Another important topic that this article addresses is the fact that Dexia is a trading partner with many large American banks. Dexia, having already been bailed out in 2008, is involved with controversy as to whether they can repay their American trading partners in full with the rescue money or not. Dexia has had problems lending to countries that cannot pay them back in full (Greece). Apparently, conservative lending is now overrated in the banking industry.
Sunday, October 23, 2011
More banks being bailed out?
This article focuses on the Belgian-French bank Dexia, and how many are angered by it being bailed out. I find this article interesting because it delves more deeply into the global issue of banking. It discusses the falling out of AIG, and suggests at some points that Dexia's problems could be related. The reason for this is the extent to how far the securitization and credit swaps of AIG reach is hard to measure. One thing they do know about Dexia is that their predictions on interest rates were wrong:" But the biggest drain on its cash stemmed from a series of complex, wrong-way bets it made on interest rates related to its municipal lending business."
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The incentive for poor lending practices that comes from bailout policies is very troubling, especially given the fact that these policies are meant to help the situation. It makes sense that the government would not want a large bank like Dexia to fail, however, more needs to be done to deal with the sense of injustice taxpayers must feel about the deal. One reason for the continued economic inertia that prevailed after the 2008 crisis(both in the U.S and Europe) is that this sense of injustice has yet to be adequately dealt with. No major Ceo's were arrested or put in jail and their companies received billions in bailout money. Until the public is satisfied on this issue, confidence in financial institutions will stay low, and only add to the problem.
ReplyDeleteWhat actually needs to be dealt with is private- public collaboration. The government constantly makes assurances to private parties without thinking it through. The private parties take advantage of that till they can before they use some of the assurances that the govt gave the public of not letting the banks fall.
ReplyDeleteThe govt needs to start having its own banks to fulfill its own goals rather than relying on private parties.
Bank nationalization is very questionable. The first challenge would be for nationalization laws to be passed, a difficult thing in the U.S since talks of nationalization spark old fears of communism.Second, there is always the argument that the government is less efficient than private institutions in specific areas. Rather than nationalization, we need stricter regulation of banks to make sure they are not being reckless.
ReplyDeleteThere are 616 Trillion dollars in currency and credit derivatives.
ReplyDeletewww.usdebtclock.org
The federal government spent 4.2 trillion dollars this year.
Divide that by the 140 million people who actually work and pay taxes in the United States.
It comes out to $30,000.00 dollars a piece.
With the average wage at 39,959.00 dollars...the government has spent 3/4ths of every ones wages before they ever see it.
They just borrow money and print money to cover the theft with Ben Bernanke and Timmy Geitners help.
If they actually taxed us for what they are spending...we would have nothing left to live on.
We could always buy a cardboard box to live in .....and shop the Dollar Store.
Even if they only spent 3.8 Trillion this year....It would still be $27,000.00 thousand dollars each in debt.
The government is outspending the take home pay of 50 percent of our United States work force.
Do you see a problem here?