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Unfortunately, it's not just investment banks.  It's real banks, and a major part of the problem, as I understand it (and others can correct me if I'm wrong), is that a lot of people have their 401(k)s tied in with these companies, too, in the form of preferred stock and so on.  It's not nearly as simple as the folks on dKos would like us to believe.

Now maybe the answer is to nationalize -- or alternatively to simply let them fail -- and wipe them out anyway.  (I think that's what I would do.)  But it seems there's a major problem sitting there that isn't being talked about that might help to explain why the government is so hesitant to make a serious move.

Just something to consider.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Tue Mar 3rd, 2009 at 08:07:55 AM EST
[ Parent ]
There is nothing wrong with letting private pension plans collapse that higher public pensions cannot solve.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 3rd, 2009 at 08:12:19 AM EST
[ Parent ]
Maybe Americans need to have their collective 401(k) investment cleaned so they realise that the "state pension insolvency crisis" was a bogus argument to convince them to divest from Social Security and into a stock market ponzi scheme, and after realising that they won't do it again.

Social Security was invented during the Great Depression for a reason.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

by Migeru (migeru at eurotrib dot com) on Tue Mar 3rd, 2009 at 08:13:44 AM EST
[ Parent ]
Which is all well and good strictly from the perspective of economics, but you want to run for reelection as POTUS or a congresscritter after you've wiped out a big chunk of your constituents retirement accounts?

It's not so clean when you add the political consideration.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Tue Mar 3rd, 2009 at 08:19:59 AM EST
[ Parent ]
It's not clean it's messy. But as JakeS says
There is nothing wrong with letting private pension plans collapse that higher public pensions cannot solve.


Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Tue Mar 3rd, 2009 at 08:40:35 AM EST
[ Parent ]
I don't disagree.  I'm just saying.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Tue Mar 3rd, 2009 at 08:41:53 AM EST
[ Parent ]
Mig
Maybe Americans need to have their collective 401(k) investment cleaned so they realise that the "state pension insolvency crisis" was a bogus argument...
The markets are in the process of administering that lesson as we blog, but the "realize" part is in doubt.  We have the RW bloviating on steroids at the moment and much of the MSM is too timid or too reluctant to engage in forceful reporting for me to have any confidence in the outcome.  The longer this runs and the greater the amount of public obligations that are poured down black holes such as AIG the greater the danger that the Obama Administration will effectively be discredited.  

Obama is now playing Hamlet.  I fear he will become Tony Blair and that the Democrats will become NuLab.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Mar 3rd, 2009 at 12:38:20 PM EST
[ Parent ]
Well, you need someone with a bully pulpit to deconstruct the "public pension insolvency crisis" arguement now that people are paying attention. Like Krugman, for instance. But I don't think he (or anyone else) is likely to do it...

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Tue Mar 3rd, 2009 at 12:43:49 PM EST
[ Parent ]
What is the public pension insolvency crisis? Last time I checked, sovereigns cannot be insolvent against liabilities denominated in their own currencies.

For that matter, last time I checked, sovereigns presiding over even remotely functioning economies cannot be insolvent, full stop. And if the economy isn't even remotely functioning, what's the chance that private pension plans are solvent anyway?

Now, here's an idea: What about y'all confiscate all the 401(k)s and all future revenues going into them, and set up an equitable public pension scheme instead? If that's insolvent, then sure as Hell the 401(k)s are insolvent. And if it's not, then what's all the squealing about public pension plan insolvency about?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 3rd, 2009 at 12:49:56 PM EST
[ Parent ]
What is the public pension insolvency crisis?
A right wing meme straight out of the "Think tanks," the last time I checked.  As J. Edgar Hoover used to say: "The wish is father of the thought." The wealthy conservatives were only too happy to let their budget deficits be papered over by excess contributions to SS and Medicare starting in the early 80s, but now they fear that these programs might start costing them some small pittance.  

I fear that too many of the Democrats are unwilling to take it on because they need contributions from the same people who are financing and benefiting from the work of these "think tanks."  That is why campaign finance reform needs to be rammed through before they start on the really difficult stuff.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Mar 3rd, 2009 at 02:13:03 PM EST
[ Parent ]
I fear he will become Tony Blair and that the Democrats will become NuLab.

I (unfortunately) refer you to many similar comments made by UK posters before the election.

Any idiot can face a crisis - it's day to day living that wears you out.

by ceebs (ceebs (at) eurotrib (dot) com) on Tue Mar 3rd, 2009 at 12:48:07 PM EST
[ Parent ]
Well, hopefully sans the creepy, fundagelical messiah complex... We've had quite enough such POTUSes for the time being, thankyouverymuch.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 3rd, 2009 at 12:51:26 PM EST
[ Parent ]
I believe ET had come to this consensus before I started following it almost exactly a year ago.  Someone else acquainted me with some aspect of that discussion last summer.  There seems to be a real danger that our mutual fears will be realized.  The greatest countervailing factor is the simple fact that going along with the Wall Street consensus, or continuing to be guided by those subject to Krugman's "regulatory cognitive disfunction" is taking us over the falls in a barrel.  There is at least some hope that Obama will pull back before it is too late, but....  

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Mar 3rd, 2009 at 02:04:37 PM EST
[ Parent ]
well as long as the financial crisis isn't his equivalent of Blairs 'Iraq moment'

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Tue Mar 3rd, 2009 at 03:29:20 PM EST
[ Parent ]
What I hope for is the inverse, a "big banks=black holes and lets pull back before we cross the event horizon" moment.  Blair underwent a conversion to the dark side, Obama is currently a captive of the dark and needs a conversion to the light.  (Might as well go full-on Manichean Mode here!)

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Mar 3rd, 2009 at 03:53:53 PM EST
[ Parent ]
I would suggest a policy of intervention a la FDIC plus a "bad bank" to work out vehicles that may in time recover.  For individuals with IRA and 401k investments in impaired institutions that are to be dissolved, offer a reimbursement with a limit, of say $30K-$50K, that will not be paid until they have reached 65 years of age.  People have been repeatedly told to diversify their investments to protect against institution risk and there should be some consequence for their decisions to do otherwise.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Mar 3rd, 2009 at 12:28:19 PM EST
[ Parent ]

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