Crisis Alert !!!!!!
September 13, 2008
– Comments (9)
Timothy F. Geithner, the president of the New York Federal Reserve, called a 6 p.m. meeting so that bank officials could review their financial exposures to Lehman Brothers and work out contingency plans over the possibility that the government would need to orchestrate an orderly liquidation of the firm on Monday, according to people briefed on the meeting.
Flanked by Treasury Secretary Henry M. Paulson Jr. and Christopher Cox, the chairman of the Securities and Exchange Commission, he gathered the executives in person to impress on them the need to work together to resolve the current crisis.
Mr. Geithner told the participants that an industry solution was needed, no matter what, and that it was not about any individual bank, according to two people briefed on the meeting but who did not attend. They said he told them that if the industry failed to solve the problem their individual banks might be next.
http://www.nytimes.com/2008/09/13/business/13rescue.html?_r=1&adxnnl=1&oref=slogin&adxnnlx=1221308423-tz9TeHzF+LAhhJd27YVVIQ
Emergency Friday night meeting???? Wasn't the crisis supposed to be over.
Analyzing the crisis is not too hard.
A banks assets are debt. If debors can't pay banks, banks can't pay depositors. If banks can't pay depositors...nobody can pay much of anything and we are all screwed.
For the past eight years, more and more banks have been loaning more and more money simply so debt could continue to be serviced. Massive loans went out to municipalities, businesses and individuals. As long as money as flowing out, many could pay just about anything for everything. Now we have accumulated a huge pile of debt and banks are running out of money to loan to keep the game going.
The real problems will start to visibly surface when companies run out of borrowing capacity. Many are on the brink today....businesses open one day will close the next stranding customers, employees, and vendors. The chain reaction could be a mess. The following is an example from Europe:
The government was facing a £20m bailout of the holiday industry's compensation scheme following the collapse of the XL travel group, which has left 85,000 holidaymakers stranded abroad.
As the first rescue flights started bringing holidaymakers back to Gatwick, it emerged that the failure of the UK's third-biggest travel operator will force the government to bail out the Civil Aviation Authority's compensation scheme, which is already £21m in deficit.
More than 285,000 holidaymakers were caught up in XL's collapse at 2.30am yesterday in what has been described as one of the biggest failures in the travel industry. Up to 1,700 staff face losing their jobs, including 200 pilots. Planes have been impounded stranding passengers at 50 destinations in the US, the Caribbean and Europe.
http://www.guardian.co.uk/business/2008/sep/13/theairlineindustry.travelleisure
And we are supposed to trust the leaders who keep telling us everything is fine. Any analyst worth his weight in salt knows this crisis eclipses ANY in the past. Good luck to us all.
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