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09/28/2008, 10:54 AM
#127
after junior and his friends decided to make an example of Lehman and allowed it to become bankrupt, lots of corporations and rich folk lost a ton of money.
Some of it is tied up in uninsured overseas accounts, some in complicated versions of "bonds" and other monetary paper -- none of which I can even pretend to understand.
But the effect of this stack of cash becoming at least frozen -- and very possibly lost -- has been dramatic.
Round the world there has been for the last couple of weeks, a vast silent run on the banks.
Not the little folks with under $100,000 who are insured -- but the filthy rich.
They are quietly transferring billions and billions of their unhard won cash into t-bills and such -- and out of any but the most well capitalized banks (of which there are really only 4 left).
This panic really began with the collapse of Indymac -- a big primarily west coast bank that went under a few weeks ago. Those with deposits greater than $100,000 were not fully protected by the FDIC.
The effect of this gigantic run on the banks has been a sucking out from nearly every american bank of their core capital. As a result they have stopped lending, and many may join Indymac in becoming insolvent.
Jim Cramer -- who I respect though I often disagree with -- advocates that the FDIC raise the ceiling on insured deposits to 2+ million dollars (from $100,000.)
His argument is that without it, the national credit and banking system will inexorably bleed to death -- leading to another great depression.
I fear he may well be right.
Behind the bailout plan is junior has belatedly being forced to recognize that had he done nothing, the depression that would have resulted would have reenforced the view that he was the most inept leader since Caligula.
Because of his history of lies, manipulations, and executive trickery -- junior has no reservoir of trust from which to draw on, in this crisis.
Obviously the bailout plan is deeply unpopular amongst both left and right. (I spent much of last week listening to many of the progressive left's leaders talk about the upsurge in grassroots fury at the plan.)
The GOP folks in talk radio land, are similarly outraged -- though even more befuddled and confused. They are collectively dizzied by the socializations proposed by junior -- and the abject failure of what had been bedrock GOP economic theory from Raygun to junior: that wholesale deregulation and tax cuts for the wealthy, inevitably brings prosperity to all.
This has become such a psychically absorbed precept amongst GOPers, that even as the system they created collapses, they advocate even more tax cuts for the rich as their solution.
That all this is happening on the eve of a national election only adds to difficulty of creating even an interim solution.
Having been demagogued to defeat by Repugs over pledges of allegiance, flag burning, gays marrying, and Iraq -- the Dems will understandably insist that any deal include both sides.
I fear that both the current dire situation, the reasons we've come to be here, and any possible solution to it -- are too too complicated for the average voter. The average GOP politician understands the "populist" advantage of pretending to defend the "people" against Wall Street.
The period between administrations is always an awkward one.
The outgoing group (however good or bad they may have been), is constrained by much diminished authority -- and the sense that they are just temporary place holders looking for their next job.
Even assuming that Obama wins (not a certainty), and that he appoints a decent crew to work on reviving the economy -- we're still talking about another 6 months before they get in place and up and running.
Potentially it could be a very bad year ahead.
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Originally Posted by bclinger
