April 16, 2020

Another 2008 bank crisis on the way…

Banks Brace for Defaults…

“JPMorgan Chase, Wells Fargo, Bank of America, Citigroup and Goldman Sachs raised the funds set aside for bad loans by nearly $20 billion…Wall Street expects that figure may go even higher…”

Entire countries looking for bailouts…

“International Monetary Fund (IMF) Managing Director Kristalina Georgieva said Wednesday that half of all countries have already requested a bailout…”

The Fed is pulling out all the stops, spending $1 trillion buying bonds, and most troubling, mortgage backed securities. The same kind of mortgage backed securities that caused so much trouble in the 2008 near collapse of the global banking industry.

“Moral hazard is not part of the debate as it was within the Fed during the financial crisis in 2008-09,” Diane Swonk, chief economist at Grant Thornton “…That is because this time really is different. We have to abandon our biases and warehouse them to deal with a health crisis. It is not the time to discuss who is worthy of our efforts.”

First, the Fed has been underwriting moral hazard – that is, irresponsible investing that fails – since 2008. Next, when economists say “this time it’s different” it’s isn’t. They say that because it’s too late to avoid things getting really bad.  Nouriel Roubini and Mohamed A el-Erian discuss both those points at length in their books on the 2008 catastrophe.

Barry Diller says we should bail out all companies losing money in the COVID-19 crisis no matter what and think about the cost later. Even airline companies struggling with out dated business models before the crisis. Oh, did I mention Diller is the billionaire owner of Expedia, the travel company?

New Jersey Governor Phil Murphy was asked by Tucker Carlson about the authority for suspending First Amendment guarantees of religion and assembly on Wednesday.

Murphy’s response:

“I wasn’t thinking of the Bill of Rights when we did this …”

Why not just declare martial law, turn the government over to the military and be done with it? After all, COVID-19 is on track to claim as many people was a normal flu season does. Last year 60,000 died of the flu, higher than usual, but not so unusual the media mentioned it.

Now we are at about 20,000 dead from COVID-19 and one fourth of the way through the year, heading for 80,000 deaths if nothing changes. But we expect deaths to start declining any day now. So, let’s ignore civil rights and liberal democratic ideals with draconian edicts.

Once the government seizes civil rights, they are very difficult to wrestle back. Just ask the ex-slaves who briefly enjoyed civil rights following the Civil War, then lost them for a century.

Los Angels Mayor Eric Garcetti says concerts and sports events are probably off the calendar until 2022. “It’s difficult to imagine us getting together in the thousands any time soon,”

LinkedIn is running a page of companies soliciting workers. That’s good news in light of 22 million unemployed. However, a quick glance shows that many of the jobs listed are the very jobs from which millions were laid off a few weeks ago and often gigs that do not provide a living wage. Many of the companies are not yet operating, so it is unclear whether they are actually hiring or just creating databases of potential applicants for later use.

First move towards Universal Basic Income formally proposed by Democrats…

You heard it here first!

“A one-time, twelve-hundred-dollar check isn’t going to cut it…”

The initial benefits are too generous for the bill to ever see the light of day, but with realistic numbers – say $500 a month for those below the median income now at about $35k annually – it might work. Stay tuned!

Read more at VicNapier.com and my Medium.com page.

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