Comments on: To Save The Banks We Must Stand Up To The Bankers http://baselinescenario.com/2009/01/27/to-save-the-banks-we-must-stand-up-to-the-bankers/ What happened to the global economy and what we can do about it Fri, 10 Feb 2012 23:19:23 +0000 hourly 1 http://wordpress.com/ By: The Bernanke rally | Economist Blog http://baselinescenario.com/2009/01/27/to-save-the-banks-we-must-stand-up-to-the-bankers/#comment-4819 Wed, 25 Feb 2009 14:52:15 +0000 http://baselinescenario.com/?p=2200#comment-4819 [...] then do we really privatize? By exercising leadership: take over insolvent banks and immediately reprivatize them. The new controlling owners can replace the boards of directors (tell me: why haven’t they [...]

]]> By: The Bernanke rally | 1800blogger http://baselinescenario.com/2009/01/27/to-save-the-banks-we-must-stand-up-to-the-bankers/#comment-4817 Wed, 25 Feb 2009 14:52:07 +0000 http://baselinescenario.com/?p=2200#comment-4817 [...] then do we really privatize? By exercising leadership: take over insolvent banks and immediately reprivatize them. The new controlling owners can replace the boards of directors (tell me: why haven’t they [...]

]]> By: John Kirkman http://baselinescenario.com/2009/01/27/to-save-the-banks-we-must-stand-up-to-the-bankers/#comment-4725 Tue, 24 Feb 2009 12:10:17 +0000 http://baselinescenario.com/?p=2200#comment-4725 (1) Wouldn’t it be simpler to have the troubled banks just declare, or be forced to declare, bankruptcy under existing law? (2) Boone and Johnson are very eagar to direct the shareholders to bankruptcy;who are these shareholders to excite such animosity? (3) Where were all of these economists and their supposed wisdom when this financial mess was building? (4) Is Sheila Bair the only individual on any side of this discussion who sees clearly the tragedy of the people falling by the wayside?

]]> By: Privatize The Banks Already « The Baseline Scenario http://baselinescenario.com/2009/01/27/to-save-the-banks-we-must-stand-up-to-the-bankers/#comment-4694 Tue, 24 Feb 2009 03:28:45 +0000 http://baselinescenario.com/?p=2200#comment-4694 [...] then do we really privatize?  By exercising leadership: take over insolvent banks and immediately reprivatize them.  The new controlling owners can replace the boards of directors (tell me: why haven’t they [...]

]]> By: Defending A Peg: Lessons for the US Banking Authorities « The Baseline Scenario http://baselinescenario.com/2009/01/27/to-save-the-banks-we-must-stand-up-to-the-bankers/#comment-4665 Mon, 23 Feb 2009 19:37:32 +0000 http://baselinescenario.com/?p=2200#comment-4665 [...] otherwise.  Either banks will be taken over by the government – and then reprivatized (and I insist on immediate reprivatization) – or they will not.  And “not” is fine with me, but this option is only persuasive [...]

]]> By: Bank Bailouts Aren’t The Only Answer — “High Noon: Geithner v. The American Oligarchs” « A New Way Forward on Economic Recovery http://baselinescenario.com/2009/01/27/to-save-the-banks-we-must-stand-up-to-the-bankers/#comment-4311 Thu, 19 Feb 2009 02:02:15 +0000 http://baselinescenario.com/?p=2200#comment-4311 [...] on one by one.  Can this be done?  Definitely, yes.  In particular, bank recapitalization – if implemented right – can use private equity interests against the powerful large bank insiders. Then you need [...]

]]> By: Ideology, Prudence, and Economic Crisis « Vox Nova http://baselinescenario.com/2009/01/27/to-save-the-banks-we-must-stand-up-to-the-bankers/#comment-4279 Wed, 18 Feb 2009 20:45:59 +0000 http://baselinescenario.com/?p=2200#comment-4279 [...] bank nationalization. A growing number of experts support this option (see here for an example), and yet it is dismissed by the predictable ideologues as “socialism”. [...]

]]> By: Reprivatization After Paulson « The Baseline Scenario http://baselinescenario.com/2009/01/27/to-save-the-banks-we-must-stand-up-to-the-bankers/#comment-4072 Tue, 17 Feb 2009 04:46:29 +0000 http://baselinescenario.com/?p=2200#comment-4072 [...] What we really need is to reprivatize – to return the banks to real private owners, preferably with strong voices on boards, and perhaps with controlling ownership stakes.  And we must, above all, make sure those owners have the incentive to break the banks into smaller, more manageable pieces, none of which are “too big to fail.”  As part of this process, some boards of directors will either have to go or be reshaped dramatically.  And new boards can decide who should or should not run these greatly restructured banks. [...]

]]> By: A very important article by an expert, discussing the necessary next step to solve the financial crisis « Fabius Maximus http://baselinescenario.com/2009/01/27/to-save-the-banks-we-must-stand-up-to-the-bankers/#comment-4012 Tue, 17 Feb 2009 00:01:42 +0000 http://baselinescenario.com/?p=2200#comment-4012 [...] this be done?  Definitely, yes.  In particular, bank recapitalization – if implemented right – can use private equity interests against the powerful large bank insiders. Then you need [...]

]]> By: Every Consensus Must End « The Baseline Scenario http://baselinescenario.com/2009/01/27/to-save-the-banks-we-must-stand-up-to-the-bankers/#comment-3915 Mon, 16 Feb 2009 14:31:12 +0000 http://baselinescenario.com/?p=2200#comment-3915 [...] downside and making sure the taxpayer gets as much upside participation as possible.  We have a proposal on the table, but other ideas have merit and the US debate in this regard seems likely to be productive – in [...]

]]> By: Links 11/02/09 « Bounded Rationality http://baselinescenario.com/2009/01/27/to-save-the-banks-we-must-stand-up-to-the-bankers/#comment-3446 Wed, 11 Feb 2009 09:27:28 +0000 http://baselinescenario.com/?p=2200#comment-3446 [...] To Save the Banks [...]

]]> By: Politics or Poppycock http://baselinescenario.com/2009/01/27/to-save-the-banks-we-must-stand-up-to-the-bankers/#comment-3403 Tue, 10 Feb 2009 17:16:57 +0000 http://baselinescenario.com/?p=2200#comment-3403 [...] them on one by one. Can this be done? Definitely, yes. In particular, bank recapitalization – if implemented right – can use private equity interests against the powerful large bank insiders. Then you need to force [...]

]]> By: HSG at MIT http://baselinescenario.com/2009/01/27/to-save-the-banks-we-must-stand-up-to-the-bankers/#comment-3233 Thu, 05 Feb 2009 03:35:48 +0000 http://baselinescenario.com/?p=2200#comment-3233 I thought this was a nice artice that peripherally talks to some of issues you raise with the current incentives of bankers. I’m not sure if firing them all is the way to go–but its interesting to ponder! http://www.economist.com/surveys/displaystory.cfm?story_id=12957761&fsrc=rss

]]> By: Rahm’s Doctrine And Breaking Up The Banks « The Baseline Scenario http://baselinescenario.com/2009/01/27/to-save-the-banks-we-must-stand-up-to-the-bankers/#comment-3146 Mon, 02 Feb 2009 02:23:23 +0000 http://baselinescenario.com/?p=2200#comment-3146 [...] of how to organize the technical details of acquiring and disposing of government ownership, see our previous suggestions; there are other ways to do this that would also be quite [...]

]]> By: Robert Hedinger http://baselinescenario.com/2009/01/27/to-save-the-banks-we-must-stand-up-to-the-bankers/#comment-3131 Sun, 01 Feb 2009 01:55:57 +0000 http://baselinescenario.com/?p=2200#comment-3131 Instead of looking at the problem from the top down (saving financial intuitions) look at it from the bottom up (saving homes and families). I just don’t believe that trickle down economics will work for the nation’s current financial problems.

A proposed Housing Crisis Solution:

Suppose you bought a home that is your primary residence and its market value has decreased to a value that is less than 120% of your current mortgage.

You have three options:

1. You can retain 100% equity in your home and continue with your current mortgage payments.
2. If you can qualify financially for a reduced mortgage, you can sell a fractional ownership of your home to a quasi-government agency and pay down your mortgage with this equity investment,
3. If you can not qualify financially for a reduced mortgage, you can sell 100% of the equity in your home to a quasi-government agency for the outstanding mortgage value and rent it back for the current market rate.

When the home is eventually sold, the quasi-government agency would share in any capital gain in proportion to its equity interest.

The quasi-government agency could then go the financial markets and sell shares in the equity they hold in these homes.

Examples:

Example 1 Example 2 Example 3 Rental
Original Cost $338,000 $338,000 $338,000
Current Mortgage $270,000 $338,000 $338,000
Current Market Value $240,000 $240,000 $240,000
Current Mortgage Payment $1600/mo $2000/mo $2000/mo
120% of Mortgage $324,000 $405,000 $405,000
80% of CMV $192,000 $192,000 $192,000
Equity sale to Government $ 78,000 $146,000 $338,000
Equity Interest of Government 28.9% 43.2% 100%
New Mortgage Payment @6% $1138/mo $1138/mo $1138/mo Rent

An additional option is to have the Mortgage Holder/Bank take less than 100% of the Mortgage value and/or finance the new mortgage at a significantly lower rate.

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