Too Big to Fail is a MYTH.

Quote from Martinghoul:
You don't have a good way of knowing what these losses would have been without govt intervention.
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+1.

It's just strange that people don't bother to look at the charts following Lehman's fall and that memory seems to be so short-lived.

What would have happened after Citi or BAC would have failed?

After Lehman ES went down 450 pts or 550 pts as you like to see it.
If they had allowed the real big one to fail perhaps another 400 down?
But I forgot - the regional banks would have come in and saved the whole economy.

Think about the term "chain reaction". This happens as well in financial markets if you allow them to act that way.
 
Quote from Martinghoul:

I am not suggesting your numbers are bad, achilles... By "counterfactual" I mean that your numbers are based on losses encountered by the system with the various govt backstops, programs etc. You don't have a good way of knowing what these losses would have been without govt intervention.
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Not true. The market always finds bottom. There's not one historical example where it hasn't. In this instance, the price tag is ~6 Trillion dollars.

How do we know that?

Bank capital and Government capital are interchangable. Money-assets are fungible. It took ~6 Trillion in writedowns for the system to find equilibrium. Banks could have shouldered that loss entirely. The result being a necessary weeding out of the hugely overweight FIRE sector. There were too many banks in America selling too much debt that no one could pay back. It was just as much a bubble in the housing industry as it was in the Financial Industry! Same as the dotcoms. Legions of worthless companies selling worthless products that everyone "thought" had value. Much of those Bankers, underwriters, insurers, "securitizers" (wallstreet), mortgage brokers, appraisers, raters and realtors ought to have been flushed just the same as those worthless dotcoms = Useless Over Capacity. It's the same in any bubble: Booms = malinvestment. Not just from idiot consumers, but from Idiot Producers. In this case, the Idiot Producers were Bankers, Insurers and Realtors that invested and expanded far too much capacity. The cost to let them fail is around ~6 Trillion, or roughly half of US Banks (pre-crash). That's reasonable considering we don't need half as many lenders. The mindjob here is Banks convinced media and Government their bloated numbers were indispensable to the economy and the bailout necessary to avert certain doom. When in fact, contemporary American history is riddled with Financial Panics that never saw a dime of Government bailout money (beyond ~FDIC), and yet the Country recovered brilliantly, time and again.

The Savings and Loan crisis saw >1000 Banks & SL'ers fail, with total asset value of half a trillion - with no Government propping beyond ~FDIC - yet the economy recovered within 3 years! Interesting to note real estate prices bubbled 40% during the lead-up to the S&L crisis (similar to the 2008 housing bubble). And half of S&L'ers got flushed in the ensuing collapse (same as the 2008 bubble, if not for Government bailouts).

The lesson here is the market always finds bottom. And within reason. The Chicken Little theory that we'll all go back to the Stone Age if Wallstreet implodes is pure rubbish. It's nothing but propaganda sold by Banks. Where is fair value? Historically, it's about +/-10% from pre-bubble levels. That's about a 40% haircut from market top to bottom in Real Estate prices (back to ~2000 average values). The Government bailout stabilized home price decline at -25% from market top (252K average new sale price). Market bottom would have been ~200K without any interference. The World would not End.
 
There is scant evidence that anything the retards on washington and wall street are doing to fix anything.

If I follow the retard fed chairmens logic correct. All we have to do is what for commercial and residential property to regain its previous value and we can begin borrowing money to bid the price of property again. Of course this is impossible.

This system is blow up so badly they will talk about it for the next thousand years.

Obama will be the first and probably the last black president because the nonsense over the last year
 
Quote from uexkuell:

+1.

It's just strange that people don't bother to look at the charts following Lehman's fall and that memory seems to be so short-lived.

What would have happened after Citi or BAC would have failed?

After Lehman ES went down 450 pts or 550 pts as you like to see it.
If they had allowed the real big one to fail perhaps another 400 down?
But I forgot - the regional banks would have come in and saved the whole economy.

Think about the term "chain reaction". This happens as well in financial markets if you allow them to act that way.
More...

Over ~9,200 Banks failed during the Great Depression (35% of all Banks) and the economy recovered 10 years later. That's With the Gold Standard that had a stranglehold on the economy and prolonged the Depression by about 8 years. Our fiat and Central Banking system can avoid such deflationary trainwrecks and the resulting contraction wouldn't be nearly as long (but possible as deep(er)).

The notion that we somehow need 25% of our GDP devoted to writing new debt, flipping properties and gaming the market is utter nonsense. Our indebtedness by household, business, Government, or any metric you like, is off the charts. There are way too many debt sellers (Bankers) relative to demand. So instead of letting the market correct itself and flush the huge overcapacity in Banking and Finance, what do we do? Fork over trillions in Taxpayer-backed debt to keep legions of insolvent Banks, underwriters, and insurers afloat. Doing nothing. Costing Trillions. It's a Japan redo.
 
Quote from JamesVU2000:

There is scant evidence that anything the retards on washington and wall street are doing to fix anything.

If I follow the retard fed chairmens logic correct. All we have to do is what for commercial and residential property to regain its previous value and we can begin borrowing money to bid the price of property again. Of course this is impossible.

This system is blow up so badly they will talk about it for the next thousand years.

Obama will be the first and probably the last black president because the nonsense over the last year
More...

I think the economy has lots of ways to right itself, and there's really nothing the FED can do except change the qualitative aspects of the impending crash (inflationary or deflationary), rather than actually stop it.

Medicine time was the Nasdaq blowup. Bush/Greenspan opted to keep the party going, double the debt, and create another disaster (which necessitated even more bailouts to "solve it", which just created the next crisis - sovereign debt). Prolonging judgment day at the expense of compounding national debt ensures the final blow up will be a catastrophe. I think it'll be worse than the Great Depression in severity, largely because we've got no industrial capacity. Resurrecting the bid on real estate should be good for a laugh. I'm not sure it's even possible since most of sheep are now bk, or sidelined from their HELOC repayment. Then again, we might not even have a firm bottom on housing since the unsold inventory is so high, banks created an artificial bottom by withholding inventory. What's it now? 20 million units? The problem with that is new builders come in to arbitrage the fake support, suppressing prices, and the banks really can't manipulate prices upward enough to get the bid they want. Enter the Government and their endless bailouts and loans to keep these guys afloat. We can't hold these markets up forever. I guess the FED took the crap off their balances sheets for 100% and Banks kept best quality. Japan was different in that they ran big trade surpluses, and had a nation of savers who financed the whole propping of banks with bond purchases. So the Japan Gov has 200% debt to GDP, but most of that held internally. So when they pay it back, Japanese spend that money back into the economy + surplus exports = wash. America has a lot held by foreigners which don't buy our crap and we're a huge net importer so nobody can soak up the shortfall in demand on repayment = big deflationary crash.
 
Achilles, with all due respect, I don't think you comprehend fully what the crisis was all about. I know that you think you can look at the numbers and say that "there's always a bottom". And yes, I agree, there IS always a bottom, but it's all about what sort of bottom it is. After all, the bottom that the world mkt found after the Great Depression was World War II. Do you think that was a good thing?

At any rate, let me give you an example of what the current crisis meant, in very specific terms. In order to do this, let me ask you a question. Are you gainfully employed and, if so, do you like receiving your paycheck from ADP (or whoever) every two weeks (or whatever)?
 
The term "too big to fail" was coined by the same imbecile who lied about why he killed American kids in Iraq.

now what's left of the the republican filth in congress and their tea-gagging geriatric filth voters are fighting to stop regulation of wall street greed.



Quote from achilles28:

In Jan 2008, the total asset value (pre-crash) of all US banks was ~12 Trillion USD.
http://www2.fdic.gov/idasp/main.asp

Current losses suffered by US banks are estimated at ~2 Trillion USD.
http://www.reuters.com/article/idCNL554155620091105?rpc=44

To date, the total cost of Government intervention to stabilize the economy is estimated at ~3.5 Trillion USD.
http://money.cnn.com/news/storysupplement/economy/bailouttracker/index.html

Total Losses (Public and Private) = ~6 Trillion.

If the bailout never happened, half of US Banks would have survived. The prudently managed Regional Banks would quickly grow to fill the vacuum left by irresponsible National Banks. These would become the new Citi's, BoA's and Goldmans. This is how Capitalism is supposed to work.
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Quote from Martinghoul:

Achilles, with all due respect, I don't think you comprehend fully what the crisis was all about. I know that you think you can look at the numbers and say that "there's always a bottom". And yes, I agree, there IS always a bottom, but it's all about what sort of bottom it is. After all, the bottom that the world mkt found after the Great Depression was World War II. Do you think that was a good thing?

At any rate, let me give you an example of what the current crisis meant, in very specific terms. In order to do this, let me ask you a question. Are you gainfully employed and, if so, do you like receiving your paycheck from ADP (or whoever) every two weeks (or whatever)?
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To be honest, I don't think you comprehend the self-corrective nature inherent in economic cycles/prices and your understanding of the Great Depression is way off. Which probably explains why you hold to the Chicken Little theory of market crashes. So no disrespect taken. I don't mean any disrespect either, btw.

As far as the Great Depression, the market and unemployment bottomed nearly a decade before WW2, in ~1933. By the time America entered the War, the market had recovered nearly half it's losses since the crash. Not coincidentally, the market bottomed in 1933 when the US went off the Gold Standard and loosened credit. That said, the severity and length of the crash was more the result of FED unwillingness to sell their gold hoards and prop banks through treasury purchases. That decision to throttle credit by a full 1/3rd and allow depositor bank runs, vaporized capital reserves, money supply and made the Big D "Great".

As far your example, I'm well aware the effect a banking crisis has on leveraged companies that rely on credit lines to meet payrolls. That's the nature crashes: a quick, sharp, severe flushing of overleveraged business, banks, consumers (and soon, Governments!). Businesses that don't have sufficient retained earnings, cash flow or assets to meet payrolls during a crash are evidently over-leveraged in a precipitous market and simply shouldn't exist. Most non-banks survived the '08 crash for that reason alone (sufficient cash flow/retained earnings = "cash rich"). But, to answer your question, yes, I'm gainfully employed (daytrader), withdraw once every ~3 months, and yes, I enjoy my paycheck :)
 
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