[mXr8icOB]

[MzTT]

Yep. Otherwise, investors panic and get out of solvent banks. Hopefully, that's the secret plan with Geithner's stress test. Figure out what's what, and then nationalize the insolvent banks.

If that's the case, however, how will they go about figuring out what's what? Outside auditors or just relying on the companies to do it themselves? I assume the boards & managers wouldn't be all that cooperative in finding out for Uncle Sam just what their MBS assets are actually worth, since that would actively assist in what's anticipated to be a total wipeout of their shareholders, exposing to fiduciary liabilities, not to mention a risk to their own jobs. Unless the TARP conditions have very rigid requirements of audits and what they'll consist of, which would legally trump any obligations to shareholders.

Do any beancounters here know what the actual auditing method will be here, and by whom? I'm genuinely curious.

Seriously, as a practical matter how would they even conduct these audits? Literally send an inspector out to a home to determine condition, get a local realtor to adjust that appraisal for local market conditions (both present and projected), hire a lawyer to re-check title encumbrances, conduct a CBR check to reassess likelihood of the mortgagor's default (taking into account projected job losses generally), and repeat ad nauseam until every single mortgage in every single security has an accurate present and future value to reflect on the balance sheet?

There's more than enough talented people out there to do the legwork but the costs would be utterly insane; it wouldn't surprise me if each $100K that the asset side of the balance sheet is nudged toward accuracy would be coupled with $10K in administrative costs expended just to ascertain that fact, and that's a $10K the bank probably doesn't, in actual fact, have. It's this simple paradox that makes temporary nationalization sound A-OK to me, if for no other reason then to gradually get these assets off the books in the way that TARP was originally supposed to do but had no time to do.

[MexicoCity]

I think that a lot of people in Washington remember the S&L crisis. Everybody involved in the cleanup that I have talked to was disgusted with the process (even though they made out well in the whole deal).

[usatramadolusa]

I still don't see why shareholders should be ****ed over by nationalisation. If I've invested my money in a bank, why shouldn't I be compensated for my share? How am I responsible for the garbage that the CEO indulges himself in?

Because you invested your money with them, dumb ****.

[seervezex]

Frankly, I don't think corporations should limit liability only to the amount invested by the shareholder. Rather, investors should share in the liability to the extent of their investment. Right now, you can only lose the amount you invested. Investors should be fair game as well.

[wbeachcomber]

Frankly, I don't think corporations should limit liability only to the amount invested by the shareholder. Rather, investors should share in the liability to the extent of their investment. Right now, you can only lose the amount you invested. Investors should be fair game as well. What's next, seizing the assets of everyone who owned stock in the company?

Glad to see this is all about screwing the common man.

[SawbasyWrab]

However, we couldn't get any business done with widespread liability like this. Exactly. Somehow I don't think the folks calling for seizing assets from investors have any interest in keeping businesses running.

[KlaraNovikoffaZ]

Under some select circumstances, shareholders are on the hook. However, we couldn't get any business done with widespread liability like this.

Why couldn't you get things done? Corporations would just have to be a lot more careful and ethical. The whole point of the joint stock corporation is to shield investors from the liabilities their investments cause. That's ****ed up.

[CreativeAcrobate]

Under some select circumstances, shareholders are on the hook. However, we couldn't get any business done with widespread liability like this.

When does that happen?

[KJnbceja]

Right, cuz the common man owns so much stock? moron. Shareholders are all these richie rich types? I'm talking Mutual funds, etc. Most people probably aren't aware of exactly what stocks they are invested in let alone having the time to go in and sit in on the meetings, and fly to wherever they are being held.

There's a big difference between common stock and voting stock.

If I was part owner in a company and the company hurt someone, I'd be liable, up to everything I owned. Why should owning stock be different? Because you don't get to make the decisions as to how the company operates. I don't think you can be liable for an investment decision that may have been made 20 years ago under different leadership. The only ones who should be responsible is the board and the ceo, for the decisions that they made.

[Pjayjukr]

You made the wrong bet. Dude, that's how it works! Losses are one thing. I never said anything about losses. Nationalization is quite another.

Hey, I've lost a decent chunk of change on Citi. Nothing backbreaking, but enough to be kinda annoyed. But hey, thems the breaks. Investing is not a risk-less endeavor. Very true. I don't mind getting screwed over by the markets. Getting screwed over by the government deciding to nationalize a business? Right. Call me when the government decides to reward me for making good investment decisions by giving me more money.

[Maymayfor]

Guys, please just ignore Ben.

[PersonalLoansBank]

If the bank is worth nothing (insolvent) your share is worth nothing. The end.

-Arrian

[SarSerceSaice]

They're afraid of nationalization, so they're trying to come up with all sorts of convoluted ways to impose restrictions short of nationalization. Ultimately, they're going to need to nationalize or hand out free cash to the banks anyway. I'm really hoping they don't opt for the latter.

It's a fire sale.

They really have no idea what they are doing, but if they admitted that, then we'd be in even worse shape.

Our society is nuts, and has been for a long time. At least we still have enough to eat.

[TriamiCaw]

Fine, then let them fail.

If they are insolvent and cannot be saved, why are they being nationalized?

Besides, I thought most honest Marxists would recognize that capitalism must reach its overproduction peak and collapse before successful revolution can occur, which would speak in favor of capital accumulation in our time. Not if the revolution is here.

[lapInsalm]

Fine, then let them fail.

If they are insolvent and cannot be saved, why are they being nationalized?

IF THEY'RE INSOLVENT AND THEREFORE WOULD FAIL WITHOUT NATIONALIZATION ANYWAY, THEN WHY COMPENSATE IN THE EVENT OF NATIONALIZATION? THE SHARES WOULD HAVE BEEN WORTHLESS ANYWAY! REGARDLESS OF WHETHER THERE'S NATIONALIZATION OR NOT! DON'T YOU SEE THAT?

[smirnoffdear]

There are voting and non-voting shares. Non-voting shares have no control whatsoever.

That totally depends on the unique charter and bylaws of each individual corporation. Though it's legally allowed to have some "non-voting" stock, it's extremely rare in practice for the obvious reason that few people would buy it. So rare as to be a red herring in fact.

Not if the government takes over the business. I completely understand the problem with risk. If the business goes bankrupt then I lose the value of the share. If the government wants to take over the business, then they have to compensate me for the value of my property. They just can't take it.

BS. First of all, any intelligent investor should have enough sense of systemic risk and history to know that temporary nationalization of at least some banks is a very real possibility in the event of severe financial crisis. Secondly, since only insolvent banks would be nationalized, and since insolvent banks would otherwise have to go bankrupt, the nationalization would only be in lieu of bankruptcy, meaning you lose nothing! That much should be obvious. If the bank's insolvent, your choices are either A) bankruptcy or B) nationalization, but in either case shareholders get hosed. I don't think anybody here is suggesting that solvent banks should be nationalized.

So what you are saying is anyone who owns shares in any bank that has TARP funds should immediately sell to avoid the risk of nationalisation? Oh, that's really helpful. I'm sure that's what the government wants, to have struggling banks go completely broke.

I didn't say that, you did. I said that those who retain shares despite a policy they oppose are as responsible for their own losses as those who supported said policy. That doesn't mean "OMG SELL EVERYTHING NOW!!!1" but rather the past tense "you should have sold off in an orderly and gradual fashion years ago when the writing was on the wall, but you didn't, so here's the result."

or at least have the choice of selling before the government takes over.

A) Aren't you the one who just said a selloff panic should be avoided? B) Who would be stupid enough to buy shares that are 100% sure to be torched?