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Gigantic Bank Pool Pledged To Avert Disaster as Second Big Crash Stuns Wall Street

Sunday, September 14, 2008, 5:09 PM

This is an incredible headline. It is incredible news. Be sure you read the punchline all the way at the bottom.

Quote:
Largest Financial Powers in the City Meet After Day of Hysterical Liquidation Sinking Prices Below Thursday's
By Laurence Stern

After the stock market had come crashing down again in a veritable deluge of forced and hysterical liquidation, word sped through the financial district last evening that the largest banks in the city were prepared to exert their organized power this morning to prevent further disaster.

Arrangements described as "fully adequate" were completed at a conference at the offices of J. P. Morgan & Co. at Broad and Wall Streets...

Although no formal statement was issued, it was the consensus of those at the meeting that the worst of the liquidation is over and that a natural demand for investment stocks now available on the bargain counter should go far toward an immediate restoration of trading stability.





-- The World, October 29, 1929

The more things change....the more they stay the same, eh?

Of course, we all remember that believing this particular show of force and official support in October of 1929 was not not the best course of action, right?

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3 Comments

wfhyslop's picture
wfhyslop
Status: Bronze Member (Offline)
Joined: Sep 3 2008
Posts: 46
What about Canada? Eh
This is an amazing site and wonderful commentary on this fast evolving situation. This particular post is even more ironic (and scary) when it has just been announced that a group of international banks has put together a $50 billion pool to try to avert the crisis. As a Canadian, I was wondering if you have any comment on whether the Canadian situation (and Canadian banks) are in any better shape than their US counterparts. The Canadian press, government, and citizens seem totaly oblivious to what is happening south of the border. The Great Depression hit Canada too! Chris, do you believe the situation will spill over to Canada and how quickly.
ianp123's picture
ianp123
Status: Member (Offline)
Joined: Jun 11 2008
Posts: 9
Speaking as a total (fellow?) hoser...
Good day, eh?

Canada will be partially insulated from this crises simply because our banks did not issue nearly as many as these bad mortgages. Our banks have always been more conservative, and there's only five of them. Some of them are heavily invested in mortgage back securities however, especially CIBC, and as a result they're taking some major hits.

In addition, the Bank of Canada has had a more tight reign on monetary policy than the Federal Reserve and, unlike the Fed, is a Crown Corporation (Founded in '33 as a private entity and nationalized by Mackenzie King in '38), operating at arms-length from the Federal Gov't. All that being said, Mark Carney has done a great job of following the US$ down for the past year, maintaining the exchange rates as about par since fall '07. This has only begin to change with the current USD rally.

The fact that most of Canada is a resource based economy will help us out as well. Ontario, which relies heavily on manufacturing, however is being hit hardest so far.

Bearing in mind that about 80% of our exports (Canada IS a net exporter) go to the US isn't helping, but that's down from 93% a decade ago. If you look at a map of the world and cover up the US, Canada is as alone as Australia only without a sea-based export network. Almost everything goes south on trucks.

I think the bottom line though it that is the USA is f**ked, Canada is at least screwed.

Hang in there, southern brothers. This may be the winter of our discontent, but with hard work and ingenuity we can have a nice spring...
cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5570
Canadian banks?

 

 I am not familiar with how stretched Canadian banks are.  I followed the ABCP disaster for a while and to be sure there are some serious losses there.  I guess it all depends if the banks have to eat those or they remain with then pensioners/citizens.

 

The collapse in the commodities market is going to hit Canada pretty hard I would imagine but I also expect Canada to emerge from the wreckage first, and largely unscathed.  Whatever is going on in the US, the world (China & India) certainly needs its resources.

Chris Martenson

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