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When this bubble pops, which financial institutions will take the loss?

I'm thinking of what Agnes wrote: that this is a game with winners and losers, and until everyone is a guaranteed loser they'll keep playing it.  But I may have got that all sideways and backwards.

Don't fight forces, use them R. Buckminster Fuller.

by rg (leopold dot lepster at google mail dot com) on Thu Nov 30th, 2006 at 07:52:41 AM EST
When this bubble pops, which financial institutions will take the loss?

The taxpayer, of course. Financial institutions cannot be allowed to fail.

Those whom the Gods wish to destroy They first make mad. -- Euripides

by Carrie (migeru at eurotrib dot com) on Thu Nov 30th, 2006 at 07:58:54 AM EST
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Technically: Is it possible to think up a law that would protect individual investors while pushing the risk back onto...well...this really isn't my field at all.  Corporate investors?  Investment houses?  Those who invest about £X in a deal?

Politically: Gordon Brown (as an example) seems (or seemed?) to have the ability to understand such issues, and he doesn't seem the type to give tax money to financial institutions unnecessarily, so is there part of the system that ties govts. hands?

Don't fight forces, use them R. Buckminster Fuller.

by rg (leopold dot lepster at google mail dot com) on Thu Nov 30th, 2006 at 08:04:22 AM EST
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in this case, it's not clear that banks will lose money. As I said, they have often sold on the risk to others (hedge funds, pension funds, etc...) so the losers may pop up in unexpected places. It may be the banks anyway if they finance funds, but it might be pensioneers of private pension funds...

But banks are quite big these days, so they will take a lot of the losses before it costs money to the taxpayer. We'll see.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu Nov 30th, 2006 at 09:41:47 AM EST
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some financial institutions cannot be allowed to fail.
However, by experience when construction companies such as Jarvis plc in the UK or Walter Bau in Germany went bust because of the construction business bubble, banks indeed took the loss.
Passing financial institutions for the worst of evils can do as little good as worshipping them.

When through hell, just keep going. W. Churchill
by Agnes a Paris on Thu Nov 30th, 2006 at 10:53:25 AM EST
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