In order to bring some transparency to what the government is doing in bailouts it should sell in the market, at 100% of nominal value, a portion of the instruments they have received in return for their bailout funds; and compensate any differences in the market value of these instruments with a tax-credit. How would it work?

Let us say the government has received $100 in shares of GM. If these shares are worth that amount the government would get their money back immediately but, if not, buyers would ask to receive a tax credit. If the market only asks for a 10% tax credit, meaning $10 in tax credit to purchase the GM shares for $100 then the government is not doing so bad but, if the market asks for 90% in tax credits, then clearly the government is pouring money down the drain.

That would certainly pressure the government into doing better. Problem though is that most probably government would never dare to have their own actions marked to market that way.

but that they do not know seems to be the real problem at least I have heard NYT’s Gretchen Morgenson say that for example Citi Bank didn’t know what was on their balance sheet
- now the idea that an accountant working for a bank doesn’t know what’s on his/her balance sheet is for me, having worked at that level all my life, so horrific that it seems to explain everything.
The top ones may excel in lofty language but when we at the cubicle level felt we no longer were capable of a sound grip on our data that’s when I got panicky
- in my last working years a scheme emerged how “they” would do that. At first computer data banks were compiled in a way that a pro could still relate them to the paper cards or files used before but then they started designing surfaces which allowed us only access to pre-designed data compilations i.e. we could no longer design queries ourselves to cross check the data the IT supplied
- this experience makes me think it could be worthwhile to look at how they fiddled with the professionalism of the cubicle level at the banks which presumably at the banks also was the level were “they” were most eager to cut costs assuming that they could replace the know how of those paralegals and accountants easily by their presumably so much smarter data banks
- by the way I have worked with really wonderful programs but they took years of fiddling with before they became paradise to work with and they never were designed to lobotomize the user.

This is so wrong in so many levels. Any cost? At the second the costs get higher than the costs of letting the firm fail, the choice should be obvious! Worst in this crisis is that no one has a clear picture of biggest banks assets or how much they need cash to not be insolvent.

To me, it is madness to create open check to banks and bail them out at “any cost”. If anyone in the system finds a way to milk out this “any cost”, I bet these costs will skyrocket and someone will make hefty sums of money in the way.

No bailing out should be done at all before banks come clean with their balance sheets and real costs of bailing out are visible. If the banks do not want to do this under these conditions, I can only assume that they know bailing them out will cost more than letting them fail. Without knowing the real costs, there is no way to even start comparing the costs of letting them fail.

Sheesh, way to encourage reckless behaviour, bailing out at “any cost”. How about selling the future and crushing the economy and dollar all together? Enough cost in there?

We can’t have that here.

Great fighting of pro-cyclicality when we already have capital requirements going up tremendously as credit ratings go down you want to top it up with even more stringent requirements. Why can’t you wait till we get out of this before becoming so puritan?

That was never the business model. The business model was giving loans at very high rates and the selling them off at low rates after hustling up an AAA. Capture a 3 percent differential over 20-30 years and you will have pocketed incredible profits.

Do Barney Frank and others (on both sides of the aisle) actually want to prevent a repeat of the bubble? That bubble was very good for a lot of people, many of whom contributed generously to political causes. If the bubble truly deflates, the price of homes in Barney Frank’s district might drop by 50% or more. What about the price of Tim Geithner’s own home, or Larry Summers’s, or… Is there really enough incentive for people to ‘get it done’, or is everyone looking only for ‘solutions’ that keep a lot of air in the bubble?

I suspect that talk about deep change will be tolerated as long as it doesn’t get in the way of the easy money flow. Easy money now, painful pullbacks tomorrow, always tomorrow. The preponderance of incentives point in that direction.

I’d love to hear good reasons why I’m wrong.

If we try to limit leverage, would we put U.S. institutions at a competitive disadvantage that would allow foreign financiers to take over much of the U.S. market for financial services?

“Canonical research findings suggest that American entrepreneurs who establish popular online markets for customized education will catalyze the creation of many good jobs in America, and will end the reign of America’s kleptobankers. Some of the researchers: Clayton Christensen, Paul Romer and Paul Krugman.”

http://www.nytimes.com/2009/07/26/magazine/26jarrett-t.html?hp

“When I asked Obama if he runs every decision past her, he answered without hesitation: “Yep. Absolutely.” Some of their Oval Office one-on-ones find Jarrett — whose acute familiarity with the business community is unique in the West Wing — playing the impersonal role of

TRUSTED FINANCIAL COUNSELOR,

the president told me. “Throughout, for example, the debates taking place on how to deal with the financial crisis, I would sit down and get her read in terms of how we strike the appropriate balance between intervention to stem panic and not being so heavy-handed that we were changing in fundamental ways the nature of our free-market economy,” he said. “And her experience as a businesswoman and contacts with C.E.O.’s around the country was very helpful.”