NationStates Jolt Archive

http://www.businessspectator.com.au/bs.nsf/Article/US-Treasury-to-invest-US20b-in-Citigroup-LP7ZY?OpenDocument
http://www.businessspectator.com.au/bs.nsf/Article/The-bad-bank-blueprint-LP9H5?OpenDocument&src=sph
http://www.bloomberg.com/apps/news?pid=20601087&sid=aP4OqmI48VQ8&refer=home
http://money.cnn.com/2008/11/23/news/companies/citigroup/index.htm?postversion=2008112401
http://www.ft.com/cms/s/0/8e4e0ee4-b7fd-11dd-ac6d-0000779fd18c.html
http://www.ft.com/cms/s/0/447938ee-b9f0-11dd-8c07-0000779fd18c.html
http://www.informationarbitrage.com/

Same basic idea as with Lehman Brothers, except after what happened last time the powers that be have decided not to let them fail.

So this is the thread to express your outrage, make predictions, post articles or opinion pieces and generally let off steam.

Well, I've been running my brain over the development federal-state regionally distributed energy policy for the past two weeks, so I've been a bit out of touch in regards to issues financial, but this is a significant moment in everything that's happened so far.

With this bailout, we know that Citigroup is the epitome of the bank that was "too big to fail".

I'm not totally a functioning, communicating human being at the moment.

Glad I'm not with Citi.

I found the terms of the deal: http://online.wsj.com/public/resources/documents/citi-term-sheet-1123.pdf

As far as I can tell, the idea is to generate a "bad bank" within Citigroup's balance sheet, where the toxic stuff goes. The government will essentially guarantee any costs and take any losses coming up associated with this stuff and make sure that Citi won't die because of it. Citi will only take a maximum of $29 billion in losses from MBS. Anything beyond that is divided across the Treasury/TARP, the Fed and the FDIC.

In return, the government gets $7b worth of preferred shares, essentially taking a stake that will pay dividends of 8%. Common stock (ie mom and dad shareholders plus most other investors) won't get any dividend beyond a cent a share, thus insuring Citi will retain money to fix its business.

Oh, and finally, the government takes effective control of compensation for executives.

I found the terms of the deal: http://online.wsj.com/public/resources/documents/citi-term-sheet-1123.pdf

As far as I can tell, the idea is to generate a "bad bank" within Citigroup's balance sheet, where the toxic stuff goes. The government will essentially guarantee any costs and take any losses coming up associated with this stuff and make sure that Citi won't die because of it. Citi will only take a maximum of $29 billion in losses from MBS. Anything beyond that is divided across the Treasury/TARP, the Fed and the FDIC.

In return, the government gets $7b worth of preferred shares, essentially taking a stake that will pay dividends of 8%. Common stock (ie mom and dad shareholders plus most other investors) won't get any dividend beyond a cent a share, thus insuring Citi will retain money to fix its business.

Oh, and finally, the government takes effective control of compensation for executives.

And how...

And how...
By making all executive compensation-, bonus- and other packages subject to government approval for the next few years. That means it's up to the regulators to decide whether the executives get the money.

Well, I've been running my brain over the development federal-state regionally distributed energy policy for the past two weeks, so I've been a bit out of touch in regards to issues financial, but this is a significant moment in everything that's happened so far.

Holy shit, no kidding? I did a paper on federal energy policy for my Econ 367 class...

It's interesting...after all the shady practices and mismanagement, banks can just hold out their hand and get hundreds of billions of dollars, but the auto industry asks for a measly 25 billion to keep their head above water, and people are shouting about how they don't deserve the money because they haven't regulated themselves or established a better business plan, and they get nothing.

:rolleyes:

By making all executive compensation-, bonus- and other packages subject to government approval for the next few years. That means it's up to the regulators to decide whether the executives get the money.

I'm kinda tempted to yell "make 'em work for the minimum wage!" but I know that would be counter-productive.

Executives jumping ship when they see the regulator coming will only make things worse.

It's interesting...after all the shady practices and mismanagement, banks can just hold out their hand and get hundreds of billions of dollars, but the auto industry asks for a measly 25 billion to keep their head above water, and people are shouting about how they don't deserve the money because they haven't regulated themselves or established a better business plan, and they get nothing.

Yeah, but at least the banks didn't consistently fight fuel economy improvements for the past three decades, not only costing us untold billions spent on foreign oil and worsening climate change but also increasing dependence on said imports and setting themselves up for failure in the process. I would go so far as to say the cumulative effects of technological stagnation in American auto manufacturing and the amounts of money spent on wasteful oil imports are both significantly higher than the damages posed by the credit crisis.

If anything, the banks did their job too well. The record levels of housing construction and homeownership rates in this country are directly attributable to the loose credit terms and government encouragement of such practices. Unfortunately, reality caught up with the American dream and it degenerated in to a morass of greed and irrational exuberance on all sides.

I think it's the level of sheer arrogance and incompetence as well as the utter disregard for their customers that really makes me unwilling to support any aid to the Big Three. Now, if they were willing to be gradually dismantled like the failed banks or to pass in to government conservatorship as part of that process, I'd consider giving them money.

Yeah, but at least the banks didn't consistently fight fuel economy improvements for the past three decades, not only costing us untold billions spent on foreign oil and worsening climate change but also increasing dependence on said imports and setting themselves up for failure in the process. I would go so far as to say the cumulative effects of technological stagnation in American auto manufacturing and the amounts of money spent on wasteful oil imports are both significantly higher than the damages posed by the credit crisis.

If anything, the banks did their job too well. The record levels of housing construction and homeownership rates in this country are directly attributable to the loose credit terms and government encouragement of such practices. Unfortunately, reality caught up with the American dream and it degenerated in to a morass of greed and irrational exuberance on all sides.

I think it's the level of sheer arrogance and incompetence as well as the utter disregard for their customers that really makes me unwilling to support any aid to the Big Three. Now, if they were willing to be gradually dismantled like the failed banks or to pass in to government conservatorship as part of that process, I'd consider giving them money.

I'm not about to argue that the auto makers haven't been complete fuck-ups on a number of issues, but when banks have gotten over $1 trillion in hand outs over the past few months, seemingly without question, it is utterly ridiculous to me to quibble over 2.5% of that total for the automakers, especially when one considers the number of jobs involved.

It's funny how people have the idea banks just have money thrown at them no-strings-attached. There's usually a pretty hefty interest rate, and other conditions like a transfer of stocks and a certain amount of control over the company. They'd be much better off lending money elsewhere, if only they could.

too big to fail = not capitolism

do i care?

well i care about the message being sent by rewarding criminals for taking over the country and pretty much destroying a heck of a lot that once made it worth something, or so some people thought it did. but then i'm not talking about the economic infrastructure by that, and it would be quite a rambling list to try and explain what i ment for those who don't have a clue.

as for wrecking the international monetary economy by inticing people into bate and switch mortgages.

well anyway, the whole thing is there was too much use of credit, and all these complicated 'leverage' schemes, and now this bailout bussiness is about restoring credit.

i could say "what is wrong with this picture?"

i mean the financial sector has come to look like, if someone had come up to you on the street in the 70s or earlier, and offered you something like that you'd have told them where they could take their scam and what they could do with it, and they'd probably have been doing federal time shortly thereafter.

somehow i don't think this money thing is working the way people who are emotionally attatched to it keep trying to pretend its supposed to.

Same basic idea as with Lehman Brothers, except after what happened last time the powers that be have decided not to let them fail.

So this is the thread to express your outrage, make predictions, post articles or opinion pieces and generally let off steam.

As its presumably a case of bail them out or head for the bomb shelter, theres not much point on ranting regards the actual intervention. One would hope that - resources permitting - theres an invesigation into what went wrong.

I found the terms of the deal: http://online.wsj.com/public/resources/documents/citi-term-sheet-1123.pdf

As far as I can tell, the idea is to generate a "bad bank" within Citigroup's balance sheet, where the toxic stuff goes. The government will essentially guarantee any costs and take any losses coming up associated with this stuff and make sure that Citi won't die because of it. Citi will only take a maximum of $29 billion in losses from MBS. Anything beyond that is divided across the Treasury/TARP, the Fed and the FDIC.

In return, the government gets $7b worth of preferred shares, essentially taking a stake that will pay dividends of 8%. Common stock (ie mom and dad shareholders plus most other investors) won't get any dividend beyond a cent a share, thus insuring Citi will retain money to fix its business.

That's not bad and creating a bad bank is one of the more sensible actions for the regulators, considering (at least from what I have read) on the condition of Citigroup. If it allows Citigroup to continue and does help to stabalise the system then by all means go ahead and do it, after all Citigroup is one of th top 10 banks in the world and needs to remain running.

Oh, and finally, the government takes effective control of compensation for executives.

So with the shares they own how much of a controlling stake is it? A bit unfair if a large majority of the shareholders actually want to increase the pay packets of the executives.

Actually a question Leon, I see they placed the all of these assets to be "ring fenced" will all have a risk weighting of 20%, now why is that? Surely some of these would have to under normal conditions have a risk weighting higher than 20% (mainly residential real estate) so why are they dropping it?

You can talk about it forever but none of you truly understand this enough to assert what is the better choice; not even the so-called experts can.

These wounds are still being inflicted and the real pain will happen later, not now when it's mostly numb.

Actually a question Leon, I see they placed the all of these assets to be "ring fenced" will all have a risk weighting of 20%, now why is that? Surely some of these would have to under normal conditions have a risk weighting higher than 20% (mainly residential real estate) so why are they dropping it?
Two reasons:

1) To free up extra capital to help the firm survive.

2) To reflect the fact that these assets are now government-guaranteed. The losses they can generate to the institution are limited, so I think it is justified to reduce their risk-weighting as far as capital adequacy is concerned.

It's interesting...after all the shady practices and mismanagement, banks can just hold out their hand and get hundreds of billions of dollars, but the auto industry asks for a measly 25 billion to keep their head above water, and people are shouting about how they don't deserve the money because they haven't regulated themselves or established a better business plan, and they get nothing.

:rolleyes:
The big three have been killing themselves for years.

The big three have been killing themselves for years.
Yeah. I think it's important to keep in mind that the reason these banks are getting this support isn't to save jobs in the industry, but because of the central role they play to the economy as a whole. The car manufacturers have been running shitty businesses for a long time, but the reason they're about to go tilt now is for example because people won't or can't get finance for cars - which is because of the crashing financial system.

The pain inflicted by the big three going bust will no doubt be significant, but it's not really as central to the US (and global) economy as a failure of Citi would be. The worst thing about the car bailout talk was that they wanted to use TARP money to do it, which just tells you that they still don't understand what they voted for and why they did it.

If they want to engage in some more corporate welfare and help out the big three, they can go right ahead - it's not my tax money (mine is being used to help out local Australian car manufacturers :rolleyes:). But they need to do that seperately from the work that is actually important.

It's interesting...after all the shady practices and mismanagement, banks can just hold out their hand and get hundreds of billions of dollars, but the auto industry asks for a measly 25 billion to keep their head above water, and people are shouting about how they don't deserve the money because they haven't regulated themselves or established a better business plan, and they get nothing.

:rolleyes:

they will get bailed out. Democrats cant afford to see Michigan's economy cease to exist. just they don't even want to suggest it while bush is in office so there is no chance the republicans can claim even a shred of responsibility.

they will get bailed out. Democrats cant afford to see Michigan's economy cease to exist. just they don't even want to suggest it while bush is in office so there is no chance the republicans can claim even a shred of responsibility.

Nope, they just tried to pass along the responsibility of the collapse.

they will get bailed out. Democrats cant afford to see Michigan's economy cease to exist.

I think it's been made abundantly clear that no one outside of Michigan cares if that happens.

Two reasons:

1) To free up extra capital to help the firm survive.

2) To reflect the fact that these assets are now government-guaranteed. The losses they can generate to the institution are limited, so I think it is justified to reduce their risk-weighting as far as capital adequacy is concerned.

Of course, I really should have thought about it more rather than just asking a stupid question, it seems really obvious. And it certainly is justified to reduce the risk weighting due to the second reason and a good idea due to the first.

But thanks anyway for pointing it out to me, if I was thinking about it I should have been able to work that out. You don't know how stupid I feel right now.

If they want to engage in some more corporate welfare and help out the big three, they can go right ahead - it's not my tax money (mine is being used to help out local Australian car manufacturers :rolleyes:). But they need to do that seperately from the work that is actually important.

Not to mention some of our tax money go straight to Japan and America because of the help to the car manufacturing in Australia.

But this is not the thread to go into the car manufacturing sector in Australia and why over the past 50 years to much support has been placed into it, where it should never have been.

I think it's been made abundantly clear that no one outside of Michigan cares if that happens.

Until the unions bosses threaten to get their members to not go to the polls or worse yet get them to vote republican.

Unions could easily reverse party house and senate membership lines.
one thing the democrats cant do is piss off AFL-CIO.

Until the unions bosses threaten to get their members to not go to the polls or worse yet get them to vote republican.

Unions could easily reverse party house and senate membership lines.
one thing the democrats cant do is piss off AFL-CIO.

Union membership has dropped drastically in the last few decades. There are still a lot of union members, but the union doesn't have nearly as much clout as it once did. They backed Kwame Kilpatrick last year, but he was still (thankfully) ousted.

Union membership has dropped drastically in the last few decades. There are still a lot of union members, but the union doesn't have nearly as much clout as it once did. They backed Kwame Kilpatrick last year, but he was still (thankfully) ousted.

Kwame is the black Nixon of Detroit. And he didn't lose an election so much as he resigned the office. Unions pull on elections Versus Unions pull on federal judges who don't have to face election are two different matters.


Actually i take it back he is like a Combo of the worst parts of Nixon and Clinton.

But this is not the thread to go into the car manufacturing sector in Australia and why over the past 50 years to much support has been placed into it, where it should never have been.

Quite right. We should leave the manufacture of luxury cars to the Europeans, the manufacture of practical cars to the Japanese (and their subsidiaries in China) and the manufacture of American cars to the Americans.

The real tragedy is that people around the world all want to buy a car. If we'd played our cards right, they'd all be lining up at the dealerships for the '08 VX-Deluxe Stump-Jump Plough. The revolutionary new one, with the laser guidance and mp3 player.

Couldn't hurt.

Quite right. We should leave the manufacture of luxury cars to the Europeans, the manufacture of practical cars to the Japanese (and their subsidiaries in China) and the manufacture of American cars to the Americans.

The real tragedy is that people around the world all want to buy a car. If we'd played our cards right, they'd all be lining up at the dealerships for the '08 VX-Deluxe Stump-Jump Plough. The revolutionary new one, with the laser guidance and mp3 player.

I don't know whether you are taking the piss out of me or whether you are being serious?

Australian veteran commentator Alan Kohler is not a fan of the whole issue: http://www.businessspectator.com.au/bs.nsf/Article/Keys-to-the-Citi-LPRNG?OpenDocument&src=sph

Plus, he links to an interesting research paper: http://www.imf.org/external/pubs/ft/wp/2008/wp08258.pdf

The only good part of this plan is the control over the executive payouts - if these are used.

Once again the US is just trying to roll the problem forward, rather than bite the bullet. In the short term (up to maybe three or four years even) the bail out may help, but it is like giving alcohol to an alcoholic. It just makes them feel better and does them no good whatsoever in the long term.

The bad debts have to be faced at some point, and if this means one or two more major financial houses failing now then that is better then five or six of them in a few years.

Union membership has dropped drastically in the last few decades. There are still a lot of union members, but the union doesn't have nearly as much clout as it once did. They backed Kwame Kilpatrick last year, but he was still (thankfully) ousted.

The states were unions are strongest (i.e. Michigan) are also heavily populated and firmly Democratic. The loss of such key states would hurt them immensely. I do think the Big Three will get some sort of Federal aid eventually, but at least Congress is making them come up with a plan rather than just hand them money. Regardless of that the industry is due for a major contraction anyways. You have an industry set up to sell 16 to 17 million units a year in the US when the substainable rate for the next few years is likely 10 to 11 million or so.

On topic: I personally favor breaking Citi up and selling off/spinning off the components. Of course as a community banker I am rather biased.

The bad debts have to be faced at some point, and if this means one or two more major financial houses failing now then that is better then five or six of them in a few years.
Yeah, but they tried that with Lehman Brothers, and the entire world went to shit. Citi is absolutely huge, worldwide. The number of obligations it has to other financial firms and the real economy is staggering.

I've seen a few criticisms with regards to the (lack of) real separation between the bad assets and Citi's balance sheet, and Alan Kohler in my previous post also mentions the fact that even the full guarantees of $306b are small compared to the actual value of Citi's balance sheet as a whole. But letting Citi fail after we've seen what happens when you do it is just careless.

Yeah, but they tried that with Lehman Brothers, and the entire world went to shit. Citi is absolutely huge, worldwide. The number of obligations it has to other financial firms and the real economy is staggering.

I've seen a few criticisms with regards to the (lack of) real separation between the bad assets and Citi's balance sheet, and Alan Kohler in my previous post also mentions the fact that even the full guarantees of $306b are small compared to the actual value of Citi's balance sheet as a whole. But letting Citi fail after we've seen what happens when you do it is just careless.

The really strange thing is that after Lehman Brothers failed the world just carried on regardless. Only the financial world went to shit - and that appears to have had little or no effect on reality outside of this rather endogenous and self centred sub set.
Farmers still plant and harvest crops, fishermen still catch fish, miners still extract mineral and whores still whore.
Kohler mentions a figure of 1500 billion - but this is just a bunch of numbers. Yes it would affect the profitability of financial shareholdings, yes it would make credit more limited - not necessarily more expensive.

Citi can be left to fail, there is no need to prop up a rotten and un justifiable castle constructed of financial advisers calling cards.
The financial system lost its way about three decades ago, when it started inventing new ways of selling debt and lost sight of its principle function. The financial system is there to facilitate other businesses, to provide cash flow, to manage fund transference, to provide short term resources in return for the long term receipt of resources. It is not there to extract every last cent out of the poor working mans pocket so that they can leverage this into billions of non existent future revenues.

I work in the financial world, as you know, I work in risk systems development. Perhaps this makes me a little more sensitive to these issues than most, in that to do my work properly, I have to understand what risk really is. Where abnormal risk exists you will always find some scheme to generate paper revenue. Get rid of these schemes, mark down as losses the reduction in book revenue that was never real in the first place, and then maybe we can rescue what is left of the system.

The financial system would be in great shape if it had not tried to become more important that the real world that it is supposed to service.

Australian veteran commentator Alan Kohler is not a fan of the whole issue: http://www.businessspectator.com.au/bs.nsf/Article/Keys-to-the-Citi-LPRNG?OpenDocument&src=sph

Interesting take but he does acknowledge that it needs to be done, he also says that this needs to be done because of the incompetency and inefficiency of the relevant government departments to act quickly and decisevly. Which to me seems what this article is about rather than an attack on this actual plan.

The really strange thing is that after Lehman Brothers failed the world just carried on regardless. Only the financial world went to shit - and that appears to have had little or no effect on reality outside of this rather endogenous and self centred sub set.
Farmers still plant and harvest crops, fishermen still catch fish, miners still extract mineral and whores still whore.
Kohler mentions a figure of 1500 billion - but this is just a bunch of numbers. Yes it would affect the profitability of financial shareholdings, yes it would make credit more limited - not necessarily more expensive.

Citi can be left to fail, there is no need to prop up a rotten and un justifiable castle constructed of financial advisers calling cards.
The financial system lost its way about three decades ago, when it started inventing new ways of selling debt and lost sight of its principle function. The financial system is there to facilitate other businesses, to provide cash flow, to manage fund transference, to provide short term resources in return for the long term receipt of resources. It is not there to extract every last cent out of the poor working mans pocket so that they can leverage this into billions of non existent future revenues.

I work in the financial world, as you know, I work in risk systems development. Perhaps this makes me a little more sensitive to these issues than most, in that to do my work properly, I have to understand what risk really is. Where abnormal risk exists you will always find some scheme to generate paper revenue. Get rid of these schemes, mark down as losses the reduction in book revenue that was never real in the first place, and then maybe we can rescue what is left of the system.

The financial system would be in great shape if it had not tried to become more important that the real world that it is supposed to service.

It's funny how you mentioned miners, because due to this crisis they are actually mining less now and the prices of these resources have actually dropped. I suppose next you would be saying that these problems have nothing to do with the recessions in Japan, Germany, NZ and the potential recession that the USA may have?

I don't know whether you are taking the piss out of me or whether you are being serious?

Sorry, I was just farting around. Stump-Jump Plough?

I don't mind some government assistance if a manufacturer has a genuine crisis, and I'm keen for it with startup industries (like solar power or sea farming for instance.) Trying to keep car manufacturing in Australia with government support is pretty dumb, it's not going to become more viable.

Sorry, I was just farting around. Stump-Jump Plough?

I don't mind some government assistance if a manufacturer has a genuine crisis, and I'm keen for it with startup industries (like solar power or sea farming for instance.) Trying to keep car manufacturing in Australia with government support is pretty dumb, it's not going to become more viable.

oh ok, yeah it is because it never was really going to be viable and the reason why tariffs on cars used to be so high. At one point we had seven different car manufacturers in Australia mainly because of these high tariffs, it never was going to be viable. I understand why they originally put it in and that was because it was a start up industry and needed some support to get started in order to compete but they just kept these tariffs on even after the industry had grown.

The really strange thing is that after Lehman Brothers failed the world just carried on regardless. Only the financial world went to shit - and that appears to have had little or no effect on reality outside of this rather endogenous and self centred sub set.
Have you somehow managed to miss the news for the past two months? In a recession officially are Japan, Germany and the EU as a whole. Basically in one without confirmation yet are the US and UK. Russia is going for a de facto recession with growth at 3% or less, Brazil looks similar, China is trying what it can. Australia is hanging on China being successful with that. India is looking a bit weak too, and its government institutions don't seem to want to do a thing about it. In all these countries jobless figures are heading upwards (sometimes quite rapidly), in some central bankers are seriously worried about deflation.

You're not seriously questioning the link between a banking crisis and the real economy, are you?

The financial system lost its way about three decades ago, when it started inventing new ways of selling debt and lost sight of its principle function.
One isn't connected to the other though. There are many thousands of families and businesses who were able to do what they wanted because of new fixed income securities. It's not really a matter of what they did, it's just a question of how they did it. All the things you mentioned come down to one thing: lowering the cost of capital for firms and individuals (case in point (http://www.bloomberg.com/apps/news?pid=20601087&sid=aIXCu2ptpeCQ&refer=home)). That's what the banks thought they were doing this time around, by more effectively managing risk. Turns out they were wrong, and the adjustment (http://www.economist.com/theworldin/displayStory.cfm?story_id=12494691&d=2009) is going to take care of itself.

But these new, smaller and more focused banks will never get a chance to grow more market share if organisations like Citi go and wipe out the system and the real economy along with it.

It seems to me the government is intent on protecting the wrong people, they seem more than happy to bail these big banks massive debts but what about the personal debt of the less wealthy.

It seems to me the government is intent on protecting the wrong people, they seem more than happy to bail these big banks massive debts but what about the personal debt of the less wealthy.
Well, imagine it as a big office tower that has a structural fault and is about to crash onto everyone. The government is trying to stop this by putting up all sorts of bracing at the bottom of the tower. Your post is equivalent to other people coming along and saying "why don't you do repairs on my house instead?"

The government isn't trying to help banks because it likes them so much, it's doing it because if they fall, they'll bury everyone beneith them. Believe me, politicians would have a much easier time being popular if they just handed out thousands of dollars to everyone - but that wouldn't actually address the problem the country has right now.

EDIT: More news:
http://www.bloomberg.com/apps/news?pid=20601109&sid=aCqvVS7Zk7ZQ&refer=home
Recession’s Grip Forces U.S. to Flood World With More Dollars

The world needs more dollars. The United States is preparing to provide them.

In an all-out assault on capitalism’s worst crisis since the Great Depression, the U.S. is taking on the role of both lender and borrower of last resort for the global economy.

The Federal Reserve, which has already pumped out hundreds of billions of dollars, might formally adopt a policy of flooding the world financial system with even more money. The Treasury, on course to borrow some $1.5 trillion this fiscal year, may tap global capital markets for even more to finance a fiscal stimulus package of as much as $700 billion and provide additional bailout money for banks.

[...]

Much of that money will come from abroad. “Foreigners don’t seem to be interested in any kind of risky U.S. asset,” says Brad Setser, a former Treasury official now at the Council on Foreign Relations in New York. So, “instead, they are buying Treasuries.” That includes China, which recently passed Japan as the biggest holder of Treasuries.

On Nov. 3, the department tripled its estimate of planned debt sales in the final three months of the year to a record $550 billion. Paulson told a conference in Washington Nov. 17 that the U.S. will issue some $1.5 trillion worth of Treasury securities in the fiscal year that began Oct. 1.

That number, too, could grow. Lawrence Summers, Treasury secretary under President Bill Clinton and an adviser to President-elect Barack Obama, told the same conference that the U.S. needs a “speedy, substantial and sustained” stimulus package to aid the economy.

More Government Spending

“Government may have to spend $600 billion to $700 billion next year to reverse the downward cycle,” Robert Reich, another Obama adviser and a professor at the University of California at Berkeley, wrote in his personal blog Nov. 9.

Kenneth Rogoff, a professor at Harvard University in Cambridge, Massachusetts, and former chief economist at the International Monetary Fund, says the new administration will also have to ask Congress for more money to repair the financial system, over and above the $700 billion already authorized for Paulson’s Troubled Asset Relief Program.

“By the time all this ends, the TARP is going to be closer to $2 trillion than $1 trillion,” ISI’s Gallagher says.

Paulson has already committed $290 billion from the program to buy preferred shares in banks and troubled insurer American International Group Inc.

There’s always a danger the Fed and Treasury may go too far, setting the stage for a big rise in inflation or another asset bubble down the road as the economy revs up and investors get back their nerve. That’s what happened in the early part of the decade as ultra-easy Fed policy and Treasury tax cuts helped fuel a credit boom since gone bust.

Bernanke and Paulson might welcome a bit of that exuberance right now -- even at the risk of higher inflation later -- as they try to prevent the biggest credit catastrophe in decades from sending the economy into a deflationary nosedive.

“It’s true that, over the long run, too much money creates inflation,” says Lyle Gramley, a former Fed governor now at the Stanford Group Co. in Washington. “But they’re trying to keep the economy from going over the precipice and into the abyss.”

Well, imagine it as a big office tower that has a structural fault and is about to crash onto everyone. The government is trying to stop this by putting up all sorts of bracing at the bottom of the tower. Your post is equivalent to other people coming along and saying "why don't you do repairs on my house instead?"

The government isn't trying to help banks because it likes them so much, it's doing it because if they fall, they'll bury everyone beneith them. Believe me, politicians would have a much easier time being popular if they just handed out thousands of dollars to everyone - but that wouldn't actually address the problem the country has right now.

EDIT: More news:
http://www.bloomberg.com/apps/news?pid=20601109&sid=aCqvVS7Zk7ZQ&refer=home

Sometimes I think you are wasting your breath Leon, you have been saying it on these forums for awhile, as have I (though not with the same eloquence) other people have said it, and it just seems like they don't want to or can't see that this needed for everybody not just for bankers.

Some more stuff, and a bump.

http://www.bloomberg.com/apps/news?pid=20601109&sid=ar.ByjvMr3YI&refer=home
Citigroup's $306 Billion Rescue Fueled by Pizza From Domino's

Nov. 25 (Bloomberg) -- The deal to rescue the world's best- known bank was pieced together by regulators over Domino's pizza in near-empty offices one block from the White House.

http://www.bloomberg.com/apps/news?pid=20601109&sid=apmehm8f5JA0&refer=home
Geithner Struggled to Get Movement on Swap Dangers (Update1)

Nov. 25 (Bloomberg) -- Timothy Geithner was among the first policy makers to shine a light on the unregulated $47 trillion credit-default swap market back in 2005. The New York Federal Reserve president has struggled since then to get dealers to carry out reforms.

http://www.economist.com/finance/displayStory.cfm?story_id=12652247&source=hptextfeature
Thanks, Hank

Asian pensioners are the latest victims of Lehman’s bankruptcy

WHEN Hank Paulson, America’s treasury secretary, let Lehman Brothers fail in September, he surely did not consider the damage the investment bank’s collapse would inflict on elderly savers a continent away. In Hong Kong, Singapore and Taiwan, thousands of people have taken to the streets to protest against the implosion of a series of retail securities which resulted from the bankruptcy.

Banks and regulators were taken off guard and are only now totting up the damage. Singaporean authorities estimate that 11,000 residents held duff securities with a face value in excess of S$530m ($347m). In Hong Kong, 43,700 residents held HK$20.1 billion-worth ($2.6 billion). In Taiwan, 51,000 people had tainted holdings of NT$40 billion ($1.2 billion). Some Taiwanese are expected to stage a mass protest on November 29th.

http://www.economist.com/finance/displaystory.cfm?story_id=12652255
The big mo

Why do share prices move relentlessly in one direction?

THESE days almost all stockmarkets seem to be falling inexorably. But in more normal times individual stocks are affected by momentum, which is the tendency for popular stocks to keep rising (and for unpopular ones to keep falling). When it comes to shares, what goes up does not always come down—at least in the short term.

The phenomenon has been noted in a wide range of studies and has often been exploited by fund managers, but it has puzzled academics for decades. It is hard to square with the idea that investors are rational. If it were easy to identify which shares were due to go up and which to go down by looking at their previous price movements, why would a rational investor be willing to sell the former group or buy the latter?

http://www.spiegel.de/international/business/0,1518,590038,00.html
Nobel Economists Offer First Aid for Global Economy

Five winners of the Nobel Prize for economics share their views on what the future global finance order should look like in exclusive essays for SPIEGEL.

Later this week, the heads of state and government of more than 20 countries are to meet in Washington to discuss the consequences of the global financial crisis. While some countries are satisfied with strong government influence on incentives systems for managers, others are demanding more far-reaching action: nothing short of a radical shake-up of the global financial system complete with new controls and new monitoring mechanisms. SPIEGEL asked five previous winners of the Nobel Prize for economics to provide their own advice for what world leaders should do.