Links for 2009-02-02

  • Interfluidity | Bank insolvency: tips & tricks – «Zombie banks beg for money. They are very clever. They come up with ways you can give them money while pretending not to give them money, such as guaranteeing their assets, guaranteeing new debt issues, or buying up assets at “hold to maturity” values. Just say no! A healthy financial system cannot be run by zombies. “Rescuing” insolvent banks makes about as much sense as tying string to the arms of a loved one’s corpse so it can come to the dinner table as a marionette. For a while that may be comforting (or not), but pretty soon it’s sure to smell really bad, and it’s gonna ooze»;
  • Information Arbitrage | Fix the Accounting, Then Fix the System – «As it stands today, those who argue against mark-to-market treatment say “This will just exacerbate the capital problem at troubled banks. And after the markets unlock, those assets will be salable at far higher prices.” Exactly. Let’s smoke out the problems NOW, and figure out the magnitude of the problem NOW. The fact that assets might fetch higher prices in the future is immaterial if you don’t have the balance sheet to get to the future, and it is certainly not the taxpayer’s responsibility to support those institutions’ common stockholders and bondholders in this mission»;

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