"Jon Elson" wrote in message
...
Ed Huntress wrote:
"F. George McDuffee" wrote in message
...

As usual Krugman asks the right question and then quits.

"So here's the question we really should be asking: When the feds
do bail out the financial system, what will they do to ensure
that they aren't also bailing out the people who got us into this
mess?"


I don't think he knows the answer to that.
But *** I *** know the answer (and I'll be the rest of you reading do,
too)! Basically, nothing will be done. The whole crappy situation is
institutionally entrenched. They've built this house of cards over
decades, and NOBODY quite knows how to take it apart without the whole
thing falling down. It will take YEARS of Congressional hearings and the
passing of new laws to stop these practices. A bunch of companies will
likely go down the tubes like Enron, when it is found there is DAMN little
actual value in all the paper they are holding. Hopefully, we won't have
a run on banks like what started at Bear Stearns, but a run on investment
and commercial banks could make what happened in 1929 look like a party!
I mean, if GM suddenly can't issue paychecks, it could get "serious".
And, it could happen pretty suddenly, the way everything is online now.

Jon

I don't think they'll do "nothing," Jon. My feeling is that they'll restore
some required disclosures to the unregulated "hedge funds" (which haven't
really been hedge funds since the '80s). And, if they find a way to make
this applicable across the board, they'll establish some kind of
documentation to derivatives trading. That means they'll have to be
registered, like stocks and most bonds are today. And deposits and some
other instruments will be subject to reserve requirements, with no way to
get around it.

In other words, all kinds of instruments will be subject to normal
good-practice banking procedures and they'll probably have to be registered.

There's some discussion going on about all this in the financial press, but
it's been overwhelmed by news of the panics. I think we'll see it surface
pretty soon.

--
Ed Huntress