PDA

View Full Version : Bailout question: Why not just ignore reserves?



c1ue
10-03-08, 01:58 PM
Here's a question I've been trying to understand:

Since the government sets reserve requirements, and also the issue is banks failing due to supposed short term dip in MBS/CDO asset values, why doesn't the government just ignore reserve requirements for, say, 1 year?

This is what happened in the Latin America debt crisis.

Then the no-reserve requirement issue can be extended until the banks can make enough money to overcome their losses from MBS/CDO assets but at more realistic valuation for said assets.

Why the haste to buy them up and make them all go away?

Perhaps it really is bailing out the US creditors which is the issue.

Spartacus
10-03-08, 02:56 PM
somebody mentioned that this is one of the items that was snuck into the bailout bill.

It was to go into effect in 2011 but that was moved up to today.

google for this (including the quotes

"bailout bill" zero reserves 2011




Here's a question I've been trying to understand:

Since the government sets reserve requirements, and also the issue is banks failing due to supposed short term dip in MBS/CDO asset values, why doesn't the government just ignore reserve requirements for, say, 1 year?

This is what happened in the Latin America debt crisis.

Then the no-reserve requirement issue can be extended until the banks can make enough money to overcome their losses from MBS/CDO assets but at more realistic valuation for said assets.

Why the haste to buy them up and make them all go away?

Perhaps it really is bailing out the US creditors which is the issue.