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<nettime> nationalization of the banking system
Stefan Heidenreich on Sat, 8 Mar 2008 23:24:32 +0100 (CET)


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<nettime> nationalization of the banking system


as financial topics come up from time to time on the list - this seems
to be worth some attention:

http://www.nakedcapitalism.com/2008/03/covert-nationalization-of-banki
ng.html

to give it a short and very simplified summary:

- Wide parts of the US-Banking system would approach bankruptcy.

- The FED started to accept junk-paper (not tradable anymore, no
adequate market pricing ) as collateral for new "credit".

- As this "credit" is seriously meant to be repaid, we should regard
the fed-money as equity. (This is the debatable core argument of
Waldman - but if we accept it, it means - in his words "that the Fed
has gotten into an entirely new line of business, and on a massive
scale." )

- Here come some numbers: Overall equity of the US banking system is
about 2 trillion. The Fed supplied 200B "credit". That is 10% !!!
(just to compare: Souvereign Wealth Funds invested a mere 24B)

- de facto FED has already covertly "nationalized" 10% of the banking
system.

A lot of questions arise from that situation:

- what kind of "banks" does this create? What will be their business?

- how does it touch the notion of "money" and "debt"?

- How does this apply to the announced death of the consumer?

I hesitate to post too lengthy on the topic.

More might come up, if a discussion requires.

all the best,
Stefan




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