There’s an informative links post at Obsidian Wings from hilzoy. And a bit of food for thought:
I do not want to hear people tell me that regulation cripples the economy, unless they are willing to admit that a lack of regulation can also cripple the economy. Not ever. I don’t understand why anyone is so much as tempted to think that “regulation” is good or bad, as a whole: to me, that’s like being for or against “things” or “people”. Some regulations are good, some are bad; obviously, we want people in government who can tell the difference, and implement regulatory systems that work well. However, altogether too many of my fellow citizens were willing to listen to ideologues, and now we all get to pay for their mistakes.
Very oddly, Malcolm Turnbull has proposed that the federal government in Australia should also bail out Australian banks. Now, unless he’s suggesting that the banks should have their exposure to Lehman Bros. etc. paid for gratis by the Australian government, to the benefit of their share price or something, it’s hard to see how this makes any sense, particularly when Turnbull has been blathering all round the shop about Kevin Rudd and Wayne Swan “talking down” the Australian economy (and thus magicking inflation into existence – it wasn’t at all Peter Costello’s fiscal profligacy, no matter what the IMF may think). One can only infer from this call that there’s an implication that there’s some disaster waiting to happen domestically.
Unless Turnbull is suggesting that the Australian government should compensate the banks for their exposure to Lehman Brothers or whatever, it’s really quite hard to work out what he’s saying here. Obviously, it’s a bit of politicking, tied up in a neat package as it is with his “bipartisanship” theme, and it may also be designed to imply that while the Bush administration has a Plan, Rudd doesn’t. But it’s difficult to read it as anything other than irresponsible, despite the instant anointing of Messiah Mal with the all important “economic credibility” by the media.
Mark, if I understand a) the situation, and b) Turnbull’s comments, he’s not talking about buying American mortgage derivatives. He’s proposing that the Australian government buy Australian mortgages off the smaller banks and the non-bank lenders, so that those lenders are able to use their capital to offer additional mortgages on the market.
In other words, something like Joshua Gans’ AussieMac proposal.
Turnbull’s proposal has some serious issues to do with Moral Hazard. Unless he can address this issue, he could seriously get his fingers burned.
Robert – other than provide a bit of competition for the big banks would it really achieve anything? Not sure we want to fuel the real estate market, though I can understand why the government would not want prices to drop too much.
Rob @ 1, that may be so, but it’s not all that clear from the reports of Turnbull’s comments.
Turdbulls flopping around like a toothless barracuda. One minute its bi-partisan Mal then next its Mal the Black Knight calling Kevin a phoney. Pot – kettle – black knight. Here’s the worlds greatest tourist from the King Howard Royal suite party slinging mud. Helpless, hapless, hopeless. The editors at the Australian must already be itching to pull the plug. One great whoosh and the balloon will go up.
If this was based on his TV appearance last night, it was in the context of some ACA or TT presenter asking him to assure viewers that Our Banks Were Solid, And If The Yanks Can Bail Out Banks, So Can We, What Do You Think Malcolm?
Yeah, that’s right, Jacques – it’s from his interview yesterday on ch. 9. That’s why I’m struggling to see what Rob thinks Turnbull’s on about. It may be that he is proposing some sort of AussieMac, but the context doesn’t make it clear, and Turnbull must know that when he’s doing a tv interview, his words will be interpreted more or less without any further policy context.
Mark: from the Peter Martin article you’re linking to:
The article, as a whole, is not very clear, but the idea does seem to be in the context of buying Australian mortgages, not American ones (or derivatives thereof).
Now, unless there are recent developments that we’ve not heard about yet, there simply isn’t the domestic equivalent of the subprime crisis here. The last S&P report on mortgage arrears suggests while they have risen slightly, they’re still only 1.5% of all mortgages. Australian subprime mortgages (which are a tiny fraction of the Australian market) have also had an increased default rate, but it’s again not a huge increase. News reports in the USA have the number around 10% of all mortgages there.
So – unless Turnbull was simply making talking out of his backside, always a possibility of course – he has to be talking about buying healthy mortgages off banks so that they can use their capital to offer new loans.
Sure, Rob, but that’s taking his statements logically. They could just as easily be throw away lines seeking any point of political advantage.
That’s entirely possible, Mark!
Seriously, there’s an interesting question as to what happens to foreign institutions holding American subprime debt, given the US bailout. There’s an afrticle at the New York Times on the topic.
Frankly, if I were the Australian government, and was feeling Machiavellian, I’d suggest that any Australian institution holding anything that would qualify for the US bailout, to sell it to an American-domiciled institution, who would then be able to onsell it to the US treasury….
The Merchant of Venice is shouting into a void and everyone is scratching their head.
Looks as though we aren’t going to escape the Nelson style ad hoc gimmicks from the Vaucluse Silver Tail either.