A Quote by Alan Greenspan
It's hard to tell which assets will be toxic. The best way to ensure that only shareholders and banks feel it is have adequate capital.
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Overpaying the banks for their toxic assets could contribute capital, but that may not be politically feasible or attractive.
If you punish the banks, all you are doing is reducing the banks' capital, which you want to increase, and punishing shareholders, who have done nothing wrong.
The financial crisis was linked to the fact that banks had excessive leverage and too many risky assets. The solution is not to try to dictate to banks what they can do or not do, but to require them to strengthen their capital to absorb potential losses and hold less risky assets.
We need the government to force the banks to write down all their bad assets now and then recapitalize themselves, preferably with private capital. Those banks that cannot raise sufficient capital should be seized and their deposits sold off.
If a lending institution is faced with bids for a package of toxic assets that are less than the carrying value of those assets, the sale of those assets would trigger a further loss and reduce the underlying capital of the institution.
What does reflect reality very well is complexity theory, which comes from physics. I'm the one pioneering the idea of bringing it to capital markets. When you look at capital markets through the lens of complexity theory, you ask "what's the scale of the system?" Scale is a fancy word for size. What measures are you using? If you look at total debt, the concentration of assets in the five largest banks, what percentage of the total assets of the five largest banks are interconnected? What you see is a very densely connected, fragile system that could collapse at any moment.
I passionately disagreed with Treasury Secretary Hank Paulson's plan to bail out the banks by using a public fund called the Troubled Asset Relief Program (TARP) to help banks take toxic assets off their balance sheets. I argued that it would be much better to put the money where the hole was and replenish the equity of the banks themselves.
Value investors will not invest in businesses that they cannot readily understand or ones they find excessively risky. Hence few value investors will own the shares of technology companies. Many also shun commercial banks, which they consider to have unanalyzable assets, as well as property and casualty insurance companies, which have both unanalyzable assets and liabilities.
I feel the best way to ensure Americans' freedom is to tighten restrictions on that freedom in any way possible. Only through wiretaps, illegal searches and seizures, unfettered government intrusion, a controlled media and a complete crackdown on free speech can we ensure the liberties of all people.
Big banks have long had private equity divisions that put up capital for deals too complex or risky for individual shareholders to finance.
In the struggle between capital and labor, more often than not capital has won, because the real source of value for most companies has historically been the hard assets that they owned and controlled.
Banks don't want certain asset classes, and that's created opportunities for private equity, hedge funds, Silicon Valley. In this case I think he was referring to some of the European banks shedding assets, and the big buyers are probably not going to be big American banks. Someone like Blackstone may have a very good chance to buy those assets, leverage them, borrow up a little bit, and do something good there.
We do not view the company itself as the ultimate owner of our business assets but instead view the company as a conduit through which our shareholders own assets.
There are lots of things which I would love to tell him, but in some way, I also feel that I lost the person closest to me. And I got a second chance to live. So in a way I feel that I live for both of us... and I will do my best.
There's only one thing that all of the central banks control and that is the base, their own liability, and they can control that in various ways. They can control it directly by open market operations, buying and selling government securities or other assets, for example, buying and selling gold, or they can control it indirectly by altering the rate at which banks lend to one another.
The biggest revenue target is the preferential rate for long-term capital gains, which raises a perennial question: Why should capital income be taxed at a much lower rate than ordinary income? Capital assets are owned overwhelmingly by the rich.
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