IMF Calls for Massive New Round of Bank Bailouts
Chris Whalen said last week TARP 2.0 is on it's way:
Now we have more confirmation from the IMF.
The IMF is calling for a huge new round of bank bailouts.
As the Telegraph noted yesterday:
Lenders across Europe and the US are facing a $4 trillion refinancing hurdle in the coming 24 months and many still need to recapitalise, the Washington-based organisation said in its Global Financial Stability Report. Governments will have to inject fresh equity into banks – particularly in Spain, Germany and the US – as well as prop up their funding structures by extending emergency support.
Prop up their funding structures?
Virtually all leading independent economists have said that the too big to fails must be broken up, or the economy won't be able to recover, and that smaller banks actually lend more into the economy than the mega-banks (and see this).
And the leading monetary economist told the Wall Street Journal that this was not a liquidity crisis, but an insolvency crisis. She said that Bernanke is fighting the last war, and is taking the wrong approach. Nobel economist Paul Krugman and leading economist James Galbraith largely agree.
The Telegraph continues:
“Progress toward global financial stability has experienced a setback since April ... [due to] the recent turmoil in sovereign debt markets,” the IMF said. “The global financial system is still in a period of significant uncertainty and remains the Achilles’ heel of the economic recovery.”
Turmoil in sovereign debt markets necessitating another round of bailouts?
This is amusing, given that it was the last round of bailouts which caused the sovereign debt crisis in the first place.
Specifically, the Bank for International Settlements – often described as a central bank for central banks (BIS) – slammed the failure of the Fed and other central banks to force companies to write off bad debts years ago.
BIS also warned that the Fed and other central banks were simply transferring risk from private banks to governments, which could lead to a sovereign debt crisis. That is what caused the sovereign debt crisis in the first place!
And BIS cautioned that bailouts could harm the economy (as did the former head of the Fed's open market operations).
The Telegraph continues:
Although banks have recognised all but $550bn of the $2.2 trillion of bad debts the IMF estimates needed to be written off between 2007 and 2010, they are still facing a looming funding shock that will need state support. “Nearly $4 trillion of bank debt will need to be rolled over in the next 24 months,” the report says.
$2.2 trillion? In reality, Tyler Durden, Mike Shedlock, Edward Harrison, Reggie Middleton, Max Keiser and many other savvy financial commentators would put the number closer to $20-40 trillion in bad debts. And they say that one of the main problems with the world economy is that the banks are hiding the real amounts of their debts (and the fact that they are totally insolvent), so that they can have the taxpayers bail give them a number of bailouts.
In other words, the big banks are saying, "The economy is unexpectedly not doing well, so we need another bailout."
Oct 7, 2010 at 3:52 PM
Reader Comments (4)
http://www.telegraph.co.uk/finance/economics/8043800/Banks-4-trillion-debts-are-Achilles-heel-of-the-economic-recovery-warns-IMF.html
http://georgewashington2.blogspot.com/2008/10/problem-was-never-liquidity-but.html
http://globalresearch.ca/index.php?context=va&aid=21310
http://www.latimes.com/business/la-fi-lenny-dykstra-20101006,0,828960.story
"It's a slow-motion car wreck," said author Randall Lane, who devoted a chapter to Dykstra in his recently published book about Wall Street excess, "The Zeroes: My Misadventures in the Decade Wall Street Went Insane." "He is a perfect metaphor for what happened to many people, but he did it on a scale that was monumental."