Manias, panics and crashes part 3

...cont'd from yesterday...

Continuation of discussion about Manias, Panics, and Crashes: A History of Financial Crises

Were you surprised by the SEC’s recent sudden move to limit short selling in the stock market? You wouldn’t be if you had read this book. Chapter 10 reviews what governmental authorities in jurisdictions around the world have done during past bank crises. Here’s my summary of that chapter in list form. Don’t be surprised if some or all of the following occur as the current bank crisis plays out.

1. Do nothing.

2. Penalize speculators.

3. Allow banks to deliberately neglect, refuse or delay payment of lawful debts and obligations to their depositors and creditors.

4. Allow banks to pay their debts and obligations in a manner that is inconvenient to their depositors and creditors, such as by payment in coins. This of course is a form of delay in payment as it takes more time to count the coins than large denominations of money.

5. Allow banks to pay their creditors with promises to pay instead of with cash.

6. Halt trading and close markets.

7. Create new official holidays so banks can remain closed for business longer, thereby delaying and hindering their creditors.

8. Prohibit or suspend publication of information about banks. That’s what the SEC tried to do recently in threatening criminal prosecutions against anyone who disparages financial firms.

9. Allow banks to delay or suspend making public any information about their financial position.

10. Limit the amount by which prices can change on trading markets.

11. Require trading to be halted or suspended after designated price change limits are reached.

12. Legislate moratorium on payment of debts or particular types of debt.

13. Deliberate neglect in enforcing laws so that banks can continue carrying out illegal activities they need to engage in to avoid going out of business.

14. Allow non-bank organizations to buy the debts of the banks at a discount.

15. Encourage or take part in organizing bail outs of failing firms.

16. Provide guarantees for the indebtedness of failing firms.

...off Friday, back next week...

Website Home has MOVED to:
http://LeisurelyCashFlow.Googlepages.com

Copyright 2008 Raymond T. Lee. All rights reserved.
LeisurelyCashFlow
eMail me Comments