Europe Bails out Dexia

From CNNMoney:

Franco-Belgian bank Dexia said Monday that it will receive € 90 billion from France, Belgium and Luxembourg, making it the first bank to get bailed out as a result of the European debt crisis.

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Ultimately all bailouts are borne by the Taxpayer because the underlying debt is being underwritten by sovereign bonds.

NoDrama said:

Ultimately all bailouts are borne by the Taxpayer because the underlying debt is being underwritten by sovereign bonds.

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And if you dont bail these institutions out, than the overall cost to society - that means taxpayers - will only be greater. Letting a financial crisis spread is very dangerous in terms of the economy, as Diamond–Dybvig(PDF) points out(and as the 2008 financial crisis confirmed); You can't just simply throw your hands up in the air, refuse aid on moral grounds and expect the market to sort itself out... You're talking about massive contractions in not only a nation's economy but the global economy - you're talking millions of regular joes losing their jobs for extended periods of time at no fault of their own.

So when you go on about your vision of a moral stand against the banks - "let them fail!" - remember that you're also condemning people to an extended and unnecessary period of economic hardship. Is that really a moral victory?

edit: alternatively, you can regulate the banks so as to prevent the need for bailouts in the first place and you penalize banks accordingly when they do need assistance. It's imperfect, but it's the only viable solution.

Best alternative, let them die. Issues will be greater up front but recovery will be more intact and quicker. If any bailout is to be paid, pay off people with accounts (like FDIC) and let the rest of it die like it deserves.

Iceland's people voted to kill their greedy ass banks off and not bail them out. Yes, they went thru a whole lot of shit but are doing much better now whilst we are still sucking tailpipe.

If the banks know ye will bail them out, what incentive do they have to behave?


We can't have banking regulations, that would be anti Libertarian. Let them fuck people over and when the people have had enough they can make their own bank........... lol

sorry couldn't resist.

Iceland got out of it's mess largely via debt repudiation, capital controls, and currency depreciation and while it is notable to note that they're recovering - their economy is also still 14% smaller than it's peak in 2007(GDP) and it's unemployment rate is still above their NAIRU.

Aside from that, one size does not fit all. Iceland let their banks fail, but they also depreciated aggressively and their economy is recovering largely via the trade surplus that their weak money policy created. In our situation, even large increases in the supply of money (M2) have not been aggressively inflationary and our trade balance has only improved modestly. We need aggregate demand, and the only place we're going to get it is via fiscal stimulus... Until then, you can expect the banks to remain weak - along with the rest of the economy.

The easiest way for aggregate demand is to pay people a fair wage, then they will have money to spend. Use any economics 101 shit you want but supply side eco's is a proven loser except for those who already have. Can't create demand if nobody has $$ and you can only do so many stimuli. The first one was too small and if we were to be lucky enough for another to get going I bet it would also be too small.


Too small almost always = same as none and sometimes worse... prolongs the suffering.

Kill it, let it die, plant a new seed.

Banks essentially are one big ponzi scheme, bailouts are nothing short of prolonging the inevitable. There was a fantastic bb interview of late, caused some uproar, and then some more when they found the guy was not a hoax.

You're right, the first stimulus was woefully small and this stimulus is also too small... But my view is still more along the lines of "doing something is better than nothing" - I'd argue things would be much worse if the first stimulus didn't go through, for example.

I agree things would be much worse. Thing is that is my point, if things were much worse people and government would actually have to do something instead of dicking around like retards.

Willyßagseed;6435665 said:

I agree things would be much worse. Thing is that is my point, if things were much worse people and government would actually have to do something instead of dicking around like retards.

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too true, unfortunately.

If you let one large bank fail others will fall like dominos.
Bank gets in some trouble -> depositors and investors shun that bank out of fear -> bank fails -> banks which have lent money to the failed bank get in some trouble -> depositors move funds out of fear -> more banks fail and on and on it goes

In the end it comes down to a choice between propping up the worst banks with taxpayer's money, or allowing the banking sector to be destroyed along with the savings and investments of millions. It's certainly true that the most historically prudent banks will survive as deposits flood in from failing banks, but I for one would rather pay some extra tax to protect my national banks than see the wealth of the nation concentrated in Switzerland and the Cayman Islands.

In my view it should be a serious crime to make risky lending or investment decisions with other people's money, akin to criminal negligence. If a bank wants to increase it's profit margins by taking bigger risks then so be it, but if the bank needs a bailout as a result then the executives who rolled the dice and the boards of directors who oversaw their work should spend the remainder of their lives behind bars.

How much risky lending would have been prevented if the bankers gambling with our savings (and taking fat salaries for their trouble) felt genuine fear of the consequences should they lack prudence? Would there ever have been a property bubble? Would there have been a sub-prime mortgage crisis? Would the Irish have had to bail out their banks to the tune of €14,000 for every man woman and child in the country? Would the Greek government have been allowed to run up unsustainable levels of debt? As things stand the worst that has happened to the bankers who risked our savings so foolishly is that a few have been forced to retire early on fat pensions. They should be wearing chains.

I would rather lose all I have in the banks and be done with it.

I would lose nothing. =) You can make more skipping a cup of coffee a day and paying yourself interest than what banks pay now.

Since the 1980's when wages started to stagnate the only way the Repubs and some Dems could keep the economy going was to have credit issued easier and promote using it. Too many people nowadays use a credit card in place of good wages and that cannot sustain an economy for long and stay healthy.


Reinstate this and many of the gambling issues go away.

http://en.wikipedia.org/wiki/Glass–Steagall_Act

mame said:

And if you dont bail these institutions out, than the overall cost to society - that means taxpayers - will only be greater. Letting a financial crisis spread is very dangerous in terms of the economy, as Diamond–Dybvig(PDF) points out(and as the 2008 financial crisis confirmed); You can't just simply throw your hands up in the air, refuse aid on moral grounds and expect the market to sort itself out... You're talking about massive contractions in not only a nation's economy but the global economy - you're talking millions of regular joes losing their jobs for extended periods of time at no fault of their own.

So when you go on about your vision of a moral stand against the banks - "let them fail!" - remember that you're also condemning people to an extended and unnecessary period of economic hardship. Is that really a moral victory?

edit: alternatively, you can regulate the banks so as to prevent the need for bailouts in the first place and you penalize banks accordingly when they do need assistance. It's imperfect, but it's the only viable solution.

Click to expand...

The avergae person will never get out from under debt slavery until the TBTF banks are finally allowed to fail. Its like Gangrene, if you don't chop off the stinking appendage it will kill the entire body.

Well, Belgium doesn't even have a functioning government. Their interim PM is resigning, their largest bank (which was already bailed out) needed another one...

Best part about all of this is that it still doesn't bring Belgium to the "warning level" of Greece or Italy. But, it is definitely closer to needing its own bailout.