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Investment Analysis Clubs / Macro Economic Trends and Risks
|Subject: Re: An interesting Fiscal Cliff observation||Date: 12/13/2012 12:26 PM|
|Author: warrl||Number: 411196 of 479883|
Putting an end to lending money to banks at 0% and borrowing it from them at 2% would also destroy the TBTF banks, and the global economic system.
It would seriously disrupt a dysfunctional global economic system. Since it is dysfunctional, some disruption is needed.
But that isn't necessarily the best way to go about it.
No more Goldman, no more Citi, no more Wells Fargo, etc. None of these banks are solvent because they are loaded to the gills with assets that are marked to fantasy. The only way to keep them functioning (and keep the $100M bonuses flowing) is to prop them up with this massive corporate welfare.
If we decide we need to prop them up, the props should come with strings attached.
Specifically, there should be targeted bailout plans for these zombie banks - plans that include SHRINKING THEM and/or BREAKING THEM UP so that when the bailout is completed, none of the pieces are TBTF.
Unfortunately, the primary beneficiaries of the current bailout plan are not TBTF banks. They are TBTF governments. And the bailout plan is designed primarily to (thinly) mask that fact and to avoid recognizing the necessity of downsizing and rationalizing those governments.
(In fact, several