muses of the moment

February 12, 2009

Batten down the hatches

Filed under: The Financial Crisis — totallygroovygirlfriday @ 9:46 pm

Another wave in the financial crisis coming soon. Banks are not solvent and are relying on the newest bailout to survive. The fundamental problems have NOT been addressed. This is NOT fixed.

Prepare now, if you have not already.

Here are some quotes from a story about the “emergency meeting” at Goldman Sachs after Geithner’s Tuesday Press Conference. Top Goldman executives were there AND top hedge fund operators:

What the group concluded was that the longer the plan takes to produce, the more difficult the situation becomes. Some (Goldman executives) actually had met with officials at the New York Federal Reserve after Geithner’s speech and were told the plan is still weeks away. That wasn’t received well.

The worse the economy becomes and the securized products held by the banks lose more value.

Ken Griffen, the founder of Citadel, stressed the need not merely to fix the prices of the securitized bonds, but also that any plan must stabilize the root cause of the problem—the mortgages themselves. And he came up with several ideas to spur home-ownership that could revive the housing market.

Link to the article at CNBC

The banks are well aware that if they had to disclose to the public the true value of their “assets” (i.e. derivatives instruments), they would be bankrupt. They have to get those “assets” off their books by selling them to the government, collecting more cash from the government to off set them, or wait until the market will buy them. There is a reason why the market doesn’t want these “assets”, the taxpayer should not want them either.

I don’t know who Mr Griffin thinks he is going to give a mortgage to, no one has  job. True employment rate is at 18%. People that have a mortgage are struggling to pay it.

Bottom line is the Big Banks are worried. That means it’s not over.

I agree with several of the economists out there, banks will be nationalized at some point. That’s probably the real reason banks are nervous. The executives will then become federal employees, our public servants.

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