What do you finance know-it-alls think about this guys suggestions?

[achiro]

Watch the video and read the comments as well.

http://finance.yahoo.com/tech-ticker/article/161718/Crisis-Solved-Give-Money-to-Healthy-Banks-Let-FDIC's-Bair-Handle-the-Dying?tickers=C,JPM,BAC,USB,WFC,XLF,SKF

[Chuck Bao]

I’m surprised nobody responded to this thread last week.

I’ll give you my opinion. I am very far from being knowledgeable. That video and text interview is frightening, but not surprising.

That guy is clearly stating that the top financial institutions in the US are “uninvestable”. Kudos to him for speaking out and Yahoo for broadcasting that view.

I have been saying for a long time that stock investors should steer clear of financial institutions and that the recapitalization process will be a series of lies, more money, more lies, more money tight rope act. This guy is just calling it wipe out and move on to the next step. That’s pretty gusty, but maybe necessary.

Basically, it is turning into a very clear choice for the Obama administration of how to play this confidence / bluff game. Throw more money into the pot with the hope of getting the right cards on the next deal or folding and handing over the chips to someone who has had a winning hand.

This guy makes a clear distinction of the American experience of letting the FDIC take over a failed banks and selling off the good assets to stronger financial institutions and the European one, which he calls socialized banking.

I have some problems with his American approach:

• What price would the FDIC get for selling the good assets? Why accept a large discount on good asset sales in a rush to sell them off?

• If the economy is tittering, what assurances are there that the purchasing financial institution will keep open the credit lines for these good loans?

• If these remaining good banks are so well-managed, why not recruit the managers and leave the state with the potential profits on the long-term value of these assets.

• The takeover of the bad assets is a losing proposition. At best, this would help stop the downward spiral in housing prices and help support the value on the good housing loans.

• The Thai experience with a failed banking system is that short-term funds bought the loans at a massive discount looking for a large, quick turnaround profit. They had no interest in providing long term banking service.

• Americans may be afraid of socialized banking. Whether you like that idea or not, that reality is here. So if you are in Obama’s seat, are you going to fold and hand your chips to someone else?