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US follows Europe's Lead - directly invests in banks
Old 10-13-2008, 09:34 PM   #1
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US follows Europe's Lead - directly invests in banks

US Treasury decides to recapitalize banks through direct investment. Had to make sure US was perceived as safe as Europe.
U.S. Treasury Said to Invest in Nine Major U.S. Banks Bloomberg.com: Worldwide

This is the new Treasury plan for using $125 billion from the recently voted "rescue" package and there will be press conferences about it tomorrow.

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Old 10-14-2008, 07:41 AM   #2
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Better than just buying up toxic assets, IMO. This at least has a better chance of eventually making the taxpayers whole, or at least closer to it.
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Old 10-14-2008, 07:55 AM   #3
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Things are easing up on the credit crisis:

"The overnight bank-to-bank lending rate continued to slide, with the London interbank overnight rate (Libor) falling to 2.18% from 2.47% Friday, according to data from Bloomberg.com. That followed a sharp drop off from 5.09% Thursday."

Credit eases, government bond prices sink - Oct. 14, 2008
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Old 10-14-2008, 07:59 AM   #4
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Yes, finally! Now maybe Main Street can go back to doing what it does best.

I guess the Plunge Protection Team took the ultimate plunge! (But that was after we had a whole lotta plunging going on).

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Old 10-14-2008, 08:00 AM   #5
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Neat trick too - the ultimate cover: "We had to do it, because Europe did it".

Now everyone can just blame Europe.

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Old 10-14-2008, 08:33 AM   #6
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Right. I saw on on-camera statement by a US banker last night (on the NBC evening news). He was saying the US had to do this because if we didn't the European banks would have a "competitive advantage".

I'm sure I heard the same thing about regulating investment banks' leverage ratios a couple years ago. The US couldn't do that because it would give European countries a "competitive advantage" and investment banking would move to Europe.

In today's case, it seems if the Europeans gain "competitive advantage", that gives their gov'ts the opportunity to subsidize more loans. I'm not sure that I see how the US taxpayers lose in that scenario.
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Old 10-14-2008, 08:52 AM   #7
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Europe was letting their investment banks lever up to 30:1 several years ago? Is that why the SEC exempted the top 5 investment banks from their 12:1 leverage constraint in 2004? Was Europe already allowing that amount of leverage?

Gosh - I guess now we all can only WISH that Europe had become the capitol of investment banking a few years ago and that our Finance CEOs had gone over to run (i.e. rip-off) their banks instead of finding ourselves in the middle of this blow-up.

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Old 10-14-2008, 09:00 AM   #8
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Quote:
Originally Posted by Independent View Post
Right. I saw on on-camera statement by a US banker last night (on the NBC evening news). He was saying the US had to do this because if we didn't the European banks would have a "competitive advantage".
That had already been playing out in Europe. I believe Ireland was the first to independently state it would back unlimited deposit insurance on all of its banks. Capital flowed from all over Europe into Ireland's banks, making all the other European banks suffer more in the process.

I believe that given the current market's desire to flee to safety -- as evidenced by these cash flows -- is the driving force behind the need to make this a coordinated global effort.
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Old 10-14-2008, 09:36 AM   #9
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Originally Posted by audreyh1 View Post
Yes, finally! Now maybe Main Street can go back to doing what it does best.
You mean, ignoring the greed and corruption on Wall Street until it comes crashing down on our heads? Who knows, maybe this time it will be different. Maybe people will actually learn from this crisis, and maybe we'll--hey look, American Idol is on!!
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Old 10-14-2008, 09:40 AM   #10
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Ouch! CompoundInterestFan - you do kinda have a point there!

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Old 10-14-2008, 07:32 PM   #11
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Originally Posted by Independent View Post
In today's case, it seems if the Europeans gain "competitive advantage", that gives their gov'ts the opportunity to subsidize more loans. I'm not sure that I see how the US taxpayers lose in that scenario.
The fear is capital (deposits, direct investments, ect) will flow out of the countries with the least amount of protections to the ones with the most. That's obviously counterproductive when you're trying to attract capital to your banking system.

edit: Or, I could have just posted . . . "What ziggy said"
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Old 10-14-2008, 09:38 PM   #12
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.....including Citigroup Inc. and Goldman Sachs Group Inc., in the government's latest attempt to shore up confidence in the financial system.
"The proposed cash injections in exchange for preferred shares are part of a $700 billion rescue approved by Congress and follow similar moves by European leaders to unfreeze global credit markets by helping beleaguered banks. The other companies are Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp., Merrill Lynch & Co., Morgan Stanley, State Street Corp. and Bank of New York Mellon Corp., said people briefed on the plan."

Are these selected based on size and which poor devil is #10?
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Old 10-14-2008, 10:12 PM   #13
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Too bad for Washington Mutual shareholders. Just missed it by a week or so.
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