Comments on: No Banks Means No Banking Crisis

By: msaroff

msaroff — Tue, 03 Feb 2009 15:18:09 +0000

Wanted to note that I made the same point, I called it amputating Wall Street, as did Willem Buiter, he called it the “good bank” solution.

By: jackie

jackie — Tue, 03 Feb 2009 11:48:59 +0000

Ian, I know you probably won’t see this comment (Way EPU’D), but your post makes so much sense. Thank-you :)
And, have you sent it to the White House? ( you really should)

By: prostratedragon

prostratedragon — Tue, 03 Feb 2009 07:46:30 +0000

This paper by Abraham and Hendershott includes a basic equilibrium model to estimate where the momentum of prices in a metropolitan-type market is likely to end up. The pdf file is here.

By: ImperialFlow

ImperialFlow — Tue, 03 Feb 2009 06:28:04 +0000

Ian,

I certainly agree with the sentiment of kicking out the middleman. It’s something of an anachronism to provide fed lending only to commercial banks. It’s explicitly inefficient from a fundamental market-function perspective.

The only glaring issue I see is that doing as your suggesting, as with most things unfortunately, requires that we have a government that is adversarial to capital aggregation in corporate entities not beholden to protecting the public trust; rather than complicit or cooperative with it.

At the moment we don’t have any regulatory, administrative, or legislative bodies who have adversarial relationships with exploitive industry; save for maybe the FDIC.

By: Hmmm

Hmmm — Tue, 03 Feb 2009 05:05:26 +0000

Interesting. Well, maybe the deal on the legislation will have to include a “modesty panel” of discovery obfuscation for the CDO holders, for example maybe the servicing bank can be empowered to handle the litigation so the CDO never has to get unrolled in public. Actually I’m not sure I’d even force the mortgagee to go through a formal bankruptcy, maybe we need a new term like “Mortgage Resolution Proceeding” so that the mortgagee isn’t unnecessarily tarred as happens in a bankruptcy.

On your second point, I agree a PR campaign should be able to do the trick.

By: ThingsComeUndone

ThingsComeUndone — Tue, 03 Feb 2009 05:04:42 +0000

This piece will scare the crap out of the banks Ian.:) Take on the Payday loan companies next!

By: Rayne

Rayne — Tue, 03 Feb 2009 04:59:30 +0000

Yeah. Bankruptcy court is where we are looking for this required renegotiation to take place — but there are two wrinkles.

First, the national banks and mortgage brokers don’t want any of their mortgages to go to court in any way, shape or form; I suspect that they are worried about discovery.

Second, many “eligible” folks are actively avoiding anything they receive from a bank, let alone from a court; we need to turn around their skepticism or cynicism about the process, make it completely transparent and advertise widely cases that are successful in order to win these people over who’ve been burnt too many times.

If we can get around these two points, we are much closer to “eventually”.

By: Cujo359

Cujo359 — Tue, 03 Feb 2009 04:54:35 +0000

You’re making too much sense, Ian. Heck, if we’d just set up our own bank with that $700 billion, we’d be out of this thing in months. Next time, I hope someone tries that first.

By: wesgpc

wesgpc — Tue, 03 Feb 2009 04:44:02 +0000

Lets hope for better macroeconomic policy, so we can find out. I will be glad to have my agnosticism removed one way or the other asap.

By: Hugh

Hugh — Tue, 03 Feb 2009 04:38:14 +0000

I’m not sure if a recovery will give you that because at some point peak oil will begin to exert a price effect. The main thing is to take non-commercial traders out of the market, increase margins, and make sure markets are transparent and regulated.