http://news.bbc.co.uk/1/hi/business/7631500.stm
He said that during the hearing Fed chairman Mr Bernanke disclosed that the Treasury would attempt to buy these debts from banks at close to their "hold-to-maturity" value, not the market value.
In practice, it means banks who sell their debts to the Treasury would receive cash equivalent to something like twice the value in their books of these poisonous assets..
In other words they would book a profit from selling to taxpayers.
It would represent a massive injection of new capital into the US banking system - for which taxpayers would receive nothing in return, except for the assurances from Mr Paulson and Chairman Bernanke that their banking system would not collapse
This is not capitalism - this is a very peculiar form of socialism.
Under capitalism weak businesses fail, this is meant to happen, this allows others to have a crack at the whip .. (Tescos?)
“To big to fail” should not happen – we explicitly stop companies becoming that big – via anti monopoly regulation – right??
To bail or not to bail - the US Senate is wincing at splashing the taxpayers cash - too late! The bankers have taken their slice and walked. All that’s left in the bucket are our savings, pensions etc. If we throw the bucket away, it’s our loss. If we plug the holes, we’re only saving what was ours in the first place.
like many other libertarian economists Ron Paul (republican – Texas) called it in 2003 (take a look http://www.lewrockwell.com/paul/paul128.html )
So we need a trip to blamesville – the two front candidates seem to be “greedy banks” and “government regulatory failure”. Banks ARE greedy, but we knew that already. They are SUPPOSED to be greedy and make as much $$$ as possible for their share holders. Asking a business to restrain itself from making money is like .. well... like asking somthing very crazy.
That would leave the regulator then.
technomist
Its not necessarily taxpayers cash, by the way, if its really money owed by the government on behalf of the taxpayers to the people they have been borrowing it from for years and who need to be paid back: all those foreign governments and businesses.
The US government will be printing money to pay for this - the debt and the currency it is valued and repaid in will become less valuable as a result of all this. It remains to be seen in the long run if the rest of the world will be as interested in this voodoo 'bail out' as the American bankers seem to be. I have no idea of all the silent ways in which such a lack of confidence would manifest itself.