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as long as you have markets, you’ll have excesses.
—Warren Buffett
“The government is in a bind: Paying rock-bottom prices for shaky mortgage-backed securities might hurt the firms that the bailout is supposed to rescue, but if the government pays a higher price, taxpayers might end up with securities it can’t resell except at a big loss.”
—Jared Bernstein, senior economist at the Economic Policy Institute
Morgan Stanley & Goldman Sachs become commercial banks, regulated by the Fed.
- More disclosures
- Higher capital reserves
- Less risk-taking — borrowing restrictions, for example
But, they will have access to the full array of the Fed’s lending facilities. As a start, MS agreed to sell up to a 20% stake to Mitsubishi UFJ Financial Group, which has $1.1t in bank deposits. Already, Morgan Stanley had $36b in retail deposits as of August 31, and GS had $20b.
Nonetheless: “Today, Goldman Sachs has $1 of capital for every $22 of assets; Morgan Stanley has $1 for every $30. By contrast, Bank of America’s has less than $11 for every $1 of capital.”
“They’re going to have to protect their deposit bases by law, and the days of high leverage are gone…The days of the big bonuses are gone.”
—Charles Geisst, a finance professor at Manhattan College in Riverdale, New York, who wrote “Wall Street: A History.”
When you have a big loss in the marketplace, there are only three people that can take the loss — the bondholders, the shareholders and the government. That’s the dance we’re seeing right now. Are we going to shove this loss into the hands of the taxpayers?
—William Seidman, who led the RTC from 1989 to 1991.
…nonetheless…
“Enough is enough. It is time to bail out the American taxpayer from bailout mania….refrain from conducting any additional government-financed bailouts for large financial firms….These massive federal bailouts have exposed taxpayers to literally tens of billions of dollars of new risk…moral hazard where companies are absolved, not punished, for excessive risk taking
[The new bill sales] are intended to give the Fed the ability to liquefy the financial markets
—Ward McCarthy, Stone and McCarthy Research Associates
We need a coordinated surge to stem contraction in the credit markets
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“We are really in uncharted waters. The question that has to be raised now is, where is all this going to end?”
—Former Richmond Federal Reserve Bank President J. Alfred Broaddus Jr.
“We are in new territory, this is a different game. [Neither Federal Reserve Chairman Ben Bernanke nor Treasury Secretary Henry Paulson] know what to do but they are trying to come up with ideas”
—Senate Majority Leader Harry Reid
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what happened to the $25b auto industry bailout, anyway?
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