Karl Denninger of Market Ticker has written an extremely cogent letter that describes the financial crisis facing this nation. He describes how we got to where we are, the immediate problems this nation faces, and the steps the government should take to correct or ameliorate the situation. Here are just a couple changes that Karl says the government must implement:
- All securities and instruments traded and held for investment by regulated financial entities must have a CUSIP assigned and be traded on a public exchange or their value must be established by independent appraisal (in the case of a house or other real property.)
- Margin requirements must be enforced against all market participants.
- All off-balance sheet vehicles must be banned and existing ones immediately brought back onto the balance sheet of the firm involved and disclosed in full
- We must either get rid of the NRSRO label for ratings agencies, allowing free and open competition, or we must hold those certified agencies to their ratings.
(There is more to this list than these four items; plus, Karl goes into much more detail, so please read the letter in full.)
This might be hard medicine to swallow, but I fear that Karl may be correct when he says that the consequences of not taking his outlined steps will be much worse than causing some institutions to fail immediately.
Karl is so right on….I think you can find the genesis of this disaster back in the Reagan Administration when we increased FDIC and FSDIC from 40K to 100K. The taxpayers took a real bath with the S & L. Now that’s starting to look like a kids tea party.
These barbarians have brought this country to it’s knees!