NEW YORK - Wall Street surged higher Thursday, with the Dow Jones industrials up more than 400 points after a report that the federal government is considering creation of a repository for banks’ bad debt.
http://news.yahoo.com/s/ap/20080918/ap_on_bi_st_ma_re/wall_street
What are the implications of this? Will the Federal government crash now instead of the banks themselves? Will it have to hyperinflate to keep itself afloat instead of the banking system?
I am guessing, but it sounds like the USG will create an entity that will offer to buy the banks’ debt for a discounted amount. The banks will be the first recipients of the government’s money, so there is no downside to them other than having to shave down their asset values pretty steeply. The cost is spread among taxpayers and downstream dollar holders. If you’re a bank or own stock in one it’s great news. It frees up additional credit for the banks, so everybody can get in on the fun.
We can only hope that the government crashes…although I guess that means we would have to financially save them. Its unbelievable how far the socialization of every facet of our society has gone.