Why the Bailout will make it worse

[thomaspaine23]

I have been doing some thinking about what the impact of this would be, and the likely action of the banks.

First off the wall street banks WILL NOT loan this money out. Why? Because of what just happened to WAMU.

All the banks are hurting, if the big ones get capital, they will hold it and wait until the small ones go under. At which point the FDIC will step in, sieze them and sell their assets to a Big bank at firesale prices. I.E. WAMU-JPMorgan (300Billion in assets for 1.9 Billion)

What they WILL do is park the money in either foreign currency or commodities. This will spike inflation/devalution of the dollar, causing interest rates to rise,
which will FURTHER depress housing prices. This will put MORE pressure on the small banks. It will also spike gas and food prices.


Food for thought

[enjerth]

I have been doing some thinking about what the impact of this would be, and the likely action of the banks.

First off the wall street banks WILL NOT loan this money out. Why? Because of what just happened to WAMU.

All the banks are hurting, if the big ones get capital, they will hold it and wait until the small ones go under. At which point the FDIC will step in, sieze them and sell their assets to a Big bank at firesale prices. I.E. WAMU-JPMorgan (300Billion in assets for 1.9 Billion)

What they WILL do is park the money in either foreign currency or commodities. This will spike inflation/devalution of the dollar, causing interest rates to rise,
which will FURTHER depress housing prices. This will put MORE pressure on the small banks. It will also spike gas and food prices.


Food for thought

This is the DEFLATION stage in Thomas Jefferson's warning.


If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered.

But the framers could not have possibly foreseen the modern age, and their wisdom and the Constitution that they wrote is outdated. :)