Banks are insolvent - can we just recognize that already?

(from an email to friends)

Will Obama and Geithner please explain, again, why we aren't just nationalizing...pre-privatizing...having the FDIC simply take over these insolvent institutions? Receivership, audits, crams-downs, carve-outs, sell-offs to new capital - the big pieces continue functioning, and a few changes in the capital accounts. Why all the panic at doing that? Why the tortured logic in trying to avoid the obvious answer?

Every dollar that a shareholder, bondholder or SIV-investor does NOT lose in these banks, is a dollar that the taxpayer and future generations just gave those private investors. The same investors that were happy to take the phantom profits in the good times. Every dividend and bonus paid after the companies were insolvent, or took TARP money, is money directly out of the taxpayer's pocket. Looted, stolen in broad daylight.

"But we didn't use the money to pay bonuses" they said to Congress this morning. Bullshit: that they continue to even exist is only because of the misplaced goodwill of the public that they fleece. There are no $10mm bonuses in a Ch. 7 liquidation or FDIC takeover - perhaps they'd like those options instead? I sure do.


Geithner's debut: Entirely underwhelming. Ridiculous. Pathetic. Insulting. And why the markets fell 5% yesterday. It is not a plan, not a framework, not a skeleton, not even a term sheet, barely an outline, and no more than vague utterances. There was no there, there. And that is the best they can come up with. We're screwed.

"Has Barack Obama’s presidency already failed?" - Martin Wolf (ft.com) via http://www.nakedcapitalism.com/2009/02/geithner-plan-smackdown-wrap.html


(fn1: this doesn't include the $200+ billion ALREADY provided or guaranteed by the Treasury. We've ALREADY bought them at least once, and now again, but still manage to somehow own less than 10%.)