a: Recapitalize, or,
b: Liquefy, or,
c: Rescue, or,
d: Bailout,
the banks, the financial service companies, the "lenders", whatever you wanna call 'em? I keep reading/hearing about the need to "provide capital to the lenders" so they can begin lending to each other again! Can anybody explain to me why banks need to lend each other money? If they were able to turn that money around by lending it to a borrower, I could understand it. But, there are only two groups of borrowers left standing: Those who can't qualify for a loan - and those who can't afford a loan.
This entire process is fruitless. At some point, perhaps two trillion(!), perhaps three trillion(!!) dollars down the line, the wizardly government economic experts are going to have to give up on the lender, and start thinking about doing something for the borrower. The lenders don't want to lend to the borrowers because the borrower doesn't have nice tidy good-looking collateral. Homeowners? Negative equity; sorry!
Businesses? Declining revenue; sorry!
Car Buyers? You're a moron!: sorry!
Credit Card Borrowers? OKAY! You we can make a profit on!
All these junque-type-"instruments" people bought into are junky precisely because of the decliine in the Underlying Asset Value. That is, the housing market. Re-"liquefy" the broke homeowners instead of tossing 'em overboard. If the banks don't have to hold a large-and-increasing inventory of empty buildings, maybe there'd be some capital available for borrowers.
This whole thing about financials lending each other money sounds like that old canard about the Chinese Merchants who found themselves marooned on a desert island: With nothing better to do, they started swapping hats. When they were rescued some years later, they'd both gotten rich from the trade! Nice story, but I think it's apocryphal.
At any rate, with property values down perhaps $2,000,000,000,000 in the aggregate, that money is gone! That means a lot of people are poorer. No Getting Around It!
No comments:
Post a Comment