From those more in the know than I, how soon will we know whether the US’s $near-trillion bailout is succeeding in ameliorating the financial crisis?
What factors will allow us to say when - with any degree of confidence/consensus - whether the bailout was better than the alternatives (including doing nothing)?
A quick-and-dirty way might be to track the TED spread. The link to Bloomberg’s chart is here
http://www.bloomberg.com/apps/quote?ticker=.TEDSP:IND
This is usually defined as the spread between LIBOR rates (the rates at which banks lend to each other) and 3-month T-Bills (the supposedly ‘riskless’ rate).
Historically this has been in the 0.50-1% range. Meaning, it has been a little riskier for banks to lend to each other than it is to buy T-Bills, but not much.
Lately, it’s been up near 4%. Meaning, banks are much more afraid to lend money to each other, and even less interested in lending to regular Joes like you and me.
As long as this rate stays high, not a lot of bank-to-bank lending will take place and therefore less lending will trickle down to Main Street.
When this spread starts to come down, it means banks have more confidence in each other’s creditworthiness, and therefore the pipes of the financial system will start to unclog.
There are other metrics to track, but if you only want to track one, this would get my vote.
CNN yesterday said 6 to 9 months before it would have a decent effect. The .5 interest rate cut. 6 to 9 months.
Seems wrong. Why did we have to pass the bailout in such a hurry if its impact was down the line ? We could have taken time and done it correctly.
I think the theoretical answer is that more banks could have failed.
More banks will fail. A lot more. We are about to take over the banking system. The infusion of 600 billion or so has not shaken interbank lending loose. CNN says a lot of banks have money but lack the confidence to let go of it. We have to get confidence in the system. I do not see how that can happen. It is very hard to borrow.
More banks will fail. A lot more. We are about to take over the banking system. The infusion of 600 billion or so has not shaken interbank lending loose. CNN says a lot of banks have money but lack the confidence to let go of it. We have to get confidence in the system. I do not see how that can happen. It is very hard to borrow.
The market is down over 600 today and dropping.
Financial stocks are plummeting the DOW is 8607.
Very possible. Anyway the urgency came from the sense that more large banks were going to fail soon if nothing was done.
How much of the money, if any, has been dispersed? I actually don’t know. The interest rate cuts the other day were also designed to promote more lending and they haven’t, so far. Meanwhile several banks in Europe went down or were given additional guarantees. A U.S. bailout can’t fix that.
The only way we will get confidence in the system is if every piece of dodgy debt is examined, dissected, and tracked backwards through however many onion layers there may be to the ultimate asset that started it. And then its actual value publicized.
I thought the first infusion was supposed to be $150 billion, but I have not been paying very close attention.
What I fear is that these organizations are extremely savvy. Once they have seen the possibility of a subsidy, they will be unwilling to accept the hit involved in selling at depressed market rates.
It is the old slippery slope. If the gov’t will pay $700 bill to bail out AB&C, well, why not anothr couple of hundred billion to help out DE&F? When willwe know we have spent enough?
And if we aren’t going to just keep spending and spending, then why spend the first $700 bill.
Speaking personally, it sucks to see my savings plummet. I hope they recover, at least to some extent. But hey, I’m a big boy, and if I take a hit, well, I’ll just have to make and save some more, and be more careful in my future investments. But what will REALLY piss me off is seeing my net worth take a huge hit AND see my government piling on hundreds of billions of unneccessary additional debt. And I damn well want to see EVERYONE - rich and poor - taking at least as big a hit as I am.
The financial gurus who cooked up these schemes have made sure transparency was not part of the deal. They do not want anybody to know what they did. These schemes were sold around the world with varying government laws and regulations. I think they did an exemplary job of looting. They will skate and even get paid to attempt to fix the messes they made.