All in all, these are my proposed solutions, after all that interesting reading:
1) Stimulus package
U.S. stimulus package is needed. However much. Print money if u have to. As much as possible. Don't be shy k....go on! When the shit hits the fan, throw theoretical economics out the window can? A drowning man clutches at straws. First up, is cashflow. You ain't got cash, you're dead. It's as simple as that. Who you go to? Big Daddy aka The Government. I mean, seriously, do you have another better choice?
And fortunately/unfortunately, some companies ARE really too big to fail. No matter how much you throw bricks at the shameless CEOs trying to make a run with their ridiculously fat bonuses, I'm sorry, but AIG is just not allowed to fail. I would be rather pissed if it did! But my big daddy wouldn't allow that, that I'm sure! (Singapore government. Suddenly, I'm thankful for the kiasi and kiasu mentality)!
Anyway, to me, it's just common sense. And everyone seems to forget that money and economics is man-made. Which means, it can be changed along the way. Like what Bernake JUST said on TV, economics is not economics if it cannot applied to real-life. Dunno what else he said, but he made alot of sense. Something about more regulations on banking sector, etc. Another day, he also said something along the lines of AIG. My analogy - AIG was quite naughty - behaving like a slutty hedge fund, when it should be a conservative fund....I mean, we are talking about insurance here!
2) The "N" word - nationalization
Anyway, before I digress further, stimulus package brings me to the next point. To me, Big Daddy was quite kind. He did more than just give money. He saved the banks from collapse. I mean, not like he had a choice anyway. Please note that these so-called giants would have been dead by now ok, if not for Big Daddy, the cashflow saviour. These so-called financial Titanics...are well, sinkable, apparently. And it includes Merrill, which I just heard on TV, that the 11th board meeting is under investigation now - something along the lines of biggies heading off with last minute bonuses, just before the crash/buyout from Bank of America? They knew?? Oooooooohh.....what sluts!
Anyway, I read an interesting article in the Straits Times yesterday. About the government nationalizing banks. Temporary buffer (govt guarantees on a zombie bank) VS a real nationalization. I agree with the author that a real nationalization is necessary. Simply, to flush out dirty policies - aka ridiculously fat bonuses, etc.
The article mentioned that nationalized banks generally do not perform well after nationalization. Fair enough. But Sweden had a similar scenario and what they did, was to nationalize one of their banks. And when the storm is ridden out, sell the bank back to the market. I think it's a brillant idea. And there will be vultures and funds waiting, no doubt. Especially if these companies/banks are good businesses at the core.
3) Creation of bids/asks
Bernake today mentioned too, that "marked-to-market" valuation would have to be re-evaluated. And I did mention it in my other post alot earlier. To recap a little, how the hell can u mark to market A to B, when B 's valuation doesn't even properly capture the real valuation? Wait a minute, what IS real valuation? I think this is the real question. I think it's perception and an accumulation of events that happened to give that thing a price. Note, it's NOT fact.
The govt can help to liquidify (is there such as word) the markets. Lubricate it with bids and asks on MBS (mortgage backed securities). Instead of "mark-to-market" it to zero, create a value. Underwrite some of these assets if necessary.
I mean, at some point, Americans do need to stay in a house, no? So, shouldn't that give some value back to the MBS? I mean, mark-to-marking it to zero (basically, writing it off), is really the worse thing you can do.
Ok, so far, these are my proposed solutions. Will write more when I come across anymore worthwhile points to take note of....
No comments:
Post a Comment