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How about this for a market based solution!

October 14th, 2008 · No Comments

The US government, after much dithering and wasting much time, finally comes up with the right solutions (although perhaps not in sufficient quantity, the jury is still out on that), and the markets vote..

Following the lead of Gordon Brown, prime-minister of the UK, it was first the rest of Europe, and now the US. It doesn’t matter all that much, but finally authorities seem to be getting at least some teeth into the financial crisis.

  • As Mr. Paulson said Tuesday morning: “Today I am announcing that the Treasury will purchase equity stakes in a wide array of banks and thrifts. Government owning a stake in any private U.S. company is objectionable to most Americans – me included. … From the $700 billion financial rescue package, Treasury will make $250 billion in capital available to U.S. financial institutions in the form of preferred stock. … Our goal is to see a wide array of healthy institutions sell preferred shares to the Treasury, and raise additional private capital, so that they can make more loans to businesses and consumers across the nation.” [Wall Street Journal]

It’s also clear why Paulson objected so much to this solution: ideology. He objects to states having stakes in banks, it’s market fundamentalism again at the source of much time wasting (and resulting carnage).

We ran a previous article with the rantings of some guy who, as a market fundamentalist, is against any kind of government intervention (and begrudged Krugman his Nobel, even calling him “no economist” in the process). But markets are voting, and they seem to be voting yes to these solutions, after having voted so comprehensively no against previous ones.

Some awkward facts for that guy:

So, we can conclude two things:

  1. The (essentially British) plan seems to be working
  2. The markets are voting yes.

How about that for a market based solution..

Tags: Credit Crisis