Comments on: Financial Crisis 102: What’s this about a bail out? I thought we couldn’t bail out a dead planet? http://understory.ran.org/2008/09/24/financial-crisis-102-what%e2%80%99s-this-about-a-bail-out-i-thought-we-couldn%e2%80%99t-bail-out-a-dead-planet/ The Understory is the official blog of Rainforest Action Network. Sat, 21 Nov 2009 01:33:44 -0800 http://wordpress.org/?v=2.8.5 hourly 1 By: Alan (Scotland) http://understory.ran.org/2008/09/24/financial-crisis-102-what%e2%80%99s-this-about-a-bail-out-i-thought-we-couldn%e2%80%99t-bail-out-a-dead-planet/comment-page-1/#comment-249545 Alan (Scotland) Mon, 06 Oct 2008 11:41:41 +0000 http://understory.ran.org/?p=1442#comment-249545 This is one of the first bits of sane thinking i have heard about this whole global recession. All anybody seems to be talking about is getting things back to normal (boom) when we should be talking about how to sort out the terrible system (lack off) that got us into this mess. I keep thinking of the social aspect of these bail outs, the governments of the world are getting the poor (tax payers) to guarantee the rich stay rich. Am i the only one who thinks we should let them and the whole corrupt system fail, then bring up everyone who contributed up on charges and have a modern day Nuremberg scale trial. There is no point fixing an industry/system that is so inherently corrupt as the banking or financial sector. This is one of the first bits of sane thinking i have heard about this whole global recession. All anybody seems to be talking about is getting things back to normal (boom) when we should be talking about how to sort out the terrible system (lack off) that got us into this mess. I keep thinking of the social aspect of these bail outs, the governments of the world are getting the poor (tax payers) to guarantee the rich stay rich. Am i the only one who thinks we should let them and the whole corrupt system fail, then bring up everyone who contributed up on charges and have a modern day Nuremberg scale trial. There is no point fixing an industry/system that is so inherently corrupt as the banking or financial sector.

]]> By: Scott Baker http://understory.ran.org/2008/09/24/financial-crisis-102-what%e2%80%99s-this-about-a-bail-out-i-thought-we-couldn%e2%80%99t-bail-out-a-dead-planet/comment-page-1/#comment-244720 Scott Baker Thu, 25 Sep 2008 06:21:35 +0000 http://understory.ran.org/?p=1442#comment-244720 The president will have to assume FDR-like powers to solve the derivative collapse. He should declare all derivatives placed outside of legally regulated markets (90% of them) null and void. These "bets" - worth $180 trillion according the U.S. Office of the Comptroller of the Currency in America alone, and up to $450 trillion worldwide - could not have been made in regulated markets, because the players had insufficient collateral. If the parties object to the elimination of their derivative bets, they should be reminded of the penalty for fraud; it is inconceivable they did not know they were establishing positions far beyond their ability to repay. For every buyer there is a seller, so the amounts lost would zero out and no party would gain an advantage. We would just get to reset the clock. This is as fair as things can be made, given where we are. What is causing the panic in the markets right now is the realization that the losers have insufficient money to pay the winners. The domino effect of multiple collapses cannot be stemmed by any government, even by running the printing press overtime. The only solution is to wipe the underlying derivatives off the books and ensure these bets are never made again by creating laws to send those who make them in the future to jail. The president will have to assume FDR-like powers to solve the derivative collapse.

He should declare all derivatives placed outside of legally regulated markets (90% of them) null and void. These “bets” – worth $180 trillion according the U.S. Office of the Comptroller of the Currency in America alone, and up to $450 trillion worldwide – could not have been made in regulated markets, because the players had insufficient collateral.

If the parties object to the elimination of their derivative bets, they should be reminded of the penalty for fraud; it is inconceivable they did not know they were establishing positions far beyond their ability to repay.

For every buyer there is a seller, so the amounts lost would zero out and no party would gain an advantage. We would just get to reset the clock. This is as fair as things can be made, given where we are.

What is causing the panic in the markets right now is the realization that the losers have insufficient money to pay the winners. The domino effect of multiple collapses cannot be stemmed by any government, even by running the printing press overtime. The only solution is to wipe the underlying derivatives off the books and ensure these bets are never made again by creating laws to send those who make them in the future to jail.

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