from London Banker by London Banker

Back in the old days (pre-1980s), the term systemic risk did not refer to contagion of illiquidity within the financial sector alone. Back then, when the real economy was much more important than low margin, unglamorous banking, it was understood that the really scary systemic risk was the risk of contagion of illiquidity from the financial sector to the real economy of trade in real goods and real services.

If you think of it, every single non-cash commercial transaction requires the intermediation of banks on behalf of – at the very least – the buyer and the seller. If you lengthen the supply chain to producers, exporters and importers and allow for agents along the way, the chain of banks involved becomes quite long and complex.

http://londonbanker.blogspot.com/2008/11/systemic-risk-contagion-and-trade.html

Mark, If banks are not re-constrained to be just good old banks the new tech ventures will have difficulty trading. Most new tech stuff needs a ww market to recoup investment. To revitalize the commercial banks, their toxic crap must be grabbed and re-housed (no $ paid for it) and then see who is left standing / worthy re-capitalizing. This toxic stuff is evidence for the cops and should be treated as such. Tim

By Bridget Kendall
BBC diplomatic correspondent

A deep-seated global crisis is often a chance to redraw the map, reflecting shifts in the balance of power in different ways.

First, the crisis can confirm or nudge ahead trends which seem to be happening anyway – like the shift of power from Western to emerging Eastern players.

http://news.bbc.co.uk/2/hi/in_depth/7724298.stm

Mark, I hope that Obama realises that the emerging economies have zero interest in US (aka western and totally discredited) centric views of any new financial system. Tim

Hank Paulson, revisionist.

The TARP is no longer the TARP. It is the TERP. That’s Troubled Equity Relief Program. Not to be confused with the Moral Hazard Generation Scheme.

Mortgage assets aren’t even going to be bought anymore. It looks like auto-loan securities and credit-card receivables will be though: sop to Detroit or taxpayer investment at the peak of a collapsing market? You decide.

This is revisionism of a grand scale and we don’t imagine congress will be pleased. We don’t want to spoil the fun though. Read excepts of the revised TARP plan and its redacted history, courtesy of the Treasury Secretary for yourself:

http://ftalphaville.ft.com/blog/2008/11/12/18152/the-terp/

Mark, This is another way of making money for those who don’t read your newsletter:-) Tim