John Cochrane on Why the Bailout Plan Would Be a Disaster

My colleague John Cochrane has written an insightful piece on the bailout. In short, he believes that the Treasury plan needs to be shot, have a stake driven through its heart, and be buried.

His arguments, posted on his website, are reprinted below:

The Monster Returns

By John H. Cochrane

A Guest Post

Like a monster from an old horror movie, the Treasury plan keeps coming back from the dead. Yes, we are in a financial crisis that needs urgent, determined, and clear-eyed help from the government. But this plan is fundamentally flawed. It won’t even work if we leave aside its horrendous cost and long-lasting damage to the financial system. The additions and sweeteners in the Senate version, and those on the table in the house, make it even less likely to work.

A workable plan has to be based on fundamentally different principles: recapitalizing banks that are in trouble, including allowing orderly failures, and providing liquidity to short-term credit markets. These are not new and untested ideas; these are the tools that governments have used for 100 years to get through financial turmoil. However, they have to be used in forceful and decisive ways that will step on a lot of powerful toes.

The Problem

The heart of the problem now, as best as anyone I know can understand it (we are all remarkably long on stories and remarkably short on numbers), is that many banks hold a lot of mortgages and mortgage-backed securities whose values have fallen below the value of money the banks have borrowed. The banks are, by that measure, insolvent. Credit market problems are a symptom of this underlying problem. Nobody really knows which banks are in trouble and how badly, nor when these troubles will lead to a sudden failure. Obviously, they don’t want to lend more money.

A credit crunch is the danger for the economy from this situation. Banks need capital to operate. In order to borrow another dollar and make a new loan, a bank needs an extra, say, 10 cents of its own money (capital) — so that if the loan declines in value by 10 cents, the bank can still pay back the dollar it borrowed. If a bank doesn’t have enough capital — because declines in asset values wiped out the 10 cents from the last loan — it can’t make new loans, even to credit-worthy customers. If all banks are in this position (a much less likely event), we have a credit crunch. People want to save and earn interest; other people want to borrow to finance houses and businesses; but the banking system is not able to do its match-maker job.

Solving the Problem

O.K., if this is the problem, then banks need more capital. Then the people, computers, buildings, knowledge, and so forth that represent the real businesses can borrow money again and start lending it out. The core of any plan must be to recapitalize the banking system. How?

Issue stock — either in offerings, in big chunks as Goldman Sachs famously did with Warren Buffett last week, or by merging or selling the whole company. There are trillions of dollars of investment capital floating around the world, happy to buy banks so long as the price is good enough. Banks don’t want to issue stock because it seems to dilute current stockholders, and it might “send bad signals.” Lots of sensible proposals amount to twisting their arms to do so. In many previous “bailouts,” the government added small (relative to $700 billion!) sweeteners to get deals like this to work.

Let banks fail, but in an orderly fashion. When a bank “fails,” it does not leave a huge crater in the ground. The people, knowledge, computers, buildings, and so forth are sold to new owners — who provide new capital — and business goes on as usual; a new sign goes in the window, new capital comes in the back door, and new loans go out the front door. Current shareholders are wiped out, and some of the senior debt holders don’t get all their money back. They complain loudly to Congress and the administration — nobody likes losing money — but their losses do not imperil the financial system. They earned great returns on the way up in return for bearing this risk; now they get to bear the risk.

We saw this process in action last week. On Monday, we heard many predictions that the financial system would implode in a matter of days. At the end of the week, JPMorgan took over Washington Mutual. Depositors and loan customers didn’t even notice.

As someone who argued publicly against the Treasury plan on Monday, I felt vindicated.

This process does need government intervention; “in an orderly fashion” is an important qualifier. Our bankruptcy system is not well set up to handle complex financial institutions with lots of short-term debt and with complex derivative and swap transactions overhanging. Until that gets fixed, we have to muddle through.

An important long-run project will be to redesign bankruptcy; delineate which classes of creditors get protected (depositors, brokerage customers, some kinds of short-term creditors) and how much regulation that protection implies; and design a system in which shareholders and debt holders can lose the money they put at risk without creating systemic risk. But not now.

What is simple to describe economically — wipe out shareholders, write down debt, marry the operations to new capital — is not straightforward legally and institutionally. If we just throw everyone into bankruptcy court, the lawyers will fight it out for years and the operations really will grind to a halt. In the heat of the crisis, we need the same kind of greasing of wheels and twisting of arms that went into the last few bank failures.

Fancy ideas. The main point of any successful plan is to marry new capital with bank operations. There are lots of creative ways to do this, including forced debt-equity swaps and various government purchases of equity. (My colleagues at the University of Chicago are particularly good at coming up with clever schemes.)

The second part of the solution is to maintain liquidity of short-term credit markets. The Fed is very good at this. Its whole purpose is to be “lender of last resort.” We are told that “banks won’t borrow and lend to each other.” But banks can borrow from the Fed. The Fed is practically begging them to do so. Even if interbank lending comes to a halt, there need not be a credit crunch. If banks are not making new loans, it is because they either do not have capital, or they don’t want to; not because they can’t borrow overnight from other banks. (And the “other banks” are still there with excess deposits.) If the Fed is worried about commercial paper rates, it can support those.

The one good part of the current proposals is a temporary extension of federal deposit insurance. The last thing we need is panicky individuals rushing needlessly to ATM machines.

By analogy, we are in a sort of “run” of short-term debt away from banks. We have learned in this crisis that the whole financial system is relying to an incredible extent on borrowing new money each day to pay off old money, which leads quickly to chaos if investors don’t want to roll over. It doesn’t make sense to threaten that overnight debt winds up in bankruptcy court, which is at the heart of the need for government to smooth failures.

In the short run, guaranteeing new short-term credit to banks as a sort of deposit insurance could stop this “run.” If we do that, of course, we will have to limit how much banks and other financial institutions can borrow at such short horizons in the future.

Banks vs. the Banking System

Banks can fail without imperiling the crucial ability of the banking system to make new loans. If a bank fails, wiping out its shareholders, and its operations are quickly married to the capital of new owners, the banking system is fine. Even if one bank shuts down — so long as there are other competing banks around who can make loans — the banking system is fine.

I think many observers, and quite a few policy makers, do not recognize the robustness that our deregulated competitive banking system conveys. If one bank failed in the 1930’s, a big out-of-state bank could not come in and take it over. Hedge funds, private equity funds, foreign banks, and sovereign wealth funds didn’t even exist — and if they did, there’s no way they would have been allowed to own a bank or even substantial amounts of bank stock. If a bank failed in the 1930’s, a competitive bank could not move in and quickly offer loans or deposit and other retail services to the first bank’s customers. JPMorgan could not have taken over WaMu. But all those competitive mechanisms are in place now — at least until a new round of regulation wipes them out. This is, I think, the reason why we’ve had nine months of historic financial chaos, and only now are we starting to see real systemic problems.

There is a temptation for regulators and government officials to hear stories of woe from failing banks, their creditors, and their shareholders, and mistakenly believe that these particular people and institutions need to be propped up.

The Treasury Plan

The Treasury plan is a nuclear option. The only way it can work to solve the central problem, recapitalizing banks, is if the Treasury buys so many mortgages that we raise mortgage values to the point that banks are obviously solvent again.

To work, this plan has to raise the market value of all mortgage-backed securities. We don’t just help bad banks; we bail out good banks (really their shareholders and debt holders), hedge funds, sovereign wealth funds, university and charitable endowments – everyone who made money on mortgage-backed instruments in good times and signed up for the risk in bad times. This is the mother of all bailouts.

There is a storm out on the lake, and some of the boats are in trouble. Commodore Bernanke has been helping to bail water from some boats until they can patch themselves up, encouraging other sound boats to help, and transferring passengers on sinking boats to others. But it’s getting tough and the storm is still raging.

Someone had a great idea: let’s blow up the dam and drain the lake! O.K., it might stop the boats from sinking, but there won’t be a lake left when we’re done. That’s the essence of the Treasury plan.

Short of that, it will not work. Suppose a bank is carrying its mortgages at 80 cents on the dollar, but the market value is 40 cents. If the Treasury buys at 40 cents or even 60 cents on the dollar, the bank is in worse trouble than before, since the bank has to recognize the market value. Unless the Treasury pushes prices all the way past 80 cents on the dollar up to 90 cents or even 100 cents, we haven’t done any good at all; and $700 billion is a drop in the bucket compared what that would take.

There is a lot of talk about “illiquid markets,” “price discovery,” and the “hold to maturity price.” The hope is that by making rather small purchases, the Treasury will be able to raise market prices a lot. This is a vain hope — at least it is completely untested in any historical experience. Never in all of financial history has anyone been able to make a small amount of purchases, establish a “liquid market,” and substantially raise the overall market price.

Since the Treasury will not be able to raise overall market prices, it will end up buying from banks that are in trouble, at prices fantastically above market value. This is transparently the same as simply giving the banks free money. Make sure the taxpayers get a thank-you card.

There is other talk (reflected in the Senate bill) of abandoning mark-to-market accounting — i.e., to pretend assets are worth more than they really are. This will not fool lenders who are worried about the true value of the assets. If anything, they will be less likely to lend. Conversely, if prices are truly artificially low, then potential lenders to banks will know this and will lend anyway. We might as well just ban all accounting if we don’t like the news accountants bring. No, we need more transparency, not less.

Many of the changes in new versions of the bill make matters worse, at least for the central task of stabilizing financial markets.

The Senate adds language to protect homeowners: “help families to keep their homes and to stabilize communities.” That’s natural; a political system cannot hope to bail out shareholders to the tune of $700 billion dollars without bailing out mortgage holders on the other end. But it makes the bank-stabilization problem much worse. Mortgages are worth a lot less if people don’t have to pay them back. This will directly lower the market value of the mortgages that we’re trying to raise.

Yes, we need to do something. But “doing something” that will not work — with potentially dire consequences — is not the right course, especially when sensible and well-understood options remain.

Leave A Comment

Comments are moderated and generally will be posted if they are on-topic and not abusive.



  1. Joe Smith says:

    You cannot allow a wipe out of the equity of existing bank investors as a result of a run on the money markets and hope to be left with a banking system capable of providing inexpensive capital.

    It would have been better if the plan had spent some time on the challenges of unwinding the mortgage backed securities and derivatives to improve transparency.

    Just how serious matters are can be seen from the fact that GE is paying Buffett something like 15 to 20% per annum (by the time you factor in all of the costs) for a $3 Billion capital infusion for three years.

    Thumb up 0 Thumb down 0
  2. charles says:

    John Cochrane vs. Warren Buffett. Hmmmmm. Steven – Who would you bet with?

    Thumb up 0 Thumb down 0
  3. dan p says:

    This makes a lot of sense – I didn’t really understand the crisis much at all.

    Thumb up 0 Thumb down 0
  4. Speed says:

    A nice story. But without some numbers (real numbers in billions of dollars, not “cents” and “cents on a dollar”) it has no meaning with respect to the crisis at hand.

    Thumb up 0 Thumb down 0
  5. MIkeM says:

    How much would it cost for the Fed to eat all the foreclosures? What if it creates Fannie and Freddie’s step-child: Frannie Muck. When John Q. Subprimeborrower defaults on his mortgage and enters forclosure, instead of the bank taking possession of the property, Frannie Muck does and is responsible for continuing the payments to the bank.

    The mortgage retains it’s value, the banks remain solvent, the securities built on the mortgages remain stable, and nobody wins.

    Does anybody know how much this would end up costing the Fed? The government’s unwanted agency, Frannie Muck, would be left with a ton of low-value properties until it can unload them on buyers and a whole lot of mortgage payments, but would the loss be so great compared to a $700 billion boondoggle?

    Thumb up 0 Thumb down 0
  6. Timothy says:

    Here’s the key paragraph in John’s post:

    “Suppose a bank is carrying its mortgages at 80 cents on the dollar, but the market value is 40 cents. If the Treasury buys at 40 cents or even 60 cents on the dollar, the bank is in worse trouble than before, since the bank has to recognize the market value. Unless the Treasury pushes prices all the way past 80 cents on the dollar up to 90 cents or even 100 cents, we haven’t done any good at all; and $700 billion is a drop in the bucket compared what that would take.”

    Forgive my limited understanding here, but isn’t a major part of the the problem that we simply do not know the “market value” of these securities, and won’t truly know them until the housing market hits bottom? If that’s the case, banks are faced not with a known “market value,” but with a completely unknown value that could in certain cases be as low as zero.

    Given this, isn’t there some benefit to having the government come in and actually set a price for these assets? Even if the price is below the current book value of the assets, it’s eliminates the risk of the assets being “worth” even less, possibly nothing. Yes, the banks lose money, but not as much as they otherwise might have, and now the assets are far more liquid, since you have the government stepping in, willing to buy them (vs. the market, which at this stage simply will not for anything other than bargain basement prices).

    I’m no expert, so please correct me if I’m missing/misstating anything here.

    Thumb up 0 Thumb down 0
  7. Jason says:

    Every post, article, story, …. I read I understand less and less. Knowledge is confusing.

    Thumb up 0 Thumb down 0
  8. Nick says:

    I’m glad you guys finally post something sensible from the other side of the debate.

    It isn’t a matter of revenge as Mr. Wolfers suggests. It’s a matter of the bailout plan not working and possibly making things worse.

    Thumb up 0 Thumb down 0
  9. Dan G says:

    So far, this is the best analysis (i.e. filled with the least amount of jargon) of the financial turmoil that I’ve read. It doesn’t, however, have much to say in terms of a solution other than “stand back and try not to get any on you.” You advocate *some* type of government intervention, but offer no specific suggestions for what it might be other than facilitating “orderly failure.”

    The policy suggestions of the article seem to amount to the government sitting back and saying “serves ya right!” to all the investors who put money into these banks. Then, when the banks turn up insolvent (to no one’s surprise), the government can step up to the auction block and help facilitate the sale.

    Isn’t this exactly what’s happening already?

    Thumb up 0 Thumb down 0
  10. Matt Bruce says:

    John Cochrane vs. Warren Buffett. Hmmmmm. Steven – Who would you bet with?

    How many years has it been since the last time Warren Buffett so much as opened his mouth for any purpose other than indirectly boosting his own holdings (or torpedoing things that he wants to buy at a distressed rate)?

    I would expect Buffett to “win,” in the same manner that I brace myself for evil to triumph over good.

    Thumb up 0 Thumb down 0
  11. RR says:

    @ charles (#2)

    Buffett wants the government to buy the MBSs at market price, not above it as the Treasury wants to do.

    At least, we finally see a critique of the plan on this blog. I wouldn’t support a plan that offers anything less than an equity stake along with a debt-to-equity swap.

    Thumb up 0 Thumb down 0
  12. MikeM says:

    Let’s all bear in mind that a lot of these mortgages are going into foreclosure because they include pre-payment penalties that effectively eliminate refinancing as an option.

    Meanwhile, banks lack operational capital to sustain the markets.

    Think about that for a second.

    Pre-payment penalties: how are these even conscionable under contract law?!

    Thumb up 0 Thumb down 0
  13. Paul K says:

    “If the Treasury buys at 40 cents or even 60 cents on the dollar” – this is patent nonsense. The problem with SEC technical accounting rules (they are actually redefining only now) says that the bank has to devalue below the 80 cents as soon as their any chance of it being below 80. So, the bank probably set it to 20 cents to be safe, since they have no proof of even its 40 cent value. By buying these out at somewhere between the low-balled market price and original face value, the bank at least gets an asset/cash to stabilize their books. Many of these will turn out to be worth as much or more than the Gov paid for them. Further, by stabilizing the market, housing prices will stabilize and rise, and so people will be more inclined to stay in the house (pay the mortgage) or refinance their way out to a more valid loan. So, lots of upside.

    Schemes like this and “insurance” on loans by the Gov only expose us to lots of downside risk (paying the insurance) and no upside.

    Thumb up 0 Thumb down 0
  14. Economic Logician says:

    Anything that is undertaken will be useless if the FDIC keeps preventing banks from making loans. (link)

    Thumb up 0 Thumb down 0
  15. jonathan says:

    You should include at minimum a link to your school’s own IGM because it has links to lots of ideas about alternatives.

    In the various alternatives, I rarely find mention of the derivatives markets, how they were built on top of these mortgage securities and how their values far exceed the mortgages assets in question. If the problem were just mortgages, the amount of money involved would not be that large, the time frames in which securities would default or not would be relatively long, and it would be much easier to liquidate institutions that were over-extended in these particular markets. If that were the case, I can’t see how we’d need a large “bailout / rescue” plan because the system has survived worse.

    As I understand the plan as it now stands, it is not given that Treasury will purchase assets for more than market value – and many argue that buying assets carefully at “right” prices is how the US taxpayer makes out in the end. (This is Buffett’s position, btw, as he’s been quite clear about.) The general discussion by the politicians is that the taxpayers buy now, hold and then try to do well as those values recover. And bluntly, as I look at the original plan, I don’t see anything mandating above market purchases.

    I believe one idea is that institutions will continue to fail but they will be cleansed of these assets and will then be taken over by someone else. Note the government is already taking on some of this risk; they guaranteed losses above $42 B in the Wachovia deal. I don’t know if the government has real exposure there or not.

    As I understand things, there is hope this plan will free up the markets as a whole, meaning the derivatives markets will recover to a sufficient degree. I’ve seen only one alternative which really addresses this and that plan suggests a classic cramdown; if the derivatives aren’t and won’t be worth the prior belief then rewrite the stuff. I believe Luigi Zingales – one of your guys – argues for a cramdown.

    I don’t know what will happen or what the right plan is, but I think Professor Cochrane and many others are focused on the idea of how the banks, etc. are capitalized while Paulsen et al are focused on capital flows. These perspectives are hard to reconcile in easy times. All we may be able to say with certainty is that the last several years have seen a truly massive explosion in derivatives – and paper capital flows – which leveraged institutional capital to a new degree, which seemed to mint money for free – see AIG, which collected money for “insurance” in swaps for which it did not have to allocate assets to cover – and for which the bill has now come due.

    Thumb up 0 Thumb down 0
  16. Jim says:

    “There is other talk (reflected in the Senate bill) of abandoning mark-to-market accounting — i.e., to pretend assets are worth more than they really are.”

    Oh No! Don’t abandon Mark to Market Accounting!

    That’s what allowed ENRON to stay afloat for as long as it did!

    Thumb up 0 Thumb down 0
  17. Doug says:

    I have read many things over the past week.

    A little common sense tells me one thing. If I believe that this is bad, really bad and it could lead to the next depression, I do not believe one $700 billion piece of legislation will fix the problem.

    Think about it for just a minute and you have to come to the same conclusion.

    How does the $700 billion get spent? The treasury department will be handling the check book. That means they need more people, offices, desks. Government is a bureaucratize, and will make new bureaucratizes.

    I expect if this passes, after the election look for a series of $20-50 billion mini bailouts. Every man and woman in congress will be bailing out the local bank, mortgage lender and broker. If some happen to be in-laws, well…

    Please, please this must be stopped now.

    Thumb up 0 Thumb down 0
  18. brazen teacher says:

    I agree with Dan P. I don’t understand this bail out mess nearly as much as I should… and what I was reading seemed full of propaganda from one side or the other- rather just pragmatic evidence and observable fact.

    I really appreciate this article. As a teacher- it seems that there is a shortage of people who can explain this as a teacher would. Streamlined with as little extra garbage as possible.

    Thumb up 0 Thumb down 0
  19. Balaji viswanathan says:

    There seems to be an implicit assumption that just because JP Morgan and Citi could easily take over WaMu and Wachovia, the system is sound and capable of handling bank failures. But, did you realize why WaMu couldn’t find a partner till Paulson proposed this plan and got sufficient political support?

    I bet that BofA, Citi and JPM are doing all these aquisitions and making the bank failures seem orderly only on the hope that they could get rid of some of the bad assets throught government support. If there was no such bailout on the cards, I bet that there would have been a great panic during WaMu and Wachovia collapse.

    Thumb up 0 Thumb down 0
  20. Caleb Mardini says:

    Could somebody let Dubner and Wolfers know?

    Thumb up 0 Thumb down 0
  21. Alex says:

    The more I understand the problem the worse it stinks. These guys have basically been cooking the books by WAY overvaluing these assets. They figured out a way to basically turn massive risk into TONS of money. The massive growth in the financial sector was not real.

    They never expected to be called on these assets. Now that they are being forced to reckon with the reality that these assets are worth close to nothing, they say the market is not being rational. Oh the irony! There is A LOT of money out there to purchase these assets, and people far more knowledgeable than Paulson, yet still they call it a “firesale”. Merrill recently sold 30.6B worth of these assets for 1.7B!

    This plan doesn’t even inject capital into the system because it forces them to write down the value regardless! The market price established by a reverse auction will cause even more write downs. And who in their right mind is going to lend to a bank that wins the CDO limbo? How low can you go (i.e. how desperate are you)?

    I now longer identify my own good with the good of the ruling class and I will not support the status quo. These people are a parasite that must be removed.

    Thumb up 0 Thumb down 0
  22. Joe Smith says:

    It would be interesting to see something like an input output model showing where capital comes from, how it flows through the intermediaries and who is using the capital. The sort of model might tell us where the losses really reside and the best place to inject public money to get the system working again.

    Thumb up 0 Thumb down 0
  23. Carl says:

    The argument seems to fall apart a bit when Cochrane claims that banks will be in even worse shape if the government buys the illiquid securities and the banks are forced to recognize the price the government paid. Mark-to-market accounting already forces the banks to value those securities at less than what they paid for them; that’s why we keep seeing these billion dollar write-downs. If a bank has already written off 50% of the value, the government can buy the security for 50% and the bank won’t show any accounting charge.

    Right now, my understanding is that banks are coming up with the amounts for these write-downs by assuming future default rates for certain classes of mortgages. The risk in these assumptions is why there is no market for the securities. Essentially, the bailout plan would remove the risk, and the market can begin working again.

    Also, when we say “$700B”, aren’t we really talking about the notional value of put option? Unless people were writing mortgages for houses that didn’t even exist (maybe some people were…), I can’t believe we’re talking about actually “spending” $700B.

    What is the problem with my understanding?

    Thumb up 0 Thumb down 0
  24. Kevin H says:

    near gibberish. First he talks about how our system is set up to handle failures, then he contradicts himself: “Our bankruptcy system is not well set up to handle complex financial institutions with lots of short-term debt and with complex derivative and swap transactions overhanging. Until that gets fixed, we have to muddle through.”

    Gee, don’t you think that’s kinda the problem! The question is the best way to muddle through.

    The whole piece begs the question, if the current system is as robust as he makes it sounds, why are we having a crisis at all?

    He’s missing the forest for the trees. He’s saying, look, I have a theory which says this tree shouldn’t burn, nor this one, and ignoring the fire.

    He also perpetuates many myths, including the idea that it is unavoidable that this plan have “horrendous cost”. That’s just ridiculous. If we buy at market prices, there is a very strong chance that we will be making money in the long term. At the very least, the cost will only be a fraction of the $700 billion. If he is talking about buying at highly subsidized rates, that is a separate issue, but he never makes that distinction.

    His boat/lake analogy is insulting to say the least. This is a $6.1 trillion market, even with $700 billion in, we are hardly draining the lake.

    Then he goes and shows he has no idea what is going on when he starts talking about mark downs. MBS are a mark to market asset. Even if an MBS were on someones books as being worth 80, and the current market value is 40, it is already going to take that hit, regardless of the governments actions.

    The only hope the bailout has, and I’ll admit it is a bit of a long shot, is that the market value of MBSs is below fair value; that the market is being irrationally risk adverse. The $700 billion simply acts as a stop-gap, which keeps market prices at or near fair value prices until the market returns to rationality.

    If the market is behaving rationally, then the world economy has lost a horrendous amount of wealth (or rather, was irrationally confident about future wealth growth). This loss is concentrated in a very vital part of the financial system, and (as about the only sensible thing written in the article) our bankruptcy system isn’t set up to handle distributing these kind of losses smoothly. In that case, it will take massive subsidies probably 2 or 3 times the size of the current $700 billion to soften the impact. Still the $700 billion is a good first effort.

    Thumb up 0 Thumb down 0
  25. Kevin H says:


    “Unless people were writing mortgages for houses that didn’t even exist (maybe some people were…), I can’t believe we’re talking about actually “spending” $700B.

    What is the problem with my understanding? ”

    Nothing, absolutely nothing, and you probably should loose confidence any anyone, such as Mr. Cochrane, who tells you differently.

    Thumb up 0 Thumb down 0
  26. Kevin H says:


    If that’s true, then the real victims are the people who bought those overvalued assets, and the crooks are the people who sold the overvalued assests. The $700 billion will be going to the people who bought the MBSs, not the crooks.

    Thumb up 0 Thumb down 0
  27. Sean says:

    Just how bad does it have to get before we can talk about abolishing the Federal Reserve Bank?

    Fractional reserve banking is an artifact of an era when we backed our money with gold, and didn’t have enough gold to support the required supply of money. We “back” our money with paper.

    Banks with full reserves don’t fail.

    Thumb up 0 Thumb down 0
  28. Kevin H says:

    @MikeM #5

    That would be exactly the same effect as if the Government simply buys the MBSs at ’80 cents’ in Cochrane’s terms.

    The chief winner would be anyone holding an MBS as they would basically have zero foreclosure risk (they would still have prepayment risk, but that’s not currently very large).

    If they really extended that program through the whole economy, it would cost in the hundred of billions to trillions of dollars. I think there are something like 20 million expected foreclosures, and I’m going to guesstimate a average home price of $200k/house. That’s $4 trillion in net home worth. If we assume that the worth of the houses is 90% of the cost of the total mortage (which is optamistic), we have a cost of $400 billion. Keep in mind that the average mortgage costs twice the value of the house at its beginning (which would mean $2 trillion in losses to the government if everyone defaulted on their very first payment) and $700 billion, where probably wouldn’t loose a cent looks pretty good.

    And again just for emphasis, we aren’t spending $700 billion, we are investing it in a market that has taken a nose dive, and has large short to medium run risks. Buy low, sell high is how you make profit.

    Thumb up 0 Thumb down 0
  29. Jeff says:

    Why can’t we just have the Treasury go shopping for distressed assets, but with a requirement to buy only at fire-sale prices? If other banks can pay 22 cents on the dollar (getting a sweet deal, I assume), why can’t the government? I’m happy to have the Treasury spend $250 billion if there is a reasonable prospect of it turning into $400 billion in a few years when this settles down.

    The controversy over benefiting the greedy fools who created this mess is obscuring the opportunity for taxpayers to siphon money out of the vaults (for years to come) of the fantastically lucrative cash-generating machines that those fat cats operate under normal circumstances.

    Trading new equity (I agree, existing equity must be drawn pushed to zero) for big capital infusions may be socialism, but it’s socialism that is easy to unwind a few years after the crisis ends — just sell the government’s shares on the open market.

    Thumb up 0 Thumb down 0
  30. David Stewart Zink says:

    If a friend and a stranger make exactly the same argument your friend will always be a little more convincing.

    Which is why it is not necessarily a criminal accusation that Ben bailed out Goldman Sachs’s stake in AIG but let lehman go hang despite equal merit.

    Was tacky if he really did have GS in the room with him at the time, though.

    Thumb up 0 Thumb down 0
  31. DaveL says:

    If they do buy these distressed assets at this low price, what is the purpose of the government getting involved? To make money for the government? The banks would still have the hole in their balance sheet and it would be fully realized. This will help them loan money to businesses and consumers.

    When you go to the auto dealer (if they are still in business) you will not get a car loan or you may pay through the nose. Your restaurant will not be able to buy from restaurant supply to stock the pantry, they may not be in business much longer either. Your local retailer will not have money to stock clothing or whatever.

    The reason Paulson wanted to ram this through is based on financial history going back hundreds of years. It had to be implemented rapidly and it had to be effective. Delay would increase the costs and make it less likely of being successful. A perusing of Milton Friedman’s Monetary History, the Great Depression chapter would be in order to illustrate how speed matters in a crisis like this. As more institutions fail the costs go up as the damage cascades.

    of course did not got through quickly, and now its adorned with plenty of pork to make it palitable. I guess Paulson’s Hamiltonian moment did not go down any better with the common man than his predicessor’s.

    Thumb up 0 Thumb down 0
  32. A. Yung says:

    Does $700 Billion dollars worth of toxic assets sound absurd to you? (The 7-Year Taxpayer’s Bailout Plan)

    Look no further.

    What the Federal Reserve is imposing IS NOT the only way to solve this crisis. Instead of shutting Main Street out of the equation, this proposed plan lifts the heavy weight of mortgages off of homeowner’s backs temporarily while covering all mortgages (Freddie, Fannie, Bear Stearns, Lehman, WAMU, etc.).

    It’s a plan where the Government and the Homeowner work together to funnel revenue back into the economy.

    1. Revise mortgage loans at 75% of the original value, with a new 30 yr, 6.5% fixed interest rate. (Current average monthly payment: $1,389)

    2. The Government pays the difference of new mortgage and old for 7 years (NEW average monthly payment for YOU: $846)

    3. Original debt held by Government as a second note. Then a 40 year note with payments starts after the seven years. You can pay this debt off at anytime, but can not refinance without paying down.

    It’s simple.

    It gives the economy 7 years to recover. It relieves the heavy mortgage debt on YOU. It cost CONSIDERABLY less on YOU and the Government than this $700 Bailout plan. Think about it. Less cents equals MORE SENSE.

    Thumb up 0 Thumb down 0
  33. jeffreytg says:

    Wait, I thought that I learned via a previous blog entry that only the uninformed would be against the bail out.

    Thumb up 0 Thumb down 0
  34. Leo says:

    I’m waiting for Wolfers’ “Economists and Bailouts: Mea MAXIMA Culpa.”

    Thumb up 0 Thumb down 0
  35. grover says:

    Rats. I wish I hadn’t misread the headline as “John *Coltrane* on Why the Bailout Plan Would Be a Disaster.”

    That would have been an altogether more entertaining article.

    Thumb up 0 Thumb down 0
  36. Alex says:

    @Kevin H — Often times the institution sells off the low risk assets and maintains the high risk assets on their balance sheet at full value (or overstated market value).

    Thumb up 0 Thumb down 0
  37. Jake Summers says:

    The market is recovering but none of you see it that way. The market is reasserting the natural price. I don’t see how you can solve this problem with price fixing. Doesn’t price fixing cause it’s own crisis down the road? Didn’t we have interest rates to low for to long?

    Of course we always want growth and we think that comes from credit creation and rate cuts? And rate increases limit growth? Isn’t what we see a cause and effect of price fixing interest rates?

    I doubt this will be the last bailout or money drop. Look how all the other bailouts failed to stabilize the market. Won’t this simply make the recession longer for Main Street as we continue to prop up Wall Street?

    If you are going to have a government solution though, I tend to agree with Nouriel Roubini.

    In basic it is:

    1. Take assets off the balance sheet.

    2. Recapitalize the banks.

    3. Reduce the debt burden. (Homeowners I believe)

    As for Paulsons plan I don’t see how he can determine the value of these assets. There is no way for him to really know so the Treasury will be speculating at best. This isn’t really a plan but instead is shopping for toxic waste at the taxpayer’s expense. The taxpayer’s are being told with a gun to their head to go around Wall Street and buy all the worst garbage no sane person would touch. We are not looking for deals, we are buying Wall Street feces left by the wolves and their insatiable appetite for profits at all costs. This won’t fix the debt burden on Main Street though while dumping the tax burden on them. And this is a consumer led recession that is going to be severe.

    The American people are also right to assume that they will not see a return. As far as I know bailouts, rescue plans, and price fixing always fail to yield the results. It seems very unlikely the American people will see any value and any suggestion is pure speculation. Nor should we, as taxpayers want to go into the business of such idiotic speculation for the benefit of Wall Street. You don’t speculate with the taxpayer’s future debt burden when we have maxed the credit line and are staring into a severe recession on main street.

    Thumb up 0 Thumb down 0
  38. Joe Torben says:

    To Kevin H and a few others: if you seriously believe that the government will likely make some money from buying these distressed assets in the long run, please explain why there isn’t a long line of investors willing to make that bet as well. Not everyone is short on cash, after all.

    Could that possibly be because the idea that it’s likely that the government will make money from these assets is “spin” (which is the PC word for “a complete lie”)?

    Thumb up 0 Thumb down 0
  39. Derek says:

    The bailout sounds like a manufactured crisis.

    The EU would fall apart if it didn’t adopt a new constitution, the European politicians said. Not!

    Saddam Hussein will terrorize us with his WMDs, the Bush Administration said. Not!

    We must bail out the financial institutions to prevent the economy from crumbling… NOT!

    Thumb up 0 Thumb down 0
  40. Erich Riesenberg says:

    “@ charles (#2)

    Buffett wants the government to buy the MBSs at market price, not above it as the Treasury wants to do.

    At least, we finally see a critique of the plan on this blog. I wouldn’t support a plan that offers anything less than an equity stake along with a debt-to-equity swap.

    — Posted by RR”

    Thank you RR, this has been the one point I would like clarified. Buffett made it clear on CNBC and Charlie Rose that he would bargain hard, while Bernanke and Paulson have said they would pay above market. I would like someone intelligible to ask Buffett to explain the misunderstanding.

    Thumb up 0 Thumb down 0
  41. jonathan says:

    Though this thread is now old, a clarification is needed about the price Treasury intends to pay. Bernanke never said we should pay high prices, just that Treasury should pay between “hold to maturity” value and “fire sale” value. The phrase “fire sale” is not the same as market value; it has a real meaning and that is a sale when there’s no market. Buffett’s comment fits Treasury’s goals to pay sensible prices, meaning they examine and value securities and pay a price that should generate a reasonable return – which has a better chance of happening because the cost of the government’s investment is lower than any private investor’s cost. Get it? When they referred to paying more than “fire sale” they were referring to when there is no market, when you take whatever you can get because the merchandise is otherwise worth zilch. That is specifically NOT a plan to buy above market, but is a recognition that the market is not currently functioning and they’ll have to set one. Making the market work is the point of the plan so, if you think about it, there’s no way they could currently pay market prices because those prices don’t exist.

    Thumb up 0 Thumb down 0
  42. Adrien says:

    I don’t have a mortgage.

    What if the 700 billion was used to pay off foreclosures and the houses get auctioned off? Homeowners or speculators still lose the house but, the bank gets the money back.

    Thumb up 0 Thumb down 0
  43. Eric H. says:

    Well, I don’t know if anyone is going to read this anymore anyway as this post has been up for a while but here goes:

    First of all, John Cochrane, being a UofC professor(I mean no offense to Levitt or Dubner, lots of good comes from creating theories based off of the assumption that all humans will act in a rational predictable manner), cannot grasp the idea that people will act irrationally. Banks choosing to not take advantage of the fed window right now is evidence that they are already acting irrationally.

    Furthermore, correct me if I am wrong but I thought the method that the treasury was going to use to purchase the securities was a reverse auction. In a reverse Auction the treasury is not setting the price, the current holders of the securities are setting it. No holder is going to offer a price to the treasury so low that it will put them in worse shape than they already are, and no holder of the securities will set the price so high that they have no chance of unloading the securities.

    Thumb up 0 Thumb down 0
  44. Michael D says:

    Excellent commentary. Thank you!

    Thumb up 0 Thumb down 0
  45. Michael says:

    Ok, if it’s the toxic loans (mortgages) at the bottom of the pile that cause uncertainty — fix that: don’t allow foreclosures on demoestic mortgages: turn them into longer term mortgages at what the owner can afford, or into rental agreements. Of course, you clever economics guys have to work out how to run with that.

    That means the root gets detoxified.



    Thumb up 0 Thumb down 0
  46. charles says:

    To Matt Bruce: You obviously don’t read Buffett’s writings or follow what others write about him. I really don’t need to go any further than that.

    To RR and Eric: Buffett supports the plan AS IS. He’s said it’s not perfect (the pin of your arqument), and may even not be enough, but said it needs to be passed. ’nuff said. You can’t split hairs when you are putting the money down.

    So take the advice of the astronaut or the astronomer? One “understands” the situation differently than the other. My money would be with Buffett.

    Thumb up 0 Thumb down 0
  47. Bentcorner says:

    Wow! I just when I thought an idiot like me would never understand the problem on Wall Street. This article made sense.

    Thumb up 0 Thumb down 0
  48. Adrian Bashford says:

    It will undoubtedly be a disaster, those involved are uniquely proficient at creating disasters.

    I just wish they would get it over with so longer term investors will even consider getting back into the market. Right now a lot of investors (that could help bring the market back up) are sitting on the sidelines waiting for the congressional shenanigans to get over with.

    Thumb up 0 Thumb down 0
  49. Mark Freeman says:

    @#43 “In a reverse Auction the treasury is not setting the price, the current holders of the securities are setting it. No holder is going to offer a price to the treasury so low that it will put them in worse shape than they already are, and no holder of the securities will set the price so high that they have no chance of unloading the securities.”

    Except the buyer (US Treasury) in this case is not the same as a private investor. If the $700B is invested poorly, US Treasury Secretary and staff are not on the hook in the same way that a private invester would be on the hook. Also, US Treasury will be operating in a political environment whose objectives go beyond maximizing investment returns. So it is quite possible that the price offered by MBS holders will be higher than what would be accepted by a return-maximizing buyer. And because the US Treasury does not have the same incentives as a private investor, they may just accept the inflated offers. Inflated offers may be the only offers provided, given the possibilities for collusion among holders of MBS.

    It would be nice to have the time to consider these and other issues. I still agree with the UofC (and other) economists who urged the Congress to take its time to craft the best plan possible. At this point, I am not convinced that the current plan is better than doing nothing.

    Thumb up 0 Thumb down 0
  50. seo says:

    Seems to me that the problem is reasonably simple. Many banks lent too much money so that people could pay way too much for way more house than they needed. Then they bundled the debt into black boxes, and sold them to foreigners who were sitting on mountains of dollars that they’d traded oil and stereos for.

    Now the houseowners aren’t going to pay their mortgages anymore, because they don’t have any equity in the new house as its current valuation. And as they lose hope in a quick turnaround in the real estate market, they decide to let the bank take the house back.

    Where it gets complicated is with the black box full of mortgages. The owners of those black boxes took out insurance on what was inside them, otherwise called “credit default swaps.” A primary underwriter of those is AIG, and if they had defaulted on their default swaps the people who would have gotten hurt would have been foreign banks, investers, and “sovereign wealth funds.”

    Well, what’s so bad about that?


    Thumb up 0 Thumb down 0
  51. Matt says:


    The problem with stiffing the foreign investors is that the continuous influx of foreign capital is all that has been keeping our economy going these past few years. If we stiff them, they stop sending money our way, and start sending it elsewhere.

    Then our dollar looks like Zimbabwe’s, and we’re all screwed.

    Thumb up 0 Thumb down 0
  52. Abraham Beldo says:

    This blog has created much debate. Some people are very much for this bill, Some people are very much against the bill, and still others are undecided looking for an answer.

    Much information has been provided. Some information has been relevant, some irrelevant. Some people have spoken about which they do not fully understand. Others have had entirely valid and comments full of incite.

    I post this blog now (belatedly) to help everyone including myself come to terms with the current bill, to help understand the problem at hand to attempt to find a solution to the problem. If you can answer my questions below, then I think you have a very solid argument full of information worth contributing to this debate.

    Purpose of the bill….

    What is the expressed purpose / Mission Statement of the bill? What problem are we trying to solve exactly?

    Urgency of bill…

    Do we need this now? Do we need this yesterday? When is too late to pass this bill? Do we have time to consider alternate means?

    Extensive list of options…

    What are all the options? What are the risks surrounding each option?

    I. Bill passes.

    A. Buyout successfully drives markets (or hereto is successful in its purpose)

    1. What are the consequences? To what degree can this be successful? How is success measured?

    2. What are the chances that it could work? (100% is not an acceptable answer)

    3. Does the gain outweigh the risk?

    B. Buyout is not successful.

    1. What are the consequences? Could the consequences be worse than an alternate means or doing nothing? Could there be more to gain?

    2. What are the chances that it will not work? (100% is not an acceptable answer)

    3. Does the gain outweigh the risk?

    II. Bill does not pass.

    A. Alternate Means are considered

    1. Need to pursue alternate means exists.

    i. What other actions can we take as policy makers to alleviate the problem?

    ii. What actions can we take as individuals to alleviate the problem?

    2. Need to pursue alternate means does not exist….

    B. Bill is tweaked and re-drafted.

    1. What are the sticking points of the bill?

    2. What could be changed about the bill to make it more effective?

    B. Do nothing

    1. What are the consequences?

    2. What are the chances that we will recover with no action being taken?


    Thumb up 0 Thumb down 0
  53. Kevin H says:

    @Joe Torben #38 It’s not certain we will make money on the deal certainly, but it is almost certain that we won’t loose $700 billion. I’ve heard somewhere that MBSs are expected to make 10-15% return on investment, so if the market is rationally pricing these things, we will be getting that much return if we pay market value.

    Now, the only way the bailout actually works is if the market is pricing these things irrationally, and therefore we’d have to pay something above market prices and hope that we were paying something close to rational prices. That certainly entails some risk. If we are inflating the value of these things by 30%, we stand to loose 15-20% of our investment, or gain 10-15% if we are right on our pricing. That seems like a reasonable risk to me, and far from the language used by the doomsayers of the plan.

    So, the cost of the downside risk of the plan is something more like $11-14 billion. Not chump change, but worth the risk of holding off a depression certainly.

    Thumb up 0 Thumb down 0
  54. Kevin H says:

    @Alex #36

    That may be for other normal assets, but one of the issues here is that MBSs are such convoluted securities that noone really knows how risky any individual piece is.

    Even if they did know, and just aren’t sharing that info, the same basic logic of my argument holds. The securities they hold are currently mark to market, irrespective of if they are risky or not. Therefor the idea that buying them at market or above market prices will lead to a write down is ridiculous.

    Thumb up 0 Thumb down 0
  55. Marc Brodeur says:

    This article seems to support my idea of the “vigorously enforced free market”

    Thumb up 0 Thumb down 0
  56. Andy Kneeter says:

    The government can artificially inflate the value of homes & mortgages for awhile by pumping money into a declining market, but it’s at a cost & the remedy isn’t permanent.

    The cost is further dollar devaluation that results in inflation & rising interest rates (inflation is an invisible tax on everyone). If adjustable rate mortgages aren’t rewritten to fixed rates, there will be increased foreclosures. Also, higher interest rates directly decrease home prices, because monthly payments of new buyers increase. Housing deflation resumes, possibly worse than before.

    The better solution (proposed by the Republican Study Group, but ignored), is to adjust policy to attract capital to financial institutions. This could be done by temporarily suspending capital gains taxes, repatriation taxes on foreign capital, & even corporate taxes in the financial services industry to support sound financial institutions that acquire other institutions & support their loans & depositors. This could even be applied to start-up financial institutions.

    Also, any plan that doesn’t privatize Freddie, Fannie, & revoke the Community Reinvestment Act isn’t serious about addressing the core causes of the sub-prime meltdown.

    Thumb up 0 Thumb down 0
  57. Mac says:

    Fundamentally correct. The reason that the Government has to do something forceful, yet not foolish, is because the taxpayer is on the hook for literally hundreds of billions of dollars in FDIC insurance payments that may result from a situation that was caused, in large part, by the government. The bailout bill is a disaster. The only way it can be at all effective for the financial market is if the government buys up the toxic mortgages at face value or very near face value, thereby transferring the short term loss to the taxpayers. No one knows exactly where this is all going, because no one knows what has been created here. Considering the real estate market, it might be a good idea to take your long term investment capital out of the stock market and invest in land.

    Thumb up 0 Thumb down 0
  58. Joe Smith says:

    Taking a step back from all this:

    Investors around the world have invested in mortgage backed securities which are now considered “toxic”. When they bought those assets did they not know what was in them and if not, why not? It seems to me that a lot of people bought assets which they had to know they did not understand.

    Thumb up 0 Thumb down 0
  59. st says:

    Mac, if I take out my retirement (I’m over 60) and put it in land, I lose, too. Property taxes rise every year where I live.

    As a long-time taxpayer, almost ready to retire, I can’t win. :(

    Thumb up 0 Thumb down 0
  60. John Maszka says:

    This bailout is just one more example of the indivisible handjob stroking irresponsible CEOs and CFOs with billions so that they can run the American economy even further into the ground. So much for Keynesian economics. If the goal is to stimulate the economy, why not give the money directly to the American taxpayers? We could do twice as much good for the economy by giving half as much money directly to hardworking American taxpayers. A bird in the hand is worth two in the bush administration.

    Thumb up 0 Thumb down 0
  61. Joe Smith says:

    The move of the Fed to buy commercial paper directly on the market is effectively an acknowledgment that the bailout is too little, too late, too clumsy. It will take too long and be too difficult to bring the banks back into the credit markets, even if the bailout is capable of working, so the Fed is providing credit directly to borrowers – all without interference from Congress.

    Thumb up 0 Thumb down 0
  62. Sky Post says:

    There are some big time investors like Hank Herrmann of Waddell & Reed who do not invest in instruments they don’t understand. When we get out of this mess and we will, perhaps we should invest in only what we can rationally describe or defend.

    Human nature does not allow many of us to admit that we don’t understand the Enron game, CDOs, or the sub-prime game. Humility has a big payback if you have the courage to demonstrate it.

    PS Regarding the bail out. I feel srongly both ways which means I don’t understand it I guess.

    Thumb up 0 Thumb down 0
  63. DCreader says:

    Very good article! One thing I don’t agree with is how much the author thinks the market value of the mortgage assets is. I think the problem is that because there are no buyers for these assets there is no true market value for them, which means banks are just in a “conservation mode”. They don’t lend and they don’t go bankrupt either – they are in the limbo. And the longer they are in this condition the more damaging it is for the whole economy (this “conservation mode” can last for a long time. Think of decade long stagnation of Japanese banks). Once there is a substantial buyer for these assets it will create a demand for them thus a price. I have no idea where that price ends up being at between $1 to $0 cents on a previously lent dollar and honestly no one can. One thing I know that once banks get rid of these illiquid assets they can start lending again. I think if we have at least 20% of banks that successfully rid of their toxic assets they start lending again and the rest of the banks can struggle and true some of them will go bankrupt. For a comparison think about a cancer that all of the banks have at different stages/severities some of them are incurable some of them can be cured and what the government is doing is speeding up the process for all of them – helping everybody and for some of them help is enough to make them work again and for some of them it is useless because they are doomed for bankruptcy.

    Thumb up 0 Thumb down 0
  64. ogmb says:

    “Most of all, caveat emptor — these are a matters for buyers and sellers, not regulators. Nobody else gets hurt if you buy a lousy mortgage pool. The government does not need to write a new rule every time someone buys a rotten tomato. Investors will demand the right transparency, complexity, and risk-sharing or monitoring of mortgage pools. That is, unless they get bailed out and learn to count on that instead! The history of the mortgage market is a grand story of bringing credit to people who need it, upon the removal of layer after layer well-intended but counterproductive “protective” regulation.” — John Cochrane, 2007

    Thumb up 0 Thumb down 0
  65. tom hammond says:

    John: Your asuumptions is based on 700B is an inconsequential amount. So how big is the problem?

    Shouldn’t you match maturities of assets values rather than using mark to market which is a shortterm measure on a longterm asset. It sounds like you are mismatching assets.

    Thumb up 0 Thumb down 0
  66. LP says:

    John: so you do not think once the Treasury sets a floor price for those MBS, the market will arbitrage them to that level.

    Thumb up 0 Thumb down 0
  67. BJ says:

    It would be a bad idea to eliminate market value accounting. However, it is equally bad to suggest that bank solvency ought to be measured based on “market” values that are distressed, which forces realization at those distressed values. It is part of the reason we have a crisis. There is no incentive for new capital to come in when it can wait for the distressed selling that has to ensue as a result. Put “market” value back in the footnotes and put the best guess at net realizable value in the financials and the economic floor for prices on residential MBS will be found.

    Thumb up 0 Thumb down 0
  68. dave (GSB '68) says:

    While I’m philosophically opposed to John McCain’s idea that ‘the government’ should buy up troubled mortgages directly from homeowners–and I’ve not heard anything yet about who qualifies or at what price–in a perverse way it might go to the heart of the current credit crisis.

    Question: are the mechanics of McCain’s idea even feasible, and in what time frame?

    Going back to the bailout, I think an equation could be built (and who better than GSB faculty to do it?) along the lines of: [average price drop of all US housing + % of foreclosed mortgages + % of hopeless mortgages] = markdown % to buy any or all MBS instruments by a date certain. Let’s say the 3 factors are 12%, 15%, and 10%; the offer = 67% of face value, period; and the surrender deadline could be 12/xx/08: “sell now; or hang on to your MBS’s if you’d rather ride out the storm.”

    Pro: many insitutions have taken huge write-downs already; they might actually improve their balance sheets by selling at 67%.

    Pro: funds are available almost immediately regardless of the holder; confidence and liquidity are restored worldwide.

    Pro: the Treasury might end up with a profit if they hold the surrendered MSB’s long enough.

    Con: adverse selection … does anyone really know if an MSB from Lehman is more toxic than one from Merrill?

    Thumb up 0 Thumb down 0
  69. Jim Perkins says:

    I like John’s idea (#60). Has anyone analyzed the positive effects on the economy – and every solid institution – of sharing 50% of the bailout equally with every citizen over 18 years of age? That would be approx. $130,000 per person I believe. Let the taxpayer decide how it is spent – the cumulative brain power and decison making put to work would far exceed the combined smarts of all the CEO’s and politicians who have voted for greed over sensible risk management over the last 20 years.

    Thumb up 0 Thumb down 0