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Banbury Cross

a pillow for lost thoughts...

Post details: To tarp or not to tarp

To tarp or not to tarp

Referendum - what a concept! The ultimate teat of democracy.

Not so long ago, one of the private banks in Iceland fell under the impression that credit geysers were financial equivalents of the fountain of youth. As that didn't quite turn out to be true, the bank went belly up and Dutch and British savers who were lured in by promises of higher interest lost all their money in the process. Their governments stepped in to cover the losses and now they are asking the Iceland taxpayers to pony up about 5 billion dollars since the bank was insured by the Iceland government, i.e. by the taxpayers.

This is a great example of what happens when insurance underwriters operate under the assumption that bad things will never happen. Aren't you supposed to have some sort of collateral or sufficient capital reserves when you take on such monstrous risks? When did people of Iceland express permission to let their financial system degenerate into a perverted farce in which fisherman, horse farmers, hoteliers, artists, and pretty much all able bodied citizens were on the hook for the greed and stupidity of private bankers? At least the Icelandic government has the decency to hold a referendum and ask its electorate how they felt about it. Rather unsurprisingly a resounding majority (93%) of the population rejected such preposterance.

Not so long ago Fed Chairman Ben Bernanke stormed into the US Congress and asked all of us - every man, woman and child, regardless of age - to shell out some $2,000 to save the overleveraged Wall Street casino from the supposedly imminent collapse. That same "collapse" from which Hank Paulson and his merry band of United Bandits of Goldman Sachs have quite handsomely profited.

The sad part is that neither George Bush, nor any representative in the Congress even mentioned the possibility that perhaps the US taxpayers should first be asked about their opinion before being burdened with such outrageous levels of debt. We can only hope that one day we will learn why the Lehman Brothers were allowed to fail while AIG, pregnant with Goldman's rotting derivatives, was generously bailed out in the tense atmosphere of post Lehman hysteria. But I am not holding my breath...

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