myinvestorsplace
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The Lender of Last Resort!
There are always cycles in the economic landscape. There are periods of optimism and stock market rallies as well as periods as we are facing now. Anything can happen… In extreme times Banks fail, Stock Markets fall, Panic sets in and Fear becomes the norm..
The question always throughout history who will be the lender of last resort?
Today it is Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke putting together the rescue package for a financial system brought down by falling home prices ,defaults on subprime mortgages all due to the common historical cause …” Cheap Money”
I will say from a historical perspective the world will not end and this too will have a close. There have been so many examples. Earlier this year in my blog Capitalinvestor1836.blogspot.com…I mentioned the similarities to the
“The Panic of 1907”
Capitalinvestor1836: The Banking Crisis of 1907 or do I mean 2007?
One immediate cause of the panic involved a failed attempt to corner the market on stock in a particular company. That led to a run on banks and trusts that had made loans for the plot, starting with the Knickerbocker Trust Co. Public confidence in other financial institutions soon evaporated.
The Treasury threw millions of dollars into the banking system. The true hero was really J. Pierpont Morgan, the banking magnate and undisputed king of New York financial markets, who saved the day..
Once depositors saw that they were going to get their money, the panic eased.
Shortly there after, Congress established the Federal Reserve System, creating a lender of last resort for the country's financial system.
During the GREAT DEPRESSION about 1,000 American homeowners a day were losing their houses to the bank. President Franklin Roosevelt and Congress initiated the Home Owners' Loan Corp., a government agency designed to prevent foreclosures on an enormous scale. It seems very similar to what is being discussed over the weekend with the 700 hundred billion dollar bailout.
This Federal agency bought defaulted mortgages from banks, and refinanced them at lower rates for fixed, 15-year terms. For 3 years the Home Owners loan Corp accepted mortgages and they were completely inundated with requests. Approximately one million homeowners received a bailout. To understand the severity... one in 10 Americans with nonfarm, owner-occupied dwellings secured aid from the agency.
Another recent crisis was the S&L failures…From 1986 through 1995, about half of the 3,234 S&Ls in the U.S. closed, leaving the FEDs stuck with tens of billions of dollars in bad loans. In 1989 the Resolution Trust Corp was created to liquidate loans and the real estate. Fortunes were made at his time by smart investors, but taxpayers paid the brunt of this failure to the tune of $124 Billion dollars. It makes one think.. How much we will have to pay for the current mess.
There is a saying on Wall Street… the street has a short memory..
This crisis will end.. No one knows how many years.. Or if the recent FED action has put in a floor. The basis is life will go on… the US will go on.. As well there will be tremendous opportunities for savvy investors…
Andrew Abraham
My Investors Place
There are always cycles in the economic landscape. There are periods of optimism and stock market rallies as well as periods as we are facing now. Anything can happen… In extreme times Banks fail, Stock Markets fall, Panic sets in and Fear becomes the norm..
The question always throughout history who will be the lender of last resort?
Today it is Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke putting together the rescue package for a financial system brought down by falling home prices ,defaults on subprime mortgages all due to the common historical cause …” Cheap Money”
I will say from a historical perspective the world will not end and this too will have a close. There have been so many examples. Earlier this year in my blog Capitalinvestor1836.blogspot.com…I mentioned the similarities to the
“The Panic of 1907”
Capitalinvestor1836: The Banking Crisis of 1907 or do I mean 2007?
One immediate cause of the panic involved a failed attempt to corner the market on stock in a particular company. That led to a run on banks and trusts that had made loans for the plot, starting with the Knickerbocker Trust Co. Public confidence in other financial institutions soon evaporated.
The Treasury threw millions of dollars into the banking system. The true hero was really J. Pierpont Morgan, the banking magnate and undisputed king of New York financial markets, who saved the day..
Once depositors saw that they were going to get their money, the panic eased.
Shortly there after, Congress established the Federal Reserve System, creating a lender of last resort for the country's financial system.
During the GREAT DEPRESSION about 1,000 American homeowners a day were losing their houses to the bank. President Franklin Roosevelt and Congress initiated the Home Owners' Loan Corp., a government agency designed to prevent foreclosures on an enormous scale. It seems very similar to what is being discussed over the weekend with the 700 hundred billion dollar bailout.
This Federal agency bought defaulted mortgages from banks, and refinanced them at lower rates for fixed, 15-year terms. For 3 years the Home Owners loan Corp accepted mortgages and they were completely inundated with requests. Approximately one million homeowners received a bailout. To understand the severity... one in 10 Americans with nonfarm, owner-occupied dwellings secured aid from the agency.
Another recent crisis was the S&L failures…From 1986 through 1995, about half of the 3,234 S&Ls in the U.S. closed, leaving the FEDs stuck with tens of billions of dollars in bad loans. In 1989 the Resolution Trust Corp was created to liquidate loans and the real estate. Fortunes were made at his time by smart investors, but taxpayers paid the brunt of this failure to the tune of $124 Billion dollars. It makes one think.. How much we will have to pay for the current mess.
There is a saying on Wall Street… the street has a short memory..
This crisis will end.. No one knows how many years.. Or if the recent FED action has put in a floor. The basis is life will go on… the US will go on.. As well there will be tremendous opportunities for savvy investors…
Andrew Abraham
My Investors Place
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