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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: mutulu who wrote (151149)	9/27/2008 10:03:09 AM
From: Micawber	Read Replies (3) \| Respond to of 306849

A publication called "Financial Armageddon" sounds like a wonderful place to get straight, unbiased reporting on this subject. Thanks for your input.

To: mutulu who wrote (151149)	9/27/2008 1:31:29 PM
From: MulhollandDrive	Read Replies (2) \| Respond to of 306849

it looks like the liquidity crisis is an unintended consequence of the fed's 'temporary' lending facilities (bailout) Is a Potential Bailout Making Things Worse? MARGINAL REVOLUTION By Alex Tabarrok on Economics Ken Rogoff says yes. Elizabeth Warren at Credit Slips summarizes Rogoff's discussion at a Harvard Roundtable (video): ................Any liquidity crisis is caused by the promise of a government bailout. Ken said that his many friends in investment banking said that there is plenty of money to invest in financial services, but right now it is "sitting on the sidelines." Why? Because the financial services industry does not want to pay the terms required to get that money back in circulation (e.g., give up equity). As he put it, why do business with Warren Buffett who will negotiate a tough deal, if you believe that the government will ride in soon with cheaper cash? Ken also talked about the need to shrink the financial services sector. He thinks it is good that the investment banking houses are failing and many people on Wall Street are losing their jobs because, in his view, we have an oversupply in that sector and our economy just can't support it. Ken's background with the IMF and on the Board of the Federal Reserve add a certain credibility to his assessment of conditions on Wall Street. If he is right, the $700 bailout is saving some investment bankers' jobs in the short term, but overall it is just making the financial system worse.......... In a related point Felix Salmon suggests that the Ted Spread may not be a valid measure of distress when the Fed is providing lots of liqudity. ...if you're a bank, you really neither want nor need three-month interbank funding right now. Global central banks, led by the Federal Reserve, have flooded the system with so much overnight liquidity that you can get as much cash as you need, at a much lower interest rate, directly from your central bank, overnight. The choice between that and locking in a high interest rate for three months is a no-brainer.