Jul 27, 2011, 5:21 PM
Post #23 of 51
Re: [raferguson] US debt crisis impact on us living in Mexico?
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Actually, the biggest cost to the US government, in the bailout, was Freddy Mac and Fannie Mae. Most of the TARP money has been paid back, and it can even be argued that the government made a profit. Goldman Sachs has actually paid back the government.
People love to demonize the banks, but the banks were not what ended up costing the taxpayer.
The losses at Freddy Mac and Fannie Mae, both pseudo-government corporations, will far outweigh any losses at any bank, and will probably cost the federal government in excess of 300 Billion dollars.
We are probably drifting away from a Mexico focus, however. ;-(
I agree about the drift from a Mexican focus, but I beg a little leeway:
Mexican banks played their hands very differently from American banks, which meant the Mexican economy and Bolsa did not take the trillions of losses that the American market and economy took.
US banks made $60 billion in bad real estate loans, that US investment banks like Goldman Sachs then packaged into junk investment packages. Goldman Sachs, Bear Stearns, Lehman Bros, and other big US banks then loaned money to investors of $30 - $40 of loans per every $1 of the junk mortgage loan packages that they were selling and had sold.
This 30:1 margin lending by US banks leveraged the $60 billion of junk mortgages (that banks created and bundled) and raised the losses to roughly $1.8 trillion.
US banks' junk mortgages and junk bundled investments and 30:1 mortgage lending were critical parts of the financial crisis, that caused the whole system to nearly collapse and caused the US Govt to bail out many firms crushed by the Crisis.
Goldman Sachs also had lots of bogus insurance policies on their junk investments, policies that they got from AIG. When AIG was collapsing due to the US Bank's hijinks, Goldman Sachs and the other big banks demanded that the Fed and the Treasury rescue AIG, so that US taxpayer dollars would pay off the AIGs bogus insurance policy (a.k.a. Credit Default Swaps) payouts to Goldman Sachs, et al. These 100's billions of bailouts flowed through the intermediaries to Goldman Sachs et al, to cover-up what should have been massive losses due to bank mismanagement.
This was a giant shell game where the US new media and politicians only turned over one shell, and announced that everything was going to get better.
Trying to claim that US banks losses, greediness, foolishness, and Federal Government rescue dollars that quietly went through back-channels to the banks, are somehow not important, ignores roughly $3 trillion of direct US bank-caused-losses and messes, not to mention how the crisis rolled through the rest of the world's financial markets.
Again, Mexican banks never got involved in Credit Default Swaps, never got involved in junk mortgages, never got involved in bundling small junk investments/mortgages into big junk investments, and Mexican banks never got into 30:1 and 40:1 margin lending, nor did they play the high risk financial shell games of Credit Default Swaps.
While US Main Street banks went bonkers trying to lend money to lots of unqualified home buyers, and while US Investment Banks went bonkers trying to get fabulous-but-unrealistic ROI's, Mexican banks and Mexican fiscal policy remained staid,
I off all this to try to keep all the pertinent facts on the table when comparing the performance of the 2 currencies, and the fiscal and monetary and regulatory systems behind them. Mexican regulators also would not allow the kinds of shenanigans that American Banks played, as US regulators sat on their hands. No negative interest loans issued by Mexican Banks.
Looking to the future: Have we seen lots of US bankers and US regulators being fired or being led away in hand-cuffs and orange jump suits?
Doesn't this mean that the same key players who caused the greatest financial crisis of a century, are still in power and still making the decisions? This core cadre of US politicians, US regulators, and US bankers are still in power and still calling the shots.
Will these leopards change their spots?
This all points to the Mexican Peso looking more stable than the US dollar for at least another year, partly due to the far more sound fiscal policies of Mexican financial, monetary, and regulatory systems and the better run Mexican banks.
Finally, this simple analysis says little or nothing about how well US politicians are currently handling the spiraling near $15 trillion of debt and the Debt Ceiling vs. Mexico's handling of their finances and modest $410 billion of public debt.
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