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jonisrael

Listed below are comments made by jonisrael between Monday, 6th October 2008 and Sunday, 4th January 2009.

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Our banks 'have to lend more' 11:07pm on 04 Jan 2009 Government offering loan insurance does not seem like a sound idea. The problem as i see it it is one of sensitivity. A good lender will be sensitive to market movements, sectoral pressures, etc. The government has to rely on a more narrow range of vibratiosn to play out its policeis otehrwise it would have to sit around and sound out all in sundry before acting. I relaly fear for competition and the market economy after the current depresion has lifted in three or four years time.
Banks should be boring 7:46pm on 13 Oct 2008 It most certainly means that we are not near the absorbing that asset values are more uncertain than at any time since the 1929. This is the crux of the matter. What is a traditional asset worth? The production of ballon debt (CDS CDOs, etc.) has had the effect of putting a question mark over the 'real value' of an asset. Until the money market and funds are confident of a floor, the attraction of financial equities is very hard to determine. At the moment the whole of the OECD is looking to create, or uncover, a stable financial 'nucleus' among the myriad of exotic particles that have spun out of orbit. The difficulty, to extend the analogy, lies in ascertaining the decay life of what is left and its affects. This is not over by a long chalk and as more banks seek capital in the *next* quarter, the solidity of the system will be even more tested.
Banks' most pressing problem 10:25am on 07 Oct 2008 Indeed Robert solvency is *the* problem confronting the banks and money markets. The Irish solution looks as if it gets around solvency doubts by bundling it up in 'not dare' to be asked questions about nation state solvency (brought to a head now with Iceland) but that could change. Moreover, the EU has not developed a unified model yet to manage the solvency crisis (forget this talk of liquidity and illiquidity). Should states take equity in banks in return for the exchequer becoming the underwriter of a potential financial armageddon? I think so, but the Irish didn't neither have the Greeks. The Swedes did howwever in teh early nineties. The Chancellor thought so in the case of NR. Does the restoration of confidence require the retirement of existign bank executives. The Irish think not, but the Chancellor, the Dutcch and Germans appear to think yes, and quickly. So with such a mixed bag of responses what is the likelihood of consistency???
Monday morning feeling 11:26am on 06 Oct 2008 The medium term solution will almost certainly involve the rehabilitation of junk bond schemes. There is no way out of this crisis short of a round of mergers and acquisitions supported by speculative bonds - the difference between now and the eighties being that junk bonds would have to be issued (and underwritten in some fashion) by governments. The assets of affected institutions (their debt effectively) would be significantly disocunted and folded into a bond - which somethign similar to but more transparent than the US proposal. The principle is well understood, the difficulty lies with the level of mark down applied to the debt. This is where the regulators and bankers fall out. A very severe mark down of asset values will undoubtedly drop property values which has the upside of stimulating sales among first tiem buyers and investors with cash, but it also has significant downsides. In Iceland, property will dramatically collapse whatever strategy is proposed however, given the debt problems.

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jonisrael