I disagree that LTCM should have been bailed out.
Bailouts come at a price.
The price is future bailouts are expected and excessive risks are taken cause they know the FED will bail them out.
How much in risky loans to Brazil, Argentina, Mexico, wherever were made by C, JPM , etc, because the belief that FED will bail them out.
If banks had to mark these to market prices instead of keeping crap like this off the books, then C, JPM etc would be crumbling now. That is my belief but unfortunately I can not probve it cause it is all hidden. We critize Japan banks for carrying tons of crap on the books while two faced USA banks do exactly that.
My point is everyone thinks the FED will bail them out.
The FED will not let FNM fail. Too big to fail.
Will not let C or JPM fail. Too big to fail.
Will not let FRE fail. Too big to fail.
GE GM F too big to fail.
Humongous emounts of debt floating around, and it is all too big to fail.
Heck the FED has even gone on record saying they will buy as many treasuries as necessary to stop deflation.
Well this FED has been T Totally and absolutely reckless with expansion of credit. Praying for a miracle that corporate spending would return before the consumer gave up. Well the sad fact of the matter is the consumer has all but thrown in the towel, housing is on its last legs, and this reckless expansion of credit has created a housing bubble, a debt bubble, a balance of trade bubble and a belief bubble. This FED failed to realize a simple fact: consumer spending is 2/3 of the economy and no amount of credit expansioncan sustain the unsustainable when jobs are being lost in the hundreds of thousands due to overcapacity and deflation from China.
We have a belief bubble.
That's a new one.
I just made it up.
Belief that this Fed can undo any and all damages that it has caused, and make the system well again by reinflating the bubble.
This is total nonsense, and the more they try the bigger the recession, and perhaps depression we will see as a result of it. I seriously doubt this fed could have done a worse job if it tried.
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