I mean look, we’ve gone through a regime change, and it’s time to let the new players, who have balance sheet capacity to buy assets at prices that reflect that.
I’ve tried to buy assets from the top 20 at prices that while low (deservedly) would allow me to employ people and add debt to my businesses pristine balance sheet. But they are not forced to sale and thus these assets just sit in limbo, at ridiculous ask prices. Until they are forced to purge all this stuff nothing is going to get moving again.
That is Japan 101.

There are ways in between stone age Calvinism and what they are doing now, which is preserving a failed system.
RJ

The payment system has already been destroyed. We — the taxpayer — are currently paying the crooks who destroyed it to preserve the appearance that it is still functioning. We all know the ultimate outcome is a massive devaluation and a lower standard of living for everyone in the US.

When someone tries to steal from me I don’t pay him money to continue to do so. If someone tries to blackmail me with the collapse of the financial system as we know it, I don’t pay them off either.

If there are adverse consequences that have to be absorbed because “I/regulators” was asleep at the switch so be it. It’s a lesson to be learned. Obviously, we all try to minimize the pain of that lesson. However, that doesn’t involve paying off the crooks that put you there.

Remove the moral compass and you have nothing but a Hobbesian free for all. Punishment when it comes should be clear and unequivocal — as in China.

Obviously, for those assigned the task of deciding whether or not to come to a bank’s rescue it is not an easy task to convince the electorate that the future losses must be nationalised, when the past profits were privatised. The rational explanation is that, without the rescue operation, the whole economy would have suffered as a result, with direct consequences for citizens and tax-payers. Given the contagion effect which is generated following the collapse of a bank, nationalising the losses prevents an even greater evil being unleashed. The financial sector is different from other sectors, precisely owing to the systemic and contagion effects that a crisis would have on all the other sectors. It is thus in the interests of the individual citizen to support the decision to rescue a bank in difficulty, as the individual interest coincides with the public interest.

What happened, however, suggests that the rational arguments that I have just propounded do not always chime with public opinion. Again, it strikes me as interesting to ask why this should be the case.

To answer this question, it is necessary to enter the realm of the analysis of human behaviour, via the field of behavioural economics. Several laboratory experiments have been carried out, which show that, when faced with some economic choices, individuals may behave in ways that are apparently not rational. In general, it has been shown that economic agents are not only motivated by self-interest, as economists have been keen to believe, but are also motivated by considerations relating to fairness and relative conditions. According to some studies, a rise in income is only seen in a positive light if it exceeds that of the reference group; if, instead, the increase in income is less than that of the reference group, it is perceived as being an absolute loss, even if it is only relative. One consequence of these tendencies, borne out in a number of experiments, is that individuals may even be prepared to renounce additional income, just to have a more equitable distribution of wealth within the community, particularly when this is to their advantage. Zizzo and Oswald, researchers at the Universities of Oxford and Warwick respectively, outline the results of an experiment in which the participants can pay out of their own pocket to “burn” money belonging to the other members of the group. The majority of subjects choose to do so, even if this reduces their own income. On average, it is the richest subjects who are most affected.

ss — i think we all reflexively favor a moral resolution. the question is whether or not one is feasible. if in order to make them suffer we destroy the payments system and revert to barter, what good has that really done?

fwiw — not to get too philosophical — there’s a reason time-tested belief systems broadly eschew revenge. if you think of religion as the accumulated trial-and-error of ten thousand years, one might even consider it the empirical residual of ancient debt crises to be turning the other cheek.

even putting government guarantees under some of these things in advance may not neutralize the risk. if a run really gets started on financial commercial paper (of the kind that sunk mony market funds after lehman) — that’s still a $700bn market. woudl gov’t really backstop it? and it could be just one of several massive liquidating markets. gov’t could quickly be faced with the choice of firewalling the gov’t off to save it or going all in.

talking nationalization is fine — i tend to think it’s the only way, for better or worse — but let’s be honest about the risk profile. it could be a catastrophe.

“a 30-year Citi bond that matures in 2034 is trading at a highly distressed 58 cents on the dollar, down from 98 cents on the dollar in late December, according to Bloomberg data”
source: http://www.crainsnewyork.com/article/20090223/FREE/902239993/1123
“Citi bondholders await their fate”