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Asian markets give Bronx cheer to $700 billion bailout

 Sep 29, 2008 11:30 AM UTC
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Filed under: International markets, Federal Natl Mtge (FNM), Amer Intl Group (AIG), Financial Crisis

Asian markets -- the ones that have "forced" Washington to do emergency rescue plans by Sunday night for the last several weeks -- have their verdict on the latest version of the $700 billion bailout plan. And those markets are not happy. Tokyo's Nikkei lost 1.3% while Hong Kong's Hang Seng Index fell 2.1%. In addition, Asian markets don't seem to like the spread of the contagion to Europe where Belgium's Fortis needed a $16 billion government injection to stave off bankruptcy.


But the bailout plan -- dubbed Troubled Asset Relief Plan (TARP), if it passes, would give Washington political cover as it enters election season. Not only that, it would lead to a 126% increase in the national debt since 2000 -- from $5 trillion to $11.3 trillion (a dangerously high 79% of GDP). However, it is a flawed plan and as I posted, here's what I think would be a better approach:



  • Cull the banking herd. I think the banks need to be triaged - that is decide who the winners and losers are. Recapitalize the winners and force the losers to merge or close.

  • Give taxpayers equity. Make sure that the taxpayers get enough of an equity stake to have a shot a winning back their money - this could be done through the same structure used with Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) - senior preferred stock.

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Roy
Roy   64%     1 point   commented 430 days ago reply

DOW JONES NEWSWIRES

American International Group (AIG), the troubled U.S. insurer, is poised to kick-start a sale of assets that is likely to attract interest from potential buyers including sovereign wealth funds, private equity groups and U.S. and European insurers, the Financial Times reports in its online edition.

Without citing sources, it says executives at AIG, which was de facto nationalized last month, have yet to decide which parts of the insurer's portfolio of global operations to sell.

However, interested parties are already positioning themselves to pick its most coveted assets, which include AIG's large operations in Japan and Asia, some of its U.S. insurance businesses and a large aircraft leasing unit, the report says, citing bankers.

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