It’s always nice to have a white knight on the rescue… The Fed not doing a rate cut but then as some kind of magician pulling 85 billion out of their hat for the rescue of AIG. Even Jim Cramer has managed to said something useful when he claimed AIG is “too big to fail”. As far as the Fed is concerned we can straighten our tie and move on with life. Nice… After failing to buy ABN Amro last year for a whopping 70 billion euro’s, Barclays gets to buy Lehman’s assets for a mere 2,5% of that amount. Quite a deal. Last year in Amsterdam that would have bought them the coffee machines only. And in Russia the government “sees signs of a crisis in the financial markets and will unveil measures aimed at stabilising the situation in the next two or three days” After a 55% drop the last few months and 11% yesterday you must be pretty smart to see a ‘signs of a crisis’. … Okay as a risk manager I’m implementing a new input in my models per today. I’m extremely bullish because if you’re a giant and do well you make serious money. If you screw up the government will come to the rescue. I’m readyto go lord, take me now.
When will the point come when the govenment has enabled the “Too Big to Fail” mindset in the markets so much that it is detrimental to US’s long term growth? The effects of AIG would have been a serious and drawn out effect to the financial markets, but should the goverment pushed for a non-gov’t rescue, such as LTCM in 1998 with all the big banks pulling together after they all met at the NY Fed? I’m not sure if TBTF is the greatest thing for our long term economy, but I am no expert by any means. Jim Cramer noted above said he thought AIG was too big to fail and that he thought the fed should have cut rates. I disagree on the rate cut and think they did the right thing and regarding AIG, it seemed like there was no other way. It is as if these TBTF companies are like a huge tree with its roots entwined with the roots of our modern society. They are fine when healthy, but horrific when not. Maybe the fed / gov’t can somehow integrate the inherient risks when companies / people decide to ‘plant their roots’ (ie. assets, insurance, businesses, etc.) near these entities so that when the next crisis rolls around, the TBTF won’t be an excuse anymore. But will there be a point where TBTF is not an excuse?
We have to separate the duties of these firms. Cannot have insurers taking on assets like the ones that are sinking AIG.
projectplatnyc Wrote: ------------------------------------------------------- > When will the point come when the govenment has > enabled the “Too Big to Fail” mindset in the > markets so much that it is detrimental to US’s > long term growth? > > I’m not sure if TBTF is the greatest thing for our > long term economy, but I am no expert by any > means. Jim Cramer noted above said he thought AIG > was too big to fail and that he thought the fed > should have cut rates. I disagree on the rate cut > and think they did the right thing and regarding > AIG, it seemed like there was no other way. > I couldnt agree more … the TBTF concept takes away the ‘FREE market’ concept. What it wil encourage for more firms to go into mega group (complex and hence less transparency) and know the government to bail it out. the current problems in the market will not be resolved from takeovers as you are just moving the opaque problem from one entity to another. transparency is what we need and that means a simplier company structure.