What To Call It?
Robert Peston is the BBC Business editor, and he has a blog. While he normally covers the British economy with posts like Interbank hysteria, which discusses the current behavior of British banks, he also comments on the US.
He has the winning entry for what to call the entity being created in the bailout bill: A stinking Septic Bank
So it looks as though the Whitehouse will have its wish: Congress will probably allow it to create its Septic Bank, into which $700bn of poisonous excrement will be sucked out of Wall Street.
…So one unanswerable question is whether poisoned banks will refuse to detox because the price of doing so – in respect of pay cuts and wealth reduction for their shareholders – would be too great?
Such behaviour on their part may be mad and irrational. But it’s now clear that bankers haven’t distinguished themselves by their rationality over recent years.
He says that he got “Septic Bank” from a British banker, but this is the sort of industrial strength snark our financial writers need.
4 comments
Does Rid-X work in a septic bank?
I think it would depend on how much paper is clogging the system. Some people think you can just flush anything.
I am still of the opinion that we just need to let this thing run its course. The reality is that only about 1 or 2 % of the mortgages out there are toxix and it would actually be a lot cheaper(since they do represent real property) to just buy them all and sell the property for whatever we can get. The net cost might be as much as $200 billion.
All the companies that are upside down because of derivatives and the like should just be allowed to die. We shouldn’t reward bad behavior with a do over.
I’ve said from the start that the problem, the root problem, is bad mortgages on overpriced property. Buy the mortgages and reset set them, where possible, to standard mortgages based on realistic prices for the property. Recreate FDR’s HOLC to handle it because we know it worked. The “toxic paper” was a Wall Street creation and is their problem, not mine.
You don’t reward stupidity.