareholders or those who were responsible for running the troubled institution," he said. This was important to guard against "moral hazard" - where companies which knew they would eventually be bailed out without penalty would run higher risks, increasing the chance of getting into trouble. Such penalties could include higher interest charged on loans, along with non-monetary penalties like sacking the chief executive, executives or board members of the company and ensuring private shareholders bear losses from the financial difficulty. Mr Stevens noted "ongoing discussion" in the US and Britain as to whether shareholders in Bear Stearns or Northern Rock could expect to see some of the value of their investments restored. Minutes from the Reserve board's meeting two weeks ago, at which it decided to leave rates on hold, were also released yesterday. They reveal increasing confidence that higher interest rates are having a "significant restraining influence" on households. Rarely has Australia's Reserve Bank been called upon to act as a lender of last resort. The first case was in 1931, during the Great Depression, when the then state-owned Commonwealth Bank rescued the Primary Producers Bank. In the mid to late 1970s, the Reserve also came to the aid of several illiquid building societies by providing loans through their bankers. .

To: Chispas who wrote (77728)	4/15/2008 10:17:31 PM
From: Chispas	Respond to of 116555

Turbine Oil Story .. I have a young (44-year old) neighbor who often asks for my help... Today, "My 3 ton hydraulic floor jack quit working, it probably needs some hydraulic oil added, do you have some ?" "Sure, come on over"... A few minutes later here he was and I had laid out tools and the oil on my workbench.... He picked up the bottle of oil and said, "This says 'Turbine oil', I thought you said that you had 'hydraulic oil' ?" "Young man, if there ever was an honest government, the maker of that oil would have been permitted to label 'turbine and hydraulic oil', but we don't have much honesty left anymore." In a few minutes he and I had his floor jack working perfectly, and his closing remark, "I'm beginning to believe most everythig you say, and wish that I'd bought gold coins last year when spot price was $666.00 as you recommended." I doubt it. I've recommended gold investing to friends and relatives for 40 years, and no one has ever followed that advice. Strange !