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Credit Denied

by Lasthorseman Thu Sep 25th, 2008 at 08:01:40 PM EST

The crash is happening now and they have known it down to the very date it would happen.  Most everything on Murikan TeeVee is carefully confined to the mental age of a five year old and scripted to purposefully avoid any historical references to any time period or the treason leading to the US entry into 1929 style economic depression.

My pension from "Enron" comes with a severance check on Sept 30.  I doubt the bank will be open to cash it.
Nicht alle Americaner ganz idioten sind.
Tearing one system down to assure another.

Even two years ago corporate was fucked up beyond repair.  Actions speak louder than biz buzzords.

... the solvency crisis in the talk in May by NY-FRB executive VP William C Dudley, May You Live in Interesting Times: The Sequel

There's lots of phrasing to make is sound like a liquidity crisis:

In essence, the Federal Reserve's willingness to provide liquidity against less liquid collateral allows the reintermediation and deleveraging process to proceed in an orderly way, which reduces the damage to weaker counterparties and funding structures. ...
The Federal Reserve has introduced three new liquidity facilities during the past five months. ...
This bolsters confidence in the triparty repo system and reduces the risk of the type of funding run that led to Bear Stearns' illiquidity crisis. ...

However, while carefully never once including the word "solvency", at least in the online prepared remarks ... in May, while talking about a series of measures to provide liquidity, he says that the main problem is:

So what has been driving the recent widening in term funding spreads? In my view, the rise in funding pressures is mainly the consequence of increased balance sheet pressure on banks. This balance sheet pressure is an important consequence of the reintermediation process. Although banks have raised a lot of capital, this capital raising has only recently caught up with the offsetting mark-to-market losses and the increase in loan loss provisions. At the same time, the capital ratios that senior bank managements are targeting may have risen as the macroeconomic outlook has deteriorated and funding pressures have increased.

... and if "balance sheet pressure" itself actually comes to a head, that is a solvency crisis.

I wonder how much liquidity-not-solvency groupthink in the FRB system is driven by the ability to talk forthrightly about systemic liquidity problems, but the perceived need to avoid talking forthrightly about systemic solvency problems, so that actual, valid, detailed analysis has its most important conclusions lost in the pyramid of executive summaries based on executive summaries between the actual detailed analysis and the top level decision makers.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Fri Sep 26th, 2008 at 05:42:15 PM EST
Is this need to avoid talking about a solvency crisis a real need that exists for a good reason (say, to avoid a run on the banks?), or is it purely a result of the Bay of Pigs syndrome?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Sep 28th, 2008 at 05:02:42 AM EST
[ Parent ]
Bruce has now expanded that comment into a diary.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Carrie (migeru at eurotrib dot com) on Sun Sep 28th, 2008 at 05:10:33 AM EST
[ Parent ]
with or rather ignore what the criminals have to say about excusing/justifying their thefts.  I have to get past that and project IF this American peasant and his family gets to survive and how.

They are after all the "government" and they routinely seize the assets of "terrorists", drug dealers and criminals of all sorts.  They just fail to do so when those criminals put them in office.


by Lasthorseman on Sun Sep 28th, 2008 at 07:19:25 AM EST
[ Parent ]
We aren't all idiots, just most of us.

Of course they're talking about liquidity and not solvency.  Illiquidity means you just have to pump more something-or-other into the system to fix it, and "more" is what the US is all about: more cars, more houses, more cowbell.  Insolvency means there isn't enough to go around and that you'll have to make do with less (and that someone else will have to do the pumping, but I don't want to go there right now).  The US is now on its third generation that has never really had to do with less, and it's a good question whether we even have the capacity to grasp the concept.

by rifek on Sun Sep 28th, 2008 at 01:55:01 PM EST
In all humility, those of us who aren't idiots were incapable of saving those who are, or, possibly, even themselves.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Sep 29th, 2008 at 07:53:44 AM EST
[ Parent ]

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