The next big bailout?

[TitoMorelli]

...In the days leading up to the collapse of Lehman Brothers, then French Finance Minister (now IMF Managing Director) Chistine Lagarde told then-Treasury Secretary Hank Paulson that he could not allow Lehman to fail. The ramifications would be catastrophic, she said. She was mostly right.

Three years later, it will be Angela Merkel talking to President Obama,Treasury Secretary Geithner and Federal Reserve Bank Chairman Ben Bernanke with exactly the same message. The United States government and the Federal Reserve must come to the rescue of the Eurozone or the ramifications will be catastrophic. And she will say that she needs roughly $1 trillion in financial guarantees and liquidity support. That's the number that will calm the markets.

She will do this publicly (it will be leaked to the FT or the NYT) because (a) she wants to maximize the pressure on the US to ride to the rescue and (b) she wants the blame to fall elsewhere in the event that the "situation" goes haywire.

And there will follow perhaps the defining moment of the Obama Presidency. If Obama goes forward and provides all or part of the $1 trillion guarantee, he will likely cut his own political throat in so doing. If Obama declines to go forward and provide all or part of the $1 trillion guarantee, he will likely preside over the second massively destabilizing financial panic in four years, thus insuring a second Great Recession, thus cutting his own political throat.

Sometimes, the choice a president has to make is between really, really bad and truly awful. That's the choice that Angela Merkel will likely drop on President Obama's desk within the next month, and probably sooner rather than later.


Read more: http://www.businessinsider.com/merkel-will-press-obama-and-the-fed-to-bail-out-the-eurozone-2011-9#ixzz1Y4dJ0KKv

[soonercruiser]

:chargrined:

[8timechamps]

I don't follow the Eurozone (or the Euro) like I did at one time, but it appears that no lessons were really learned from the near catastrophic US financial collapse. Sure, banks have raised lending parameters to avoid another toxic debt overflow, but the companies in question then, are the same ones paying extraordinary bonuses to executive now (less the firms that merged with the last standing (i.e. Merrill Lynch to Bank of America).

In this case, most people that don't follow the economy will yell "don't give any money to the Europeans!". However, in today's truly global economy, a crash in the Euro would equate to a crash in the dollar, and the effects will be felt by the US.

These are the kind of decisions that come with the office of President of the USA. They're not easy decisions, but that's supposed to be why he's in office. It will certainly be interesting to watch how he handles it.

[diverdog]

I would like to know why China is not part of this discussion?

[badger]

They need to kick Greece outta the Eurozone. They ruined the Euro with their outta control spending and now have riots in its streets and a government begging its WW2 attacker for a bailout to show for it afterward.

I actually read interviews with Greek citizens saying that if Germany paid them back for their "war crimes" that they wouldn't have any financial problems. Gag.

We have had our own outta control spendaholics to rein in before (Read: California). Europe needs to figure out how it will prevent future economic catastrophes before coming hat in hand to us.

[sappstuf]

They need to kick Greece outta the Eurozone. They ruined the Euro with their outta control spending and now have riots in its streets and a government begging its WW2 attacker for a bailout to show for it afterward.

I actually read interviews with Greek citizens saying that if Germany paid them back for their "war crimes" that they wouldn't have any financial problems. Gag.

We have had our own outta control spendaholics to rein in before (Read: California). Europe needs to figure out how it will prevent future economic catastrophes before coming hat in hand to us.

Greece would be easy, but Italy and Spain will sink them.

[badger]

Are there any European countries besides Germany that aren't in trouble? If they're all in trouble, then is there really trouble?

Put it this way: Say I'm in third grade and I have chicken pox but my brother does not. So, my parents do everything they can to prevent my brother from catching it too. Well, eventually, my brother gets chicken pox too despite their best efforts. We both have the pox and there's nothing we can do about it now that we have it till it just goes away.

So basically, every European nation has chicken pox right now and eventually they'll recover, because that's how economies are, they're cyclical and eventually no more chicken pox (and hopefully, like chicken pox, they'll learn from financial mistakes and be immune from having the pox ever again).

So, should the U.S. sink tons of money into sending them all to the doctor when it's obvious that they all have chicken pox and about all a doctor would do is just make them a bit more comfortable during their time of illness, which they'll eventually recover from regardless?

Sorry, I have no idea why I was thinking about chicken pox all of the sudden. :D

[8timechamps]

They need to kick Greece outta the Eurozone. They ruined the Euro with their outta control spending and now have riots in its streets and a government begging its WW2 attacker for a bailout to show for it afterward.

I actually read interviews with Greek citizens saying that if Germany paid them back for their "war crimes" that they wouldn't have any financial problems. Gag.

We have had our own outta control spendaholics to rein in before (Read: California). Europe needs to figure out how it will prevent future economic catastrophes before coming hat in hand to us.

Don't look now, but America is Greece part 2. The only difference (and granted, it's a big one), is that we have currency in our favor. Given the way things are going globally, the USD may not set the market in global currency for long.

[soonercoop1]

America is the next big bailout....

[SanJoaquinSooner]

Any of their schools want to join the Big 12? One road trip to Europe each year wouldn't be bad.

[CrimsonCream]

[INDENT][Three years later, it will be Angela Merkel talking to President Obama,Treasury Secretary Geithner and Federal Reserve Bank Chairman Ben Bernanke with exactly the same message.

Might very well be but she won't be talking to Obama, Geithner or Bernanke.

[TitoMorelli]

Might very well be but she won't be talking to Obama, Geithner or Bernanke.

CC, I think the writer is talking about 3 years after the Lehman Bros. collapse, meaning very soon.