1933 Is Coming Again

FDR in 1933, signing the Emergency Banking Act to deal with the impending collapse of U.S. banks.

The financial crisis is reaching a climax. Either Washington will let the banking system go into cardiac arrest, or it will take measures to bring it back to life so it can vigorously function again. The frightening severity of the crisis and the political imperative not to let banks collapse the way they almost did in 1933 will force the Obama Administration to take the necessary actions.

To view dictionary popup window put your cursor on the blue scripture words.

“…upon the earth distress of nations, with perplexityStrongs 640: aporia, ap-or-ee´-a; from the same as 639; a (state of) quandary:—perplexity.
Strongs 639: aporeo, ap-or-eh´-o; from a compound of 1 (as a negative particle) and the base of 4198; to have no way out, i.e. be at a loss (mentally):— (stand in) doubt, be perplexed
—Luke 21:25

Root of All Evil

“For the love of money is the root Strongs 4491: rhiza, hrid´-zah; apparently a primary word; a “root” (literally or figuratively):—root of all.of all evilStrongs 2556: kakos, kak-os´; apparently a primary word; worthless (intrinsically, such; whereas 4190 properly refers to effects), i.e. (subjectively) depraved, or (objectively) injurious:—bad, evil, harm, ill, noisome, wicked. …..”
—1 Timothy 6:10a

Get rid of mark-to-market accounting rules, which are unnecessarily destroying the balance sheets of banks and other financial institutions. For regulators and auditors to force banks to repeatedly write down the value of their regulatory capital based on an impaired market is an astonishing absurdity. Selling anything in a distressed market always leads to artificially low prices. If mark-to-market accounting had been in effect in the early 1990s, when we last had a financial crisis, most of the major commercial banks would have gone under. We’d have had another Great Depression. To appease those who think there is use in this kind of pricing of assets, include it in a footnote.

–Bring back the uptick rule for short sales, and demand that the SEC enforce regulations against naked short-selling.

–Have the Federal Reserve aggressively buy mortgage-backed securities from banks. This would trigger a mass of refinancing at low, fixed rates of 4.5% to 5%. Housing prices would move up, and housing sales would revive.

Nationalize banks? A horror. You can bet that would truly paralyze the flow of credit: Does anyone believe Washington can manage banks?

Sadly, in human affairs it is sometimes necessary for a crisis to reach an acute, mortal stage before effective action is taken. The inflationary virus of the 1970s had been felled by the Fed by the spring of 1982. But the central bank kept squeezing hard, plunging the economy ever deeper into recession, with unemployment peaking at nearly 11%. In August of that year the Fed suddenly and dramatically eased up. The reason: Mexico was going to default on its debts, which would have smashed an already fragile banking system.

With the Fed’s dramatic reversal, stocks soared and interest rates plummeted. In early 1983 the economy sharply turned upward, and America entered into what was, up to that time, its greatest peacetime boom.

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