$700 Billion May Not Be Enough: Dr Doom

CNBC
Friday, Sept 26, 2008

$700 billion may not be enough to bail out Wall Street says one analyst, given the lack of transparency and the length and breadth of financial markets involved.

Marc Faber, editor & publisher of ‘The Gloom, Boom & Doom Report’, told CNBC’s Asia Squawk Box on Friday, he doubts that $700 billion would make any difference when you consider the size of U.S. credit markets.

“Looking at the size of the credit market in the United States, the equities market, the housing market and then looking at the size of the credit default swap market, which is around $62 trillion now, and the world wide derivatives market which is now $1,300 trillion dollars, I very much doubt that $700 billion would make any difference at all. In fact, I think it’s a bad proposal in the sense that it will distort market pricing,” Faber said.

(Article continues below)

Faber says that the fundamental problem is not falling home prices as U.S. Treasury Secretary Henry Paulson suggests.

“The problem is that too much money was lent against homes at inflated asset values. In other words that means at the peak of the market, people went and lent them 120 percent against the value of the home. And that is the problem — the leverage in the system,” Faber said.

Full article here

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2 Responses to “$700 Billion May Not Be Enough: Dr Doom”

Candice Cameron Says:
September 26th, 2008 at 10:04 pm
Of course it won’t be enough. That’s why the Paulson proposal includes the phrase “The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding AT ANY ONE TIME.”

AND…now that the bailout (oops! I mean “rescue”) is being extended to other credit areas, the pricetag will inevitably go way, way up. Essentially, it will cost as much as the citizens will put up with being stolen from them.

CC
John Shaplin Says:
September 27th, 2008 at 6:21 pm
Yea, Paulson and his crowd put the figure at $700 billion the same way the Adminstration puts the cost of the War at $840 billion- which just includes daily, out-of-pocket expenses not including such items as long-term care for wounded veterans, interest on the loans to meet daily expense, equipment replacement or the long term costs of disinvestment in infrastructure and education, vital components of GDP growth.

Furthermore, a staffer of the GAO testified this week before Congress indicating that just the process of selling their “toxic assets” to the government is going to further erode confidence in these Wall Street firms because it will require them to EXPOSE how BAD their POSITIONS really are! So in order to have the remotest chance of “stabilizing” the markets ( sort of like “stabilizing” the MidEast- not something ordinary Americans can stuff in their pockets and take home to dinner) the whole process will have to be like blind-man’s bluff with a blank check.

No doubt Senator Shelby- one of the few really opposing the bail-out- now knows what the “boy who cried wolf” really felt.