In other words, if you invested money in one of these lenders, and then you bought a CDS, then you deserve to get your money out.
But for those who purchased the swaps without any stake in the bank itself, well, you go fly a kite.
Maybe we'll give you the fees back from the bank coffers.
But what were you doing in the first place buying these things when you had no stake?
That's on you.
I know this would cause quite an upset in the system, reneging on a legal financial instrument, but look where we are. The instrument itself was only made legal by the likes of shady dealers such as Phil Gramm who helped engineer the Enron scam.
They know something is wrong and don't like it. They know that it involves abuses of deregulation, or that some of that deregulation was itself abusive, but they seem unable to see that the whole neo-classical approach was only propaganda to cover systematic looting. We need to break the spell and reject the entire frame--as a country--as a world economy--while there still are such things remaining to us. If sanity be culturally normative, then by the norms of this culture I claim insanity.
As I see it the main current problem is the transition phase we are in now where everyone is holding on to their chips and begging the bank - i.e. Paulson and his collegues around the world - for more.
I think we need transparency more then anything. Removing all these exotic crap is one way, another is forcing greater transparency (and thus faster bankrupcies) so that the new owners can take over, a third would be to put up new institutions of credit and clearly signal that old ones will not be propped up - again causing faster bankrupcies in insolvent companies.
Targetted, though, it might work. One of the main tricks would be to find honest-broker bankruptcy courts with enough expertise to understand the root problems. It could be a good experiment to run, starting with General Motors, wherein there is enough mutual need among labor, management, politicians, and subsidiary industries to promote some level of unified solutions. Of course, stockholders would be the last served, but isn't there some sort of cliche about risk involved there? paul spencer
Insurable Interest
or as a
Contract for Difference
ie an out and out bet.
But not the bastard we have now.
