Tuesday, March 11, 2008

Helping hand or playing musical chairs?

The Fed alongwith other central banks (ECB, Bank of England etc) announced plans to make available through loans, an additional $200mil to the ailing financial industry. This is being hailed as a great 'innovative' and timely assistance to the 'poor' and credit beaten banks.....but hold on a minute, let's back up a bit...what did they say they would accept as collateral? ...Unbelievably, the collateral for these loans is going to be the very same subprime assets that that have been the cause to begin with.

Now i don't claim to be an economist but how does this move truly help the current situation? It just means transferring these subprime assets to yet another lender which in this case means ultimately transferring it to the taxpayers.

Doesn't anyone feel that the banks really need to take responsibility for this? What kind of a message is this sending? That if they do this the next time they will be bailed out again?

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