Guest
10-14-2008, 09:06 AM
In time there will be books written about the events surrounding the worldwide financial crisis and the efforts directed towards its resolution. While reading many of the news reports in recent days, while I've begun to draw some conclusions, I assure you I won't be writing a book.
Back to some of my conclusions. They're all drawn from various news reports with the conclusions being my own. I'll make them abbreviated.
• The U.S. is no longer the world's financial leader. The European Union (EU) has assumed that role. Their actions over the weekend to nationalize their banks in a huge way went a lot farther towards stemming the financial crisis than anything the U.S. is even contemplating.
• The EU has committed 10 times the amount of their treasury funds to resolve the financial crisis as the U.S. has. The EU is an economy that's roughly the same size as the U.S. with a population that's about 50% larger than ours.
• The EU has already injected almost $2.5 trillion to nationalize the key banks in the U.K., Germany, France and Spain. The U.S. is still trying to figure out how to inject $250 billion into our financial institutions.
• Reports are that initially the White House wanted only to buy back bad loans from troubled financial institutions, the initial bailout proposal presented by Henry Paulson. Unconfirmed reports from insiders are that President Bush wanted no part of anything that even remotely looked like the nationalization of U.S. banks. But as the crisis worsened and the EU plans began to take form, the U.S, administration was forced to abandon their idealogy and follow the direction being provided by the EU.
• Concurrent with injecting the money into their banks, the EU finance ministers fired the CEO's of the banks which got the most money, eliminated any bonuses or golden parachutes, and essentially took control of the banks. The U.S. is still studying how or when to do this sort of thing.
• The political leaders of the EU countries have made it clear to their residents that they can and should rely on actions by their government to resolve the crisis that began in the U.S. It may have been best said by Britain's Prime Minister Gordon Brown, "The government cannot just leave people alone to be buffetted about. We must in an uncertain and unstable world be the rock of stability on which our people can depend." (Maybe I missed it, but what has our President or eiher of the candidates said anything like this in such a strong and resolute way?)
• The EU finance ministers have already injected capital into the key banks as well as provided substantial guarantees to assure the loosening of the European credit markets. Reports are that in the U.S. lobbyists for the banks and the non-bank financial companies are lobbying the administration had so that one group or the other won't be advantaged by receiving Treasury Department funding. The lobbyists for the investment banks and mutual funds are concerned that if deposit guarantees are broadly expanded for the banks, that they will lose huge amounts of money market deposits and the associated management fees.
• While the EU has actually injected almost $2.5 trillion into their banking system, all the U.S. has done so far is authorize the expenditure of $700 billion. We have not as yet spent even one dollar of that amount. Thus far all our time and effort has been spent creating a new sub-department of the Treasury, hiring people, finid office space, writing rules for how we will deploy the money, and hiring third-party consultants to make the investment/deployment decisions and track the results of the investments.
This is just the beginning of the dramatic erosion of our financial leadership of the world. The U.S. followed the EU in the development of a solution that is working. We were not able to commit anywhere near the amount of treasury support as the EU countries did, presumably because we no longer have the borrowing capacity to do so. It might have been best said by French President Nicolas Sarkozy, "The time of everyone acting alone is over." I interpret that to mean that a "super-nationalization" of the world's banking system is underway, which the U.S. will almost certainly have to join.
What's more disturbing is the well-known fact that political leadership closely follows financial leadership in world affairs. Right now and for the foreseeable future our political and business leaders have placed the U.S. in a position where we could easily become a second-tier world power behind the likes of China, India and now a re-energized and financially capable European Union.
Watch for the books and articles on this subject. I know I will be.
Back to some of my conclusions. They're all drawn from various news reports with the conclusions being my own. I'll make them abbreviated.
• The U.S. is no longer the world's financial leader. The European Union (EU) has assumed that role. Their actions over the weekend to nationalize their banks in a huge way went a lot farther towards stemming the financial crisis than anything the U.S. is even contemplating.
• The EU has committed 10 times the amount of their treasury funds to resolve the financial crisis as the U.S. has. The EU is an economy that's roughly the same size as the U.S. with a population that's about 50% larger than ours.
• The EU has already injected almost $2.5 trillion to nationalize the key banks in the U.K., Germany, France and Spain. The U.S. is still trying to figure out how to inject $250 billion into our financial institutions.
• Reports are that initially the White House wanted only to buy back bad loans from troubled financial institutions, the initial bailout proposal presented by Henry Paulson. Unconfirmed reports from insiders are that President Bush wanted no part of anything that even remotely looked like the nationalization of U.S. banks. But as the crisis worsened and the EU plans began to take form, the U.S, administration was forced to abandon their idealogy and follow the direction being provided by the EU.
• Concurrent with injecting the money into their banks, the EU finance ministers fired the CEO's of the banks which got the most money, eliminated any bonuses or golden parachutes, and essentially took control of the banks. The U.S. is still studying how or when to do this sort of thing.
• The political leaders of the EU countries have made it clear to their residents that they can and should rely on actions by their government to resolve the crisis that began in the U.S. It may have been best said by Britain's Prime Minister Gordon Brown, "The government cannot just leave people alone to be buffetted about. We must in an uncertain and unstable world be the rock of stability on which our people can depend." (Maybe I missed it, but what has our President or eiher of the candidates said anything like this in such a strong and resolute way?)
• The EU finance ministers have already injected capital into the key banks as well as provided substantial guarantees to assure the loosening of the European credit markets. Reports are that in the U.S. lobbyists for the banks and the non-bank financial companies are lobbying the administration had so that one group or the other won't be advantaged by receiving Treasury Department funding. The lobbyists for the investment banks and mutual funds are concerned that if deposit guarantees are broadly expanded for the banks, that they will lose huge amounts of money market deposits and the associated management fees.
• While the EU has actually injected almost $2.5 trillion into their banking system, all the U.S. has done so far is authorize the expenditure of $700 billion. We have not as yet spent even one dollar of that amount. Thus far all our time and effort has been spent creating a new sub-department of the Treasury, hiring people, finid office space, writing rules for how we will deploy the money, and hiring third-party consultants to make the investment/deployment decisions and track the results of the investments.
This is just the beginning of the dramatic erosion of our financial leadership of the world. The U.S. followed the EU in the development of a solution that is working. We were not able to commit anywhere near the amount of treasury support as the EU countries did, presumably because we no longer have the borrowing capacity to do so. It might have been best said by French President Nicolas Sarkozy, "The time of everyone acting alone is over." I interpret that to mean that a "super-nationalization" of the world's banking system is underway, which the U.S. will almost certainly have to join.
What's more disturbing is the well-known fact that political leadership closely follows financial leadership in world affairs. Right now and for the foreseeable future our political and business leaders have placed the U.S. in a position where we could easily become a second-tier world power behind the likes of China, India and now a re-energized and financially capable European Union.
Watch for the books and articles on this subject. I know I will be.