- -Editorial: Why We Have a Crisis and What's Next (CNN News)
"This is because the credit crisis reflects something more fundamental than a serious problem of mortgage defaults. Global investors, now on the sidelines, have declared a buyers' strike against the sophisticated paper assets of securitization that financial institutions use to measure and offload risk."
"In recent years, our banks, borrowing to maximize the leverage of their assets at unheard-of levels, produced mountains of financial paper instruments (called asset-backed securities) with little means of measuring their value. Incredibly, these paper instruments were insured by more dubious paper instruments."
"Therefore, the housing crisis was a mere trigger for a collapse of trust in paper, followed by a de-leveraging of the entire global financial system. As a result, we are experiencing the painful downward reappraisal of the value of virtually every asset in the world."
"Most banks are leveraged by more than 10 to 1. Translation: The U.S. financial system will have a whopping $15 trillion to $20 trillion less credit available next year than was around a year and a half before. The cost of money is rising and the availability shrinking."
"We need a private/public global bank clearing facility. The bankers don't trust each other. The central banks, working with the private institutions in providing enhanced data, need to begin to refashion the world's financial architecture." 10-08
- -Evidence of Economic Hardship (Time.com)
"Here, ten indicators of how the economy, U.S. cities, and everyday citizens are faring lately...." 08-10
- Editorial: What Caused the Need for the Bailout? (MSNBC News)
"Once in the U.S., the redeployed Chinese savings allowed a multi-decade shopping spree to continue. U.S. consumers bought houses, cars and goods at a record clip earlier this decade, pushing consumer spending to a record 70% of economic activity in recent years. Meanwhile, Americans stopped saving altogether - the personal savings rate was negative for some years during the housing bubble, showing that U.S. consumers were outspending their income."
"But this shopping spree - Americans have been spending some $700 billion annually more than they produce, borrowing the difference from overseas creditors - couldn't last forever. Once house prices stopped rising, consumers pulled back and the U.S. economy slowed. Nonfarm payrolls have now shrunk in eight consecutive months, and banks that only a few years ago were showing record profits are now bleeding red ink." 09-08
- How Sweden Handled a Similar Financial Crisis (New York Times)
"The country was so far in the hole in 1992 — after years of imprudent regulation, short-sighted economic policy and the end of its property boom — that its banking system was, for all practical purposes, insolvent."
" 'But Sweden took a different course than the one now being proposed by the United States Treasury. And Swedish officials say there are lessons from their own nightmare that Washington may be missing.' "
"Sweden did not just bail out its financial institutions by having the government take over the bad debts. It extracted pounds of flesh from bank shareholders before writing checks. Banks had to write down losses and issue warrants to the government." 09-08
- Minimizing Your Own Risks in the Financial Chaos (New York Times)
"Consider a few modest but concrete things you can do that could reduce your exposure to four of the big areas of risk — investments, job security, your mortgage and insurance — that have been front and center this week."
"Some of these suggestions may have more impact for you than others, but they all can help you feel as if you’ve taken back some measure of control." 09-08