They broke it and now cannot fix it. Radical intervention appears to be called for now.
Dec. 21 (Bloomberg) -- Citigroup Inc., Bank of America Corp., and JPMorgan Chase & Co. abandoned a U.S. Treasury- sponsored plan to buy assets from cash-strapped structured investment vehicles.
The ``SuperSiv'' fund brokered by Treasury Secretary Henry Paulson, slated to be about $80 billion when it was announced in October, ``is not needed at this time,'' the banks said in a statement today.
The need for a bailout has diminished as HSBC Holdings Plc, bond insurer MBIA Inc. and other companies that manage SIVs arranged their own rescues. The steps lessened the threat that SIVs will dump their holdings and further roil credit markets contaminated by losses in securities tied to subprime mortgages. New York-based Citigroup said last week it would guarantee $58 billion in debt from SIVs it manages in order to avoid a forced sale of the assets.
``The market is in surgery and they can't even get the Band- Aids to work,'' said Thomas Flaherty, who manages $25 billion in corporate debt at Aberdeen Asset Management in Philadelphia.http://www.bloomberg.com/apps/news?pid=20601087&sid=awlfMTVBEuIs&refer=home
OK, what now?? Could it be absolution?
Fair Warning: There is some political stuff in this article which I have avoided posting, but if you go to the site to read the article you will see it.
Similarly, the "money" power of the Federal Reserve – our own monetary Frankenstein monster which reflects us yet inevitably, viciously turns on us – is both profound and seemingly limitless, but yet somehow still mundane and weak. It is the heart of a wretched and lawless system that nevertheless has a few fundamental rules.
Such as this one: the banks are all insolvent, but the insolvency has to be manageable. The subprime problem illustrates the same thing that Fed Chairman Ben Bernanke would telegraph if he ever sent those oft remarked money laden helicopters aloft to drop their load: the situation has become utterly unmanageable.
And indeed we see, the major players are beginning to carp at each other (most recent target Goldman Sachs for their cynical short plays), and are running to Abu Dhabi and Beijing to "shore up capital structure" (Citigroup and Morgan Stanley).
Of course, it is not enough. Somebody is going to be left holding the bag, they all know it, and they’re all scrambling around, pointing fingers, trying to make sure it isn’t them. And it’s too late. And it’s coming soon. They know that, too.
So I've revised my thinking somewhat. I now think there is a real and substantial possibility that a major worldwide economic event will occur in a matter of months, maybe even weeks. And I think the event, should it occur, will center on exactly what it should be centered on: the monetary-financial-banking system.
Thus it's not too soon to start thinking about how calamity and suffering can be avoided, and as it happens I think it is quite simple, and very much like the ancient Solon's solution: the "debts" to the banks must be absolved and the dollar must be redefined in gold terms based upon what is currently on hand at the Treasury and the Federal Reserve, so as to cover deposits in the banking system and avoid a collapse of activity in the "real economy". The gold would be eventually distributed to the banks physically, and the Federal Reserve would be closed. Forever.http://www.lewrockwell.com/orig5/regan-j4.html