Friday, February 13, 2009

Just Nationalize Already

I'm the biggest money grubbing capitalist that you will ever find, but when I trade these markets on a daily basis and continue to get suffocated with the same rhetoric and rudderless leadership from both sides of the political aisle, I say let's just do it. Nationalize the garbage banks with garbage assets and let the market get on with acting like a market gain. The powers that be feel that nationalization would send a message that we are in trouble? Newsflash to the sevants on K Street, the dam is breaking, and all your collective thumbs in the wall have done absolutely nothing so far. If they don't do it soon it will be another case of "too little too late."

Nouriel Roubini has this to say in the Washington Post this morning:

As free-market economists teaching at a business school in the heart of the world's financial capital, we feel downright blasphemous proposing an all-out government takeover of the banking system. But the U.S. financial system has reached such a dangerous tipping point that little choice remains. And while Treasury Secretary Timothy Geithner's recent plan to save it has many of the right elements, it's basically too late.

The subprime mortgage mess alone does not force our hand; the $1.2 trillion it involves is just the beginning of the problem. Another $7 trillion -- including commercial real estate loans, consumer credit-card debt and high-yield bonds and leveraged loans -- is at risk of losing much of its value. Then there are trillions more in high-grade corporate bonds and loans and jumbo prime mortgages, whose worth will also drop precipitously as the recession deepens and more firms and households default on their loans and mortgages.

Last year we predicted that losses by U.S. financial institutions would hit $1 trillion and possibly go as high as $2 trillion. We were accused of exaggerating. But since then, write-downs by U.S. banks have passed the $1 trillion mark, and now institutions such as the International Monetary Fund and Goldman Sachs predict losses of more than $2 trillion.

Nationalization is the only option that would permit us to solve the problem of toxic assets in an orderly fashion and allow lending finally to resume. Of course, the economy would still stink, but the death spiral we are in would stop.

Here is the fully story.

8 comments:

drew said...

I have been a commercial Mort banker for 10+ yrs. It has always been harder to find good deals than to find good banks to do them. this has CHANGED. The banking industry is holding the US hostage, lower LTV ratios,higher debt coverage requirements all had lead to banks not doing loans, good loans, investment grade loans! Their cost of funds has never been lower and the spreads the are charging the borrowers are at a 10 yr high! Its killing my business and causing a chain reaction. I just canceled my Disney trip for this year,put off home remolding, both of which would have put $$ in the economy. The banks are part of the cause for this problem and they are the cause of the continuing problem. Until the tax payers buy all the bad debt!! What a bunch of BS!!

drew said...

I have been a commercial Mort banker for 10+ yrs. It has always been harder to find good deals than to find good banks to do them. this has CHANGED. The banking industry is holding the US hostage, lower LTV ratios,higher debt coverage requirements all had lead to banks not doing loans, good loans, investment grade loans! Their cost of funds has never been lower and the spreads the are charging the borrowers are at a 10 yr high! Its killing my business and causing a chain reaction. I just canceled my Disney trip for this year,put off home remolding, both of which would have put $$ in the economy. The banks are part of the cause for this problem and they are the cause of the continuing problem. Until the tax payers buy all the bad debt!! What a bunch of BS!!

upsidetrader said...

thanks drew and u know i'm with u

Jana said...

Drew is my bro-in-law - I forwarded your post to him and a link to the background of your twitter page.

Holla!

upsidetrader said...

j girl

holla back

Tony said...

I have no idea what to think, but I enjoy your commentary and twitter. I find it very interesting that raging capitalists are now begging for bank nationalization! I see you point.

I'm a physician with no debt and largely unaffected by this so-called "meltdown", altho I'm sure I'll be swept up into it eventually. I've always thought banks and lending should be a utility with humungous regulation, little leverage and uniform standards-- like a utility.

I find it frankly amusing that all the supposed attributes of capitalism has now brought the system to its knees. Makes me glad I turned left into med school and not right into business school lo those many years ago. I may be poorer than Angelo Mozillo, but my soul is still intact.

Keep up the great work, Upside.

Grodge

GL said...

a friend of mine just purchased a condo in San Francisco. The condo was close to $1M. The problem is the bank did not ask for 20% down payment, they required 70%. Yes, you are reading that correct. I know for a fact that he has $2M liquid in one of his bank accounts and they still raped him. Perhaps because he is self employed. It's just wrong.

According to him he will also be cutting back on any "nice to have items" through the remainder of the year.

We need to do something. Even people I know that have a crap load of money are suffering from buying paralysis. It's very strange!

Nationalize the banks and hang all the bank executives.

As the Nike slogan says "Just Do It"

Jonny said...

Yeah, fuck the banks! Hang the bastards. All of them.

I thought there was incredible irony in how the general public (lead by the media, of course) reacted to the auto bail out versus the bank bail out. We were pretty cool about the banks but how we //loathed// the auto guys... Was it some sort of self hatred? On one hand we were happy to see the crooks in white collars get everything and on the other we wanted only pain for the largely blue collar car industry... What IS that about?

As for the banks, though, their crimes are many and their misdeeds are multitudinous. If George and Dick hadn't spent eight years softening us up to scum bugs fucking us over, perhaps things would be different and we'd actually be in the streets demanding real change, real accountability.

The banks knew. They always knew.

Now, we're picking up the pieces. Why? Because to them we're just a useless underclass of useless eaters. That's what you get when you have a system that rewards sociopaths from cradle to grave.

Welcome to America.

Not mine or yours. But it's theirs. We just live here.

About Me

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I am a former hedge fund manager, broker and capital markets dude who now trades for his own account. I love what I do. I will try to post some stocks and an occasional chart that looks attractive for entry.I will also try to point out the idiocy of conventional wisdom and the lack of value added by the mainstream financial media. These postings should not be viewed as recommendations.