Monday, September 29, 2008
Bail out fails? Yay? (Updated)
Looks like the bailout failed.
Now it's time to see if I was right that the market will right itself. Expect a few more lending institutions to fail, but the market was bloated and depositors will be ok. (I am ok with supplementing the FDIC as needed, just not with, well, lots of stuff in the Paulson / Dodd / Pelosi / Frank plan)
Update:
The "crash" of the stock market (smaller percentage wise than lots of other crashes) is being compared to size of the bailout to argue that we would've saved money by the bailout. For example, on Charlie Gibson I saw the 7.7% decline in the stock market listed as equivalent to a $1.1 trillion decrease in the stocks (which looks correct) followed by the statement that we just threw away $400 billion by not passing the bailout.
In a word, this is horsepuckey.
The money taken out of the stock market is still in the world economy. It's just doing something other than adding to the price of stocks, which means nothing has been lost, it's only been moved to different investments.
Interestingly, the movement from stocks to other investments will likely lessen any liquidity problems as some fraction will move into CDs, money markets, and savings accounts which would ... increase operating capital for lending - in theory, what the bail out is trying to do.
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Now it's time to see if I was right that the market will right itself. Expect a few more lending institutions to fail, but the market was bloated and depositors will be ok. (I am ok with supplementing the FDIC as needed, just not with, well, lots of stuff in the Paulson / Dodd / Pelosi / Frank plan)
Update:
The "crash" of the stock market (smaller percentage wise than lots of other crashes) is being compared to size of the bailout to argue that we would've saved money by the bailout. For example, on Charlie Gibson I saw the 7.7% decline in the stock market listed as equivalent to a $1.1 trillion decrease in the stocks (which looks correct) followed by the statement that we just threw away $400 billion by not passing the bailout.
In a word, this is horsepuckey.
The money taken out of the stock market is still in the world economy. It's just doing something other than adding to the price of stocks, which means nothing has been lost, it's only been moved to different investments.
Interestingly, the movement from stocks to other investments will likely lessen any liquidity problems as some fraction will move into CDs, money markets, and savings accounts which would ... increase operating capital for lending - in theory, what the bail out is trying to do.
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